SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 31, 2003
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INERGY, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 0-32453 43-1918951
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(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) Number)
Two Brush Creek Boulevard, Suite 200, Kansas City, MO 64112
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(Address of Principal Executive Offices) (Zip Code)
(816) 842-8181
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Registrant's telephone number, including area code
(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets
Acquisition of Assets
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On July 31, 2003, Inergy Propane, LLC, a limited liability company that
is wholly owned by Inergy, L.P., acquired substantially all of the propane
assets of United Propane, Inc. ("United Propane"). In exchange for these
assets:
(a) Inergy, L.P. issued 889,906 common units and 254,259 senior
subordinated units to United Propane;
(b) Inergy Propane, LLC paid approximately $2.4 million in cash to
United Propane for inventory, accounts receivable and other current
assets; and
(c) Inergy Propane, LLC assumed approximately $5 million of United
Propane's liabilities.
Inergy Propane, LLC obtained the cash portion of the purchase price by
drawing on its existing credit facility with Wachovia Bank, National Association
and certain other lenders. Inergy Propane, LLC intends to utilize the acquired
United Propane assets in its existing retail propane business.
United Propane
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United Propane was founded in 1943 and was the 24th largest retailer and
distributor of propane in the United States. During the twelve months ended June
30, 2003, United Propane delivered approximately 23 million gallons of propane
and served nearly 30,000 customers from twelve customer service centers in
Maryland, Delaware and West Virginia. United Propane had approximately 135
employees who are now employees of Inergy Propane, LLC.
Transactions Related to the United Propane Acquisition
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Inergy, L.P. agreed that on or before August 30, 2003, it would use its
best efforts to file a shelf registration statement under the federal securities
laws to register the 889,906 common units issued to United Propane, plus 254,259
common units that may be issued as a result of the conversion of the senior
subordinated units issued to United Propane. Inergy, L.P. agreed to use its best
efforts to cause that registration statement to be declared effective by the SEC
within 90 days after filing and thereafter to keep it in effect until the
earlier of (i) the date on which all of the registered common units have been
sold, and (ii) the date on which all of the registered common units may be sold
without registration or restriction.
Pursuant to a Unitholder Agreement entered into by Inergy, L.P. and United
Propane, United Propane agreed that for a period of three years it would vote
508,518 of its common units issued in this acquisition in favor of and in
accordance with any recommendation of the majority of the Board of Directors of
our managing general partner. United Propane further agreed during this three
year period to give Inergy, L.P. a right of first refusal with respect to
508,518 of its common units.
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Robert Pascal, the sole shareholder and chief executive officer of United
Propane, was appointed to the Board of Directors of our managing general partner
in July 2003.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
It is impracticable to provide United Propane's historical audited
financial statements as of June 30, 2003 and for the year then ended, as
required by this Item within the time this Current Report on Form 8-K is
required to be filed. Such historical financial statements will be filed
as soon as practicable, but not more than 60 days after this Current
Report on Form 8-K is required to be filed.
(b) Pro Forma Financial Information.
It is impracticable to provide the pro forma financial statements required
by this Item within the time this Current Report on Form 8-K is required
to be filed. Such pro forma financial statements will be filed as soon as
practicable, but not more than 60 days after this Current Report on Form
8-K is required to be filed.
(c) Exhibits.
2.1. Asset Purchase Agreement, dated June 30, 2003, by and among Inergy,
L.P., Inergy Propane, LLC, United Propane, Inc. and Robert Pascal.
2.2. Registration Rights Agreement, dated July 31, 2003, by and among
Inergy, L.P., United Propane, Inc. and Robert Pascal.
2.3. Unitholder Agreement, dated July 31, 2003, by and between Inergy,
L.P. and United Propane, Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INERGY, L.P.
By: INERGY GP, LLC, its Managing General
Partner
Dated: August 15, 2003 By: /s/ Laura L. Ozenberger
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Laura L. Ozenberger
Vice President -- General Counsel and
Secretary
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Exhibit Index
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Exhibit Number Description
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2.1. Asset Purchase Agreement, dated June 30, 2003, by and among
Inergy, L.P., Inergy Propane, LLC, United Propane, Inc. and
Robert Pascal.
2.2. Registration Rights Agreement, dated July 31, 2003, by and
among Inergy, L.P., United Propane, Inc. and Robert Pascal.
2.3. Unitholder Agreement, dated July 31, 2003, by and between
Inergy, L.P. and United Propane, Inc.
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EXECUTION COPY
Exhibit 2.1
ASSET PURCHASE AGREEMENT
among
United Propane, Inc.
(as "United"),
Robert A. Pascal
(as "Shareholder" of United)
and
INERGY PROPANE, LLC
(as "Buyer")
(June 30, 2003)
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS............................................1
ARTICLE 2. PURCHASE AND SALE OF ASSETS............................5
2.1 Assets.................................................5
2.2 Excluded Assets........................................5
ARTICLE 3. PURCHASE PRICE; NONCOMPETITION PAYMENTS................5
3.1 Aggregate Purchase Price...............................5
3.2 Allocation of Purchase Price...........................6
3.3 Noncompete Payments....................................7
ARTICLE 4. CLOSING................................................7
4.1 Closing Date...........................................7
4.2 Transfer of Assets.....................................7
4.3 Payments by Buyer......................................7
4.4 Inventory; Accounts Receivable.........................8
4.5 Escrow.................................................9
ARTICLE 5. LIABILITIES NOT ASSUMED BY BUYER.......................9
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF SELLER AND
SHAREHOLDER...........................................10
6.1 Corporate Organization................................10
6.2 Due Qualification.....................................10
6.3 Authority; Binding Effect.............................10
6.4 No Creation of Violation, Default, Breach
or Encumbrance .......................................10
6.5 No Present Default....................................11
6.6 Approvals, Licenses and Authorizations................11
6.7 Compliance With Law...................................12
6.8 Financial Statements..................................12
6.9 Absence of Certain Events.............................12
6.10 Title to and Condition of Properties..................13
6.11 Intangible Properties.................................15
6.12 Contracts and Commitments.............................16
6.13 Insurance.............................................17
6.14 Tax Returns and Tax Audits............................17
6.15 Books and Records.....................................18
6.16 Substantial Customers and Suppliers...................18
6.17 No Litigation, Adverse Events or Violations...........18
6.18 Employee Benefit Plans; Labor Matters.................19
6.19 Business Names........................................20
6.20 Brokers and Finders...................................21
6.21 Environmental.........................................21
6.22 Investment Representations............................22
6.23 Disclosure............................................23
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF BUYER...............23
7.1 Organization; Documentation...........................23
7.2 Authority; Binding Effect.............................23
7.3 No Creation of Violation, Default, Breach
or Encumbrance .......................................23
7.4 Brokers and Finders...................................24
7.5 No Adverse Action.....................................24
7.6 Approvals, Licenses and Authorizations................24
7.7 MLP SEC Documents.....................................24
7.8 MLP Securities........................................24
ARTICLE 8. ACCESS TO INFORMATION BY BUYER........................25
8.1 Prior to Closing......................................25
8.2 Public Information....................................25
8.3 Confidentiality.......................................25
ARTICLE 9. COVENANTS OF THE PARTIES..............................26
9.1 Actions Pending Closing...............................26
9.2 Information...........................................27
9.3 Further Assurances....................................27
9.4 Compliance............................................27
9.5 Delivery of Documents.................................28
9.6 Bulk Transfer Laws....................................28
9.7 Noncompetition, Registration Rights, Unitholder
and Lease Agreements..................................28
9.8 No Shop...............................................28
9.9 Curtis Bay Rail Terminal..............................29
9.10 Supplemental Information..............................29
9.11 HSR Act...............................................29
9.12 Employee Matters......................................30
9.13 Profit Sharing Plan...................................30
9.14 Health and Welfare Benefits...........................31
9.15 Past Service Credit...................................31
9.16 Employment Agreements.................................31
9.17 Use of the "United Propane, Inc." Names...............31
9.18 Payment of Liabilities................................31
ARTICLE 10. CONDITIONS TO BUYER'S OBLIGATION TO CONSUMMATE THE
TRANSACTION ........................................31
10.1 Compliance with Agreement.............................32
10.2 Representations and Warranties........................32
10.3 Certificate...........................................32
10.4 Corporate Authorization...............................32
10.5 Opinion of Counsel....................................32
10.6 Good Standing.........................................32
10.7 Noncompetition, Lease, Unitholder, Registration
Rights and Escrow Agreements..........................32
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10.8 Tax Certificates......................................33
10.9 Receipt...............................................33
10.10 Instruments of Transfer...............................33
10.11 No Litigation.........................................33
10.12 Third Party Consents..................................33
10.13 Satisfactory Due Diligence Results....................33
10.14 No Adverse Event......................................33
10.15 Proceedings Satisfactory..............................34
10.16 Financing.............................................34
10.17 Use of Names..........................................34
10.18 HSR Act...............................................34
ARTICLE 11. CONDITIONS TO SELLER'S AND SHAREHOLDER'S OBLIGATION
TO CONSUMMATE THE TRANSACTION.......................34
11.1 Compliance With Agreement.............................34
11.2 Representations and Warranties........................34
11.3 Certificate...........................................34
11.4 Opinion of Counsel....................................35
11.5 Third Party Consents..................................35
11.6 Escrow Agreements.....................................35
11.7 Lease Agreements......................................35
11.8 Election of Shareholder to Board of Directors.........35
11.9 No Litigation.........................................35
11.10 Authorization.........................................35
11.11 Noncompetition Agreements.............................35
11.12 Registration Rights Agreement.........................35
11.13 Unitholder Agreement..................................35
11.14 No Adverse Event......................................35
11.15 Proceedings Satisfactory..............................36
11.16 HSR Act...............................................36
ARTICLE 12. INDEMNIFICATION.....................................36
12.1 United's and Shareholder's Indemnity..................36
12.2 Buyer's Indemnity.....................................36
12.3 Special Hazardous Substances Indemnity................37
12.4 Procedure.............................................37
12.5 Claims Against Escrow.................................39
12.6 United's Indemnification Limitations..................39
12.7 Buyer's Indemnification Limitations...................39
12.8 Costs.................................................39
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ARTICLE 13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES..........40
ARTICLE 14. EXPENSES............................................40
ARTICLE 15. TERMINATION.........................................40
15.1 Termination...........................................40
15.2 No Liability..........................................41
15.3 Notice................................................41
ARTICLE 16. MISCELLANEOUS.......................................42
16.1 Notices...............................................42
16.2 Parties in Interest and Assignment....................42
16.3 Modification..........................................43
16.4 Waiver................................................43
16.5 Entire Agreement......................................43
16.6 Execution in Multiple Originals.......................43
16.7 Headings..............................................43
16.8 Invalid Provisions....................................43
16.9 Governing Law.........................................43
16.10 Gender................................................44
16.11 Exhibits and Schedules................................44
Schedules:
Schedule 2.1 Assets
Schedule 2.1A Real Property
Schedule 2.1B Leases of Real Property
Schedule 2.1C Propane Tanks, Propane Storage Tanks and Vehicles
Schedule 2.1D Leases of Propane Tanks, Propane Storage Tanks and
Vehicles
Schedule 2.1F Contracts and Other Agreements
Schedule 2.1G Intangible Property
Schedule 2.1H Memberships and Permits
Schedule 2.1J Patents and Trademarks
Schedule 2.1K Trade Secrets
Schedule 2.2 Excluded Assets
Schedule 3.1(d) Reimbursable Capital Items
Schedule 3.1(e) Pre-Paid Sporting Tickets
Schedule 3.2 Allocation of Purchase Price
Schedule 6.1 Subsidiaries
Schedule 6.2 Foreign Qualifications
Schedule 6.4 United's Required Consents
Schedule 6.5 Contracts in Default
Schedule 6.6 Approvals, Licenses and Authorizations
Schedule 6.7 Violations of Law
Schedule 6.8(b) United Propane's Accounting Protocol
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Schedule 6.10A Permitted Encumbrances
Schedule 6.10B Right to Use Agreements
Schedule 6.12(c) Discounts and Rebates
Schedule 6.13 Insurance Policies
Schedule 6.14(f) Taxes Due
Schedule 6.16 Substantial Customers and Suppliers
Schedule 6.18(a) Employee Benefit Plans
Schedule 6.21 Hazardous Substances and Wastes
Schedule 7.3 Buyer's Required Consents
Schedule 9.12(a) List of Employees
Schedule 9.12(c) Employment-Related Claims
Exhibits:
Exhibit A Form of Noncompetition Agreement
Exhibit B NOT USED
Exhibit C Form of Lease
Exhibit C-1 Properties to be leased by Buyer
Exhibit D NOT USED
Exhibit E Opinion of United's Counsel
Exhibit F Opinion of Buyer's Counsel
Exhibit G Unitholder Agreement
Exhibit H Form of Escrow Agreement
Exhibit I NOT USED
Exhibit J Registration Rights Agreement
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ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is made and entered into this 30th day
of June, 2003, by and among United Propane, Inc., a Delaware corporation
(hereinafter referred to as "United"), Robert Pascal, shareholder of United
(hereinafter referred to as "Shareholder"), and Inergy Propane, LLC, a Delaware
limited liability company (hereinafter referred to as "Buyer"), and joined by
Inergy L.P., a Delaware limited partnership, solely for the purposes of Sections
4.3, 6.22, 7.7, 7.8, 9.7, 10.7, 11.8, 11.10, 11.12, 11.13 and 11.14 hereof.
RECITALS
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A. United desires to contribute to Buyer, and Buyer desires to
acquire from United, substantially all of the assets of United used in United's
retail propane business upon the terms and conditions hereinafter set forth.
B. Shareholder, being the holder of all of the issued and
outstanding capital stock of United, desires that United contribute to Buyer
substantially all of the assets of United used in United's retail propane
business upon the terms and conditions hereinafter set forth.
AGREEMENT
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In consideration of the above premises, the mutual agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
-----------------------
In addition to terms defined elsewhere in this Agreement, the
following terms shall have the meanings assigned to them herein, unless the
context otherwise dictates, both for purposes of this Agreement and all
Schedules and Exhibits hereto:
"Accounts Receivable" shall have the meaning set forth in Section
3.1(c).
"Accounts Receivable Payment" shall have the meaning set forth in
Section 4.4(b).
"Accounts Receivable Estimate" shall have the meaning set forth in
Section 4.4(b).
"Affiliate" shall mean "affiliate" and "associate" as such terms are
defined in Rule 405 of the Securities Act of 1933.
"Agreement" or "this Agreement" shall mean this Asset Purchase
Agreement, as amended from time to time by the parties hereto, together with all
Schedules and Exhibits hereto.
"Assets" shall mean the entire right, title and interest in and to
all of the assets and properties owned or used by United, including without
limitation, all of the assets and properties owned or used by United in
connection with or arising out of the Business of every type and
description, tangible and intangible, wherever located and whether or not
reflected on the books and records of United, including, without limitation, the
assets and properties described on Schedule 2.1 hereto, but in no event shall
"Assets" include the Excluded Assets.
"Assumed Contracts" shall mean the Contracts and Other Agreements set
forth on Schedule 2.1B, Schedule 2.1D and Schedule 2.1F.
"Assumed Liabilities" shall have the meaning set forth in Section
4.2(b) hereof.
"Balance Sheet" shall mean the balance sheet of United, dated June
30, 2002.
"Balance Sheet Date" shall mean the date of the Balance Sheet of
United.
"Benefit Plans" shall have the meaning set forth in Section 6.18(a)
hereof.
"Business" shall mean the business of United with respect to the
following: (i) marketing, distributing and selling propane gas on a retail
basis; (ii) selling, servicing and installing parts, appliances and supplies
related thereto on a retail basis; and which business is being acquired by Buyer
pursuant to this Agreement at Closing.
"Claim Notice" shall have the meaning set forth in Section 12.4
hereof.
"Closing" shall mean the transfer by United to Buyer of the Assets
and by Buyer to United of the consideration set forth herein and the
consummation of the transactions contemplated by this Agreement.
"Closing Date" shall be the time of the Closing established pursuant
to Section 4.1 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contracts and Other Agreements" shall mean all contracts,
agreements, understandings, indentures, notes, bonds, loans, instruments,
leases, subleases, mortgages, franchises, licenses, commitments or binding
arrangements, express or implied, oral or written, whether or not enforceable.
"Curtis Bay Rail Terminal" shall mean the assets, properties and
rights used in United's wholesale propane rail terminal business located at
Baltimore City, Maryland.
"Customer Deposits" shall have the meaning set forth in Section
3.1(y) hereof.
"Cut-Off Date" shall have the meaning set forth in Section 15.1(b)
hereof.
"Damages" shall have the meaning set forth in Section 12.1 hereof.
"Documents and Other Papers" shall mean and include any document,
agreement, instrument, certificate, notice, consent, affidavit, letter,
telegram, telex, statement, file, computer disk, microfiche or other document in
electronic format, schedule, exhibit or any other paper whatsoever.
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"ERISA" shall have the meaning set forth in Section 6.18 hereof.
"Excluded Assets" shall mean the assets and properties described on
Schedule 2.2 hereof.
"Facility" shall have the meaning set forth in Section 6.21(b)
hereof.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"Hazardous Substances" shall have the meaning set forth in Section
6.21(a) hereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Indemnified Party" shall have the meaning set forth in Section 12.4
hereof.
"Indemnifying Party" shall have the meaning set forth in Section 12.4
hereof.
"Inventory Estimate" shall have the meaning set forth in Section
4.4(a) hereof.
"Inventory Payment" shall have the meaning set forth in Section
4.4(a) hereof.
"Knowledge" shall mean, with respect to United, all facts and
information which are either within the actual knowledge of Shareholder,
Darshanna Patel, or Chip Garrett, or that would have been known to such persons
in the exercise of reasonable care and after due inquiry.
"Lien" shall mean any lien, pledge, claim, charge, security interest
or encumbrance of any nature whatsoever.
"Material Adverse Effect" shall mean with respect to the consequences
of any fact or circumstance (including the occurrence or non-occurrence of any
event) that such fact or circumstance has caused, is causing or will cause,
directly, indirectly or consequentially, singly or in the aggregate with other
facts and circumstances, with respect to United, any Damages in excess of One
Hundred Thousand Dollars ($100,000.00).
"Material Contract" shall mean and involve any Contracts and Other
Agreements, if it involves, relates to or affects the Business or the Assets or
both and if any one or more of the following applies: (i) it involves, or may
reasonably be expected to involve, the payment or receipt of Fifty Thousand
Dollars ($50,000.00) or more (whether in cash or in goods or services of an
equivalent value) over its term, including renewal options, or Twenty Five
Thousand Dollars ($25,000.00) during any one year or (ii) it imposes
restrictions on the conduct of the Business in any material way, or (iii) it
burdens, benefits, or imposes liabilities upon, or otherwise with respect to,
any real property owned or leased by United, or (iv) the present or prospective
Business is dependent upon it in any material way.
"MLP" means Inergy L.P., a Delaware limited partnership.
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"MLP Common Units" means the Common Units as defined in the MLP
Partnership Agreement.
"MLP Partnership Agreement" means the Amended and Restated Agreement
of Limited Partnership of Inergy, L.P.
"MLP SEC Documents" means (i) MLP's Registration Statement on Form
S-3 (SEC File No. 333-101165), including the Prospectus, dated November 22,
2002, constituting a part thereof, (ii) MLP's annual report on Form 10-K for its
fiscal year ended September 30, 2002, as amended to date; (iii) MLP's quarterly
reports on Form 10-Q for its fiscal quarters ended December 31, 2002 and March
31, 2003, respectively; (iv) MLP's current reports on Form 8-K dated February 5,
2003, February 10, 2003, February 27, 2003, February 27, 2003, May 7, 2003 and
May 19, 2003, respectively; and (v) the description of the MLP Common Units
contained in MLP's Registration Statement on Form 8-A filed with the Securities
and Exchange Commission on March 15, 2001, which is incorporated into that
registration statement by reference to the description of the MLP Common Units
set forth under the captions "Prospectus Summary," "Cash Distribution Policy,"
"Description of the Common Units," "The Partnership Agreement" and "Tax
Considerations" in the Prospectus forming a part of MLP's Registration Statement
on Form S-1 (Reg. No. 333-56976).
"MLP Senior Subordinated Units" means those interests issued by the
MLP pursuant to this Agreement having the same rights and obligations as those
Senior Subordinated Units defined in the MLP Partnership Agreement.
"Noncompetition Agreements" shall have the meaning set forth in
Section 3.3 hereof.
"Notice Period" shall have the meaning set forth in Section 12.4
hereof.
"Organizational Documents" of an entity shall mean, if a corporation,
its articles of incorporation or certificate of incorporation, as the case may
be, and Bylaws, and if a limited liability company, its certificate of formation
and limited liability company agreement, and any other documents, agreements or
instruments relating to the creation, formation, organization, governance or
ownership of such entity.
"Parts and Appliances Inventory" shall have the meaning set forth in
Section 3.1(b).
"Permitted Encumbrances" shall have the meaning set forth in Section
6.10(a) hereof.
"Person" means a natural person, partnership, limited partnership,
corporation, limited liability company, trust, government, government agency and
any other legal entity.
"Propane Inventory" shall have the meaning set forth in Section
3.1(a) hereof.
"Purchase Price" shall have the meaning set forth in Section 3.1
hereof.
4
"Real Property" shall have the meaning set forth in Section 6.10(a)
hereof.
"Real Property Owners" shall have the meaning set forth in Section
6.10(a) hereof.
"Release" shall have the meaning set forth in Section 6.21(a) hereof.
"Reimbursable Capital Items" means new propane tanks, storage tanks
and related labor charges, and bulk and service trucks. A list of Reimbursable
Capital Items purchased by United between May 15, 2003 and the date hereof is
set forth on Schedule 3.1(d).
"Retained Liabilities" shall have the meaning set forth in Article 5
hereof.
"SEC" shall mean the Securities and Exchange Commission.
"Tax" or "Taxes" shall have the meaning set forth in Section 6.14(a)
hereof.
ARTICLE 2. PURCHASE AND SALE OF ASSETS
---------------------------------------
2.1 Assets. Subject to the terms and conditions hereof and subject to the
representations and warranties made herein, at the Closing United shall validly
contribute, assign, transfer, grant, bargain, deliver and convey the Assets,
including, without limitation, the assets and properties described on Schedule
2.1 hereto, to Buyer (or to one or more of Buyer's designees).
2.2 Excluded Assets. Described on Schedule 2.2 hereto are those assets and
properties owned or used by United that are specifically not being purchased by
or transferred to Buyer and are excluded from the Assets.
ARTICLE 3. PURCHASE PRICE; NONCOMPETITION PAYMENTS
-------------------------------------------------
3.1 Aggregate Purchase Price. The aggregate purchase price (the "Purchase
Price") for the Assets is Forty Nine Million Nine Hundred Ninety Eight Thousand
Dollars ($49,998,000.00), plus an amount equal to the sum of the following:
(a) An amount equal to the value of the inventory of propane gas
located in United's bulk storage tanks and trucks as of the close of
business on the Closing Date with the amount of such inventory to be based
upon a reading from the sight gauge located on such bulk storage tanks and
trucks taken by United (with Buyer having observation rights) on the
Closing Date and priced based upon the cost method for inventory regularly
employed by United in its inventory accounting practices (the "Propane
Inventory");
(b) An amount equal to the value of the inventory of parts and
appliances of United as of the close of business on the Closing Date,
usable and saleable in the ordinary course of the Business of United, with
the amount of such inventory to be based upon a physical inventory taken by
United (with Buyer having observation rights) on June 30, 2003 and
thereafter maintained by United throughout Closing Date in
5
accordance with United's perpetual inventory method, with the value of
such inventory at Closing to be based upon the cost method for inventory
regularly employed by United in its inventory accounting practices (the
"Parts and Appliances Inventory");
(c) For the accounts receivable arising from the Business of United
and owned by United, the amount of which shall be determined from the books
and records of United by Buyer and United, as of the close of business on
the Closing Date ("Accounts Receivable"):
(i) An amount equal to ninety-five percent (95%) of the Accounts
Receivable which have been due and payable for less than one
hundred twenty (120) days prior to Closing Date;
(ii) An amount equal to fifty percent (50%) of the Accounts
Receivable which have been due and payable for at least one
hundred twenty (120) days but less than one hundred eighty
(180) days prior to the Closing Date; and
(iii)No amount shall be payable for Accounts Receivable which are
due and payable for one hundred eighty (180) days or more
prior to the Closing Date;
(d) An amount equal to the cost of all Reimbursable Capital Items
purchased by United after May 15, 2003 and prior to the Closing Date; and
(e) An amount equal to United's cost of sporting event tickets and
related expenses listed on Schedule 3.1(e) for events subsequent to Closing
Date.
minus an amount equal to the sum of the following:
(y) An amount equal to the sum of the customer deposits and
customer credits held by United on the Closing Date as determined by
Buyer and United from the books and records of United on the Closing
Date (the "Customer Deposits");
(z) An amount equal to the property and ad valorem taxes
(including personal property and inventory) with respect to the Assets
that are required to be paid by Buyer subsequent to the Closing Date,
which taxes relate, in whole or in part, to periods prior to the
Closing Date. In the event the amount of any property or ad valorem
tax cannot be ascertained as of the Closing Date, proration shall be
made on the basis of the preceding year, and to the extent that such
proration may be inaccurate, United and Buyer agree to make such
payment to the other after the tax statements have been received which
are necessary to allocate such taxes properly between United and Buyer
on a pro rata basis as of the Closing Date.
3.2 Allocation of Purchase Price. Buyer and United agree to allocate the
Purchase Price to the Assets in the manner provided on Schedule 3.2 hereto.
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3.3 Noncompete Payments. At the Closing on the Closing Date, United and
Shareholder will each enter into a noncompetition agreement with Buyer in the
form of Exhibit A attached hereto (the "Noncompetition Agreements"), pursuant to
which United will receive a total of One Thousand Dollars ($1,000.00) and
Shareholder will receive a total of One Thousand Dollars ($1,000.00).
ARTICLE 4. CLOSING
-------------------
4.1 Closing Date. The Closing shall take place on July 31, 2003 or such
other date as the parties may agree upon, but in no event later than
October 31, 2003 (herein called the "Closing Date"). The Closing shall take
place at the offices of Saul Ewing LLP, 100 South Charles Street, Baltimore,MD,
21201, or such other place as the parties may agree upon.
4.2 Transfer of Assets. At the Closing:
(a) United shall contribute, transfer, assign, grant, bargain, deliver
and convey to Buyer (or one or more of its designees) all right, title and
interest in and to the United's Assets (other than all governmental
licenses, permits and approvals to the extent not assignable by Buyer),
free and clear of any and all Liens. The transactions contemplated by this
Section 4.2(a) shall be effected or evidenced by delivery by United to
Buyer of bills of sale, assignments, and other documents of transfer
acceptable in form and substance to Buyer.
(b) Buyer shall assume (i) the liabilities of United under the Assumed
Contracts to which United is a party, (ii) the liabilities of United with
respect to Customer Deposits, (iii) the liabilities of United with respect
to accrued but unused vacation time and sick time to which employees of the
United who are hired by Buyer will be entitled as of the Closing Date, (iv)
the liabilities of United that are in the aggregate amount of Four Million
Nine Hundred Ninety Eight Thousand Dollars ($4,998,000.00) plus an amount
equal to the sum of the amounts calculated in Sections 3.1(d) and 3.1(e)
above, minus an amount equal to the sum of the amounts calculated in
Sections 3.1(y) and 3.1(z) above, which liabilities shall be identified by
mutual agreement of United and Buyer at or prior to the Closing, and (v)
such other liabilities of United as Buyer may agree in writing to assume
prior to the Closing (collectively, the "Assumed Liabilities"). Such
assumption of the Assumed Liabilities shall be effected or evidenced by
delivery by Buyer to United of an appropriate written instrument or
instruments of assumption acceptable in form and substance to United.
The transfer of Assets and assumption of liabilities shall be effective as
of the close of Business on the Closing Date.
4.3 Payments by Buyer. Subject to the terms and conditions of this
Agreement, Buyer shall make payments to United and the Shareholder, as follows:
(a) At the Closing, delivering to United, certificates evidencing that
number of MLP Common Units equal to $35,000,000.00 divided by the average
closing
7
price for MLP Common Units on the NASDAQ for the ten (10) trading days
ending on the second trading day prior to the Closing Date.
(b) At the Closing, delivering to United, a certificate evidencing
that number of MLP Senior Subordinated Units equal to $10,000,000.00
divided by the average closing price for MLP Common Units on the NASDAQ for
the ten (10) trading days ending on the second trading day prior to the
Closing Date.
(c) At the Closing, delivering to United cash in an aggregate amount
of One Thousand Dollars ($1,000.00), and to Shareholder, cash in an
aggregate amount of One Thousand Dollars ($1,000.00), as set forth in the
Noncompetition Agreements;
(d) At the Closing, assuming the Assumed Liabilities and only the
Assumed Liabilities;
(e) At the Closing, Buyer shall deliver to United cash equal to ninety
percent (90%) of the Inventory Estimate (as defined in Section 4.4 below);
and
(f) At the Closing, Buyer shall deliver to United cash equal to ninety
percent (90%) of the Accounts Receivable Estimate (as defined in Section
4.4 below).
Buyer shall be responsible for and agrees to pay when due all sales, use
and transfer taxes arising out of the transfer of the Assets by United and the
other transactions contemplated hereunder, which shall be Buyer's obligation.
4.4 Inventory; Accounts Receivable.
(a) No later than five (5) business days prior to the Closing, United
shall deliver to Buyer a statement setting forth in reasonable detail
United's reasonable estimate of the value of both the Propane Inventory and
the Parts and Appliances Inventory that will be on hand at the time of
Closing (the "Inventory Estimate"). No less than five (5) business days
after the Closing, Buyer and United shall, mutually, calculate the amounts
to be paid under Sections 3.1(a) and 3.1(b) for the Parts and Appliances
Inventory and Propane Inventory (the "Inventory Payment"). If the Inventory
Payment is more than ninety percent (90%) of the Inventory Estimate, then
Buyer shall pay cash in an amount equal to such difference to United within
five (5) business days after the Closing.If the Inventory Payment is less
than ninety percent (90%) of the Inventory Estimate, then United shall pay
cash in an amount equal to such difference to Buyer within five (5)
business days after the Closing.
(b) No later than five (5) business days prior to the Closing, United
shall deliver to Buyer a statement setting forth in reasonable detail
United's reasonable estimate of the value of the Accounts Receivable that
will be on hand at the time of Closing (the "Accounts Receivable
Estimate"). No less than five (5) business days after the Closing, Buyer
and United shall, mutually, calculate the amount to be paid under Section
3.1(c) for the Accounts Receivable (the "Accounts Receivable Payment"). If
the Accounts Receivable Payment is more than ninety percent (90%) of the
Accounts Receivable Estimate, then Buyer shall pay cash in an amount equal
to such difference to
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United within five (5) business days after the Closing. If the
Accounts Receivable Payment is less than ninety percent (90%) of the
Accounts Receivable Estimate, then United shall pay cash in an amount equal
to such difference to Buyer within five (5) business days after the
Closing.
4.5 Escrow. At the Closing on the Closing Date, Buyer, United, and
Shareholder agree to and shall enter into an Escrow Agreement with [Wells Fargo]
Bank ("Escrow Agent"), in the form of Exhibit H attached hereto (the "Escrow
Agreement"), pursuant to which Buyer will deposit into escrow MLP Senior
Subordinated Units having a value of One Million Dollars ($1,000,000.00), with
such sum to be available for the indemnification of the Buyer under this
Agreement.
ARTICLE 5. LIABILITIES NOT ASSUMED BY BUYER
-------------------------------------------
Anything in this Agreement to the contrary notwithstanding, United shall be
responsible for all of its liabilities and obligations not hereby expressly
assumed by Buyer (the "Retained Liabilities"), and Buyer shall not assume, or in
any way be liable or responsible for, any liabilities or obligations of United,
except the Assumed Liabilities. Without limiting the generality of the
foregoing, Buyer shall not assume, or in any way be liable or responsible for,
the following:
(a) Any liability or obligation of United arising out of or in
connection with the negotiation and preparation of this Agreement and the
consummation and performance of the transactions contemplated hereby,
whether or not such transactions are consummated, including, but not
limited to, any tax liability so arising;
(b) Any liability or obligation of United with respect to employment
or consulting agreements, pension, profit-sharing, welfare or benefit
plans, or amounts owing for commissions or compensation, termination,
severance or other payments to present or former employees, officers,
directors or shareholders of United, except with respect to accrued but
unused vacation time and sick time to which employees hired by Buyer will
be entitled as of the Closing Date;
(c) Any liability (other than with respect to the Assumed Liabilities)
to which any of the parties may become subject as a result of the fact that
the transactions contemplated by this Agreement are being effected without
compliance with the provisions of any Bulk Transfer Law or any similar
statute as enacted in any jurisdiction, domestic or foreign;
(d) Any liability or obligation under the Consolidated Omnibus Budget
Reconciliation Act, as amended, and the Tax Reform Act of 1986, with
respect to employees of United (whether salary, hourly or otherwise) who
are not employed by Buyer in a position and at a base salary substantially
equivalent to such employee's present position and base salary; or
(e) Any liability with respect to any dispute, claim, complaint or
legal action arising between Shareholder and United, in any way resulting
from or claimed to
9
be resulting from the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby or otherwise.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER
-------------------------------------------------------------------
United and Shareholder hereby, jointly and severally, represent and
warrant to Buyer and agree both as of the date hereof and as of the Closing
Date as follows:
6.1 Corporate Organization. United is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority to own, operate and
lease its Assets and to conduct its Business as and where such Business is
now conducted. Except as described in Schedule 6.1 attached hereto, United
has no subsidiary and does not hold any equity or other ownership interest
in any other entity.
6.2 Due Qualification. United is duly qualified to do business and is
in good standing under the laws of each jurisdiction in which the nature of
its Business or of the properties owned or leased by it makes such
qualification necessary, or where the failure to be so qualified would not
have a Material Adverse Effect. A list of such jurisdictions is attached
hereto as Schedule 6.2.
6.3 Authority; Binding Effect. United and Shareholder each have the
right, power, authority, and capacity to execute and deliver this Agreement
and all other agreements contemplated hereby to be entered into by it, to
perform the obligations hereunder and thereunder on its part to be
performed and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by United and Shareholder of this
Agreement and all other agreements and documents contemplated hereby to be
entered into by it and the performance by United and Shareholder of their
respective obligations to be performed hereunder and thereunder have been
duly approved by all necessary action, and no further approvals are
required by the officers or directors of United in connection therewith.
This Agreement constitutes, and when duly executed and delivered, all other
agreements contemplated hereby to be entered into by it will constitute,
the legal, valid, and binding obligations of United and Shareholder,
enforceable against such parties in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other similar laws relating to or affecting creditors'
rights generally and to general equity principles (whether such
enforceability is considered in a proceeding at law or in equity).
6.4 No Creation of Violation, Default, Breach or Encumbrance. The
execution, delivery and performance of this Agreement by United and
Shareholder does not, and the consummation by such Person of the
transactions contemplated hereby will not (i) violate (A) any statute, rule
or regulation to which such Person is subject or (B) any order, writ,
injunction, decree, judgment or ruling of any court, administrative agency
or governmental body to which such Person is subject, (ii) conflict with or
violate any provision of the Organizational Documents of United, or (iii)
assuming receipt of the consents set forth in Schedule 6.4 hereto, require
the consent of any Person or result in the breach of or constitute a
default (or an event
10
which, with notice or lapse of time or both, would constitute a default)
under, violate, conflict with, breach or give rise to any right of
termination, cancellation or acceleration of, or to a loss of benefit to
which United is entitled, under (A) any mortgage, indenture, note or other
instrument or obligation for the payment of money or any contract,
agreement, lease, sublease or license, in each case, to which United is a
party, or (B) any governmental licenses, authorizations, permits, consents
or approvals required for United to own, license or lease and operate its
properties or to conduct its Business as presently conducted by it.
6.5 No Present Default. Except as disclosed in Schedule 6.5 hereto,
all Material Contracts to which United is a party are valid and in full
force and effect and constitute legal, valid and binding obligations of
United. Except as disclosed in Schedule 6.5 hereto, United is not in
default under or in breach of any mortgage, indenture, note or other
instrument or obligation for the payment of money or any Material Contract,
and to the Knowledge of United, no other parties to any such mortgage,
indenture, note, instrument, obligation or Material Contract is in default
thereunder or in breach thereof; no event has occurred which, with the
passage of time or the giving of notice, would constitute such a breach or
default by United or, to the Knowledge of United, by any such other party;
no claim of default thereunder has been asserted or, to the Knowledge of
United, threatened; and neither United nor, to the Knowledge of United, any
other party thereto, is seeking the renegotiation thereof.
6.6 Approvals, Licenses and Authorizations.
(a) Except as may be required by the HSR Act, no (i) order, license,
consent, waiver, authorization or approval of, or (ii) exemption by, or
(iii) giving of notice to, or (iv) registration with or the taking of any
other action in respect of, any person not a party to this Agreement
(including any federal, state, local, foreign or other governmental
department, commission, board, bureau, agency or instrumentality,
including, but not limited to, those such entities with regulatory,
oversight or licensing authority in any way dealing with or touching upon
trucking or the hauling of propane), and no filing, recording, publication
or registration in any public office or any other place, in each case is,
necessary on behalf of United (x) to authorize United's execution, delivery
and performance of this Agreement or any other agreement, document or
instrument contemplated hereby to be executed and delivered by United, (y)
to authorize the consummation by United of the transactions contemplated
hereby or thereby, or (z) for the legality, validity, binding effect or
enforceability with respect to United of any of the foregoing.
(b) All licenses, permits, concessions, warrants, franchises and other
governmental authorizations and approvals of all federal, state, local or
foreign governmental or regulatory bodies required or necessary for United
to carry on its Business (including, but not limited to, the business of
trucking or the hauling of propane) as and where presently conducted by it
have been duly obtained and are in full force and effect and are set forth
truly, correctly and completely on Schedule 6.6 hereto. There are no
proceedings pending or, to the Knowledge of United, threatened which are
likely to result in the revocation, cancellation or suspension or any
material modification of any thereof.
6.7 Compliance With Law. Except as set forth on Schedule 6.7 hereto, United
is not in violation of any statute, law, rule or regulation, or any order, writ,
injunction or decree of any court, administrative agency, governmental body or
arbitration tribunal, to which it or any of the Assets is subject in connection
with the operation of the Business of United, the violation of which would have
a Material Adverse Effect.
6.8 Financial Statements.
(a) United has delivered to Buyer the balance sheets of United as of
the Balance Sheet Date and as of the date that is one year and two years
prior to such Balance Sheet Date and the related statements of income,
shareholder's equity and cash flows for each of the three fiscal years then
ended, and the notes thereto, together with the compilation report of
Gross, Mendelsohn & Associates, P.A., independent certified public
accountants, thereon and the balance sheet of United as of May 31, 2003 and
the related statements of income, shareholder's equity and cash flows for
the eleven-month period ended on each such date.
(b) The financial statements referred to in Section 6.8(a) above
fairly present the financial position, results of operation and cash flows
of United as and at the relevant dates thereof and for the periods covered
thereby in accordance with GAAP, except as outlined on Schedule 6.8(b).
(c) Except as set forth in the Balance Sheet or in the Schedules
hereto, United has no (i) liabilities or obligations, direct or contingent,
accrued or otherwise, of a nature customarily reflected in financial
statements in accordance with GAAP, except those incurred after the Balance
Sheet Date in the ordinary course of business consistent with past practice
and except lease and other contract obligations and other obligations or
liabilities which are disclosed in this Agreement or the Schedules hereto,
and (ii) liabilities or obligations under any Benefit Plans except those
incurred after the Balance Sheet Date in the ordinary course of business
consistent with past practice and pursuant to the terms of the Benefit
Plans described in Schedule 6.18(a).
6.9 Absence of Certain Events. Since the Balance Sheet Date, the Business
of United has been operated only in the ordinary and normal course of Business.
Since the Balance Sheet Date:
(a) There has not been any adverse change in the financial condition,
Assets, liabilities, results of operations, Business, prospects or
condition, financial or otherwise, of United and there has been no
occurrence, circumstance or combination thereof which would reasonably be
expected to result in any such adverse change thereto before or after the
Closing Date;
(b) There has not been any damage, destruction or loss, whether
covered by insurance or not, adversely affecting the Assets or the
Business;
(c) There has not been any increase or decrease in the compensation
payable to or to become payable by United to any of the officers, key
employees or agents of the Business, or change in any insurance, pension or
other beneficial plan,
12
payment or arrangement made to, for or with any of such officers, key
employees or agents or any commission or bonus paid to any of such
officers, key employees or agents;
(d) United has not (i) incurred any obligation or liability or
assumed, guaranteed, endorsed or otherwise become responsible for the
liabilities or obligations of any other person (whether absolute, accrued,
contingent or otherwise), except normal trade or business obligations
incurred in the ordinary course of business; (ii) discharged or satisfied
any Lien or paid any obligation or liability (whether absolute, accrued,
contingent or otherwise), other than in the ordinary course of business;
(iii) mortgaged, pledged, created or subjected to a Lien any of the Assets;
(iv) sold, assigned, transferred, leased or otherwise disposed of any of
the Assets, except in the ordinary course of business, or acquired any
Assets or any interest therein except in the ordinary course of business;
(v) amended, terminated, waived or released any rights or canceled any debt
owing to or claim by United; (vi) transferred or granted any rights under
any Contracts and Other Agreements, patents, inventions, trademarks, trade
names, service marks or copyrights, or registrations or licenses thereof or
applications therefor, or with respect to any know-how or other proprietary
or trade rights; (vii) modified or changed any Material Contracts; or
(viii) entered into any transaction, contract or commitment which by reason
of its size or otherwise was material to the Business of United or
financial condition of United or which was not in the ordinary course of
United's Business as now conducted;
(e) United has not terminated, discontinued, closed or disposed of any
plant, facility or business operation related to the Business of United;
(f) United has not made any investment of a capital nature affecting
the Business except in the ordinary course of business and consistent with
past business practices; and
(g) There has not been any other event or condition of any character
whatsoever which has had or may have a Material Adverse Effect on the
Assets or Business of United.
6.10 Title to and Condition of Properties.
(a) Schedule 2.1A contains a true, correct and complete list of all
Real Property related to the operation of the Business in which United has
any interest, including an accurate and legally sufficient description of
each property and the interests therein. Schedule 2.1B hereto contains a
true, correct and complete list of all leases and subleases of real and
mixed property related to the operation of the Business under which United
is a lessor or lessee (true, accurate and complete copies of which have
previously been delivered to Buyer). Schedule 2.1A and Schedule 2.1B
each identifies the owner of each individual parcel of Real Property
listed therein ("Real Property Owners") and indicates whether such Real
Property Owner is United, Shareholder, or an Affiliate of United or
Shareholder (reflecting therein how such Real Property Owner is an
Affiliate of United or Shareholder) or a non-Affiliate of United. United
has good, marketable and indefeasible fee simple title to all of the owned
real properties described on
13
Schedule 2.1A hereto, and good, marketable and indefeasible title to all
the leasehold estates created by the leases and subleases
described on Schedule 2.1B hereto (such real properties and leasehold
estates collectively referred to herein as the "Real Property"), all free
and clear of Liens, easements, restrictions and reservations except only
for those matters set forth on Schedule 6.10A hereto (such matters
hereinafter referred to as "Permitted Encumbrances"). Without limiting the
generality of the foregoing, as to leasehold estates under the leases and
subleases of Real Property, United has quiet and peaceable possession of
each of the leased properties. All leases and subleases in which United
is a lessor or sublessor are in full force and effect, there is no default
or event of default thereunder and the rent thereunder has not been
prepaid for more than a one-month period.
(b) A true, correct and complete list of all propane tanks, propane
storage tanks and vehicles which are owned or serviced by United and which
have a fair market or book value per unit in excess of Two Hundred Fifty
Dollars ($250.00) is included on Schedule 2.1C and a true, correct and
complete list of all leases of personal property included in the Assets
under which United is a lessee or lessor involving any propane tank,
propane storage tank or any vehicle and which have a fair market or
book value per unit in excess of Two Hundred Fifty Dollars ($250.00) is
included on Schedule 2.1D (true, accurate and complete copies of which
have previously been delivered to Buyer). All propane tanks used in the
Business which have a capacity of at least one hundred twenty (120)
gallons are under contract to customers or are physically located on
the plant lot of United's retail locations. United has good and
indefeasible title to (i) all of the personal property set forth on
Schedule 2.1C and indicated as being owned by it, (ii) all of the Assets
reflected in the financial statements of United, and (iii) all Assets
purported to have been acquired by United after the date of such
financial statements, free and clear of all Liens, except for such Assets
disposed of in the usual and ordinary course of business consistent with
past practices, and all of such Assets are in United's possession and
control.
(c) The conduct of the Business of United in the ordinary course is
not dependent upon the right to use the property of others, except under
valid and binding agreements identified on Schedule 6.10B hereto (true,
accurate and complete copies of which have previously been delivered to
Buyer). The Real Property and the improvements located thereon
do not encroach upon any easements, rights of way or the property of others
and there are no encroachments onto the Real Property from the property of
others. The Assets include all utility connections, and the right to use
the same, necessary for the conduct of the Business in the ordinary course
and said utilities are available under public rights of way or easements
benefiting the Real Property. All of the Real Property has both physical
and legal access to an open and publicly-dedicated road.
(d) United owns or has irrevocable rights to use and is transferring
to Buyer hereunder all assets, property and rights as are necessary or
useful for the conduct of Business as the Business has been conducted
during at least the past two years, except for governmental licenses,
permits and approvals to the extent not assignable to Buyer.
14
(e) The Assets being transferred by United, including, but not
limited to, the machinery, equipment (including automobiles, trucks and
heavy machinery), furniture and fixtures are in good operating condition
and repair and of an appropriate character suitable for the uses for which
intended in the operation of the Business.
(f) All inventories of United are of a quality and quantity usable and
salable in the ordinary course of the Business and in any event are not in
excess of projected requirements over the next twelve (12) months, and the
values at which such inventories are carried on the books of account fairly
represent the value thereof, are not in excess of realizable value, and
reflect the normal inventory valuation policy of United.
(g) The Accounts Receivable of United as shown on its books and
records have arisen in the ordinary course of the Business, represent valid
and enforceable obligations owed to United and are recorded as accounts
receivable on the books of United in accordance with GAAP and said Accounts
Receivable (billed and unbilled) of United (net of the reserve amount) will
be fully paid in the ordinary course of Business.
6.11 Intangible Properties.
(a) Schedule 2.1J hereto contains a list of all patents and
applications therefor, trademarks, trademark registrations and
applications therefor, trade names, service marks, copyrights,
copyright registrations and applications therefor, both foreign and
domestic, owned, possessed, used or held by or licensed to United and
related to the operation of the Business and United owns the entire right,
title and interest in and to the same, together with the goodwill
associated therewith. United has the right to use and is transferring to
Buyer the unrestricted right to use trade secrets, know-how, formulae,
technical processes and information, manufacturing, testing and operating
techniques and procedures, all engineering data and plans and all other
data and information used by United in the Business or which is necessary
for the Business as now conducted. None of the items in the categories
listed in the preceding sentence of this Section 6.11 are subject to any
pending or threatened challenge or infringement, and no impediment exists
as to United's exclusive ownership and use or validity of any such item.
The foregoing constitutes all information necessary to permit the conduct
from and after the Closing Date of the Business, as such Business is and
has normally been conducted. All acts necessary under all provisions of
applicable law to protect the items listed on Schedule 2.1J, including,
without limitation, the filing of required affidavits of use and
incontestability, applications for renewals of registrations and notice
of registration, have been taken by United. All licenses granted to United
by others which are essential or useful to any part of the Business are
assignable to Buyer without consent of or notice to any person, without
change in the terms or provisions thereof and without premium. United has
not infringed any unexpired patent, trademark, trademark registration,
trade name, copyright, copyright registration, trade secret or any other
proprietary or intellectual property right of any party in connection with
the operation of the Business. United has not given any indemnification for
patent, trademark, service mark or copyright infringements.
15
(b) Schedule 2.1K hereto contains a list of United's trade secrets
related to the operation of the Business.
6.12 Contracts and Commitments.
(a) To the extent not listed on Schedule 2.1B or Schedule 2.1D,
Schedule 2.1F hereto lists all Material Contracts related to the
operation of the Business to which United is a party or by which it or
any of its assets or properties are bound (true and correct copies,
each of which have been previously delivered to Buyer). Each Material
Contract (whether disclosed on Schedule 2.1B, Schedule 2.1D,
Schedule 2.1F or otherwise) is in full force and effect and
embodies the complete understanding between the parties thereto with
respect to the subject matter thereof. Except as expressly set forth
on Schedule 2.1F, (i) there exists no material default or claim
thereof by any party to any Material Contract, (ii) there are no facts
or conditions which, if continued or noticed, would result in a
default having a Material Adverse Effect under any Material Contract,
(iii) United has not received any notice that any person intends to
cancel, modify or terminate any Material Contract, or to exercise or
not to exercise any options thereunder, (iv) United has not given any
notice of cancellation, modification or termination of any Material
Contract or of exercise or non-exercise of any options thereunder, (v)
each Material Contract is a valid and binding agreement enforceable in
accordance with its terms except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally and to
general equity principles (whether such enforceability is considered
in a proceeding at law or in equity), and (vi) no consent or approval
of the other parties to any Material Contract or any person pursuant
to any Material Contract is required for the consummation of the
transactions contemplated herein except as set forth on said Schedule,
all of which have been obtained and are in full force and effect.
(b) United is not a party to any contract for goods or services
or any lease with any officer, director, shareholder, employee or
agent of United or any Affiliate of any such person.
(c) No purchase or sale commitments by United are in excess of
the normal, ordinary and usual requirements of the Business; United
has no outstanding power of attorney to any person, firm or
corporation for any purpose whatsoever; United is not restricted by
law or agreement from carrying on the Business anywhere in the world;
no officer, director, shareholder or Affiliate of United has any
financial interest, direct or indirect, in United's supplier s or
customers; except as set forth on Schedule 6.12(c) hereto, United
grants no discounts or rebates to its customers.
(d) United has not made any other contract or agreement or
granted any option to contribute or otherwise transfer all or a
significant part of the capital stock or Assets of United.
(e) The Customer Deposits (as defined in Section 3.1(y)) are all
amounts owed to customers of United as a result of amounts held by
United as a customer deposit.
16
6.13 Insurance. A list of all policies of insurance and bonds of
any type presently in force (including without limitation all
occurrence based policies which provide coverage for events occurring
in any of the five years prior to the date hereof) with respect to the
Business, including, without limitation, those covering product
liability claims and the Assets and operations, are set forth on
Schedule 6.13 hereto. Such policies and bonds (a) provide coverage in
such amounts, and against such losses and risks, as maintained by
comparable businesses exercising prudent business practices to provide
for the protection of the Business and Assets, and (b) will be
maintained in effect up to and including the Closing Date. United will
use its best efforts to obtain at Buyer's expense any additional
insurance coverage which Buyer reasonably may request United to carry
until and including the Closing Date. United will at the written
request of Buyer cause the policies of insurance against fire and
other casualty to property to be endorsed so as to include Buyer as a
party insured thereunder as its interest may appear.
6.14 Tax Returns and Tax Audits.
(a) United has filed with all appropriate governmental agencies
all Tax or information returns and Tax reports required to be filed.
All such returns and reports as are based on income have been prepared
on the same basis as those of previous years; and all federal, state,
foreign and local income, profits, franchise, sales, use, occupation,
property, excise, ad valorem, employment or other taxes ("Tax" or
"Taxes") of United, and all interest, penalties, assessments or
deficiencies claimed to be due by any such taxing authority with
respect to the foregoing have been fully paid.
(b) United has made adequate accruals for the payment of all
Taxes payable in respect of the period subsequent to the last period
for which such taxes were paid, and, to the Knowledge of United,
United has no liability for such taxes in excess of the amounts so
paid or accruals so made.
(c) United is not a party to any pending action or proceeding,
nor, to the Knowledge of United, is any action or proceeding
threatened or contemplated by any governmental authority for
assessment or collection of Taxes or any other governmental charges,
and no claim for assessment or collection of Taxes or any other
governmental charges has been asserted against United, nor, to the
Knowledge of United, is the assertion of any such claim pending or
contemplated nor is there any basis for any such claim. To the
Knowledge of United, there have been no reports prepared by any agent
of the Internal Revenue Service with respect to any Tax matter
involving United.
(d) United is not or has not been required to file any Tax
returns with, or pay any Taxes to, any foreign countries or political
subdivisions thereof. United does not have in effect any powers of
attorney with respect to any Tax matters involving it. At no time has
a consent been filed by United to have the provisions of section
341(f)(2) of the Code apply, nor has any agreement under section
341(f)(3) been filed by United.
(e) United agrees to provide to Buyer such other Tax information
with respect to the Business or the Assets as Buyer may reasonably
request.
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(f) There are no Taxes, fees or governmental charges (including
without limitation sales taxes) payable by United, the Shareholder or
Buyer to any state, city or subdivision of either thereof as a result
of the sale of the Assets and the Business to Buyer, other than those
taxes listed in Schedule 6.14(f) hereto.
6.15 Books and Records.
(a) The books, records and accounts of United (i) are in all
respects true, complete and correct, (ii) have been maintained in
accordance with good business practices on a basis consistent with
prior years, (iii) are stated in reasonable detail and accurately and
fairly reflect the transactions and dispositions of the Assets by
United, and (iv) accurately and fairly reflect the depreciation
associated with such Assets.
(b) United has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general
or specific authorization; and (ii) transactions are recorded as
necessary (A) to permit preparation of financial statements in
conformity with GAAP or any other criteria applicable to such
statements, and (B) to maintain accountability for the assets of
United.
6.16 Substantial Customers and Suppliers. Schedule 6.16 hereto sets forth
a true and complete list of the ten (10) largest suppliers to the Business on
the basis of cost) of goods (including propane gas) or services purchased during
the twelve months ended April 30, 2002 and 2003, as well as the dollar amounts
of such goods or services purchased during such year. Schedule 6.16 hereto
alsosets forth a true and complete list of the ten (10) largest customers of the
Business (in terms of sales) during the twelve months ended April 30, 2002 and
2003, as well as the dollar amounts of such sales during such year. Except to
the extent set forth in Schedule 6.16, since April 30, 2003, no such supplier or
customer has ceased or reduced its sales to or purchases from United, or given
notice of an intention to cease or reduce such sales or purchases.
6.17 No Litigation, Adverse Events or Violations. There is no action, suit,
claim or legal, administrative, arbitration, condemnation or other proceeding or
governmental investigation or examination or any change in any zoning or
building ordinance affecting any of the Assets, pending or, to the Knowledge of
United, threatened or injunction or orders entered, pending or threatened
against United or any business, properties or assets of United, at law or in
equity, before or by any federal, state, municipal or other governmental
department, court, commission, board, bureau, agency or instrumentality,
domestic or foreign, to restrain or prohibit the consummation of the
transactions contemplated hereby or which, if determined adversely, is
reasonably likely to result in (i) a Material Adverse Effect or (ii) materially
and adversely affect the consummation of the transactions contemplated by this
Agreement and there is no state of facts currently existing on which any of the
foregoing might be based. United is not in violation of, any applicable federal,
state, local or foreign law, ordinance (including any zoning or building
ordinance), regulation, order, requirement, statute, rule, permit, concession,
grant, franchise, license or other governmental authorization relating or
applicable to it, to any of the Assets or the Business, except where such
violation would not give rise to a Material Adverse Effect.
18
6.18 Employee Benefit Plans; Labor Matters.
(a) Schedule 6.18(a) sets forth a true and complete list of any and
all pension, retirement, savings, disability, medical, dental, health, life
(including any individual life insurance policy as to which United is the
owner, beneficiary or both), death benefit, group insurance, profit
sharing, deferred compensation, stock options or other stock incentive,
bonus incentive, vacation pay, sick pay, severance or termination pay,
employment agreement, "cafeteria" or "flexible benefit" plan under Section
125 of the Code, or other employee or director benefit plan, trust,
arrangement, contract, agreement, policy or commitment, whether formal or
informal, written or oral, under which employees, former employees,
directors or former directors of United are entitled to participate by
reason of their current or prior employment, or current or former
directorship, with United, including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (i) to which United is a party
or a sponsor or a fiduciary thereof or (ii) with respect to which United
has made payments, contributions or commitments, or may otherwise have any
liability (collectively, the "Benefit Plans"). With respect to the Benefit
Plans, individually and in the aggregate, United has made available to
Buyer, a true and correct copy of (a) the most recent annual report (Form
5500) filed with the IRS, if any, (b) such Benefit Plan, (c) any summary
plan description relating to such Benefit Plan and (d) each trust agreement
and group annuity contract, if any, relating to such Benefit Plan.
(b) The Benefit Plans have been operated and administered by United in
material compliance with all applicable laws relating to employment or
labor matters including ERISA and the Code. With respect to the Benefit
Plans, no event has occurred which would subject United to liability
(except liability for benefits, claims and funding obligations payable in
the ordinary course) under ERISA, the Code, or any other applicable
statute, order or governmental rule or regulation. With respect to the
Benefit Plans, individually and in the aggregate, there has been no
prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code which would result in liability to United, and
there has been no action, suit, grievance, arbitration or other claim with
respect to the administration or investment of assets of the Benefit Plans
(other than routine claims for benefits made in the ordinary course of plan
administration) pending, or to the Knowledge of United, threatened.
(c) All contributions to and payments under any Benefit Plan required
in respect of periods ending on or before the Closing Date have been made
by United before the Closing Date. Except as may be required to comply with
Section 9.14 of this Agreement, there is no agreement, contract or
understanding between United, on the one hand, and any employee,
participant, labor union, collective bargaining unit or other person or
entity, on the other hand, that requires or may require any amendment to
any of the Benefit Plans.
(d) Each Benefit Plan that is intended to be tax qualified under
Section 401(a) of the Code is tax qualified and each such Benefit Plan has
received, or application has been made for, a favorable determination
letter from the IRS stating that
19
the Plan meets the requirements of the Code and that any trust or trusts
associated with the Plan are tax exempt under Section 501(a) of the Code.
Each Benefit Plan that is funded with a trust that is intended to be
tax-exempt under Section 501(c)(9) of the Code is exempt from taxation and
each such trust has received a letter from the IRS stating that the trust
meets the requirements of the Code for tax-exempt status, within the
immediately preceding three-year period.
(e) United, and any entity which together with United could be deemed
to be a "single employer" within the meaning of Section 414(b), (c), (m) or
(o) of the Code, does not now maintain or contribute to and, within the
immediately preceding three-year period, has not maintained or contributed
to, any defined plan that is (i) a defined benefit plan within the meaning
of Section 3(35) of ERISA or (ii) subject to the requirements of Title IV
of ERISA.
(f) United is not a party to any collective bargaining or other labor
union contract. There is no pending or threatened union organizational
effort, labor dispute, strike or work stoppage relating to employees of
United and none has occurred within the immediately preceding five (5)-year
period. United, and any representative or employee of United, has not
committed any unfair labor practice in connection with the operation of the
Business of United, and there is no pending or threatened charge or
complaint against United by the National Labor Relations Board or any
comparable state agency. United is in compliance with all applicable laws
respecting employment, wages, hours, safety and health and other terms and
conditions of employment. United has not experienced a "plant closing" or
"mass layoff" within the meaning of the Worker Adjustment and Retraining
Notification Act, 29 U.S.C.ss.ss. 2101 et seq. ("WARN") within the
immediately preceding three-year period.
(g) There are no written or oral employment agreements, employment
contracts or understandings relating to employment (other than ordinary
course arrangements for "at-will" employment) to which United is a party
(excluding any such agreements, contracts or understandings listed in
Schedule 6.18(a) hereto).
(h) Except as may be required to comply with Section 9.14 of this
Agreement, the consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional
acts or events) result in any payment (whether of severance pay or increase
in compensation, benefits or rights or otherwise) becoming due from United
to any of its employees, former employees, directors or former directors,
nor accelerate the timing of any payment or the vesting of any rights or
increase the amount of any compensation due to any such person. As a direct
or indirect result of the consummation of the transactions contemplated
hereby, United will not be obligated to make a payment to any person that
would not be deductible as a result of the application of Section 280G of
the Code.
6.19 Business Names. United does not do business in any state or
country under any name other than "United Propane, Incorporated" or "United
Propane, Inc."
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6.20 Brokers and Finders. No broker or finder has acted for United or
Shareholder in connection with this Agreement and the transactions
contemplated hereby; and no broker or finder is entitled to any brokerage
or finder's fee or other commission in respect thereof based in any way on
any agreement, arrangement or understanding made by United or Shareholder.
6.21 Environmental.
(a) There has not been, as of the date hereof, any "Release" (as
defined in 42 U.S.C. ss. 9601(22)) or threat of a Release of any "Hazardous
Substances" (as defined in 42 U.S.C. ss. 9601(14)) or oil, gasoline or
other petroleum related products on or about any of the Real Property.
(b) United has no contract or agreement and has not otherwise arranged
for disposal or treatment, or arranged with a transporter for transport for
disposal or treatment, of Hazardous Substances at any "Facility" (as
defined in 42 U.S.C. ss. 9601(9)) owned or operated by another Person.
(c) United has not accepted any Hazardous Substances for transport to
disposal or treatment facilities or sites selected by United.
(d) The Real Property and the use thereof is in compliance with and
United is in compliance with all applicable laws, statutes, ordinances,
rules and regulations of any governmental or quasi-governmental authority
(federal, state or local) relating to environmental protection, underground
storage tanks, toxic waste, hazardous waste, oil or hazardous substance
handling, treatment, storage, disposal or transportation, or arranging
therefor, respecting any products or materials previously or now located,
delivered to or in transit to or from the Real Property, including without
limitation the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, and the Superfund
Amendments and Reauthorization Act of 1986.
(e) Schedule 6.21 attached hereto is a true, correct and complete list
of all Hazardous Substances used or generated by United in the conduct of
the Business since January 1, 1970, and a list of the methods used by
United and any predecessor (including a list of past and present disposal
and reclamation sites) to dispose thereof.
(f) The past disposal practices relating to Hazardous Substances of
United (and its predecessors, if any) have been accomplished in accordance
with all applicable laws, rules, regulations and ordinances.
(g) United has not been notified of nor is there any basis for any
potential liability of United with respect to the clean-up of any waste
disposal site or facility. United has no information to the effect that any
site at which United has disposed of Hazardous Substances or oil has been
or is under investigation by any local, state or federal governmental body,
authority or agency.
21
(h) United has not received any notification of releases of Hazardous
Substances or oil from any governmental or quasi-governmental agency.
6.22 Investment Representations.
(a) United and Shareholder have each reviewed the MLP SEC Documents
and recognize that an investment in MLP involves significant risks,
including those set forth under the caption "Risk Factors" in the
Prospectus, dated November 22, 2002, of MLP. United and Shareholder have
each been furnished any information relating to MLP and its Affiliates,
their respective business and financial condition, the MLP Common Units and
the MLP Senior Subordinated Units and any other matter requested by United
and have been afforded the opportunity to ask questions and receive answers
concerning MLP and to obtain any additional information which MLP possesses
or can acquire without unreasonable effort or expense. United and
Shareholder have each been furnished access to any and all other
information that is material to United, Shareholder's or a reasonable
investor's decision to acquire the MLP Common Units and the MLP Senior
Subordinated Units.
(b) United and Shareholder are each an "accredited investor" under
Regulation D of the SEC.
(c) The MLP Common Units and the MLP Senior Subordinated Units are
being acquired (i) solely for United's own account and not as nominee or
agent or otherwise on behalf of any other person, and (ii) not with a view
to or with any present intention to reoffer, resell, fractionalize, assign,
grant any participating interest in, or otherwise distribute the MLP Units
in violation of the Securities Act of 1933, as amended.
(d) United agrees that the certificates evidencing the MLP Common
Units and the MLP Senior Subordinated Units acquired by United shall be
stamped or otherwise imprinted with a conspicuous legend in substantially
the following form:
The Units represented by this certificate have not
been registered under the Securities Act of 1933, as
amended (the "Act") or any state securities laws. These Units
have been acquired for investment and not with a view to
distribution or resale, and may not be sold, pledged,
hypothecated, donated or otherwise transferred, whether or
not for consideration, without an effective registration
statement under the Act and any applicable state securities
laws, or an opinion of counsel satisfactory to Inergy, L.P.
that such registration is not required with respect to the
proposed disposition thereof and that such disposition will
not cause the loss of the exemption(s) upon which Inergy
relied in transferring these Units to the original purchaser
thereof.
United agrees that a stop transfer order shall be placed on the transfer
books maintained with respect to the MLP Common Units and the MLP Senior
Subordinated Units which
22
give effect to the foregoing restrictive legend. Buyer agrees that such
stop transfer order will be removed on any MLP Common Units or MLP Senior
Subordinated Units sold pursuant to an effective registration statement
under the Securities Act of 1933.
6.23 Disclosure. To the Knowledge of United, none of the financial
statements referred to in Section 6.8 above, or any representation or
warranty or other provision contained herein, or in any document, schedule
or certificate delivered or to be delivered to Buyer in connection with
this Agreement or the transactions contemplated hereby, or any written
statement, certificate or other document furnished to Buyer in connection
with this Agreement or the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary in order to make the statements
contained therein not misleading.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF BUYER
----------------------------------------------------
Buyer represents and warrants to United and Shareholder, both as of the
date hereof and as of the Closing Date, as follows:
7.1 Organization; Documentation. Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the power and authority and all licenses, authorizations,
permits, consents and approvals required to own, license or lease and operate
its properties and to conduct its business as presently conducted by it.
7.2 Authority; Binding Effect. Buyer has the power and authority to execute
and deliver this Agreement and all other agreements contemplated hereby to be
entered into by it, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by Buyer of this Agreement and all other agreements and documents
contemplated hereby to be entered into by it and the performance by Buyer of all
obligations on its part to be performed hereunder and thereunder have been duly
approved by all necessary action by Buyer, and no further approvals are required
by the members of Buyer in connection therewith. This Agreement constitutes, and
when duly executed and delivered by Buyer, all other agreements contemplated
hereby to be entered into by it will constitute, the legal, valid and binding
obligation of Buyer, enforceable against Buyer, in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally and to general equity principles (whether such enforceability is
considered in a proceeding at law or in equity).
7.3 No Creation of Violation, Default, Breach or Encumbrance. The execution
and delivery by Buyer of this Agreement does not, and the consummation by Buyer
of the transactions contemplated hereby will not (i) conflict with or violate
any provision of the Organizational Documents of Buyer; (ii) assuming receipt of
the consents set forth in Schedule 7.3 hereto, require the consent of any person
or entity or result in the breach of or constitute a default under any contract,
agreement, lease, license, mortgage, indenture, note or other instrument or
obligation to which Buyer is a party, which could adversely affect the ability
of Buyer to consummate the transactions contemplated by this Agreement; or (iii)
violate
23
(A) any statute, rule or regulation to which Buyer is subject or (B) any order,
writ, injunction, decree, judgment or ruling of any court, administrative agency
or governmental body to which Buyer is subject.
7.4 Brokers and Finders. No broker or finder has acted for Buyer in
connection with this Agreement and the transactions contemplated hereby; and no
broker or finder is entitled to any brokerage or finder's fee or other
commission in respect thereof based in any way on any agreement, arrangement or
understanding made by Buyer.
7.5 No Adverse Action. There are no actions, suits, claims or legal,
administrative, arbitration or other proceedings or governmental investigations
or examinations pending or threatened or injunctions or orders entered, pending
or threatened against Buyer or its business, property or assets, at law or in
equity, before or by any federal, state, municipal or other governmental
department, court, commission, board, bureau, agency or instrumentality,
domestic or foreign, to restrain or prohibit the consummation of the
transactions contemplated hereby or to obtain damages which if decided adversely
would adversely affect the ability of Buyer to consummate the transactions
provided for in this Agreement.
7.6 Approvals, Licenses and Authorizations. Except as may be required by
the HSR Act, no (i) order, license, consent, waiver, authorization or approval
of, or (ii) exemption by, or (iii) giving of notice to, or (iv) registration
with or the taking of any other action in respect of, any person not a party to
this Agreement or any federal, state, local, foreign or other governmental
department, commission, board, bureau, agency or instrumentality; and no filing,
recording, publication or registration in any public office or any other place
in each case is now, or under existing law in the future will be, necessary on
behalf of Buyer to authorize either the execution, delivery and performance of
this Agreement or any other agreement, document or instrument contemplated
hereby to be executed and delivered by it and the consummation by it of the
transactions contemplated hereby or thereby, or for the legality, validity,
binding effect or enforceability of any thereof.
7.7 MLP SEC Documents. None of the SEC Documents or any representation or
warranty or other provision contained herein, or in any document, schedule or
certificate delivered or to be delivered to United in connection with this
Agreement or the transactions contemplated hereby, or any written statement,
certificate or other document furnished to United in connection with this
Agreement or the transactions contemplated hereby, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements contained therein not misleading.
7.8 MLP Securities. The MLP Common Units and the MLP Senior Subordinated
Units to be issued to United pursuant to this Agreement, and any MLP Common
Units issued upon conversion of the MLP Senior Subordinated Units to be issued
to United pursuant to this Agreement will, when issued, be duly and validly
authorized, validly issued and fully paid and non-assessable and free from any
restrictions on transfer, except for restrictions imposed by federal or state
securities laws and except for those imposed pursuant to the Unitholder
Agreement attached hereto as Exhibit G. All such Units shall be issued to United
free and clear of all liens, claims and encumbrances of third parties, other
than those liens, claims and encumbrances which have been created by United or
which have been provided for in the
24
Escrow Agreement. All MLP Common Units issued to United shall, when issued, be
approved for listing on NASDAQ and any other securities exchange on which MLP
Common Units are then listed.
ARTICLE 8. ACCESS TO INFORMATION BY BUYER
------------------------------------------
8.1 Prior to Closing. Until the Closing, United will furnish Buyer, its
members, officers, employees, accountants, attorneys, representatives and
agents, with all financial, operating, engineering and other data and
information concerning the Business and the Assets as Buyer shall from time to
time reasonably request and will accord Buyer or its authorized representatives
access, during normal business hours and subject to minimal disruption of
United's operations, to the Assets and United's books, records, contracts and
documents (including tax returns filed and those in preparation) and will give
such persons the opportunity to ask questions of, and receive answers from,
appropriate representatives of United with respect to the Business and the
Assets. Buyer and its authorized representatives shall have the right to conduct
a Phase I environmental study with respect to Real Property, if deemed necessary
in due diligence reviews, by a consultant selected by Buyer and reasonably
satisfactory to United. No investigations by Buyer, or its members, employees,
accountants, attorneys, representatives or agents, shall reduce or otherwise
affect the obligation or liability of United with respect to any
representations, warranties, covenants or agreements made herein or in any other
certificate, instrument, agreement or document executed and delivered in
connection with this Agreement.
8.2 Public Information. Except as may be required by law, until the Closing
or termination of this Agreement, United shall consult with Buyer and Buyer
shall consult with United with respect to the content of any communications to
be made to employees, customers, suppliers and others having dealings with
United as well as communications made to the public and to the form and content
of any application or report to be made to any judicial or regulatory authority
or other governmental authority which relates to the transactions contemplated
by this Agreement. Notwithstanding the foregoing, Buyer may make such press
releases and public disclosures as Buyer may deem necessary or appropriate to
comply with state and Federal securities laws after consultation with United.
8.3 Confidentiality. All information disclosed by any party to this
Agreement to the other party shall be kept confidential by such receiving party
and shall not be used by such receiving party other than as herein contemplated
or required by court order, except to the extent that such information was known
by such receiving party when received or hereafter becomes legally obtainable
from other sources or to the extent such duty as to confidentiality is waived by
the other party. In the event of termination of this Agreement, each party
hereto shall return, upon request, to the other parties, all documents (and
reproductions thereof) received from such other parties (and in the case of
reproductions, all such reproductions made by the receiving party) that include
information not within the exceptions contained in the first sentence of this
Section 8.3.
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ARTICLE 9. COVENANTS OF THE PARTIES
------------------------------------
9.1 Actions Pending Closing. From the date hereof to the Closing, except as
contemplated by this Agreement, United and Shareholder each hereby represent,
warrant, covenant and agree that, unless the prior written consent of Buyer is
obtained, United and Shareholder will not take any action which would result in
a violation of any of the following proscriptions:
(a) The Business will be carried on diligently and in the usual,
regular and ordinary manner and United will use commercially reasonable
best efforts to preserve its present business organization intact, keep
available the services of its present officers and employees and preserve
its present relationships with Persons having business dealings with it,
all solely as the same relates to the Business, and shall not make or
institute any methods of manufacture, purchase, sale, lease, management,
accounting or operation in or affecting the Business which are not usual
and customary in the industry and consistent with United's past practices;
(b) United will not increase or decrease the compensation payable or
to become payable to any officer or employee, or make any change in any
insurance, pension or other employee benefit plan nor pay any commission or
bonus to any of such officers or employees;
(c) United will not make any change in its sales, credit or collection
terms and conditions insofar as the same relates to its Business;
(d) United will not (i) incur any obligation or liability or assume,
guarantee, endorse or otherwise become responsible for the liabilities or
obligations of any other person (whether absolute, accrued, contingent or
otherwise), except normal trade or business obligations incurred in the
ordinary course of business; (ii) discharge or satisfy any Lien or pay any
obligation or liability (whether absolute, accrued, contingent or
otherwise), other than in the ordinary course of business; (iii) mortgage,
pledge, create or subject to a Lien any of the Assets; (iv) contribute,
assign, transfer, lease or otherwise dispose of any of the Assets, except
in the ordinary course of business, or acquire any assets or any interest
therein except in the ordinary course of business; (v) amend, terminate,
waive or release any rights or cancel any debt owing to or claim by United;
(vi) transfer or grant any rights under any Contracts and Other Agreements,
patents, inventions, trademarks, trade names, service marks or copyrights,
or registrations or licenses thereof or applications therefor, or with
respect to any know-how or other proprietary or trade rights; (vii) modify
or change any Material Contracts; or (viii) enter into any transaction,
contract or commitment which by reason of its size or otherwise is material
to the Business or financial condition or which is not in the ordinary
course of the Business as now conducted;
(e) All tangible Assets of United will be used, operated, maintained
and repaired in a manner consistent with past practices;
26
(f) United will not do any act or omit to do any act, or permit
any act or omission to act, which will cause a breach by it of any
Material Contract;
(g) United will not make any material capital investment, other
than purchasing a Reimbursable Capital Item, which affects the
Business without the prior written consent of Buyer;
(h) United will not permit any insurance policy naming it as a
beneficiary or a loss payable payee and relating to the Assets or
Business to be canceled, terminated or modified or any of the coverage
thereunder to lapse unless simultaneously with such termination,
cancellation, or modification replacement policies providing
substantially the same coverage are in full force and effect;
(i) United will pay when due or otherwise in the ordinary course
consistent with past practices each of the following: (i) any trade
accounts payable, (ii) any payments required by any indentures,
mortgages, financing agreements, loan agreements or similar agreements
or (iii) taxes of whatever kind or nature or payments related thereto
(including, without limitation, estimated payments and withholding
remittances), unless the amount or applicability of such tax is being
challenged by United; and
(j) United will maintain its books, accounts and records in a
manner and on a basis consistent with prior years.
9.2 Information. From the date hereof to the Closing, United and
Shareholder will promptly inform Buyer in writing of any litigation commenced
against them or either of them in respect of (a) the transactions contemplated
by this Agreement or (b) the Assets or Business.
9.3 Further Assurances. At Closing or thereafter, United shall execute and
deliver or cause to be executed and delivered to Buyer such further instruments
of transfer, assignment and conveyance and take such other action as Buyer may
reasonably require to more effectively carry out the transfer of the Assets and
Business to Buyer and the consummation of the matters contemplated by this
Agreement.
9.4 Compliance. From the date hereof to the Closing, except as contemplated
by this Agreement, United and Shareholder each hereby agree to use commercially
reasonable best efforts to:
(a) cause all obligations imposed upon United or Shareholder in this
Agreement to be duly complied with, and cause all conditions precedent to
such obligations to be satisfied prior to the Cut-Off Date; and
(b) obtain any and all consents, waivers, amendments, modifications,
approvals, authorizations, notations and licenses necessary to the
consummation of the transactions contemplated by this Agreement.
27
9.5 Delivery of Documents. At or prior to the Closing, United shall deliver
to Buyer all keys to any improvements located on any of the Real Property of
United, all Documents and Other Papers related to the operation of the Business
or the Assets, including without limitation all files relating to the
receivables and payables (whether current or past), original certificates of
letter patent, trademarks and copyrights, and hard copies of any books or
records or Documents and Other Papers or information and data relating to the
operation of the Business or the Assets stored on any electronic media,
including computers.
9.6 Bulk Transfer Laws. The parties hereto each waives compliance by the
others with the provisions of any statute of any state or jurisdiction
regulating bulk sales or transfers which may be applicable to the sale of the
Assets. United agrees that it will, so far as is practicable, apply so much of
the Purchase Price it receives under this Agreement as may be necessary to pay
United's Retained Liabilities which are then known to exist and to be due.
United hereby agrees to indemnify and hold Buyer and its members, officers,
employees, agents, representatives, successors and assigns harmless from and
against any and all losses, claims, damages, expenses and liabilities (including
legal fees and expenses) to which Buyer may become subject pursuant to the bulk
transfer provisions of the Uniform Commercial Code of any bulk transfer or sale
statute with regard to the sale of the Assets contemplated by this Agreement.
9.7 Noncompetition, Registration Rights, Unitholder and Lease Agreements.
(a) Buyer, Shareholder and United agree to enter into the
Noncompetition Agreements in the form attached hereto as Exhibit A at or
prior to Closing.
(b) United, MLP and Shareholder agree to enter into the Registration
Rights Agreement in the form attached hereto as Exhibit J at or prior to
Closing.
(c) United and MLP agree to enter into a Unitholder Agreement in the
form attached hereto as Exhibit G at or prior to Closing, with respect to
that portion of MLP Common Units designated therein.
(d) United agrees to enter into, and United and Shareholder agree to
and shall cause each other Real Property Owner, except those Real Property
Owners which are not Affiliates of United or Shareholder, to enter into, a
Lease Agreement in the form attached hereto as Exhibit C with Buyer on
each parcel of Real Property, with each such Base Rent (as defined in
Exhibit C) as is set forth on Exhibit C-1 attached to Exhibit C.
Each Lease Agreement provides that the Buyer shall have the right of first
refusal on any sale of the underlying Real Property. Shareholder agrees
that he will guarantee the obligations of the Real Property Owners under
each Lease Agreement entered into pursuant to this Agreement.
9.8 No Shop. United and Shareholder each agree that, from the date
hereof and until the first to occur of the Closing or the termination of
this Agreement in accordance with Article 15, United, each of its officers
and directors and Shareholder will not, and United and Shareholder will
direct and use their best efforts to cause each of their respective
representatives to not, initiate, solicit, encourage or respond to,
directly or indirectly, any inquiries or the making
28
or implementation of any proposal or offer (including any proposal or offer to
Shareholder) with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities of, United (any such proposal or offer being an
"Acquisition Proposal") or provide any Confidential Information respecting
United or Buyer or any affiliate of Buyer to, or engage in any activities or
have any discussions or negotiations with, any person relating to an Acquisition
Proposal or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. United and Shareholder will: (a) immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any persons conducted heretofore with respect to any of the foregoing, and each
will take the steps necessary to inform such persons of the obligations
undertaken in this Section 9.8; and (b) notify the Buyer immediately if any such
inquiries or proposals are received by, any such information is requested from,
or any such discussions or negotiations are sought to be initiated or continued
with, United or Shareholder.
9.9 Curtis Bay Rail Terminal. United, Shareholder and Buyer agree that,
between the date hereof and the Closing Date, they will enter into good faith
negotiations respecting the terms of a lease or other agreement whereby the
Buyer would lease all equipment, land, propane gas, and other things necessary
from the operator of the Curtis Bay Rail Terminal, subject to any rights of
third parties having agreements with respect thereto.
9.10 Supplemental Information. United and Shareholder each agree that such
party has the obligation until the Closing to provide Buyer with such additional
information ("Supplemental Information") in the form of (a) amendments to then
existing Schedules or (b) additional Schedules, as would be necessary to make
such parties' representations and warranties true and correct as of the Closing.
For purposes only of determining whether the conditions to the obligations of
Buyer have been satisfied, the Schedules to this Agreement as of the Closing
Date will be deemed to be the Schedules to this Agreement as of the date hereof
as amended or supplemented by the Supplemental Information provided to Buyer
prior to the Closing pursuant to this Section 9.10. If the Supplemental
Information so provided discloses information which has had or is likely to have
in the future a Material Adverse Effect on the Business or Assets, Buyer will be
entitled to terminate this Agreement by notice to United and Shareholder. In the
event information first disclosed in the Supplemental Information was known to
United or Shareholder at the date hereof and was therefore required to be
disclosed at the time of signing of this Agreement but was not, and Buyer does
not terminate the Agreement and proceeds to Closing, then Buyer will be entitled
to be indemnified for all Damages that are attributable to such failure to
disclose by United or Shareholder.
9.11 HSR Act. Buyer and United agree that a filing pursuant to and under
the HSR Act is required in connection with the consummation of the transactions
contemplated by this Agreement. Each of United and Buyer agree that, promptly
following the execution of this Agreement, such party will compile and file, (or
will cause its "ultimate parent entity" (as determined for purposes of the HSR
Act) to file) under the HSR Act such information respecting it as the HSR Act
requires of an entity to be acquired, in the case of United, and of an acquiring
entity, in the case of Buyer. Buyer shall pay the HSR Act filing fee required
thereunder.
29
9.12 Employee Matters.
(a) Schedule 9.12(a) sets forth a list of all salaried and hourly
employees employed by United and such employees' current compensation. As
of the Closing Date, Buyer shall offer employment to all active employees
of the Business and all employees of the Business who, as of the Closing
Date, are on a permitted leave of absence, at the same salary or wages
provided by United as of the Closing Date and with benefits comparable to
those provided by United as of the Closing Date. Such employees of United
who shall accept such offer of employment by the Buyer shall be referred to
herein as a "Transferred Employee." Except as set forth in the next
sentence, Buyer shall have no liability for any salary or benefits accrued
prior to the Closing Date. With respect to employees hired by Buyer in
substantially equivalent positions at substantially equivalent salaries,
Buyer agrees to afford to such employees their accrued but unused vacation
time and sick time as of the Closing Date and an amount equal to the value
of such accrued but unused vacation time and sick time to which such
employees will be entitled shall be deducted from the Purchase Price.
Nothing contained in this Section 9.12 is intended to confer any benefit or
legal right on any employees of United and no such employees shall be
considered a third party beneficiary of this Agreement.
(b) COBRA. United shall be solely responsible for any obligations
under the Consolidated Omnibus Budget Reconciliation Act, as amended, and
the Tax Reform Act of 1986, with respect to employees of United (whether
salary, hourly or otherwise) who are not employed by Buyer in a position
and at a base salary substantially equivalent to such employee's present
position and base salary.
(c) Employment-Related Claims. United assumes all liability, costs and
expenses (including reasonable attorneys' fees) for all existing employment
claims which have been filed by any employee or former employee of United
prior to the Closing Date relating to arbitrations, unfair labor practice
charges, employment discrimination charges, lawsuits, any
employment-related tort claim or other claims or charges of or by employees
of United or any thereof filed after the Closing Date but arising as a
result of actions or events or series of actions or events all or a portion
of which occurred prior to the Closing Date. Schedule 9.12(c) sets forth a
brief description of all such claims which have been filed
as of the date hereof. United will promptly describe to Buyer in writing a
brief description of any of such claims which may be filed after the date
hereof but on or before the Closing Date.
9.13 Profit Sharing Plan. Within a reasonable period of time after the
Closing Date, Seller shall transfer from the profit sharing plan qualified under
Section 401(a) of the Code that is maintained by Seller (the "Seller's Plan") to
a plan qualified under Section 401(a) of the Code that is maintained by Buyer
(the "Buyer's Plan"), an amount equal to the aggregate account balances held in
the Seller's Plan as of the date of transfer with respect to all Transferred
Employees. The transfer of assets contemplated by this Section 9.13 shall be in
cash or a combination of cash and in kind property, as may be mutually agreed to
by Seller and Buyer. Prior to the date of such transfer, and as preconditions
thereto: (i) Seller shall deliver to Buyer a copy of the most recently issued
IRS determination letter that the Seller's Plan is qualified under the Code,
together with a representation from Seller that from the date of such
determination
30
letter through the date of transfer, no act or omission has occurred which would
bring into question the validity of such letter; and (ii) Buyer shall deliver to
Seller a copy of the most recently issued IRS determination letter that the
Buyer's Plan is qualified under the Code, together with a representation from
Buyer that from the date of such determination letter through the date of
transfer, no act or omission has occurred which would bring into question the
validity of such letter. Subsequent to the transfer of assets to the Buyer's
401(k) Plan, neither Seller nor the Seller's Plan shall retain any liability
with respect to such Transferred Employees to provide them with benefits in
accordance with the terms of the Seller's Plan. Buyer and Seller shall provide
each other with such records and information as may be necessary or appropriate
to carry out their obligations under this Section 9.13 and shall cooperate in
the filing of all documents required for the transfer of assets and liabilities
described herein.
9.14 Health and Welfare Benefits. As of the Closing Date, Buyer shall
assume all rights and obligations of United under United's group health
insurance policy with MAMSI and agrees that it will continue such policy for the
benefit of Transferred Employees through September 30, 2003. With respect to
each other insured benefit plan or arrangement provided to Transferred Employees
by United immediately prior to the Closing Date, Buyer agrees that it will
either: 1) assume all rights and obligations of United under the insurance
policy or policies under which United provides such benefits; or 2) provide the
Transferred Employees benefits comparable to the benefits provided by United
immediately prior to the Closing Date under employee benefit plans maintained by
the Buyer.
9.15 Past Service Credit. Buyer shall provide each Transferred Employee
credit for eligibility and vesting purposes for all service of the Transferred
Employee with the United prior to the Closing under any employee benefit plan or
arrangement maintained or established by Buyer.
9.16 Employment Agreements. Buyer agrees that between the date hereof and
the Closing date, it will enter into good faith negotiations to enter into an
employment contract with each of Darshanna Patel, Chip Garrett, Stephen Holtz
and Ron Zabiegalski.
9.17 Use of the "United Propane, Inc." Names. Each of United and
Shareholder agrees not to grant, license or otherwise take any affirmative
action to allow any of the names "United," "United Propane" or any derivatives
thereof to be used by any individual or entity in the conduct of any business
that trades, markets or distributes propane gas (at retail, wholesale or
otherwise), gathers, processes, stores, transports, trades, markets or
distributes natural gas or liquefied by-products of natural gas or petroleum (at
retail, wholesale or otherwise) or sells, services and installs parts,
appliances or supplies related thereto.
9.18 Payment of Liabilities. Buyer agrees that it will pay, honor and
otherwise adhere to all of the obligations arising in connection with the
Assumed Liabilities.
ARTICLE 10. CONDITIONS TO BUYER'S OBLIGATION TO CONSUMMATE THE TRANSACTION
--------------------------------------------------------------------------
Each and every obligation of Buyer to be performed at or before the Closing
hereunder is subject, at the Buyer's election, to the satisfaction on or prior
to the Closing Date of
31
the conditions set forth below. Notwithstanding the failure of any one or more
of such conditions, Buyer may nevertheless waive compliance with such condition
and proceed with Closing without satisfaction, in whole or in part, of any one
or more of such conditions, in which event neither United nor Shareholder shall
have any obligation or liability to Buyer with respect to such waived
condition(s). This section is not intended to limit the Buyer's right to
indemnification from United or Shareholder under Section 12 hereof.
10.1 Compliance with Agreement. United and Shareholder shall, in all
material respects, each have performed, all of their respective obligations and
agreements, and complied with all covenants, warranties and conditions contained
in this Agreement which are required to be performed or complied with by such
party on or prior to the Closing Date.
10.2 Representations and Warranties. The representations and warranties of
United and Shareholder contained in this Agreement shall be true, complete and
correct in all material respects on and as of the Closing Date with the same
force and effect as though such representations and warranties had been made or
given on the Closing Date.
10.3 Certificate. United and Shareholder shall have delivered to Buyer a
certificate, dated the Closing Date, in the case of United, signed by its duly
authorized officers to the effect stated in Sections 10.1 and 10.2 hereof.
10.4 Corporate Authorization. Buyer shall have received a copy of the
resolutions of the directors and Shareholder of United, certified as of the
Closing Date by the secretary or assistant secretary thereof, duly authorizing
the execution, delivery and performance by United of this Agreement and each
other agreement and instrument contemplated hereby, together with an incumbency
certificate as to the persons authorized to execute and deliver such documents
and instruments on its behalf.
10.5 Opinion of Counsel. Buyer shall have been furnished with the opinion
of Saul Ewing LLP, counsel to United and Shareholder, dated the Closing Date and
addressed to Buyer, substantially in the form set forth in Exhibit E hereto.
10.6 Good Standing. United shall have delivered to Buyer certificates
issued by appropriate governmental authorities evidencing the good standing of
United as of a date or dates not more than five (5) days prior to the Closing
Date as a corporation of the respective states in which it was organized or
qualified to do business.
10.7 Noncompetition, Lease, Unitholder, Registration Rights and Escrow
Agreements.
(a) United and Shareholder shall have executed and delivered to Buyer
a Noncompetition Agreement in the form attached hereto as Exhibit A as
required by Section 9.7 hereof.
(b) Buyer shall have received an executed Lease Agreement from the
Real Property Owner of each parcel of Real Property, as required by Section
9.7 hereof.
32
(c) United shall have executed and delivered to MLP a Unitholder
Agreement in the form attached hereto as Exhibit G as required by Section
9.7 hereof.
(d) United and Shareholder shall have executed and delivered to MLP a
Registration Rights Agreement in the form attached hereto as Exhibit J as
required by Section 9.7 hereof.
(e) United and Shareholder shall have executed and delivered to Buyer
the Escrow Agreement in the form attached hereto as Exhibit H as required
by Section 4.5 hereof.
10.8 Tax Certificates. United shall use its best efforts to obtain and
deliver to Buyer letters or certificates from the appropriate Maryland, Virginia
and Delaware state agencies indicating that all sales, gross receipts (as
applicable) and use taxes payable by United on or prior to the Closing Date have
been paid and that there is no lien for unpaid sales or use taxes on the Assets,
except for any sales tax or use or motor vehicle excise taxes with respect to
the transfer of any vehicles hereunder, which is Buyer's obligation.
10.9 Receipt. United and Shareholder shall have duly executed and delivered
to Buyer an instrument acknowledging payment of the sums required to be paid on
the Closing Date as specified in Section 4.3 above.
10.10 Instruments of Transfer. United shall have executed and delivered to
Buyer such bills of sale, assignments and other instruments of transfer and
conveyance (in form and substance reasonably satisfactory to counsel for Buyer)
as shall be necessary or desirable to vest in Buyer all the right, title and
interest in and to the Assets.
10.11 No Litigation. No party hereto shall be a party to or be threatened
with any litigation or administrative proceeding that affects or relates, in any
material way, to the enforceability of this Agreement or any of the parties'
ability to perform its obligations at Closing.
10.12 Third Party Consents. Buyer shall have received the consents (or in
lieu thereof waivers) listed in Schedule 6.4 hereto. All filings with, and
approvals by, third parties required to be made or received by Buyer for the
consummation of the transactions contemplated hereby shall have been made or
obtained.
10.13 Satisfactory Due Diligence Results. On or before July 31, 2003, Buyer
shall have secured such reports and data concerning the condition of the Assets
and Real Property, including without limitation any environmental condition
disclosed in due diligence reviews or Phase I studies, and its adaptability to
Buyer's intended purposes, and of the compliance of the Real Property and Assets
with all laws regulations, orders, rules, ordinances and other public or
governmental requirements and legal restrictions as are satisfactory to Buyer in
its sole discretion.
10.14 No Adverse Event. The Business and the Assets shall not be adversely
affected, or threatened to be adversely affected, in such manner as which would
reasonably be expected to result in a Material Adverse Event in any material way
as a result of fire, explosion,
33
hurricane, earthquake, disaster, accident or other casualty, shortage of any
material supplies, changes in technology, strike or labor disturbance,
obsolescence of product or service, any action or threatened action by the
United States or any other governmental authority, flood, drought, embargo,
riot, civil disturbance, uprising, activity of armed forces, act of God or
public enemy.
10.15 Proceedings Satisfactory. All proceedings, corporate or other, to be
taken in connection with the transactions contemplated by this Agreement, and
all documents incident thereto, shall be reasonably satisfactory in form and
substance to Buyer.
10.16 Financing. On or before July 31, 2003, Buyer shall have obtained any
required consent from its lenders under that Fourth Amended and Restated Credit
Agreement dated as of December 12, 2001 by and among Inergy Propane, LLC, as
Borrower, Certain Lenders referred to therein and Wachovia Bank, National
Association (f/k/a First Union National Bank), as Administrative Agent.
10.17 Use of Names. United shall have changed its corporate name and
adopted a name that does not include the following words or phrases, or any
derivatives thereof: "United" or "Propane" or "United Propane."
10.18 HSR Act. The termination or expiration of the applicable waiting
period under the HSR Act shall have occurred.
ARTICLE 11. CONDITIONS TO SELLER'S AND SHAREHOLDER'S OBLIGATION
---------------------------------------------------------------
TO CONSUMMATE THE TRANSACTION
-----------------------------
Each and every obligation of United and Shareholder to be performed at or
before the Closing hereunder is subject, at such party's election, to the
satisfaction on or prior to the Closing Date of the conditions set forth below.
Notwithstanding the failure of any one or more of such conditions, United and
Shareholder may nevertheless waive compliance with such condition and proceed
with Closing without satisfaction, in whole or in part, of any one or more of
such conditions, in which event Buyer shall not have any obligation or liability
to United with respect to such waived condition(s). This section is not intended
to limit United's or Shareholder's right to indemnification from Buyer under
Section 12 hereof.
11.1 Compliance With Agreement. Buyer shall have performed all of its
obligations and agreements and complied with all covenants, warranties and
conditions contained in this Agreement which are required to be performed or
complied with by Buyer on or prior to the Closing Date.
11.2 Representations and Warranties. The representations and warranties of
Buyer contained in this Agreement shall be true, complete and correct on and as
of the Closing Date with the same force and effect as though such
representations and warranties had been given on the Closing Date.
11.3 Certificate. Buyer shall have delivered to United a certificate dated
the Closing Date and signed by one of its duly authorized persons to the effect
stated in Sections 11.1 and 11.2 hereof.
34
11.4 Opinion of Counsel. United shall have been furnished with the opinion
of Laura Ozenberger, counsel to Buyer, dated the Closing Date and addressed to
United, substantially in the form set forth in Exhibit F hereto.
11.5 Third Party Consents. Third Party Consents. United shall have received
the consents (or in lieu thereof waivers) listed in Schedule 7.3 hereto. All
filings with, and approvals by, third parties required to be made or received by
United for the consummation of the transactions contemplated hereby shall have
been made or obtained.
11.6 Escrow Agreements. Buyer and the Escrow Agent shall have executed and
delivered to United the Escrow Agreement in the form attached hereto as Exhibit
H.
11.7 Lease Agreements. Buyer shall have executed and delivered a Lease
Agreement to each Real Property Owner who is either (i) United or Shareholder or
(ii) an Affiliate of United or Shareholder, with respect to the appropriate
parcel of Real Property.
11.8 Election of Shareholder to Board of Directors. At the Closing,
Shareholder shall be elected a director of Inergy GP, LLC, the general partner
of MLP.
11.9 No Litigation. No party hereto shall be a party to or be threatened
with any litigation or administrative proceeding that affects or relates, in any
material way, to the enforceability of this Agreement or any of the parties'
ability to perform its obligations at Closing.
11.10 Authorization. United shall have received a copy of the resolutions
of the board of directors of the managing partner of MLP and the board of
directors of Buyer, certified as of the Closing Date by the secretary or
assistant secretary thereof, duly authorizing the execution, delivery and
performance by Buyer or MLP of this Agreement, as the case may be, and each
other agreement and instrument contemplated hereby, together with an incumbency
certificate as to the persons authorized to execute and deliver such documents
and instruments on its behalf.
11.11 Noncompetition Agreements. Buyer shall have executed and delivered to
United and Shareholder a Noncompetition Agreement in the form attached hereto as
Exhibit A as required by Section 9.7 hereof.
11.12 Registration Rights Agreement. MLP shall have executed and delivered
to United and Shareholder a Registration Rights Agreement in the form attached
hereto as Exhibit J.
11.13 Unitholder Agreement. MLP shall have executed and delivered to United
a Unitholder Agreement in the form attached hereto as Exhibit G.
11.14 No Adverse Event. The business of MLP shall not be adversely
affected, or threatened to be adversely affected in any material way as a result
of fire, explosion, hurricane, earthquake, disaster, accident or other casualty,
shortage of any material supplies, changes in technology, strike or labor
disturbance, obsolescence of product or service, any action or threatened action
by the United States or any other governmental authority, flood, drought,
35
embargo, riot, civil disturbance, uprising, activity of armed forces, act of God
or public enemy.
11.15 Proceedings Satisfactory. All proceedings, corporate or other, to be
taken in connection with the transactions contemplated by this Agreement, and
all documents incident thereto, shall be reasonably satisfactory in form and
substance to United.
11.16 HSR Act. The termination or expiration of the applicable waiting
period under the HSR Act shall have occurred.
ARTICLE 12. INDEMNIFICATION
---------------------------
12.1 United's and Shareholder's Indemnity. Subject to the provisions of
this Article 12, United and the Shareholder, from and after the Closing Date,
jointly and severally agree to, indemnify and hold Buyer and its members,
directors, officers, agents, employees, representatives, successors and assigns,
harmless from and against any and all damage, loss, cost, obligation, claims,
demands, assessments, judgments or liability (whether based on contract, tort,
product liability, strict liability or otherwise), including taxes, and all
expenses (including interest, penalties and attorneys' and accountants' fees and
disbursements) (collectively "Damages") incurred in litigation or otherwise, and
any investigation relating thereto, by any of the above-named persons, directly
or indirectly, resulting from or in connection with:
(a) Any misrepresentation, breach of warranty or failure to perform
any covenant or agreement made or undertaken by United or Shareholder in
this Agreement or in any other written agreement, certificate (including
the certificate delivered by United in accordance with Section 10.3
hereof), schedule or exhibit delivered to Buyer pursuant to this Agreement;
(b) The Retained Liabilities;
(c) The operation of the Business or the ownership of the Assets prior
to the Closing Date, except the foregoing shall not apply with respect to
events occurring after the Closing Date; and
(d) Any action, suit, proceeding or claim incident to any of the
foregoing.
12.2 Buyer's Indemnity. Buyer, from and after the Closing Date, shall
indemnify and hold United and Shareholder harmless from and against any Damages
incurred by United and/or Shareholder resulting from or in connection with:
(a) Any misrepresentation, breach of warranty or failure to perform
any covenant or agreement made or undertaken by Buyer in this Agreement or
in any other written agreement, certificate (including the certificate
delivered by United in accordance with Section 11.3 hereof), schedule or
exhibit delivered to United or Shareholder pursuant to this Agreement,
including the MLP SEC Documents;
(b) The Assumed Liabilities;
36
(c) The operation by Buyer of what had been the Business or the
ownership of the Assets by Buyer after the Closing Date except the
foregoing shall not apply with respect to events occurring prior to Closing
Date; and
(d) Any action, suit, proceeding or claim incident to any of the
foregoing.
12.3 Special Hazardous Substances Indemnity. United and Shareholder each
hereby covenant and agree to indemnify, protect and hold harmless Buyer and its
members, officers, agents, employees, representatives, successors and assigns
from and against any and all Damages (including without limitation reimbursement
of clean-up costs) directly or indirectly arising from or as a result of (a)
claims, actions or causes of action, including, without limitation, those
involving toxic torts and those seeking reimbursement of clean-up costs, which
arise out of the handling, treatment, storage, disposal or transportation or
arranging therefor, by United of any pollutant, contaminant or Hazardous
Substance or toxic substance (including, without limitation, any constituent
thereof) and which handling, treatment, storage, disposal or transportation or
arrangement therefor occurred or began, in whole or in part, on or prior to the
Closing Date, even though such claim, action or cause of action may be made or
filed after the Closing Date, (b) United, by contract, agreement or otherwise,
prior to the Closing, arranging for disposal or treatment, or arranging with a
transporter for transport for disposal or treatment of any Hazardous Substance
at any facility owned or operated by another person or entity, (c) United
accepting, prior to the Closing, any Hazardous Substance for transport to
disposal or treatment facilities or sites selected by United, (d) any Release,
to the extent the quantity or concentration exceeds cleanup standards applicable
under state or federal law, whichever is more stringent, to non-residential
property (commercial, light industrial or industrial as applicable to any
property) of Hazardous Substances or oil, gasoline or other petroleum related
products upon, about or into the Real Property or respecting any products or
materials prior to the Closing located upon, delivered to or in transit to or
from the Real Property whether or not such Release occurs as the result of the
negligence or misconduct of United or any third party or otherwise, or (e) any
violation, actual or alleged, of or any other liability under or in connection
with any law, statute, ordinance, rule or regulation of any governmental or
quasi-governmental authority, specifically including without limitation the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Superfund Amendments and
Reauthorization Act of 1986, or any other environmental protection, toxic waste,
hazardous waste, oil, underground storage tank, health, safety or Hazardous
Substance handling, treatment, storage, disposal or transportation, or arranging
therefor, laws, statutes, ordinances, rules or regulations respecting any
products or materials prior to the Closing located upon, delivered to,
transported from or in transit to or from the Real Property whether or not such
violation or alleged violation occurs as the result of the negligence of
misconduct of United or any third party or otherwise. Furthermore, in the event
Buyer is required to clean up any Real Property as a result of contamination
occurring prior to the Closing, United and Shareholder hereby agree to conduct
such environmental cleanup to the full extent required by any regulatory
authorities having jurisdiction over the subject matter thereof.
12.4 Procedure. All claims for indemnification by a party under this
Article 12 (the party claiming indemnification and the party against whom such
claims are asserted being
37
hereinafter called the "Indemnified Party" and the "Indemnifying Party,"
respectively) shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which an Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against
or sought to be collected from such Indemnified Party by a third party,
such Indemnified Party shall with reasonable promptness give notice (the
"Claim Notice") to the Indemnifying Party of such claim or demand,
specifying the nature of and specific basis for such claim or demand and
the amount or the estimated amount thereof to the extent then feasible
(which estimate shall not be conclusive of the final amount of such claim
and demand). The Indemnifying Party shall not be obligated to indemnify the
Indemnified Party under this Agreement with respect to any such claim or
demand if the Indemnified Party fails to notify the Indemnifying Party
thereof in accordance with the provisions of this Agreement, and, as a
result of such failure, the Indemnifying Party's ability to defend against
the claim or demand is materially prejudiced. The Indemnifying Party shall
have ten (10) days from the delivery or mailing of the Claim Notice (the
"Notice Period") to notify the Indemnified Party (i) whether or not it
disputes the liability of the Indemnifying Party to the Indemnified Party
hereunder with respect to such claim or demand, and (ii) whether or not it
desires, at the cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such claim or demand; provided, however, that any
Indemnified Party is hereby authorized, but is not obligated, prior to and
during the Notice Period, to file any motion, answer or other pleading that
it shall deem necessary or appropriate to protect its interests or those of
the Indemnifying Party. If the Indemnifying Party notifies the Indemnified
Party within the Notice Period that it desires to defend the Indemnified
Party against such claim or demand, the Indemnifying Party shall, subject
to the last sentence of this paragraph, have the right to control the
defense against the claim by all appropriate proceedings and any settlement
negotiations, provided that to the satisfaction of the Indemnified Party,
the Indemnifying Party shall secure the Indemnified Party against such
contested claims by posting a bond or otherwise. If the Indemnified Party
desires to participate in, but not control, any such defense or settlement,
it may do so at its sole cost and expense. If the Indemnifying Party fails
to respond to the Indemnified Party within the Notice Period, elects not to
defend the Indemnified Party, or after electing to defend fails to commence
or reasonably pursue such defense, then the Indemnified Party shall have
the right, but not the obligation, to undertake or continue the defense of,
and to compromise or settle (exercising reasonable business judgment), the
claim or other matter all on behalf, for the account and at the risk of the
Indemnifying Party. Notwithstanding the foregoing, if the basis of the
proceeding relates to a condition of operations which existed or were
conducted both prior to and after the Closing Date or if the Indemnified
Party would be otherwise adversely affected as a result of any adverse
decision of such proceeding, each party shall have the same right to
participate at its own expense and at its own risk in the proceeding
without either party having the right of control.
(b) If requested by the Indemnifying Party, the Indemnified Party
agrees, at the Indemnifying Party's expense, to cooperate with the
Indemnifying Party and its counsel in contesting any claim or demand which
the Indemnifying Party elects to contest, or, if appropriate and related to
the claim in question, in making any
38
counterclaim against the person asserting the third party claim or demand,
or any cross-complaint against any person. No claim as to which
indemnification is sought under this Agreement may be settled without the
consent of the Indemnifying Party.
(c) If any Indemnified Party should have a claim against the
Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall send a Claim Notice with respect to such claim to
the Indemnifying Party. If the Indemnifying Party disputes such claim, such
dispute shall be resolved by litigation in an appropriate court of
competent jurisdiction.
12.5 Claims Against Escrow. Buyer may make a claim for payment of Damages
to which it is entitled under Section 12.1 or 12.3 hereof by notifying the
Escrow Agent pursuant to the Escrow Agreement and requesting release of the
appropriate funds to cover such Damages, but the seeking of such claim for
payment from the Escrow Agent shall not limit Buyer in any manner in the
enforcement of any other remedies available to it under this Article 12.
12.6 United's Indemnification Limitations.
(a) United shall not be liable to the Buyer for indemnification claims
brought by Buyer pursuant to this Article 12 to the extent that such
indemnification exceeds Ten Million Dollars ($10,000,000.00).
(b) United and/or Shareholder shall not be liable for, Buyer shall not
be entitled to, any indemnification for Damages under this Agreement until
such Damages shall total Two Hundred Fifty Thousand Dollars ($250,000.00)
in the aggregate (the "Threshold Amount"); provided, however, that in the
event Damages exceed the Threshold Amount, United's and Shareholder's
liability for indemnification for such Damages shall be equal to the
Threshold Amount plus the amount of such Damages that exceed the Threshold
Amount.
12.7 Buyer's Indemnification Limitations: Buyer shall not be liable for,
and United and Shareholder shall not be entitled to, any indemnification for
Damages under this Agreement until such Damages shall total the Threshold
Amount; provided, however, that in the event Damages exceed the Threshold
Amount, Buyer's liability for indemnification for such Damages shall be equal to
the Threshold Amount plus the amount of such Damages that exceed the Threshold
Amount.
12.8 Costs. If any legal action or other proceeding is brought for the
enforcement or interpretation of any of the rights or provisions of this
Agreement (including the indemnification provision), or because of an alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and all other costs and expenses
incurred in that action or proceeding, in addition to any other relief to which
it may be entitled.
39
ARTICLE 13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------------------
All representations and warranties made by the parties in this Agreement or
pursuant hereto in any certificate, instrument or document shall survive the
consummation of the transactions contemplated by this Agreement, and may be
fully and completely relied upon by Buyer and by United and Shareholder, as the
case may be, notwithstanding any investigation heretofore or hereafter made by
such party or on behalf of any of them up to and including December 31, 2004;
provided, however, that with respect to any demand or claim as to which notice
has been given within said period, the representations and warranties with
respect thereto shall survive until finally resolved by agreement or in the
courts; and provided, further, that the foregoing shall not apply to any
agreement that is to be entered into at Closing pursuant to the terms hereof,
the terms of which shall survive until fully performed in accordance with such
agreement; and all representations and warranties made by the parties in this
Agreement or pursuant hereto in any certificate, instrument or document shall
not be deemed merged into any instruments or agreements delivered at Closing.
ARTICLE 14. EXPENSES
--------------------
Except as otherwise set forth herein, each party agrees to pay, without
right of reimbursement from any other, the costs incurred by such party incident
to the preparation and execution of this Agreement and performance of their
respective obligations hereunder, whether or not the transactions contemplated
by this Agreement shall be consummated, including, without limitation, the fees
and disbursements of legal counsel, accountants and consultants employed by the
respective parties in connection with the transactions contemplated by this
Agreement.
ARTICLE 15. TERMINATION
-----------------------
15.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) By agreement of all of the parties hereto;
(b) By either Buyer or United if the Closing has not taken place on or
before October 31, 2003 (the "Cut-Off Date"); provided that the right to
terminate this Agreement under this Section 15.1(b) hereof shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or results in, the failure of the Closing
to occur within such period;
(c) By Buyer pursuant to Section 9.10 hereof;
(d) By Buyer or United, as the case may be, (i) if any of the
conditions precedent to the performance of the obligations of the party
giving notice of termination shall not have been fulfilled and cannot be
fulfilled on or prior to the Closing and shall not have been waived in
writing by such party, or (ii) if a default shall be made by the other
party in observance or in the due and timely performance of any of the
material covenants or agreements herein contained that cannot be cured on
or prior to the Closing and shall not have been waived in writing by such
party; or (iii) if there exists an
40
inaccuracy, failure or breach of, in any material respect, a warranty or
representation set forth herein or in any other agreement or instrument
executed pursuant hereto which has not been waived in writing by the party
for whose benefit such warranty or representation was made or given;
(e) By Buyer in the event that, prior to July 31, 2003, Buyer's due
diligence review under Section 10.13 is not satisfactory to Buyer in any
respect, then Buyer may terminate this Agreement by notice to United given
prior to July 31, 2003 and if no such notice is given to United by said
date, then Buyer's right to terminate this Agreement under this Section
15.1(e) shall terminate;
(f) By Buyer in the event that, prior to July 31, 2003, Buyer is
unable to obtain the required consent from its lenders under Section 10.16,
then Buyer may terminate this Agreement by notice to United given prior to
July 31, 2003 and if no such notice is given to United by said date, then
Buyer's right to terminate this Agreement under this Section 15.1(f) shall
terminate
(g) Notwithstanding the foregoing, any right of Buyer to terminate
this Agreement under sections 10.13 and 10.16 shall expire if such right is
not exercised on or before July 31, 2003; and
(h) At the option of Buyer or United, if any action or proceeding
shall have been instituted and remain pending before a court or other
governmental body by any federal, state or local government or agency
thereof to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or if any federal, state or local
government or agency thereof shall have threatened to institute any
proceeding before a court or other governmental body to restrain the
consummation of such transactions or to force divestiture, provided that
neither party shall have the option to terminate this Agreement as provided
herein after any such action or notice by any federal, state or local
government or governmental agency or other person shall be withdrawn or
settled.
15.2 No Liability. Except in the event of a termination of this Agreement
pursuant to Section 15.1(d) hereof, there shall be no liability on the parties
hereto or any of their respective members, managers, officers, directors,
shareholders or Affiliates as a result thereof under this Agreement. A
termination under Section 15.1(d) hereof shall not prejudice any claim for
damages which any party may have hereunder or in law or in equity as a
consequence of any matter giving rise to a termination of the Agreement under
Section 15.1(d) hereof. Buyer shall have the right to specific performance if
the Agreement is not otherwise terminated in accordance with the terms hereof.
15.3 Notice. Buyer may exercise its right of termination of this Agreement
only by delivering written notice to that effect to United, provided that such
notice is received by United prior to the Closing. United may exercise its right
of termination of this Agreement only by delivering written notice to that
effect to Buyer, provided that such notice is received by Buyer prior to the
Closing.
41
ARTICLE 16. MISCELLANEOUS
-------------------------
16.1 Notices. All notices, requests, demands and other communications
hereunder shall be given (a) by personal delivery (with written confirmation by
the person making such delivery), (b) by certified or registered mail with
postage prepaid, (c) by fax (with confirmation confirmed) or (d) by
nationally-recognized overnight courier as follows:
If to United and Shareholder:
-----------------------------
Name: With Copy To:
----- -------------
Robert A. Pascal Saul Ewing LLP
28 Floral Avenue 100 South Charles Street
Key West Florida 33040 Baltimore 21201, MD
Attn: Harry D. Shapiro
Facsimile: (410) 332-8862
If to Buyer:
------------
Name: With Copy To:
----- -------------
Inergy Propane, LLC Stinson Morrison Hecker LLP
Two Brush Creek Blvd., Suite 200 1201 Walnut, Suite 2800
Kansas City, Missouri 64112 Kansas City, Missouri 64106
Attn: John J. Sherman Attn: Paul E. McLaughlin
Facsimile: (816) 471-3854 Facsimile: (816) 691-3495
or to such other addresses as either party may provide to the other in writing
in accordance with this Section 16.1. Such notice, request, demand or other
communication is received: (i) when delivered, if delivered by personal
delivery; (ii) on the date received as conclusively evidenced by a signed
receipt, if sent by certified or registered mail with postage prepaid, (iii) on
the date of the confirmation of successful fax transmission, if so transmitted,
and (iv) on the date received as conclusively evidenced by a written delivery
confirmation of a nationally recognized courier, if sent in such manner.
16.2 Parties in Interest and Assignment.
(a) This Agreement is binding upon and is for the benefit of the
parties hereto and their respective successors and assigns. Except as
expressly provided herein, nothing in this Agreement, express or implied,
is intended to confer on any person other than the parties hereto or their
respective successors and assigns any rights, remedies or obligations or
liabilities under or by reason of this Agreement.
(b) Except as provided in Section 16.2(c) hereof, neither this
Agreement nor any of the rights or duties of any party hereto may be
transferred or assigned to any person except by a written agreement
executed by all of the parties hereto.
42
(c) Notwithstanding the above, Buyer may transfer and assign all or
any portion of its rights under this Agreement in connection with any
merger, consolidation or conversion of Buyer or any sale of all or
substantially all of the assets of Buyer.
16.3 Modification. This Agreement may not be amended or modified except by
a writing signed by an authorized representative of the party against whom
enforcement of the change is sought. No waiver of the performance or breach of,
or default under, any condition or obligation hereof shall be deemed to be a
waiver of any other performance, or breach of, or default under the same or any
other condition or obligation of this Agreement.
16.4 Waiver. Each party hereto may, by written notice to the other party
hereto: (a) extend the time for the performance of any of the obligations or
other actions of such other party under this Agreement; (b) waive any
inaccuracies in the representations or warranties of such other party contained
in this Agreement or in any document delivered pursuant to this Agreement; (c)
waive compliance by such other party with any of the conditions or covenants of
the other contained in this Agreement; or (d) waive or modify performance of any
of the obligations of such other party under this Agreement. Except as provided
in the preceding sentence, no action taken by or on behalf of any party,
including without limitation any investigation by or on behalf of such party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained in this Agreement.
16.5 Entire Agreement. This Agreement embodies the entire agreement between
the parties hereto and there are no agreements, representations or warranties
between the parties other than those set forth or provided herein. All Exhibits
and Schedules called for by this Agreement and delivered to the parties shall be
considered a part hereof with the same force and effect as if the same had been
specifically set forth in this Agreement.
16.6 Execution in Multiple Originals. This Agreement may be executed in
multiple originals, each of which shall be deemed an original but all of which
together shall constitute but one and the same instrument.
16.7 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
16.8 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable; (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof; and (c)
the remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid or unenforceable provision or
by its severance herefrom.
16.9 Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Delaware
applicable to
43
agreements made and to be performed entirely within such State, including all
matters of enforcement, validity and performance.
16.10 Gender. Masculine pronouns used in this Agreement shall be construed
to include feminine and neuter pronouns, and words in the singular shall include
the plural, unless the context otherwise requires.
16.11 Exhibits and Schedules. All of the Exhibits and Schedules attached
hereto are incorporated herein and made a part of this Agreement by this
reference thereto.
44
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement on the date first above written.
United Propane, Incorporated
/s/ Robert A. Pascal By: /s/ Robert A. Pascal
- ------------------------------- -------------------------------------
Robert A. Pascal Robert A. Pascal, Chairman
INERGY,L.P. INERGY PROPANE, LLC
By:/s/ John J. Sherman By: /s/ John J. Sherman
---------------------------- -------------------------------------
Name: John. J. Sherman Name: John J. Sherman
Title: President Title: President
Inergy Holdings, LLC, a Delaware limited liability company and the sole member
of Inergy GP, LLC hereby joins in the above Agreement solely to confirm its
agreement that, at the Closing, it will elect Shareholder to the Board of
Directors of the Inergy GP LLC, the general partner of MLP.
Dated: June 30, 2003 By: /s/ John J. Sherman
-------------------------------------
John J. Sherman, President
45
EXECUTION COPY
Exhibit 2.2
-----------
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of
July 31, 2003, by and among INERGY, L.P., a Delaware limited partnership ("the
"Company"), UNITED PROPANE, INC., a corporation organized under the laws of the
State Delaware ("United"), and ROBERT A. PASCAL, an individual ("Pascal").
In connection with the Asset Purchase Agreement dated June 30, 2003, by and
among Inergy Propane, LLC, the Company, United and Pascal (the "Asset Purchase
Agreement"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to United an aggregate of Eight
Hundred Eighty Nine Thousand Nine Hundred Six (889,906) Common Master Limited
Partnership Units of the Company. The Common Master Limited Partnership Units
issued to United pursuant to the Asset Purchase Agreement and the Common Master
Limited Partnership Units which may be issued upon conversion of the Master
Limited Partnership Senior Subordinated Units issued pursuant to the Asset
Purchase Agreement are referred to herein as the "Common Units."
To induce United and Pascal to execute and deliver the Asset Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "Securities
Act"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, United and Pascal
hereby agree as follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall have the
following meanings:
(i) "Investors" means United, Pascal and any transferees or
assignees who agree to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "Material Transaction" means any material transaction in
which the Company or any of its subsidiaries proposes to engage or is engaged,
including a purchase or sale of assets or securities, financing, merger,
consolidation, tender offer or any other transaction that would require
disclosure pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and with respect to which the Board of Directors of the Company
reasonably has determined in good faith that compliance with this Agreement may
reasonably be expected to either materially interfere with the Company's or such
subsidiary's ability to consummate such transaction in a timely fashion or
require the Company to disclose material, nonpublic information prior to such
time as it would otherwise be required to be disclosed.
(iii) "register," "registered," and "registration" refer
to a registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "SEC").
(iv) "Registrable Securities" means (a) the Common Units and (b)
any shares of capital stock issued or issuable, from time to time (with any
adjustments) as a distribution on or in exchange for the Common Units.
(v) "Registration Statement" means a registration statement of
the Company under the Securities Act.
(b) Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Asset Purchase Agreement.
2. REGISTRATION.
(a) Mandatory Registration. The Company shall use its best efforts to
prepare and file with the SEC as soon as practicable, but in no event later than
the thirtieth (30th) day following the date of this Agreement (the "Filing
Date"), a Registration Statement on Form S-3 covering the resale by the
Investors of the Registrable Securities. The S-3 Registration Statement shall
provide that the Registrable Securities may be offered and sold by the Investors
on a continuous or delayed basis in the future in accordance with Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"). The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to the Investors and their counsel prior to its filing or
other submission. The Investors shall provide their approval of (or comments to)
the information included in such Registration Statement with respect to the
Investors, the Registrable Securities held by them and the intended method of
disposition of such Registrable Securities within the earlier of five (5) days
and three (3) business days after their receipt of such Registration Statement.
The Company shall use its best efforts to cause the aforesaid Registration
Statement to become effective as soon as practicable, but in no event later than
the ninetieth (90th) day after the Filing Date (unless delayed by reasons
outside of the Company's control). The Company shall not be obligated to file
and cause to become effective more than one Registration Statement pursuant to
this Section 2(a).
(b) Underwritten Offering. If the Investors who hold a majority in
interest of the Registrable Securities elect to have an offering pursuant to the
Registration Statement pursuant to Section 2(a) be an underwritten offering,
such Investors shall give written notice to the Company of such election. Upon
receipt of such notice, the Company will use reasonable efforts to engage an
investment banker or bankers and manager or managers to administer the offering,
which investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Investors who hold a majority in interest of the Registrable
Securities. The Company may delay effecting an underwritten offering pursuant to
this Section 2(b) for a period of up to 90 days after the date of a request for
such underwritten offering if at the time of such request the Company is
engaged, or proposes to engage, in any Material Transaction.
2
(c) Eligibility for Form S-3. The Company represents and warrants
that it meets the requirements for the use of Form S-3 for registration of the
sale by the Investors and the Company shall use its best efforts to file all
reports and statements required to be filed by the Company with the SEC in a
timely manner so as to thereafter maintain such eligibility for the use of Form
S-3.
(d) Holdback. If the Company at any time shall register Common Master
Limited Partnership Units under the Securities Act in an underwritten offering
pursuant to any other registration under the Securities Act (other than on Form
S-4 or Form S-8 or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with option or other employee benefit
plans), and the managing underwriter(s) of such offering advises the Company in
writing that in its opinion the sale of Registrable Securities at the time of or
following the offering would interfere with the successful marketing of the
securities proposed to be sold in the offering (in terms of a significant
adverse effect on the price, timing or distribution of such securities), the
Investors shall not, if requested in writing to the Company by the managing
underwriter(s), sell, make any short sale of, grant any option for the purchase
of, or otherwise dispose of any Registrable Securities (other than those
Registrable Securities included in such registration pursuant to Section 2(b) or
2(2) above) without the prior written consent of the Company for a period as
shall be determined by the managing underwriter(s), which period cannot begin
more than 10 days prior to the effectiveness of such Registration Statement and
cannot last more than 180 days after the effective date of such Registration
Statement; provided, however, that the restrictions on transfer of Registrable
Securities under this Section 2(e) shall not be imposed upon the Investors more
than once during any consecutive twelve-month period. The provisions of this
Section 2(e) shall not apply unless all executive officers and directors of the
Company owning Common Master Limited Partnership Units shall also have agreed
not to sell publicly their Common Master Limited Partnership Units under the
circumstances and pursuant to the terms set forth in this Section 2(d).
(e) Suspension. Anything contained in this Agreement to the contrary
notwithstanding, the Company may, by notice in writing to each holder of
Registrable Securities to which a prospectus relates, require such holder to
suspend, for up to 90 days, the use of any prospectus included in a Registration
Statement filed hereunder if a Material Transaction exists that would require an
amendment to such Registration Statement or supplement to such prospectus
(including any such amendment or supplement made through incorporation by
reference to a report filed under Section 13 of the Exchange Act). The Company
may not invoke the foregoing requirement for more than a total of 90 days during
any 365 day period.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
(a) The Company shall respond promptly to any and all comments made by
the staff of the SEC to the Registration Statement required by Section 2(a), and
shall submit to the SEC, before the close of business on the fifth business day
immediately following the business day on which the Company learns (either by
telephone or in writing) that no review of
3
such Registration Statement will be made by the SEC or that the staff of the SEC
has no further comments on such Registration Statement, as the case may be, a
request for acceleration of the effectiveness of such Registration Statement to
a time and date as soon as practicable. The Investors' rights to cause the
Company to file Registration Statements hereunder, and the Company's obligation
to keep any such Registration Statements effective pursuant to Rule 415, shall
continue until the earlier of (i) the date on which all of the Registrable
Securities have been sold, or (ii) the date on which all of the Registrable
Securities (in the reasonable opinion of counsel to the Investors) may be
immediately sold to the public without registration or restriction pursuant to
Rule 144(k) under the Securities Act or any successor provision (the
"Registration Period"). The financial statements of the Company included in the
Registration Statement or incorporated by reference therein will comply as to
form in all material respects with the applicable accounting requirements and
the published rules and regulations of the SEC applicable with respect thereto.
Such financial statements will be prepared in accordance with U.S. generally
accepted accounting principles, consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed on summary
statements and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
immaterial year-end adjustments).
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to any Registration
Statement filed hereunder and the prospectus used in connection with such
Registration Statement as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration
Statement until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof as set forth in the Registration Statement.
(c) The Company shall furnish to each Investor whose Registrable
Securities are included in a Registration Statement, and to its legal counsel
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of a Registration Statement referred to
in Section 2(a), each letter written by or on behalf of the Company to the SEC
or the staff of the SEC (including, without limitation, any request to
accelerate the effectiveness of the Registration Statement or amendment
thereto), and each item of correspondence from the SEC or the staff of the SEC,
in each case relating to the Registration Statement (other than any portion, if
any, thereof which contains information for which the Company has sought
confidential treatment), (ii) on the date of effectiveness of the Registration
Statement or any amendment thereto, a notice stating that the Registration
Statement or amendment has been declared effective, and (iii) such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
4
(d) The Company shall use its best efforts to (i) register or qualify
the Registrable Securities covered by any Registration Statement under such
other securities or "blue sky" laws of such jurisdictions in the United States
as each Investor who holds Registrable Securities being offered reasonably
requests, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (a) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (b) subject itself to general taxation in any such jurisdiction,
(c) file a general consent to service of process in any such jurisdiction, (d)
provide any undertakings that cause the Company undue expense or burden, or (e)
make any change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of the
Company and its stockholders.
(e) In the event the Investors who hold a majority in interest of the
Registrable Securities being offered have elected to have an underwritten
offering pursuant to Section 2(b), the Company shall enter into and perform its
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.
(f) As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor by telephone and facsimile of the happening
of any event, of which the Company has knowledge, as a result of which the
prospectus included in any Registration Statement filed hereunder, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and, promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request.
(g) The Company shall use its best efforts (i) to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest practicable moment (including in each case by amending or
supplementing such Registration Statement) and (ii) to notify each Investor who
holds Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof (and if such Registration Statement is supplemented or
amended, deliver such number of copies of such supplement or amendment to each
Investor as such Investor may reasonably request).
(h) The Company shall permit a single firm of counsel representing the
Investors (designated by and retained at the expense of the Company) to review
the Registration Statements and all amendments and supplements thereto at least
five days prior to its filing with the SEC, and not file any document containing
disclosure with respect to the Investor, the
5
Registrable Securities held by it or the intended method of disposition of such
Registrable Securities as to which such counsel reasonably objects.
(i) The Company shall make generally available to its security holders
as soon as practical, but not later than ninety (90) days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the Securities Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
(j) At the request of any Investor in the case of an underwritten
public offering, the Company shall, on the date of effectiveness of the
Registration Statement (i) furnish an opinion, dated as of such date, from
counsel representing the Company addressed to the Investors participating in
such offering and in form, scope and substance as is customarily given in an
underwritten public offering and (ii) use its best efforts to furnish a letter,
dated such date, from the Company's independent certified public accountants in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and the Investors participating in such offering.
(k) The Company shall use its best efforts to promptly cause all of
the Registrable Securities covered by the Registration Statement to be listed,
included for quotation or otherwise eligible for trading on any Public Market on
which securities of the same class or series issued by the Company are then so
listed, included or eligible, if any, if such is then permitted under the rules
of such Public Market.
(l) The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after the Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver or cause
to be delivered to the transfer agent for the Registrable Securities (with
copies to the Investors whose Registrable Securities are included in such
Registration Statement), such opinions or instructions as the transfer agent
requires for the preparation and delivery of such certificates.
(m) At the request of any Investor, the Company shall prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
(n) The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the Securities Act and the Exchange Act, and the
rules and regulations promulgated by the SEC.)
6
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as the Company or the underwriter may reasonably request
in writing and shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least five (5) trading
days prior to the first anticipated filing date of a Registration Statement, the
Company shall notify each Investor of the information the Company requires from
each such Investor.
(b) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of a Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
(c) In the event Investors holding a majority in interest of the
Registrable Securities being offered determine to engage the services of an
underwriter pursuant to Section 2(b), each Investor agrees to enter into and
perform such Investor's obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification and
contribution obligations, with the underwriter(s) of such offering and the
Company and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities, unless
such Investor has notified the Company in writing of such Investor's election
not to participate in such underwritten distribution.
(d) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Sections 3(f),
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Sections 3(f) and, if so directed by the Company,
such Investor shall deliver to the Company (at the expense of the Company) or
destroy (and deliver to the Company a certificate of destruction) all copies in
such Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
(e) No Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below, and
7
(iv) complies with all applicable laws in connection therewith. Notwithstanding
anything in this Section 4(e) to the contrary, this Section 4(e) is not intended
to limit an Investor's rights under Sections 2(a) or 3(b) hereof.
(f) Each Investor agrees that during such time as such Investor may be
engaged in a distribution of the Registrable Securities, such Investor shall
comply with Regulation M promulgated under the Exchange Act and pursuant thereto
it shall, among other things: (i) not engage in any stabilization activity in
connection with the securities of the Company in contravention of such rules;
and (ii) distribute the Registrable Securities under the registration statement
solely in the manner described in the registration statement.
5. EXPENSES OF REGISTRATION. All reasonable expenses incurred by the
Company in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3 above, including, without limitation, all registration, listing
and qualifications fees, printers and accounting fees, and the fees and
disbursements of counsel for the Company shall be borne by the Company.
6. INDEMNIFICATION. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities, and
(ii) the directors, officers, partners, members, employees and agents of such
Investor and each person who controls any Investor within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, if any, (each, an
"Indemnified Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in the Registration
Statement under which such Registrable Securities were registered or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act or any other law, including without limitation any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of the Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being, collectively, "Violations"). Subject to the restrictions
set forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Investors and each other Indemnified Person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a
8
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person, or a person duly
acting on their behalf, expressly for use in the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company; which consent shall not be
unreasonably withheld, and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company pursuant
to Section 3(c) hereof, and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Person, notwithstanding such advice, used it.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9 hereof.
(b) In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees severally and not jointly to
indemnify, hold harmless and defend, to the same extent and in the same manner
set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, its employees, agents and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, each underwriter or broker
involved in the offering and any other securityholder selling securities
pursuant to the Registration Statement or any of its directors or officers or
any person who controls such underwriter, broker or securityholder within the
meaning of the Securities Act or the Exchange Act (collectively and together
with an Indemnified Person, an "Indemnified Party"), against any Claim to which
any of them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company or the underwriter by such Investor, or a person duly acting on its
behalf, expressly for use in connection with the preparation of such
Registration Statement; and subject to Section 6(c) such Investor will reimburse
any legal or other expenses (promptly as such expenses are incurred and are due
and payable) reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
such Investor, which consent shall not be unreasonably withheld; provided,
further, however, that the Investor shall be liable under this Agreement
(including this Section 6(b) and Section 7) for only that amount as does not
exceed the net proceeds actually received by such Investor as a result of the
sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9 hereof.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
9
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that such indemnifying party shall not be entitled to assume such
defense and an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential conflicts of interest between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding or the actual or potential defendants in, or targets of, any such
action include both the Indemnified Person or the Indemnified Party and the
indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are in conflict with those
available to such indemnifying party. The indemnifying party shall pay for only
one separate legal counsel for the Indemnified Persons or the Indemnified
Parties, as applicable, and such legal counsel shall be selected by Investors
holding a majority-in-interest of the Registrable Securities included in the
Registration Statement to which the Claim relates, if the Investors are entitled
to indemnification hereunder, or by the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying party
is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law as is appropriate
to reflect the relative fault of the indemnifying party, on the one hand, and
the Indemnified Person or Indemnified Party, as the case may be, on the other
hand, with respect to the Violation giving rise to the applicable Claim;
provided, however, that (i) no contribution shall be made under circumstances
where the maker would not have been liable for indemnification under the fault
standards set forth in Section 6, (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities who
was not guilty of such fraudulent misrepresentation, and (iii) contribution
(together with any indemnification or other obligations under this Agreement) by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
10
8. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("Rule 144"), the Company agrees to:
(a) file with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such requirements
(it being understood that nothing herein shall limit the Company's obligations
under Section 4(c) of the Asset Purchase Agreement) and the filing and
availability of such reports and other documents is required for the applicable
provisions of Rule 144; and
(b) furnish to each Investor so long as such Investor holds
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit such Investor to sell such securities under Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights of the Investors
hereunder, including the right to have the Company register Registrable
Securities pursuant to this Agreement, shall be automatically assignable by each
Investor to any transferee of all or any portion of the Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company after such
assignment, (ii) the Company is furnished with written notice of (a) the name
and address of such transferee or assignee, and (b) the securities with respect
to which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act
and applicable state securities laws, and (iv) the transferee or assignee agrees
in writing for the benefit of the Company to be bound by all of the provisions
contained herein. In addition, and notwithstanding anything to the contrary
contained in this Agreement or the Asset Purchase Agreement, the Registrable
Securities may be pledged, and all rights of the Investors under this Agreement
or any other agreement or document related to the transactions contemplated
hereby may be assigned, without further consent of the Company, to a bona fide
pledgee in connection with an Investor's margin or brokerage account.
10. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
written consent of the Company and Investors who hold a majority in interest of
the Registrable Securities or, in the case of a waiver, with the written consent
of the party charged with the enforcement of any such provision; provided,
however, that no amendment hereto which restricts the ability of an Investor to
elect not to participate in an underwritten offering shall be effective against
any Investor which does not consent in writing to such amendment; provided,
further, however, that no consideration shall be paid to an Investor by the
Company in connection with an amendment hereto unless each Investor similarly
affected by such amendment receives a pro-rata amount of consideration from the
Company. Unless an Investor otherwise agrees, each amendment hereto must
similarly
11
affect each Investor. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five (5) days after being placed in the mail, if mailed, or
upon receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Inergy, L.P.
Two Brush Creek Boulevard, Suite 200
Kansas City, Missouri 64112
Attn: John J. Sherman
Fax: 816.471.3854
Telephone: 816.842.8181
with a copy simultaneously transmitted by like means to:
Stinson Morrison Hecker LLP
1201 Walnut Street, Suite 2800
Kansas City, Missouri 64106
Attn: Paul E. McLaughlin
Fax: 816.691.3495
Telephone: 816.842.8600
and if to any Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 11(b).
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts made and to be
performed in the State
12
of Delaware. The Company and the Investors further agree that service of process
upon such party, mailed by first class mail shall be deemed in every respect
effective service of process upon such party in any such suit or proceeding.
Nothing herein shall affect a party's right to serve process in any other manner
permitted by law. The parties agree that a final non-appealable judgment in any
such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
(e) This Agreement and the Asset Purchase Agreement (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Asset Purchase
Agreement supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
(i) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(j) All consents, approvals and other determinations to be made by the
Investors pursuant to this Agreement shall be made by the Investors holding a
majority in interest of the Registrable Securities held by all Investors.
(k) Each party to this Agreement has participated in the negotiation
and drafting of this Agreement. As such, the language used herein shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party to
this Agreement.
(l) For purposes of this Agreement, the term "business day" means any
day other than a Saturday or Sunday or a day on which banking institutions in
the State of Delaware are authorized or obligated by law, regulation or
executive order to close, and the term "trading day" means any day on which the
Public Market where the Common Units are then listed or traded, is open for
trading.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
INERGY, L.P.
By: /s/ John J. Sherman
---------------------------------
Name: John J. Sherman
Title: President
INVESTORS:
UNITED PROPANE, INC.
By: /s/ Robert A. Pascal
---------------------------------
Name: Robert A. Pascal
Title: Chairman of the Board
/s/ Robert A. Pascal
---------------------------------
ROBERT A. PASCAL
14
EXECUTION COPY
Exhibit 2.3
UNITHOLDER AGREEMENT
--------------------
THIS UNITHOLDER AGREEMENT is made and entered into this July 31, 2003
among Inergy L.P., a Delaware limited partnership ("MLP") and United Propane,
Inc., a Maryland corporation (the "Unitholder").
RECITALS:
---------
A. MLP, Unitholder, Inergy Propane LLC, a Delaware limited liability
company ("Buyer") and certain other parties and entities have entered into that
certain Asset Purchase Agreement, dated June 30, 2003 (the "Asset Purchase
Agreement").
B. All capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in the Asset Purchase Agreement.
C. In connection with the closing of the Asset Purchase Agreement, MLP has
issued to Unitholder 508,518 MLP Common Units represented by Unit Certificate
No. CU 0158 (the "Restricted Units").
D. The Asset Purchase Agreement contemplates the execution and delivery of
this Agreement, whereby MLP and the Unitholder desire to create certain rights
and obligations with respect to the Restricted Units upon the terms and
conditions hereinafter set forth.
AGREEMENT:
----------
In consideration of the premises and of the mutual covenants and
agreements hereinafter set forth and set forth in the Asset Purchase Agreement,
the parties hereto do hereby agree as follows:
1. MLP's Right of First Refusal. Unitholder agrees that it will not
distribute, assign or otherwise transfer any of the Restricted Units without
prior written consent of MLP, unless Unitholder shall have first made the
following described offer to MLP:
(a) Unitholder Notice. The Unitholder shall give written notice
("Unitholder Notice") to MLP of the Unitholder's intention to transfer
Restricted Units. Such Unitholder Notice shall state:
(i) that the Unitholder intends to transfer Restricted Units;
(ii) the name and address of the prospective transferee or, if a
sale is to be made on the NASDAQ, a statement to that effect; and
(iii)the terms and conditions of such proposed transfer,
including the fees, commissions, underwriting discounts and other costs
that will be incurred in connection with the transfer (the "Transaction
Costs").
In the event of an involuntary transfer of the Restricted Units, the
transferee of such units (a "Unitholder" hereunder) shall notify MLP of such
involuntary transfer (also a "Unitholder Notice"), with such Unitholder Notice
to be given within five (5) days after such involuntary transfer.
(b) Option of MLP to Purchase Restricted Units. MLP may, at its
option, purchase all, but not less than all, of the Restricted Units that
are the subject of such Unitholder Notice, upon the following terms and
conditions:
(i) The purchase price for MLP's option to purchase shall be an
amount equal to (A) minus (B), where (A) equals that number of
Restricted Units that are the subject of a Unitholder Notice
multiplied by the average closing price for the MLP Common Units on
the NASDAQ for the five (5) trading days prior to the date on which
MLP receives the Unitholder Notice (the "Receipt Date"), and (B)
equals the Transaction Costs.
(ii) MLP may exercise its option by giving written notice to the
Unitholder within two (2) business days after the Receipt Date.
(iii)The closing of the purchase by MLP of Unitholder's
Restricted Units upon exercise of MLP's option hereunder shall be
held at the offices of MLP on such date and at such time as MLP shall
specify in its notice of exercise, but in no event more than ten (10)
days after the Receipt Date; provided, however, in the event such
purchase requires the consent of MLP's lending banks or other
financial lenders, then MLP may designate the closing to a date not
later than forty-five (45) days after the Receipt Date and, if such
later closing date is designated, MLP shall pay (as additional
purchase price for the Units) an amount equal to (X) minus (Y), where
(X) equals the product of the Prime Rate in effect on the Receipt
Date and the purchase price for the Units to be purchased with such
product being multiplied by a fraction, the numerator of which is the
number of days between the Receipt Date and the date of closing and
the denominator of which is 365, and (Y) equals the lesser of (1) the
amount determined in the foregoing clause (X) or (2) the sum of any
distribution paid or to be paid on the Units being purchased where
the record date for such distributions is on or after the Receipt
Date and on or prior to the date of closing (as used herein, "Prime
Rate" means the prime rate as published by Wachovia Bank).
(iv) In the event that MLP does not exercise its option with
respect to the Restricted Units desired to be transferred by
Unitholder, it shall be deemed to have failed to exercise its option
as to any such units and the Unitholder may transfer all, but not
less than all, of the Restricted Units proposed to be transferred;
provided however, that such transfer shall be made only in strict
accordance with the terms stated in the Unitholder Notice. In the
event that the Unitholder shall fail to make such transfer within
thirty (30) days following the expiration of the period designated
for exercise of the options by MLP, such Restricted Units shall again
become subject to all of the terms, conditions, restrictions, and
options set forth in this Agreement.
2
(c) Continuing Restrictions. Except as provided in the succeeding
sentence, the person or entity to whom such Restricted Units are assigned
or otherwise transferred, voluntarily or involuntarily, shall hold such
units subject to the terms, conditions, restrictions and options set forth
in this Agreement, and shall acknowledge acceptance of this Agreement by
concurrently executing and delivering to MLP an agreement substantially the
same as this Agreement, in form and substance acceptable to counsel for
MLP. Any Restricted Units sold to MLP, sold pursuant to an effective
Registration Statement, whether on Form S-3 or otherwise, or sold by means
of a public market or exchange, including without limitation the NASDAQ,
shall not thereafter be subject to this Agreement or any of the
restrictions provided herein.
2. Unitholder's Voting Agreement. With respect to any matter voted upon by
MLP, Unitholder agrees to vote all Restricted Units in favor of and in
accordance with any recommendation of the majority of the board of directors of
MLP, and not directly or indirectly vote against or take any other action or
refrain from taking any other action against or in opposition to such board of
directors of MLP.
3. Restrictive Legend. The certificates representing the Restricted Units
held by the Unitholder, and any other party who acquires the Restricted Units
subject to this Agreement, shall have placed thereon a legend reading as
follows:
"This certificate and all interests represented by this
certificate are subject to restrictions on transfer and
voting as set forth in that Unitholder Agreement executed
and entered into on the 31st day of July, 2003, copies of
which may be inspected during the regular business hours
of this Company. Neither this certificate nor any interest
represented by this certificate may be sold, transferred,
pledged, or otherwise disposed of, voluntarily or involun-
tarily, except upon strict compliance with the provisions
of the said Unitholder Agreement."
4. Termination. This Agreement shall, automatically and without any action
on the part of either party, terminate on [insert third anniversary of Closing
Date]; provided, however, if either party breaches any of its obligations
arising prior to such termination, such party shall continue to have liability
for such breach.
5. Miscellaneous.
(a) Successors. All rights and obligations pursuant to this Agreement
shall adhere to and be binding upon the parties hereto, their heirs,
administrators, executors, successors and assigns. In the event that any
party to this Agreement shall cease to be a unitholder of the Company
through a disposition of shares in a manner permitted hereunder, all
rights, options and obligations of such person under this Agreement shall
thereafter terminate.
(b) Entire Agreement; Amendments. Except as contemplated under the
Asset Purchase Agreement, this Agreement cancels and supersedes all
previous agreements
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relating to the subject matter of this Agreement, written or oral, between
the parties hereto and contains the entire understanding of the parties
hereto and shall not be amended, modified or supplemented in any manner
whatsoever except as otherwise provided herein or in writing signed by
each of the parties hereto.
(c) Severability. If for any reason any provision hereof shall be
determined to be invalid or unenforceable, the validity and effect of the
other provisions hereof shall not be affected thereby.
(d) Notices. All notices, requests, demands and other communications
hereunder shall be given (i) by personal delivery (with a written
confirmation by the person making such delivery), (ii) by certified or
registered mail with postage prepaid, (iii) by fax (with confirmation
confirmed), or (iv) by nationally-recognized overnight courier as follows::
If to Unitholder:
-----------------
Name: With Copy To:
---- ------------
Robert A. Pascal Saul Ewing LLP
28 Floral Avenue 100 South Charles Street
Key West, Florida 33040 Baltimore 21201, MD
Attn: Harry D. Shapiro
Facsimile Number: (410)332-8660
If to Buyer:
------------
Name: With Copy To:
---- ------------
Inergy Propane, LLC Stinson Morrison Hecker LLP
Two Brush Creek Blvd., suite 200 1201 Walnut, Suite 2800
Kansas City, Missouri 64112 Kansas City, Missouri 64106
Attn: John J. Sherman Attn: Paul E. McLaughlin
Facsimile Number: (816) 471-3854 Facsimile Number: (816) 691-3495
or to such other addresses as either party may provide to the other in writing
in accordance with this paragraph 4(d). Such notice, request, demand or other
communication is received: (i) when delivered, if delivered by personal
delivery; (ii) on the date received as conclusively evidenced by a signed
receipt, if sent by certified or registered mail with postage prepaid, (iii) on
the date of the confirmation of successful fax transmission, if so transmitted,
and (iv) on the date received as conclusively evidenced by a written delivery
confirmation of a nationally recognized courier, if sent in such manner.
(e) Construction. Whenever the context of this agreement requires, the
use of masculine gender pronouns shall include the appropriate feminine and
neuter pronouns and the singular number includes the plural.
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(f) Law Governing. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Delaware
applicable to agreements made and to be performed entirely within such
state, including all matters of enforcement, validity and performance.
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which shall constitute one agreement which is binding upon all the parties
hereto, notwithstanding that all parties are not signatories to the same
counterpart.
(h) Specific Performance. Unitholder hereby acknowledges and agrees
that the remedy at law available to MLP would be inadequate for any breach
of the Agreement whereby Unitholder or its legal representative would
refuse to transfer the shares of the Company in accordance with the terms
of this Agreement or whereby Unitholder would attempt to transfer shares of
MLP not in accordance with the terms of this Agreement. In recognition of
that fact, Unitholder hereby agrees that, in addition to any other remedies
which it may have, MLP shall be entitled to specific performance of all
affirmative duties with respect to the transfer of units of MLP hereunder
and to an injunction, restraining order or other form of equitable relief
prohibiting a violation of any of the restrictive covenants with respect to
the transfer of MLP Units hereunder.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
INERGY, L.P.
By /s/ John J. Sherman
----------------------------
Name: John J. Sherman
Title: President
UNITED PROPANE, INC.
By: /s/ Robert A. Pascal
----------------------------
Name: Robert A. Pascal
Title: Chairman
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