EXHIBIT 10.32
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STOCK PURCHASE AGREEMENT
BY AND AMONG
AGL ENERGY CORPORATION,
AGL PROPANE SERVICES, INC.,
UNITED CITIES PROPANE GAS, INC.
TECO PROPANE VENTURES, LLC, AND
PIEDMONT PROPANE COMPANY,
AS SELLERS
AND
HERITAGE PROPANE PARTNERS, L.P.
AS BUYER
NOVEMBER 6, 2003
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STOCK PURCHASE AGREEMENT
EXECUTION COPY DATED NOVEMBER 6, 2003
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS............................................................................................ 2
1.1 Certain Defined Terms................................................................................... 2
1.2 Certain Additional Defined Terms........................................................................ 2
1.3 Construction............................................................................................ 4
ARTICLE 2 CLOSING................................................................................................ 4
2.1 Agreed HHI Cash Amount.................................................................................. 4
2.2 Payment of Purchase Price............................................................................... 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF US PROPANE AND THE SELLERS........................................... 7
3.1 Organization of HHI..................................................................................... 7
3.2 Capitalization of HHI................................................................................... 7
3.3 Authority and Capacity.................................................................................. 7
3.4 Binding Agreement....................................................................................... 8
3.5 No Breach or Violation.................................................................................. 8
3.6 No Consents............................................................................................. 8
3.7 No Violation............................................................................................ 8
3.8 No Proceedings.......................................................................................... 9
3.9 Listing................................................................................................. 9
3.10 Finder's Fees........................................................................................... 9
3.11 Business Permits........................................................................................ 9
3.12 Books and Records....................................................................................... 9
3.13 Taxes................................................................................................... 10
3.14 Intellectual Property................................................................................... 10
3.15 Regulation.............................................................................................. 11
3.16 HHI Assets.............................................................................................. 11
3.17 Title to HHI Assets..................................................................................... 11
3.18 Financial Statements; Absence of Liabilities............................................................ 11
3.19 Absence of Certain Changes.............................................................................. 11
3.20 Compliance with Laws.................................................................................... 12
3.21 Benefit Plans........................................................................................... 12
3.22 Operations of HHI....................................................................................... 12
3.23 Opinion of Financial Advisor............................................................................ 12
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE BUYER............................................................ 12
4.1 Organization and Existence.............................................................................. 12
4.2 Authority............................................................................................... 12
4.3 Binding Agreement....................................................................................... 12
4.4 No Breach or Default.................................................................................... 13
4.5 Consents................................................................................................ 13
4.6 Adequate Funding........................................................................................ 13
4.7 Finder's Fees........................................................................................... 13
4.8 Investment Intent....................................................................................... 13
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ARTICLE 5 AGREEMENTS............................................................................................. 14
5.1 Conduct and Preservation of the Business of HHI......................................................... 14
5.2 Restrictions on Certain Actions......................................................................... 14
5.3 Declaration and Payment of Dividends by HHI............................................................. 16
5.4 Confidentiality and Tax Shelter Regulations............................................................. 16
ARTICLE 6 ADDITIONAL AGREEMENTS.................................................................................. 16
6.1 Access to Information, Confidentiality.................................................................. 16
6.2 Third Party Consents.................................................................................... 17
6.3 Release of Liens........................................................................................ 17
6.4 Public Announcements.................................................................................... 17
6.5 Access to Records after Closing......................................................................... 17
6.6 Fees and Expenses....................................................................................... 17
6.7 Taxes; Other Charges.................................................................................... 18
6.8 Amendment of Schedules.................................................................................. 19
6.9 Actions by Parties...................................................................................... 20
6.10 Addition of NewLP....................................................................................... 20
6.11 Amendment of Buyer's Partnership Agreement.............................................................. 20
6.12 Elimination of Intercompany Accounts.................................................................... 20
6.13 Pre-Closing Dividends of Net Worth Note and Distribution Note........................................... 20
ARTICLE 7 CONDITIONS TO OBLIGATIONS OF THE PARTIES............................................................... 21
7.1 Conditions to Closing of the Buyer...................................................................... 21
7.2 Conditions to Closing of the Sellers.................................................................... 23
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER...................................................................... 24
8.1 Termination............................................................................................. 24
8.2 Effect of Termination................................................................................... 25
8.3 Amendment............................................................................................... 25
8.4 Waiver.................................................................................................. 25
ARTICLE 9 INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS........................................................... 25
9.1 Indemnification Obligations of the Buyer................................................................ 25
9.2 Indemnification Obligations of the Sellers.............................................................. 26
9.3 Indemnification Procedures.............................................................................. 27
9.4 Survival................................................................................................ 28
9.5 No Special or Consequential Damages..................................................................... 29
ARTICLE 10 MISCELLANEOUS......................................................................................... 29
10.1 Notices................................................................................................. 29
10.2 Entire Agreement........................................................................................ 31
10.3 Binding Effect; Assignment; No Third Party Benefit...................................................... 31
10.4 Severability............................................................................................ 31
10.5 Governing Law........................................................................................... 31
10.6 Jurisdiction............................................................................................ 32
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10.7 Further Assurances...................................................................................... 32
10.8 Descriptive Headings.................................................................................... 32
10.9 Counterparts............................................................................................ 32
iv
CLOSING SCHEDULES
Schedule 2.1(a) Method for Determining Current Liabilities of HHI
Schedule 3.2(a) - Other Securities of HHI
Schedule 3.2(b) - Indebtedness of US Propane or Sellers Owing to HHI
Schedule 3.5 - Default or Violation
Schedule 3.13(a) - Tax Returns (Exceptions)
Schedule 3.13(b) - List of Tax Returns
Schedule 3.13(g) - Taxes in Stock Acquisitions
Schedule 3.14 - Intellectual Property
Schedule 3.18(a) - HHI Unaudited Financial Statements
Schedule 3.18(b) - Other Liabilities
Schedule 5.2(b) - Certain Actions
Schedule 6.12 - HHI Affiliated Payables and Receivables to be Eliminated
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EXHIBITS
Exhibit 1.1 - Definitions
Exhibit 7.1(c) - Form of Officers' Certificate of Sellers and US Propane
Exhibit 7.1(e) - Consents
Exhibit 7.2(c) - Form of Officers' Certificate of the Buyer
Exhibit 7.2(e) - Consents
Annex I - Promissory Note
Annex II - Pledge Agreement
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated as of November
6, 2003, is entered into by and among the following:
1. U.S. Propane, L.P., a Delaware limited partnership ("US
Propane");
2. AGL Energy Corporation, a Delaware corporation ("AGL Sub"),
AGL Propane Services, Inc., a Delaware corporation ("AGLINC"
and, collectively with AGL Sub, AGL Propane"), United Cities
Propane Gas, Inc., a Tennessee corporation ("UC Gas"), TECO
Propane Ventures, LLC, a Delaware limited liability company
("TECO Propane"), and Piedmont Propane Company, a North
Carolina corporation ("Piedmont Propane", and collectively
with AGL Propane, UC Gas and TECO Propane, the "Sellers"); and
3. Heritage Propane Partners, L.P. (the "Buyer"), a Delaware
limited partnership of which (i) the general partner interests
are owned by US Propane and (ii) the common limited partner
interests ("Common Units") of which are listed for trading on
the New York Stock Exchange.
RECITALS:
1. Heritage Holdings, Inc., a Delaware corporation ("HHI"), is
currently a wholly owned subsidiary of US Propane; and
2. The Sellers are the owners of (a) all of the member interests
of U.S. Propane, L.L.C., a Delaware limited liability company
that is the general partner of US Propane ("USP GP"), and (b)
all of the outstanding limited partner interests of US
Propane; and
3. US Propane, USP GP and the Sellers (collectively, the "Seller
Related Parties") have entered into that certain Acquisition
Agreement ("Acquisition Agreement"), of even date herewith,
among the Seller Related Parties and La Grange Energy, L.P., a
Texas limited partnership (the "Acquirer"), pursuant to which,
among other things, the Sellers have agreed to sell US Propane
to the Acquirer and that prior to the closing of the
transactions contemplated therein and herein, the Sellers will
(i) form a limited partnership ("NewLP") and a limited
liability corporation ("NewGP") that will each be owned by the
Sellers in the same proportions as US Propane and USP GP are
owned, respectively; (ii) following the formation of NewLP and
NewGP, the Sellers will (a) cause NewGP and NewLP to take the
actions specified in Section 6.10 and (b) cause all of the
members interests in USP GP to be transferred to NewGP; (iii)
the Sellers and NewGP will then transfer to NewLP, among other
things, all of the US Propane general and limited partners
interests; and (iv) after completion of the actions referred
to in clauses (i) through (iii), NewGP will cause US Propane
to distribute to NewGP and NewLP (a) all of the outstanding
capital stock of HHI (the "HHI Stock") and (b) all of the
180,028
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Common Units of the Buyer that are owned by US Propane (the
actions referred to in clause (iv), the "Distribution"); and
(vi) NewLP will assume from US Propane all obligations under
that certain $11,538,944.36 promissory note from US Propane to
HHI (the "Net Worth Note") and HHI will release US Propane
from all obligations under the Net Worth Note (the actions
described in clauses (i) through (v) are referred to herein
collectively as the "Pre-Closing Restructuring");
4. After completion of the Pre-Closing Restructuring and prior to
the Closing (as defined in Article 2), HHI shall declare a
dividend payable to NewGP and NewLP (its owners of record as
of the record date to be established for such dividend) of (i)
the Net Worth Note, such dividend to be payable to NewGP and
NewLP on the first Business Day immediately after the Closing
Day and (ii) the obligation to pay to NewGP and NewLP the
amount determined in accordance with Section 6.13(b) (which
obligation shall be evidenced by a note (the "Distribution
Note"), to be in a form mutually acceptable to the Sellers and
Buyer, such dividend to be paid prior to Closing; and
5. Subject to the terms and conditions set forth herein, each of
the Sellers has agreed to sell, and following NewLP's
formation to cause NewLP to sell, to the Buyer, and the Buyer
has agreed to purchase from each of the Sellers, the HHI Stock
that such Seller receives in the Distribution, such purchase
and sale to be effected in accordance with, and subject to the
terms and conditions set forth in, this Agreement.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, each capitalized
term has the meaning given to it in Exhibit 1.1.
1.2 CERTAIN ADDITIONAL DEFINED TERMS. In addition to such terms as are
defined in Section 1.1, the following terms are used in this Agreement as
defined in the Articles or Sections set forth opposite such terms:
Defined Term Article or Section Reference
------------ ----------------------------
Acquirer Recitals
Acquisition Agreement Recitals
AGLINC Preamble
AGL Propane Preamble
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Defined Term Article or Section Reference
------------ ----------------------------
AGL Sub Preamble
Agreement Preamble
Base Statement 2.1
Buyer Preamble
Buyer Material Adverse Effect 4.4
Buyer Indemnified Parties 9.2
Cash Purchase Price 2.2(a)(I)
Closing Article 2
Closing Consideration 2.2(a)
Closing Date Article 2
Closing Statement 2.1(c)
commercially reasonable best efforts 6.2
Common Units Preamble
CPA Firm 2.1(d)
Distribution Recitals
Distribution Note Recitals
Current Liabilities of HHI 2.1(a)
Final Closing Statement 2.1(d)
HHI Recitals
HHI Assets 3.16
HHI Cash 2.1(a)
HHI Stock Recitals
Indemnified Party 9.3(a)
indemnifying Party 9.3(a)
MLP Agreement Amendment 6.11
Net Worth Note Recitals
NewGP Recitals
NewLP Recitals
NewLP Release 2.2(a)
Objection 2.1(d)
Per Day Rate 2.2(a)(III)
Piedmont Propane Preamble
Pledge Agreement 2.2(a)(II)
Pre-Closing Restructuring Recitals
Pro Rated Distribution Payment 2.2(b)
Promissory Note 2.2(a)(II)
Review Period 2.1(d)
Seller Indemnified Parties 9.1
Seller Related Parties Recitals
Sellers Preamble
TECO Propane Preamble
Third Party Action 9.3(a)
UC Gas Preamble
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1.3 CONSTRUCTION. Unless the context requires otherwise: (a) the gender
(or lack of gender) of all words used in this Agreement includes the masculine,
feminine, and neuter; (b) the term "include" or "includes" means "includes,
without limitation," and "including" means "including, without limitation"; (c)
references to Articles and Sections refer to Articles and Sections of this
Agreement; (d) references to Exhibits and Schedules refer to the Exhibits and
Schedules attached to this Agreement, which are made a part hereof for all
purposes; (e) references to Laws refer to such Laws as they may be amended from
time to time, and references to particular provisions of a Law include any
corresponding provisions of any succeeding Law; and (f) references to money
refer to legal currency of the United States of America.
ARTICLE 2
CLOSING
Subject to the terms and conditions hereof, the Closing of the
transactions contemplated by this Article 2 (the "Closing") will take place at
the time and place provided for in the Contribution Agreement, on the third
Business Day following the date on which the last of the conditions to Closing
set forth in Section 7.1 and 7.2 have been satisfied or waived by the party or
parties entitled to waive the same, provided that the Closing shall be deemed to
be effective after the closings of the transactions contemplated by the
Acquisition Agreement and the Contribution Agreement (the "Closing Date").
Except for purposes of Sections 2.1, 2.2 and 2.3, all Closing transactions will
be deemed to have occurred simultaneously.
2.1 AGREED HHI CASH AMOUNT.
(a) Not later than the close of business on the fourth trading day
preceding the Closing, US Propane shall deliver to the Buyer a statement ("Base
Statement") of the cash and cash equivalents held and expected to be held in the
accounts of HHI immediately prior to the Closing, if and to the extent such cash
and cash equivalents exceed the Current Liabilities of HHI expected to be
outstanding immediately prior to the Closing (the amount of such excess cash and
cash equivalents, the "HHI Cash"); provided, however, that neither the cash and
cash equivalents set aside for the payment of any current liabilities relating
to estimated tax payments due or payable by HHI or payments due under the Net
Worth Note, nor the current liabilities attributable to such estimated tax
payments, shall be taken into account for the purposes of determining HHI Cash.
As used herein, the term "Current Liabilities of HHI" shall be calculated in
accordance with Schedule 2.1(a), and shall exclude, without limitation, any
deferred Tax obligation of HHI, any Taxes to the extent subject to an indemnity
obligation of Sellers in Section 6.7 (other than accrued and unpaid income taxes
payable for any cash distributions received by HHI on its Common Units prior to
the Closing), any intercompany accounts to the extent eliminated in accordance
with Section 6.12, any current maturities of long-term debt of HHI, the
obligations of HHI under the Distribution Note and the obligation of HHI to pay
the dividend of the Net Worth Note in accordance with Section 6.13.
(b) During the period that commences upon the Distribution and
ends immediately prior to the Closing, the Sellers will cause HHI to declare and
pay a dividend equal in aggregate amount to the HHI Cash, such dividend to be
declared and paid in cash prior to the Closing to
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NewLP or the Sellers, in their respective capacities as the stockholder(s) of
HHI (as the case may be), pro rata in accordance with their respective ownership
interests.
(c) Within 45 days following the Closing Date, Buyer shall prepare
and deliver to Sellers a statement (the "Closing Statement"), which shall set
forth in reasonable detail (A) the HHI Cash amount immediately prior to the
Closing based upon a detailed balance sheet prepared consistent with the balance
sheet used to prepare the Base Statement and (B) a calculation of the additional
amount payable to, or payable by, Sellers based upon the difference between the
HHI Cash reflected in the Base Statement and the HHI Cash reflected in the
Closing Statement. The Sellers agree, at no cost to Buyer, to give Buyer and its
authorized representatives reasonable access (provided that in their sole
discretion Sellers or their representatives may accompany Buyer and its
representatives) to such employees, officers and other facilities and such books
and records of Sellers as are reasonably necessary to allow Buyer and its
authorized representatives to prepare the Closing Statement. The Base Statement
shall be prepared in accordance with GAAP (as defined in Exhibit 1.1) and on a
basis consistent with the Financial Statements using the same accounting
methods, policies, practices, procedures and adjustments as were used in the
preparation of the Financial Statements. The Closing Statement shall be prepared
in accordance with GAAP and on a basis consistent with the Financial Statements,
using the same accounting methods, policies, practices, procedures and
adjustments as were used in the preparation of the Base Statement.
(d) Following its receipt from Buyer of the Closing Statement, the
Sellers shall have 30 days to review the Closing Statement and to inform Buyer
in writing of any disagreement which they may have with the Closing Statement,
which objection (i) shall specify in reasonable detail the Sellers' disagreement
with the Closing Statement and (ii) shall include a detailed adjusted balance
sheet prepared as of the Closing Date reflecting the adjustments and changes
requested by Seller (the "Objection"). Buyer agrees, at no cost to the Sellers,
to give the Sellers and their authorized representatives reasonable access to
such employees, officers and other facilities and such books and records of HHI
as are reasonably necessary to allow Sellers and their authorized
representatives to review and confirm the Closing Statement prepared by Buyer.
If Buyer does not receive the Objection within such 30-day period, the amount of
HHI Cash set forth on the Closing Statement delivered pursuant to Section 2.1(a)
shall be deemed to have been accepted by Sellers and shall become binding upon
Sellers. If Sellers do timely deliver an Objection to Buyer, Buyer shall then
have 10 Business Days from the date of receipt of such Objection (the "Review
Period") to review and respond to the Objection. Buyer and Sellers shall attempt
in good faith to resolve any disagreements with respect to the determination of
HHI Cash immediately prior to the Closing. If they are unable to resolve all of
their disagreements with respect to the determination of such HHI Cash within 10
Business Days following the expiration of Buyer's Review Period, they may refer,
at the option of either Buyer or Sellers, their differences to KPMG or if KPMG
declines to accept such engagement, a nationally recognized firm of independent
public accountants selected jointly by Buyer and Sellers, who shall determine
only with respect to the differences so submitted, whether and to what extent,
if any, the amount of HHI Cash immediately prior to the Closing set forth in the
Closing Statement requires adjustment. If Buyer and Sellers are unable to so
select the independent public accountants within five Business Days of KPMG
declining to accept such engagement, either Buyer or Sellers may thereafter
request that the CPR Institute for Dispute Resolution make such selection (as
applicable, KPMG, the firm selected by Buyer and Sellers or the firm selected by
5
the CPR Institute for Dispute Resolution is referred to as the "CPA Firm").
Buyer and Sellers shall direct the CPA Firm to use its reasonable best efforts
to render its determination within 30 days after the issue is first submitted to
the CPA Firm. The CPA Firm's determination shall be conclusive and binding upon
Buyer and Sellers. The fees and disbursements of the CPA Firm shall be shared
equally by Buyer and Sellers. Buyer and Sellers shall make readily available to
the CPA Firm all relevant books and records relating to the Closing Statement
and all other items reasonably requested by the CPA Firm. The Closing Statement
as agreed to by Buyer and Sellers or as determined by the CPA Firm shall be
referred to as the "Final Closing Statement."
(e) If the HHI Cash on the Final Closing Statement exceeds the HHI
Cash reflected in the Base Statement, then Buyer shall pay to Sellers in cash
the amount of such excess. If the HHI Cash reflected in the Base Statement
exceeds the HHI Cash on the Final Closing Statement, then Sellers shall pay to
Buyer in cash the amount of such excess. All amounts payable under this Section
2.1(e) shall be paid within three Business Days of the determination of the
Final Closing Statement by wire transfer of immediately available funds to a
bank account in the United States of America designated in writing by the
recipient not less than one Business Day before such payment.
2.2 PAYMENT OF PURCHASE PRICE.
(a) At the Closing in exchange for the HHI Stock, the Buyer will
pay to NewLP, in accordance with clauses (i) and (ii) below, a total of
$100,000,000.00 the "Closing Consideration"). The Closing Consideration shall be
paid as follows:
(i) Buyer will pay to NewLP by wire transfer of
immediately available funds (to an account designated
by NewLP to Buyer not later than three Business Days
before Closing by NewLP to Buyer) a total of
$50,000,000.00 (the "Cash Purchase Price"); and
(ii) Buyer will deliver to NewLP a fully executed
promissory note of Buyer payable to the order of
NewLP or its successors and assigns in the original
principal amount of $50,000,000.00, such promissory
note to be in the form attached as Annex I hereto
(the "Promissory Note"), and the payment of which
shall be secured by a pledge from Buyer of the HHI
Stock purchased by Buyer, such pledge to be in the
form attached as Annex II hereto (the "Pledge
Agreement").
(b) In consideration for the payment by the Buyer to NewLP of the
Closing Consideration as provided in Section 2.2(a) above, NewLP or Sellers will
deliver to the Buyer stock certificates, duly endorsed in blank and accompanied
by a stock power, evidencing all of the HHI Stock, such shares of HHI Stock to
be delivered free and clear of any Encumbrance other than any Encumbrance
arising under the Pledge Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF US PROPANE AND THE SELLERS
For the purposes of this Agreement, each of the Sellers, severally but
not jointly, and US Propane represent and warrant as set forth in this Article
3.
3.1 ORGANIZATION OF HHI. HHI has been duly incorporated and is validly
existing in good standing as a corporation under the laws of the State of
Delaware with full corporate power and authority to own or lease its properties
and to conduct its business, in each case in all material respects as conducted
on the date hereof. HHI is duly registered or qualified as a foreign corporation
for the transaction of business under the laws of each jurisdiction in which the
character of the business conducted by it or the nature or location of the
properties owned or leased by it makes such registration or qualification
necessary, except where the failure so to register or qualify would not have an
HHI Material Adverse Effect.
3.2 CAPITALIZATION OF HHI.
(a) On the date of this Agreement there are, and immediately after
giving effect to the transactions contemplated by this Agreement there will be,
534,787.841 shares of HHI Stock issued and outstanding, all of which are validly
issued, fully paid and nonassessable and are owned beneficially and of record on
the date of this Agreement by US Propane free and clear of any Encumbrance,
other than Encumbrances arising under this Agreement. US Propane will continue
to own the HHI Stock until such time as US Propane effects the Distribution of
the HHI Stock to NewLP, at which time such share of HHI Stock will be owned by
NewLP free and clear of any Encumbrances, other than Encumbrances arising under
this Agreement. Except as set forth on Schedule 3.2(a) and except for the
obligations contained in this Agreement (including the Distribution Note to be
issued prior to Closing), there are no outstanding securities of HHI other than
the HHI Stock and no subscriptions, options, convertible securities, warrants,
calls or rights of any kind (issued or granted by, or binding upon, HHI, US
Propane or any of the Sellers) to purchase or otherwise acquire any security of
or equity interest in HHI.
(b) Except for the obligations in respect of the Net Worth Note or
as described on Schedule 3.2(b) there is no existing or outstanding indebtedness
or other obligation of US Propane or any of the Sellers owing to HHI.
3.3 AUTHORITY AND CAPACITY. US Propane and each of the Sellers have all
right, power, authority and capacity necessary to enter into this Agreement and
the other Operative Agreements. Subject to the declaration of the Distribution
by USP GP, US Propane has all right, power, authority and capacity necessary to
effect the Distribution. Upon receipt of the shares of HHI Stock in the
Distribution, NewLP will have all right, power, authority and capacity necessary
to sell, convey, transfer and deliver in accordance with this Agreement the
shares of HHI Stock to be received by NewLP in the Distribution. Except for the
approvals required to complete the Pre-Closing Transactions, no consent or
approval of any Person (other than the termination or lapse of the applicable
waiting period that may be applicable under the HSR Act) is necessary for US
Propane or any of the Sellers to approve this Agreement, or to consummate the
transactions contemplated hereby or by the other Operative Agreements. This
Agreement and the Operative Agreements to be executed at the Closing will be
effective at the Closing to
7
transfer to Buyer all of the Sellers' interests in, right to, and ownership of
the shares of HHI Stock, free and clear of any Encumbrance, without the approval
or execution of any other Person.
3.4 BINDING AGREEMENT. This Agreement has been, and each of the
Operative Agreements to be executed by any of the Sellers or US Propane will be,
duly executed and delivered by each of the Sellers and US Propane, and
constitutes the valid and legally binding agreement of each of the Sellers and
US Propane, enforceable against each of the Sellers and US Propane in accordance
with its terms; provided that the enforceability hereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws relating to or affecting creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as rights to indemnity and
contribution hereunder may be limited by federal or state securities laws.
3.5 NO BREACH OR VIOLATION. None of the execution, delivery and
performance by the Sellers or US Propane of (a) this Agreement or (b) the
Operative Agreements to which any of the Sellers or US Propane is a party (i)
conflicts or will conflict with or constitutes or will constitute a violation of
the certificate or articles of incorporation or bylaws or other organizational
documents of any of the Sellers or US Propane, (ii) constitutes or will
constitute a breach or violation of, or a default under (or an event which, with
notice or lapse of time or both, would constitute such an event), any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which any of the Sellers or US Propane is a party or by which any of them or
any of their respective properties may be bound, other than as set forth on
Schedule 3.5, (iii) violates or will violate any statute, law or regulation or
any order, judgment, decree or injunction of any arbitrator or Governmental
Authority directed to HHI or any of the Sellers or US Propane or any of their
properties in a proceeding to which any of them or their property is a party
except as have been or will be obtained prior to Closing under the HSR Act or
(iv) will result in the creation or imposition of any Encumbrance upon any
property or assets of HHI (other than an Encumbrance arising under the Pledge
Agreement), which conflicts, breaches, violations or defaults, in the case of
clauses (ii) or (iii), would have an HHI Material Adverse Effect.
3.6 NO CONSENTS. Except as may be obtained under the HSR Act, no
permit, consent, approval, authorization, order, registration, filing or
qualification of or with any Governmental Authority is required (a) in
connection with the execution and delivery by any of the Sellers or US Propane
of this Agreement or the other Operative Agreements to which any of them is
party, or (b) the consummation by any of the Sellers or US Propane of the
transactions contemplated by, this Agreement or the other Operative Agreements.
3.7 NO VIOLATION. None of HHI, the Sellers or US Propane is in (i)
violation of its certificate or articles of incorporation or bylaws or other
organizational documents, (ii) violation of any law, statute, ordinance,
administrative or governmental rule or regulation applicable to it or of any
decree of any Governmental Authority having jurisdiction over it or (iii)
breach, default (or an event which, with notice or lapse of time or both, would
constitute such a default) or violation in the performance of any obligation,
agreement or condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any agreement, indenture, lease or other
instrument to which it is a party or by which it or any of its properties may be
bound,
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which breach, default or violation in the case of clause (ii) or (iii) would, if
continued, have an HHI Material Adverse Effect.
3.8 NO PROCEEDINGS. There is (i) no Proceeding before or by any
Governmental Authority or arbitrator or official, domestic or foreign, now
pending or, to the knowledge of the Sellers or US Propane, threatened, to which
any of the Sellers or US Propane or any of its assets is or may be a party or to
which the business or property of any of HHI or any of its assets is or may be
subject, (ii) no statute, rule, regulation or order that has been enacted,
adopted or issued by any Governmental Authority or that has been proposed by any
Governmental Authority, (iii) no injunction, restraining order or order of any
nature issued by a federal or state court or foreign court of competent
jurisdiction to which HHI or any of its assets is or may be subject, and (iv) no
Proceeding, injunction, restraining order or order of any nature before or by
any Governmental Authority or arbitrator that affects any of HHI, the Sellers or
US Propane in connection with the transactions contemplated by the Contribution
Agreement, this Agreement or the Acquisition Agreement, that, in the case of
clauses (i), (ii), (iii) and (iv) above, is reasonably expected to (A)
individually or in the aggregate have an HHI Material Adverse Effect, (B)
prevent or result in the suspension of the sale of the HHI Stock to the Buyer as
contemplated herein or (C) draw into question in any manner the validity of this
Agreement or any of the other Operative Agreements.
3.9 LISTING. The HHI Stock is not listed for trading on any stock
exchange.
3.10 FINDER'S FEES. None of HHI, the Sellers or US Propane is obligated
(directly or indirectly) under any agreement with any Person that would obligate
the Buyer, HHI or any of their respective Affiliates to pay any commission,
brokerage or "finder's fee" in connection with the transactions contemplated
herein.
3.11 BUSINESS PERMITS. HHI has, or at the Closing Date will have, such
Permits as are necessary to own its properties and to conduct its business as
currently conducted, except for such Permits which, if not obtained, would not
have, individually or in the aggregate, an HHI Material Adverse Effect; HHI has,
or at the Closing Date will have, fulfilled and performed all its material
obligations with respect to such Permits, and no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
thereof or results in any impairment of the rights of the holder of any such
Permit, except for such revocations, terminations and impairments that would not
have an HHI Material Adverse Effect; and none of such Permits contains any
restriction that is materially burdensome to HHI.
3.12 BOOKS AND RECORDS. To the knowledge of the Sellers and US Propane,
HHI (i) makes and keeps books, records and accounts, which, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of
assets and (ii) maintains systems of internal accounting controls sufficient to
provide reasonable assurances that (A) transactions are executed in accordance
with management's general or specific authorization; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets; (C) access to
assets is permitted only in accordance with management's general or specific
authorization; and (D) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
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3.13 TAXES.
(a) Except as set forth on Schedule 3.13(a), HHI has filed all
material Tax Returns required to be filed with the IRS and any other applicable
taxing authority through the date hereof, which returns are complete and correct
in all material respects, and has timely paid or has provided an accrual on the
Financial Statements for all Taxes due pursuant to such returns, other than
those (i) which, if not paid, would not have an HHI Material Adverse Effect or
(ii) which are being contested in good faith and disclosed in Schedule 3.13(a).
Except as set forth on Schedule 3.13(a), HHI is not currently the beneficiary of
any extension of time within which to file any Tax Returns.
(b) Schedule 3.13(b) lists all federal, state, local and foreign
income Tax Returns filed with respect to HHI and any affiliated, consolidated,
combined, unitary or similar group of which HHI is or was a member for the two
taxable years prior to the date hereof and indicates those Tax Returns that are
the subject of an audit as of the date hereof. Except as set forth on Schedule
3.13(b), there are no audits or investigations by any taxing authority in
progress nor have Sellers or HHI received any notice from any taxing authority
that it intends to conduct such an audit or investigation. Except as set forth
on Schedule 3.13(b), no claim has been made by a taxing authority in a
jurisdiction where HHI does not file Tax Returns such that it is or may be
subject to taxation by that jurisdiction. HHI has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(c) There are no liens for Taxes upon any of the assets of HHI
other than liens for Taxes not yet due and payable.
(d) HHI has no liability for Taxes other than those incurred in
the ordinary course of business and in respect of which adequate reserves are
being maintained on the Financial Statements in accordance with GAAP.
(e) HHI has not made any material payments, is not obligated to
make any material payments and is not a party to any agreement that under
certain circumstances could obligate it to make any material payments that will
not be deductible under Code Section 280G.
(f) HHI has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2) during the applicable
period specified in Code Section 897(c)(l)(A)(ii).
(g) Except as disclosed in Schedule 3.13(g), since August 10,
2000, HHI (i) has not been a member of an affiliated group filing a consolidated
federal income Tax Return and (ii) does not have any liability for Taxes of any
Person (other than US Propane or a Heritage Entity) under Treas. Reg. Section 1.
1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise, excluding liability for
Taxes to the extent set forth on Schedule 3.13(g) for stock acquisitions for
which HHI obtained commercially reasonable indemnification and which liability
was assumed by Buyer upon transfer of the assets of the acquired entity to
Buyer.
3.14 INTELLECTUAL PROPERTY. Except as set forth on Schedule 3.14, HHI
owns or possesses or has the right to use, or at the Closing Date will own or
possess or have the right to use, in the localities where they are currently
used by HHI, all patents, trademarks, trademark
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registrations, service marks, service xxxx registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights necessary for the
conduct of its business, other than those which if not so owned or possessed
would not have an HHI Material Adverse Effect, and HHI is not aware of any claim
to the contrary or any challenge by any other Person to the rights of HHI with
respect to the foregoing.
3.15 REGULATION. HHI is not (i) an "investment company" or a company
"controlled by" an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or (ii) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" thereof, within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
3.16 HHI ASSETS. The material assets of HHI consist of (a) 4,426,916.00
Common Units and (b) the Net Worth Note (collectively, the "HHI Assets"),
provided that the term HHI Assets shall exclude the HHI Cash.
3.17 TITLE TO HHI ASSETS. HHI is, and as of the Closing will be, the
record and beneficial owner of the Common Units, free and clear of all
Encumbrances (other than Encumbrances arising under the Pledge Agreement). As of
the Closing, HHI will have good and marketable title to all of the other HHI
Assets, free and clear of all Encumbrances (other than Encumbrances arising
under the Pledge Agreement).
3.18 FINANCIAL STATEMENTS; ABSENCE OF LIABILITIES. Attached hereto as
Schedule 3.18(a) are copies of the unaudited balance sheets as of August 31,
2002 and the related statement of income, cash flows and owners' equity for the
fiscal year then ended (including in all cases the notes, if any, thereto) of
HHI and the unaudited balance sheet as of August 31, 2003 (the "Financial
Statement Date") and the related statement of income, cash flows and owners'
equity for the fiscal quarter then ended of HHI (collectively, the "Financial
Statements"). The Financial Statements have been prepared in accordance with
GAAP except for the absence of footnotes and, in the case of the unaudited
statements as of the Financial Statement Date, for normal year-end adjustments
and fairly present the financial position of HHI as of the date set forth
therein.
(b) Except as reserved against in the Financial Statements or as
otherwise disclosed on Schedule 3.18(b), there are no liabilities of, relating
to or affecting HHI, other than deferred tax liabilities, liabilities incurred
in the ordinary course of business consistent with past practice since the
Financial Statement Date and Tax liabilities to be paid or reimbursed by Sellers
as provided in Section 6.7.
3.19 ABSENCE OF CERTAIN CHANGES. Since the Financial Statement Date,
except for, or as contemplated by, the execution, delivery and performance of
this Agreement and the other Operative Agreements, (a) there has been no event
(except for changes resulting from changes in the market value of the Common
Units owned by HHI) that would have a Material Adverse Effect; (b) HHI's
business has been conducted only in the ordinary course consistent with past
practice; (c) HHI has not incurred any material liability, engaged in any
material transaction or entered into any material agreements outside the
ordinary course of business consistent with past practice that individually or
in the aggregate would have a Material Adverse Effect; (d) HHI has
11
not suffered any material loss, damage, destruction or other casualty to any of
the HHI Assets (whether or not covered by insurance) that individually or in the
aggregate would have a Material Adverse Effect; and (e) HHI has not taken any of
the actions set forth in Section 5.2, except as permitted thereunder.
3.20 COMPLIANCE WITH LAWS. Subject to the specific representations and
warranties in this Agreement, which representations and warranties shall govern
the subject matter thereof, since August 10, 2000 HHI has complied in all
material respects with all Applicable Laws relating to the ownership or
operation of the HHI Assets and the conduct of its business. HHI is not charged
or, to the Knowledge of the Sellers, threatened with, or under investigation
with respect to, any violation of any Applicable Law relating to any aspect of
the ownership or operation of HHI or its business.
3.21 BENEFIT PLANS. HHI does not maintain or contribute to any Benefit
Plan.
3.22 OPERATIONS OF HHI. Since August 10, 2000 HHI's only activities
have been to serve as the general partner of Buyer and its subsidiary limited
partnership, to own the Common Units and to conduct activities and operations
related thereto. HHI ceased to be the general partner of Buyer and its
subsidiary limited partnership on February 4, 2002.
3.23 OPINION OF FINANCIAL ADVISOR. The Special Committee has received
the opinion of Xxxxxxx Xxxxx to the effect that, as of the date of such opinion,
the consideration to be paid by Heritage MLP in connection with the transactions
contemplated by this Agreement is fair, from a financial point of view, to the
Common Unitholders of Heritage MLP.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
For purposes of this Agreement, the Buyer hereby represents and
warrants to each of the Sellers and US Propane as set forth in this Article 4.
4.1 ORGANIZATION AND EXISTENCE. The Buyer is duly formed, validly
existing and in good standing as a limited partnership under the Delaware LP Act
with full partnership power and authority to own or lease its properties and to
conduct its business as currently conducted.
4.2 AUTHORITY. The Buyer has all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby, in
accordance with and upon the terms and conditions set forth herein. All
partnership action required to be taken by the Buyer or any of its partners for
the authorization of this Agreement and the other Operative Agreements to which
Buyer will be a party have been validly taken.
4.3 BINDING AGREEMENT. The execution and delivery of, and the
performance by the Buyer of its obligations under, this Agreement and the other
Operative Agreements to which Buyer will be a party has been duly and validly
authorized by the Buyer, and (a) this Agreement has been, and (b) the other
Operative Agreements to which Buyer will be a party will be, duly executed and
delivered by the Buyer and constitutes or when executed will constitute the
valid
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and legally binding agreement of the Buyer, enforceable against the Buyer in
accordance with its terms; provided that the enforceability hereof and thereof
may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws relating to or affecting creditors' rights generally
and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law) and except as rights to
indemnity and contribution hereunder may be limited by federal or state
securities laws.
4.4 NO BREACH OR DEFAULT. None of the execution, delivery and
performance of this Agreement by the Buyer or the other Operative Agreements to
which Buyer will be party (i) conflicts or will conflict with or constitutes or
will constitute a violation of the certificate or agreement of limited
partnership of the Buyer, (ii) constitutes or will constitute a breach or
violation of, or a default under (or an event which, with notice or lapse of
time or both, would constitute such an event), any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which the Buyer
or any of its subsidiaries is a party or by which the Buyer or any of its
subsidiaries or any of their respective properties may be bound, (iii) assuming
compliance with Section 4.5, violates or will violate any statute, law or
regulation or any order, judgment, decree or injunction of any Governmental
Authority directed to the Buyer or any of its subsidiaries or any of their
respective properties in a Proceeding to which any of them or their property is
a party or (iv) other than the imposition of an Encumbrance under the Pledge
Agreement, will result in the creation or imposition of any Encumbrance upon any
property or assets of its subsidiaries, which conflicts, breaches, violations or
defaults, in the case of clauses (ii), (iii) or (iv), would have a material
adverse effect upon the condition (financial or other), business, prospects,
properties, net worth or results of operations of the Buyer and its
subsidiaries, taken as a whole (a "Buyer Material Adverse Effect").
4.5 CONSENTS. No permit, consent, approval, authorization, order,
registration, filing or qualification of or with any Governmental Authority is
required in connection with the execution and delivery of, or the consummation
by the Seller of the transactions contemplated by, this Agreement or the other
Operative Agreements to which Buyer will be a party, except as may be obtained
under the HSR Act.
4.6 ADEQUATE FUNDING. Buyer has cash on hand as undrawn amounts under
committed credit facilities to pay in full in immediately available funds that
portion of the Cash Purchase Price required to be paid in cash at the Closing.
4.7 FINDER'S FEES. The Buyer is not obligated (directly or indirectly)
under any agreement with any Person that would obligate any of the Sellers or US
Propane to pay any commission, brokerage or "finder's fee" in connection with
the transactions contemplated herein.
4.8 INVESTMENT INTENT. The HHI Stock to be acquired by Buyer will be
acquired for the account of the Buyer for investment only and not for the
benefit of any other Person or with a view toward resale or redistribution in a
manner that could require registration under the Securities Act of 1933, as
amended, and the Buyer does not now have any reason to anticipate any change in
the Buyer's circumstances or other particular occasion or event that would cause
the Buyer to sell such HHI Stock.
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ARTICLE 5
AGREEMENTS
Each of the Sellers, severally but not jointly, and US Propane hereby
covenant and agree with the Buyer as set forth in this Article 5.
5.1 CONDUCT AND PRESERVATION OF THE BUSINESS OF HHI. Except as
expressly provided in this Agreement, the Sellers and US Propane shall (a) cause
HHI to conduct its business substantially as it is being conducted on the date
hereof; (b) use their commercially reasonable best efforts to cause HHI to
preserve, maintain and protect its assets and business consistent with available
resources; and (c) use their commercially reasonable best efforts to cause HHI
to preserve intact the business organization of HHI, consistent with its
available resources, to keep available the services of the employees of HHI and
to maintain existing relationships with suppliers, contractors, distributors,
customers and others having business relationships with HHI. Notwithstanding the
immediately preceding sentence, the Sellers and US Propane shall cause the
Pre-Closing Restructuring to be completed prior to Closing.
5.2 RESTRICTIONS ON CERTAIN ACTIONS. Without limiting the generality of
Section 5.1, except as otherwise expressly contemplated by this Agreement, from
and after the date hereof and until the Closing Date, without the approval of
the Buyer, with respect to the business of HHI:
(a) None of the Sellers or US Propane shall agree, or shall permit
HHI, to sell, transfer or otherwise dispose, or grant or agree to grant an
option to purchase, sell, transfer, or otherwise dispose of any HHI Stock or any
other shares of capital stock or any securities convertible or exercisable for
shares of capital stock of HHI, except as provided in Section 2.1.
(b) Except for the Pre-Closing Restructuring, for the actions
contemplated in Section 6.10 and Section 6.13 or as set forth on Schedule
5.2(b), neither US Propane nor any of the Sellers shall, or shall cause or
permit HHI to:
(i) make any expenditures outside the ordinary course of
business consistent with past practice which, individually or in
the aggregate, exceed $5,000;
(ii) make any material change in the ongoing operations of
HHI's business;
(iii) create, incur, guarantee or assume any indebtedness
for borrowed money;
(iv) mortgage or pledge any of the HHI Stock or create or
suffer to exist any Encumbrance thereon;
(v) sell, lease, transfer or otherwise dispose of,
directly or indirectly, any assets, except in the ordinary course
of business consistent with past practice (provided that,
notwithstanding this Section 5.2(b)(v), prior to Closing HHI may
distribute the HHI Cash to its stockholder(s) as contemplated in
Sections 2.1 and
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5.3 hereof), or sell, lease, transfer, or otherwise dispose of any
fixed assets, whether or not in the ordinary course of business,
which have a value, individually or in the aggregate, in excess of
$5,000;
(vi) enter into any lease, contract, agreement,
commitment, arrangement or transaction relating to its assets;
(vii) amend, modify or change any existing lease or
contract;
(viii) waive, release, grant or transfer any rights of value
relating to HHI's business;
(ix) hire or promote from within any executive employees
or hire any new employees or recall any laid-off employees;
(x) delay payment of any account payable or other
liability relating to HHI's business beyond the later of its due
date or the date when such liability would have been paid in the
ordinary course of business consistent with past practice, unless
such delay is due to a good faith dispute as to liability or
amount;
(xi) permit any current insurance or reinsurance or
continuation coverage to lapse if such policy insures risks,
contingencies or liabilities (including product liability) related
to HHI's business;
(xii) except as set forth in this Section 5.2, take any
action that would make any of the representations or warranties of
the Sellers or US Propane untrue as of any time from the date of
this Agreement to the date of the Closing, or would result in any
of the conditions set forth in this Agreement not being satisfied;
(xiii) authorize or propose, or agree in writing or
otherwise take, any of the actions described in this Section 5.2;
(xiv) merge into or with or consolidate with any other
corporation or acquire all or substantially all of the business or
assets of any corporation or other Person;
(xv) purchase any securities of any corporation or other
Person;
(xvi) take any action or enter into any commitment with
respect to or in contemplation of any liquidation, dissolution,
recapitalization, reorganization, or other winding up of HHI's
business;
(xvii) create any employee benefit plans (within the meaning
of Section 3(3) of ERISA) or any other employee benefit plan or
program not subject to ERISA, except as required by law;
15
(xviii) declare any distribution or dividend or issue any
securities, other than the declaration and payment by US Propane of
the Distribution and the declaration and payment by HHI from time
to time prior to Closing of a dividend(s) cash and cash equivalents
in accordance with Sections 2.1 or 5.3 hereof; or
(xix) distribute or alter any of the HHI Assets.
5.3 DECLARATION AND PAYMENT OF DIVIDENDS BY HHI. Notwithstanding
anything in this Agreement to the contrary, (a) at any time and from time to
time prior to the Closing the Board of Directors of HHI may declare and pay cash
dividends to its stockholder(s) in an amount of up to the HHI Cash, as
determined in Section 2.1, provided that the HHI Assets shall not be dividended
and (b) after completing the Pre-Closing Restructuring and prior to the Closing
HHI shall declare the dividends specified in Section 6.13, which dividends shall
be paid as specified in such Section 6.13.
5.4 CONFIDENTIALITY AND TAX SHELTER REGULATIONS. Except as reasonably
necessary to comply with applicable securities laws and notwithstanding anything
in this Agreement to the contrary or in any other agreement to which a party
hereto is bound, the parties hereto (and each employee, representative, or other
agent of any of the parties) are expressly authorized to disclose to any and all
persons, without limitation of any kind, the U.S. federal income "tax treatment"
and "tax structure" (as those terms are defined in Treas. Reg. Sections
1.6011-4(c)(8) and (9), respectively) of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to such parties relating to such "tax treatment" and
"tax structure" of the transactions contemplated by this Agreement. For these
purposes, "tax structure" is limited to facts relevant to the U.S. federal
income tax treatment of the transaction described herein.
ARTICLE 6
ADDITIONAL AGREEMENTS
Each of the Sellers, severally but not jointly, and US Propane hereby
covenant and agree with the Buyer as set forth in this Article 6.
6.1 ACCESS TO INFORMATION, CONFIDENTIALITY. Between the date hereof and
the Closing, US Propane and the Sellers shall cause HHI (i) to give the Buyer
and its Affiliates and authorized representatives reasonable access to all
employees of HHI and all facilities and all books and records relating to HHI's
business, (ii) to permit the Buyer and its Affiliates and authorized
representatives to make such inspections of HHI's business and assets as they
may reasonably require to verify the accuracy of any representation or warranty
contained in Article 3 and (iii) to furnish the Buyer and its Affiliates and
authorized representatives with such financial and operating data and other
information with respect to HHI's business and assets as any such Party may from
time to time reasonably request and as is available to US Propane or the Sellers
without undue effort or expense; provided, however, that the Sellers shall have
the right to have a representative present at all times of any such inspections
or examinations conducted at the offices or other facilities of HHI.
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6.2 THIRD PARTY CONSENTS. Between the date hereof and the Closing,
Buyer, US Propane and the Sellers shall use their commercially reasonable best
efforts to obtain all consents from third parties required for Buyer, US Propane
and the Sellers to perform their obligations hereunder. If the parties hereto
agree that a filing under the HSR Act is necessary or appropriate in respect of
this Agreement and the Other Operative Agreements and the transactions
contemplated hereby and thereby, each party hereto agrees to make an appropriate
filing of a Notification and Report Form pursuant to the HSR Act with respect to
the transactions contemplated hereby within five Business Days after the date of
this Agreement, use their commercially reasonable best efforts to cause the
waiting period under the HSR Act to expire as quickly as possible and to supply
promptly any additional information and documentary material that may be
requested pursuant to the HSR Act. Notwithstanding the foregoing, no party
hereto shall have any obligation to dispose of, hold separate or otherwise
restrict its enjoyment of any of their assets or properties in order to obtain
requisite approvals pursuant to the HSR Act. "Commercially reasonable best
efforts" or any phrase of similar tenor as used in this Agreement or any other
Operative Agreement shall mean such good faith efforts as are commercially
reasonable, comparing the cost and expense of the efforts to the benefit to be
gained (without regard to the identity of the beneficiary).
6.3 RELEASE OF LIENS. Between the date hereof and the Closing, US
Propane and the Sellers shall obtain full releases of any Encumbrances on the
HHI Stock.
6.4 PUBLIC ANNOUNCEMENTS. Between the date hereof and the Closing,
except as may be required by Applicable Law or stock exchange rule, none of the
Parties or any of their respective Affiliates or representatives shall issue any
press release or otherwise make any public statement with respect to this
Agreement or the transactions contemplated hereby without the prior written
consent of each of the other Parties. Any press release or other public
statement with respect to this Agreement or the transactions contemplated hereby
shall be mutually agreed upon by the Buyer, the Sellers and US Propane.
6.5 ACCESS TO RECORDS AFTER CLOSING. For a period of six years from and
after the Closing Date, each of the Sellers and their representatives shall have
reasonable access to inspect and copy all books and records relating to HHI's
business to the extent that such access may reasonably be required in connection
with matters relating to or affected by the operation of HHI's business prior to
the Closing, provided, however, that the Buyer shall have the right to have a
representative present at all times of any such inspection conducted by Sellers.
The Buyer shall afford such access upon receipt of reasonable advance notice and
during normal business hours. If the Buyer shall desire to dispose of any of
such books and records prior to the expiration of such period, the Buyer shall,
prior to such disposition, give the Sellers a reasonable opportunity, at their
expense, to segregate and remove such books and records as they may select. Each
Party shall be solely responsible for any costs or expenses incurred by it
pursuant to this Section 6.5.
6.6 FEES AND EXPENSES. Except as otherwise expressly provided in this
Agreement, each of the Sellers, US Propane and the Buyer shall pay its own fees
and expenses (including (a) its individual or internal company expenses, as the
case may be, including all salaries and expenses of its employees performing
legal or accounting duties and (b) the fees and expenses of counsel, financial
advisors, accountants and others engaged by such Party) incurred in connection
with
17
the negotiation, execution and delivery of this Agreement, the other Operative
Agreements and the transactions contemplated hereby and thereby, whether or not
the Closing shall have occurred. It is specifically agreed that any fees and
expenses of the Special Committee of the Board of US Propane, its counsel, and
its investment advisors will be an expense of Buyer.
6.7 TAXES; OTHER CHARGES.
(a) Tax Periods Ending on or Before the Closing Date. The Buyer
shall prepare or cause to be prepared and timely file or cause to be timely
filed all Tax Returns for HHI for all tax periods ending prior to the Book Close
which are filed after the Book Close (a "Pre-Closing Period"). For purposes of
this Section 6.7, Book Close shall mean December 1, 2003, unless the Closing
Date is prior to December 1, 2003, in which event Book Close shall mean the
Closing Date. Subject to Section 6.7(b), Sellers shall timely pay all Taxes due
and payable with respect to a Pre-Closing Period Tax Return. Buyer shall prepare
or cause to be prepared and timely file and cause to be timely filed all other
Tax Returns of HHI. Subject to Section 6.7(b), Buyer shall pay or cause HHI to
pay all Taxes shown to be due and payable thereon. Not less than twenty (20)
Business Days prior to the due date for filing any Tax Return, taking into
account any applicable extensions, Buyer shall deliver a copy of such Tax Return
to Sellers. Sellers shall pay directly to HHI their portion of the Taxes shown
to be due on such Tax Return (determined under Section 6.7(b) hereof) within ten
(10) Business Days prior to the due date for the filing of such Tax Return. The
Buyer agrees that it will not, prior to the Closing Date or following its
purchase of the HHI Stock, make any transfer or take any action that would
require HHI to file a single day tax return for any of the 2003 calendar year.
(b) Liability for Taxes. From and after the Book Close, Sellers
shall indemnify Buyer and its affiliates (including HHI), and hold them harmless
from and against, any losses imposed on or incurred by Buyer or its affiliates
(including HHI), directly or indirectly, by reason of or resulting from any and
all Taxes imposed upon HHI with respect to or pursuant to (i) any Pre-Closing
Period and (ii) any taxable period beginning on or before the Book Close and
ending after the Book Close (a "Straddle Period"), but only with respect to the
portion of such Straddle Period ending the day before the Book Close (such
portion, a "Pre-Closing Straddle Period"), and not for any losses or Taxes of
HHI or any Affiliate of Buyer resulting from the consummation of any transaction
contemplated by this Agreement. If there is a net refund received by HHI that is
reflected on a Tax Return for a Pre-Closing Period or a Pre-Closing Straddle
Period, the Buyer shall promptly pay, or cause HHI to pay, the amount of such
net refund to the Sellers. From and after the Book Close, Buyer shall indemnify
Sellers and hold Sellers harmless from and against all losses imposed on or
incurred by Sellers, directly or indirectly, by reason of or resulting from any
and all Taxes imposed on HHI (i) with respect to or pursuant to any taxable
period commencing on the Book Close, (ii) the portion of any Straddle Period
commencing on the Book Close and (iii) any Taxes arising or imposed on HHI
resulting from any transaction contemplated by this Agreement. For purposes of
this Section 6.7, in the case of any Taxes that are imposed on a periodic basis
and are payable for the Straddle Period, the portion of such Tax which relates
to the Pre-Closing Straddle Period shall (i) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed to be the amount of
such Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the day before the
Book Close and the denominator of which is the number of days in the entire
taxable period, and (ii) in the case of
18
any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant taxable period, including the
taxable year of Heritage MLP, ended on the day before the Book Close.
(c) Cooperation on Tax Matters.
(A) The Buyer, US Propane and the Sellers shall
cooperate fully, as and to the extent reasonably requested
by the other party, in connection with the filing of Tax
Returns pursuant to this Section and any audit, litigation
or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's
request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually
convenient basis to provide additional information and
explanation of any material provided hereunder. Buyer, US
Propane and the Sellers agree (A) to retain all books and
records with respect to Tax matters pertinent to HHI
relating to any taxable period beginning before the Book
Close until the expiration of the statute of limitations
(and, to the extent notified by Buyer, any extensions
thereof) of the respective taxable periods, and to abide by
all record retention agreements entered into with any
taxing authority, and (B) to give the other party
reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other
party so requests, shall allow the other party to take
possession of such books and records.
(B) The Buyer, US Propane and the Sellers further
agree, upon request, to use their best efforts to obtain
any certificate or other document from any Governmental
Authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the
transactions contemplated hereby).
(C) The Buyer agrees that it will not liquidate HHI
on the Book Close or Closing Date.
(d) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement or the other Operative
Agreements (including any transfer tax imposed in any state or subdivision),
shall be paid by the Buyer when due. From time to time upon the reasonable
request of Buyer, the Sellers and US Propane shall cooperate in good faith with
the Buyer to obtain available exemptions from such Taxes. The Buyer will, at its
own expense, file all necessary Tax Returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and, if required by applicable law, US Propane and the Sellers
will join in the execution of any such Tax Returns and other documentation.
6.8 AMENDMENT OF SCHEDULES. US Propane and the Sellers shall have the
continuing obligation until the Closing to amend or supplement promptly their
Schedules with respect to any matter hereafter arising or discovered that, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in their Schedules. For purposes of
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determining whether the conditions set forth in Section 7.1(a) have been
fulfilled, the Schedules will not give effect to any amendment or supplement
thereof. If the Closing shall occur, then all matters disclosed pursuant to any
such supplement or amendment at or prior to the Closing shall be waived, and the
Schedules as so supplemented or amended at the time of Closing shall thereafter
constitute the Schedules for purposes of this Agreement.
6.9 ACTIONS BY PARTIES. Each Party agrees to use its commercially
reasonable best efforts to satisfy the conditions to Closing set forth in
Article 7 and to use its commercially reasonable best efforts to refrain from
taking any action within its control that would cause a breach of a
representation, warranty, covenant or agreement set forth in this Agreement.
6.10 ADDITION OF NEWLP. The Sellers covenant and agree that upon
completion of the formation and organization of NewLP the Sellers will take such
actions as are necessary or appropriate to add NewLP as a party to this
Agreement. From and after such time as NewLP is so made a party, the Parties
agree that NewLP shall constitute a Seller to the same extent as if NewLP were
originally identified as a Seller herein.
6.11 AMENDMENT OF BUYER'S PARTNERSHIP AGREEMENT. The Sellers covenant
and agree that prior to Closing the Sellers shall cause USP GP to take such
actions as may be necessary or appropriate to amend the Buyer Partnership
Agreement to clarify that, notwithstanding the terms of Section 7.12 of the
Buyer Partnership Agreement, immediately after the closings of the transactions
contemplated in this Agreement and the Acquisition Agreement, the Common Units
held by HHI as of the date hereof and to be converted into Class E Units upon
the Closing which will represent the Pledged Units under the Pledge Agreement,
will continue to be treated as issued and outstanding limited partner interests,
such amendment to be in such form as shall be mutually acceptable to Sellers and
Acquirer (such form of amendment to the Buyer Partnership Agreement, the "MLP
Agreement Amendment").
6.12 ELIMINATION OF INTERCOMPANY ACCOUNTS. Prior to the Closing the
Sellers shall take such actions, and shall cause USP GP, US Propane and HHI to
take such actions as may be necessary or appropriate to eliminate from HHI the
affiliated payables and receivables listed in Schedule 6.12.
6.13 PRE-CLOSING DIVIDENDS OF NET WORTH NOTE AND DISTRIBUTION NOTE.
(a) After the Pre-Closing Restructuring is completed and prior to
the Closing, the Sellers shall cause HHI to declare a dividend of the Net Worth
Note, such dividend to be payable to NewGP and NewLP as the owners of record of
HHI on the record date established for payment of such dividend, and the payment
date of such dividend shall be the first Business Day after the Closing Date.
(b) After the Pre-Closing Restructuring is completed and prior to
the Closing and if the Closing occurs at any time before the receipt by HHI on
the Common Units held by HHI of the payment by the Buyer of the quarterly cash
distribution for the Buyer's quarterly period ending November 30, 2003, the
Sellers shall cause HHI to declare and pay to NewGP and NewLP, as the then
holders of record, the Distribution Note, the payment of the dividend of such
Distribution Note to be made immediately prior to the Closing. If the Closing
occurs at any time
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after the receipt by HHI on the Common Units held by HHI of the payment by the
Buyer of the quarterly cash distribution for the Buyer's quarterly period ending
November 30, 2003, Sellers shall not cause HHI to pay a dividend of the
Distribution Note. The Distribution Note shall obligate HHI to pay to NewGP and
NewLP an aggregate amount (the "Pro Rated Distribution Payment") to be
calculated and paid by HHI as follows:
An amount equal to the excess of (i) (A) the Per Day Rate (as
defined below) times the (ii) (B) number of calendar days in the period
that commenced on, and includes, September 1, 2003 and ends on, but
excludes December 1, 2003 (or, if the Closing occurs before December 1,
2003, such date on which the Closing occurs) over (ii) the amount of
accrued and unpaid income taxes payable, if any, by HHI in respect of
the amount calculated in clause (i). As used herein, the term "Per Day
Rate" means a fraction, of which (i) the numerator is equal to the
product of (A) the quarterly cash distribution per Common Unit paid by
Buyer to the holders of its Common Units for the quarterly period
ending November 30, 2003 and (B) of which the denominator is 91. The
Parties hereto agree that the foregoing calculation is intended to
provide that the Distribution Note, if any, shall not include any
amounts that relate to the quarterly cash distribution with respect to
the quarterly period beginning on December 1, 2003. Buyer shall pay the
Pro Rated Distribution Payment to the holder(s) of the Distribution
Note within one Business Day following the payment date established by
Buyer for such cash distribution.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE PARTIES
7.1 CONDITIONS TO CLOSING OF THE BUYER. The obligations of the Buyer to
consummate the transactions contemplated by this Agreement at the Closing shall
be subject to the fulfillment by each of the Sellers and US Propane, jointly and
severally, on or prior to the Closing Date of each of the following conditions
(all of which may be waived in whole or in part by Buyer in its sole
discretion):
(a) Representations and Warranties True. All the representations
and warranties of the Sellers and US Propane contained in this Agreement, and in
any agreement, instrument or document delivered by the Sellers and US Propane
pursuant to this Agreement on or prior to the Closing Date shall be true and
correct, individually and in the aggregate, in all material respects (other than
those representations and warranties of the Sellers and US Propane that are
qualified by materiality or an HHI Material Adverse Effect, which shall be true
and correct in all respects as so qualified) as of the date of this Agreement
and as of the Closing Date, and any representations and warranties of the
Sellers and US Propane made as of a specified date earlier than the Closing Date
shall have been true and correct in all material respects on and as of such
earlier date (other than those representations and warranties of the Sellers and
US Propane that are qualified by materiality or an HHI Material Adverse Effect,
which representations and warranties shall have been true and correct in all
respects as so qualified.).
(b) Covenants and Agreements Performed. Each of the Sellers and US
Propane shall have performed and complied with, in all material respects, all
covenants and agreements required by this Agreement to be performed or complied
with by them (including, without limitation, completion of the Pre-Closing
Restructuring).
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(c) Certificates. The Buyer shall have received a certificate from
the Sellers and US Propane, in substantially the form set forth in Exhibit
7.1(c), dated the Closing Date, representing and certifying that the conditions
set forth in Sections 7.1(a) and 7.1(b) have been fulfilled.
(d) Legal Proceedings. No preliminary or permanent injunction or
other order, decree or ruling issued by a Governmental Authority, and no
statute, rule, regulation or executive order promulgated or enacted by a
Governmental Authority, shall be in effect (i) that restrains, enjoins,
prohibits or otherwise makes illegal the consummation of the transactions
contemplated hereby or (ii) that would impose any material limitation on the
ability of the Buyer effectively to receive the benefits and to exercise full
rights of ownership of the HHI Stock under this Agreement. No Proceeding before
a Governmental Authority shall be pending (A) seeking to restrain or prohibit
the consummation of the transactions contemplated hereby or (B) that could
reasonably be expected, if adversely determined, to impose any material
limitation on the ability of the Buyer effectively to receive the benefits and
to exercise full rights of ownership of the HHI Stock to be acquired by the
Buyer under this Agreement.
(e) Consents. All Consents set forth on Exhibit 7.1(e) shall have
been obtained or made and shall be in full force and effect as to the Sellers
and US Propane at the time of the Closing.
(f) No HHI Material Adverse Effect. Since the date of this
Agreement, there shall not have been any event or condition having an HHI
Material Adverse Effect.
(g) Deliveries of Stock Certificates. The Sellers shall deliver
the stock certificate(s) representing the HHI Stock, duly endorsed in blank or
accompanied by duly executed assignment documents.
(h) Certain Operative Agreements. Each of the other Operative
Agreements shall have been executed and delivered by each of the Sellers and US
Propane that are party thereto, and such Operative Agreements shall be in full
force and effect subject only to the Closing.
(i) Resignation of Directors. HHI shall have received the
resignation of each of its directors constituting HHI Board of Directors
immediately prior to Closing, such resignations to be effective upon Closing.
(j) Contribution Agreement and Acquisition Agreement. All of the
conditions to the closings of the Contribution Agreement and Acquisition
Agreement (other than the closing of the transactions pursuant to this
Agreement) shall have been satisfied or waived.
(k) The MLP Agreement Amendment shall have been executed by the
parties thereto and shall be in full force and effect, subject to the Closing of
the transactions contemplated by the Acquisition Agreement and the Closing.
(l) HSR Waiting Period. If applicable, the waiting period under
the HSR Act applicable to the consummation of the transaction contemplated
hereby shall have expired or been terminated without any adverse condition
attached thereto.
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7.2 CONDITIONS TO CLOSING OF THE SELLERS. The obligations of US Propane
and each of the Sellers to consummate the transactions contemplated by this
Agreement at the Closing shall be subject to the fulfillment by the Buyer, on or
prior to the Closing Date of each of the following conditions (all of which may
be waived in whole or in part by Seller in their sole discretion):
(a) Representations and Warranties True. All the representations
and warranties of the Buyer contained in this Agreement, and in any agreement,
instrument or document delivered by the Buyer pursuant to this Agreement on or
prior to the Closing Date shall be true and correct, individually and in the
aggregate, in all material respects (other than the representations and
warranties of the Buyer that are qualified by materiality or a Buyer Material
Adverse Effect, which shall be true and correct in all respects as so qualified)
as of the date of this Agreement and as of the Closing Date, and any
representations and warranties of the Buyer made as of a specified date earlier
than the Closing Date shall have been true and correct in all material respects
on and as of such earlier date (other than the representations and warranties of
the Buyer that are qualified by materiality or a Buyer Material Adverse Effect,
which representations and warranties shall have been true and correct in all
respects as so qualified).
(b) Covenants and Agreements Performed. The Buyer shall have
performed and complied with, in all material respects, all covenants and
agreements required by this Agreement and the other Operative Agreements to be
performed or complied with by it (including, without limitation, completion of
the Pre-Closing Restructuring).
(c) Certificates. US Propane and the Sellers shall have received a
certificate from the Buyer, in substantially the form set forth in Exhibit
7.2(c), executed by the Buyer, dated the Closing Date, representing and
certifying that the conditions set forth in Section 7.2(a) and Section 7.2(b)
have been fulfilled and a certificate as to the incumbency of the officers
executing this Agreement on behalf of the Buyer.
(d) Legal Proceedings. No preliminary or permanent injunction or
other order, decree or ruling issued by a Governmental Authority, and no
statute, rule, regulation or executive order promulgated or enacted by a
Governmental Authority, shall be in effect that restrains, enjoins, prohibits or
otherwise makes illegal the consummation of the transactions contemplated
hereby. No Proceeding before a Governmental Authority shall be pending (A)
seeking to restrain or prohibit the consummation of the transactions
contemplated hereby or (B) that could reasonably be expected, if adversely
determined, to impose any material limitation on the ability of the Sellers to
receive the Purchase Price.
(e) Consents. All Consents set forth on Exhibit 7.2(e) shall have
been obtained or made and shall be in full force and effect as to the LP at the
time of the Closing.
(f) No Buyer Material Adverse Effect. Since the date of this
Agreement, there shall not have been any event or condition having a Buyer
Material Adverse Effect.
(g) Purchase Price. The Buyer shall have paid the Closing
Consideration for the HHI Stock as provided in Section 2.2.
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(h) Contribution Agreement and Acquisition Agreement. All of the
conditions to the closings of the Contribution Agreement and the Acquisition
Agreement (other than the closing of the transactions pursuant to this
Agreement) shall have been satisfied or waived.
(i) NewLP Release. Buyer shall have executed and delivered the
NewLP Release, which shall be in full force and effect subject to the Closing.
(j) HSR Waiting Period. If applicable, the waiting period under
the HSR Act applicable to the consummation of the transactions contemplated
hereby shall have expired or been terminated without any adverse condition
attached thereto.
(k) Conversion of Class E Units. The New York Stock Exchange shall
have confirmed that the Class E Units pledged under the Pledge Agreement shall
be convertible in the event of foreclosure of the Promissory Note automatically
and without further action.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby abandoned by written notice at any time prior to the Closing
in any of the following manners:
(a) concurrently with any permitted termination of the
Contribution Agreement or the Acquisition Agreement;
(b) by written consent of each of the Parties;
(c) by any Party if the Closing has not occurred on or before
February 15, 2004, unless such failure to close resulted from a breach of this
Agreement by the Party or its Affiliate seeking to terminate this Agreement
pursuant to this Section 8.1(c);
(d) by any Party if (i) there is any statute, rule or regulation
that makes consummation of the transactions contemplated hereby or the operation
of HHI's business illegal or otherwise prohibited or (ii) a Governmental
Authority (A) has issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby, and such order, decree, ruling or other action
shall have become final and nonappealable or (B) has made any order, decree,
ruling or other action consenting to or approving consummation of the
transactions contemplated hereby contingent or conditional in any manner that
has a material adverse effect on HHI's business;
(e) by any Party, if there has been any violation or breach by any
other Party (other than an Affiliate or related party of the first party) of any
representation, warranty, covenant or agreement contained in this Agreement that
has rendered impossible the satisfaction of any condition to the obligations of
such other Party set forth in Section 7.1 or Section 7.2 and such violation or
breach has neither been cured within 30 days after notice by such first Party to
the other Party nor waived by the first Party; or
24
(f) by any Party, if any other event shall occur that shall render
the satisfaction of any such condition to the obligations of any other Party
(other than an Affiliate or related party of the first party) impossible and
such condition has not been waived by the other Parties.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 8.1 by any Party, written notice thereof shall
forthwith be given to the other Parties specifying the provision hereof pursuant
to which such termination is made. If this Agreement is terminated for any
reason, this Agreement, the Contribution Agreement and the Acquisition Agreement
shall become void and have no effect, except that the agreements contained in
this Section 8.2 and in Section 6.6 and Article 10 shall survive the termination
hereof. Nothing contained in this Section 8.2 shall relieve any Party from
liability for fraud or any willful breach of this Agreement.
8.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by each of the Parties.
8.4 WAIVER. Any Party may, on behalf of itself only and not on behalf
of any other Party, (a) waive any inaccuracies in the representations and
warranties of any other Party (other than an Affiliate or related party of the
first Party) contained herein or in any document, certificate or writing
delivered pursuant hereto, (b) waive compliance by any other Party (other than
an Affiliate or related party of the first Party) with any of its agreements
contained herein and (c) waive fulfillment of any conditions to its obligations
contained herein. Any agreement on the part of a Party to any such waiver shall
be valid only if set forth in an instrument in writing signed by or on behalf of
such Party. No failure or delay by a Party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
ARTICLE 9
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS
9.1 INDEMNIFICATION OBLIGATIONS OF THE BUYER. From and after the
Closing Date, the Buyer shall indemnify each of the Sellers and their respective
members, partners, Affiliates and controlling Persons (the "Seller Indemnified
Parties"), and hold the Sellers harmless from and against and in respect of any
and all Losses arising out of, based upon or resulting from:
(a) the breach of any representation or warranty of the Buyer
contained in or made pursuant to Article 4 of this Agreement;
(b) the breach by the Buyer or failure of the Buyer to observe or
perform in any material respect, any of its covenants or agreements contained in
this Agreement; and
(c) any Taxes of HHI to the extent payable by Buyer as specified
in Section 6.7.
Notwithstanding the foregoing, the Buyer will not have any obligation to
indemnify the Seller Indemnified Parties for Losses under Section 9.1(a) unless
and until the aggregate amount of all such Losses under Section 9.1(a) exceeds
$100,000 (regardless of whether, in the case of third
25
party actions, suits or proceedings with respect to any of the foregoing, the
Buyer may have a meritorious defense), at and after which time the Buyer shall
be liable, jointly and severally, for all Losses in excess of $100,000. The
immediately preceding sentence shall not apply to any obligation of Buyer under
Section 6.7. The rights and remedies of the Buyer based upon, arising out of or
otherwise in respect of any clause of this Section 9.1 or any representation,
warranty or covenant in this Agreement shall in no way be limited by the fact
that the act, omission, occurrence or other state of facts upon which any such
claim is based may also be the subject matter of any representation, warranty or
covenant in this Agreement that would not give rise to any rights or remedies of
the Sellers.
9.2 INDEMNIFICATION OBLIGATIONS OF THE SELLERS. From and after the
Closing Date, the Sellers, jointly and severally, shall indemnify the Buyer and
its partners, Affiliates and controlling Persons (the "Buyer Indemnified
Parties"), as the case may be, and hold such Persons harmless from and against
and in respect of any and all Losses arising out of, based upon or resulting
from:
(a) the breach of any representation or warranty of the Sellers
and US Propane contained in or made pursuant to Article 3 of this Agreement.
(b) the breach by any of the Sellers or US Propane or failure of
any of the Sellers or US Propane or any of their Affiliates to observe or
perform in any material respect, any of their covenants or agreements contained
in this Agreement; and
(c) any Taxes of any of HHI to the extent payable by Sellers as
specified in Section 6.7;
Notwithstanding the foregoing, none of the Sellers or US Propane will have any
obligation to indemnify any of the Buyer Indemnified Parties for Losses under
Section 9.2(a) unless and until the aggregate amount of all such Losses under
Section 9.2(a) exceeds $100,000 (regardless of whether, in the case of third
party actions, suits or proceedings with respect to any of the foregoing, any of
the Sellers or US Propane may have a meritorious defense), at and after which
time the Sellers shall be liable, jointly and severally, for all Losses in
excess of $100,000. The immediately preceding sentence shall not apply to any
obligation of the Sellers or US Propane under Section 6.7. The rights and
remedies of the Buyer Indemnified Parties, based upon, arising out of or
otherwise in respect of any clause of this Section 9.2 or any representation,
warranty or covenant in this Agreement shall in no way be limited by the fact
that the act, omission, occurrence or other state of facts upon which any such
claim is based may also be the subject matter of any representation, warranty or
covenant in this Agreement that would not give rise to any rights or remedies of
the Buyer Indemnified Parties.
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9.3 INDEMNIFICATION PROCEDURES.
(a) Promptly after receipt by any Person entitled to
indemnification under Section 9.1 or Section 9.2 (an "indemnified Party") of
notice of the commencement of any Proceeding by a Person not a Party to this
Agreement in respect of which the indemnified Party will seek indemnification
hereunder (a "Third Party Action"), the indemnified Party shall notify the
Person that is obligated to provide such indemnification (an "indemnifying
Party") thereof in writing, but any failure to so notify the indemnifying Party
shall not relieve it from any liability that it may have to the indemnified
Party under Section 9.1 or Section 9.2, except to the extent that the
indemnifying Party is actually and materially prejudiced by the failure to give
such notice. The indemnifying Party shall be entitled to participate in the
defense of such Third Party Action and to assume control of such defense with
counsel reasonably satisfactory to such indemnified Party; provided, however,
that:
(A) the indemnified Party shall be entitled to participate in
the defense of such Third Party Action and to employ counsel at its own
expense to assist in the handling of such Third Party Action;
(B) the indemnifying Party shall obtain the prior written
approval of the indemnified Party, which approval shall not be
unreasonably withheld or delayed, before entering into any settlement
of such Third Party Action or ceasing to defend against such Third
Party Action, if pursuant to or as a result of such settlement or
cessation, injunctive or other equitable relief would be imposed
against the indemnified Party or the indemnified Party would be
adversely affected thereby;
(C) no indemnifying Party shall consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each indemnified Party of a release from all liability in respect of
such Third Party Action; and
(D) the indemnifying Party shall not be entitled to control
the defense of any Third Party Action unless within 15 days after
receipt of such written notice from the indemnified Party the
indemnifying Party confirms in writing its responsibility to indemnify
the indemnified Party with respect to such Third Party Action and
reasonably demonstrates that it will be able to pay the full amount of
the reasonably expected Losses in connection with any such Third Party
Action.
Except as set forth in the following sentence, after written notice by
the indemnifying Party to the indemnified Party of its election to assume
control of the defense of any such Third Party Action in accordance with the
foregoing and compliance by the indemnifying Party with Section 9.3(a)(iv), (A)
the indemnifying Party shall not be liable to such indemnified Party hereunder
for any Legal Expenses subsequently incurred by such indemnified Party
attributable to defending against such Third Party Action, and (B) as long as
the indemnifying Party is reasonably contesting such Third Party Action in good
faith, the indemnified Party shall not admit any liability with respect to, or
settle, compromise or discharge the claim underlying, such Third Party Action
without the indemnifying Party's prior written consent. If (A) the indemnifying
Party does not assume control of the defense of such Third Party Action in
27
accordance with this Section 9.3 or (B) the indemnified Party has been advised
in writing by counsel that representation of such indemnified Party and the
indemnifying Party by the same counsel would be inappropriate under applicable
standards of professional conduct (in which case the indemnifying Party shall
not have the right to assume control of the defense of such Third Party Action
on behalf of the indemnified Party, in each case the indemnified Party shall
have the right to defend and/or settle such Third Party Action in such manner as
it may deem appropriate at the cost and expense of the indemnifying Party,
provided that (i) the indemnifying Party shall be obligated to reimburse the
indemnified Parties for the costs and expenses of only a single counsel for such
Third Party Action and any matters related thereto, and (ii) the indemnified
Party shall not settle or resolve such Third Party Action without the prior
written consent of the indemnifying Party (which consent will not be
unreasonably withheld, conditioned or delayed), and the indemnifying Party will
promptly reimburse the indemnified Party therefor in accordance with this
Article 9. The reimbursement of fees, costs and expenses required by this
Article 9 shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred.
(b) If the indemnifying Party shall be obligated to indemnify the
indemnified Party pursuant to this Article 9, the indemnifying Party shall be
subrogated to all rights of the indemnified Party with respect to the claims to
which such indemnification relates. If an indemnified Party becomes entitled to
any indemnification from an indemnifying Party, such indemnification shall be
made in cash upon demand.
(c) The right of indemnification pursuant to this Article 9 shall
constitute the sole and exclusive remedy of each of the Parties to this
Agreement, other than with respect to fraud or willful breach by a Party. So
long as a claim for indemnification pursuant to this Article 9 is being
contested in good faith by the indemnifying Party or such claim shall otherwise
remain unliquidated, such claim shall not affect any of the rights of the
indemnifying Party under the LP Agreement, including any right to current
distributions by the LP.
9.4 SURVIVAL. Except as provided in this Section 9.4, and except for
fraud and intentional misconduct, all representations, warranties, covenants and
agreements contained in this Agreement shall terminate as specified below.
(a) The right to indemnification:
(A) with respect to the representations and warranties
contained in Articles 3 or 4 (other than the representations and
warranties in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.10, 3.13,
3.17, 4.1, 4.2, 4.3, 4.4, 4.5, 4.7 and 4.8) shall survive for 180 days
after the Closing;
(B) with respect to the representations and warranties
contained in Sections 3.5, 3.6, 3.7, 3.13, 4.4, 4.5 and 4.8 shall
survive until the expiration of the applicable statute of limitations;
(C) with respect to the representations and warranties
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.10, 3.17, 4.1, 4.2, 4.3,
and 4.7 shall survive without any time limit; and
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(D) with respect to the covenants and agreements contained in
this Agreement (including those covenants and agreements set forth in
Section 6.7), shall survive for the applicable statute of limitations.
The expiration of any survival period under this Agreement
will not affect the liability of any Party under this Article 9 for any Loss as
to which a bona fide claim has been asserted prior to the termination of such
survival period.
9.5 NO SPECIAL OR CONSEQUENTIAL DAMAGES. No Party shall be entitled to
recover special, consequential, exemplary or punitive damages from the other
Parties, and each Party hereby waives any claim or right to special,
consequential, exemplary or punitive damages hereunder, even if caused by the
active, passive, sole, joint, concurrent or comparative negligence, strict
liability, or other fault of any Party, other than fraud and intentional
misconduct.
ARTICLE 10
MISCELLANEOUS
10.1 NOTICES. All notices, requests, demands and other communications
required or permitted to be given or made hereunder by any Party shall be in
writing, and shall be delivered either personally, or by registered or certified
mail (postage prepaid and return receipt requested) or by express courier or
delivery service, or by telegram, telefax, telex or similar facsimile means, to
the Parties, at the addresses (or at such other addresses as shall be specified
by the Parties by like notice) set forth below:
(a) If to the Sellers or US Propane:
(A) AGL Energy Corporation
AGL Propane Services, Inc.
X.X. Xxx 0000
Xxxxxxx, XX 00000
Attention: General Counsel
(000) 000-0000
(000) 000-0000 (facsimile)
(B) United Cities Propane Gas, Inc.
c/o Atmos Energy Corporation
5430 LBJ Freeway
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: J. Xxxxxxx Xxxxx
(000) 000-0000
(000) 000-0000 (facsimile)
29
(C) TECO Propane Ventures, LLC
c/o TECO Energy, Inc.
000 X. Xxxxxxxx Xx.
Xxxxx, XX 00000
Attention: General Counsel
(000) 000-0000
(000) 000-0000(facsimile)
(D) Piedmont Propane Company
0000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Xxxxx X. X'Xxxx
(000) 000-0000
(000) 000-0000 (facsimile)
(E) Xxxxxxx & Xxxxx L.L.P.
000 Xxxxxx
Xxxxxxx, Xxxxx 00000
Attention: G. Xxxxxxx X'Xxxxx
(000) 000-0000
(000) 000-0000 (facsimile)
(b) If to the Buyer:
Heritage Propane Partners, L.P.
0000 X. Xxxx
Xxxxx 000
Xxxxx, XX 00000
(000) 000-0000 (facsimile)
with a copy to:
Xxxxxxxx & Xxxxxx L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
(000) 000-0000 (facsimile)
and
30
Doerner, Saunders, Xxxxxx & Xxxxxxxx, L.L.P.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxx
(000) 000-0000 (facsimile)
Notices and other communications shall be deemed given or made (i) when
received, if sent by telegram, facsimile, telex or similar electronic
transmission means (written confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by facsimile, telex or
similar electronic transmission means) and (ii) when delivered and receipted for
(or upon the date of attempted delivery where delivery is refused), if
hand-delivered, sent by registered or certified mail or sent by express courier
or delivery service, except in the case of facsimile transmissions received
after the normal close of business at the receiving location, which shall be
deemed given on the next Business Day.
10.2 ENTIRE AGREEMENT. This Agreement and the other Operative
Agreements, together with the Schedules and Exhibits hereto (where applicable,
as executed and delivered), constitute the entire agreement between the Parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, between the Parties with respect to the
subject matter hereof.
10.3 BINDING EFFECT; ASSIGNMENT; NO THIRD PARTY BENEFIT. This Agreement
shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned (whether by
operation of law or otherwise) by any Party without the prior written consent of
each of the Parties, and any purported assignment without such consent shall be
void, provided, however, that Buyer may assign its rights, interests and
obligations under the Agreement to ___________ without the prior written consent
of the Sellers but no such assignment shall relieve the Buyer of its obligations
hereunder. Except as provided in Article 9, nothing in this Agreement, express
or implied, is intended to or shall confer upon any Person other than the
Parties, and their respective successors and permitted assigns, any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
10.4 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in all
other respects this Agreement shall remain in full force and effect; provided,
however, that if any such provision may be made enforceable by limitation
thereof, then such provision shall be deemed to be so limited and shall be
enforceable to the maximum extent permitted by Applicable Law.
10.5 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Texas, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Texas or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Texas.
31
10.6 JURISDICTION. Any legal action, suit or proceeding in law or
equity arising out of or relating to this Agreement or the transactions
contemplated by this Agreement may only be instituted in any state or federal
court located in the State of Texas, and each Party agrees not to assert, by way
of motion, as a defense or otherwise, in any such action, suit or proceeding,
any claim that is not subject personally to the jurisdiction of such court, that
its property is exempt or immune from attachment or execution, that the action,
suit or proceeding is brought in an inconvenient forum, that the venue of the
action, suit or proceeding is improper or that this Agreement, or the subject
matter hereof or thereof may not be enforced in or by such court. Each Party
further irrevocably submits to the jurisdiction of any such court in any such
action, suit or proceeding. Any and all service of process and any other notice
in any such action, suit or proceeding shall be effective against any Party if
given by registered or certified mail (return receipt requested) or by any other
means which requires a signed receipt in accordance with, and at the address
listed in, Section 10.1. Nothing herein contained shall be deemed to affect the
right of any Party to serve process in any manner permitted by law.
10.7 FURTHER ASSURANCES. From time to time following the Closing, at
the request of any Party and without further consideration, the other Parties
shall execute and deliver to such requesting Party such instruments and
documents and take such other action as such requesting Party may reasonably
request or as may be otherwise necessary to (a) more fully and effectively
transfer the HHI Stock to, and vest the HHI Stock in, the Buyer, (b) enable the
Buyer to assume and fully and timely perform in accordance with their terms any
or all of the obligations of HHI, (c) enable the Buyer or their Affiliates to
receive the benefits of the ownership of the HHI Stock, and (d) otherwise
consummate more fully and effectively the transactions contemplated by this
Agreement and the other Operative Agreements.
10.8 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted
for convenience of reference only, do not constitute a part of this Agreement
and shall not affect in any manner the meaning or interpretation of this
Agreement.
10.9 COUNTERPARTS. This Agreement may be executed by the Parties in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same agreement.
[SIGNATURE PAGES FOLLOW]
32
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the day and year first above written.
US PROPANE: U.S. PROPANE, L.P.,
a Delaware limited partnership
By: U.S. Propane, L.L.C.,
its General Partner
By: ______________________________
Name:_________________________
Title:________________________
THE SELLERS: AGL ENERGY CORPORATION,
a Delaware corporation
By: ______________________________
Name:_________________________
Title:________________________
AGL PROPANE SERVICES, INC.,
a Delaware corporation
By: ______________________________
Name:_________________________
Title:________________________
UNITED CITIES PROPANE GAS, INC.,
a Tennessee corporation
By: ______________________________
Name:_________________________
Title:________________________
TECO PROPANE VENTURES, LLC,
a Delaware limited liability company
By: __________________________________
Name:_____________________________
Title:____________________________
PIEDMONT PROPANE COMPANY,
a North Carolina corporation
By: ___________________________________
Name:______________________________
Title:_____________________________
THE BUYER: HERITAGE PROPANE PARTNERS, L.P.,
a Delaware limited partnership
By: US Propane, L.P.
By: US Propane, L.L.C.
its General Partner
By: ______________________________
Name:_________________________
Title:________________________
STOCK PURCHASE AGREEMENT
SUMMARY of SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 2.1(a) Method For Determining Current Liabilities Of HHI
Schedule 3.2(a) Other Securities of HHI
Schedule 3.2(b) Indebtedness of US Propane or Sellers Owing to HHI
Schedule 3.5 Default or Violation
Schedule 3.13(a) Tax Returns (Exceptions)
Schedule 3.13(b) List of Tax Returns
Schedule 3.13(g) Taxes in Stock Acquisitions
Schedule 3.14 Intellectual Property
Schedule 3.18(a) HHI Unaudited Financial Statements
Schedule 3.18(b) Other Liabilities
Schedule 5.2(b) Certain Actions
Schedule 6.12 HHI Payables and Receivables to be Eliminated
EXHIBITS
Exhibit 1.1 Definitions
Exhibit 7.1(c) Form of Officers' Certificate of Sellers and US Propane
Exhibit 7.1(e) Consents
Exhibit 7.2(c) Form of Officers' Certificate of the Buyer
Exhibit 7.2(e) Consents
Annex I Promissory Note
Annex II Pledge Agreement
EXHIBIT 1.1
DEFINITIONS
"Affiliate" means, with respect to a Person, (a) any other Person more
than 50 percent of whose outstanding voting securities are directly or
indirectly owned, controlled or held with the power to vote by such Person or
(b) any other Person directly or indirectly controlling, controlled by or under
common control with such Person. The term "controls" (and the variants thereof)
as used in this definition means the possession of the power, acting alone, to
direct or cause the direction of the management and policies of a Person by
virtue of ownership of voting securities or otherwise.
"Applicable Law" means any Law to which a specified Person or property
is subject.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of Texas or Oklahoma are authorized or
obligated to close.
"Buyer Partnership Agreement" means the Amended and Restated Agreement
of Limited Partnership of Buyer, dated as of June 27, 1996, as amended or
supplemented and in effect as of the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to a corresponding provision
of any successor law.
"Contract" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Contribution Agreement" means that certain Contribution Agreement, of
even date herewith, among Acquirer, Buyer and US Propane, as same may be amended
or supplemented during the term hereof.
"Control" means the possession, directly or indirectly, through one or
more intermediaries, of any of the following:
(d) (i) in the case of a corporation, more than 50 percent of the
outstanding voting securities thereof; (ii) in the case of a limited liability
company, partnership, limited partnership or joint venture, equity securities of
such entity that entitle the owner/holder thereof to the right to receive more
than 50 percent of the distributions from such entity; (iii) in the case of a
trust or estate, including a business trust, more than 50 percent of the
beneficial interests therein; and (iv) in the case of any other entity, equity
securities or ownership interests in such entity that entitle the owner/holder
thereof to more than 50 percent of the economic or beneficial interests therein;
or
(e) in the case of any entity, the possession of the power, acting
alone or as a member of a group (as defined in Rule 13d-5 under the Exchange
Act), to direct or cause the direction of the management and policies of the
entity by virtue of ownership of voting securities or otherwise.
"Delaware LP Act" means the Delaware Revised Uniform Limited
Partnership Act, as amended and in effect from time to time.
"Encumbrance" means any security interest, lien, pledge, claim, charge,
escrow, encumbrance, option, right of first offer, right of first refusal,
preemptive right, mortgage, indenture, security agreement or other similar
agreement, arrangement, contract, commitment, understanding or obligation,
whether written or oral and whether or not relating in any way to credit or the
borrowing of money.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America on the applicable date.
"Governmental Authority" (or "Governmental") means a federal, state,
local or foreign governmental authority; a state, province, commonwealth,
territory or district thereof; a county or parish; a city, town, township,
village or other municipality; a district, xxxx or other subdivision of any of
the foregoing; any executive, legislative or other governing body of any of the
foregoing; any agency, authority, board, department, system, service, office,
commission, committee, council or other administrative body of any of the
foregoing; any court or other judicial body; and any officer, official or other
representative of any of the foregoing.
"HHI Material Adverse Effect" means the occurrence or existence of any
event or circumstance that (a) would have a material adverse effect on the
condition (financial or other), business, properties, net worth or results of
operations of HHI, or (b) would subject HHI to any material liability or
disability, or (c) would impede in any material respect the ability of HHI,
Sellers, US Propane or Buyer to consummate the transactions contemplated by the
Contribution Agreement, this Agreement or the Acquisition Agreement.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"IRS" means the Internal Revenue Service.
"Knowledge" has the meaning assigned to such term in the Acquisition
Agreement.
"Law" means any applicable constitutional provision, statute, act, code
(including the Code), law, regulation, rule, ordinance, order, decree, ruling,
proclamation, resolution, judgment, decision, declaration, or interpretative or
advisory opinion or letter of a Governmental Authority having valid
jurisdiction.
"Legal Expenses" means the reasonable out-of-pocket fees, costs and
expenses of any kind incurred by any Person entitled to indemnification pursuant
to Article 9 in investigating, preparing for, defending against or providing
evidence, producing documents or taking other action with respect to any claim
as to which such person is entitled to indemnification pursuant to Article 9.
"Losses" means losses, damages, liabilities, claims, costs and expenses
(including, without limitation, related Legal Expenses), but excluding losses,
damages, liabilities, claims, costs and expenses incurred in connection with or
relating to lost profits or special, consequential, exemplary or punitive
damages.
"Operative Agreements" means this Agreement, the Promissory Note, the
Pledge Agreement, the MLP Agreement Amendment, the Noncompetition Agreement and
the NewLP Release.
"Parties" means, collectively, each of the parties named in the
Preamble.
"Permits" means licenses, permits, franchises, consents, approvals,
variances, exemptions and other authorizations of or from Governmental
Authorities.
"Person" means any individual, corporation, firm, partnership, limited
partnership, limited liability company, joint venture, association, joint-stock
company, trust, enterprise, other entity, unincorporated association or
Governmental Authority.
"Proceedings" means all proceedings, actions, claims, suits,
investigations and inquiries by or before any arbitrator or Governmental
Authority.
"Special Committee" means the Special Committee of the Board of
Directors of the general partner of US Propane, consisting of Xxxxxxx X.
Xxxxxxx, J. Xxxxxxx Xxxxxx and Xxxx X. Xxxxx.
"Subsidiary" means as to any Person, (a) any corporation more than 50
percent of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(excluding stock of any class or classes of such corporation that might have
voting power by reason of the happening of any contingency) is at the time owned
by such Person and/or one or more Subsidiaries of such Person and (b) any
partnership, limited partnership, limited liability company, joint venture,
association, joint-stock company, trust, enterprise, other entity or
unincorporated association in which such Person and/or one or more Subsidiaries
of such Person has more than a 50 percent equity interest at the time.
"Tax Return" means any return or report, including any related or
supporting information, with respect to Taxes.
"Taxes" means any income taxes or similar assessments or any sales,
gross receipts, excise, occupation, use, ad valorem, property, production,
severance, transportation, employment, payroll, franchise or other tax imposed
by any United States federal, state or local (or any foreign or provincial)
taxing authority, including any interest, penalties or additions attributable
thereto.
