AGREEMENT AMONG INITIAL STOCKHOLDERS AND SYN INC.
THIS AGREEMENT, dated May 17, 1995, is made and entered into
among Empire Gas Corporation, a Missouri corporation ("Empire"),
Northwestern Growth Corporation, a South Dakota corporation ("NGC"), and SYN
Inc., a Delaware corporation ("SYN~), with respect to the following facts:
A. Empire currently is engaged in the business of
distributing and selling at retail liquified petroleum ("LP") gas and
appliances, and has a management experienced in the operation of such
business.
B. NGC is a wholly-owned subsidiary of Northwestern
Public Service Company ("NWPS") and has as one of its objectives the making
of investments that could benefit NWPS and its stockholders.
C. Empire and NGC, acting together, have made a
successful bid to acquire the LP gas distribution and appliance business of
Synergy Group Incorporated ("Synergy"; such acquisition being hereinafter
called the "Synergy Acquisition"), in what is planned to be the first Step
in the proposed development by Empire and NGC, on a team basis, of a
significant position in the LP gas distribution industry. Empire and NGC
have contemplated, in their bidding for the Synergy Acquisition, that they
will rely principally on Empire for management expertise and on NGC to
provide or arrange the financing for the Synergy Acquisition, and that the
success of the Synergy Acquisition will depend in large measure upon the
cost savings and operating improvements expected to be achieved by having
Empire do the planning and management of the business of Synergy and its
subsidiaries, under the direction of the Board of Director of SYN.
D. Empire and NGC have caused SYN to be incorporated
to serve as the vehicle (directly or through subsidiaries to be created) for
making the Synergy Acquisition.
E. Empire and NGC, on behalf of SYN, are concluding
the negotiation of the definitive agreement (the "Synergy Acquisition
Agreement") for the Synergy Acquisition, and need to provide for (i) the
initial capitalization of SYN, (ii) certain loan financing for SYN, (iii)
the management of SYN and (iv) for certain matters pertaining to the
ownership of shares of stock of SYN.
NOW THEREFORE, in consideration of the premises and the
agreements, exchanged herein, the parties hereto agree as follows:
ARTICLE 1: INITIAL CAPITALIZATION OF SYN;
STOCK SUBSCRIPTIONS AND RESERVATIONS OF STOCK
Section 1.01 Initial Authorized Stock of SYN. SYN has been
incorporated by Empire and NGC with an initial authorized capitalization (as
set forth in Article FOURTH of SYN's Certificate of Incorporation, a true
and complete copy of which is attached hereto as Exhibit A), consisting of
100,000 shares of common stock, par value 1 cents per share (the "Common Stock";
and the 100,000 shares of Common Stock referred to herein shall only be
increased with the prior written agreement of Empire and NGC unless such
increased number of shares is to be issued in an arm's length transaction to
a party who is not affiliated with any of the parties to this Agreement),
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and 100,000 shares of preferred stock, par value 1 cent per share, issuable in
one or more series (the "Preferred Stock"). Prior to the consummation of
the Synergy Acquisition, SYN shall, and Empire and NGC shall cause SYN to,
take all action necessary to create and authorize the issuance of a series
of the Preferred Stock, namely, the Series A Cumulative Preferred Stock,
consisting of 70,500 shares, the terms of which shall be as set forth in
Exhibit B attached hereto, with such changes therein as the parties hereto
may approve before such series is created (the "Series A Preferred Stock").
Section 1.02 Subscriptions and Option for Stock. NGC has
previously purchased, and hereby subscribes for, stock of SYN, and NGC has
granted Empire an option to purchase certain shares of stock from NGC, as
follows:
(a) SYN and NGC acknowledge that NGC has
purchased from SYN, and SYN has sold and issued to NGC,
1,000 shares of Common Stock for a cash purchase price of
$1,000.00 which has been paid by NGC to SYN, and that these
shares are the only shares of stock of SYN that are
currently outstanding.
(b) NGC hereby subscribes for, and agrees to
purchase from SYN, and SYN hereby agrees to sell and issue
to NGC, an additional 71,500 shares of Common Stock for a
cash purchase price of $71,500.00 to be paid at the time of
such issuance, with this transaction to be consummated (the
"Subscription Closing") at the First Closing, as defined in
the Synergy Acquisition Agreement, unless an earlier time
for the Subscription Closing is agreed to by the parties
hereto. The obligation of NGC under its subscription in
this paragraph (b) is subject to the condition (unless
waived by NGC) that NGC shall have been able to obtain the
funds from the Permanent Financing or the Temporary
Financing, as those terms are defined in the Synergy
Acquisition Agreement, at or prior to the time of the
Subscription Closing.
(c) NGC hereby subscribes for, and agrees to
purchase from SYN, and SYN hereby agrees to sell and issue
to NGC, 68,000 shares of Series A Preferred Stock for a cash
purchase price of $1,000 per share ($68,000,000.00 total),
with this transaction to be consummated at the Subscription
Closing. The obligation of NGC under its subscription in
this paragraph (c) is subject to the condition (unless
waived by NGC) that NGC shall have been able to obtain the
funds from the Permanent Financing or the Temporary
Financing, as those terms are defined in the Synergy
Acquisition Agreement, at or prior to the time of the
Subscription Closing and that, at the time of the
Subscription Closing, the First Closing (as defined in the
Synergy Acquisition Agreement) is concurrently occurring or
is reasonably assured of being consummated immediately
thereafter.
(d) Empire hereby subscribes for, and agrees to
purchase from SYN, and SYN hereby agrees to issue and sell
to Empire, 10,000 shares of Common Stock (which shall
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represent 10% of the issued and outstanding Common Stock)
for a cash purchase price of $10,000 to be paid at the time
of such issuance, with this transaction to be consummated at
the Subscription Closing. The obligation of Empire under
its subscription in this paragraph (d) is subject to the
condition (unless waived by Empire) that NGC consummates its
purchase of shares of Common Stock under paragraph (b) above
in this Section 1.02 at the Subscription Closing.
(e) NGC hereby grants to Empire an option to
purchase from NGC, at a price of $1.00 per share, up to
20,000 of the shares of Common Stock which shall represent
20% of the issued and outstanding Common Stock, subject to
NGC acquiring such shares pursuant to paragraph (b) above in
this Section 1.02. Such option may be exercised at any time
after September 30, 1995 and prior to September 30, 1997, or
the Determination Date (as defined in Section 1.04 herein),
whichever is earlier, by Empire's giving written notice of
such exercise to NGC. After the giving of such notice, NGC
shall assign and deliver to Empire the shares of Common
Stock for which the stock option was exercised, as promptly
as possible, but in any event within seven days, in exchange
for Empire's payment to NGC of the purchase price for such
shares; and the shares so assigned and delivered shall then
be shares owned by Empire and shall be held by Empire
subject to the terms of this Agreement.
Section 1.03 Reservations of Stock for Issuance. SYN
shall, and Empire and NGC shall cause SYN to, take all action necessary to
reserve for initial issuance, 17,500 shares of Common Stock and 2,500 shares
of Series A Preferred Stock to be issued to the Stockholders (as defined in
the Synergy Acquisition Agreement) at the Second Closing (also as defined in
the Synergy Acquisition Agreement), pursuant to the Synergy Acquisition
Agreement.
Section 1.04 Common Stock Returns. The following
provisions of this Section 1.04 apply in the event Empire exercises the
stock option granted to it in Section 1.02(d) herein:
(a) The "Common Stock Return," as that term is
used herein, shall be the number of shares of Common Stock
of SYN which Empire hereby agrees to assign and deliver to
NGC, without cost to NGC, in the event that the common
equity value at a Determination Date (as defined below) is
below levels specified for such date in subparagraph (iii)
in this paragraph (a). The Common Stock Return shall be set
in accordance with the following formula:
(i) The Determination Date shall be the
date on which SYN is sold (meaning a sale of
substantially all of the assets of SYN and its
subsidiaries, the acquisition of SYN by another,
non-affiliated entity by merger or consolidation,
or the sale of partnership units or shares of stock
of SYN which entitle the holder thereof to cast at
least a majority of the votes entitled to be cast
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in the general election of directors of SYN or the
date on which the sale of partnership units or
shares of SYN's Common Stock is closed in an
underwritten public offering, for which the
partnership units or shares are registered under
the Securities Act of 1933, or the date on which
this Agreement expires or is terminated in
accordance with Section 7.02 herein, whichever of
the foregoing first occurs).
(ii) The value of the total outstanding
Common Stock of SYN on the Determination Date (the
"Value"), shall be determined by the parties hereto
on the basis of the sale price for SYN if the sale
of SYN is involved, or based upon the price to SYN
(or the selling stockholders if SYN is not the
seller) in the event an underwritten public
offering of partnership units or Common Stock of
SYN is involved, or on the basis of the fair market
value of the outstanding Common Stock of SYN in
every other event, as determined by an appraisal
firm or an investment banking firm selected by the
parties hereto, with such fair market value to be
determined on the basis of the value of SYN and its
subsidiaries as a whole, if sold as a going
concern. In the event there is a combination of
one or more entities with SYN, the value of SYN
will be determined by either (x) a fair market
value appraisal or (y) in the event there is a
public offering within nine months after such
combination, the value shall be the initial price
to the public of the SYN shares of Common Stock or
partnership units in such public offering.
(iii) For these purposes, "deemed
outstanding shares of Common Stock" shall be the
total of the number of shares of Common Stock
issued and outstanding, plus the number that would
be issued and outstanding if all outstanding stock
options, warrants, conversion rights and other
rights to acquire shares of Common Stock were
exercised, whether or not exercisable at the time.
The number of shares of Common Stock of SYN
constituting the Common Stock Return shall be the
percentage of the deemed outstanding shares of
Common Stock of SYN as of the Determination Date,
determined on the basis of the following table and
paragraph (b) below, if applicable:
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Column A Column B Column C
Percentage of deemed Percentage of deemed
outstanding shares of outstanding shares of
Common Stock of SYN Common Stock of SYN
shall be 0% if the shall be 7.5% if the
Fiscal Year of Value as of the Value as of the
SYN in which Determination Date is Determination Date is
Determination at least the following less than the following
Date occurs: amount: amount:
______________ ______________________ _______________________
1996 $24,500,000 $22,250,000
1997 $30,000,000 $24,750,000
1998 $36,750,000 $27,500,000
1999 $45,000,000 $30,600,000
2000 $55,200,000 $34,000,000
After 2000 1.225 times the 1.1125 times the
previous year's previous year's
amount amount
(b) If the Value as of the Determination Date is more
than the amount in Column C in Section 1.04(a)(iii) above, but less than the
amount in Column B therein, the percentage used to determine the Common
Stock Return shall be a figure between 7.5% and 0% which is in proportion to
what the Value is to the amounts in the two columns for the particular
Determination Date.
Section 1.05 Acquisition for Investment. Empire and NGC
each represent and warrant to the other, and to SYN, as follows: It has
(through its management personnel) such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of its purchase of securities of SYN as provided for in this
Agreement; it is acquiring such securities, and will acquire them, for
investment and not with a view toward, or with any intention of,
distributing or selling any of the securities and it will not sell or offer
to sell or otherwise transfer any of the securities in violation of the
Securities Act of 1933, as amended.
ARTICLE 2: LOAN FINANCING FOR SYN
NGC shall make a commercially reasonable effort to arrange
for SYN, or provide SYN with, loan financing for SYN, on a fully secured
basis, of up to $70,000,000 principal amount needed by SYN for the Synergy
Acquisition.
ARTICLE 3: LIMIT TO FINANCING OBLIGATIONS
Neither Empire nor NGC, nor any of their affiliates, shall
have any obligation to provide, or arrange, financing for SYN other than as
expressly provided for in Articles 1 and 2 herein.
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ARTICLE 4: SYNERGY ACQUISITION
Each of the parties hereto will make a commercially
reasonable effort in cooperation with the other parties hereto, to do those
things within its control to consummate the Synergy Acquisition in
accordance with the terms of, and subject to the conditions in, the Synergy
Acquisition Agreement. Nothing in this Agreement or otherwise shall be
construed to give anyone who is not a party to this Agreement, whether under
a third party beneficiary legal doctrine or otherwise, a right to enforce
the provisions of this Article or to obtain relief for any failure to
perform in accordance with the requirements of this Article.
ARTICLE 5: MANAGEMENT OF SYN
Section 5.01 At or before the First Closing (as defined in
the Synergy Acquisition Agreement), the parties hereto will enter into a
management agreement in substantially the form attached hereto as Exhibit C,
or with such changes therein as the parties hereto hereafter agree upon (the
"Management Agreement"), pursuant to which the planning and management of
the business of SYN subsequent to the Second Closing (as defined in the
Synergy Acquisition Agreement) will be conducted by Empire under the
direction of the Board of Directors of SYN, as provided therein.
Section 5.02 Directors and Officers of SYN.
(a) For purposes of this Agreement, "Control
Period" means the period of time commencing on the date of
this Agreement and continuing either (i) until this
Agreement is terminated pursuant to Section 7.02 herein
because of the termination of the Synergy Acquisition
Agreement without the Synergy Acquisition having been
completed or (ii) until a time after the First Closing, as
defined in the Synergy Acquisition Agreement, when (A) the
Control Period is terminated by agreement of the parties
hereto, (B) NGC no longer owns a majority of the shares of
Common Stock of SYN deemed to be outstanding (determined as
provided in Section 1.04 herein), (C) Empire no longer owns
at least 20% of the shares of Common Stock of SYN deemed to
be outstanding or has an option to acquire at least that
amount of shares, or (D) when SYN consummates an
underwritten public offering of partnership units or shares
of its Common Stock, registered under the Securities Act of
1933, whichever of (A), (B), (C) or (D) first occurs.
(b) Throughout the Control Period, NGC and
Empire shall vote their voting shares of stock of SYN that
are capable of being voted, and will otherwise use their
respective commercially reasonable efforts, to carry out the
following:
(i) the Board of Directors of SYN shall
consist of five members, three of whom shall be nominees of
NGC (the "NGC Positions") and two of whom shall be nominees
of Empire (the "Empire Positions"); and any vacancies
occurring in the NGC Positions will be promptly filled with
nominees of NGC and any vacancies occurring in the Empire
Positions will be promptly filled with nominees of Empire.
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(ii) The officers of SYN shall include
at all times a Chairman of the Board and a Vice Chairman of
the Board, who will be persons nominated by NGC, and a
President and Chief Executive Officer, who will be Paul S.
Lindsey, Jr., and a Secretary, who will be a person
nominated by Empire. The authority and duties of such
officers shall be as set forth in the by-laws of SYN, a true
and complete copy of which as in effect on the date hereof
is attached hereto as Exhibit D.
(c) To initiate compliance with preceding
paragraph (b), Empire and NGC have caused the following
persons to be elected to the positions with SYN indicated by
their names, to serve for the period provided in the by-laws
of SYN:
Chairman of the Board and director - Merle
D. Lewis (an NGC nominee for such
positions);
Vice Chairman of the Board and director
Richard R. Hylland (an NGC nominee for such
positions);
President and Chief Executive Officer and
director - Paul S. Lindsey, Jr. (an Empire
nominee as to the position of director);
Secretary and director - Douglas A. Brown
(an Empire nominee for such positions);
with the fifth member of the Board of Directors of SYN (one
of the NGC Positions) to be nominated by NGC, and elected,
at a future time when NGC has selected the nominee for such
position.
ARTICLE 6: DISPOSITION OF SYN STOCK BY EMPIRE OR NGC
Section 6.01 Permitted Dispositions.
(a) NGC may at any time or from time to time
transfer any of the securities issued by SYN which NGC may
own at any time to NWPS or any wholly-owned subsidiary of
NWPS, provided that notice of such transfer is given to the
other parties to this Agreement and that the transferee
becomes a party to this Agreement with respect to the
securities so transferred, but all of such transferees and
NGC shall collectively act, and be treated, as a single
entity with NGC acting as their representative for purposes
of this Agreement.
(b) Empire may at any time and from time to
time transfer any of the securities issued by SYN which
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Empire may own at any time to any affiliated party, provided
that notice of such transfer is given to the other parties
to this Agreement and the transferee becomes a party to this
Agreement with respect to the securities so transferred, but
all such transferees and Empire shall collectively act, and
be treated, as a single entity with Empire acting as their
representative for purposes of this Agreement.
Section 6.02 Rights of First Refusal
(a) Except as permitted by Section 1.04 and
Section 6.01(b) herein, so long as the Management Agreement
is in effect, Empire will not sell or otherwise dispose of
any shares of Common Stock of SYN, or any other securities
convertible into such shares, to any party without first
offering the same for sale to NGC in writing on the same
terms as are offered to or by the other party (with full
disclosure of such terms to NGC) and allowing not less than
30 days after its receipt of the offer for NGC to accept the
offer; and if such offer is accepted by NGC, NGC shall have
90 days in which to complete the purchase on such terms.
(b) Except as permitted by Section 1.02(e) and
Section 6.01(a) herein, so long as the Management Agreement
is in effect, NGC will not sell or otherwise dispose of any
shares of Common Stock of SYN, or any other securities
convertible into such shares, to any party without first
offering the same for sale to Empire in writing on the same
terms as are offered to or by the other party (with full
disclosure of such terms to Empire) and allowing Empire not
less than 30 days after its receipt of the offer for Empire
to accept the offer, and if such offer is accepted by
Empire, Empire shall have 90 days in which to complete the
purchase on such terms, but if Empire declines such offer,
then Empire shall have the right to participate on a pro
rata basis in the sale of such shares by NGC.
ARTICLE 7: MISCELLANEOUS
Section 7.01 Restrictive Legend. Each certificate issued
by SYN to evidence shares of Common Stock, or securities convertible into
such shares, owned by either Empire or NGC shall be endorsed with the
following legend:
"The shares represented by this certificate are
subject to the Agreement among the Corporation and
its Initial Stockholders, dated as of May 17, 1995,
as the same may be amended, on file with the
issuing Corporation at its principal business
office and may be transferred or otherwise disposed
of only in accordance therewith."
Section 7.02 Term of this Agreement. This Agreement, if
not sooner terminated by agreement of the parties hereto or pursuant to the
next sentence, shall terminate when the Control Period terminates. In the
event the Synergy Acquisition Agreement is terminated without the Synergy
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Action having been completed, the parties hereto will
liquidate and dissolve SYN as promptly as possible when all obligations of
SYN under, or with respect to, the Synergy Acquisition Agreement have been
discharged or provided for; and this Agreement shall then automatically
terminate.
Section 7.03 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been given (a)
when delivered in person (b) one business day after deposit with a
nationally recognized overnight courier service (c) two business days after
being deposited in the United States mail, postage prepaid, first class,
registered or certified mail, or (d) the business day on which it is sent
and received by facsimile as follows:
(i) If to SYN, to:
SYN Inc.
c/o Northwestern Growth Corporation
33 Third Street, S.E.
Huron, South Dakota 57350
Fax No. (605) 353-8286
Attention: Richard R. Hylland, President
with a copy to Empire, addressed and sent to it at
the place required under this Agreement for giving
notice to Empire
(ii) If to Empire, to:
Empire Gas Corporation
P.O. Box 303
1700 South Jefferson
Lebanon, Missouri 65536
Fax No. (417) 532-8529
Attention: Paul S Lindsey, Jr., President
(iii) If to NGC, to:
Northwestern Growth Corporation
33 Third Street, S.E.
Huron, South Dakota 57350
Fax No. (605) 353-8286
Attention: Richard R. Hylland, President
Section 7.04 Section 351 of the Code. Each of the parties
hereto agrees to comply with the requirements of Section 6.28 of the Synergy
Acquisition Agreement, both with respect to the transaction referred to
therein and with respect to any transaction under this Agreement to the
extent necessary to assure the result under Section 351 of the Internal
Revenue Code of 1986, as amended, for the transaction referred to in such
Section 6.28.
Section 7.05 Captions. The captions in this Agreement are
included for convenience of reference only and shall be ignored in the
construction and interpretation of this Agreement.
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Section 7.06 Governing Law. This Agreement shall be
construed in accordance with and governed by the internal laws of the State
of Delaware without regard to the choice of law principles thereof.
Section 7.07 Counterparts. Execution of separate copies of
this Agreement by each or some of the several parties hereto shall have the
same force and effect as though all such parties had executed the original
of this Agreement. Further, the parties hereto may execute several
counterparts of this Agreement, all of which shall constitute but one and
the same agreement.
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IN WITNESS WHEREOF, each of the parties hereto have caused
this Agreement to be executed in its name as of the date first above
written.
EMPIRE GAS CORPORATION
By /s/ Paul S. Lindsey, Jr.
________________________
President
NORTHWESTERN GROWTH CORPORATION
By /s/ Richard R. Hylland
______________________
President
SYN INC.
By /s/ Paul S. Lindsey, Jr.
________________________
Title: _____________________
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Exhibit Document
_______ ________
A Syn Inc. Certificate of Incorporation
B Series A Preferred Stock
C Management Agreement
D Syn Inc. By-laws