Exhibit 4
SHAREHOLDERS' AGREEMENT
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AGREEMENT made and entered into as of this 21st day of
December, 1993 by and among PETROLEUM HEAT AND POWER CO., INC.
("Petro"), STAR GAS HOLDINGS, INC. ("Holdings"), AMERICAN GAS &
OIL INVESTORS, AmGO II, AmGO III, FIRST RESERVE SECURED ENERGY
ASSETS FUND, L.P., FRC STAR GAS, INC. and THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA ("Prudential") (who are sometimes
hereinafter referred to individually as a "Shareholder" and
collectively as the "Shareholders") and STAR GAS CORPORATION
("Star Gas" or the "Corporation"), a Delaware corporation having
its principal place of business at 500 Birchfield Drive, Mt.
Laurel, New Jersey 08054.
W I T N E S S E T H :
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1. Recitals. This Agreement is entered into with
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reference to the following:
1.1 The Shareholders constitute the holders of
all of the outstanding shares of equity securities of Star Gas.
1.2 The term "Shares" as used herein means all
shares of equity securities of Star Gas now or hereafter owned by
the Shareholders. Except as provided herein, the term "Shares"
shall not include any equity securities held by a person who is
not a party to or bound by the terms and conditions of this
Agreement. When calculating the number or percentage of Shares
owned by a Shareholder, all Shares of convertible preferred stock
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shall be deemed to be converted to Shares of Common Stock at the
then conversion ratio and such Shareholder shall be deemed to own
all Shares of Common Stock issuable upon the conversion of
preferred stock of the Corporation. Aside from the signatories
of this Agreement, except as provided herein, no person shall
have the right to sign this Agreement and no person shall be
entitled to the benefits of this Agreement. Capitalized terms
used but not defined in this Agreement shall have the same
meaning as in the Purchase Agreement of even date among the
parties hereto (other than Prudential) ("Purchase Agreement").
1.3 The Shareholders desire to impose certain
restrictions on the sale, transfer or other disposition of the
Shares and to make arrangements for the voting of the Shares.
1.4 The Shareholders have agreed that for the
purpose of designating candidates for election of directors the
Shareholders shall be divided into four categories of
shareholders, as follows:
Name Category
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Petroleum Heat and Power Co., Inc. Petro Shareholder
Star Gas Holdings, Inc. Holdings Shareholder
American Gas & Oil Investors First Reserve Shareholders
AmGO II First Reserve Shareholders
AmGO III First Reserve Shareholders
First Reserve Secured Energy
Assets Fund, L.P. First Reserve Shareholders
FRC Star Gas, Inc. First Reserve Shareholders
Prudential Prudential Shareholder
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The Petro Shareholder, the Holdings Shareholder, the First
Reserve Shareholders and the Prudential Shareholder are sometimes
referred to herein as the "Petro Shareholder", the "Holdings
Shareholder", the "First Reserve Shareholders" and the
"Prudential Shareholder", respectively, and collectively as, the
"Shareholders".
2. Elections to the Board of Directors.
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2.1 Star Gas shall be governed by a Board of
Directors consisting of no less than 6 and no more than 8
persons. Each category of Shareholder shall have the right to
nominate directors as follows: The Petro Shareholder shall have
the right to nominate for election up to but no more than 3
directors, the Holdings Shareholder shall have the right to
nominate for election up to but no more than 2 directors, the
First Reserve Shareholders shall have the right to nominate for
election up to but no more than 1 director so long as the First
Reserve Shareholders collectively hold at least 5% of the
outstanding Shares and the Prudential Shareholder shall have the
right to nominate for election no more than 2 directors so long
as the Prudential Shareholder holds at least 15% of the
outstanding Shares and the right to nominate for election 1
director so long as the Prudential Shareholder holds at least 5%
and less than 15% of the outstanding Shares. The outstanding
Shares for purposes of calculating the percentage of any category
of Shareholders shall exclude Shares resulting from additional
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issuances of equity securities after the date hereof other than
(i) pursuant to the conversion of Convertible Preferred Stock
outstanding on the date hereof and (ii) Shares issued in
accordance with Section 4 hereof to the extent that such category
of Shareholders have exercised their preemptive rights.
2.2 (a) The current Board of Directors shall
consist of the following persons:
Petro Shareholder First Reserve Prudential
Directors Shareholders Director Shareholder Directors
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3 persons 1 person 2 persons
Holdings Shareholder
Directors
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2 persons
(b) The Shareholders agree to vote their
Shares at any meeting of the Shareholders of Star Gas called for
such purpose (or to deliver their written consents in lieu of
such a meeting) as follows:
(i) To fill any vacancy on the Board of
Directors by the election of a person designated by the
Shareholders of the category of Shareholders entitled to fill
such vacancy.
(ii) To remove from office any director
elected as a representative of the Petro Shareholder, the
Holdings Shareholder, the First Reserve Shareholders or the
Prudential Shareholder at the request of the Shareholders of the
category of Shareholders which initially designated the director.
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The Petro Shareholder, the Holdings
Shareholder, the First Reserve Shareholders or Prudential
Shareholder may make their request for the election or removal of
a director representing the Shareholders of their respective
category by delivering to the other
Shareholders one or more written instruments signed by the
holders of the Shares representing a majority of the voting power
of the Shares held by the category of Shareholders making the
request.
The right to designate nominees for
directors and to have them elected under this Article shall inure
to the benefit of transferees of Shares pursuant to Articles 5
and 6; provided, however, that such benefits shall not inure to a
person which purchases Shares from Prudential pursuant to Section
5.2 prior to the date of a Change of Control with respect to
Petro.
2.3 For as long as the First Reserve Shareholders
are entitled to designate a director to the Board of Directors,
each First Reserve Shareholder that is a First Reserve
Shareholder on the date hereof (a "Current FRC Shareholder")
shall be entitled to designate a non-voting observer to attend
meetings of the Board of Directors, provided that the aggregate
number of observers and the First Reserve Shareholder director
shall not exceed the number of Current FRC Shareholders. The
Corporation shall provide each such observer with the same notice
of meetings of the Board of Directors as that provided to
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directors. Each such observer shall be provided reasonable access
to the books, records and properties of the Corporation and shall
be provided with a reasonable opportunity to discuss the business
and affairs of the Corporation with the officers of the
Corporation, provided that the First Reserve Shareholders shall
cause all information relating to the Corporation that is
provided to such observers to be held in confidence.
3. Certain Action Requiring Super Majority
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Shareholder Vote.
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3.1 The Shareholders shall vote their Shares to
include in the Certificate of Incorporation of Star Gas
provisions that whenever Star Gas shall take any of the actions
specified below, such action may be taken only by the affirmative
vote of the holders of eighty percent (80%) (this percentage
shall be adjusted after the issuance of any Shares after the date
hereof or upon the sale by Prudential of any Shares as provided
in Section 3.2) of the Shares (for this purpose, Shares includes
the Series B and Series D 8% Cumulative Convertible Preferred
Stock); provided, however, that (i) so long as Prudential shall
own 10% or more of such Shares no such action shall be taken
without the affirmative vote of Prudential; (ii) so long as First
Reserve Shareholders own any Common Stock no change will be made
to the Certificate of Designation of Star Gas establishing the
relative rights and preferences of the 8% Cumulative Convertible
Preferred Stock and the 12.625% Cumulative Redeemable Preferred
Stock without the affirmative vote of the First Reserve
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Shareholders holding a majority of the Common Stock owned by such
category; and (iii) the affirmative vote of a majority of the
holders of Shares of each Shareholder category shall be required
to approve any merger or other business combination in which the
value of the consideration (as determined pursuant to Section
5.7) to be received by any class or series of stock is not equal
to that received by all others:
(a) Any material change in the Certificate
of Incorporation or any Certificate of
Designations establishing the relative
rights and preferences of any class of
preferred stock.
(b) The merger or consolidation of the
Corporation with any other Corporation
if such other Corporation is engaged in
any business other than the sale and
distribution of propane and other
activities which are incidental to such
business, except the merger of any
subsidiary into another subsidiary or
the Corporation.
(c) The liquidation or dissolution of the
Corporation.
(d) Engaging in any business other than the
(i) sale and distribution of propane and
other activities which are incidental to
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that business and (ii) the engagement by
Star Gas' Highway division in its
present business activities.
(e) Granting to any employee of Star Gas any
option, warrant or right to purchase any
shares of capital stock of Star Gas.
(f) Except pursuant to the Star Gas Put/Call
Agreement of even date between the
Corporation and Prudential, repurchasing
from any Shareholder any shares of
capital stock of Star Gas except as
contemplated by the express terms of
such capital stock.
(g) Modifying, amending, repealing or
adopting any By-Law of Star Gas that
would materially alter the rights of any
category of Shareholders.
(h) Any reorganization or recapitalization
of the Corporation or the
reclassification of the Corporation's
capital stock.
(i) Amending, modifying or renewing the
Management Services Agreement.
(j) The sale by the Corporation of any
securities to a Shareholder or any
affiliate of a Shareholder other than
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for cash or other than pursuant to the
Petro Option, the FRC Option and the
Management Services Agreement.
3.2 If solely as a result of the sale or issuance
of additional equity securities of the Corporation, Prudential
shall own shares representing less than twenty percent (20%) of
the voting power of all shares entitled to vote on the matters
listed above, then the eighty percent (80%) voting requirement
shall be changed to equal that percentage that is one percentage
greater than 100% minus the actual percentage voting power of
Prudential; provided, however, (i) the percentage voting
requirement shall never exceed ninety percent (90%) and (ii) upon
transfer of Shares by Prudential pursuant to Article 5.2, the
voting percentage shall be reduced to sixty-six and 2/3 percent
(66 2/3%) if at the time of such transfer or any time thereafter
the FRC Shareholders hold less than 20% of the voting power of
all Shares entitled to vote on such matters. Notwithstanding the
foregoing, Sections 3.1 and 3.2 shall terminate at such time that
(a) Prudential holds less than 10% of the voting power of all
Shares entitled to vote on such matters and (b) the FRC
Shareholders hold less than 20% of the voting power of all Shares
entitled to vote on such matters.
It is understood that any sale of the assets or stock
of Petroleum Heat and Power Co., Inc. ("Petro") or a merger or
consolidation to which Petro is a party, other than a sale to, or
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a merger or consolidation with, Star Gas, is not covered by this
Section.
3.3 The By-Laws of the Corporation shall provide
that a special meeting of Shareholders shall be called by the
Secretary at the request of the holders of a majority of the
Shares held by any category of Shareholders or as otherwise
required by law.
3.4 Approval of Certain Matters. The affirmative
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vote of a majority of the disinterested members of the
Corporation's Board of Directors, including, so long as there are
any Prudential Shareholder directors, at least one Prudential
Shareholder director and one First Reserve Shareholder director,
shall be required for each of the following:
(a) (i) Entering into or modifying any
agreement, arrangement or contract (other
than an agreement or contract for the
issuance or sale of equity securities
governed by Article 4 hereof) between Star
Gas and any Shareholder or any entity or
person controlling, controlled by or under
common control with, any Shareholder, or (ii)
issuing or selling any securities to any
Shareholder or any entity or person
controlling, controlled by or under common
control with, any Shareholder (other than any
issuance or sale of equity securities
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governed by Article 4 hereof or any issuance
of equity securities upon the conversion or
exchange of other securities in accordance
with their terms).
(b) Approving the reimbursement of Petro for
services rendered pursuant to Paragraph 4(d)
of that certain Management Services Agreement
dated the date hereof between Petro and Star
Gas.
(c) The exercise by the Corporation of First
Refusal Rights pursuant to this Agreement.
For purposes of this agreement, a "disinterested director" is a
director of the Corporation that does not have any direct or
indirect interest in the relevant matter and who was appointed by
a shareholder group no member of which, nor any affiliate of any
such member, has any direct or indirect interest in the relevant
matter except, in any such case, as a stockholder of Star Gas,
provided that the Holdings Shareholder Directors and the Petro
Shareholder Directors shall be deemed to be independent of each
other and disinterested as to matters only affecting the other,
unless Holdings owns securities representing 5% or more (i) of
the voting power of Petro's voting securities or (ii) in value of
Petro's outstanding equity securities. For purposes of paragraph
(a) above, each member of the Sevin Group shall be deemed to
control Petro.
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Notwithstanding the foregoing, at such time as
there are no Prudential Shareholder directors serving the
affirmative vote of the First Reserve Shareholders director shall
be required to take any action with respect to the matters set
forth in subsections (a), (b) or (c) of this Section 3.4.
3.5 The restrictions contained in this Article 3
that are applicable to Star Gas shall also apply to each Company
Subsidiary (as defined in the certain Purchase Agreement) now
existing or hereafter created and any restricted activity shall
not be taken without the required Star Gas director approval.
3.6 In the event the Corporation sells all or
substantially all of its assets, then at the election of
Prudential, all of the Shareholders shall vote their Shares so as
to cause the dissolution and liquidation of the Corporation.
3.7 The provisions of this Article 3 shall
terminate immediately upon the completion of the initial public
offering of the Common Stock of the Corporation.
3.8 All propane distribution business
opportunities that are referred to Petro shall be deemed business
opportunities of the Corporation and not of Petro. Petro may not
avail itself of any such opportunity without the unanimous vote
of the disinterested directors of the Corporation.
4. Sale of Equity Securities.
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4.1 If the Board of Directors shall determine
that it is in the best interest of the Corporation to sell equity
securities for cash, then the Corporation may sell such equity
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securities provided, however, that prior to such sale the
Corporation shall provide to the Shareholders for a period of 30
days and on a pro rata basis in proportion to the number of
Shares owned by each Shareholder the right to purchase such
equity securities on the same terms and conditions as the
Corporation proposes to sell them. Each Shareholder may elect to
purchase all or any part of its pro rata portion of such
securities and may transfer its pre-emptive rights to one or more
persons controlling, controlled by or under common control with
such Shareholder. In determining the number of Shares of Common
Stock owned by a Shareholder for purposes of this Section, each
Shareholder shall be deemed to own the number of shares of Common
Stock actually owned by it plus the number of shares of Common
Stock issuable to it upon the conversion of the 8% Cumulative
Convertible Preferred Stock of the Company owned by such
Shareholder. Any Shareholder may condition its election to
purchase such equity securities on any one or more Shareholders
also electing to purchase such equity securities. Subject to the
preceding sentence, to the extent that all or any portion of such
equity securities are not purchased and paid for by the
Shareholders within such 30 day period, the Corporation may sell
such unpurchased securities on substantially the same terms and
conditions for a period of 120 days following the expiration of
such 30 day period. To the extent that such equity securities
are not sold during such period of 120 days, this section shall
apply to any future sale. The provisions of this Section 4.1
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shall terminate immediately upon the completion of the initial
public offering of Common Stock of the Corporation.
4.2 The Shareholders agree to cause the
Corporation to change its capital
structure immediately prior to any initial offering of equity
securities of the Corporation to the public. The new capital
structure shall require that each Shareholder contribute ten
percent (10%) of the Shares that it holds at such time to the
Corporation in return for an equal number of shares of Class C
Common Stock having the terms contained in the Amended and
Restated Certificate of Incorporation of Star Gas in effect on
the date hereof. In such event, the provisions of this Agreement
that relate to the Shares will terminate with respect to the
Shares and will instead apply to the shares of such Class C
Common Stock. Notwithstanding the foregoing, holders of Class B
Common Stock (non-voting) may elect in writing not to exchange
their Shares for Class C Common Stock. Such election shall be
irrevocable.
5. No Shares of the Corporation shall be sold, trans-
ferred, hypothecated, negotiated, pledged, assigned, encumbered
or otherwise disposed of by any Shareholder, except as herein
provided in accordance with the following procedures and the
procedures set forth in Article 6:
5.1 Any Shareholder may transfer all or any por-
tion of his Shares to any other Shareholder in its category of
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Shareholders, and Holdings may transfer its shares to Petro, free
of the First Offer Right and First Refusal Right referred to
below. Following any Change of Control with respect to Petro,
Prudential and each of the FRC Shareholders may transfer its
Shares free of any restrictions imposed by this Agreement. A
Shareholder may transfer Shares to any other person or entity
controlling, controlled by or under common control with it, free
of the First Refusal Right, and Prudential may transfer Shares to
any portfolio or fund managed or advised by Prudential or any of
its affiliates without restriction. In addition, the First
Reserve Shareholders may pledge their Shares to Brooklyn Union
Gas or a wholly owned subsidiary thereof or transfer the pledged
Shares subject to Section 5.4 hereof.
5.2 In addition to any rights it may have under
Section 5.3 below, Prudential may sell Shares to a Qualified
Purchaser provided it has granted a right to purchase such Shares
("First Offer Right") first to the Corporation and then to Petro
and Holdings as follows:
(a) Prudential shall give notice to the
Corporation and to Petro and Holdings stating its intention of
offer for sale a number of Shares, the number of Shares intended
to be so offered, the price at which such Shares will be offered
and any other terms of the Offer.
(b) Petro and Holdings shall have the First
Offer Right for a period of 30 days to purchase all, but not less
than all, of the Shares described in the notice and on a pro rata
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basis (or on such other proportions as they may agree upon) on
the same terms and conditions and at the same price.
(c) If the First Offer Right is not
exercised in its entirety as provided above, then no Shares shall
be purchased pursuant to this Section 5.2 and Prudential, subject
to the conditions set forth in Article 6, may sell such Shares to
a Qualified Purchaser (and to no other purchaser) in accordance
with the terms and at a price not less than the price specified
in the notice during the period of 120 days following the
expiration of the First Offer Right.
(d) If such Shares are not sold as provided
herein within such period of 120 days, this Article 5 shall apply
to any future offer.
5.3 No Shareholder (other than sales by
Prudential pursuant to Section 5.2) ("Offeror Shareholder") may
sell any Shares until it has granted a right to purchase its
shares ("First Refusal Right") first to the Corporation and then
to the other Shareholders, including Prudential, as follows:
(a) If an Offeror Shareholder receives from
a third party or third parties (other than an underwriter in
connection with any public offering of Shares) a bonafide offer
or offers ("First Refusal Offer") to purchase or otherwise
acquire all or a portion of its Shares, it shall provide written
notice ("First Refusal Notice") to the Corporation and the other
Shareholders of the terms of the First Refusal Offer which shall
identify the purchaser(s), the number of Shares subject to the
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First Refusal Offer, the price and all other terms and
conditions. If the First Refusal Offer consists in part or in
whole of consideration other than cash, the Offeror Shareholder
shall provide such information as may be reasonably necessary to
analyze the non-cash component of the consideration, together
with the Offeror Shareholder's estimate of the fair value of such
non-cash component.
(b) Subject to subsection 5.3(d), for a
period of 15 days from the receipt of such notice, the
Corporation shall have the First Refusal Right to purchase all or
any portion of the Shares described in the First Refusal Notice
on the same terms and conditions and at the same price specified
in the First Refusal Notice.
(c) Subject to subsection 5.3(d), if the
First Refusal Right is not exercised in its entirety by the
Corporation, then the other Shareholders shall have the First
Refusal Right for an additional period of 15 days to purchase the
remaining Shares described in the First Refusal Notice on a pro
rata basis (or in such other proportions as they may agree upon)
on the same terms and conditions and at the same price as
described in the First Refusal Notice.
(d) If the First Refusal Right is not
exercised in its entirety as to all of the Shares as described
above, then no Shares shall be purchased pursuant to this Section
5.3 and the Offeror Shareholder may sell such Shares in
accordance with the First Refusal Offer during the period of 120
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days following the expiration of the First Refusal Right and to
the extent such Shares are not sold as provided herein within
such period of 120 days, this Article 5 shall apply to any future
offer.
5.4 Any transferee of shares, pursuant to Article
5 or 6 hereof, shall execute this Agreement. Any such transferee
shall become a member of the same category of Shareholders as its
transferor.
5.5 Any Shareholder entitled to take action
during a time period specified in
this Article 5 may waive the duration of such period and agree to
a time period of a shorter
duration.
5.6 Immediately upon completion of the initial
public offering of Common Stock of the Corporation, the
provisions of this Article 5 shall apply only to the
Corporation's Class C Common Stock and shall terminate with
respect to all other classes of Common Stock.
5.7 For purposes of Article 5 and Article 6, the
terms of any sale of Shares of one class or series of securities
(the "First Securities") shall be deemed to be the same as those
for another class or series of securities (the "Second
Securities") if (i) (A) the consideration received in such sale
for each Share of the First Securities divided by the number of
Shares of common stock of the Corporation which each Share of the
First Security could be converted into based on the relevant
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conversion ratio for such security in effect immediately
preceding such sale equals (B) the consideration received in such
sale for each Share of the Second Securities divided by one (if
the Second Security is common stock of the Corporation) or (in
all other cases) the number of Shares of common stock for the
Corporation which each Share of the Second Security could be
converted into based on the exchange ratio for such security in
effect immediately preceding such sale and (ii) all other terms
of the sale of the First Securities and the Second Securities are
the same.
5.8 Any party that acquires Shares of any First
Reserve Shareholder or the Prudential Shareholder shall agree in
writing to assume such party's obligations in respect of such
shares under the Shareholders Put/Call Agreement of even date
herewith in the event that such assumption is required by the
terms of the Shareholder Put/Call Agreement.
5.9 For purposes of this Agreement, the following
definitions shall apply:
"Qualified Purchaser" means:
(i) existing shareholders of the
Corporation;
(ii) insurance companies with
assets of not less than
$1,000,000,000;
(iii) commercial banks and
investments banks with
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assets of not less than
$1,000,000,000; and
(iv) investment managers (including
mutual funds and pension
funds) with assets under
management of not less than
$1,000,000,000.
"Change of Control" means the occurrence
of any event which results in the number of directors of Petro's
Board of Directors who are designated by the Sevin Group (in an
individual or fiduciary capacity) in accordance with a
shareholders agreement dated as of July 28, 1992 among Petro and
certain shareholders constituting less than a majority of the
Board. "Sevin Group" shall mean, collectively, the Estate of
Malvin P. Sevin, Audrey L. Sevin, Irik P. Sevin, Thomas J.
Edelman, Margot Gordon and Phillip Ean Cohen.
6. Tag Along Rights. (a)(i) If any Shareholder
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entitled to sell Shares pursuant to Section 5.2 or 5.3 (the
"Tag-along Offering Holders") receives from a third party or
third parties (other than from an underwriter in connection with
any public offering of Shares) a bona fide offer or offers to
purchase or otherwise acquire, in one transaction or any series
of similar transactions not subject to Section 5.1 (a "Tag-along
Transfer Offer"), a number of Shares representing at least 5% of
the then outstanding Shares (the "Tag-along Transfer Stock"),
such Tag-along Offering Holders shall then cause the Tag-along
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Transfer Offer to be reduced to writing and shall provide written
notice (the "Tag-along Transfer Notice") of such Tag-along
Transfer Offer to the Corporation and the Corporation shall
provide written notice of such Tag-along Transfer Notice to each
of the other Shareholders (the "Tag-along Transfer Offerees") in
the manner set forth in this Section. The Tag-along Transfer
Notice shall contain a true and correct copy of the Tag-along
Transfer Offer. In addition, the Tag-along Transfer Notice shall
identify the third party, the Tag-along Transfer Stock, the price
contained in the Tag-along Transfer Offer, the estimated expenses
associated with the sale, all the other terms and conditions of
the Tag-along Transfer Offer and, in the case of a Tag-along
Transfer Offer in which the consideration payable for Shares
consists in part or in whole of consideration other than cash,
such information as may be reasonably necessary to analyze the
non-cash component of the consideration, together with the
Tag-along Offering Holders' reasonable estimate of the fair value
of such non-cash component.
The Tag-along Transfer Offerees shall have the right
and option, exercisable as set forth below, to accept the
Tag-along Transfer Offer for up to such number of Shares as is
determined in accordance with the provisions of this Section
6(a). The terms of any sale of Shares by a Tag-along Transfer
Offeree pursuant to the exercise of its option under this Section
shall be the same terms as those for the sale of such Shares by
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the Tag-along Offering Holders; provided that any indemnity given
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by the sellers to the purchasers in connection with such sale
shall be apportioned among all the sellers according to the
consideration to be received by each seller. Each Tag-along
Transfer Offeree that desires to exercise such option shall
provide the Tag-along Offering Holder with written irrevocable
notice (specifying the number of shares of the Tag-along Transfer
Stock as to which such Tag-along Transfer Offeree is accepting
the offer) within 15 days after the date the Tag-along Transfer
Notice is received ("Tag-along Notice Period"), and shall
simultaneously provide a copy of such notice to the Corporation
and the other Tag-along Transfer Offerees. Such written notice
may not be withdrawn or modified at any time. At the expiration
of the Tag-along Notice Period each accepting Tag-along Transfer
Offeree shall, simultaneously with such expiration, deliver to
the Corporation (or such other person as may be agreed between
the Tag-along Offering Holder and the accepting Tag-along
Transfer Offeree) to be held by such person for sale or return
upon the terms of this Section 6, the certificate or certificates
representing the Shares to be sold or otherwise disposed of
pursuant to such Tag-along Transfer Offer by such Tag-along
Transfer Offeree, duly endorsed, together with a limited
power-of-attorney authorizing the Tag-along Offering Holder to
sell or otherwise dispose of such Shares pursuant to the terms of
the Tag-along Transfer Offer.
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(ii) Each Tag-along Transfer Offeree shall have the
right to sell, pursuant to the Tag-along Transfer Offer, an
amount of Shares equal to the amount specified in such person's
notice, or if less an amount of Shares equal to the product of
(A) the total number of Shares of Tag-along Transfer Stock
(including the shares of any Tag-along Transfer Offeree) to be
sold pursuant to such Tag-along Transfer Offer, times (B) a
fraction, the numerator of which shall be the total number of
Shares held by such Tag-along Transfer Offeree, and the
denominator of which shall be the total number of Shares held by
all Tag-along Transfer Offerees that are accepting such Offer and
the Tag-along Offering Holders. For purposes of this paragraph,
Shares held by any Shareholder shall include (without
duplication) Shares held by any affiliate of such shareholder,
and Shares then issuable upon exercise of all warrants or options
then held by such persons. The aggregate of such Shares for
which Tag-along Transfer Offerees have elected to sell pursuant
to this Section 6 shall be referred to as the "Tag-along Transfer
Offeree Shares."
(iii) Promptly after the consummation of the sale or
other disposition of the Shares of the Tag-along Offering Holder
and the Tag-along Transfer Offerees to the third party pursuant
to the Tag-along Transfer Offer and in any event no later than
one business day after such consummation, the Tag-along Offering
Holder shall notify the Tag-along Transfer Offerees thereof,
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shall remit to each of the Tag-along Transfer Offerees the total
sales price of the Shares of such Tag-along Transfer Offeree sold
or otherwise disposed of pursuant thereto (after deduction of
such Tag-along Transfer Offeree's proportionate share of the out-
of-pocket expenses associated with such sale based on the number
of Shares sold by the Tag-along Offering Holder and each
Tag-along Transfer Offeree), and shall furnish such other
evidence of the expenses associated with and the completion and
time of completion of such sale or other disposition and the
terms thereof as may be reasonably requested by the Tag-along
Transfer Offerees.
(iv) If at the termination of the Tag-along Notice
Period any Tag-along Transfer Offeree shall not have accepted the
offer contained in the Tag-along Transfer Notice with respect to
any Tag-along Transfer Offer, such Tag-along Transfer Offeree
will be deemed to have waived any of and all of its rights under
this Section 6 with respect to the sale or other disposition of
its Tag-along Transfer Offeree Shares pursuant to such Tag-along
Transfer Offer. The Tag-along Offering Holders shall have 120
days in which to sell the Tag-along Transfer Stock and Tag-along
Transfer Offeree Shares not otherwise excluded pursuant to the
previous sentence, to the third party, at a price not higher than
that contained in the Tag-along Transfer Notice and on terms not
more favorable to the Tag-along Offering Holder than were
contained in the Tag-along Transfer Notice. Promptly after any
25
sale pursuant to this Section 6, the Tag-along Offering Holder
shall notify the Corporation of the consummation thereof and
shall furnish such evidence of the completion thereof (including
time of completion) of such sale and of the terms of the terms
thereof as the Corporation may request. If, at the end of such
60 day period (or such longer period, as aforesaid), the
Tag-along Offering Holder has not completed the sale of all the
Tag-along Transfer Stock and Tag-along Transfer Offeree Shares,
the Tag-along Offering Holder shall return to such Tag-along
Transfer Offerees all certificates representing the Shares which
such Tag-along Transfer Offerees delivered for sale or other
disposition pursuant to this Section 6(a), and all the
restrictions on sale or other disposition contained in this
Agreement with respect to Shares owned by the Tag-along Offering
Holder shall again be in effect.
(v) Notwithstanding anything contained in this Section
6, there shall be no liability on the part of the Tag-along
Offering Holder to any Tag-along Transfer Offeree if the sale of
Shares to a third party is not consummated for whatever reason.
Whether to effect a sale of Shares pursuant to this Section 6 by
the Tag-along Offering Holder is in the sole and absolute
discretion of such Tag-along Offering Holder.
(b) The failure by any Tag-along Transfer Offeree to
exercise its First Offer Right or First Refusal Right pursuant to
26
Article 5 shall not affect the rights of such person to exercise
its Tag-along rights pursuant to Article 6, including its right
to exercise its Tag-along Rights in connection with the sale of
Tag-along Transfer Stock.
(c) The Tag-along Offering Holders shall cause any
third party purchasing Shares hereunder to assume the obligations
of the relevant Tag-along Transfer Offerees under the Shareholder
Put/Call Agreement of even date herewith in respect of the
relevant Shares.
(d) The provisions of this Article 6 shall terminate
immediately upon completion of the initial public offering of
Common Stock of the Corporation.
7. Financial Statements. During the term of this
--------------------
Agreement, the Corporation covenants and agrees that it shall
furnish to each Shareholder (i) within ninety (90) days after the
end of each fiscal year of the Corporation a consolidated balance
sheet of the Corporation and its subsidiaries as at the end of
such fiscal year and consolidated statements of income (loss),
stockholders' equity and cash flows of the Corporation and its
subsidiaries for such fiscal year audited by the Corporation's
regularly employed, nationally-recognized firm of independent
public accountants in accordance with generally accepted account-
ing principles applied on the basis consistently maintained
throughout the period involved, (ii) within forty-five (45) days
after the close of each fiscal quarter the financial statements
27
referred to in clause "(i)" which shall be prepared by the
Corporation and need not be covered by the report of any
independent public accountants. With each quarterly and annual
financial report, the Corporation shall deliver a list of
shareholders including their respective equity security holdings.
The Corporation shall deliver to each Shareholder a description
of any action taken by written consent of directors or
shareholders in lieu of a meeting promptly after such action is
taken. The Corporation shall also deliver to each Shareholder a
true and complete copy of each report, including but not limited
to audit reports, review reports, special reports, reports on
internal controls and management reports, submitted by a firm of
certified public accountants to the Corporation or its board of
directors promptly after the Corporation or board receives such
report. Upon the request of any Shareholder, the Corporation
shall promptly deliver to such Shareholder the information
specified in paragraph (d)(4) of Rule 144A under the Securities
Act of 1933. Additionally, during normal business hours, the
Corporation shall permit each Shareholder reasonable access to
the books and records of the Corporation and shall make available
to representatives of each Shareholder, employees of the
Corporation to explain such books and records and financial
statements. The provisions of this Section shall terminate
immediately upon a class of equity securities of the Corporation
becoming subject to the periodic reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934.
28
8. The parties agree that it is impossible to
determine the monetary damages which will accrue to a Shareholder
by reason of a failure of any other Shareholder to perform any of
the obligations under this Agreement requiring the performance of
an act other than the payment of money only. Therefore, if any
party hereto shall institute any action or proceeding in equity
to enforce the provisions hereof, any person (including the
Corporation) against whom such equitable action or proceeding is
brought hereby waives the claim or defense therein that such
party or such legal representative has an adequate remedy at law,
and such person shall not urge in such equitable action or
proceeding the claim or defense that such remedy at law exists.
9. In the event that any of the covenants, terms or
conditions of this Agreement are held illegal and in the further
event that director and/or shareholder action, including, but not
by way of limitation, the execution of any documents or instru-
ments, such as an amendment of the Certificate of Incorporation
of the Corporation, will make such covenants, terms or conditions
legal and enforceable, each of the parties hereto hereby agrees
that he shall take such action as may reasonably be required to
make any such covenant, term or condition valid and enforceable.
In the event that any of the parties hereto refuses to take such
action, the remaining Shareholders who are parties hereto are
hereby jointly and severally appointed as the attorney-in-fact
for the other Shareholders for the purpose of taking any action
29
that is authorized by the terms of this paragraph, including, but
not limited to:
(a) The voting of the other Shareholder's
shares.
(b) The removal of the Shareholder or his
appointee(s) in breach of this paragraph as a director.
(c) The nomination and election of a new
director for the purpose of initiating and completing such action
as may be required to make any illegal or unenforceable covenant,
term or condition of this Agreement valid and enforceable.
(d) The signing of any document or
certificate, including, but not limited to an amendment to the
Certificate of Incorporation of the Corporation, which will make
said invalid and/or unenforceable covenant, term or condition
valid and enforceable.
10. The Shareholders agree that the following legends
shall be placed upon each certificate representing all or a
portion of their Shares:
"Transfer, hypothecation, negotiation, pledge,
sale, encumbrance, assignment or other disposition
of this share certificate and the shareholdings
represented hereby are restricted by and are
subject to all of the terms, conditions and
provisions of a certain agreement entered into
between certain of the shareholders and the
Corporation as of December 21, 1993, as amended, a
copy of which is on file with the Secretary at the
principal office of the Corporation."
11. Any controversy arising out of or in any way
relating to this Agreement including any modification or amend-
30
ment thereof, shall be resolved by arbitration in the City of New
York, pursuant to the rules then obtaining of the American Arbi-
tration Association. The parties agree that the arbitrators
sitting in any such controversy shall have no power or jurisdic-
tion to alter or modify any express provision of this Agreement,
or to make any award which by its terms effects such alteration
or modification. The parties hereto hereby consent to (a) the
application of the Federal Arbitration Statutes (b) the jurisdic-
tion of the Supreme Court of the State of New York and of the
United States District Court for the Southern District of New
York for all purposes in connection with said arbitration and (c)
that any notice, process or notice of motion or other application
to either of said Courts or Judges thereof or of any notice in
connection therewith any arbitration hereunder, may be served in
or out of the State or Southern District of New York by certified
or registered mail return receipt requested or by personal ser-
vice, provided a reasonable time for appearance is allowed, or in
such other manner as may be permitted under the Rules of the
American Arbitration Association or of either of said Courts.
Judgment upon the award rendered may be entered by any court
having jurisdiction. Any provisional remedy which, but for this
Agreement to arbitrate disputes, would be available at law shall
be available to the parties hereto pending arbitration.
12. (a) This Agreement will terminate upon the
occurrence of any of the following events:
31
(i) adjudication of the Corporation as
bankrupt or insolvent;
(ii) appointment of a receiver or trustee
for all or substantially all of the assets of the Corporation;
(iii) the making by the Corporation of
an assignment for the benefit of its creditors or the admission
in writing by the Corporation of its inability to pay its debts
generally as they become due; or
(iv) the dissolution of the Corporation.
None of the events referred to above shall effect any
obligations theretofore incurred by the Corporation or any Share-
holder pursuant to this Agreement.
(b) This Agreement may be modified or rescinded
only with the written consent of the Corporation and all of the
Shareholders.
13. This Agreement contains the entire agreement of
the parties concerning the subject matter hereof, and supersedes
any and all prior agreements and amendments among the
parties hereto concerning the subject matter hereof, which prior
agreements are hereby canceled. The Shareholders Agreement,
dated January 30, 1987, and as subsequently amended, between the
Corporation and the First Reserve Shareholders has been
terminated and canceled pursuant to a separate agreement. This
Agreement shall terminate ten years from the date hereof and
shall be automatically renewed for successive ten-year periods
thereafter unless the parties hereto agree otherwise in writing.
32
14. If any provision of this Agreement is held
invalid, such invalidity shall not affect the other provisions
hereof which can be given effect without the invalid provision,
and to this end the provisions of this Agreement are intended to
be and shall be deemed severable.
15. Any and all notices, requests, demands or other
communications hereunder shall be in writing and shall be deemed
given if delivered personally or sent by certified or registered
mail, postage prepaid, to each of the parties at the addresses
set forth at the end of this Agreement or to such addresses as
may from time to time be designated by any of them in writing by
notice similarly given to all parties in accordance with this
paragraph. Copies of all such notices, requests, demands or
other communications shall be sent to:
(a) If to the Petro Shareholder or to the
Corporation, to:
Petroleum Heat and Power Co., Inc.
Clearwater House
2187 Atlantic Street
Stamford, Connecticut 06902
Attn: George Leibowitz
Senior Vice President
with a copy to:
Phillips, Nizer, Benjamin, Krim & Ballon
31 West 52nd Street
New York, NY 10019
Attn: Alan Shapiro, Esq.
(b) If to the Holdings Shareholder, to:
Hanseatic Corporation
450 Park Avenue - Suite 2302
New York, NY 10022
33
Attn: Paul Biddelman
(c) If to the First Reserve Shareholders, to:
First Reserve Corporation
475 Steamboat Road
Greenwich, CT 06830
Attn: William E. Macaulay
(d) If to the Prudential Shareholder, to:
The Prudential Insurance Company of America
c/o Prudential Financial Restructuring Group
Four Gateway Center - 9th Fl.
100 Mulberry Street
Newark, New Jersey 07102-4069
Attn: Managing Director
Fax: (201) 802-2662
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4669
Attn: Duncan Stewart, Esq.
Fax: (212) 821-8111
(e) If to Star Gas, to:
Star Gas Corporation
500 Birchfield Drive
Mt. Laurel, NJ 08054
Attn: William Powers
with a copy to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attn: Richard Cass, Esq.
Notices under this Agreement shall be deemed delivered on the
date delivered personally to the recipient or on the date post-
marked by the United States Post Office, as the case may be.
34
16. Waiver by any party of any breach of this Agree-
ment or failure to exercise any right hereunder shall not be
deemed to be a waiver of any other breach or right. The failure
of any party to take action by reason of any such breach or to
exercise any such right shall not deprive such party of the right
to take action at any time while such breach or condition giving
rise to such right continues.
17. As used in this Agreement, the masculine pronouns
shall refer to male or female persons or corporate entities where
such construction is required to give meaning to a provision
contained herein.
18. This Agreement shall be binding upon and inure to
the benefit of the respective successors and assigns of the
parties hereto, provided, however, that the provisions of this
paragraph shall not alter the provisions contained in this
Agreement restricting transfer of the shareholdings in the
Corporation.
19. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.
35
IN WITNESS WHEREOF, the parties have hereunto set their
hands and the corporate seal the day and year first above
written.
PETROLEUM HEAT AND POWER CO., INC. STAR GAS CORPORATION
By: /s/ George Leibowitz By: /s/ Robert M. Cherry
------------------------- --------------------------
George Leibowitz Robert M. Cherry
Senior Vice President Senior Vice President
AMERICAN GAS & OIL INVESTORS AmGO II
By: First Reserve First Reserve
Corporation, Corporation,
as Managing General Partner, as Managing General
Partner,
By: /s/ William Macaulay By: /s/ William Macaulay
------------------------- -------------------------
William Macaulay William Macaulay
Managing Director Managing Director
AmGO III
By: First Reserve
Corporation,
as Managing General Partner, THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ William Macaulay By: /s/ Jeff Diamond
--------------------------- ---------------------
William Macaulay Jeff Diamond
Managing Director Vice President
FIRST RESERVE SECURED ENERGY ASSETS STAR GAS HOLDINGS, INC.
FUND, L.P.
By: First Reserve Corporation,
as Managing General Partner, By: /s/ Paul Biddelman
---------------------
Name: Paul Biddelman
By: /s/ William Macaulay
--------------------------
William Macaulay
Managing Director
FRC STAR GAS, INC.
By: /s/ William Macaulay
--------------------------
William Macaulay
Managing Director
36