EXHIBIT 2.2
MERGER AGREEMENT
AMONG
BLUE RHINO CORPORATION,
ARK ACQUISITION, LLC,
AND
ARK HOLDING COMPANY, LLC
NOVEMBER 22, 2002
TABLE OF CONTENTS
ARTICLE I THE MERGER............................................................... 1
1.1 Merger............................................................................ 1
1.2 Required Approval; Filing......................................................... 1
1.3 Effective Time.................................................................... 1
1.4 Closing........................................................................... 2
1.5 Effect of Merger.................................................................. 2
1.6 Further Assurances................................................................ 2
1.7 Merger Consideration.............................................................. 2
1.8 Working Capital Adjustment........................................................ 3
1.9 Transfer of Financial Results of Operations....................................... 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF ARK.................................... 4
2.1 Organization and Good Standing; Governing Documents............................... 4
2.2 Authority......................................................................... 4
2.3 No Conflict or Breach............................................................. 4
2.4 Consents and Approvals............................................................ 5
2.5 Capitalization.................................................................... 5
2.6 Subsidiaries; Investments......................................................... 5
2.7 Ark Subs.......................................................................... 6
2.8 Minute Books...................................................................... 6
2.9 Financial Statements.............................................................. 6
2.10 Books and Records................................................................. 7
2.11 Title to Assets; Liens............................................................ 7
2.12 Real Property..................................................................... 8
2.13 Tangible Personal Property........................................................ 8
2.14 Inventories....................................................................... 8
2.15 Contracts......................................................................... 9
2.16 Receivables....................................................................... 9
2.17 Intellectual Property............................................................. 9
2.18 Major Suppliers and Customers..................................................... 10
2.19 Litigation........................................................................ 10
2.20 Compliance with Decrees and Laws.................................................. 10
2.21 Permits........................................................................... 10
2.22 Taxes............................................................................. 11
2.23 Environmental Matters............................................................. 11
2.24 Insurance......................................................................... 12
2.25 Labor and Employment Matters...................................................... 12
2.26 Employees; Compensation; Benefit Plans............................................ 13
2.27 Absence of Certain Changes........................................................ 13
2.28 Product Warranties................................................................ 14
2.29 Product Liability................................................................. 15
2.30 Related Party Transactions........................................................ 15
2.31 Brokers........................................................................... 15
2.32 Bank Accounts..................................................................... 15
2.33 Acknowledgement of Class B Unit Acquisition....................................... 15
2.34 Members' Investor Representations................................................. 15
2.35 Disclosure........................................................................ 16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BLUE RHINO AND ACQUISITION SUB......... 16
3.1 Capital Structure of Blue Rhino................................................... 16
3.2 Organization, Standing and Authority of Blue Rhino................................ 16
3.3 Organization, Standing and Authority of Acquisition Sub........................... 16
3.4 Authorized and Effective Agreement................................................ 17
3.5 Governmental Approvals............................................................ 17
3.6 Brokers........................................................................... 17
ARTICLE IV COVENANTS OF ARK......................................................... 17
4.1 Access and Information............................................................ 18
ARTICLE V MUTUAL COVENANTS......................................................... 18
5.1 Best Efforts...................................................................... 18
5.2 Confidentiality................................................................... 18
ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BLUE RHINO AND ACQUISITION SUB 19
6.1 Representations and Warranties.................................................... 19
6.2 Compliance with Covenants......................................................... 19
6.3 Absence of Litigation............................................................. 19
6.4 Absence of Change................................................................. 19
6.5 Consents and Approvals............................................................ 19
6.6 Removal of Liens.................................................................. 19
6.7 Purchase of Class B Unit.......................................................... 19
6.8 Investment Letters................................................................ 20
6.9 Legal Opinion..................................................................... 20
6.10 No Claim Regarding Interests...................................................... 20
6.11 Consulting Agreements............................................................. 20
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ARK........................... 20
7.1 Representations and Warranties.................................................... 20
7.2 Compliance with Covenants......................................................... 20
7.3 Absence of Litigation............................................................. 20
7.4 Consulting Agreement.............................................................. 20
ARTICLE VIII CLOSING DELIVERIES....................................................... 20
8.1 Deliveries by Ark................................................................. 20
8.2 Deliveries by Blue Rhino.......................................................... 21
8.3 Other Deliveries.................................................................. 22
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ARTICLE IX INDEMNIFICATION.......................................................... 22
9.1 Indemnification by the Members.................................................... 22
9.2 Indemnification by Blue Rhino..................................................... 22
9.3 Indemnification by Blue Rhino Regarding Acquisition Sub........................... 22
9.4 Notice of Claim................................................................... 22
9.5 Defense........................................................................... 23
9.6 Other Remedies.................................................................... 23
ARTICLE X TERMINATION.............................................................. 23
10.1 Termination....................................................................... 23
10.2 Effect on Obligations............................................................. 24
ARTICLE XI MISCELLANEOUS............................................................ 24
11.1 Survival of Representations....................................................... 24
11.2 Expenses.......................................................................... 24
11.3 Publicity......................................................................... 24
11.4 Best Efforts...................................................................... 24
11.5 Notices........................................................................... 25
11.6 Counterparts...................................................................... 25
11.7 Assignment........................................................................ 25
11.8 Third Party Beneficiaries......................................................... 26
11.9 Headings.......................................................................... 26
11.10 Recitals.......................................................................... 26
11.11 Amendments........................................................................ 26
11.12 Specific Performance.............................................................. 26
11.13 Governing Law..................................................................... 26
11.14 Jurisdiction...................................................................... 26
11.15 Remedies.......................................................................... 26
11.16 Severability...................................................................... 26
11.17 Entire Agreement.................................................................. 27
11.18 Construction...................................................................... 27
11.19 Time of Essence................................................................... 27
11.20 Waiver............................................................................ 27
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LISTS OF EXHIBITS AND SCHEDULES
Exhibits:
[OMITTED--EXHIBITS WILL BE FURNISHED SUPPLEMENTARILY TO THE COMMISSION UPON
REQUEST]
A Form of Certificate of Merger
B Form of Class B Unit Purchase Agreement
C Investor Representation Letter
D Form of Legal Opinion of Ark's Counsel
6.11-A & B Forms of Consulting Agreements
Schedules:
1.7(a)(ii) List of redeemed Class B Unit holders and purchase amount
1.7(b) Ark Members and Distribution Schedule for Stock Consideration
2.1 Jurisdictions of Ark and Ark Subs
2.4 Consents and Approvals
2.11 Liens
2.12 Leased Real Property
2.15 Contracts
2.17 Intellectual Property
2.18 Major Suppliers
2.21 Permits
2.24 Insurance
2.27 Changes Since Most Recent Financial Statement
2.32 Bank Accounts
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MERGER AGREEMENT
THIS MERGER AGREEMENT (this "AGREEMENT"), dated as of November 22,
2002, is by and among ARK HOLDING COMPANY, L.L.C., a North Carolina limited
liability company ("ARK"), ARK ACQUISITION, LLC, a North Carolina limited
liability company ("ACQUISITION SUB"), and BLUE RHINO CORPORATION, a Delaware
corporation ("BLUE RHINO").
R E C I T A L S:
- - - - - - - -
The parties desire that Acquisition Sub shall be merged into Ark (said
transaction being hereinafter referred to as the "MERGER"), and the parties
desire to provide for certain undertakings, conditions, representations,
warranties and covenants in connection with the transactions contemplated
hereby.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 Merger. Ark and Acquisition Sub are constituent entities (the
"CONSTITUENT ENTITIES") to the Merger as contemplated by the North Carolina
Limited Liability Company Act (the "Act"). At the Effective Time:
(a) Acquisition Sub shall be merged into Ark in accordance with the
applicable provisions of the Act, with Ark being the surviving entity
(hereinafter sometimes referred to as the "SURVIVING ENTITY").
(b) The separate existence of Acquisition Sub shall cease and the
Merger shall in all respects have the effects provided in Section 1.5.
(c) The Manager of Ark as of the Effective Time shall be Blue Rhino
until its successor is elected in accordance with the Surviving Entity's
Operating Agreement dated February 12, 1998, as may be amended from time to
time (the "ARK OPERATING AGREEMENT").
1.2 Required Approval; Filing. The Merger shall not become effective unless
this Agreement is duly approved: (i) by Ark in accordance with the Ark Operating
Agreement by the holders of record of greater than fifty percent (50%) of the
outstanding units of Ark ("UNITS"), as defined in the Ark Operating Agreement;
and (ii) by the sole member of Acquisition Sub. Upon fulfillment or waiver of
the conditions specified in ARTICLE VI, the Surviving Entity will cause a
Articles of Merger substantially in the form of Exhibit A hereto to be executed
and filed with the Secretary of State of North Carolina, as provided in Section
57C-9A-22 of the Act.
1.3 Effective Time. The Merger shall be effective on the day and hour
specified in the Articles of Merger filed as provided in Section 1.2 (the
"EFFECTIVE TIME").
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1.4 Closing. The closing of the transactions contemplated by this Agreement
(the "CLOSING") shall take place at the offices of Womble Carlyle Sandridge &
Rice, PLLC, One West Fourth Street, Winston-Salem, North Carolina, at 10:00 a.m.
on the date hereof (the "CLOSING DATE").
1.5 Effect of Merger. From and after the Effective Time, the separate
existence of Acquisition Sub shall cease, and the Surviving Entity shall
thereupon and thereafter, to the extent consistent with its governing documents,
possess all of the rights, privileges, immunities and franchises, of a public as
well as a private nature, of each of the Constituent Entities; and all property,
real, personal and mixed, and all debts due on whatever account, and all other
chose in action, and each and every other interest of or belonging to or due to
each of the Constituent Entities shall be taken and deemed to be transferred to
and vested in the Surviving Entity without further act or deed; and the title to
any real estate or any interest therein vested in either of the Constituent
Entities shall not revert or be in any way impaired by reason of the Merger. The
Surviving Entity shall thenceforth be responsible for all the liabilities,
obligations and penalties of each of the Constituent Entities; and any claim,
existing action or proceeding, civil or criminal, pending by or against either
of the Constituent Entities may be prosecuted as if the Merger had not taken
place, or the Surviving Entity may be substituted in its place; and any judgment
rendered against either of the Constituent Entities may be enforced against the
Surviving Entity. Neither the rights of creditors nor any liens upon the
property of either of the Constituent Entities shall be impaired by reason of
the Merger.
1.6 Further Assurances. If, at any time after the Effective Time, the
Surviving Entity shall consider or be advised that any further deeds,
assignments or assurances in law or any other actions are necessary, desirable
or proper to vest, perfect or confirm of record or otherwise, in the Surviving
Entity, the title to any property or rights of the Constituent Entities acquired
or to be acquired by reason of, or as a result of, the Merger, each of the
Constituent Entities agrees that it and its proper officers, directors and
managers shall and will execute and deliver all such proper deeds, assignments
and assurances in law and do all things necessary, desirable or proper to vest,
perfect or confirm title to such property or rights in the Surviving Entity and
otherwise to carry out the purpose of this Agreement, and that the proper
officers, directors and managers of the Surviving Entity are fully authorized
and directed in the name of the Constituent Entities or otherwise to take any
and all such actions.
1.7 Merger Consideration.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of Ark or the holders of record of the Units
(the "MEMBERS"), the Units, in the aggregate, shall be converted into,
and shall represent the right to receive:
(i) Subject to the Working Capital Adjustment set forth in
Section 1.8 below, 389,105 shares of Blue Rhino's common stock,
par value $0.001 per share, equal to $6,000,000 divided by the
average of the closing prices of the Common Stock on the Nasdaq
National Market over the thirty (30) trading days ending November
1, 2002, such average closing price being $15.42, as reported in
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The Wall Street Journal - Eastern Edition listing for each such
day (the "STOCK CONSIDERATION"); and
(ii) Cash (the "CASH CONSIDERATION" and, together with the
Stock Consideration, the "MERGER CONSIDERATION") equal to the sum
of Ten Thousand Dollars ($10,000) which shall be used to satisfy
the payment obligation to each Class B Unit holder of Ark and
each Ark Sub (as defined in Section 2.6) as consideration for
Ark's acquisition of such Class B Units as contemplated by
Section 6.7 hereof. The amount each such obligation and name of
the payee is shown on Schedule 1.7(a)(ii).
(b) Blue Rhino shall deliver the Stock Consideration to the Members in
accordance with the distribution schedule attached as Schedule 1.7(b).
(c) At the Effective Time, each one percent (1%) membership interest
of Acquisition Sub shall be converted into one (1) Class A Unit of Ark.
(d) Blue Rhino or the Surviving Entity shall enter into consulting
agreements contemplated by Section 6.11, the aggregate value of which is
$200,000.
1.8 Working Capital Adjustment.
(a) The Stock Consideration shall be subject to downward adjustment,
dollar for dollar, to the extent Ark's Aggregate Negative Working Capital
(as defined below) is greater than Two Million Four Hundred Ninety Thousand
Dollars ($2,490,000) (the "Working Capital Adjustment"). For purposes of
this Agreement, Aggregate Negative Working Capital shall be equal to the
amount by which aggregate current liabilities exceed aggregate current
assets for Ark and the Ark Subs (as defined in Section 2.6) considered as a
group, and all as determined as of the Closing Date in accordance with
generally accepted accounting principles, consistently applied.
(b) Blue Rhino shall cause its determination of the Aggregate Negative
Working Capital to be reviewed by The Daniel Professional Group, Inc. (the
"Accountants"), and shall deliver to Ark a copy of such initial
determination on the Closing Date and the report of the Accountants
regarding its review thereof, together with a certificate of such
accounting firm that the current assets and current liabilities used in the
calculation of Aggregate Negative Working Capital have been fairly stated
in accordance with generally accepted accounting principles, consistently
applied.
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1.9 Transfer of Financial Results of Operations. Acquisition Sub, Blue
Rhino, and Ark agree that, upon Closing, the transfer of all financial results
of operations of Ark and the Ark Subs (as defined in Section 2.6) contemplated
by this Agreement, including the balance sheet of Ark and each Ark Sub and the
related statements of operations, equity and cash flows each determined in
accordance with Section 2.9(a)(C), shall be deemed to have occurred on November
1, 2002.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ARK
Ark, acknowledging that Blue Rhino and Acquisition Sub are executing this
Agreement and consummating the Merger in reliance thereon, represents and
warrants to Blue Rhino and Acquisition Sub as follows:
2.1 Organization and Good Standing; Governing Documents. Ark is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of North Carolina. Ark has the requisite limited liability
company power and authority to own, operate and lease its properties and to
carry on its business as now conducted. Ark is duly qualified to do business as
a foreign limited liability company and is in good standing in all other
jurisdictions in which the character of the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary, and such jurisdictions are listed on Schedule 2.1. True and complete
copies of the Articles of Organization and the Ark Operating Agreement,
including all amendments to such documents, have previously been delivered to
Blue Rhino.
2.2 Authority. Ark has all requisite power and authority to execute,
deliver and perform this Agreement and the Exhibits to this Agreement to which
Ark is a party (together with this Agreement, the "ARK AGREEMENTS") and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of each of the Ark Agreements, and the consummation of
the transactions contemplated thereby, have been duly and validly authorized by
all necessary limited liability company action (subject to the approval of the
Members). This Agreement has been duly executed and delivered by Ark and
constitutes, and, at Closing, each of the other Ark Agreements will be duly
executed and delivered by Ark and constitute, a valid and binding obligation of
Ark, enforceable against Ark in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the rights and remedies of creditors, and subject to the further qualification
that the remedy of specific performance or injunctive relief is discretionary
with the court before which any proceeding therefor may be brought.
2.3 No Conflict or Breach. The execution, delivery and performance of the
Ark Agreements do not and will not:
(a) conflict with or constitute a violation of the Ark Articles of
Organization or Ark Operating Agreement;
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(b) conflict with or constitute a violation of any law, statute,
judgment, order, decree or regulation of any legislative body, court,
administrative agency, governmental authority or arbitrator applicable to
or relating to Ark or its assets;
(c) conflict with, constitute a default under, result in a breach or
acceleration of, or require notice to or the consent of any third party
under, any contract, agreement, commitment, lease, mortgage, note, license
or other instrument or obligation to which Ark is party or by which it is
bound or by which its assets are affected; or
(d) result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever on any of the assets of Ark or on the
Units.
2.4 Consents and Approvals. Schedule 2.4 describes (a) each consent,
approval, authorization, registration or filing with any federal, state or local
judicial or governmental authority or administrative agency; and (b) each
consent, approval, authorization of or notice to any other third party, which is
required in connection with the valid execution and delivery by Ark of this
Agreement or any of the other Ark Agreements or the consummation by Ark of the
transactions contemplated hereby or thereby (clauses (a) and (b), collectively,
the "REQUIRED CONSENTS").
2.5 Capitalization. All of the Units are validly issued, fully paid and
nonassessable, are free from any lien, pledge or other encumbrance of any kind,
and were not issued in violation of any, preemptive rights, and are owned of
record and beneficially by the Members listed on Schedule 2.5. There are no
outstanding or authorized options, warrants, rights, contracts, calls, puts,
right to subscribe, conversion rights or other agreements or commitments to
which Ark is a party or which are binding upon Ark providing for the issuance,
disposition or acquisition of any Units or membership interests. Except for the
Ark Operating Agreement, there are no voting trusts, proxies or any other
agreements or understandings with respect to the voting of the Units or
membership interests of Ark. Except for the Ark Operating Agreement and the
agreements with the Class B Unit holders contemplated by Sections 2.33 and 6.7
hereof, Ark is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any Units or membership interests.
2.6 Subsidiaries; Investments. Except for its subsidiaries listed in this
Section 2.6 (each an "Ark Sub" and together, the "Ark Subs"), Ark does not own
or hold any shares of stock or any other security or interest in any other
entity, or any rights to acquire any such security or interest. Except for the
Ark Subs, Ark has never had any subsidiary entity of which the securities having
a majority of the voting power in electing the board of directors (or analogous
body) were, at the time as of which any determination was made, owned by Ark
either directly or indirectly. The following are the Ark Subs:
(a) Caribou Propane, LLC
(b) Javelina Propane, LLC
(c) Raven Propane, L.L.C.
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(d) Jayhawk Propane, LLC, and
(e) Buffalo Propane, LLC
2.7 Ark Subs. As of the Closing Date, and after giving effect to the Class
B Unit acquisitions contemplated by Section 6.7 below, Ark is the sole member
and manager of each Ark Sub. Each of the Ark Subs is a limited liability company
duly organized, validly existing and in good standing under the laws of their
respective states of organization. Each Ark Sub has the requisite power and
authority to own, operate and lease its properties and to carry on its business
as now conducted. Each Ark Sub is duly qualified to do business as a foreign
entity and is in good standing in all jurisdictions in which the character of
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary. True and complete copies of
the Articles of Organization (or equivalent) and the Operating Agreement of each
Ark Sub, including all amendments to such documents (such documents and
amendments being the "FORMATION DOCUMENTS"), have previously been delivered to
Blue Rhino. The execution, delivery and performance of the Ark Agreements do not
and will not:
(a) conflict with or constitute a violation of any of the Formation
Documents of any Ark Sub;
(b) conflict with or constitute a violation of any law, statute,
judgment, order, decree or regulation of any legislative body, court,
administrative agency, governmental authority or arbitrator applicable to
or relating to any Ark Sub or their respective assets;
(c) conflict with, constitute a default under, result in a breach or
acceleration of, or require notice to or the consent of any third party
under, any contract, agreement, commitment, lease, mortgage, note, license
or other instrument or obligation to which any Ark Sub is party or by which
any Ark Sub is bound or by which its assets are affected; or
(d) result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever on any of the assets of any Ark Sub.
2.8 Minute Books. The minute books of Ark and each Ark Sub are true,
correct, complete and current in all material respects and contain accurate and
complete records of all material actions taken by such entity's members and
managers and each committee thereof, and all signatures contained in such minute
books are the true signatures of the persons whose signatures they purport to
be.
2.9 Financial Statements
(a) Ark has previously delivered to Blue Rhino true and complete
copies of (i) the final balance sheet of Ark and each Ark Sub as of
December 31, 2001 and the related statements of operations, equity and cash
flows for the fiscal years then ended, including the footnotes to such
statements, additional or supplemental information supplied therewith and
the report prepared in connection therewith by the certified public
accountants that prepared such financial statements; and (ii) interim
financial reports of
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Ark and each Ark Sub prepared for each quarter since December 31, 2001 (all
of the foregoing, collectively, the "FINANCIAL STATEMENTS"). The Financial
Statements: (A) are in accordance with the books and records of Ark and
each Ark Sub, as the case may be; (B) present fairly the assets,
liabilities and financial condition of Ark and each Ark Sub, as the case
may be, in all material respects as of the respective dates of the
Financial Statements, and the results of operations for the periods then
ending; and (C) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, subject to normal year-end adjustments and footnotes.
(b) Neither Ark nor any of the Ark Subs has any liability or
obligation, whether accrued, absolute or contingent, that is not reflected
or reserved against in the most recent Financial Statements or those
incurred since the date of such Financial Statements in the ordinary course
of business consistent with past practice. All items of income or expense
which are unusual or of a nonrecurring nature are separately disclosed in
the Financial Statements.
2.10 Books and Records. The books and records of Ark and each Ark Sub are
true, accurate and complete and, where appropriate, have been maintained in
accordance with generally accepted accounting principles applied on a consistent
basis. At Closing, all such books and records and all tax returns filed by Ark
and each Ark Sub will be in the possession of Ark.
2.11 Title to Assets; Liens. Except as disclosed on Schedule 2.11:
(a) Ark and each Ark Sub has good and marketable title to all of the
properties and assets (real or personal, tangible or intangible) owned by
it (including, without limitation, those properties and assets shown on the
most recent Financial Statements), and a valid leasehold or other
possessory interest in all other properties and assets used, operated or
occupied by it, located on its premises or otherwise shown on the most
recent Financial Statements, except for tangible personal property sold or
disposed of in the ordinary course of business and consistent with past
practice.
(b) Except for liens to be cleared at closing through application of
the Cash Consideration pursuant to Section 1.7(a)(ii), all of the
properties and assets of Ark and each Ark Sub (whether real or personal,
tangible or intangible, owned, leased or otherwise acquired) are free and
clear of any liens, claims, charges, security interests, mortgages, pledges
or other encumbrances or restrictions of any nature whatsoever
(collectively, "LIENS"). There are no existing breaches or defaults under,
and no events or circumstances have occurred which, with or without notice
or lapse of time or both, would constitute a breach of or a default under,
any instrument, agreement or other document that creates, evidences or
constitutes any such Lien or that evidences, secures or governs the terms
of any indebtedness or obligation secured by any such Lien (any such
instrument, agreement or other document is referred to herein as a "LIEN
INSTRUMENT"). Neither the execution of any of the Ark Agreements by Ark nor
consummation of the Merger or the other transactions contemplated thereby
will, with
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respect to any Lien Instrument, (i) constitute a breach thereof
or a default thereunder; (ii) permit (with or without notice, lapse of time
or both), cause or result in (A) the acceleration of any indebtedness or
other obligation evidenced, secured or governed thereby or (B) the
foreclosure or other enforcement of any such Lien; (iii) permit or cause
the terms thereof to be renegotiated; or (iv) require the consent of the
holder of any such indebtedness or obligation or any third party.
2.12 Real Property. Neither Ark nor any Ark Sub owns any real property.
Schedule 2.12 contains a true and correct description of all: (i) real property
leased by Ark or any Ark Sub (the "LEASED REAL PROPERTY"); (ii) leases relating
to the Leased Real Property (collectively, the "REAL PROPERTY LEASES"); (iii)
Liens upon or, to the best knowledge of Ark, affecting any of the rights to or
interest in any of the Leased Real Property or any Real Property Lease; (iv)
agreements, oral or written, pursuant to which any person or entity (other than
Ark or a Ark Sub) leases, subleases, occupies or has the right to occupy any
Leased Real Property; and (v) agreements and other undertakings, oral or
written, to sell, lease, sublease, assign, encumber or otherwise dispose of any
Leased Real Property or Real Property Lease. To the best knowledge of Ark, the
Leased Real Property is zoned for the various purposes for which the buildings
and other improvements located thereon (the "IMPROVEMENTS") are presently being
used, and such uses thereof are in compliance with all applicable zoning and
land use laws, ordinances and regulations. All Improvements are in good repair
and in good operating condition, ordinary wear and tear excepted, and free from
latent and patent defects. No part of any Improvement encroaches on any real
property not included in the Leased Real Property. Each of the Real Property
Leases is valid, binding and enforceable in accordance with its terms and is in
full force and effect, and there are no offsets or defenses by either landlord
or tenant thereunder. There are no existing breaches of or defaults under, and
no events or circumstances have occurred which, with or without notice or lapse
of time or both, would constitute a breach of or a default under, any of the
Real Property Leases.
2.13 Tangible Personal Property. Ark and each Ark Sub owns or leases all
buildings, machinery, equipment, vehicles and other tangible assets necessary
for the conduct of its respective business (the "TANGIBLE PROPERTY"). Each item
of Tangible Property is in good operating order, condition and repair, ordinary
wear and tear excepted, is suitable for immediate use in the ordinary course of
business, is, to the best knowledge of Ark, free from defects (latent and
patent), is merchantable and is of a quality and quantity presently usable in
the ordinary course of business. To the best knowledge of Ark, no item of
Tangible Property is in need of repair or replacement. All motor vehicles have
current registrations, consistent with their class of use, for the states in
which they operate, and all motor vehicles have current inspection
certifications for the states in which such inspections are required by the
normal operation of such vehicles by Ark or a Ark Sub, as the case may be, in
the ordinary course of business.
2.14 Inventories. To the best knowledge of Ark, all items included in the
inventories of Ark and each Ark Sub (i) are in good condition, not obsolete or
defective; (ii) are useable or saleable within ninety (90) days from the date of
this Agreement in the ordinary course of business and at the current operating
profit margins of the entity owning the inventory; (iii) are located on the
premises described on Schedule 2.12; and (iv) have been acquired only in bona
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fide transactions entered into in the ordinary course of business. The
quantities of each item of inventory are not excessive based upon historical
requirements.
2.15 Contracts. Schedule 2.15 lists all contracts, commitments, agreements
(including agreements for the borrowing of money or the extension of credit),
leases (other than Real Property Leases), licenses, understandings and
obligations, whether written or oral, to which Ark or any Ark Sub is party or by
which Ark or any Ark Sub is bound or affected, that: (i) involves the
expenditure by any party to such contract, commitment, agreement, lease,
license, understanding or obligation of more than $10,000 (ii) are not
terminable by either party thereto without penalty on not more than 30 days
notice; (iii) include third party warranties or guarantees with respect to any
item of Tangible Property; or (iv) that are otherwise material to the operation
of the business of Ark or any Ark Sub (all of the foregoing, collectively,
"CONTRACTS"). Ark has delivered to Blue Rhino true and complete copies of all
written Contracts and true and complete memoranda describing all oral Contracts,
including any and all amendments and other modifications to such Contracts. Each
of the Contracts is valid, binding and enforceable in accordance with its terms
and is in full force and effect. No Contract will result in a loss upon
completion of performance, and no purchase commitment is in excess of the normal
business requirements of Ark or any Ark Sub or at excessive prices. There are no
existing defaults, and no events or circumstances have occurred which, with or
without notice or lapse of time or both, would constitute defaults, under any of
the Contracts. Neither the execution of any of the Ark Agreements nor the
consummation of the Merger or the other transactions contemplated thereby will,
with respect to any Contract: (i) constitute a default thereunder; (ii) require
the consent of any person or party, except for the Required Consents; or (iii)
affect the continuation, validity and effectiveness of any Contract or the terms
of any Contract.
2.16 Receivables. All accounts receivable and trade accounts reflected on
the most recent Financial Statements (less any such receivables collected since
the date thereof) and all accounts receivable and trade accounts presently owing
and to be owing to Ark and any Ark Sub on the Closing Date (collectively, the
"RECEIVABLES," in each case net of the reserves established and reflected on the
most recent Financial Statements), are, and on the Closing Date will be, legal,
valid and binding obligations, and are and will be, to the best knowledge of
Ark, collectible in full at face value (net of the reserves established and
reflected in the most recent Financial Statements) within ninety (90) days after
closing.
2.17 Intellectual Property. Schedule 2.17 sets forth a list of all: (i)
trademarks, service marks, trade names, logos and other designations owned or
used by Ark or any Ark Sub, and all United States, foreign and state
registrations relating thereto and applications therefor; (ii) copyrighted works
owned by Ark or any Ark Sub and registrations issued by the United States
Copyright Office or the office of any foreign jurisdiction for any of the
copyrights; (iii) inventions owned or used by Ark or any Ark Sub which are the
subject of United States or foreign letters patent or applications therefor,
together with the applicable patent number, application number, application date
and issue date; (iv) confidential or proprietary processes, formulas, technical
data, trade secrets, know-how, and other similar information that is of
commercial value to Ark or any Ark Sub, and (v) all software, whether
commercially available, commercially developed for Ark or any Ark Sub, or
developed by Ark or any Ark Sub, including
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a brief description thereof (collectively, "INTELLECTUAL PROPERTY"). Ark or the
Ark Sub, as the case may be, owns all right, title and interest in and to each
item included in the Intellectual Property, free and clear of any Liens or
licenses, except for commercially acquired software, to which Ark or a Ark Sub
has current valid and paid-up licenses to use as presently used by such entity
on the computers on which such software is installed. The Intellectual Property
consists of all of the intellectual property rights necessary to conduct the
business of Ark and the Ark Subs as presently conducted. All registrations
relating to the Intellectual Property are validly issued and remain in full
force and effect. Each trademark has been in continuous use on all goods
described in the applicable registrations.
2.18 Major Suppliers and Customers. Each supplier of goods or services to
whom Ark and the Ark Subs paid more than $200,000, in the aggregate, during the
12 months ended on September 30, 2002, is disclosed on Schedule 2.18, which
Schedule reflects in each case the amounts so paid. Ark is not engaged in any
dispute with any of such suppliers or customers. Ark has no reason to believe
that the Merger will have any adverse effect on the business relationship of any
such suppliers.
2.19 Litigation. There are no claims, actions, suits, inquiries, hearings
or investigations ("CLAIMS") pending or, to the knowledge of Ark, threatened,
against Ark or any Ark Sub (including any related to its Intellectual Property)
and no Claims have been brought within the last two years against Ark or any Ark
Sub, which Claims are not fully insured against and for which Ark's insurance
carrier has not accepted responsibility for coverage in accordance with the
terms of Ark's insurance policies. There are no facts or circumstances that
could serve as the basis for any Claim against Ark or any Ark Sub, or, by virtue
of the execution, delivery and performance of this Agreement, against Blue Rhino
or Acquisition Sub.
2.20 Compliance with Decrees and Laws. There is not outstanding or, to the
knowledge of Ark, threatened, any order, writ, injunction or decree of any
court, governmental agency or arbitration tribunal against or involving Ark or
any Ark Sub which would have a material adverse effect on the assets of such
entity or on its continuing operations. Ark and each Ark Sub is currently, and
has been at all times during the past three years, in compliance in all material
respects with all laws, statutes, rules, regulations, orders and licensing
requirements of federal, state, local and foreign agencies and authorities
applicable to the business and properties of such entity (including, without
limitation, those relating to antitrust and trade regulation, civil rights,
environment, labor and employment discrimination, affirmative action, safety and
health) (collectively, "RULES"). To the knowledge of Ark, there has been no
allegation of any violation of any Rules, and no investigation or review by any
federal, state or local body or agency is pending, threatened or planned with
respect to Ark or any Ark Sub.
2.21 Permits. Ark and each Ark Sub has obtained all permits,
authorizations, certificates, approvals, licenses, exemptions and
classifications required for the conduct of its respective business in the
locations at which each currently operates and for the ownership and operation
of its assets, all of which permits are described on Schedule 2.21 (the
"PERMITS"). Neither Ark nor any Ark Sub is in violation of any of the Permits,
and no proceedings to revoke or limit any Permit are pending or, to the
knowledge of Ark, threatened.
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2.22 Taxes. Ark and each Ark Sub has timely filed all tax returns that each
was required to file before the Closing Date, and such tax returns were correct
and complete in all respects. All taxes required to be withheld or paid by Ark
and each Ark Sub (whether or not shown on any tax return) have been withheld and
paid. Neither Ark nor any Ark Sub currently is the beneficiary of any extension
of time within which to file any tax return and 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. There is no pending or, to the knowledge of
Ark, threatened dispute or claim concerning any tax liability of Ark or any Ark
Sub. Neither Ark nor any Ark Sub has any liability for taxes except (i) as of
the most recent fiscal month end, as shown on the reserve for tax liability
(excluding any reserve for deferred taxes established to reflect timing
differences between book and tax income) set forth on the face of the most
recent balance sheet (rather than in any notes thereto); and (ii) as of the
Closing Date, as will be shown in the reserve as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
Ark or the Ark Sub, as the case may be, in filing its tax returns. Neither Ark
nor any Ark Sub has ever been a member or an affiliated group within the meaning
of Section 1504(a) of the Code filing a consolidated tax return and has never
entered into a tax sharing or tax allocation agreement. Blue Rhino is not
required to withhold any tax from the Merger Consideration.
2.23 Environmental Matters. Neither Ark nor any Ark Sub is in violation of,
and has not violated, any applicable federal, state, county or local statutes,
laws, regulations, rules, ordinances, codes, licenses or permits of any
governmental authorities relating to environmental matters, including by way of
illustration and not by way of limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource Conservation Recovery
Act, the Clean Air Act, the Clean Water Act, the Occupational Safety and Health
Act, the Toxic Substances Control Act, any "Superfund" or "Superlien" law or any
other federal, state or local statute, law, ordinance, code, rule, regulation,
order, decree or guideline (whether published or unpublished) regulating,
relating to or imposing liability or standards of conduct concerning Hazardous
Materials, in each case as amended from time to time (collectively,
"Environmental Laws"). For purposes of this Agreement, "HAZARDOUS MATERIALS"
includes but is not necessarily limited to asbestos, asbestos containing
materials ("ACM"), polychlorinated biphenyls, lead-based paints, any petroleum,
petroleum by-product (including, but not limited to, crude oil, diesel oil, fuel
oil, gasoline, lubrication oil, oil refuse, used motor oil, oil mixed with other
waste, oil sludge and all other liquid hydrocarbons, regardless of specific
gravity), natural or synthetic gas or other hazardous or toxic substances,
materials, wastes, pollutants or contaminants defined under or regulated by the
Environmental Laws. Specifically, but not in limitation of the foregoing:
(a) Ark and each Ark Sub has obtained and is in material compliance
with the terms and provisions of all licenses and permits necessary for its
respective operations and its respective assets to be in compliance with
the Environmental Laws, all of which are disclosed on Schedule 2.21.
(b) The Improvements and the Tangible Property are free of asbestos
containing materials ("ACMs") and are free of Hazardous Materials, except
for current inventories of propane, gasoline, and diesel fuel.
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(c) Ark and each Ark Sub has at all times received, handled, used,
stored, treated and disposed of all Hazardous Materials in strict
compliance with all Environmental Laws. With respect to all Hazardous
Materials that Ark or any Ark Sub has transported or for which such entity
has arranged for the transport from or to any property that it owns, leases
or uses in its operations, the facility that has accepted such Hazardous
Material is in strict compliance with all Environmental Laws.
(d) No Hazardous Material has been released, deposited, discharged,
placed, disposed of or originated on any property that Ark or any Ark Sub
owns, leases or uses in its operations. No real estate owned or leased by
Ark or any Ark Sub has been used as a landfill or a waste disposal site by
Ark or any Ark Sub or, to the best knowledge of Ark, by any other person at
any time.
(e) There is no electrical equipment, including transformers,
containing polychlorinated biphenyls (PCBs) included in the assets of Ark
or any Ark Sub. There are no monitoring wells for monitoring Hazardous
Materials on, in or coming from real property owned or leased by Ark or any
Ark Sub. There are no underground storage tanks or pipelines situated on
any real property owned or leased by Ark or any Ark Sub. There are no liens
on any real property owned or leased by Ark or any Ark Sub resulting from
any cleanup or proposed cleanup under the Environmental Laws. To the best
knowledge of Ark, no part of the Leased Real Property constitutes
"wetlands" as defined under any Environmental Law or other law or
regulation.
(f) No notices of any violation, inquiries or requests for information
relating to any of the matters referred to in Sections 2.232.3(a), 2.3(b),
2.3(c), 2.3(d), (e), and (f) have been received by Ark or any Ark Sub.
2.24 Insurance. Schedule 2.24 describes all insurance policies maintained
by Ark and each Ark Sub with respect to its respective business and the assets.
All premiums due thereon have been paid and will be paid through the Effective
Time.
2.25 Labor and Employment Matters. No employees of Ark or any Ark Sub have
been or are represented by a union or other labor organization or covered by any
collective bargaining agreement. There is no unfair labor practice complaint,
labor organizational effort, strike, slowdown or similar labor matter pending
or, to the knowledge of Ark, threatened against or affecting Ark, any Ark Sub or
their respective businesses. Ark and each Ark Sub is in compliance with all
federal, state and local laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and there is no unfair labor practice charge or complaint or charge of
employment discrimination or retaliation against Ark or any Ark Sub pending or,
to the knowledge of Ark, threatened, impending or planned. There have been no
"layoffs" of employees of or any "plant closings" by Ark or any Ark Sub, as such
terms are defined in the Work Adjustment and Retaining Notification Act
("WARN"), within the past 90 days, nor has there been any event during the past
seven years which requires the giving of notice under WARN.
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2.26 Employees; Compensation; Benefit Plans. Ark has previously given to
Blue Rhino a complete and correct list of the name, age, position, length of
employ, rate of compensation and any incentive compensation arrangements,
bonuses or commissions or fringe or other benefits, of each person who is
employed by or associated with Ark or any Ark Sub in any capacity, as well as
each other person to whom Ark or any Ark Sub has a policy, practice or
obligation to pay or provide retirement, health, welfare or other benefits of
any kind. Except as provided on Schedule 2.26, there are no Plans, as defined
below, contributed to, maintained or sponsored by Ark or any Ark Sub, to which
Ark or any Ark Sub is obligated to contribute or with respect to which Ark or
any Ark Sub has any liability or potential liability, whether direct or
indirect, including all Plans contributed to, maintained or sponsored by each
member of the controlled group of companies, within the meaning of Sections
414(b), 414(c), and 414(m) of the Code, of which Ark or any Ark Sub is a member
to the extent Ark or any Ark Sub has any potential liability with respect to
such Plans. For purposes of this Agreement, the term "PLANS" shall mean: (a)
employee benefit plans as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), whether or not funded and
whether or not terminated; (b) employment agreements; and (c) personnel policies
or fringe benefit plans, policies, programs and arrangements, whether or not
subject to ERISA, whether or not funded, and whether or not terminated,
including, without limitation, stock or Unit bonus, deferred compensation,
pension, severance, bonus, vacation, travel, incentive and health, disability
and welfare plans.
2.27 Absence of Certain Changes. Except as disclosed on Schedule 2.27,
since the date of the most recent Financial Statements, Ark and each Ark Sub has
conducted its operations and business only in the ordinary course consistent
with past practices, neither Ark nor any Ark Sub has:
(a) suffered a material adverse change in its business, financial
condition, operating results, earnings, assets, customer, supplier,
employee and sales representative relations, business prospects, business
condition or financing arrangements, or suffered any material casualty loss
or damage to its assets (whether or not covered by insurance);
(b) except for the acquisition of Class B Units at each of Ark and the
Ark Subs contemplated by Section 2.33 hereof, redeemed or repurchased,
directly or indirectly, any Units or membership interests or made any
distributions with respect to any Units or membership interests;
(c) issued, sold or transferred any of its notes, bonds or other debt
securities or any equity securities, securities convertible, exchangeable
or exercisable into equity securities, or warrants, options or other rights
to acquire equity securities;
(d) borrowed any amount or incurred or become subject to any
liabilities, except liabilities incurred in the ordinary course of
business;
(e) discharged or satisfied any lien or encumbrance or paid any
obligation or liability, other than liabilities paid in the ordinary course
of business, or prepaid any amount of indebtedness for borrowed money;
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(f) subjected any portion of its properties or assets to any Lien;
(g) sold, leased, assigned or transferred (including, without
limitation, transfers to Members or any employees or affiliates of Ark) a
portion of its tangible assets, except for sales of inventory in the
ordinary course of business, or canceled without fair consideration any
debts or claims owing to or held by it;
(h) entered into, amended or terminated any lease, contract, agreement
or commitment, or taken any other action or entered into any other
transaction other than in the ordinary course of business and in accordance
with past custom and practice, or entered into any transaction with any of
its employees, officers, directors or managers;
(i) entered into any other material transaction not in the ordinary
course of business, or materially changed any business practice;
(j) made or granted any bonus or any wage, salary or compensation
increase in amount or frequency inconsistent with historical practices or
adopted any new employee benefit plan or arrangement;
(k) conducted its cash management customs and practices and accounting
methods other than in the usual and ordinary course of business in
accordance with past custom and practice;
(l) made any loans or advances to, or guarantees for the benefit of,
any person or entity;
(m) made any charitable contributions or pledges in excess of $1,000
in the aggregate;
(n) entered into any lease of capital equipment or real estate
involving rental in excess of $5,000 per annum for any of Ark or a Ark Sub,
or $50,000 per annum in the aggregate for Ark and the Ark Subs; or
(o) changed or authorized any change in its Articles of Organization
(or equivalent formation document) or Operating Agreement, or any
certificate or authorization to conduct business in a foreign jurisdiction.
2.28 Product Warranties. Each product manufactured or sold by Ark and the
Ark Subs has been in conformity with all applicable contractual commitments and
express warranties, as well as with all warranties implied by law, of each such
entity.
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2.29 Product Liability. Neither Ark nor any Ark Sub has any liability (and,
to Ark's knowledge, there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any liability) arising out of any injury to
individuals, including wrongful death, or damage to property as a result of the
ownership, possession, or use of any product manufactured, sold, leased, or
delivered by Ark or any Ark Sub.
2.30 Related Party Transactions. The Real Property Leases, leases of
Tangible Property, and the Contracts do not include any agreement with, or any
other commitment to: (a) any officer, director or manager of Ark; (b) any person
related by blood or marriage to any such officer, director or manager; (c) any
Member; or (d) any corporation, partnership, trust or other entity in which Ark,
any such officer, director or related person or any Member has an equity or
participating interest.
2.31 Brokers. No finder, broker, agent or other intermediary has acted for
or on behalf of Ark in connection with the transactions contemplated by the Ark
Agreements, and there are no claims for any brokerage commission, finder's fee
or similar payment due from Ark.
2.32 Bank Accounts. Schedule 2.32 sets forth: (a) a true and complete list
of the names of each bank, trust company, securities broker and other financial
institution at which Ark or any Ark Sub has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship; and (b) a
true and complete list and description of each such account, box and
relationship, indicating in each case the account number and the names of the
officers, employees, agents or other representatives of Ark or the Ark Sub
having access, signatory power or power to give direction with respect to such
account, box or relationship.
2.33 Acknowledgement of Class B Unit Acquisition. On or before the Closing
Date, Ark has purchased all of the issued and outstanding Class B units of Ark
and each Ark Sub. All holders of such Class B Units are shown on Schedule 1.7.
2.34 Members' Investor Representations. To the knowledge of Ark, each
Member:
(a) who is a natural person either (A) has a net worth, or a joint net
worth with his or her spouse, that exceeds $1 million, and/or (B) had an
individual income for each of 2000 and 2001 that exceeded $200,000, or
joint income with his or her spouse that exceeded $300,000, and reasonably
expects to reach the same income level in 2002; or
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(b) that is not a natural person is either (A) a corporation or
partnership, not formed for the specific purpose of acquiring the Merger
Consideration, with total assets in excess of $5,000,000, or (B) an entity
in which all of the equity owners are natural persons who satisfy the
criteria set forth in clause (i) above; and
(c) will be acquiring the Stock Consideration solely for such Member's
own account for investment purposes and not with a view to the distribution
thereof and understands that the Stock Consideration has not been
registered and cannot be resold without compliance with all applicable
securities laws.
2.35 Disclosure. No representation, warranty or statement made by Ark in
any Ark Agreement, or any document furnished or to be furnished to Blue Rhino
pursuant to any Ark Agreement, contains or will contain any untrue statement of
a material fact, or omits or will omit to state any material fact necessary to
make the statements contained in this Agreement or such other document not
misleading. The fact that Ark has delivered copies of certain documents to Blue
Rhino shall not alone constitute disclosure of facts required to be disclosed on
any Schedule to this Agreement, unless such document is expressly referenced in
such Schedule. Receipt by Blue Rhino of such documents and notice of their
contents (other than by reference on a Schedule) shall in no way limit Ark's
obligations or Blue Rhino's other rights under this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BLUE RHINO AND ACQUISITION SUB
Each of Blue Rhino and Acquisition Sub represents and warrants to Ark as
follows:
3.1 Capital Structure of Blue Rhino. As of the date hereof, the authorized
capital stock of the Company consists of 100,000,000 shares of common stock and
20,000,000 shares of preferred stock. As of September 30, 2002, there were
14,210,000 shares of common stock issued and outstanding and no shares of
preferred stock issued and outstanding. As of October 31, 2002, there were
options and warrants outstanding issued by the Company to purchase an aggregate
of 3,552,211 and 2,412,348 shares of Common Stock, respectively. Except as set
forth above, there are no options, warrants or other rights (including
conversion, preemptive or other rights) or agreements outstanding to purchase
any of the Company's authorized and unissued capital stock.
3.2 Organization, Standing and Authority of Blue Rhino. Blue Rhino is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware, with full corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as now
conducted, and is duly qualified to do business in the states of the United
States where its ownership or leasing of property or the conduct of its business
requires such qualification and where failure to qualify would have a material
adverse effect on the financial condition, results of operations, or business of
Blue Rhino on a consolidated basis.
3.3 Organization, Standing and Authority of Acquisition Sub. Acquisition
Sub is a limited liability company duly organized, validly existing and in good
standing under the laws of
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the State of North Carolina. Acquisition Sub is a wholly owned subsidiary of
Blue Rhino, and has full limited liability company power to consummate the
transactions herein contemplated.
3.4 Authorized and Effective Agreement.
(a) Each of Blue Rhino and Acquisition Sub has all requisite power and
authority to execute, deliver and perform this Agreement and the Exhibits
to this Agreement to which Blue Rhino and Acquisition Sub, as the case may
be, is a party (together with this Agreement, the "BLUE RHINO AGREEMENTS")
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of each of the Blue Rhino Agreements,
and the consummation of the transactions contemplated thereby, have been
duly and validly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by Blue Rhino and
Acquisition Sub and constitutes, and, at Closing, each of the other Blue
Rhino Agreements will be duly executed and delivered by Blue Rhino and
Acquisition Sub and constitute, a valid and binding obligation of Blue
Rhino and Acquisition Sub, enforceable against Blue Rhino and Acquisition
Sub in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the rights and
remedies of creditors, and subject to the further qualification that the
remedy of specific performance or injunctive relief is discretionary with
the court before which any proceeding therefor may be brought.
(b) Neither the execution and delivery by Acquisition Sub or Blue
Rhino of this Agreement, nor the performance of any other obligation of
Acquisition Sub or Blue Rhino under this Agreement, conflicts with, will
result in the breach of, or constitutes a default under, the terms of their
respective Certificates of Incorporation or Bylaws, any indenture or other
instrument or agreement to which either is a party or by which any of the
assets of either may be bound or affected, or any statute, ordinance,
judgment, order, decree, regulation or rule of any court or governmental
body affecting or relating to either or its assets, or will result in the
creation of any lien upon any assets of either.
3.5 Governmental Approvals. No consent, approval, authorization,
registration or filing with any federal, state or local judicial or governmental
authority or administrative agency is required in connection with the valid
execution and delivery by Blue Rhino or Acquisition Sub of the Blue Rhino
Agreements or the consummation by Blue Rhino of the transactions contemplated in
the Blue Rhino Agreements.
3.6 Brokers. No finder, broker, agent or other intermediary has acted for
or on behalf of Blue Rhino or Acquisition Sub in connection with the
transactions contemplated by this Agreement, and there are no claims for any
brokerage commission, finder's fee or similar payment due from Blue Rhino or
Acquisition Sub.
ARTICLE IV
COVENANTS OF ARK
Ark covenants and agrees with Blue Rhino as follows:
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4.1 Access and Information. Ark shall permit Blue Rhino and its counsel,
accountants and other representatives full access during normal business hours
to all the properties, assets, books, records, agreements and other documents of
Ark. Ark shall furnish to Blue Rhino and its representatives all information
concerning Ark as Blue Rhino may reasonably request. Ark shall permit and
facilitate communications between Blue Rhino and Ark's suppliers, customers,
landlords and other persons having relationships with Ark.
ARTICLE V
MUTUAL COVENANTS
Each of Blue Rhino and Ark covenants and agrees with the other as follows:
5.1 Best Efforts. Each of Blue Rhino and Ark shall use its best efforts to
make or obtain all consents, approvals, authorizations, registrations and
filings with all federal, state or local judicial or governmental authorities or
administrative agencies as are required in connection with the consummation of
the transactions contemplated by this Agreement. In addition, Seller shall use
its best efforts to obtain as promptly as possible all other Required Consents.
5.2 Confidentiality. In recognition of the confidential nature of certain
of the information which will be provided to each party by the others, each of
Blue Rhino and Ark agrees to retain in confidence, and to require its directors,
officers, employees, consultants, professional representatives and agents
(collectively, its "REPRESENTATIVES") to retain in confidence all information
transmitted or disclosed to it by another party to this Agreement, and further
agrees that it will not use for its own benefit and will not use or disclose to
any third party, or permit the use or disclosure to any third party of, any
information obtained from or revealed by the other, except that each of Blue
Rhino and Ark may disclose the information to those of its Representatives who
need the information for the proper performance of their assigned duties with
respect to the consummation of the transactions contemplated by this Agreement.
In making such information available to its Representatives, each of Blue Rhino
and Ark shall take any and all precautions necessary to ensure that its
Representatives use the information only as permitted by this Agreement.
Notwithstanding anything to the contrary in the foregoing provisions, such
information may be disclosed: (i) where it is necessary to any regulatory
authorities or governmental agencies; (ii) if it is required by court order or
decree or applicable law; (iii) if it is ascertainable or obtained from public
or published information; (iv) if it is received from a third party not known to
the recipient to be under an obligation to keep such information confidential;
or (v) if the recipient can demonstrate that such information was in its
possession prior to disclosure of the information in connection with this
Agreement. If any party shall be required to make disclosure of any such
information by operation of law, such disclosing party shall give the party from
whom such information was received prior notice of the making of such disclosure
and shall use all reasonable efforts to afford such other party an opportunity
to contest the making of such disclosure. In the event that the Closing shall
not occur, each of Blue Rhino and Ark shall immediately deliver, or cause to be
delivered, upon request from the party from which such information was received
(without retaining any copies) any and all documents, statements or other
written information obtained from the other that contain confidential
information.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BLUE RHINO AND ACQUISITION SUB
The obligations of Blue Rhino and Acquisition Sub to consummate the
transactions contemplated by this Agreement are subject to the satisfaction of
the following conditions on or before the Closing Date, unless specifically
waived in writing prior to the Closing Date:
6.1 Representations and Warranties. The representations and warranties of
Ark contained in this Agreement shall have been true and correct on the date of
this Agreement and shall be true and correct on the Closing Date as though made
on and as of the Closing Date.
6.2 Compliance with Covenants. Ark shall have duly performed and complied
with all covenants, agreements and obligations required by this Agreement to be
performed or complied with by each on or prior to the Closing.
6.3 Absence of Litigation. No action or proceeding shall be pending or
threatened by or before any court or other governmental body or agency seeking
to restrain, prohibit or invalidate the transactions contemplated by this
Agreement or which would adversely affect the right of Blue Rhino to operate or
control Ark after the Closing Date.
6.4 Absence of Change. Between the date of this Agreement and the Effective
Time, no material adverse change shall have occurred in the business, assets,
operations, prospects or financial or other condition of Ark, nor shall there
have occurred any material casualty loss or destruction of, or damage to, any of
Ark's assets.
6.5 Consents and Approvals. All: (a) Required Consents; (b) licenses; (c)
other orders or notifications of, or registrations, declarations or filings
with, or expiration of waiting periods imposed by, any applicable governmental
or judicial authority; and (d) consents, approvals, authorizations or
notifications of any other third parties, all as required in connection with
consummation of the transactions contemplated by this Agreement, including the
ownership and operation of Ark by Blue Rhino, shall have been made or obtained
or shall have occurred. Any condition or restriction imposed in connection with
any of the foregoing shall not have a material adverse effect on the Blue
Rhino's right to operate or control Ark after the Effective Time.
6.6 Removal of Liens. All Liens, other than those identified on Schedule
2.11 or those related to the debt referenced in Section 1.7(a)(ii), shall have
been paid at closing or sufficient action taken to cause their removal, and Ark
shall have provided evidence satisfactory to Blue Rhino of such action.
6.7 Purchase of Class B Unit. Ark shall have acquired all of the issued and
outstanding Class B Units of Ark and each Ark Subs on or prior to the Closing
Date, and there shall be no claims, pending or threatened, related to such
acquisition. The purchase agreement for each Class B Unit holder shall be in the
form attached as Exhibit B.
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6.8 Investment Letters. Blue Rhino shall have received from all of the
equity owners who are natural persons of Ark a duly executed Investor
Representation Letter substantially in the form of Exhibit C hereto (a
"REPRESENTATION LETTER").
6.9 Legal Opinion. Blue Rhino shall have received from House & Tippett,
PLLC, counsel to Ark, an opinion, dated the Closing Date, in the form of Exhibit
D.
6.10 No Claim Regarding Interests. No claim shall have been made or
threatened that any person or entity (other than Members): (i) is the holder or
beneficial owner of, or has the right to acquire or to obtain beneficial
ownership of, any of the Units or any other voting, equity or ownership interest
in, Ark; or (ii) is entitled to all or any portion of the Merger Consideration.
6.11 Consulting Agreements. The Surviving Entity shall have entered into
consulting agreements with each of Robert Irish, a current Member, and C.J. Lett
III, manager of Member Blue Bison, LLC. Each consulting agreement shall be for a
term of three (3) months commencing on the Closing Date and shall reflect
consulting fees of $100,000 each. The consulting services shall consist of
transition support as reasonable required by Blue Rhino. The form of each
consulting agreement is attached hereto as Exhibit 6.11-A and 6.11-B
respectively.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ARK
The obligations of Ark to consummate the transactions contemplated by this
Agreement are subject to the satisfaction of each of the following conditions on
or before the Closing Date, unless specifically waived in writing by Ark prior
to the Closing:
7.1 Representations and Warranties. The representations and warranties of
Blue Rhino contained in this Agreement shall have been true and correct on the
date of this Agreement, and shall be true and correct on the Closing Date as
though made on and as of the Closing Date.
7.2 Compliance with Covenants. Blue Rhino shall have duly performed and
complied with all covenants, agreements and obligations required by this
Agreement to be performed or complied with by it on or before the Closing Date.
7.3 Absence of Litigation. No action or proceeding shall be pending by or
before any court or other governmental body or agency seeking to restrain,
prohibit or invalidate the transactions contemplated by this Agreement.
7.4 Consulting Agreement. The consulting agreements contemplated by Section
6.1 shall have been executed and delivered by all parties hereto.
ARTICLE VIII
CLOSING DELIVERIES
8.1 Deliveries by Ark. At the Closing, Ark shall deliver, or cause to be
delivered, to Blue Rhino the following:
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(a) all bank books, financial and bank records, bookkeeping and
accounting records, copies of all Tax Returns and amendments to all of the
foregoing, corporate minute books, stock ledgers and all other books and
records of or relating to Ark, certified by Ark to be true, correct and
complete as of the Closing Date (including the same listed items for each
Ark Sub);
(b) a certificate signed by the Manager of Ark confirming the
satisfaction of the conditions set forth in Sections 6.1 and 6.2 as to
representations, warranties and covenants and Section 6.4 as to absence of
changes;
(c) a copy of all necessary limited liability company resolutions
authorizing the execution, delivery and performance of this Agreement by
Ark, and the consummation of the transactions contemplated in this
Agreement, all accompanied by the certification of the Manager of Ark to
the effect that such resolutions are in full force and effect and have not
been amended, modified or rescinded;
(d) For Ark, a good standing certificate from the Secretary of State
of Delaware;
(e) the Representation Letters duly executed by the Members;
(f) copies of the purchase agreements executed by all Class B Unit
holders of Ark and each Ark Sub as contemplated by Section 6.7;
(g) the legal opinion referred to in Section 6.9; and
(h) evidence of that all Required Consents have been obtained or
satisfied.
8.2 Deliveries by Blue Rhino. At the Closing, Blue Rhino shall deliver or
cause to be delivered to Ark (except as provided in Section 8.2(c))the
following:
(a) a certificate of an officer of Blue Rhino confirming the
satisfaction of the conditions set forth in Sections 7.1 and 7.2 as to
representations, warranties and covenants;
(b) a copy of all corporate resolutions authorizing the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated in this Agreement, accompanied by the
certification of the Secretary of Blue Rhino to the effect that such
resolutions are in full force and effect and have not been amended,
modified or rescinded; and
(c) the Merger Consideration in accordance with the terms and subject
to the restrictions and adjustments set forth in Section 1.7.
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8.3 Other Deliveries. The parties to the consulting agreements contemplated
by Section 6.11 shall have executed and delivered to each other their respective
consulting agreements.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Members. The Members shall indemnify, defend and
hold harmless Blue Rhino and its officers, directors and affiliates (the "Blue
Rhino Indemnitees") from, against and with respect to any and all loss, damage,
claim, obligation, liability, cost and expense (including, without limitation,
reasonable attorneys' fees and costs and expenses incurred in investigating,
preparing, defending against or prosecuting any litigation, claim, proceeding or
demand), of any kind or character, including without limited, personal injury,
wrongful death or property damage (a "LOSS"), arising out of or in connection
with this Agreement, any representations and warranties contained herein of Ark
and any Ark Sub, and any transaction contemplated hereby, if such Loss is caused
by the negligent act or omission, willful misconduct or fraud of any Member or
Manager.
9.2 Indemnification by Blue Rhino. If the Merger is not consummated, Blue
Rhino shall indemnify, defend and hold harmless Ark from, against and with
respect to any Loss arising out of or in connection with any of the following:
(a) any breach of any of the representations and warranties of Blue
Rhino contained in or made pursuant to this Agreement; or
(b) any failure by Blue Rhino to perform or observe, or to have
performed or observed, in full, any covenant, agreement or condition to be
performed or observed by it pursuant to this Agreement.
9.3 Indemnification by Blue Rhino Regarding Acquisition Sub. If the Merger
is not consummated, Blue Rhino shall indemnify, defend and hold harmless Ark
from, against and with respect to any Loss arising out of or in connection with
any of the following:
(a) any breach of any of the representations and warranties of
Acquisition Sub contained in or made pursuant to this Agreement; or
(b) any failure by Acquisition Sub to perform or observe, or to have
performed or observed, in full, any covenant, agreement or condition to be
performed or observed by Acquisition Sub pursuant to this Agreement.
9.4 Notice of Claim. Any party seeking to be indemnified hereunder (the
"INDEMNIFIED PARTY") shall promptly notify the party from whom indemnity is
sought (the "INDEMNITY OBLIGOR") in writing of any claim for recovery,
specifying in reasonable detail the nature of the Loss. The Indemnified Party
shall provide to the Indemnity Obligor as promptly as practicable thereafter all
information and documentation reasonably requested by the Indemnity Obligor to
verify the claim asserted. The failure of the Indemnified Party to notify the
Indemnity Obligor on a timely basis or at all will not relieve the Indemnity
Obligor of any liability that it
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may have to the Indemnified Party, except to the extent that the Indemnified
Party demonstrates that the defense of such action is prejudiced by such
failure.
9.5 Defense. Whether or not the Indemnity Obligor is permitted to employ
counsel to defend any claim for a Loss, the Indemnified Party shall have the
right to employ separate counsel and to participate in such action at the
Indemnity Obligor's reasonable expense. All the parties to this Agreement shall
cooperate in the defense or prosecution of such claim and shall furnish such
records, information and testimony and shall attend such conferences, discovery
proceedings and trials as may be reasonably requested in connection therewith.
The Indemnity Obligor shall not be liable for any settlement of any such claim
effected without its prior written consent, which shall not be unreasonably
withheld.
9.6 Other Remedies. The foregoing indemnification provisions are in
addition to, and not in derogation or limitation of, any statutory, equitable or
common law remedy any party may have as a result of a Loss.
ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated at any time prior to the
Closing by:
(a) the mutual written consent of Ark and Blue Rhino;
(b) Ark (if Ark is not then in breach of any material term of this
Agreement), if Blue Rhino shall (i) fail to perform or observe any
covenant, agreement or condition contained in this Agreement required to be
performed or observed on or prior to the Closing Date; or (ii) breach any
of its representations or warranties contained in this Agreement, which
failure or breach is not cured within ten (10) days after Ark have notified
Blue Rhino of its intent to terminate this Agreement pursuant to this
Section 10.1(b);
(c) Blue Rhino (if Blue Rhino is not then in breach of any term of
this Agreement), if Ark shall (i) fail to perform or observe any covenant,
agreement or condition contained in this Agreement required to be performed
or observed on or prior to the Closing Date; or (ii) breach any of its
representations or warranties contained in this Agreement, which failure or
breach is not cured within ten days after Blue Rhino has notified Seller of
its intent to terminate this Agreement pursuant to this Section 10.1(c);
(d) Ark or by Blue Rhino, if there shall be any order, writ,
injunction or decree of any court or governmental or regulatory agency
binding on Ark or Blue Rhino, which prohibits or restrains any party from
consummating the transactions contemplated by this Agreement; or
(e) By Blue Rhino, by giving written notice to Seller on or before ten
(10) days following the date of this Agreement, if Blue Rhino is not
reasonably satisfied with
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the results of its continuing business, legal and accounting due diligence
review concerning Ark.
10.2 Effect on Obligations. Termination of this Agreement pursuant to this
Article shall terminate all obligation of the parties hereunder, except for the
obligations under this Section 10.2 and Sections 11.2 (with respect to
expenses), 11.3 (with respect to publicity) and 5.2 (with respect to
confidentiality); provided, however, that termination pursuant to Section
10.1(b) or Section 10.1(c) shall not relieve the defaulting or breaching party
from any liability to any other party under this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Representations. All representations and warranties of the
parties contained in this Agreement or otherwise made in writing in connection
with the transactions contemplated by this Agreement shall survive the execution
and delivery of this Agreement for a period of one (1) year, except for the
representations in Sections 2.5, 2.22, and 2.23, which shall each survive until
the expiration of any applicable statute of limitations. The right to
indemnification, payment of damages, or other remedy based on the
representations are warranties of Ark and on covenants, agreements, and
obligations herein of Ark will not be affected by any investigation conducted
with respect to, or any knowledge acquired (or capable of being required) at any
time, whether before or after the execution and delivery of this Agreement or
the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with any such representation, warranty, covenant, agreement or obligation. The
waiver of any condition based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant, agreement, or
obligation, will not affect the right to indemnification, payment of damages, or
other remedy based on such representation, warranty, covenant, agreement or
obligation.
11.2 Expenses. Except as otherwise provided herein, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expense, whether or not
the Merger is consummated. Ark's expenses (including any legal fees or expenses)
in connection with this Agreement or any of the transactions contemplated by
this Agreement shall be included in the calculation of the Aggregate Negative
Working Capital pursuant to Section 1.8 hereof.
11.3 Publicity. Each of Ark and Blue Rhino agrees it will not make any
press releases or other announcements prior to the Closing with respect to the
transactions contemplated by this Agreement, except as required by applicable
law or regulation, without the prior approval of the other party.
11.4 Best Efforts. Each party to this Agreement agrees to use its best
efforts to satisfy the conditions to the Closing set forth in this Agreement and
otherwise to consummate the transactions contemplated by this Agreement.
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11.5 Notices. All notices, demands and other communications made hereunder
shall be in writing and shall be given either by personal delivery, by
nationally recognized overnight courier (with charges prepaid) or by facsimile
(with telephone confirmation), and shall be deemed to have been given or made
when personally delivered, the day following the date deposited with such
overnight courier service or when transmitted to facsimile machine and confirmed
by telephone, addressed to the respective parties at the following addresses (or
such other address for a party as shall be specified by like notice):
If to Ark:
Ark Propane, L.L.C
108 Cambridge Plaza Drive
Winston-Salem, NC 27104
Attention: David Renegar
With a copy (which shall not constitute notice) to:
Donald House, Esq.
3325 Healy Drive
Winston-Salem, NC 27103
Fax: 336-768-3369
If to Blue Rhino or to Acquisition Sub:
Blue Rhino Corporation
100 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
Attention: Billy D. Prim, Chief Executive Officer
Fax: 336-331-6901
With a copy (which shall not constitute notice) to:
Womble Carlyle Sandridge & Rice, PLLC
One West Fourth Street
Winston-Salem, North Carolina 27101
Attention: Peter A. Zorn, Esq.
Fax: 336-726-6906
11.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which, taken
together shall constitute one and the same instrument.
11.7 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties to this Agreement and their respective successors and
permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of
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the parties to this Agreement without the prior written consent of all other
parties to this Agreement, and any purported assignment without such consent
shall be void.
11.8 Third Party Beneficiaries. Except as otherwise specifically provided
in this Agreement, none of the provisions of this Agreement or any document
contemplated by this Agreement is intended to grant any right or benefit to any
person or entity that is not a party to this Agreement.
11.9 Headings. The article and section headings contained in this Agreement
are solely for the purpose of reference, are not part of this Agreement and
shall not in any way affect the meaning or interpretation of this Agreement.
11.10 Recitals. The recitals set forth at the beginning of this Agreement
are incorporated by reference in, and made a part of, this Agreement.
11.11 Amendments. Any waiver, amendment, modification or supplement of or
to any term or condition of this Agreement shall be effective only if in writing
and signed by all parties hereto, and the parties to this Agreement waive the
right to amend the provisions of this Section orally.
11.12 Specific Performance. Ark acknowledges that, if it fails to
consummate the transactions contemplated by this Agreement, such failure will
cause irreparable harm to Blue Rhino for which there will be no adequate remedy
at law. Blue Rhino shall be entitled, in addition to its other remedies at law,
to specific performance of this Agreement if Ark shall, unless as specifically
permitted hereunder, refuse to consummate the transactions contemplated by this
Agreement.
11.13 Governing Law. This Agreement shall be governed by the laws of the
State of North Carolina, without regard to conflicts of laws principles.
11.14 Jurisdiction. Each of the parties to this Agreement submits to the
jurisdiction of any state or federal court sitting in North Carolina, in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of such action or proceeding may be heard and
determined in any such court.
11.15 Remedies. In the event litigation shall be necessary to enforce,
interpret or rescind the provisions of this Agreement or any related matter, the
prevailing party shall be entitled to recover from the adverse party, in
addition to any other relief, the prevailing party's reasonable attorneys' fees
for services before trial, at trial, and on any subsequent appeal by the adverse
party.
11.16 Severability. In the event that any provision in this Agreement shall
be determined to be invalid, illegal or unenforceable in any respect, the
remaining provisions of this Agreement shall not be in any way impaired, and the
illegal, invalid or unenforceable provision shall be fully severed from this
Agreement and there shall be automatically added a replacement provision as
similar in terms and intent to such severed provision as may be legal, valid and
enforceable.
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11.17 Entire Agreement. This Agreement, together with the Schedules and
Exhibits hereto and the documents and instruments delivered pursuant hereto,
constitute the entire contract between the parties to this Agreement pertaining
to the subject matter of this Agreement, and supersede all prior and
contemporaneous agreements and understandings between the parties with respect
to such subject matter.
11.18 Construction. Each party to this Agreement and its counsel have
reviewed and revised this Agreement. The normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or of any amendments,
schedules or exhibits to this Agreement. The parties to this Agreement intend
that each representation, warranty and covenant in this Agreement shall have
independent significance. If any party has breached any representation, warranty
or covenant in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the party has not breached shall not
detract from or mitigate the fact that the party is in breach of the first
representation, warranty or covenant.
11.19 Time of Essence. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
11.20 Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in counterparts by their duly
authorized officers, all as of the day and year first above written.
ARK HOLDING COMPANY, LLC
By: /s/ David Renegar
-------------------------------------------
David Renegar
Manager
ARK ACQUISITION, LLC
By: Blue Rhino Corporation
Sole Member/Manager
By: /s/ Mark Castaneda
----------------------------------
Mark Castaneda
Chief Financial Officer
BLUE RHINO CORPORATION
By: /s/ Mark Castaneda
-------------------------------------------
Mark Castaneda
Chief Financial Officer
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