AGREEMENT AMONG INITIAL STOCKHOLDERS AND SYN INC.
THIS AGREEMENT, dated May 17, 1995, is made and entered
into among Empire Gas Corporation, a Missouri corporation
("Empire"), Northwestern Growth Corporation, a South Dakota
corporation ("NGC"), and SYN Inc., a Delaware corporation
("SYN"), with respect to the following facts:
A. Empire currently is engaged in the business of
distributing and selling at retail liquefied petroleum ("LP") gas
and appliances, and has a management experienced in the operation
of such business.
B. NGC is a wholly-owned subsidiary of Northwestern
Public Service Company ("NWPS") and has as one of its objectives
the making of investments that could benefit NWPS and its
stockholders.
C. Empire and NGC, acting together, have made a
successful bid to acquire the LP gas distribution and appliance
business of Synergy Group Incorporated ("Synergy"; such
acquisition being hereinafter called the "Synergy Acquisition"),
in what is planned to be the first step in the proposed
development by Empire and NGC, on a team basis, of a significant
position in the LP gas distribution industry. Empire and NGC
have contemplated, in their bidding for the Synergy Acquisition,
that they will rely principally on Empire for management
expertise and on NGC to provide or arrange the financing for the
Synergy Acquisition, and that the success of the Synergy
Acquisition will depend in large measure upon the cost savings
and operating improvements expected to be achieved by having
Empire do the planning and management of the business of Synergy
and its subsidiaries, under the direction of the Board of
Directors of SYN.
D. Empire and NGC have caused SYN to be incorporated
to serve as the vehicle (directly or through subsidiaries to be
created) for making the Synergy Acquisition.
E. Empire and NGC, on behalf of SYN, are concluding
the negotiation of the definitive agreement (the "Synergy
Acquisition Agreement") for the Synergy Acquisition, and need to
provide for (i) the initial capitalization of SYN, (ii) certain
loan financing for SYN, (iii) the management of SYN and (iv) for
certain matters pertaining to the ownership of shares of stock of
SYN.
NOW THEREFORE, in consideration of the premises and the
agreements exchanged herein, the parties hereto agree as follows:
ARTICLE I: INITIAL CAPITALIZATION OF SYN;
STOCK SUBSCRIPTIONS AND RESERVATIONS OF STOCK
SECTION 1.01 INITIAL AUTHORIZED STOCK OF SYN. SYN has
been incorporated by Empire and NGC with an initial authorized
capitalization (as set forth in Article FOURTH of SYN's
Certificate of Incorporation, a true and complete copy of which
is attached hereto as Exhibit A), consisting of 100,000 shares of
common stock, par value 1 CENT per share (the "Common Stock"); and
the 100,000 shares of Common Stock referred to herein shall only
be increased with the prior written agreement of Empire and NGC
unless such increased number of shares is to be issued in an
arm's length transaction to a party who is not affiliated with
any of the parties to this Agreement), and 100,000 shares of
preferred stock, par value 1 CENT per share, issuable in one or more
series (the "Preferred Stock"). Prior to the consummation of the
Synergy Acquisition, SYN shall, and Empire and NGC shall cause
SYN to, take all action necessary to create and authorize the
issuance of a series of the Preferred Stock, namely, the Series A
Cumulative Preferred Stock, consisting of 70,500 shares, the
terms of which shall be as set forth in Exhibit B attached
hereto, with such changes therein as the parties hereto may
approve before such series is created (the "Series A Preferred
Stock").
SECTION 1.02 SUBSCRIPTIONS AND OPTION FOR STOCK. NGC
has previously purchased, and hereby subscribes for, stock of
SYN, and NGC has granted Empire an option to purchase certain
shares of stock from NGC, as follows:
(a) SYN and NGC acknowledge that NGC has
purchased from SYN, and SYN has sold and issued to NGC,
1,000 shares of Common Stock for a cash purchase price of
$1,000.00 which has been paid by NGC to SYN, and that these
shares are the only shares of stock of SYN that are
currently outstanding.
(b) NGC hereby subscribes for, and agrees to
purchase from SYN, and SYN hereby agrees to sell and issue
to NGC, an additional 71,500 shares of Common Stock for a
cash purchase price of $71,500.00 to be paid at the time of
such issuance, with this transaction to be consummated (the
"Subscription Closing") at the First Closing, as defined in
the Synergy Acquisition Agreement, unless an earlier time
for the Subscription Closing is agreed to by the parties
hereto. The obligation of NGC under its subscription in
this paragraph (b) is subject to the condition (unless
waived by NGC) that NGC shall have been able to obtain the
funds from the Permanent Financing or the Temporary
Financing, as those terms are defined in the Synergy
Acquisition Agreement, at or prior to the time of the
Subscription Closing.
(c) NGC hereby subscribes for, and agrees to
purchase from SYN, and SYN hereby agrees to sell and issue
to NGC, 68,000 shares of Series A Preferred Stock for a cash
purchase price of $1,000 per share ($68,000,000.00 total),
with this transaction to be consummated at the Subscription
Closing. The obligation of NGC under its subscription in
this paragraph (c) is subject to the condition (unless
waived by NGC) that NGC shall have been able to obtain the
funds from the Permanent Financing or the Temporary
Financing, as those terms are defined in the Synergy
Acquisition Agreement, at or prior to the time of the
Subscription Closing and that, at the time of the
Subscription Closing, the First Closing (as defined in the
Synergy Acquisition Agreement) is currently occurring or is
reasonably assured of being consummated immediately
thereafter.
(d) Empire hereby subscribes for, and agrees to
purchase from SYN, and SYN hereby agrees to issue and sell
to Empire, 10,000 shares of Common Stock (which shall
represent 10% of the issued and outstanding Common Stock)
for a cash purchase price of $10,000 to be paid at the time
of such issuance, with this transaction to be consummated at
the Subscription Closing. The obligation of Empire under
its subscription in this paragraph (d) is subject to the
condition (unless waived by Empire) that NGC consummates its
purchase of shares of Common Stock under paragraph (b) above
in this Section 1.02 at the Subscription Closing.
(e) NGC hereby grants to Empire an option to
purchase from NGC, at a price of $1.00 per share, up to
20,000 of the shares of Common Stock which shall represent
20% of the issued and outstanding Common Stock, subject to
NGC acquiring such shares pursuant to paragraph (b) above in
this Section 1.02. Such option may be exercised at any time
after September 30, 1995 and prior to September 30, 1997, or
the Determination Date (as defined in Section 1.04 herein),
whichever is earlier, by Empire's giving written notice of
such exercise to NGC. After the giving of such notice, NGC
shall assign and deliver to Empire the shares of Common
Stock for which the stock option was exercised, as promptly
as possible, but in any event within seven days, in exchange
for Empire's payment to NGC of the purchase price for such
shares; and the shares so assigned and delivered shall then
be shares owned by Empire and shall be held by Empire
subject to the terms of this Agreement.
SECTION 1.03 RESERVATIONS OF STOCK FOR ISSUANCE. SYN
shall, and Empire and NGC shall cause SYN to, take all action
necessary to reserve for initial issuance, 17,500 shares of
Common Stock and 2,500 shares of Series A Preferred Stock to be
issued to the Stockholders (as defined in the Synergy Acquisition
Agreement) at the Second Closing (also as defined in the Synergy
Acquisition Agreement), pursuant to the Synergy Acquisition
Agreement.
SECTION 1.04 COMMON STOCK RETURN. The following
provisions of this Section 1.04 apply in the event Empire
exercises the stock option granted to it in Section 1.02(d)
herein:
(f) The "Common Stock Return," as the term is
used herein, shall be the number of shares of Common Stock
of SYN which Empire hereby agrees to assign and deliver to
NGC, without cost to NGC, in the event that the common
equity value at a Determination Date (as defined below) is
below levels specified for such date in subparagraph (iii)
in this paragraph (a). The Common Stock Return shall be set
in accordance with the following formula:
(i) The Determination Date shall be the date
on which SYN is sold (meaning a sale of substantially
all of the assets of SYN and its subsidiaries, the
acquisition of SYN by another, non-affiliated entity by
merger or consolidation, or the sale of partnership
units or shares of stock or SYN which entitle the
holder thereof to cast at least a majority of the votes
entitled to be cast in the general election of
directors of SYN or the date on which the sale of
partnership units or shares of SYN's Common Stock is
closed in an underwritten public offering, for which
the partnership units or shares are registered under
the Securities Act of 1933, or the date on which this
Agreement expires or is terminated in accordance with
Section 7.02 herein, whichever of the foregoing first
occurs).
(ii) The value of the total outstanding
Common Stock of SYN on the Determination Date (the
"Value"), shall be determined by the parties hereto on
the basis of the sale price for SYN if the sale of SYN
is involved, or based upon the price to SYN (or the
selling stockholders if SYN is not the seller) in the
event an underwritten public offering of partnership
units or Common Stock of SYN is involved, or on the
basis of the fair market value of the outstanding
Common Stock of SYN in every other event, as determined
by an appraisal firm or an investment banking firm
selected by the parties hereto, with such fair market
value to be determined on the basis of the value of SYN
and its subsidiaries as a whole, if sold as a going
concern. In the event there is a combination of one or
more entities with SYN, the value of SYN will be
determined by either (x) a fair market value appraisal
or (y) in the event there is a public offering within
nine months after such combination, the value shall be
the initial price to the public of the SYN shares of
Common Stock or partnership units in such public
offering.
(iii) For these purposes, "deemed
outstanding shares of Common Stock" shall be the total
of the number of shares of Common Stock issued and
outstanding, plus the number that would be issued and
outstanding if all outstanding stock options, warrants,
conversion rights and other rights to acquire shares of
Common Stock were exercised, whether or not exercisable
at the time. The number of shares of Common Stock of
SYN constituting the Common Stock Return shall be the
percentage of the deemed outstanding shares of Common
Stock of SYN as of the Determination Date, determined
on the basis of the following table and paragraph (b)
below, if applicable:
Column A Column B Column C
Percentage of deemed Percentage of deemed
outstanding outstanding
shares of Common Stock shares of Common Stock
of SYN of SYN
shall be 0% if the shall be 7.5% if the
Fiscal Year of Value as of Value as of
SYN in which the Determination Date the Determination Date
Determination is at least the is less than the
Date occurs: following amount: following amount:
1996 $24,500,000 $22,250,000
1997 $30,000,000 $24,750,000
1998 $36,750,000 $27,500,000
1999 $45,000,000 $30,600,000
2000 $55,200,000 $34,000,000
After 2000 1.225 times the 1.1125 times the
previous year's amount previous year's amount
(g) If the Value as of the Determination Date is
more than the amount in Column C in Section 1.04(a)(iii)
above, but less than the amount in Column B therein, the
percentage used to determine the Common Stock Return shall
be a figure between 7.5% and 0% which is in proportion to
what the Value is to the amounts in the two columns for the
particular Determination Date.
SECTION 1.06 ACQUISITION FOR INVESTMENT. Empire and
NGC each represent and warrant to the other, and to SYN, as
follows: It has (through its management personnel) such
knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of purchase of
securities of SYN as provided for in this Agreement; it is
acquiring such securities, and will acquire them, for investment
and not with a view toward, or with any intention of,
distributing or selling any of the securities and it will not
sell or offer to sell or otherwise transfer any of the securities
in violation of the Securities Act of 1933, as amended.
ARTICLE II: LOAN FINANCING FOR SYN
NGC shall make a commercially reasonable effort to
arrange for SYN, or provide SYN with, loan financing for SYN, on
a fully secured basis, of up to $70,000,000 principal amount
needed by SYN for the Synergy Acquisition.
ARTICLE III: LIMIT TO FINANCING OBLIGATIONS
Neither Empire nor NGC, nor any of their affiliates,
shall have any obligation to provide, or arrange, financing for
SYN other than as expressly provided for in Articles I and II
herein.
ARTICLE IV: SYNERGY ACQUISITION
Each of the parties hereto will make a commercially
reasonable effort in cooperation with the other parties hereto,
to do those things within its control to consummate the Synergy
Acquisition in accordance with the terms of, and subject to the
conditions in, the Synergy Acquisition Agreement. Nothing in
this Agreement or otherwise shall be construed to give anyone who
is not a party to this Agreement, whether under a third party
beneficiary legal doctrine or otherwise, a right to enforce the
provisions of this Article or to obtain relief for any failure to
perform in accordance with the requirements of this Article.
ARTICLE V: MANAGEMENT OF SYN
SECTION 5.01 At or before the first Closing (as
defined in the Synergy Acquisition Agreement), the parties hereto
will enter into a management agreement in substantially the form
attached hereto as Exhibit C, or with such changes therein as the
parties hereto hereafter agree upon (the "Management Agreement"),
pursuant to which the planning and management of the business of
SYN subsequent to the Second Closing (as defined in the Synergy
Acquisition Agreement) will be conducted by Empire under the
direction of the Board of Directors of SYN, as provided therein.
SECTION 5.02 DIRECTORS AND OFFICERS OF SYN
(a) For purposes of this Agreement, "Control
Period" means the period of time commencing on the date of
this Agreement and continuing either (i) until this
Agreement is terminated pursuant to Section 7.02 herein
because of the termination of the Synergy Acquisition
Agreement without the Synergy Acquisition having been
completed or (ii) until a time after the First Closing, as
defined in the Synergy Acquisition Agreement, when (A) the
Control Period is terminated by agreement of the parties
hereto, (B) NGC no longer owns a majority of the shares of
Common Stock of SYN deemed to be outstanding (determined as
provided in Section 1.04 herein), (C) Empire no longer owns
at least 20% of the shares of Common Stock of SYN deemed to
be outstanding or has an option to acquire at least that
amount of shares, or (D) when SYN consummates an
underwritten public offering of partnership units or shares
of its Common Stock, registered under the Securities Act of
1933, whichever of (A), (B), (C) or (D) first occurs.
(b) Throughout the Control Period, NGC and Empire
shall vote their voting shares of stock of SYN that are
capable of being voted, and will otherwise use their
respective commercially reasonable efforts, to carry out the
following:
(i) the Board of Directors of SYN shall
consist of five members, three of whom shall be
nominees of NGC (the "NGC Positions") and two of whom
shall be nominees of Empire (the "Empire Positions");
and any vacancies occurring in the NGC Positions will
be promptly filled with nominees of NGC and any
vacancies occurring in the Empire Positions will be
promptly filled with nominees of Empire.
(ii) The officers of SYN shall include at all
times a Chairman of the Board and a Vice Chairman of
the Board, who will be persons nominated by NGC, and a
President and Chief Executive Officer, who will be Paul
S. Lindsey, Jr., and a Secretary, who will be a person
nominated by Empire. The authority and duties of such
officers shall be set forth in the by-laws of SYN, a
true and complete copy of which as in effect on the
date hereof is attached hereto as Exhibit D.
(c) To initiate compliance with preceding
paragraph (b), Empire and NGC have caused the following
person to be elected to the positions with SYN indicated by
their names, to serve for the period provided in the by-laws
of SYN:
* Chairman of the Board and director -- Merle
D. Lewis (an NGC nominee for such positions);
* Vice Chairman of the Board and director --
Richard R. Hylland (an NGC nominee for such
positions);
* President and Chief Executive officer and
director -- Paul S. Lindsey, Jr. (an Empire
nominee as to the position of director);
* Secretary and director -- Douglas A. Brown
(an Empire nominee for such positions);
with the fifth member of the Board of Directors of SYN (one
of the NGC Positions) to be nominated by NGC, and elected,
at a future time when NGC has selected the nominee for such
position.
ARTICLE VI: DISPOSITION OF SYN STOCK BY EMPIRE OR NGC
SECTION 6.01 PERMITTED DISPOSITIONS.
(a) NGC may at any time or from time to time
transfer any of the securities issued by SYN which NGC may
own at any time to NWPS or any wholly-owned subsidiary of
NWPS, provided that notice of such transfer is given to the
other parties to this Agreement and that the Transferee
becomes a party to this Agreement with respect to the
securities so transferred, by all of such transferees and
NGC shall collectively act, and be treated, as a single
entity with NGC acting as their representative for purposes
of this Agreement.
(b) Empire may at any time and from time to time
transfer any of the securities issued by SYN which Empire
may own at any time to any affiliated party, provided that
notice of such transfer is given to the other parties to
this Agreement and the transferee becomes a party to this
Agreement with respect to the securities so transferred, but
all such transferees and Empire shall collectively act, and
be treated, as a single entity with Empire acting as their
representative for purposes of this Agreement.
SECTION 6.02 RIGHTS OF FIRST REFUSAL.
(c) Except as permitted by Section 1.04 and
Section 6.01(b) herein, so long as the Management Agreement
is in effect, Empire will not sell or otherwise dispose of
any shares of Common Stock of SYN, or any other securities
convertible into such shares, to any party without first
offering the same for sale to NGC in writing on the same
terms as are offered to or by the other party (with full
disclosure of such terms to NGC) and allowing not less than
30 days after its receipt of the offer for NGC to accept the
offer, and if such offer is accepted by NGC, NGC shall have
90 days in which to complete the purchase on such terms.
(d) Except as permitted by Section 1.02(e) and
Section 6.01(a) herein, so long as the Management Agreement
is in effect, NGC will not sell or otherwise dispose of any
shares of Common Stock of SYN, or any other securities
convertible into such shares, to any party without first
offering the same for sale to Empire in writing on the same
terms as are offered to or by the other party (with full
disclosure of such terms to Empire) and allowing Empire not
less than 30 days after its receipt of the offer for Empire
to accept the offer, and if such offer is accepted by
Empire, Empire shall have 90 days in which to complete the
purchase on such terms, but if Empire declines such offer,
then Empire shall have the right to participate on a pro
rata basis in the sale of such shares by NGC.
ARTICLE VII: MISCELLANEOUS
SECTION 7.01 RESTRICTIVE LEGEND. Each certificate
issued by SYN to evidence shares of Common Stock, or securities
convertible into such shares, owned by either Empire or NGC shall
be endorsed with the following legend:
"The shares represented by this certificate
are subject to the Agreement among the
Corporation and its Initial Stockholders,
dated as of May 17, 1995, as the same may be
amended, on file with the issuing Corporation
at its principal business office and may be
transferred or otherwise disposed of only in
accordance therewith."
SECTION 7.02 TERM OF THIS AGREEMENT. This Agreement,
if not sooner terminated by agreement of the parties hereto or
pursuant to the next sentence, shall terminate when the Control
Period terminates. In the event the Synergy Acquisition
Agreement is terminated without the Synergy Acquisition having
been completed, the parties hereto will liquidate and dissolve
SYN as promptly as possible when all obligations of SYN under, or
with respect to, the Synergy Acquisition Agreement have been
discharged or provided for, and this Agreement shall then
automatically terminate.
SECTION 7.03 NOTICES. All notices and other
communications hereunder shall be in writing and shall be deemed
to have been given (a) when delivered in person, (b) one business
day after deposit with a nationally recognized overnight courier
service (c) two business days after being deposited in the United
States mail, postage prepaid, first class, registered or
certified mail, or (d) the business day on which it is sent and
received by facsimile, as follows:
(i) If to SYN, to:
SYN Inc.
c/o Northwestern Growth Corporation
33 Third Street, S.E.
Huron, South Dakota 57350
Fax No. (605) 353-8286
Attention: Richard R. Hylland, President
with a copy to Empire, addressed and
sent to it at the place required under
this Agreement for giving notice to
Empire
(ii) If to Empire, to:
Empire Gas Corporation
P.O. Box 303
1700 South Jefferson
Lebanon, Missouri 65536
Fax No. (417) 532-8529
Attention: Paul S. Lindsey, Jr., President
(iii) If to NGC, to:
Northwestern Growth Corporation
33 Third Street, S.E.
Huron, South Dakota 57350
Fax No. (605) 353-8286
Attention: Richard R. Hylland, President
SECTION 7.04 SECTION 351 OF THE CODE. Each of the
parties hereto agrees to comply with the requirements of Section
6.28 of the Synergy Acquisition Agreement, both with respect to
the transaction referred to therein and with respect to any
transaction under this Agreement to the extent necessary to
assure the result under Section 351 of the Internal Revenue Code
of 1986, as amended, for the transaction referred to in such
Section 6.28.
SECTION 7.05 CAPTIONS. The captions in this Agreement
are included for convenience of reference only and shall be
ignored in the construction and interpretation of this Agreement.
SECTION 7.06 GOVERNING LAW. This Agreement shall be
construed in accordance with and governed by the internal laws of
the State of Delaware without regard to the choice of law
principles thereof.
SECTION 7.07 COUNTERPARTS. Execution of separate
copies of this Agreement by each or some of the several parties
hereto shall have the same force and effect as though all such
parties had executed the original of this Agreement. Further,
the parties hereto may execute several counterparts of this
Agreement, all of which shall constitute but one and the same
agreement.
IN WITNESS WHEREOF, each of the parties hereto have
caused this Agreement to be executed in its name as of the date
first above written.
EMPIRE GAS CORPORATION
By /s/ Paul S. Lindsey, Jr.
__________________________
President
NORTHWESTERN GROWTH CORPORATION
By /s/ Richard R. Hylland
_____________________________
President
SYN INC.
By /s/ Paul S. Lindsey, Jr.
______________________________
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