The opinion of the court was delivered by: WALKER
Plaintiff United Acquisition Corp. ("UAC") seeks the aid of this court to enforce what it claims to be a binding contract to purchase all of the stock of United Refining, Inc. ("URI") from the defendants, Banque Paribas ("Paribas"), Banque Paribas Suisse, S.A. ("Paribas Swiss") and the Royal Bank of Canada ("Royal Bank"). Specifically, plaintiff seeks an order enjoining defendant from selling any stock of URI or its URI's subsidiaries to any third parties. The plaintiff's request for a temporary restraining order was denied on December 9, 1985, and the trial on the permanent injunction and the preliminary injunction was ordered consolidated pursuant to Rule 65(a)(2) and scheduled for December 13, 1985. On that date, the court received evidence in the form of depositions and exhibits and heard argument. The deponents were offered for cross-examination which was waived. The court has carefully reviewed the evidence including a word by word reading of the depositions.
URI is a holding company which owns all of the issued stock of its operating company, United Refining Company ("URC") with headquarters in Warren, Pennsylvania. URC in turn has two wholly-owned subsidiaries: United Refining Company of Pennsylvania and Kiantone Pipeline Corporation. (Jacquet Aff.)
Prior to any of the events relevant to this action, Coral Petroleum Corporation ("Coral") owned all of the shares of URI and pledged the shares as collateral on a $35 million loan from defendants to Coral. (Jacquet 17) The participations were as follows: Paribas, $14 1/2 million; Royal Bank, $10 1/2 million and Paribas Suisse $10 million.
When Coral defaulted on the loan, the defendants foreclosed on the URI shares. In August 1985, the defendants purchased the shares at a public foreclosure sale using a subsidiary TPL Corporation ("TPL") to purchase the stock (Aiello 21, Jacquet Aff. 2) The stock of TPL is owned by the defendant banks in proportion to their participations in the original loan to Coral. (Aiello 10-12) The TPL board of directors consists of Ralph J. Aiello, Vice President and General Counsel of Paribas, and Timothy L. Porter, a member of the legal department of Paribas (Aiello 10). URC and its subsidiaries are now in bankruptcy. (Jacquet Aff. 2)
Upon acquiring URI, the defendants placed their representatives on the Board. At about the same time, Michel Jacquet, Executive Vice President and General Manager of the New York branch of Paribas, concluded that it was necessary to appoint new management, on a temporary basis, for URI. (Jacquet 43) Jacquet had been engaged in general discussions with Joe A. Ris, a manager experienced with companies in bankruptcy and reorganization. (Ris 22) Ris and Jacquet, had served together for six months in the French Foreign Legion in 1961. (Jacquet 7) The two former officers had been out of contact for twenty-four years, until they met in a restaurant in May, 1985, decided to renew their relationship and began to discuss whether there was any possibility of Ris assisting the bank in some capacity. (Jacquet 23, 29).
The two men discussed possible assistance by Ris with two problem companies that Paribas controlled: Land-Sea, a west coast oil terminal owner, and MRW, a restaurant management concern. (Jacquet 29) While nothing came of the discussions regarding Land-Sea, Ris was authorized to find a buyer for some of the MRW restaurants. (Jacquet 40, 81, 82)
Sometime during the month before October 10, 1985, Jacquet interested Ris in managing URI on a temporary basis. (Jacquet 43, 44) They agreed that Ris would have no contract and that his employment would be terminable at will. The two men settled on a compensation figure of $60,000 per month for a minimum of six weeks. Although the figure seemed high, it made "allowance for the fact that we required from Mr. Ris to spend an important part of his time in Warren, that he had to release most if not all of his present duties, and that . . . his employment could be terminated immediately." (Jacquet 47; PSM Ex. 1)
Aside from the responsibility of Ris for managing the insolvent company, Ris and Jacquet differ in their depositions as to the role Ris was to play in securing a buyer for the URI stock. Jacquet maintains that while it was clear that URI was for sale, no specific role for Ris as a finder arose until one month after Ris began work when Ris on November 10, 1985 told Jacquet he had a buyer. (Jacquet 49) Ris testified that as of early October it was his understanding that he was to find a buyer. (Ris 14) In any event, at a board meeting on October 10, 1985 Ris was appointed President and CEO of the operating companies. (Ris 7)
At about the same time that Ris was being brought in to manage the companies, but before he began work, Ed Guinan of the Guinan Company sent a written offer to Paribas for the purchase of the shares of URI according to Jacquet. (Jacquet 58) Ris was told that his appointment was on hold pending this offer. (Jacquet 57, 58, 59) The Guinan offer was for $4 million with a warrant to purchase back 10 or 15 percent of the stock. (Jacquet 59) This offer, unlike other offers had "no strings attached", that is, no requests for representations or warranties. (Jacquet 58)Jacquet and Gough, the man who discussed this offer with the banks, agreed on the price. Next, according to Jacquet, the purchasers were to wire the funds the next working day to the bank in order to give evidence of the funds and then the two parties would sit down and write up the agreement. The funds were never wired and the deal collapsed. (Jacquet 59)
Jacquet telephoned Ris the day after Columbus Day (Columbus Day was observed on Monday, October 14, 1985) to inform him that the proposed sale to Guinan had come to naught and that he could begin work immediately. (Jacquet 64)
Prior to the Guinan offer, the banks had, according to Jacquet, received a written offer from a Thomas Shiah. (Jacquet 65) The banks rejected this offer because it (1) entailed a long due diligence period and (2) required the banks to make representations and warranties they were not prepared to accept. These terms were unacceptable because the banks had owned URI for a short period of time and were unwilling to accept responsibility and possibly incur liability for past management. (Jacquet 80)
When, on November 10, 1985, Ris told Jacquet that he had a "buyer" for URI, he was referring to John Catsimatidis. Catsimatidis and Ris had known each other for about one year after Ris had been appointed Chairman of the creditors committee and later trustee in bankruptcy of Capital Airlines in which Catsimatidis had a substantial ownership interest. (Catsimatidis 6) Discussions between Catsimatidis and Ris over a possible purchase of Capitol's stock and assets by Catsimatidis led to discussions of other similar investment opportunities. Catsimatidis specifically informed Ris and his associate, Michael Sherman, that he was available as an investor. (Catsimatidis 13)
High risk investments were a departure for Catsimatidis from his prior business activity. He is the President of Red Apple Supermarkets which runs supermarkets in the New York area, Red Apple Services which is part owner of another company that charters corporate jets and Red Apple Real Estate which owns real estate in the tri-state area. (Catsimatidis 3, 4) Catsimatidis stated that he "was getting bored with the real estate business [and] looking to do something else." (Catsimatidas 34)
On the morning of November 15, 1985, the requested meeting arranged by Ris, took place in the New York office of Paribas with Jacquet, Catsimatidis, Ris and Antonio Dionisi, the senior credit officer of Paribas, in attendance. (Jacquet 84, 85; Catsimatidis 29, 33) Catsimatidis offered $2.5 million for the stock of URI and promised a written confirmation of the offer. (Catsimatidis 34, 35)
Jacquet found the $2.5 million to be below his expectations and stated conditions other than price that would have to be met before there could be an agreement, "to have the agreement of the other two shareholders, in case of an agreement to have immediate evidence of the funds, and to agree on the terms of the agreement, of the written agreement, mentioning specifically that we didn't want representations and warranties inter alia." (Jacquet 86, 87)
Catsimatidis testified that he agreed to do whatever Jacquet wanted him to do. (Catsimatidis 35, 37) In fact, that afternoon Catsimatidis filled out the papers necessary to open a Paribas bank account and signed a letter drafted by his attorney, Mr. Dykhouse. (Catsimatidis 36); (Jacquet, Aff. Ex. A).
The November 15, 1985 letter expressed the intent of UAC to "enter into an agreement (the "Agreement") pursuant to which the Banks shall sell and UAC shall purchase", the common stock of URI for a price of $2.5 million. The letter stated further, in pertinent part:
UAC and the Banks shall immediately direct their respective attorneys to commence preparation of a mutually satisfactory form of Agreement, which shall, among other things, (i) provide for payment of the price in cash at closing against transfer to UAC of good title to the stock free of any liens, encumbrances, and security interests; (ii) require a closing not later than November 27, 1985 or a later date in the sole discretion of UAC; and (iii) [sic] warranties and conditions which are customary in transactions of this kind.
The November 15, 1985 letter, although signed by Catsimatidis, was not executed by Paribas, and Jacquet telephoned Ris on November 27, 1985 to state that the offer was not accepted by the owners. (Jacquet 103)
Catsimatidis telephoned Ris at his home on Thanksgiving Day, November 28, 1985 and spoke with Jacquet who was spending the holiday with Ris and his wife. Catsimatidis remembered very little of this conversation at his deposition (Catsimatidis 58, 59), but in referring to the Thanksgiving conversation in his affidavit stated that "Jacquet indicated that he would prefer the offer to be increased." (Catsimatidis Aff. para. 7)
Catsimatidis considered increasing the offer and communicated this to Sherman, on December 2 and 3. (Catsimatidis 62). Ris then called Jacquet to inform him that Catsimatidis may be willing to increase the offer and Jacquet agreed to a meeting. (Ris 60; Jacquet 113).
Catsimatidis accompanied by Sherman met with Jacquet in Jacquet's office for about 15 minutes on Wednesday, December 4, 1985. (Catsimatidis 65, 66). Ris, who spent the day at URI's headquarters in Warren, Pennsylvania, did not attend. (Ris 126) At some point during this period, Catsimatidis communicated to Jacquet an offer of $2.5 million in cash plus $1 million to be paid upon confirmation of the reorganization plan of the URC companies. Jacquet found this offer unacceptable. (Jacquet Aff. 5). At the December 4 meeting, Catsimatidis offered Jacquet $2.5 million cash plus $2 million upon the confirmation of the reorganization plan. Jacquet did not respond to the new offer at the meeting. (Jacquet 14; Catsimatidis 67)
Catsimatidis also stated that he was attempting to acquire another company and feared that his bank may impose certain restrictive covenants upon him that would impair his ability to continue his offer for the stock of URI. Nonetheless, Catsimatidis indicated to Jacquet that he was willing to go forward with the URI stock sale transaction, but would like to hear from him by noon Thursday December 5. (Catsimatidis 66, 67)
According to Catsimatidis, neither the timing of the agreement or the closing nor the necessity to wire funds were discussed. (Catsimatidis 67, 69, 70). When asked whether the discussion was strictly on price, Catsimatidis testified: "Cash deal, cash American money on the table, exchange of stock, usual representations and warranties." (Catsimatidis 67, 68). Catsimatidis was then asked whether there was any discussion about what the usual representations and warranties would include. He responded "I am sure it is whatever the SEC requires." (Catsimatidis 68) Catsimatidis also stated that he was willing to buy the shares of stock owned by Paribas if Jacquet had difficulty getting the other banks' approval. (Catsimatidis 72)
After the meeting Catsimatidis went with Sherman to his office and telephoned Dykhouse, but Dykhouse was not in. Because Catsimatidis felt he should send a written confirmation of the meeting, he borrowed Sherman's secretary and dictated a letter dated December 4, 1985. (Catsimatidis 70, 71) The letter referred to the letter of November 15 which was "amended" to reflect the discussions of December 4. There was no change in the requirement for the "preparation of a mutually satisfactory form of Agreement" referred to in the earlier letter. (Jacquet Aff. Ex. B).
Later in the day on December 4th, Ris called Jacquet. Jacquet told him that the new price proposed was not acceptable in light of an offer which had been hinted at by the creditors of URI and indicated that a $4 million offer would be more likely to get approval. (Jacquet 105) Following the meeting on December 4th, Catsimatidis also became aware that the URI creditors had made a substantial offer for the URI stock. (Catsimatidis 76) But he was told by Sherman or Ris that Jacquet had said "if Catsimatidis can come up with $4 million all cash, its his deal." (Catsimatidis 76, 82).
On December 5, 1981 Catsimatidis met Sherman and Ris for breakfast at the Plaza Hotel in New York. (Catsimatidis 87) According to Catsimatidis, Ris told him that Jacquet had said that if Catsimatidis arrives with $4 million it was his deal and Jacquet would not go back to the creditors. (Catsimatidis 91) Catsimatidis then told Ris and Sherman that he could come up with the money, but that he wanted to offer $3 million cash today and a million dollars over four months with interest. But he also informed them that "if push comes to shove, I had to come up with $4 million today [sic], I will come up with it." (Catsimatidis 93)
Following breakfast with Sherman and Ris, Catsimatidis accompanied them to Ris's office where Ris called Jacquet to arrange a meeting. At 10:00 a.m. the meeting was held with the four, plus Dionisi and Aiello. According to Catsimatidis, Jacquet said "Look John, the deal. You need $4 million all cash and you got a deal." (Catsimatidis 100) Catsimatidis thereupon offered $3 million in cash with $1 million payable in four monthly installments of $250,000. (Catsimatidis 101) Jacquet did not accept the offer but asked for bank references. According to Catsimatidis, as the ...