<PAGE>
<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 'SS'240.14a-11(c) or 'SS'240.14a-12
SUBURBAN PROPANE PARTNERS, L.P.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
________________________________________________________________________________
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
______________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
______________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
______________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________________
(5) Total fee paid:
______________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
___________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
(3) Filing Party:
___________________________________________________________________________
(4) Date Filed:
___________________________________________________________________________
<PAGE>
<PAGE>
Preliminary Copy -- As filed with the Securities and Exchange Commission on
April 15, 1999
SUBURBAN
One Subrban Plaza 240 Route 10 West P.O. Box 206 Whippany, NJ 07981-0206
Office 973-503-9045 Fax 973-515-5994
http://www.suburbanpropane.com
Mark A. Alexander
President
& Chief Executive Officer
April , 1999
Dear Suburban Common Unitholder:
I strongly encourage you to review the information on the proposed
recapitalization of Suburban in the accompanying Proxy Statement. Your Board of
Supervisors unanimously recommends that you vote FOR each of the proposals
necessary to complete the recapitalization.
Since the summer of 1997, Millennium Chemicals Inc., the General Partner's
indirect parent, has been actively exploring opportunities to maximize the value
of its investment in Suburban, including a sale of the General Partner's
interests. Unlike most of our competitors, Suburban has always been managed
under the direction of its Board of Supervisors, rather than its General
Partner. The sale of the General Partner's interests would not, therefore,
directly change the day-to-day management of Suburban. However, your Board has
been concerned that a sale would give a disproportionate share of any future
increases in Suburban's value to a third party, rather than to the Common
Unitholders.
During this same period, management embarked on an extensive restructuring
program to improve Suburban's operating results. A key goal of the restructuring
has been to position Suburban for long-term, profitable growth. As you know from
our recent announcements, our continuing restructuring efforts have started to
bear fruit. During the 1997-1998 heating season, which was the warmest on record
partially due to the effects of El Nino, Suburban nonetheless significantly
increased its cash flow from operations, earnings and cash on hand. Certainly,
we cannot predict the weather, and there is still much work to be done. But it
is clear to your Board that Suburban is in a substantially stronger position as
a result of its restructuring efforts, regardless of weather.
Suburban's improvement in cash flow and liquidity prompted your Board to
consider how best to capture the benefits of these efforts for you, the Common
Unitholders. Ultimately, your Board was able to capitalize on Millennium's
recently announced plan to sell all its interests in Suburban. The
recapitalization proposals described in the Proxy Statement, which your Board
unanimously recommends that you vote FOR, will, in the Board's judgment, greatly
simplify and improve Suburban's capitalization, substantially increase the
Common Unitholders' ownership and better position us for growth. The
recapitalization will enhance Suburban's ability to increase cash distributions
to you. In fact, subject to your vote FOR the recapitalization proposals, the
annual distribution you receive will increase to $2.05 per Common Unit per year
from $2.00 per Common Unit per year, effective for the fiscal quarter in which
the recapitalization is completed.
Both your management and your Board are excited about the opportunities
that lie ahead after completion of the recapitalization. Please read this Proxy
Statement carefully and do not hesitate to call the numbers listed in the Proxy
Statement if you need any additional information or assistance.
Above all, please VOTE. Suburban is your company, and your voice should be
heard.
Very truly yours,
Mark A. Alexander
President and Chief Executive Officer
<PAGE>
<PAGE>
Preliminary Copy -- As filed with the Securities and Exchange Commission on
April 15, 1999
SUBURBAN PROPANE
One Subrban Plaza 240 Route 10 West P.O. Box 206 Whippany, NJ 07981-0206
Office 973-887-5300 Fax 973-515-5982
http://www.suburbanpropane.com
April , 1999
RECAPITALIZATION PROPOSED -- YOUR VOTE IS VERY IMPORTANT
Dear Suburban Common Unitholder:
This Proxy Statement provides you with detailed information about the
proposed recapitalization of your partnership, Suburban Propane Partners, L.P.
The recapitalization, announced on November 30, 1998, cannot be completed
without your vote. We have scheduled a special meeting of common unitholders to
be held on Wednesday, May 26, 1999 at 10:00 a.m., local time, at Suburban's
principal executive offices at One Suburban Plaza, 240 Route 10 West, Whippany,
New Jersey. This letter gives notice of the meeting.
Your Board of Supervisors has unanimously approved the proposed
recapitalization upon the unanimous recommendation of Suburban's Elected
Supervisors, acting as a Special Committee, and recommends that common
unitholders vote FOR the recapitalization proposals. The Special Committee's
recommendation was based, in part, upon the opinions of its financial advisors,
Rothschild Inc. and A.G. Edwards & Sons, Inc., that the recapitalization is
fair, from a financial point of view, to the public common unitholders (that is,
common unitholders other than Suburban's management).
The recapitalization includes:
Redemption. Suburban will redeem all subordinated units and
additional limited partner units owned by its general partner.
Substitution of a New General Partner. A new entity owned by
approximately 45 executives and key employees of Suburban will
purchase all general partner interests and become the new general
partner of Suburban.
Amendment of the Partnership Agreement. Suburban's partnership
agreement will be amended to permit and effect the recapitalization.
Termination and Replacement of the Distribution Support Agreement.
The distribution support provided by the departing general partner
will be terminated and replaced with a liquidity arrangement provided
by Suburban.
Your Board believes the recapitalization will enhance Suburban's ability to
provide increased cash distributions to common unitholders and simplify
Suburban's capital structure. If it is completed:
The common unitholders' ownership of Suburban will increase from
approximately 74% to 98%.
The quarterly distribution will be increased from $0.50 to $0.5125
per unit per quarter (from $2.00 to $2.05 per unit per year), subject
to the completion of the recapitalization and effective for the
fiscal quarter in which it is completed. The total amount will
consist of the existing minimum quarterly distribution of $0.50 per
unit per quarter plus an additional $0.0125 per unit per quarter
above the minimum quarterly distribution.
The common unitholders will participate in all distributions of
available cash and will no longer have to wait until the subordinated
units have received the minimum quarterly distribution of $0.50 per
unit and the additional limited partner units have been redeemed for
$22 million before receiving any additional distributions above the
minimum quarterly distribution (assuming sufficient available cash to
make excess distributions).
<PAGE>
<PAGE>
The new general partner's share of additional distributions above the
minimum quarterly distribution will be significantly reduced from
current levels.
The Elected Supervisors will constitute a majority of the Board of
Supervisors and management's interests will be further aligned with
the public common unitholders.
YOU ALSO SHOULD CAREFULLY READ 'RISK FACTORS' BEGINNING ON PAGE 17 OF THIS
PROXY STATEMENT, WHICH DISCUSSES CERTAIN IMPORTANT MATTERS THAT YOU SHOULD
CAREFULLY CONSIDER IN EVALUATING THE RECAPITALIZATION AND CASTING YOUR VOTE.
AMONG OTHER THINGS, SUBURBAN WILL BE USING A SIGNIFICANT PORTION OF ITS CASH ON
HAND TO FUND THE RECAPITALIZATION AND PAY TRANSACTION EXPENSES.
As we explain in this Proxy Statement, in addition to the affirmative vote
of the holders of a majority of the outstanding public common units, completion
of the recapitalization is subject to a number of other conditions, some of
which are beyond our control. We cannot predict with certainty when we will
complete the recapitalization, but we hope to complete it in the next two
months.
Whether or not you plan to attend the special meeting, please take the time
to vote by completing and mailing the enclosed proxy card according to the
instructions contained in this Proxy Statement. If you sign, date and mail your
proxy card without indicating how you want to vote, your proxy will be counted
as a vote in favor of each of the recapitalization proposals. If you fail to
return your card or return your card unsigned, the effect will be a vote against
each of the recapitalization proposals unless you vote in person.
WE ENCOURAGE YOU TO READ THIS PROXY STATEMENT CAREFULLY. IF YOU HAVE ANY
QUESTIONS OR NEED ANY HELP IN VOTING, YOU MAY CALL INNISFREE M&A INCORPORATED,
SUBURBAN'S PROXY SOLICITOR, AT 1-877-750-5837 (TOLL-FREE).
Very truly yours,
<TABLE>
<S> <C>
Mark A. Alexander John Hoyt Stookey
President and Chief Executive Officer Chairman of the Board of Supervisors
</TABLE>
Proxy Statement dated April , 1999 and first mailed to common unitholders on
April , 1999.
<PAGE>
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement contains forward-looking statements about the
financial condition and results of operations of Suburban assuming the
recapitalization is completed, including statements about Suburban's
post-recapitalization debt levels, cash flows and earnings per unit and the
restructuring charges expected to be incurred to complete the recapitalization.
The recapitalization and Suburban's business are subject to certain risks and
uncertainties that could cause actual results of Suburban's operations to differ
materially from those discussed in these and other forward-looking statements,
including, among other things:
the impact of the use of a significant portion of Suburban's cash on
hand to redeem the subordinated units and additional limited partner
units and to pay transaction expenses;
the impact of the replacement of the distribution support arrangement
provided by an affiliate of the current general partner with a
liquidity arrangement provided by Suburban;
the impact of weather conditions on the demand for propane;
the impact of fluctuations in the unit cost of propane;
Suburban's ability to compete with other suppliers of propane and
other energy sources;
Suburban's ability to retain customers;
the impact of energy efficiency and technology advances on the demand
for propane;
the ability of management to continue to control expenses;
the impact of regulatory developments; and
the impact of legal proceedings.
We undertake no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this Proxy Statement might not occur.
i
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS............................................................ i
QUESTIONS AND ANSWERS ABOUT THE RECAPITALIZATION........................................................... 1
PROXY STATEMENT SUMMARY.................................................................................... 4
The Recapitalization.................................................................................. 4
Current Ownership and Ownership Following the Recapitalization........................................ 5
Recommendations of the Special Committee and Board of Supervisors and Opinions of Financial
Advisors............................................................................................. 6
Risk Factors.......................................................................................... 6
Interests of Certain Persons in the Recapitalization.................................................. 7
Federal Income Tax Consequences....................................................................... 7
The Meeting; Required Vote............................................................................ 7
The Transaction Agreements............................................................................ 7
Conditions to Consummation of the Recapitalization.................................................... 8
Termination of the Recapitalization Agreement......................................................... 8
Amendment of the Partnership Agreements............................................................... 9
Funding of the Recapitalization....................................................................... 9
Amendment of the Existing Credit Agreement............................................................ 10
Financing Arrangements for the GP Interest Purchase................................................... 10
Effect on Restricted Unit Plan; Management Cash Reserve............................................... 10
Description of Common Units and Other Partnership Interests Following the Recapitalization............ 11
Capitalization........................................................................................ 14
Summary Historical and Pro Forma Financial and Operating Data......................................... 15
RISK FACTORS............................................................................................... 17
Risks Relating to the Recapitalization................................................................ 17
Suburban's Existing Cash Resources Will Decrease Significantly................................... 17
The General Partner's Distribution Support Agreement Will Be Terminated and Replaced with a
Liquidity Arrangement Provided by Suburban....................................................... 17
Neither the Minimum Quarterly Distribution nor Increased Distributions per Common Unit Are
Assured.......................................................................................... 18
Interests of Certain Persons in the Recapitalization............................................. 18
Risks Relating to Suburban's Business that Could Reduce Available Cash from Operating Surplus......... 19
Weather Conditions Affect the Demand for Propane................................................. 19
Price Volatility of Propane Supply Costs......................................................... 20
Competition; Ability to Retain Customers......................................................... 20
Energy Efficiency and Technology Advances May Affect Demand...................................... 20
Regulatory Changes............................................................................... 21
Legal Proceedings................................................................................ 21
THE MEETING................................................................................................ 22
Date, Time and Place.................................................................................. 22
Matters to be Considered.............................................................................. 22
Record Date........................................................................................... 22
Quorum; Vote Required................................................................................. 22
Recommendations of the Special Committee and the Board of Supervisors................................. 22
Proxies and Revocability of Proxies................................................................... 23
Cost of Solicitation of Proxies....................................................................... 23
THE RECAPITALIZATION....................................................................................... 24
Background............................................................................................ 24
Reasons for the Recapitalization; Recommendations of the Special Committee and Board of Supervisors... 31
Opinion of Rothschild Inc. ........................................................................... 34
Opinion of A.G. Edwards & Sons, Inc. ................................................................. 40
Interests of Certain Persons in the Recapitalization.................................................. 47
Acceleration of Restricted Units................................................................. 47
</TABLE>
ii
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Employment Agreement with Mark A. Alexander...................................................... 48
Supplemental Executive Retirement Plan........................................................... 48
Successor General Partner Ownership.............................................................. 49
Millennium and the General Partner............................................................... 49
Compensation of the Special Committee............................................................ 49
United States Federal Income Tax Consequences to Suburban and to Common Unitholders................... 49
THE SUCCESSOR GENERAL PARTNER.............................................................................. 52
Balance Sheet Information Concerning the Successor General Partner.................................... 53
PRICE RANGE OF COMMON UNITS AND DISTRIBUTIONS OF SUBURBAN.................................................. 54
THE TRANSACTION AGREEMENTS................................................................................. 55
The Recapitalization Agreement........................................................................ 55
The Recapitalization............................................................................. 55
Representations and Warranties................................................................... 56
Covenants........................................................................................ 56
Conditions to Consummation of the Recapitalization............................................... 57
Termination...................................................................................... 57
Termination Fees and Expense Reimbursements...................................................... 58
Extension Fee.................................................................................... 58
Amendment........................................................................................ 58
Termination of the Distribution Support Agreement................................................ 59
The GP Interest Purchase Agreement.................................................................... 59
The GP Interest Purchase......................................................................... 59
Representations and Warranties................................................................... 59
Additional Agreements............................................................................ 59
Conditions to Consummation of the GP Interest Purchase........................................... 60
Termination...................................................................................... 60
SUMMARY OF AMENDMENTS TO THE PARTNERSHIP AGREEMENTS........................................................ 61
Introduction; Required Vote by Unitholders............................................................ 61
Summary of Amendments to the Partnership Agreement.................................................... 61
Summary of Amendments to the Operating Partnership Agreement.......................................... 63
Conforming Changes.................................................................................... 64
FINANCING OF THE TRANSACTIONS.............................................................................. 64
Financing Arrangements of the Operating Partnership for the Recapitalization.......................... 64
Funding of the Recapitalization.................................................................. 64
Amendments to the Existing Credit Agreement...................................................... 64
Amendments to the Senior Note Agreement.......................................................... 65
Financing Arrangements of the Successor General Partner for the GP Interest
Purchase............................................................................................ 65
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS............................................ 66
Unaudited Pro Forma Condensed Consolidated Balance Sheet.............................................. 67
Unaudited Pro Forma Condensed Consolidated Statements of Operations................................... 68
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.............................. 70
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................... 71
General............................................................................................... 71
Selected Quarterly Financial Data..................................................................... 72
Results of Operations................................................................................. 72
Risk Management....................................................................................... 76
Liquidity and Capital Resources....................................................................... 76
Readiness for Year 2000............................................................................... 78
Quantitative and Qualitative Disclosures about Market Risk............................................ 79
MANAGEMENT OF SUBURBAN FOLLOWING THE RECAPITALIZATION...................................................... 81
Partnership Management................................................................................ 81
Changes to Board of Supervisors....................................................................... 81
Members of the Board of Supervisors and Executive Officers of Suburban................................ 81
</TABLE>
iii
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 83
CASH DISTRIBUTION POLICY................................................................................... 84
General............................................................................................... 84
Available Cash................................................................................... 84
Operating Surplus and Capital Surplus............................................................ 84
Distributions from Operating Surplus.................................................................. 85
Distributions from Capital Surplus.................................................................... 85
Adjustment of Minimum Quarterly Distribution and Target Distribution Level............................ 85
Distributions of Cash Upon Liquidation................................................................ 86
Cash Available for Distribution....................................................................... 86
Liquidity Arrangement................................................................................. 87
DESCRIPTION OF THE AMENDED PARTNERSHIP AGREEMENTS.......................................................... 88
Organization and Duration............................................................................. 88
Purpose............................................................................................... 88
Power of Attorney..................................................................................... 88
Management............................................................................................ 88
Board of Supervisors............................................................................. 88
Officers......................................................................................... 89
Meetings; Voting...................................................................................... 90
Limited Liability..................................................................................... 90
Status as Limited Partner or Assignee................................................................. 91
Non-citizen Assignees; Redemption..................................................................... 91
Merger, Sale or Other Disposition of Assets........................................................... 92
Issuance of Additional Securities..................................................................... 92
Transfer of General Partner Interests and Incentive Distribution Rights............................... 92
Conversion of Incentive Distribution Rights........................................................... 93
Withdrawal or Removal of the Successor General Partner................................................ 93
Amendment of Amended Partnership Agreement............................................................ 94
Limited Call Right.................................................................................... 96
Termination and Dissolution........................................................................... 97
Liquidation and Distribution of Proceeds.............................................................. 97
Indemnification....................................................................................... 97
Books and Reports..................................................................................... 98
Right to Inspect Partnership Books and Records........................................................ 98
Registration Rights................................................................................... 98
FUTURE UNITHOLDER PROPOSALS................................................................................ 99
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 99
INDEX OF DEFINED TERMS..................................................................................... 100
</TABLE>
ANNEXES
<TABLE>
<S> <C> <C>
ANNEX A -- Amended and Restated Recapitalization Agreement............................................ A-1
ANNEX B -- GP Interest Purchase Agreement, as amended................................................. B-1
ANNEX C -- Form of Second Amended and Restated Agreement of Limited Partnership marked to indicate the
changes from the partnership agreement currently in effect.................................. C-1
ANNEX D -- Opinion of Rothschild Inc.................................................................. D-1
ANNEX E -- Opinion of A.G. Edwards & Sons, Inc. ...................................................... E-1
ANNEX F -- Balance Sheet Information Concerning the Departing General Partner and its Parent.......... F-1
</TABLE>
iv
<PAGE>
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE RECAPITALIZATION
<TABLE>
<S> <C> <C>
Q: WHAT IS THE PROPOSED RECAPITALIZATION?
A: Suburban Propane Partners, L.P. ('Suburban') is proposing a recapitalization (the 'Recapitalization') that
includes:
Redeeming all outstanding subordinated units and additional limited partner units from Suburban Propane
GP, Inc. (the 'General Partner') for $69 million.
Replacing the General Partner with a new management-owned general partner of Suburban and of Suburban
Propane, L.P. (the 'Operating Partnership' and, together with Suburban, the 'Partnerships').
Amending the partnership agreements of the Partnerships to permit and effect the Recapitalization and to
reduce the new general partner's percentage of additional distributions above the minimum quarterly
distribution.
Terminating the distribution support provided by the General Partner and its parent and replacing it
with a liquidity arrangement provided by Suburban.
Increasing the quarterly distribution from $0.50 to $0.5125 per unit per quarter (from $2.00 to $2.05
per unit per year), subject to the completion of the Recapitalization and effective for the fiscal
quarter in which it is completed.
Q: WHAT ARE THE REASONS FOR THE RECAPITALIZATION?
A: The Recapitalization is being proposed primarily to enhance Suburban's ability to provide increased cash
distributions to common unitholders and to simplify Suburban's capital structure. The Special Committee
believes that the Recapitalization will not only end any uncertainty arising from Millennium Chemicals Inc.'s
announced plan to sell its interests in Suburban but also create greater value for the public common
unitholders than a transaction involving the sale of these interests to an unrelated party. See pages 31
through 34 of this Proxy Statement.
Q: WHAT ARE POTENTIAL BENEFITS TO COMMON UNITHOLDERS?
A: The Recapitalization is designed to offer the following potential benefits to common unitholders:
The common unitholders' ownership of Suburban will increase from approximately 74% to 98%.
The quarterly distribution will be increased from $0.50 to $0.5125 per unit per quarter (from $2.00 to
$2.05 per unit per year), subject to the completion of the Recapitalization and effective for the fiscal
quarter in which it is completed. The total amount will consist of the existing minimum quarterly
distribution of $0.50 per unit per quarter plus an additional $0.0125 per unit per quarter above the
minimum quarterly distribution.
The common unitholders will participate in all distributions of available cash and will no longer have
to wait until the subordinated unitholders have received their minimum quarterly distribution of $0.50
per unit and the additional limited partner units have been redeemed for $22 million before receiving
any distributions above the common unitholders' minimum quarterly distribution (assuming sufficient
available cash to make excess distributions).
The new general partner's share of additional distributions above the minimum quarterly distribution
(its incentive distribution rights) will be significantly reduced from current levels.
Suburban's capital structure will be simplified.
The Elected Supervisors will be elected solely by the common unitholders and will constitute a majority
of the Board of Supervisors.
Management's interests will be further aligned with the public common unitholders.
Q: WHAT ARE POTENTIAL DISADVANTAGES AND RISKS TO COMMON UNITHOLDERS?
A: The following are certain potential disadvantages and risks of the Recapitalization (see page 17 of this Proxy
Statement):
</TABLE>
1
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
The use of $78.5 million in cash to fund the Recapitalization and transaction fees and expenses will
significantly reduce Suburban's cash resources and lower interest income on those cash resources,
thereby increasing the likelihood that Suburban will need to borrow additional funds in the future,
which would increase Suburban's leverage and interest expense. This will increase the risk that there
will be insufficient cash to pay any distributions on the Common Units, and could make Suburban more
vulnerable to changes in general economic conditions and industry changes, adversely affect its ability
to finance future operations and capital needs and limit its ability to pursue acquisitions and other
business opportunities.
The distribution support agreement currently provided by the General Partner and its indirect parent,
Millennium America Inc., will be replaced with a commitment of Suburban to maintain borrowing capacity
under its working capital facility, or any replacement facility, to pay the minimum quarterly
distribution through March 31, 2001. Therefore, instead of having a third party with greater financial
resources than Suburban contribute cash that does not need to be repaid within a fixed period of time,
Suburban is in effect setting aside some of its own resources that could otherwise have been used for
distributions, working capital needs or other purposes, which may adversely affect Suburban's
operations. Consequently, the cost of the liquidity arrangement, if used, would be indirectly borne by
the common unitholders.
Q: WHAT OTHER EFFECTS WILL THE RECAPITALIZATION HAVE ON MY COMMON UNITS?
A: Except for the amendments to the partnership agreements to permit and effect the Recapitalization, the legal
rights of common unitholders will not change. Following the Recapitalization, the common units will continue
to trade on the New York Stock Exchange.
Q: WHAT IS THE SPECIAL COMMITTEE?
A: The special committee ('Special Committee') consists of the three members of Suburban's Board of Supervisors
who were elected to the Board of Supervisors by the common unitholders and subordinated unitholders. These
elected supervisors were appointed by the Board of Supervisors as a special committee to evaluate and make a
recommendation on the Recapitalization on behalf of the public common unitholders (common unitholders other
than Suburban's management). The Special Committee based its recommendation to the Board of Supervisors to
approve the Recapitalization on the fairness opinions of Rothschild Inc. and A.G. Edwards & Sons, Inc. and
certain other factors. See page 31 of this Proxy Statement.
Q: WHAT IS THE RECOMMENDATION OF THE BOARD OF SUPERVISORS?
A: Based on the unanimous recommendation of the Special Committee, the Board of Supervisors unanimously
recommends that common unitholders vote FOR each of the Recapitalization proposals.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE RECAPITALIZATION?
A: The affirmative vote of the holders of at least a majority of the outstanding common units, including the
holders of at least a majority of the outstanding common units held by persons other than Suburban's
management, and the affirmative vote of the holders of at least a majority of the outstanding subordinated
units entitled to vote, each voting as a separate class, are required to approve each of the Recapitalization
proposals. The General Partner owns all of the outstanding subordinated units and has agreed to vote all of
the subordinated units in favor of all the Recapitalization proposals. The Recapitalization cannot be effected
unless all of the Recapitalization proposals are approved.
Q: WHO WILL BE THE NEW GENERAL PARTNER?
A: The new general partner of Suburban will be Suburban Energy Services Group LLC, a new entity owned by
approximately 45 executives and key employees of Suburban (the 'Successor General Partner'). Following the
Recapitalization, however, the Board of Supervisors will continue to have all responsibility for the
management of Suburban's business just as it does today. See page 52 of this Proxy Statement.
Q: WHY REPLACE THE GENERAL PARTNER?
A: Since August 1997, Millennium Chemicals Inc., the indirect parent of the General Partner, has been exploring
opportunities to realize the highest cash or other value upon the sale of its interests in Suburban.
</TABLE>
2
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
Q: WHO WILL SERVE ON THE BOARD OF SUPERVISORS AFTER THE RECAPITALIZATION?
A: The size of the Board of Supervisors will be reduced from seven members to five members by eliminating the
class of management supervisors, which means that the three supervisors elected by the common unitholders will
hold a majority of the Board's seats. The elected supervisors will continue to be John Hoyt Stookey, Harold R.
Logan, Jr. and Dudley C. Mecum. The supervisors to be appointed by the Successor General Partner will be Mark
A. Alexander and Michael J. Dunn, Jr. (who currently serve as Suburban's management supervisors).
Q: HOW WILL THE REDEMPTION BE FUNDED?
A: The redemption price for the subordinated units and the additional limited partner units and the fees and
expenses of the Recapitalization will be funded from Suburban's then existing cash resources and, if
necessary, borrowings under the Operating Partnership's existing credit agreement. See page 64 of this Proxy
Statement.
Q: HOW WILL THE PURCHASE OF THE GENERAL PARTNER INTERESTS AND INCENTIVE DISTRIBUTION RIGHTS BE FINANCED?
A: The Successor General Partner has entered into a commitment letter with Mellon Bank, N.A. for the provision of
a $6 million loan to be used to purchase the general partner interests and incentive distribution rights. The
Operating Partnership has agreed to purchase the loan (and the related security) from Mellon Bank, N.A. if an
event of default occurs and has agreed to reserve availability under its existing credit agreement for this
purpose, which will reduce borrowing availability for working capital needs or other purposes. See page 65 of
this Proxy Statement.
Q: WHEN WILL THE RECAPITALIZATION BE COMPLETED?
A: Completion of the Recapitalization is subject to a number of conditions, some of which are beyond our control.
We cannot predict with certainty if or when the Recapitalization will be completed, but we hope to complete it
in the next two months.
Q: WHAT IF THE RECAPITALIZATION IS NOT COMPLETED?
A: If the public common unitholders do not approve each of the Recapitalization proposals or if the other
conditions to completing the Recapitalization are not satisfied or waived, the capital structure of Suburban
and the quarterly distribution will not change.
Q: WHEN IS THE SPECIAL MEETING?
A: The special meeting will be held on Wednesday, May 26, 1999 at 10:00 a.m., local time, at Suburban's principal
executive offices at One Suburban Plaza, 240 Route 10 West, Whippany, New Jersey. See page 22 of this Proxy
Statement.
Q: WHAT DO I NEED TO DO RIGHT NOW?
A: Please take the time to vote by completing and mailing the enclosed proxy card according to the instructions
contained in this Proxy Statement, whether or not you plan to attend the special meeting. If you sign, date
and mail your proxy card without indicating how you want to vote, your proxy will be counted as a vote in
favor of each of the Recapitalization proposals. If you fail to return your card or return your card unsigned,
the effect will be a vote against each Recapitalization proposal unless you vote in person.
Q: DO I SEND IN MY COMMON UNIT CERTIFICATES?
A: No. Your common unit certificates will not be changed.
Q: HOW CAN I GET HELP IN VOTING?
A: If you have any questions or need any help in voting, you may call Innisfree M&A Incorporated, Suburban's
proxy solicitor, at its toll-free number: 1-877-750-5837.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT SUBURBAN?
A: From various sources described under 'Where You Can Find More Information' on page 99 of this Proxy Statement.
</TABLE>
3
<PAGE>
<PAGE>
PROXY STATEMENT SUMMARY
This summary highlights selected information from this Proxy Statement and
may not include all of the information that is important to you. To understand
the Recapitalization fully and for a more complete description of the terms of
the Recapitalization, you should carefully read this entire document and the
documents to which you are referred. Except as the context otherwise requires,
references to or descriptions of operations of Suburban include the operations
of the Operating Partnership and any other subsidiary operating partnership or
corporation and Suburban's predecessor, Suburban Propane. See 'Where You Can
Find More Information' on page 99 and 'Disclosure Regarding Forward-Looking
Statements' on page i. On page 100 you will find an index of defined terms used
in this Proxy Statement.
THE RECAPITALIZATION (see page 24)
The Recapitalization consists of:
Redemption. Suburban will redeem all 7,163,750 outstanding subordinated
units (the 'Subordinated Units') and all 220,000 outstanding additional
limited partner units ('APUs'), all of which are owned by the General
Partner, for $69 million.
Substitution of a New General Partner. The General Partner will sell to
the Successor General Partner for $6 million (the 'GP Interest Purchase')
its combined 2% general partner interests in Suburban and the Operating
Partnership (the 'GP Interests') and its rights to receive more than 2% of
cash distributions if distributions exceed certain specified levels (the
'Incentive Distribution Rights'). The Successor General Partner will
assume the rights and duties of the General Partner under the partnership
agreements of the Partnerships and will be substituted for the General
Partner as the new general partner of the Partnerships.
Amendment of the Partnership Agreements. The partnership agreements of the
Partnerships will be amended to permit and effect the Recapitalization.
They will also be amended to reduce the Incentive Distribution Rights and
to provide the Board of Supervisors with the right to convert the reduced
Incentive Distribution Rights into common units ('Common Units') after the
fifth anniversary of the closing of the Recapitalization (the 'Closing').
Termination and Replacement of the Distribution Support Agreement. The
Distribution Support Agreement dated as of March 5, 1996 among the General
Partner, Millennium America Inc. and Suburban (the 'Distribution Support
Agreement') will be terminated and replaced with a liquidity arrangement
provided by Suburban.
Increase in Quarterly Distribution. The quarterly distribution will be
increased from $0.50 to $0.5125 per unit per quarter (from $2.00 to $2.05
per unit per year), subject to the completion of the Recapitalization and
effective for the fiscal quarter in which it is completed. The total
amount will consist of the existing minimum quarterly distribution of
$0.50 per unit per quarter plus an additional $0.0125 per unit per quarter
above the minimum quarterly distribution.
4
<PAGE>
<PAGE>
CURRENT OWNERSHIP AND OWNERSHIP FOLLOWING THE RECAPITALIZATION
Set forth below are charts showing the current ownership and the
post-Recapitalization ownership of the Partnerships (determined based on the
number of Restricted Units outstanding as of the date of this Proxy Statement).
(Chart Displaying current ownership of the Partnership)
(Chart displaying post-Recpaitalization ownership of the Partnership)
5
<PAGE>
<PAGE>
The combined 2% GP Interests being acquired by the Successor General
Partner in the Recapitalization will be designated as approximately 453,956
general partner units in the Partnerships (determined based on 681,320
Restricted Units outstanding as of the date of this Proxy Statement). (This
number could change if the number of Restricted Units changes before the Closing
either as a result of a lapse of unvested Restricted Units or a new grant under
the Restricted Unit Plan, neither of which is presently expected to occur.)
Although designated as a number of units, the combined 2% GP Interests will
continue to represent a 1.0% general partner interest in Suburban and a 1.0101%
general partner interest in the Operating Partnership. The designation will not
have any economic or other effect on the Common Units. The designation is
included in the Recapitalization proposal to amend Suburban's Partnership
Agreement.
RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND BOARD OF SUPERVISORS AND OPINIONS
OF FINANCIAL ADVISORS (see pages 31 and 34 )
The Board of Supervisors currently consists of two management-designated
supervisors (the 'Management Supervisors'), two supervisors appointed by
Suburban's general partner (the 'Appointed Supervisors') and three supervisors
who have no affiliation with Suburban's general partner or management (the
'Elected Supervisors'). The Elected Supervisors were elected to the Board of
Supervisors by the holders of Common Units (the 'Common Unitholders') and
Subordinated Units. As part of the Recapitalization, the General Partner will
receive $69 million from Suburban for all of the Subordinated Units and APUs and
$6 million from the Successor General Partner for the GP Interests and the
Incentive Distribution Rights. The Management Supervisors will hold equity
interests in the Successor General Partner and will receive certain benefits
from the Recapitalization as described in 'The Recapitalization -- Interests of
Certain Persons in the Recapitalization.'
Because the Appointed Supervisors and the Management Supervisors have
interests in the Recapitalization that are different from, or may conflict with,
the interests of the Common Unitholders other than the General Partner, the
Successor General Partner or any of their affiliates (the 'Public Common
Unitholders'), the Elected Supervisors were appointed as the Special Committee
to evaluate and make a recommendation to the Board of Supervisors with respect
to the Recapitalization on behalf of the Public Common Unitholders. The Special
Committee was represented by independent legal counsel.
Rothschild Inc. ('Rothschild') and A.G. Edwards & Sons, Inc. ('A.G.
Edwards') served as independent financial advisors to the Special Committee in
connection with the Recapitalization and have rendered their opinions to the
Special Committee that the terms of the Recapitalization are fair, from a
financial point of view, to the Public Common Unitholders. The Rothschild
opinion is attached as Annex D to this Proxy Statement and the A.G. Edwards
opinion is attached as Annex E to this Proxy Statement. Common Unitholders are
urged to read the opinions of Rothschild and A.G. Edwards in their entirety for
descriptions of the procedures followed, matters considered and limitations on
the reviews undertaken in rendering the opinions.
After considering the advice of its independent legal counsel and based
upon the Rothschild opinion, the A.G. Edwards opinion and the other factors
described below in this Proxy Statement, the Special Committee unanimously
recommended approval of the Recapitalization to the Board of Supervisors. Based
on such recommendation, the Board of Supervisors unanimously approved the
Recapitalization and recommends that Common Unitholders vote FOR each of the
Recapitalization proposals. See 'The Recapitalization -- Background' and
' -- Reasons for the Recapitalization; Recommendations of the Special Committee
and Board of Supervisors.'
RISK FACTORS (see page 17)
We refer you to 'Risk Factors' on page 17, which discusses certain
important matters that you should carefully consider in evaluating the
Recapitalization proposals and casting your vote, including:
Suburban will be using a significant portion of its existing cash
resources to redeem the Subordinated Units and APUs and to pay transaction
expenses.
6
<PAGE>
<PAGE>
The Distribution Support Agreement will be terminated and replaced with a
liquidity arrangement provided by Suburban. Suburban used the Distribution
Support Agreement in fiscal 1997 to cover $22 million of the minimum
quarterly distribution on the Common Units.
Neither the minimum quarterly distribution nor additional distributions
per Common Unit are assured.
Certain members of the Board of Supervisors and certain officers of the
Operating Partnership have interests in the Recapitalization that are
different from, or may conflict with, the interests of Public Common
Unitholders.
Suburban faces certain risks in its business operations, including (1)
weather conditions, (2) price volatility of propane supply costs, (3)
competition, (4) energy efficiency and technology advances, (5) regulatory
changes and (6) legal proceedings.
INTERESTS OF CERTAIN PERSONS IN THE RECAPITALIZATION (see page 47)
You should be aware that certain executive officers of Suburban and certain
members of the Board of Supervisors have interests in the Recapitalization that
are different from, or may conflict with, the interests of the Public Common
Unitholders. Mark A. Alexander and Michael J. Dunn, Jr., members of senior
management and the Management Supervisors, own equity interests in the Successor
General Partner and hold restricted Common Units ('Restricted Units') under the
1996 Restricted Unit Plan of Suburban (the 'Restricted Unit Plan') which, by
their terms, will accelerate and convert into Common Units upon completion of
the Recapitalization. The two Appointed Supervisors are executive officers of
Millennium Chemicals Inc., the indirect parent of the General Partner. Each of
the Elected Supervisors holds Restricted Units which, by their terms, will
accelerate and convert into Common Units upon completion of the
Recapitalization. The General Partner will receive a $1 million fee for
extending the automatic termination date of the Recapitalization Agreement from
May 15, 1999 to June 15, 1999. See 'The Recapitalization -- Interests of Certain
Persons in the Recapitalization' and 'The Successor General Partner.'
FEDERAL INCOME TAX CONSEQUENCES (see page 49)
In general, the Recapitalization is not expected to result in taxable
income or loss to the Common Unitholders. See 'The Recapitalization -- United
States Federal Income Tax Consequences to Suburban and to Common Unitholders.'
THE MEETING; REQUIRED VOTE (see page 22)
The special meeting of Common Unitholders to vote on the Recapitalization
proposals will be held on Wednesday, May 26, 1999 at 10:00 a.m., local time, at
Suburban's principal executive offices at One Suburban Plaza, 240 Route 10 West,
Whippany, New Jersey (the 'Meeting'). The affirmative vote of the holders of at
least a majority of the outstanding Common Units, including the holders of at
least a majority of the outstanding Public Common Units, and the affirmative
vote of the holders of at least a majority of the outstanding Subordinated Units
entitled to vote, each voting as a separate class, are required to approve each
of the Recapitalization proposals. The General Partner owns all of the
outstanding Subordinated Units and has agreed to vote all of the Subordinated
Units in favor of all the Recapitalization proposals. The Recapitalization
cannot be effected without approval of each of the Recapitalization proposals.
THE TRANSACTION AGREEMENTS (see page 55)
The Amended and Restated Recapitalization Agreement, dated as of March 15,
1999 by and among the Partnerships, the General Partner, Millennium
Petrochemicals Inc. ('Millennium'), the sole stockholder of the General Partner
and a subsidiary of Millennium Chemicals Inc., and the Successor General Partner
(the 'Recapitalization Agreement') is the legal document that governs the
Recapitalization. The Purchase Agreement dated as of November 27, 1998, as
amended, by and among the General Partner, Millennium and the Successor General
Partner (the 'GP Interest Purchase Agreement') is the legal document that
governs the GP Interest Purchase. The Recapitalization
7
<PAGE>
<PAGE>
Agreement and the GP Interest Purchase Agreement are attached to this Proxy
Statement as Annexes A and B, respectively, and we encourage you to read them
carefully.
CONDITIONS TO CONSUMMATION OF THE RECAPITALIZATION (see page 57)
In order for the Recapitalization to occur, the following conditions, in
addition to the required votes of unitholders, must be satisfied or waived:
The holders of at least a majority of the outstanding principal amount of
the 7.54% Senior Notes due June 30, 2011 of the Operating Partnership (the
'Senior Notes') must consent to the Recapitalization and to certain
amendments to the Note Purchase Agreement governing the Senior Notes (the
'Senior Note Agreement').
The holders of the outstanding principal amount of the loans and
commitments under the Operating Partnership's Amended and Restated Credit
Agreement, dated as of September 30, 1997 (the 'Existing Credit
Agreement'), must consent to certain transactions included in the
Recapitalization and to certain amendments to the Existing Credit
Agreement.
Suburban must have existing cash resources and, if necessary, the
availability of borrowings under the Existing Credit Agreement in an
amount sufficient to pay the redemption price and transaction fees and
expenses of the Recapitalization.
The GP Interest Purchase must occur concurrently with the consummation of
the Recapitalization and the Successor General Partner must obtain
sufficient financing for the GP Interest Purchase.
The opinions of Rothschild and A.G. Edwards must not be withdrawn. (This
is a condition for the benefit of the Partnerships only.)
The Special Committee must not withdraw its recommendation to the Board of
Supervisors to approve the Recapitalization at any time prior to mailing
this Proxy Statement. (This is a condition for the benefit of the
Partnerships only.)
TERMINATION OF THE RECAPITALIZATION AGREEMENT (see page 57)
The Recapitalization Agreement may be terminated at any time prior to the
Closing:
by written consent of the parties;
by any of the parties if the Closing does not occur on or before May 15,
1999, unless extended under certain circumstances by the Elected
Supervisors to June 15, 1999 upon payment by Suburban to Millennium of a
$1 million extension fee, or unless otherwise extended by written consent
of the parties;
by Suburban or the Successor General Partner at any time prior to the
mailing of the Proxy Statement if the Special Committee withdraws its
recommendation to the Board of Supervisors to approve the Recapitalization
(subject to the payment by Suburban to Millennium of a $2 million
termination fee);
by Millennium or the General Partner at any time prior to the Meeting if
the Special Committee withdraws its recommendation to approve the
Recapitalization (in which case Suburban must pay certain out-of-pocket
expenses of Millennium and the General Partner);
by Millennium or the General Partner at any time prior to the mailing of
the Proxy Statement if Millennium, the General Partner or any of their
affiliates is concurrently entering into a definitive written agreement
for a transaction that is more favorable to Millennium and the General
Partner than the Recapitalization (subject to the payment by Millennium to
Suburban of a $3 million termination fee);
by any of the parties if any governmental entity permanently prohibits the
Recapitalization; or
by any of the parties if any of the other parties materially breaches its
agreements under the Recapitalization Agreement or any other agreement
entered into in connection with the Recapitalization or any representation
or warranty fails to be true and correct for 30 days
8
<PAGE>
<PAGE>
without cure after notice of breach and such breach or failure would
reasonably be expected to have a material adverse effect on the party
invoking its termination right or would materially impair the
Recapitalization.
Upon termination of the Recapitalization Agreement, the GP Interest Purchase
Agreement may be terminated by either party.
AMENDMENT OF THE PARTNERSHIP AGREEMENTS (see page 88)
In order to consummate the Recapitalization, certain amendments must be
made to Suburban's limited partnership agreement (the 'Partnership Agreement')
and the Operating Partnership's limited partnership agreement (the 'Operating
Partnership Agreement' and, collectively with the Partnership Agreement, the
'Partnership Agreements'). If approved, the Partnership Agreements will be
amended to, among other things:
Permit the redemption of all outstanding Subordinated Units and APUs.
Limit the distributions to the Successor General Partner, including as
holder of the Incentive Distribution Rights, to 15% of all distributions
above $0.55 per unit per quarter.
Provide the Board of Supervisors the option, exercisable after five years
from the Closing, to cause all the Incentive Distribution Rights to be
converted into a number of Common Units having a value equal to the fair
market value of the Incentive Distribution Rights.
Terminate the Distribution Support Agreement and replace it with a
liquidity arrangement provided by Suburban.
Eliminate the Successor General Partner's obligation to maintain a 2%
ownership interest in the Partnership and the Operating Partnership if
Suburban issues additional limited partner interests in the future and
redesignate the combined 2% GP Interests in Suburban as approximately
453,956 general partner units (determined based on 681,320 Restricted
Units outstanding as of the date of this Proxy Statement and representing
a 1.0% general partner interest in Suburban and a 1.0101% general partner
interest in the Operating Partnership).
Reduce the size of the Board of Supervisors from seven to five members by
eliminating the two positions currently held by the two Management
Supervisors, which means that the Board will consist of three Elected
Supervisors and two Appointed Supervisors.
As a result of the redemption of the Subordinated Units, require the
approval of only Common Unitholders for certain matters including the
election of the Elected Supervisors, a merger or consolidation involving
Suburban, the sale of substantially all the assets of Suburban, the
transfer of the general partner interest, the withdrawal or removal of the
Successor General Partner and certain future amendments to the Partnership
Agreement as it will be amended in the Recapitalization (the 'Amended
Partnership Agreement').
See 'Summary of Amendments to the Partnership Agreements,' 'Description of
the Amended Partnership Agreements' and the Amended Partnership Agreement (Annex
C to this Proxy Statement).
FUNDING OF THE RECAPITALIZATION (see page 64)
Suburban estimates that the redemption price for the Subordinated Units and
APUs and the transaction fees and expenses in connection with the
Recapitalization, including the GP Interest Purchase, will be approximately
$78.5 million. The transaction fees and expenses include a $1 million fee
payable to the General Partner to extend the automatic termination date of the
Recapitalization Agreement from May 15, 1999 until June 15, 1999. This extension
fee was authorized by the Board of Supervisors and was agreed to be paid at the
time the Recapitalization Agreement was signed.Suburban expects to fund the
redemption price and the fees and expenses of the Recapitalization, including
the GP Interest Purchase, entirely from its cash on hand at the time of the
Closing. Actual cash and cash equivalents on hand as of March 27, 1999 were
approximately $75 million and net accounts receivable was approximately $65
million. Suburban presently anticipates that the cash generated from accounts
9
<PAGE>
<PAGE>
receivable, together with the current levels of cash on hand, will be sufficient
to fund the costs of the Recapitalization and maintain sufficient levels of
available cash to meet immediate cash distribution needs. If Suburban's cash on
hand at the time of the Closing is insufficient to pay the redemption price and
such fees and expenses, Suburban intends to borrow any necessary funds under the
Existing Credit Agreement. See 'Risk Factors -- Risks Relating to the
Recapitalization -- Suburban's Existing Cash Resources Will Decrease
Significantly.'
AMENDMENT OF THE EXISTING CREDIT AGREEMENT (see page 64)
The Existing Credit Agreement provides for borrowings of up to $100
million, $75 million of which is available for general corporate purposes and
$25 million of which is available to fund acquisitions. As of the date of this
Proxy Statement, there were no amounts outstanding under this facility. In
connection with the Recapitalization, the Existing Credit Agreement will be
amended and restated to, among other things, (i) extend its maturity date to the
fiscal quarter ending March 31, 2001, (ii) amend the minimum adjusted
consolidated net worth covenant to reduce the required minimum net worth of the
Operating Partnership from $125 million to $50 million, (iii) provide for a $22
million liquidity subfacility to be available for the payment of the minimum
quarterly distribution in certain circumstances, (iv) exclude from the mandatory
prepayment provisions an amount sufficient to purchase the $6 million loan to be
made to the Successor General Partner by Mellon Bank, N.A. ('Mellon') to
purchase the GP Interests and Incentive Distribution Rights from the Successor
General Partner (the 'GP Loan') if an event of default occurs under such loan,
(v) decrease the maximum ratio of consolidated total indebtedness to EBITDA (as
defined in the Existing Credit Agreement) from 5.25 to 1.00 to 5.10 to 1.00,
(vi) modify certain definitions and covenants relating to the ownership of the
General Partner and the Operating Partnership, (vii) increase the Applicable
Margins (as defined in the Existing Credit Agreement) of the interest rates
payable with respect to borrowings under the Existing Credit Agreement and
(viii) provide for the lenders' consents to the amendments to the Partnership
Agreements and the Senior Note Agreement contemplated by the Recapitalization
and to the termination of the Distribution Support Agreement. See 'Financing of
the Transactions -- Financing Arrangements of the Operating Partnership for the
Recapitalization.'
FINANCING ARRANGEMENTS FOR THE GP INTEREST PURCHASE (see page 65)
The Successor General Partner has entered into a commitment letter with
Mellon for the $6 million GP Loan to be used to purchase the GP Interests and
Incentive Distribution Rights from the General Partner. The GP Loan will mature
on the fifth anniversary of the Closing and will be secured by a pledge of the
GP Interests held by the Successor General Partner. The Operating Partnership
has agreed to purchase the GP Loan from Mellon if an event of default occurs
under the GP Loan and has agreed to reserve availability under the Existing
Credit Agreement for this purpose, which will reduce borrowing availability for
working capital needs or other purposes.
EFFECT ON RESTRICTED UNIT PLAN; MANAGEMENT CASH RESERVE (see page 47)
Suburban has granted 681,320 Restricted Units pursuant to the terms of the
Restricted Unit Plan. Because the substitution of the Successor General Partner
as the general partner of Suburban will result in a 'change of control' under
the terms of such plan, all Restricted Units will accelerate and convert into an
equal number of Common Units at the closing of the Recapitalization
(representing an approximate 3.1% increase in the number of Common Units
outstanding after the Recapitalization on a fully-diluted basis). Holders of
Restricted Units who will become members in the Successor General Partner have
agreed to surrender substantially all of their Restricted Units, prior to their
vesting, in exchange for the right to participate in a new compensation deferral
plan of the Partnerships. Suburban will deposit a number of Common Units equal
to the number of Restricted Units surrendered by these members into a trust. The
total number of Common Units deposited is expected to be approximately 592,000.
Suburban will also deposit all quarterly distributions it may pay on these
Common Units into the trust. Under the compensation deferral plan, the members
of the Successor General Partner will defer receipt of these Common Units and
related distributions until the date the GP Loan is repaid in full or the
seventh anniversary of the Closing, whichever date the deferring member may
choose, but
10
<PAGE>
<PAGE>
subject to the earlier distribution and forfeiture provisions of the
compensation deferral plan. In addition, these members will defer receipt of
$930,000 per year of quarterly distributions on these deferred Common Units
through the fiscal quarter ending March 31, 2001 (the 'Management Cash
Reserve'). The members of the Successor General Partner will agree that, in
certain circumstances, the Management Cash Reserve may be drawn upon to support
the Minimum Quarterly Distribution. In addition, if the Operating Partnership
elects or is required to purchase the GP Loan from Mellon, the deferred Common
Units may, at Suburban's or the Operating Partnership's discretion, be forfeited
and cancelled (and the related distributions may also be forfeited). The
remaining Restricted Units, which consist of unsurrendered Restricted Units and
units held by supervisors or other employees and former employees of the
Partnerships, will accelerate and convert into Common Units at the Closing.
DESCRIPTION OF COMMON UNITS AND OTHER PARTNERSHIP INTERESTS FOLLOWING THE
RECAPITALIZATION (see pages 84, 88 and 94)
<TABLE>
<S> <C>
Units to be Outstanding
After the Recapitalization.............. 22,243,820 Common Units, representing a combined 98% limited partner
interest, and 453,956 general partner units (the 'General Partner
Units'), representing a combined 2% general partner interest (based
on 681,320 Restricted Units outstanding as of the date of this Proxy
Statement). The 453,956 General Partner Units include a 1.0101%
general partner interest in the Operating Partnership deemed to be
equal to 229,271 General Partner Units.
Distributions of Available Cash........... Suburban will continue to distribute all of its Available Cash within
45 days after the end of each fiscal quarter to Common Unitholders
and to the Successor General Partner based on the priorities
described below. Available Cash for any quarter will continue to
consist, generally, of all cash on hand at the end of such quarter,
as adjusted for reserves. The complete definition of Available Cash
is set forth in the Amended Partnership Agreement. The Board of
Supervisors has broad discretion in making cash disbursements and
establishing reserves, thereby affecting the amount of Available Cash
that will be distributed in any quarter.
Priority of Distributions................. In general, Available Cash will be distributed based on the following
priorities:
First, 98% to the Common Units and 2% to the Successor General
Partner, until each Common Unit has received the minimum quarterly
distribution of $0.50 per unit (the 'Minimum Quarterly
Distribution'), any arrearages on the Common Units from prior
quarters and the target distribution of $0.55 per unit (the 'Target
Distribution').
Thereafter, 85% to the Common Units and 15% to the Successor
General Partner.
After the fiscal quarter ending March 31, 2001, the priorities will
be the same, except that the Common Units will no longer be entitled
to arrearages.
Expected Distributions to Common
Unitholders and Successor General
Partner................................. Suburban intends, to the extent there is sufficient Available Cash
from operating surplus, to increase the quarterly distribution from
$0.50 to $0.5125 per unit per quarter (from
</TABLE>
11
<PAGE>
<PAGE>
<TABLE>
<S> <C>
$2.00 to $2.05 per unit per year), subject to the completion of the
Recapitalization and effective for the fiscal quarter in which it is
completed. The total amount will consist of the existing Minimum
Quarterly Distribution of $0.50 per unit per quarter plus an
additional $0.0125 per unit per quarter above the Minimum Quarterly
Distribution. Suburban intends to pay proportionate distributions to
the Successor General Partner of $0.01 per General Partner Unit per
quarter (a total of $0.04 per General Partner Unit per year).
Liquidity Arrangement..................... The Distribution Support Agreement for the Minimum Quarterly
Distribution currently provided by the General Partner and its
indirect parent, Millennium America Inc. ('Millennium America'), will
be replaced at the Closing with a liquidity arrangement provided by
Suburban (the 'Liquidity Arrangement'). The Liquidity Arrangement
will consist of a requirement in the Partnership Agreement that
Suburban maintain, through the quarter ending March 31, 2001, $22.0
million of committed availability under its working capital line
under the Existing Credit Agreement or any replacement facility to
support the Minimum Quarterly Distribution. The committed
availability will be reduced to $11.6 million on January 1, 2001
(reduced by any amounts in excess of $10.4 million previously drawn),
which is the currently estimated amount of the Minimum Quarterly
Distribution for the last quarter in which the Liquidity Arrangement
is in effect. Generally, if adjusted Operating Surplus is less than
the aggregate Minimum Quarterly Distribution for the previous four
fiscal-quarter period (a 'Distribution Shortfall'), or if there is no
Distribution Shortfall but Suburban has insufficient borrowing
capacity under its general working capital facility, any borrowings
to pay the Minimum Quarterly Distribution will be deemed to be
drawdowns of the Liquidity Arrangement and will permanently reduce
the Liquidity Arrangement (which borrowings will be distributed to
the extent permitted by Suburban's contracts and securities).
Notwithstanding the foregoing, in the case of a Distribution
Shortfall, the Management Cash Reserve must be drawn upon first. Any
other borrowings to pay the Minimum Quarterly Distribution will be
deemed to be regular working capital borrowings and, therefore, will
not reduce the Liquidity Arrangement. Suburban is in effect setting
aside some of its own resources that could otherwise have been used
for distributions, working capital needs or other purposes, which may
adversely affect Suburban's operations. Consequently, the cost of the
Liquidity Arrangement, if used, would be indirectly borne by the
Common Unitholders. See 'Cash Distribution Policy -- Liquidity
Arrangement.'
Conversion of Incentive Distribution
Rights.................................. At any time after the fifth anniversary of the date of the Closing,
the Board of Supervisors (with the approval of a majority of the
Elected Supervisors) will have the option to cause all, but not less
than all, of the Incentive Distribution
</TABLE>
12
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Rights to be converted into that number of Common Units equal in
value to the fair market value of the Incentive Distribution Rights.
The fair market value will be determined by agreement of the Board of
Supervisors and the holders of such rights or, failing that, by an
independent investment banking firm. See 'Description of the Amended
Partnership Agreement -- Conversion of Incentive Distribution
Rights.'
Suburban's Ability to Issue Additional
Units................................... Prior to the record date for the quarter ending March 31, 2001,
Suburban may not issue more than 9,375,000 Common Units (except for
Common Units issued in certain accretive acquisitions or to repay
certain indebtedness) or any securities senior to the Common Units
without the approval of the holders of a majority of the outstanding
Common Units.
Limited Call Right........................ If, at any time, less than 20% of the issued and outstanding Common
Units are held by persons other than the Successor General Partner
and its affiliates, the Successor General Partner will continue to
have the right to purchase all of the remaining Common Units at a
price equal to the then current market price of the Common Units. See
'Description of the Amended Partnership Agreements -- Limited Call
Right.'
Limited Voting Rights..................... Common Unitholders will continue to have only limited voting rights
on matters affecting Suburban's business. See 'Description of the
Amended Partnership Agreements -- Meetings; Voting.'
Removal and Withdrawal of the General
Partner................................. Subject to certain conditions, the Successor General Partner may be
removed by the vote of the holders of at least a majority of the
outstanding Common Units. A meeting of Common Unitholders to effect
such removal, however, may be called only by the Board of Supervisors
or by the holders of 20% or more of the outstanding Common Units. The
Successor General Partner will agree not to voluntarily withdraw as
general partner of Suburban and the Operating Partnership prior to
September 30, 2006, subject to limited exceptions, without obtaining
the approval of the holders of at least a majority of the outstanding
Common Units.
Transfer Restrictions..................... All purchasers of Common Units who wish to become Common Unitholders
of record will continue to be required to deliver an executed
transfer application (which may be obtained from Suburban's transfer
agent) before the transfer of such Common Units will be registered
and before cash distributions and federal income tax allocations will
be made to the transferee.
Listing................................... The Common Units will continue to be listed on the New York Stock
Exchange under the symbol 'SPH.'
</TABLE>
13
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of Suburban as
of December 26, 1998 and as adjusted to give pro forma effect to the
Recapitalization as if it had occurred on December 26, 1998. The table should be
read in conjunction with the Unaudited Pro Forma Condensed Consolidated
Financial Statements of Suburban and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' included elsewhere in this Proxy
Statement and Suburban's consolidated financial statements and notes thereto
incorporated by reference in this Proxy Statement from Suburban's Quarterly
Report on Form 10-Q for the three months ended December 26, 1998.
<TABLE>
<CAPTION>
DECEMBER 26, 1998
-----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS(A) PRO FORMA
---------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Liabilities:
Long-term debt (excluding current portion)......................... $ 427,850 $-- $427,850
---------- -------------- ---------
Partners' Capital:
Common Unitholders................................................. 87,222 (12,619) 74,603
Subordinated Unitholder............................................ 53,141 (53,141) --
General Partner.................................................... 24,595 (22,374) 2,221
Unearned compensation.............................................. (11,634) 11,634 --
---------- -------------- ---------
Common Units held in trust, at cost................................ -- 11,064 11,064
Deferred compensation trust........................................ -- (11,064) (11,064)
Total partners' capital....................................... 153,324 (76,500) 76,824
---------- -------------- ---------
Total capitalization.......................................... $ 581,174 $(76,500) $504,674
---------- -------------- ---------
---------- -------------- ---------
</TABLE>
- ------------
(a) See 'Unaudited Pro Forma Condensed Consolidated Financial Statements'
included elsewhere in this Proxy Statement for a discussion of the pro
forma adjustments.
14
<PAGE>
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
The following table presents summary condensed consolidated historical and
pro forma financial and operating data (which are unaudited), for the dates
indicated, of Suburban and its predecessor company (prior to Suburban's initial
public offering on March 4, 1996) and pro forma financial and operating data for
Suburban after giving effect to the Recapitalization. The summary condensed
consolidated historical data are derived from the unaudited consolidated
financial statements of Suburban for the three months ended December 26, 1998
and December 27, 1997, and the audited consolidated financial statements of
Suburban and its predecessor company for the five years in the period ended
September 26, 1998 and should be read in conjunction with 'Management's
Discussion and Analysis of Financial Condition and Results of Operations'
included elsewhere in this Proxy Statement and the financial statements of
Suburban and the notes thereto incorporated in this Proxy Statement by reference
from Suburban's Quarterly Report on Form 10-Q for the three months ended
December 26, 1998 and Annual Report on Form 10-K for the year ended September
26, 1998. In Suburban's opinion, the historical unaudited financial statements
for the three months ended December 26, 1998 and December 27, 1997 contain all
adjustments, consisting only of normal recurring adjustments necessary for a
fair presentation of results of operations and financial condition. The results
for the interim periods are not necessarily indicative of the results that can
be expected for a full fiscal year. Suburban's summary pro forma financial data
after giving effect to the Recapitalization are derived from the Unaudited Pro
Forma Condensed Consolidated Financial Statements of Suburban included elsewhere
in this Proxy Statement and should be read in conjunction therewith. The dollar
and volume amounts in the table below, except per unit data, are in thousands.
<TABLE>
<CAPTION>
PREDECESSOR
SUBURBAN(A) COMPANY
--------------------------------------------------------------------------------------- --------
PRO FORMA PRO FORMA MARCH 5, OCT. 1,
THREE MONTHS THREE MONTHS THREE MONTHS YEAR YEAR YEAR 1996 1995
ENDED ENDED ENDED ENDED ENDED ENDED THROUGH THROUGH
DEC. 26, DEC. 26, DEC. 27, SEPT. 26, SEPT. 26, SEPT. 27, SEPT 28, MARCH 4,
1998 1998 1997 1998 1998 1997 1996 1996
------------ ------------- ------------ --------- --------- --------- -------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Revenues............... $161,216 $ 161,216 $204,886 $667,287 $ 667,287 $ 771,131 $323,947 $383,999
Depreciation and
Amortization......... 8,782 8,782 9,292 36,531 36,531 37,307 21,046 14,816
Restructuring Charge... -- -- -- -- -- 6,911 2,340 --
Income (Loss) Before
Interest Expense and
Income Taxes......... 24,118 23,963 35,025 69,440 68,814 47,763 (3,464) 61,796
Interest Expense,
Net.................. 8,704(b) 7,586 8,108 35,108 (b) 30,614 33,979 17,171 --
Provision for Income
Taxes................ 7 7 16 35 35 190 147 28,147
Net Income (Loss)...... 15,407 16,370 26,901 34,297 38,165 13,594 (20,782) 33,649
Net Income (Loss) per
Unit(c).............. $ 0.68 $ 0.56 $ 0.92 $ 1.51 $ 1.30 $ 0.46 $ (0.71)
BALANCE SHEET DATA (END OF
PERIOD)
Cash and Cash
Equivalents.......... $ 1,000 $ 54,188 $ 37,612 $ -- $ 59,819 $ 19,336 $18,931
Current Assets......... 93,796 146,984 148,406 -- 132,781 104,361 120,692
Total Assets........... 687,020 738,208 808,166 -- 729,565 745,634 776,651
Current Liabilities.... 120,799 95,487 100,783 -- 91,550 96,701 101,826
Long-term Debt......... 427,850 427,850 428,176 -- 427,897 427,970 428,229
Other Long-term
Liabilities.......... 61,547 61,547 109,798 -- 62,318 79,724 81,917
Predecessor Equity.....
Partners'
Capital-General
Partner.............. 2,221 24,595 25,223 -- 24,488 12,830 3,286
Partners'
Capital-Limited
Partners............. 74,603 128,729 144,186 -- 123,312 128,409 161,393
STATEMENT OF CASH FLOWS
DATA
Cash Provided by (used
in)
Operating Activities... $ 6,440(b) $ 7,518 $ 8,384 $ 65,727(b) $ 70,073 $ 58,848 $62,961 $(3,765)
Investing Activities... (2,101) (2,101) 8,818 2,900 2,900 (20,709) (30,449) (21,965)
Financing Activities... (11,667)(d) (11,048) 1,074 (34,965)(d) (32,490) (37,734) (13,786) 25,799
OTHER DATA
EBITDA(e).............. $ 32,900 $ 32,745 $ 44,317 $105,971 $ 105,345 $ 85,070 $17,582 $76,612
Capital
Expenditures(f):
Maintenance and
growth............. 2,936 2,936 3,070 12,617 12,617 24,888 16,089 9,796
Acquisitions......... 109 109 3,693 4,041 4,041 1,880 15,357 13,172
Retail Propane Gallons
Sold................. 137,603 137,603 158,278 529,796 529,796 540,799 257,029 309,871
<CAPTION>
<S> <C<C> <C>
PREDECESSOR
COMPANY
-------------------
YEAR ENDED
-------------------
SEPT. 30, OCT. 1,
1995 1994
--------- --------
STATEMENT OF OPERATIONS
DATA
Revenues............... $ 633,620 $677,767
Depreciation and
Amortization......... 34,055 34,300
Restructuring Charge... -- --
Income (Loss) Before
Interest Expense and
Income Taxes......... 55,544 75,490
Interest Expense,
Net.................. -- --
Provision for Income
PREDECESSOR
COMPANY
-------------------
YEAR ENDED
-------------------
SEPT. 30, OCT. 1,
1995 1994
--------- --------
Taxes................ 25,299 33,644
Net Income (Loss)...... 30,245 41,846
Net Income (Loss) per
Unit(c)..............
BALANCE SHEET DATA (END OF
PERIOD)
Cash and Cash
Equivalents.......... $ 136 $ 298
Current Assets......... 78,846 88,566
Total Assets........... 705,686 724,280
Current Liabilities.... 69,872 74,555
Long-term Debt......... -- --
Other Long-term
Liabilities.......... 77,579 90,173
Predecessor Equity..... 558,235 559,552
Partners'
Capital-General
Partner..............
Partners'
Capital-Limited
Partners.............
STATEMENT OF CASH FLOWS
DATA
Cash Provided by (used
in)
Operating Activities... $ 53,717 $ 77,067
Investing Activities... (22,317) (16,126)
Financing Activities... (31,562) (68,093)
OTHER DATA
EBITDA(e).............. $ 89,599 $109,790
Capital
Expenditures(f):
Maintenance and
growth............. 21,359 17,839
Acquisitions......... 5,817 1,448
Retail Propane Gallons
Sold................. 527,269 568,809
</TABLE>
15
<PAGE>
<PAGE>
(a) Suburban acquired the propane business and assets of the predecessor company
on March 5, 1996. There are no material differences in the book basis of
assets and liabilities between Suburban and the predecessor company.
(b) Reflects incremental interest costs resulting from (a) interest income
foregone on cash balances used in connection with the Recapitalization; (b)
increased interest expense (at an assumed weighted average interest rate of
8% per annum under the Existing Credit Agreement) on borrowings that would
have been necessary if the Recapitalization had occurred on September 27,
1998 and September 28, 1997 for the pro forma financial information for the
three months ended December 26, 1998 and the year ended September 26, 1998,
respectively; and (c) the amortization of related debt issuance costs.
(c) Net income (loss) per unit is computed by dividing the limited partners'
interest in net income (loss) by the number of units outstanding. Pro forma
Net income per Unit for the three months ended December 26, 1998 and for the
year ended September 26, 1998 reflects an increase over the actual
results for the three months ended December 26, 1998 and for the year ended
September 26, 1998 resulting from the redemption of 7,163,750 Subordinated
Units and accelerated vesting of 681,320 Restricted Units outstanding as of
the date of this Proxy Statement.
(d) Reflects additional partnership distributions associated with the
accelerated vesting of Restricted Units pursuant to the change of control
provisions of the Restricted Unit Plan and (ii) the increase in annual
distributions on Common Units from $2.00 per unit to $2.05 per unit.
(e) EBITDA (Earnings before interest, taxes, depreciation and amortization) is
calculated as income (loss) before interest expense and income taxes plus
depreciation and amortization. EBITDA should not be considered as an
alternative to net income (as an indicator of operating performance) or as
an alternative to cash flow (as a measure of liquidity or ability to service
debt obligations) and is not in accordance with or superior to generally
accepted accounting principles but provides additional information for
evaluating Suburban's ability to pay the minimum quarterly distribution.
Because EBITDA excludes some, but not all, items that affect net income and
this measure may vary among companies, the EBITDA data presented above may
not be comparable to similarly titled measures of other companies.
(f) Suburban's capital expenditures fall generally into three categories: (i)
maintenance expenditures, which include expenditures for repair and
replacement of property, plant and equipment; (ii) growth capital
expenditures, which include new propane tanks and other equipment to
facilitate expansion of Suburban's customer base and operating capacity; and
(iii) acquisition capital expenditures, which include expenditures related
to the acquisition of retail propane operations and a portion of the
purchase price allocated to intangibles associated with such acquired
businesses.
16
<PAGE>
<PAGE>
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained or incorporated by reference in this Proxy
Statement in evaluating the Recapitalization and casting your vote. In
connection with the forward-looking statements which appear in this Proxy
Statement, Common Unitholders should carefully review the factors discussed or
referred to below. Also see 'Disclosure Regarding Forward-Looking Statements.'
RISKS RELATING TO THE RECAPITALIZATION
SUBURBAN'S EXISTING CASH RESOURCES WILL DECREASE SIGNIFICANTLY
At the Closing, Suburban intends to fund the redemption price (the
'Redemption Price') for the Subordinated Units and APUs and the fees and
expenses for the Recapitalization, including the GP Interest Purchase, which is
expected to total $78.5 million, from its cash on hand at the time of the
Closing and, if such cash is insufficient, from borrowings under the Existing
Credit Agreement. Actual cash and cash equivalents on hand as of March 27, 1999
were approximately $75 million and net accounts receivable was approximately $65
million. Suburban anticipates that the cash generated from accounts receivable
coupled with the current levels of cash on hand will be sufficient to fund the
costs of the Recapitalization and maintain sufficient levels of available cash
to meet immediate cash distribution needs. As a result of such cash funding,
Suburban's cash will decrease significantly and its interest income earned on
its cash will decrease, thereby increasing the risk that Suburban may need to
borrow additional funds in the future for operating expenses and to pay
distributions, which would increase Suburban's leverage and interest expense.
Such cash funding also could increase the risk that there will be insufficient
cash to pay distributions on the Common Units, and could (i) make Suburban's
results of operations more susceptible to adverse economic or operating
conditions, which in the past have affected significant portions of the propane
industry, (ii) adversely affect its ability to finance future operations and
capital needs and (iii) limit its ability to pursue acquisitions and other
business opportunities. The interest payments on any increased indebtedness will
be required to be paid before any distributions can be made on the Common Units.
For a description of the Existing Credit Agreement and the financing
arrangements of the Successor General Partner for the GP Interest Purchase,
including related agreements of Suburban, see 'Financing of the Transactions.'
Also see ' -- Interests of Certain Persons in the Recapitalization.'
THE GENERAL PARTNER'S DISTRIBUTION SUPPORT AGREEMENT WILL BE TERMINATED AND
REPLACED WITH A LIQUIDITY ARRANGEMENT PROVIDED BY SUBURBAN
At the Closing, the Distribution Support Agreement with the General Partner
and its indirect parent, Millennium America, will be terminated and replaced
with a liquidity arrangement provided by Suburban. The Distribution Support
Agreement provides that, if the amount of Available Cash from Operating Surplus
with respect to any quarter through the quarter ending March 31, 2001 is less
than the aggregate Minimum Quarterly Distribution on all outstanding Common
Units plus the proportionate distributions on the GP Interests, then the General
Partner will contribute cash (in exchange for APUs) to Suburban in an amount
equal to the shortfall for such quarter up to an aggregate maximum amount of
$43.6 million. Suburban may use such cash to make distributions or for any other
partnership purpose. Accordingly, the Distribution Support Agreement is not a
guaranty of payment of the Minimum Quarterly Distribution. The General Partner's
obligation under the Distribution Support Agreement is fully and unconditionally
guaranteed by Millennium America. See Annex F attached hereto, 'Balance Sheet
Information Concerning the Departing General Partner and its Parent.' As a
result of Suburban's lower than anticipated earnings for fiscal 1997 and the
costs incurred in connection with operational restructuring efforts, the General
Partner and Millennium America contributed a total of $22 million to Suburban
under the Distribution Support Agreement for the fiscal quarters ended June 28,
1997 and September 27, 1997, which cash was used in distributing the Minimum
Quarterly Distribution on the Common Units. The current remaining support
obligation of the General Partner and Millennium America under the Distribution
Support Agreement is $21.6 million, subject to increase to the extent the APUs
are repaid in accordance with the terms of the Partnership Agreement.
17
<PAGE>
<PAGE>
The Liquidity Arrangement that will replace the Distribution Support
Agreement consists of a requirement in the Partnership Agreement that Suburban
maintain $22.0 million of committed availability under the Existing Credit
Agreement, or any replacement facility, through the quarter ending December 31,
2000 and $11.6 million of committed availability through the quarter ending
March 31, 2001 (reduced by any amounts in excess of $10.4 million previously
drawn).
Although the duration of the Liquidity Arrangement is the same as the
Distribution Support Agreement, there are a number of differences between them:
(1) The Distribution Support Agreement commits the resources of a
third party with greater financial resources than Suburban, while the
Liquidity Arrangement sets aside Suburban's own resources for the sole
purpose of enhancing Suburban's ability to make distributions at a time
when operating cash flow is not sufficient. In addition, borrowing
availability committed to the Liquidity Arrangement will not be available
to Suburban for distributions, working capital needs or other purposes
until the end of the fiscal quarter ending March 31, 2001, which may
adversely affect Suburban's operations. Consequently, the cost of the
Liquidity Arrangement, if used, would be indirectly borne by the Common
Unitholders.
(2) Further, the ability of Suburban to borrow to make payments under
the Liquidity Arrangement depends on whether Suburban is in compliance at
such time with the covenants and other provisions of the Existing Credit
Agreement and the Senior Note Agreement. If Suburban is not generating
sufficient operating cash flow to pay the Minimum Quarterly Distribution,
there is a heightened risk that Suburban will not be in a position to meet
the conditions for borrowing under the working capital line of the Existing
Credit Agreement.
(3) APUs issued in exchange for contributions under the Distribution
Support Agreement do not bear interest and have no fixed redemption date,
so there is no risk that Suburban would be obligated to make payments on
the APUs at a time when it did not have sufficient liquidity. On the other
hand, borrowings under the working capital line to fund the Liquidity
Arrangement, if used, would bear interest and have a fixed maturity date.
Any such borrowings will be distributed to the extent permitted by
Suburban's contracts and securities.
(4) Suburban's obligation under the Liquidity Arrangement is
permanently reduced by the amount drawn even if Suburban repays the amounts
borrowed with cash from operations. Furthermore, the Liquidity Arrangement
will be reduced to $11.6 million for the quarter ending March 31, 2001,
which is the currently estimated amount of the Minimum Quarterly
Distribution for such quarter. In contrast, the obligations of the General
Partner and Millennium America would be replenished back up to $43.6
million if the APUs were repaid in accordance with the terms of the
Partnership Agreement.
NEITHER THE MINIMUM QUARTERLY DISTRIBUTION NOR INCREASED DISTRIBUTIONS PER
COMMON UNIT ARE ASSURED
The Board of Supervisors has structured the Recapitalization based on its
belief that it will enhance Suburban's ability to provide increased cash
distributions to the Common Unitholders. This belief is based on certain
assumptions concerning Suburban's future operations, including assumptions that
normal weather conditions will prevail in Suburban's operating areas, that
Suburban's operating margins will remain constant and that market and overall
economic conditions will not change substantially. If these assumptions, which
are largely beyond the control of Suburban, are not realized, there may not be
sufficient cash available to increase the distributions on the Common Units or
even to pay the Minimum Quarterly Distribution. See ' -- Risks Relating to
Suburban's Business that Could Reduce Available Cash from Operating Surplus.'
INTERESTS OF CERTAIN PERSONS IN THE RECAPITALIZATION
Certain executive officers of Suburban and certain members of the Board of
Supervisors have interests in the Recapitalization that are different from, or
may conflict with, the interests of the Public Common Unitholders. Mark A.
Alexander and Michael J. Dunn, Jr., members of senior management and the
Management Supervisors, own equity interests in the Successor General Partner
and hold
18
<PAGE>
<PAGE>
Restricted Units under Suburban's Restricted Unit Plan which, by their terms,
will accelerate and convert into vested and issuable Common Units upon the
completion of the Recapitalization. Messrs. Alexander and Dunn are the only
members of the Board of Supervisors who will own interests in the Successor
General Partner. The Successor General Partner has entered into a commitment
letter with Mellon for the GP Loan to fund the purchase of the GP Interests and
Incentive Distribution Rights from the General Partner. The Operating
Partnership has agreed to, and has the right to, purchase the GP Loan from
Mellon if an event of default occurs and has agreed to reserve availability
under the Existing Credit Agreement for this purpose, which will reduce
borrowing availability for working capital needs or other purposes until the GP
Loan is repaid. See 'Financing of the Transactions -- Financing Arrangements of
the Successor General Partner for the GP Interest Purchase.' In addition, all
fees and expenses incurred in connection with the GP Interest Purchase will be
paid by Suburban as part of the Recapitalization expenses. Suburban estimates
that the fees and expenses related to the GP Interest Purchase will total
approximately $ . The two Appointed Supervisors are executive officers of
Millennium Chemicals Inc., the indirect parent of the General Partner, which
will receive a total of $75 million in consideration for its Subordinated Units,
APUs, GP Interests and Incentive Distribution Rights. In addition, Suburban will
pay the General Partner a $1 million fee to extend the automatic termination
date of the Recapitalization Agreement from May 15, 1999 until June 15, 1999.
This extension fee was authorized by the Board of Supervisors and was agreed to
be paid at the time the Recapitalization Agreement was signed. See 'The
Recapitalization -- Interests of Certain Persons in the Recapitalization.'
As a result of these differing interests, the Appointed Supervisors and the
Management Supervisors had a conflict of interest in negotiating the terms of
the Recapitalization, including the Redemption Price. In this regard, it should
be noted that the Subordinated Units being redeemed have not received a
distribution since November 1996 due to Suburban's generating less cash than
expected during fiscal 1997 and the Board of Supervisors' unanimous
determination that it was prudent to reserve some cash that otherwise would have
been available to be distributed on the Subordinated Units in fiscal 1998. The
Special Committee was appointed by the Board of Supervisors to evaluate the
Recapitalization and make a recommendation to the Board of Supervisors as to
whether the Recapitalization is fair to the Public Common Unitholders. The
Special Committee retained Rothschild and A.G. Edwards to render opinions as to
the fairness, from a financial point of view, of the terms of the
Recapitalization to the Public Common Unitholders. The members of the Special
Committee are not receiving additional compensation for serving on the Special
Committee, but each member holds Restricted Units which, by their terms, will
accelerate and convert into vested and issuable Common Units upon completion of
the Recapitalization. In addition, effective as of January 1, 1999, the annual
compensation paid to Harold R. Logan, Jr. and Dudley C. Mecum for serving on the
Board of Supervisors increased from $15,000 to $50,000 each. At the same time,
their entitlement to a $1,000 meeting fee was eliminated. John Hoyt Stookey's
annual compensation for serving on the Board of Supervisors remained unchanged
at $75,000.
RISKS RELATING TO SUBURBAN'S BUSINESS THAT COULD REDUCE AVAILABLE CASH FROM
OPERATING SURPLUS
WEATHER CONDITIONS AFFECT THE DEMAND FOR PROPANE
Weather conditions have a significant impact on the demand for propane for
both heating and agricultural purposes. Because a substantial portion of
Suburban's propane is used in the heating-sensitive residential and commercial
markets, weather conditions have a particularly significant effect on the
financial performance of Suburban. The volume of propane sold is at its highest
during the six-month peak heating season of October through March and is
directly affected by the severity of the winter weather. Historically,
approximately two-thirds of Suburban's retail propane volume is sold during the
peak heating season.
In addition, actual weather conditions can vary substantially from year to
year, significantly affecting Suburban's financial performance. For example, the
El Nino weather phenomenon impacted weather conditions during fiscal 1998.
Temperatures during fiscal 1998 were 4% warmer than normal and 4% warmer than
fiscal 1997 as reported by the National Oceanic and Atmospheric Administration
('NOAA'). Temperatures during January and February of the fiscal 1998 heating
season were the warmest on record according to the NOAA, which began keeping
records over 100 years ago. During the three months ended December 26, 1998,
temperatures nationwide were 12% warmer than normal and 14% warmer than the
three months ended December 27, 1997. In fiscal 1998, Suburban's revenues
19
<PAGE>
<PAGE>
were 13.5% lower than in fiscal 1997 principally due to lower propane prices
(because of lower propane costs) and, to a lesser extent, due to the warmer than
normal temperatures. Furthermore, variations in weather in one or more regions
in which Suburban operates can significantly affect the total volume of propane
sold by Suburban and, consequently, Suburban's results of operations. Variations
in the weather in the Northeast, where Suburban has a greater concentration of
higher margin residential accounts, generally have a greater impact on
Suburban's operations than variations in the weather in other markets.
Suburban's ability to pay the Minimum Quarterly Distribution is substantially
dependent on the Available Cash generated by the Operating Partnership, which is
affected by weather conditions. As a result, there can be no assurance that the
weather conditions in any quarter or year will not have a material adverse
effect on Suburban's operations or that Suburban's Available Cash will be
sufficient to pay the increased distributions on the Common Units or even to pay
the Minimum Quarterly Distribution.
PRICE VOLATILITY OF PROPANE SUPPLY COSTS
The retail propane business is a 'margin-based' business in which gross
profits depend on the excess of sales prices over the propane supply costs.
Propane is a commodity, and, as such, its unit price is subject to volatile
changes in response to changes in supply or other market conditions over which
Suburban has no control. Consequently, the unit price of propane purchased by
Suburban, as well as other propane suppliers, can change rapidly over a short
period of time. In general, product supply contracts permit suppliers to charge
posted prices at the time of delivery or the current prices established at major
storage points such as Mont Belvieu, Texas and Conway, Kansas. As rapid
increases in the wholesale cost of propane may not be immediately passed on to
customers, such increases could reduce margins. Consequently, Suburban's
profitability is sensitive to changes in wholesale propane prices. Suburban
engages in transactions to hedge product costs from time to time in an attempt
to reduce cost volatility, although to date such activities have not been
significant. There can be no assurances that future volatility in propane supply
costs will not have a material adverse effect on Suburban's gross profits,
income and cash flow or Suburban's Available Cash required to make the Minimum
Quarterly Distribution.
COMPETITION; ABILITY TO RETAIN CUSTOMERS
The retail propane industry is mature and highly competitive. Suburban
expects the overall demand for propane to remain relatively constant over the
next several years, with year-to-year industry volumes being affected primarily
by weather patterns. Therefore, Suburban's ability to grow within the industry
is dependent on its ability to acquire other retail distributors, open new
district locations, add new customers and retain existing customers. Suburban
competes with other distributors of propane, including a number of large
national and regional firms and several thousand small independent firms.
Generally, warmer-than-normal weather further intensifies competition. Suburban
believes that its ability to compete effectively depends on the reliability of
its service, its responsiveness to customers and its ability to maintain
competitive retail prices.
Propane also competes with other sources of energy, some of which are less
costly for equivalent energy value. Electricity is a major competitor of
propane, but propane generally enjoys a competitive price advantage over
electricity. In addition, propane competes with natural gas, which is a
significantly less expensive source of energy than propane. As a result, except
for certain industrial and commercial applications, propane is generally not
economically competitive with natural gas in areas where natural gas pipelines
already exist. The gradual expansion of the nation's natural gas distribution
systems has resulted in the availability of natural gas in many areas that
previously depended upon propane. To a lesser extent, Suburban also competes
with fuel oil. In the future, Suburban may compete with other alternative energy
sources as they are developed.
ENERGY EFFICIENCY AND TECHNOLOGY ADVANCES MAY AFFECT DEMAND
The national trend toward increased conservation and technological
advances, including installation of improved insulation and the development of
more efficient furnaces and other heating devices, has adversely affected the
demand for propane by retail customers. Future technological advances in
heating, conservation and energy generation may affect Suburban's financial
condition and results of operations.
20
<PAGE>
<PAGE>
REGULATORY CHANGES
Suburban is subject to various federal, state and local environmental,
health and safety laws and regulations. Generally, these laws impose limitations
on the discharge of pollutants and establish standards for the handling of solid
and hazardous wastes. Suburban's compliance with or liabilities under
environmental, health and safety laws and regulations, including the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
have not historically had a material adverse effect on Suburban. Future
developments, such as stricter environmental, health or safety laws and
regulations thereunder could, however, affect Suburban's operations and to the
extent that there are any environmental liabilities unknown to Suburban or
environmental, health or safety laws or regulations are made more stringent,
there can be no assurance that Suburban's results of operations will not be
materially and adversely affected.
The Research and Special Programs Administration ('RSPA') of the U.S.
Department of Transportation has promulgated Final Rule HM-225 (the 'RSPA Final
Rule'). The RSPA Final Rule, which became effective on August 16, 1997, contains
a statement that a pre-existing RSPA regulation (Hazardous Materials Regulation
177.834(i)) requires operators of cargo tank vehicles to maintain an
'unobstructed view' of the vehicle itself when making deliveries to customer
tanks. This new interpretation espoused by RSPA would have required either two
operators being in attendance during most customer deliveries or one attendant
remaining at a mid-point between the cargo tank vehicle and the customer tank, a
practice that the propane industry, including Suburban, considers to be unsafe.
Suburban and four other major propane marketers filed suit in the U.S. District
Court for the Western District of Missouri challenging the RSPA Final Rule on
the basis that it was promulgated in an arbitrary and capricious manner and in
violation of the Administrative Procedure Act. In March 1998, the plaintiffs in
Suburban's case obtained a preliminary injunction staying and postponing the
effective date of the RSPA Final Rule as it applies to any enforcement of RSPA's
interpretation of Hazardous Materials Regulation 177.834(i). The National
Propane Gas Association, the industry's trade association, also filed a suit
challenging the RSPA Final Rule in the U.S. District Court for the Northern
District of Texas. A decision favorable to the government was rendered by the
court in the National Propane Gas Association's case on March 17, 1999.
Notwithstanding the outcome of the National Propane Gas Association's case, the
preliminary injunction obtained by Suburban and the other propane marketers in
Suburban's case remains in effect. In July 1998, RSPA announced the
establishment of an advisory committee for a negotiated rule-making proceeding
regarding the matters addressed in the RSPA Final Rule. As a result of the
negotiated rulemaking process, a draft Notice of Proposed Rulemaking has been
agreed to by the advisory committee. The proposed regulatory changes were
published on March 22, 1999 in the Federal Register in the form of Notice of
Proposed Rulemaking. This Proposed Rulemaking, which after the expiration of a
comment period would become a Final Rule, imposes certain additional safety
requirements on the propane industry but does not require obligations that would
have a material adverse effect upon Suburban. Assuming the Final Rule is adopted
in a form substantially the same as the Proposed Rulemaking, Suburban would be
prepared to discontinue its involvement in its case. It is currently anticipated
that a Final Rule will be promulgated by July 1, 1999. In the interim, on March
30, 1999, the court granted the joint motion of Suburban, the other propane
marketers and the government to stay the claims in Suburban's case. The
preliminary injunction obtained by Suburban and the other propane marketers in
Suburban's case will remain in effect during the stay.
LEGAL PROCEEDINGS
Suburban's operations are subject to all operating hazards and risks
normally incidental to handling, storing and delivering combustible liquids such
as propane. As a result, Suburban has been, and is likely to continue to be, a
defendant in various legal proceedings and litigation arising in the ordinary
course of business. Suburban is self-insured for general and product, workers'
compensation and automobile liabilities up to predetermined amounts above which
third party insurance applies. Suburban believes that the self-insured
retentions and coverage it maintains are reasonable and prudent. Although any
litigation is inherently uncertain, based on past experience, the information
currently available to it, and the amount of its self-insurance reserves for
known and unasserted self-insurance claims (which was approximately $21.6
million at December 26, 1998), Suburban does not
21
<PAGE>
<PAGE>
believe that these pending or threatened litigation matters will have a material
adverse effect on its results of operations or its financial condition.
THE MEETING
DATE, TIME AND PLACE
The Meeting will be held on Wednesday, May 26, 1999 at 10:00 a.m., local
time, at Suburban's principal executive offices at One Suburban Plaza, 240 Route
10 West, Whippany, New Jersey.
MATTERS TO BE CONSIDERED
At the Meeting, the Common Unitholders will be asked to consider and vote
upon the following proposals included in the Recapitalization. Approval of the
Recapitalization requires approval of each of the Recapitalization proposals.
The Recapitalization cannot be effected without approval of each of the
Recapitalization proposals.
Proposal permitting Surburban to redeem all 7,163,750 outstanding Subordinated
Units and all 220,000 outstanding APUs, all of which are owned by the General
Partner, for $69 million.
Proposal permitting the General Partner to sell its GP Interests and its
Incentive Distribution Rights (as reduced by amendment to the Partnership
Agreement) to the Successor General Partner for $6 million.
Proposal to amend the Partnership Agreements to permit and effect the
Recapitalization.
Proposal to terminate the Distribution Support Agreement and to replace it
with the Liquidity Arrangement.
RECORD DATE
The Board of Supervisors has fixed the close of business on April 12, 1999
as the record date (the 'Record Date') for determining the Common Unitholders
entitled to notice of and to vote at the Meeting. At the close of business on
the Record Date, there were 21,562,500 Common Units outstanding and entitled to
vote at the Meeting, held by approximately 1,069 holders of record.
QUORUM; VOTE REQUIRED
The Partnership Agreement as currently in effect provides that the presence
at the Meeting, either in person or by proxy, of the holders of at least a
majority of the outstanding Common Units is necessary to constitute a quorum at
the Meeting. The Partnership Agreement also provides that, in the absence of a
quorum, the Meeting may be adjourned from time to time by the affirmative vote
of holders of at least a majority of the outstanding Common Units represented
either in person or by proxy.
The Recapitalization Agreement requires the affirmative vote of the holders
of at least a majority of the outstanding Common Units held by persons other
than the General Partner, the Successor General Partner or any of their
affiliates (the 'Public Common Units') for the approval of each of the
Recapitalization proposals. In addition, the Partnership Agreement requires the
affirmative vote of the holders of at least a majority of the outstanding Common
Units and the holders of at least a majority of the outstanding Subordinated
Units entitled to vote, each voting as a separate class, for the approval of
each of the Recapitalization proposals. The General Partner owns all of the
outstanding Subordinated Units and pursuant to the Recapitalization Agreement
has agreed to vote such Subordinated Units in favor of all the Recapitalization
proposals.
RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND THE BOARD OF SUPERVISORS
The Special Committee believes that the Recapitalization is fair to, and in
the best interests of, the Public Common Unitholders and, for the reasons
described in this Proxy Statement and based, in part, on the opinions of
Rothschild and A.G. Edwards, has unanimously recommended approval of the
Recapitalization to the Board of Supervisors. Based on such recommendation, the
Board of Supervisors
22
<PAGE>
<PAGE>
unanimously recommends that Common Unitholders vote FOR approval of each of the
Recapitalization proposals. See 'The Recapitalization -- Background' and
' -- Reasons for the Recapitalization; Recommendations of the Special Committee
and Board of Supervisors.'
PROXIES AND REVOCABILITY OF PROXIES
A proxy card for voting at the Meeting is enclosed with this Proxy
Statement, which is being mailed to all holders of Common Units as of the Record
Date. All Common Units represented at the Meeting by properly executed proxies
received prior to or at the Meeting and not revoked will be voted in accordance
with the instructions contained in such proxies. An executed proxy that does not
indicate how Common Units are to be voted will be voted FOR each of the
Recapitalization proposals. Unless the arrangement between a beneficial owner
and a broker or other nominee holder provides otherwise, brokers and other
nominee holders of Common Units will not have discretionary authorization to
vote Common Units on any of the matters to be voted thereon in the absence of
instructions from the beneficial owners of such Common Units. Beneficial owners
are therefore urged to provide instructions to such brokers or other nominees
concerning how they wish their Common Units to be voted. Abstentions and broker
non-votes are each included in the determination of the number of Common Units
present for quorum purposes. Abstentions and broker non-votes will in effect be
votes against each of the Recapitalization proposals because approval thereof
requires the affirmative vote of the holders of at least a majority of the
outstanding Common Units and the holders of at least a majority of the
outstanding Public Common Units.
The Board of Supervisors is not currently aware of any business to be acted
upon at the Meeting other than approval of the Recapitalization proposals. If,
however, other matters are properly brought before the Meeting, or any
adjournments or postponements thereof, the persons appointed as proxies will
have discretion to vote or act thereon according to their best judgment. Such
adjournments may be for the purpose of soliciting additional proxies. Suburban
does not currently intend to seek an adjournment of the Meeting.
The execution of a proxy will not affect a Common Unitholder's right to
attend the Meeting and vote in person. A Common Unitholder who has given a proxy
may revoke it at any time before its use by (a) delivering an executed written
notice of revocation to the Secretary of Suburban, (b) executing and submitting
a later-dated proxy or (c) attending the Meeting and voting in person.
Attendance at the Meeting will not in itself constitute the revocation of a
proxy.
It is the policy of Suburban to keep confidential proxy cards, ballots and
voting tabulations that identify individual stockholders, except where
disclosure is mandated by law and in other limited circumstances.
COST OF SOLICITATION OF PROXIES
Suburban will bear all costs relating to the solicitation of proxies from
the Common Unitholders and will reimburse banks, brokerage houses, custodians,
nominees, fiduciaries and other persons holding Common Units in their names or
in the names of their nominees for their reasonable expenses in forwarding proxy
material to beneficial owners of Common Units. Suburban has engaged Innisfree
M&A Incorporated, a professional proxy solicitation firm (the 'Solicitation
Agent'), to solicit proxies on behalf of Suburban. Suburban will pay the
Solicitation Agent a fee of $20,000, plus expenses, for its services. In
addition, certain officers, directors and regular employees of the Partnerships
may, without additional compensation, solicit proxies by facsimile, telegraph,
mail, telephone and personal interview. Common Unitholders are urged to send in
their proxies without delay.
COMMON UNITHOLDERS SHOULD NOT SEND ANY UNIT CERTIFICATES WITH THEIR PROXY
CARDS. IF YOU HAVE ANY QUESTIONS OR NEED ANY HELP IN VOTING, YOU MAY CALL
INNISFREE M&A INCORPORATED, SUBURBAN'S PROXY SOLICITOR, AT 1-877-750-5837
(TOLL-FREE).
23
<PAGE>
<PAGE>
THE RECAPITALIZATION
BACKGROUND
In August 1997, Millennium advised Mark A. Alexander, President and Chief
Executive Officer of Suburban, that Millennium had retained a financial advisor
to explore opportunities to realize the highest cash or other value upon the
sale of its interests in Suburban. On August 21, 1997, representatives of
Suburban's management met with Millennium's financial advisor to review a draft
information memorandum containing publicly available information about
Suburban's business that had been prepared by Millennium's financial advisor.
Following the August 21, 1997 meeting, the Elected Supervisors and
Suburban's management concluded that they needed legal and financial advice to
assist them in evaluating the impact on Suburban and the Common Unitholders of
any proposal developed by Millennium's financial advisor. The Elected
Supervisors and management believed these proposals were likely to involve
issues of importance to Suburban, such as amendments to the Partnership
Agreement, modifications to the Distribution Support Agreement and/or the
provision of confidential information to potential buyers (including
competitors). On September 30, 1997, Suburban retained Baker & Botts, L.L.P. to
provide advice regarding the fiduciary duties of the supervisors and other legal
matters, including the need for a unitholder vote and communications with
potential buyers of Millennium's interests in Suburban, that might arise in
connection with a possible transaction. As of October 17, 1997, Suburban
retained Rothschild to render financial advice regarding one or more transaction
proposals.
On September 3, 1997, pursuant to the Distribution Support Agreement,
Millennium made a capital contribution of $10,000,000 to Suburban in exchange
for 100,000 APUs. The Board of Supervisors elected to require this capital
contribution, together with the capital contribution made on November 12, 1997,
as a result of Suburban's lower than anticipated earnings for fiscal 1997 and
the costs incurred in connection with Suburban's operational restructuring
efforts.
In October 1997, Millennium and Millennium's financial advisor advised
Suburban's management that a nationwide propane marketer ('Propane Company A')
was interested in acquiring the stock of the General Partner (thereby indirectly
acquiring the GP Interests, Incentive Distribution Rights, Subordinated Units
and APUs) and merging Propane Company A's operations with those of the Operating
Partnership. The resulting joint venture would be owned jointly by Suburban and
Propane Company A with Suburban having a 58% to 62% interest in the joint
venture and Propane Company A having a 38% to 42% interest in the joint venture.
The proposed joint venture would have been managed by the general partner of
Propane Company A. Propane Company A stated that the stock of the General
Partner had what it termed an indicative value in the range of $75 million.
Propane Company A's preliminary proposal also contemplated cost savings to be
generated from elimination of duplicative expenses and a reduction in capital
expenditures.
At a meeting of the Board of Supervisors on October 29, 1997, George H.
Hempstead, III, an Appointed Supervisor and an executive officer of Millennium
Chemicals Inc., briefed the Board regarding the status of Millennium's
preliminary discussions with Propane Company A. Rothschild then discussed
various potential alternative transactions to Propane Company A's proposal. The
Board concluded that it would be appropriate for Suburban's representatives to
explore the Propane Company A proposal with Millennium and Millennium's
financial advisor and also pursue other transaction alternatives that might be
beneficial to the Common Unitholders.
On November 12, 1997, pursuant to the Distribution Support Agreement,
Millennium made a capital contribution of $12,000,000 to Suburban in exchange
for 120,000 APUs.
On November 14, 1997, Mr. Alexander and representatives of Rothschild met
with representatives of Millennium and Millennium's financial advisor to explore
Propane Company A's proposal. Mr. Alexander and Rothschild identified several
significant disadvantages to the Common Unitholders: (a) the proposed
transaction was, in effect, a transfer of management control from the Board of
Supervisors (three members of which were elected by the unitholders) to Propane
Company A without any apparent premium being paid to the Common Unitholders;
(b) the proposal appeared to be based on forecasts of operating performance of
Propane Company A that could not be verified; and
24
<PAGE>
<PAGE>
(c) potential conflicts of interest between the Common Unitholders and Propane
Company A's general partner did not appear to be adequately addressed.
On November 20, 1997, the Elected Supervisors held a special telephonic
meeting at which Rothschild reported to the Elected Supervisors regarding the
meeting on November 14, 1997. The Elected Supervisors concluded that Propane
Company A's proposal was more advantageous to Propane Company A than to the
Common Unitholders. In light of their perception that Millennium was seriously
interested in pursuing a sale of its interests in Suburban, the Elected
Supervisors directed Suburban's management and Rothschild to continue to review
alternatives to the Propane Company A proposal. Rothschild also informed the
Elected Supervisors that Millennium Chemicals Inc. engaged in preliminary
discussions with a diversified energy company ('Diversified Energy Company A')
involving the swap of certain of its chemical plant assets for Millennium's
General Partner interests and engaged in preliminary discussions regarding the
possibility that another diversified energy company ('Diversified Energy Company
B') would acquire the General Partner interests. Neither of these discussions
rose to the level of a transaction proposal.
On January 13, 1998, members of management and representatives of
Rothschild and Baker & Botts, L.L.P. met with representatives of the general
partner of another nationwide propane marketer ('Propane Company B') and its
counsel to discuss various structures for a possible business combination
between Suburban and Propane Company B. Propane Company B discussed a
transaction proposal in which Suburban would acquire the general partner
interests of Propane Company B for $8 million in cash plus an unspecified number
of Common Units and would also acquire a portion of the subordinated units of
Propane Company B for $30 million in cash. It was also proposed that Propane
Company B would redeem its remaining subordinated units from its general partner
by cancelling a debt obligation of the parent company of Propane Company B's
general partner to Propane Company B.
On January 29, 1998, Mr. Alexander made a presentation to the Board of
Supervisors regarding a potential business combination with Propane Company B
and stated that he would continue to analyze the combination. At the meeting,
John E. Lushefski, an Appointed Supervisor and an executive officer of
Millennium Chemicals Inc., updated the Board on matters relating to the General
Partner interests and informed the Board that Millennium's financial advisor was
continuing its efforts to sell Millennium's interests in Suburban. Mr. Lushefski
confirmed that these discussions were all very preliminary and that it was
difficult to predict the outcome of these discussions. Mr. Lushefski did not
disclose the number of entities that had expressed an interest in response to
Millennium's efforts. He did, however, indicate that Millennium had some
preliminary discussions in this respect with a third nationwide propane marketer
('Propane Company C'). These discussions did not result in a transaction
proposal. Although Suburban and Propane Company B continued to discuss a
possible business combination, they were unable to agree on a proposal.
In February 1998, Suburban was contacted on behalf of the general partner
of a fourth nationwide propane marketer ('Propane Company D') regarding
Suburban's possible interest in acquiring that general partner's interests in
Propane Company D. After initial discussions and preliminary business due
diligence, they were unable to agree on a proposal.
During the next several months, Rothschild and members of management
continued to explore possible alternative transactions and engaged in
discussions with various energy companies. These alternatives consisted of
continuing preliminary and general discussions with Diversified Energy Company
B, Propane Company B and Propane Company D. None of these discussions led to a
transaction proposal.
In February 1998, Suburban was contacted by an investment firm (the
'Investment Firm') regarding a possible purchase of the General Partner's
interests. After an initial meeting, Suburban referred the Investment Firm to
Millennium.
On April 28, 1998, Mr. Alexander, Michael J. Dunn, Jr., Senior Vice
President of Suburban, and Anthony M. Simonowicz, Vice President and Chief
Financial Officer of Suburban, met with representatives of the Investment Firm.
Mr. Alexander provided the Investment Firm with publicly available information
regarding the Partnerships.
25
<PAGE>
<PAGE>
On May 21, 1998, representatives of Millennium met with Millennium's
financial advisor to discuss the Investment Firm's proposal.
On May 28, 1998, Millennium signed a letter of intent (the 'Letter of
Intent') to sell the General Partner's interests to the Investment Firm for $70
million and the assumption of Millennium's approximately $22 million of
remaining support obligations under the Distribution Support Agreement. The
Letter of Intent contained confidentiality provisions and gave the Investment
Firm an exclusive negotiating period through July 27, 1998. Shortly thereafter,
the Investment Firm began a formal and extensive due diligence review of
Suburban's business which lasted several months. Millennium and the Investment
Firm also began to negotiate transaction documents.
On June 25, 1998, the Elected Supervisors met with representatives of Baker
& Botts, L.L.P and Suburban. Baker & Botts, L.L.P. advised the Elected
Supervisors of their fiduciary duties and other legal matters in connection with
a possible transaction between Millennium and the Investment Firm. Following
this meeting, the Elected Supervisors met separately with the chief executive
officer of the Investment Firm to evaluate the Investment Firm's goals and
objectives in investing in Suburban. At the conclusion of this separate meeting,
the Elected Supervisors determined that it was in the best interests of Suburban
and the Common Unitholders to cooperate with the Investment Firm and Millennium
regarding a possible sale of the General Partner's interests. The Elected
Supervisors based their determination, in part, on the Investment Firm's
agreement with Suburban's strategy to grow through acquisitions and the
Investment Firm's demonstrated commitment to having the Board of Supervisors
continue to control Suburban's business.
On July 20, 1998, two of the Elected Supervisors conducted a special
telephonic meeting to review potential conflict of interest issues arising from
the Investment Firm's request that certain members of senior management
participate as investors in an entity formed by the Investment Firm to purchase
the General Partner's interests. A representative of Baker & Botts, L.L.P. and
Suburban participated in this meeting. The Elected Supervisors concluded that it
would be preferable to limit any investments by senior management. It was agreed
that John Hoyt Stookey, Chairman of the Board of Supervisors, would discuss this
matter further with the chief executive officer of the Investment Firm.
By July 27, 1998, the end of the exclusive negotiation period under the
Letter of Intent, the Investment Firm and Millennium had not reached agreement.
Millennium then agreed to extend the exclusive negotiation period under the
Letter of Intent until August 28, 1998.
During August 1998, Suburban had informal discussions with one of its
lenders regarding the lender's interest in extending further credit to Suburban,
with the proceeds to be used for repurchasing all or part of the General
Partner's interests in the event that Millennium and the Investment Firm did not
reach agreement. These discussions were motivated, in part, by Suburban's
increasing cash flow due to its operational restructuring efforts.
On August 28, 1998, the extension of the exclusive negotiation period
between Millennium and the Investment Firm expired and was not extended again.
While willing to continue the discussions with the Investment Firm with respect
to the proposed transaction, Millennium did not deem it beneficial to further
extend the period of exclusivity with the Investment Firm in light of inquiries
by other potential purchasers. As a result, Millennium continued discussions
with the Investment Firm, but also advised the Investment Firm that it would
entertain other transaction proposals.
On September 10, 1998, representatives of the general partner of Propane
Company B met again with Mr. Alexander regarding Propane Company B's interest in
discussing a possible proposal for a business combination. Between September 10,
1998 and October 22, 1998, Suburban, representatives of Rothschild and the
general partner of Propane Company B engaged in informal discussions regarding a
possible business combination, but none of these discussions led to a proposal.
On September 11, 1998, after preliminary discussions with Rothschild, the
investment banking subsidiary of a major financial institution (the 'Financial
Services Company') proposed to purchase the General Partner's interests for $70
million and the assumption of Millennium's approximately $22 million of
remaining support obligations under the Distribution Support Agreement. On
September 15, 1998, Suburban entered into a confidentiality agreement with the
Financial Services Company, and
26
<PAGE>
<PAGE>
Messrs. Alexander, Dunn and Simonowicz met with representatives of the Financial
Services Company to disclose business information regarding Suburban.
On September 17, 1998, the Financial Services Company increased its
proposed purchase price to $75 million and Millennium entered into an agreement
to negotiate exclusively with the Financial Services Company extending through
October 15, 1998. Thereafter, representatives of the Financial Services Company
began due diligence activities which continued for the next three weeks.
In the course of such due diligence, the Financial Services Company
expressed to Suburban an interest in a transaction whereby, after it purchased
the General Partner's interests, it would tender the Subordinated Units and the
APUs to Suburban for redemption and management would invest in the acquiror of
the General Partner's interests. Suburban indicated an interest in jointly
developing a transaction with the Financial Services Company that might involve
a redemption.
On September 30, 1998, the Elected Supervisors conducted a special
telephonic meeting that was also attended by Rothschild, representatives of
Baker & Botts, L.L.P., Messrs. Alexander, Dunn and Simonowicz and Suburban
management. Mr. Simonowicz and Rothschild reviewed Suburban's financial
performance over the past three years, emphasizing the continued improvement in
operating cash flow and liquidity. Rothschild analyzed the Investment Firm and
Financial Services Company proposals. Rothschild then compared these proposals
to a possible recapitalization of Suburban that would include the redemption of
the Subordinated Units and APUs and the purchase of the GP Interests and
Incentive Distribution Rights by Suburban's management. In the course of
reviewing the proposals of the past year, and in light of the continuing
improvement in operating cash flow and liquidity, the Elected Supervisors
recognized that a recapitalization proposal that had the added benefit of having
management acquire the General Partner's interests, might create greater value
for the Common Unitholders than the third party proposals reviewed during the
past year. The Elected Supervisors also noted that the proposed recapitalization
could include a component requiring the elimination or modification of the
Incentive Distribution Rights. The Elected Supervisors concluded that the
concept of a recapitalization appeared to have merit and instructed management
to continue to work with Rothschild to develop a definitive proposal.
Mr. Alexander and Rothschild then contacted Millennium to discuss a
recapitalization proposal. Millennium advised them that its exclusivity
agreement with the Financial Services Company prevented Millennium from
discussing a recapitalization proposal. On October 1, 1998, after Millennium
received written consent from the Financial Services Company to discuss
alternative transactions with (and only with) representatives of Suburban, Mr.
Alexander and Rothschild met with Millennium to discuss a recapitalization
proposal.
Subsequently, the Financial Services Company indicated to Suburban and
Millennium that, due to market conditions, it no longer believed that it could
raise the financing to complete its proposed purchase of the General Partner's
interests.
On October 21, 1998, the Elected Supervisors conducted a special telephonic
meeting to consider valuation issues related to the purchase of the GP Interests
and Incentive Distribution Rights by senior management of Suburban discussed as
part of the recapitalization proposal raised at the Elected Supervisor's meeting
on September 30, 1998. Rothschild, Mr. Alexander and Suburban management
participated in the special meeting. The Elected Supervisors expressed their
position that, as part of any recapitalization proposal, the percentage interest
of the Incentive Distribution Rights should be significantly reduced as a way to
increase value for the Common Unitholders, but that such percentage should not
be reduced to a level that was so low that it would have the effect of removing
the incentive for management to promote the growth of Suburban. Rothschild was
requested to develop a specific proposal in this regard.
On October 22, 1998, the Board of Supervisors held a special telephonic
meeting and approved the appointment of the Elected Supervisors as the Special
Committee for the purpose of evaluating and making a recommendation on a
possible recapitalization involving management as raised at the meeting of the
Elected Supervisors on September 30, 1998. Mr. Hempstead, the only Millennium
representative attending the meeting, abstained from voting on the appointment
of the Special Committee. The Rothschild analysis of various potential revisions
of the general partner structure and Incentive
27
<PAGE>
<PAGE>
Distribution Rights and significant changes to the current general partner
rights was reviewed by the Board. This analysis included the following
components:
Increasing Common Unitholder value while preserving some level of
management incentive.
Allowing the Board to convert the Incentive Distribution Rights to Common
Units after a period of years following the completion of a
recapitalization so as to further align management's interests with the
Public Common Unitholders.
Requiring general partner distributions to be set aside for a period of
time so as to create greater incentive for management to promote
Suburban's growth.
On October 26, 1998, the Special Committee met to discuss the
recapitalization proposal and recent operations. Representatives of Rothschild,
Weil, Gotshal & Manges LLP, counsel to Suburban, Baker & Botts, L.L.P., Messrs.
Alexander, Dunn and Simonowicz and Suburban management also attended the
meeting. (Harold R. Logan, Jr., a member of the Special Committee, and a
representative of Baker & Botts, L.L.P. participated by conference telephone).
At this meeting, the Special Committee voted to retain Rothschild as its
financial advisor and also voted to retain Baker & Botts, L.L.P., which had been
providing advice to the Elected Supervisors, as its legal advisor. Mr.
Simonowicz presented a review of performance and outlook which indicated
Suburban's continued operational improvement over prior periods.
Mr. Alexander then outlined the recapitalization proposal as follows:
The 7,163,750 Subordinated Units and 220,000 APUs currently owned by the
General Partner would be redeemed by Suburban. The redemption price would
be funded from borrowings by the Operating Partnership of approximately
$70 million. The redemption would increase Common Unitholder ownership
from 74% to 98%.
The Distribution Support Agreement would be terminated and Suburban would
establish a liquidity arrangement to enhance Suburban's ability to pay the
Minimum Quarterly Distribution through March 31, 2001.
A limited liability company to be formed by senior management would
purchase the GP Interests and the Incentive Distribution Rights for
approximately $5 million with proceeds of a loan from a bank or other
financial institution.
The Partnership Agreement would be amended to permit the proposed
recapitalization.
Approvals of the Common Unitholders, the holders of the Subordinated Units
and the holders of at least a majority in principal amount of the Senior
Notes would be required.
Mr. Alexander concluded by recommending the recapitalization proposal as
the best option, in his view, for the Common Unitholders compared with previous
alternative proposals.
Rothschild then outlined the terms of a possible restructuring of the
Incentive Distribution Rights and possible limitations on the GP Interests along
the lines suggested by the Elected Supervisors as follows:
The Incentive Distribution Rights would be limited to a total of 13% in
excess of the base distribution of 2% on the GP Interests of incremental
Available Cash for all distributions above $2.20 per Common Unit per year,
a significant reduction from current levels.
Suburban would have the option, at any time after the fifth anniversary of
the closing of the proposed recapitalization, to acquire the Incentive
Distribution Rights at their fair market value. This option would be
exercisable at the discretion of the Board of Supervisors.
Certain distributions to the new general partner would be available to
Suburban to support distributions to the Common Unitholders until March
31, 2001 and thereafter would be used solely to pay down the debt incurred
by the new general partner to acquire the GP Interests until such debt was
paid in full.
Rothschild and management of Suburban were instructed to continue refining
the recapitalization proposal, negotiating definitive agreements with Millennium
and arranging financing in order to present a definitive set of proposals to the
Board of Supervisors.
28
<PAGE>
<PAGE>
On October 27, 1998, Millennium Chemicals Inc. publicly announced that it
intended to hold its investment in Suburban as a discontinued operation and that
it had adopted a plan to dispose of its investment.
On October 30, 1998, anticipating the need for borrowings to finance the
Recapitalization, Suburban entered into a commitment letter with The Bank of New
York.
On November 5, 1998, the Special Committee held a special telephonic
meeting at which various issues were discussed with a representative of Baker &
Botts, L.L.P., including the fiduciary duties of the Special Committee, the
terms of the engagement letter with Rothschild, the effect of the
recapitalization proposal on the composition of the Board of Supervisors, the
changes to the Partnership Agreement that would result from the recapitalization
proposal, certain issues raised in the negotiations with Millennium on the
Recapitalization Agreement and the desirability of amending Mark Alexander's
Employment Agreement so that a sale of the General Partner's interests as
contemplated by the Recapitalization would not constitute a change of control
that would entitle Mr. Alexander to severance payments if he voluntarily
terminates his employment.
On November 20, 1998, the Special Committee met with its legal and
financial advisors to consider the Recapitalization. Management of Suburban was
present to give a further review of Suburban's operating performance and to
report on the status of negotiations with Millennium and any remaining
negotiating issues, as well as the status of various proposals received by
management to finance the purchase of the General Partner's interests.
Rothschild then delivered a written presentation concerning the financial
effects of the Recapitalization, after which the Special Committee entered into
an extensive discussion of the financial aspects of the Recapitalization with
Rothschild. Rothschild then delivered its oral opinion (subsequently confirmed
in writing) that the Recapitalization is fair, from a financial point of view,
to the Public Common Unitholders. The Special Committee then met separately with
legal counsel to further discuss the legal aspects of the Recapitalization. The
Special Committee informed management of its position on the remaining
negotiating issues with Millennium and instructed management to finalize
negotiations with Millennium on these issues. Pending the resolution of these
issues, the Special Committee deferred voting on the recommendation of the
Recapitalization and scheduled a telephonic meeting for the morning of November
21, 1998 to receive management's report on the outcome of its negotiations with
Millennium.
On November 21, 1998, the Special Committee held a telephonic meeting at
which management reported on the outcome of its negotiations with Millennium.
Finding that all open issues had been resolved satisfactorily to Suburban and
the Common Unitholders, and after further discussion and based on the advice of
its advisors and Rothschild's opinion, the Special Committee unanimously
determined that the Recapitalization is fair to, and in the best interests of,
the Public Common Unitholders and unanimously voted to recommend that the Board
of Supervisors approve the Recapitalization and recommend the Recapitalization
to the Common Unitholders.
On November 21, 1998, immediately following the vote of the Special
Committee to recommend approval of the Recapitalization to the Board of
Supervisors, the Board of Supervisors held a telephonic meeting at which the
Special Committee informed the Board of Supervisors of its determination and
recommendation that the Board of Supervisors approve the Recapitalization and
recommend the Recapitalization to the Common Unitholders. Based on such
recommendations, the Board of Supervisors unanimously determined that the
Recapitalization is fair to, and in the best interests of, the Public Common
Unitholders and unanimously voted to approve the Recapitalization and to
recommend that the Common Unitholders vote for the Recapitalization at the
Meeting. The Board of Supervisors then approved drafts of the Recapitalization
Agreement and GP Interest Purchase Agreement and authorized the officers of
Suburban to execute and deliver such agreements substantially in the forms
approved at the meeting.
Over the course of the next few days, definitive documents for the
Recapitalization were finalized by counsel for Suburban, Millennium and the
Special Committee and, after the close of business on November 27, 1998,
Millennium, the General Partner, Suburban and the Successor General Partner
executed the Recapitalization Agreement and Millennium, the General Partner and
the Successor General Partner executed the GP Interest Purchase Agreement. On
November 30, 1998, Suburban and Millennium each publicly announced the
Recapitalization.
29
<PAGE>
<PAGE>
On December 3, 1998, Mr. Alexander, Mr. Dunn, Mr. Simonowicz and Robert M.
Plante, Treasurer of Suburban, made a series of presentations about the
Recapitalization to various analysts that follow Suburban's business and the
propane industry generally. On the same day, Suburban filed a Current Report on
Form 8-K with the SEC concerning these presentations, which report is
incorporated by reference in this Proxy Statement.
On December 14, 1998, the Special Committee and A.G. Edwards entered into
an engagement letter pursuant to which A.G. Edwards was engaged to deliver a
second opinion regarding the fairness of the Recapitalization, from a financial
point of view, to the Public Common Unitholders.
On December 22, 1998, the Successor General Partner entered into a
commitment letter with Mellon for the provision of a $6 million loan to be used
to purchase the GP Interests and Incentive Distribution Rights from the General
Partner.
On January 22, 1999, two of the members of the Special Committee held a
special meeting at which A.G. Edwards delivered its written presentation
concerning the financial aspects of the Recapitalization and its written opinion
that the Recapitalization is fair, from a financial point of view, to the Public
Common Unitholders.
On February 3, 1999, the Special Committee held a special meeting at which
management informed the Special Committee that it now believed that Suburban's
cash on hand and borrowing capacity under the Existing Credit Agreement would be
sufficient to effect the Recapitalization and finance Suburban's future
operations and capital needs and that therefore it would not be necessary for
Suburban to enter into a new credit facility. The Special Committee deferred
making a recommendation on the two financing alternatives and instructed
management to prepare a detailed presentation on the advantages and
disadvantages of each alternative.
On February 3, 1999, at a regularly scheduled meeting of the Board of
Supervisors, Mr. Logan, a member of the Special Committee, summarized for the
full Board the A.G. Edwards fairness opinion.
On February 5, 1999, the Special Committee held a special telephonic
meeting at which management gave a written presentation concerning the financing
alternatives for the Recapitalization, including an analysis of the sources and
uses of cash on hand, the provisions of a proposed credit facility with The Bank
of New York, the anticipated amendments that would be made to the Existing
Credit Agreement, the additional transactional costs and interest expense
associated with the new facility with The Bank of New York, and the varying
effects of the two alternatives on Suburban's financial ratios and covenant
package. Based on this presentation, the Special Committee then approved
management's proposal to finance the Recapitalization primarily with cash on
hand and, if necessary, borrowings under the Existing Credit Agreement.
On February 5, 1999, following the Special Committee meeting, the Board of
Supervisors met by telephone and received the Special Committee's recommendation
on financing the Recapitalization. The Board of Supervisors then unanimously
approved management's financing proposal.
On February 18, 1999, the Special Committee held a special telephonic
meeting at which it recommended to the Board of Supervisors an increase in the
quarterly distribution on the Common Units from $0.50 to $0.5125 per unit per
quarter (from $2.00 to $2.05 per unit per year), subject to the completion of
the Recapitalization and effective for the fiscal quarter in which it is
completed.
On February 18, 1999, following the Special Committee meeting, the Board of
Supervisors held a special telephonic meeting at which the Board of Supervisors
received the recommendation of the Special Committee regarding the increase in
the quarterly distribution on the Common Units from $0.50 to $0.5125 per unit
per quarter, subject to the completion of the Recapitalization and effective for
the fiscal quarter in which it is completed. Based on the Special Committee's
recommendation, the Board of Supervisors approved the proposed increase.
On February 25, 1999, A.G. Edwards met with the Chairman of the Board of
Supervisors and presented its written presentation concerning the financial
aspects of the Recapitalization and its fairness opinion that it delivered to
the two other members of the Board of Supervisors on January 22, 1999.
30
<PAGE>
<PAGE>
On March 15, 1999, Millennium, the General Partner, Suburban and the
Successor General Partner executed the Amended and Restated Recapitalization
Agreement.
On April 14, 1999, the Special Committee held a special telephonic meeting
with its legal and financial advisors. At this meeting, Rothschild and A.G.
Edwards delivered their oral opinions (subsequently confirmed in writing as of
the date of this Proxy Statement) that, as of such date, the Recapitalization
was fair, from a financial point of view, to the Public Common Unitholders.
After discussion and based on the advice of its advisors and the opinions of
Rothschild and A.G. Edwards, the Special Committee unanimously reaffirmed its
determination that the Recapitalization is fair to, and in the best interests
of, the Public Common Unitholders and unanimously voted to recommend that the
Board of Supervisors approve the Recapitalization and recommend the
Recapitalization proposals to the Common Unitholders.
On April 14, 1999, immediately after the Special Committee meeting, the
Board of Supervisors held a telephonic meeting at which the Special Committee
reaffirmed to the Board of Supervisors its determination and recommendation that
the Board of Supervisors approve the Recapitalization and recommend the
Recapitalization to the Common Unitholders. Based on such recommendations, the
Board of Supervisors attending the telephonic meeting (Mr. Lushefski was absent)
unanimously determined that the Recapitalization is fair to, and in the best
interests of, the Public Common Unitholders and unanimously voted to approve the
Recapitalization and to recommend that the Common Unitholders vote for the
Recapitalization proposals at the Meeting. The Board of Supervisors then
ratified the execution of the Amended and Restated Recapitalization Agreement
and approved the forms of the Amended Partnership Agreements, documents related
to the new compensation deferral plan and related trust, the commitment letter
for the proposed amendments to the Existing Credit Agreement and the proposed
amendments to the Senior Note Agreement, the put arrangement with Mellon and
other documents and authorized the officers of Suburban to execute and deliver
such agreements substantially in the forms approved at the meeting. On the same
day of this telephonic meeting, all of the directors (Mr. Lushefski included)
executed a written consent unanimously confirming all of the actions taken at
the telephonic meeting.
As of April 15, 1999, Millennium, the General Partner and the Successor
General Partner executed an amendment to GP Interest Purchase Agreement to make
a technical correction to one of the representations and warranties given by the
General Partner and Millennium.
REASONS FOR THE RECAPITALIZATION; RECOMMENDATIONS OF THE SPECIAL COMMITTEE AND
BOARD OF SUPERVISORS
The Special Committee's unanimous determination that the Recapitalization
is fair to, and in the best interests of, the Public Common Unitholders and its
unanimous recommendation to the Board of Supervisors to approve the
Recapitalization was based on a number of factors. In view of the wide variety
of factors considered in connection with its evaluation of the Recapitalization,
the Special Committee did not find it practicable to, and did not, quantify or
otherwise attempt to assign relative weights to the specific factors considered
in reaching their determination, except that the Special Committee put
significant weight on the opinions of its financial advisors. In addition,
individual members of the Special Committee may have given different weights to
different factors. In making the recommendation, the members of the Special
Committee exercised their independent business judgment assisted by their
independent financial and legal advisors and based upon their own business
knowledge and experience.
During the course of its deliberations, the Special Committee, with the
assistance of management and its legal and financial advisors, considered a
number of factors, including the following potential advantages of the
Recapitalization to Common Unitholders:
The Common Unitholders would participate in all distributions of Available
Cash from Operating Surplus, receiving 98% of all distributions up to
$0.55 per unit per quarter and 85% of all distributions in excess of that
amount. The benefits of any increased cash flow from internal growth or
acquisitions (partially offset by lower interest income or higher interest
expense, if any) would therefore accrue immediately and primarily to the
Common Unitholders, instead of
31
<PAGE>
<PAGE>
to the Subordinated Units ($14.6 million to pay the Minimum Quarterly
Distribution on the Subordinated Units for a full year) and the APUs
(which would have had to be redeemed for $22 million before the Common
Unitholders would be entitled to distributions above the Minimum
Quarterly Distribution).
Distributions to the General Partner (including as the holder of the
Incentive Distribution Rights) would be limited to 15% of all Available
Cash from Operating Surplus distributed over $0.55 per Common Unit per
quarter. Currently, the General Partner is also entitled to 25% of all
distributions over $0.633 per Common Unit in any quarter and 50% of any
distributions over $0.822 per Common Unit in any quarter.
All of Suburban's executives and key employees who will become members of
the Successor General Partner will surrender substantially all of their
Restricted Units, prior to their vesting, in exchange for the right to
participate in a new compensation deferral plan of the Partnerships.
Suburban will deposit a number of Common Units equal to the number of
Restricted Units surrendered by these members into a trust. Suburban will
also deposit all quarterly distributions it may pay on these Common Units
into the trust. Under the compensation deferral plan, receipt of the
Common Units will be deferred until the date on which the GP Loan is
repaid in full or the seventh anniversary of the Closing, whichever the
deferring member may choose, but subject to the earlier distribution and
forfeiture provisions of the compensation deferral plan. Receipt of
$930,000 per year of quarterly distributions on these Common Units will be
deferred by the members as part of the Management Cash Reserve under the
compensation deferral plan to support the Minimum Quarterly Distribution
through the fiscal quarter ending March 31, 2001. In addition, if the
Operating Partnership elects or is required to purchase the GP Loan from
Mellon, the Common Units deposited in the trust may, at Suburban's or the
Operating Partnership's discretion, be forfeited and cancelled (and the
related distributions may be forfeited).
The Recapitalization will not only end any uncertainty arising from
Millennium Chemicals Inc.'s announced plan to sell its interests in
Suburban but will also create greater value for the Public Common
Unitholders than a transaction involving the sale of these interests to an
unrelated third party.
Management's economic interest in Suburban would be increased by reason of
its ownership through the Successor General Partner of the 2% general
partner interest and the Incentive Distribution Rights, which would
further align the interests of management and the Common Unitholders and
provide further incentives to management to enhance the long-term
prospects of Suburban.
The Board of Supervisors (with the approval of a majority of the Elected
Supervisors) would have the option, exercisable after five years from
Closing, to cause all, but not less than all, of the Incentive
Distribution Rights to be converted into Common Units having a value equal
to the fair market value of the Incentive Distribution Rights.
Suburban would establish the $22.0 million Liquidity Arrangement to
replace the Distribution Support Agreement.
As a result of the elimination of the class of Management Supervisors on
the Board, the three Elected Supervisors would constitute a majority of
the Board of Supervisors.
Matters that previously required the approval both of the holders of a
majority of the Common Units and of the holders of a majority of the
Subordinated Units, voting separately, would now require only the approval
of the holders of a majority of the Common Units.
The right of the Common Unitholders to accrue arrearages with respect to
the Minimum Quarterly Distribution before payments on Incentive
Distribution Rights would continue through the fiscal quarter ending
March 31, 2001.
32
<PAGE>
<PAGE>
During the course of its deliberations, the Special Committee also
considered the following potential disadvantages of the Recapitalization (also
see 'Risk Factors' on page 17):
The Recapitalization will significantly reduce Suburban's cash resources
and lower interest income on those cash resources, thereby increasing the
likelihood that Suburban will need to borrow additional funds in the
future, which would increase Suburban's leverage and interest expenses.
This will increase the risk that there will be insufficient cash to pay
any distributions on the Common Units, and could make Suburban more
vulnerable to changes in general economic conditions and industry changes,
adversely affect its ability to finance future operations and capital
needs and limit its ability to pursue acquisitions and other business
opportunities.
The Liquidity Arrangement would not offer all the benefits of the
Distribution Support Agreement, which enabled Suburban to require a third
party with greater financial resources than Suburban to make a capital
contribution to cover certain shortfalls in the payment of the Minimum
Quarterly Distribution, without any obligation to repay such capital
contribution or pay interest thereon (although such capital contribution
would have to be repaid in full prior to making any distributions to
Common Unitholders over the Minimum Quarterly Distribution). Suburban is
in effect setting aside some of its own resources that could otherwise
have been used for distributions, working capital needs or other purposes,
which may adversely affect Suburban's operations. Consequently, the cost
of the Liquidity Arrangement, if used, would be indirectly borne by the
Common Unitholders.
The Operating Partnership has agreed to purchase from Mellon the $6
million note issued by the Successor General Partner to Mellon if an event
of default under such note occurs.
As a result of the accelerated vesting of the Restricted Units held by
management and other employees, the interests of the existing Common
Unitholders would be subject to minimal dilution.
The period during which the Common Units will be entitled to arrearages
and to vote on the issuance of additional Common Units or securities
senior to the Common Units will be shortened by at least a year as a
result of the redemption of the Subordinated Units.
The Special Committee also considered the following factors:
The oral and written presentations of Rothschild and A.G. Edwards and the
opinions of Rothschild and A.G. Edwards that the Recapitalization is fair,
from a financial point of view, to the Public Common Unitholders, as well
as the reputations and qualifications of Rothschild and A.G. Edwards.
The financial condition, results of operations, business and prospects of
Suburban, including recent improvements due to Suburban's operational
restructuring.
The cash flow projections of Suburban.
The payment history on the Common Units and Subordinated Units and the
capital contributions made pursuant to the Distribution Support Agreement.
The terms of the Recapitalization Agreement, the GP Interest Purchase
Agreement, the Amended Partnership Agreements and the amendments to the
Existing Credit Agreement and the Senior Note Agreement.
The conditions to the consummation of the Recapitalization, including the
approval of the holders of at least a majority of the outstanding Public
Common Units.
The background that resulted in the development of the structure of the
Recapitalization.
The conflicts of interest in structuring the Recapitalization.
The consequences of maintaining the Subordinated Units and APUs
outstanding and continuing to have the general partner owned by
Millennium.
The ability of the Elected Supervisors to terminate the Recapitalization
Agreement at any time between the signing of the agreement and the date of
the Proxy Statement upon the payment to Millennium of $2 million.
33
<PAGE>
<PAGE>
BASED ON THE UNANIMOUS RECOMMENDATION OF THE SPECIAL COMMITTEE, THE BOARD
OF SUPERVISORS UNANIMOUSLY RECOMMENDS THAT THE COMMON UNITHOLDERS VOTE FOR EACH
OF THE RECAPITALIZATION PROPOSALS.
OPINION OF ROTHSCHILD INC.
Rothschild was retained by the Special Committee to act as its financial
advisor in connection with the Recapitalization. At the November 20, 1998
meeting of the Special Committee, Rothschild rendered to the Special Committee
its oral opinion (which opinion was subsequently delivered to the Special
Committee in written form dated as of November 20, 1998) to the effect that, as
of the date of such opinion and based on the matters set forth therein, the
Recapitalization was fair, from a financial point of view, to the Public Common
Unitholders. At the April 14, 1999 meeting of the Special Committee, Rothschild
rendered to the Special Committee its oral opinion to the effect that, as of the
date of such opinion and based on the matters set forth therein, the
Recapitalization was fair, from a financial point of view, to the Public Common
Unitholders. Rothschild confirmed its oral opinion with a written opinion also
dated April 14, 1999 (the 'Rothschild Opinion').
THE FULL TEXT OF THE ROTHSCHILD OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW
UNDERTAKEN AS OF APRIL 14, 1999, IS ATTACHED AS ANNEX D TO THIS PROXY STATEMENT
AND IS INCORPORATED IN THIS PROXY STATEMENT BY REFERENCE. THE DESCRIPTION OF THE
ROTHSCHILD OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE ROTHSCHILD OPINION ATTACHED AS ANNEX D. COMMON UNITHOLDERS ARE URGED TO READ
THE ROTHSCHILD OPINION IN ITS ENTIRETY.
Rothschild is a nationally recognized investment banking firm. The Special
Committee selected Rothschild because of the firm's reputation and experience in
investment banking in general and because of its familiarity with, and prior
work for, Suburban. Rothschild, as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers, acquisitions, recapitalizations and similar
transactions.
In connection with rendering its opinions, Rothschild, among other things:
reviewed certain publicly available financial and other data with respect
to Suburban and the Operating Partnership, including (a) the consolidated
financial statements of Suburban for the fiscal years ended September 28,
1996 and September 27, 1997, the nine-month periods ended June 28, 1997
and June 27, 1998 and, (b) the filed form of Suburban's Annual Report on
Form 10-K for the fiscal year ended September 26, 1998, the filed form of
Suburban's Quarterly Report on Form 10-Q for the three months ended
December 26, 1998 and certain other financial and operating data relating
to Suburban made available to Rothschild from published sources and from
the internal records of Suburban;
reviewed a draft dated April 10, 1999 of Amendment No. 3 to Suburban's
Preliminary Proxy Statement, reviewed the Recapitalization Agreement, the
GP Interest Purchase Agreement, the forms of the Amended Partnership
Agreements and the form of agreement terminating the Distribution Support
Agreement;
reviewed current and historical market prices and trading volumes of the
Common Units, the payment history of distributions on the Common Units and
the Subordinated Units and the capitalization and financial condition of
Suburban;
compared Suburban, from a financial point of view, with certain other
publicly traded partnerships in the propane industry;
considered the financial terms, to the extent publicly available, of
selected recent transactions in the propane industry;
reviewed and discussed with the Elected Supervisors and management of
Suburban certain information of a business and financial nature regarding
Suburban furnished to Rothschild by Suburban, including financial
forecasts and related assumptions of Suburban;
reviewed and discussed with Suburban's management historical and
forecasted capital expenditure requirements for both maintenance and other
operational purposes;
34
<PAGE>
<PAGE>
reviewed and discussed with Suburban's management the terms of the
amendments to the Existing Credit Agreement and the Senior Note Agreement;
reviewed and discussed with Suburban's management arrangements for the
purchase of the GP Interests by the Successor General Partner, financing
documents for the GP Interest Purchase and the terms of the new
compensation deferral plan;
made inquiries regarding and discussed the Recapitalization with
respective counsel to the Special Committee and Suburban;
performed pro forma capitalization analyses and used five-year financial
projections prepared by management for fiscal years 1999 through 2003, in
order to compute pro forma potential distributions and pro forma unit
coverage and compared this to the status quo case; and
performed such other analyses and examinations and considered such other
financial, economic and market criteria as Rothschild deemed relevant and
appropriate.
In connection with its review, Rothschild relied upon and assumed, without
independent verification, the accuracy and completeness of all information
utilized, reviewed or considered by Rothschild. With respect to financial
forecasts for Suburban provided to Rothschild, Rothschild assumed that such
forecasts were reasonably prepared on bases reflecting the best available
estimates and judgments of Suburban's management at the time of preparation as
to the future financial performance of Suburban. Rothschild used Suburban
management's base case operating projections for 1999 to 2003 (the 'Management
Case') and downside case operating projections for 1999 to 2003 (the 'Rothschild
Base Case'). Rothschild also assumed that there had not occurred any material
change in Suburban since the dates on which Suburban's most recent financial
statements were made available to Rothschild.
The Special Committee did not, however, engage Rothschild to, and therefore
Rothschild did not, verify the accuracy or completeness of any such information.
Rothschild has relied upon the assurances of the management of Suburban that
management is not aware of any facts that would make such information inaccurate
or misleading. Rothschild relied on advice of respective counsel to the Special
Committee and Suburban and independent accountants to Suburban as to all legal
and financial reporting matters with respect to Suburban and the
Recapitalization. Rothschild did not conduct a physical inspection of the
properties or facilities of Suburban nor did it make or obtain any independent
evaluation or appraisals of any such properties or facilities or assets and
liabilities. The Rothschild Opinion is based on economic, monetary, market and
other conditions as in effect on, and the information made available to
Rothschild, as of the date of this Proxy Statement. Rothschild further assumed
that the Recapitalization would be consummated substantially in accordance with
the terms described in the Recapitalization Agreement and GP Interest Purchase
Agreement without waiver of any of the conditions or obligations thereunder.
The following is a summary of the material analyses performed by Rothschild
in arriving at the Rothschild Opinion.
Pro Forma Financial Analysis. Rothschild analyzed the pro forma impact of
the Recapitalization on Suburban based on 1998 results for Suburban, 1998
results adjusted for non-recurring items ('Adjusted 1998'), the Management Case
and the Rothschild Base Case. Rothschild also assumed that the annualized
quarterly distribution would be increased from the Minumum Quarterly
Distribution of $2.00 per Common Unit to a quarterly distribution of $2.05 per
Common Unit as part of the Recapitalization. Forecast potential Common Unit
distribution, potential Common Unit distribution per unit and potential General
Partner distribution were analyzed before and after debt paydown/reserve. All
other forecast analyses were performed only after debt paydown/reserve, that is,
available cash (distributable cash flow (EBITDA less interest expense,
maintenance capital expenditures and cash taxes) ('DCF') less the annualized
minimum quarterly distribution ('MQD')) in each year would first be used to
paydown/reserve in an amount equal to the greater of (i) any debt outstanding
that was incurred in connection with the Recapitalization or (ii) $5 million.
35
<PAGE>
<PAGE>
Under this scenario, the pro forma impact on Suburban's capitalization is
as follows:
Common Units outstanding would increase by 681,320 Common Units, from
approximately 21.6 million Common Units to 22.2 million Common Units, as a
result of the conversion of Restricted Units into Common Units or the
deposit by Suburban into a trust for the members of the Successor General
Partner of Common Units in exchange for surrendered Restricted Units;
7.2 million Subordinated Units would be redeemed, and there would be a
corresponding decrease in the General Partner unit equivalent as a result
of the redemption of the Subordinated Units;
total units outstanding (excluding the General Partner unit equivalent)
would be reduced from 28.7 million units to 22.2 million units;
debt outstanding at December 26, 1998 would increase by approximately $25
million from $428 million to $453 million;
net debt outstanding would increase from $374 million to $452 million; and
the quarterly distribution would be increased from $2.00 per Common Unit
to $2.05 per Common Unit on an annualized basis.
In addition, Rothschild analyzed the impact of the Recapitalization on
Suburban's
DCF;
selected coverage ratios including (a) EBITDA less capital expenditures
divided by net interest and Common Unit distribution, (b) DCF divided by
Common Unit distribution and General Partner distribution, (c) DCF per
unit and (d) DCF per unit divided by the annualized MQD; and
selected credit ratios including (a) net debt divided by EBITDA and (b)
EBITDA divided by net interest.
The results of Rothschild's pro forma analysis for these items, based on
1998 and Adjusted 1998 results for Suburban, the Management Case and the
Rothschild Base Case, are as follows:
<TABLE>
<CAPTION>
ACTUAL 1998 ADJUSTED 1998
------------------------------------ ------------------------------------
BEFORE PRO FORMA FOR BEFORE PRO FORMA FOR
RECAPITALIZATION RECAPITALIZATION RECAPITALIZATION RECAPITALIZATION
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
DCF ($ in millions)........................... 62.1 57.6 58.8 54.3
EBITDA minus Capital Expenditures Divided by
Net Interest plus Common Unit
Distribution................................ 1.24x 1.14x 1.20x 1.10x
DCF Divided by Common Unit Distribution and
General Partner Distribution................ 1.41x 1.26x 1.34x 1.19x
DCF Per Unit Divided by Annualized MQD........ 1.06x 1.29x 1.00x 1.22x
Net Debt Divided by EBITDA.................... 3.55x 4.29x 3.66x 4.43x
EBITDA Divided by Net Interest................ 3.44x 3.00x 3.33x 2.91x
</TABLE>
<TABLE>
<CAPTION>
FORECAST MANAGEMENT CASE FORECAST ROTHSCHILD BASE CASE
------------------------------------ ------------------------------------
BEFORE PRO FORMA FOR BEFORE PRO FORMA FOR
RECAPITALIZATION RECAPITALIZATION RECAPITALIZATION RECAPITALIZATION
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
DCF ($ millions)
1999..................................... 60.1 56.2 60.1 56.2
2000..................................... 65.8 63.0 54.9 51.6
EBITDA minus Capital Expenditures Divided by
Net Interest plus Common Unit Distribution
1999..................................... 1.22x 1.12x 1.22x 1.12x
2000..................................... 1.30x 1.21x 1.15x 1.07x
DCF Divided by Common Unit Distribution and
General Partner Distribution
1999..................................... 1.37x 1.23x 1.37x 1.23x
2000..................................... 1.50x 1.38x 1.25x 1.13x
</TABLE>
(table continued on next page)
36
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
FORECAST MANAGEMENT CASE FORECAST ROTHSCHILD BASE CASE
------------------------------------ ------------------------------------
BEFORE PRO FORMA FOR BEFORE PRO FORMA FOR
RECAPITALIZATION RECAPITALIZATION RECAPITALIZATION RECAPITALIZATION
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
DCF Per Unit Divided by Annualized MQD
1999..................................... 1.03x 1.26x 1.03x 1.26x
2000..................................... 1.12x 1.42x .94x 1.16x
Net Debt Divided by EBITDA
1999..................................... 3.53x 4.27x 3.53x 4.27x
2000..................................... 3.26x 3.94x 3.60x 4.36x
EBITDA Divided by Net Interest
1999..................................... 3.46x 3.07x 3.46x 3.07x
2000..................................... 3.75x 3.43x 3.39x 3.06x
</TABLE>
In addition, for both the Management Case and the Rothschild Base Case,
Rothschild analyzed the pro forma effects on potential Common Unit
distributions, potential Common Unit distributions per unit and potential
General Partner distributions for the 1999 and 2000 fiscal years. In light of
the uncertainties inherent in any projected data, unitholders are cautioned not
to place undue reliance on these pro forma effects. See 'Disclosure Regarding
Forward-Looking Statements.' The pro forma effects were as follows:
<TABLE>
<CAPTION>
FORECAST MANAGEMENT CASE FORECAST ROTHSCHILD BASE CASE
-------------------------------------------------------- ----------------------------------
BEFORE PRO FORMA FOR PRO FORMA BEFORE BEFORE PRO FORMA FOR
RECAPITALIZATION RECAPITALIZATION DEBT PAYDOWN/RESERVE RECAPITALIZATION RECAPITALIZATION
---------------- ---------------- -------------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Potential Common Unit
Distributions ($
millions)
1999.............. 43.1 45.6 53.6 43.1 45.6
2000.............. 43.1 46.7 58.6 43.1 46.7
Potential Common Unit
Distributions Per
Unit ($)
1999.............. 2.00 2.05 2.41 2.00 2.05
2000.............. 2.00 2.10 2.63 2.00 2.10
Potential General
Partner Distributions
($ millions)
1999.............. 1.2 .9 2.0 1.2 .9
2000.............. 1.2 1.0 2.9 1.1 1.0
<CAPTION>
PRO FORMA BEFORE
DEBT PAYDOWN/RESERVE
--------------------
<S> <C>
Potential Common Unit
Distributions ($
millions)
1999.............. 53.6
2000.............. 49.2
Potential Common Unit
Distributions Per
Unit ($)
1999.............. 2.41
2000.............. 2.21
Potential General
Partner Distributions
($ millions)
1999.............. 2.0
2000.............. 1.2
</TABLE>
Analysis of Selected Publicly Traded Companies. Rothschild used publicly
available information to compare selected financial and market trading
information to Suburban pro forma for the Recapitalization and to a group of
selected retail propane distributors, all of which are also master limited
partnerships (the 'Suburban Comparable Group'). The retail propane distributors
in the Suburban Comparable Group were selected by Rothschild based on the
similarity of their businesses to that of Suburban. The Suburban Comparable
Group was comprised of:
AmeriGas Partners, L.P.;
Cornerstone Propane Partners, L.P.;
Ferrellgas Partners, L.P.;
Heritage Propane Partners, L.P.; and
Star Gas Partners, L.P.
No partnership used in Rothschild's analyses is identical to Suburban.
Rothschild's analyses involve complex considerations and judgments concerning
differences in the potential financial and operating characteristics of the
Suburban Comparable Group and other factors regarding the trading values of each
partnership included in the Suburban Comparable Group.
37
<PAGE>
<PAGE>
For the purposes of this analysis, the financial information reviewed
included, among other things, the following:
market capitalization (equity market value (the number of Common Units
plus the number of Subordinated Units plus the number of implied General
Partner Units multiplied by the market price of the Common Units) plus the
book value of debt plus minority interest less cash) to latest twelve
months ('LTM') EBITDA and forecasted 1999 EBITDA and 2000 EBITDA based on
currently available research estimates;
LTM, forecasted 1999 and 2000 EBITDA less capital expenditures divided by
net interest and Common Unit distribution;
LTM, forecasted 1999 and 2000 DCF divided by Common Unit distribution;
LTM, forecasted 1999 and 2000 DCF per unit divided by the annualized
quarterly distribution;
net debt divided by LTM EBITDA;
LTM EBITDA divided by LTM net interest; and
net debt divided by market capitalization.
The comparisons of Suburban's financial information to that of the means of
the Suburban Comparable Group are summarized below:
<TABLE>
<CAPTION>
LTM FORECASTED 1999
---------------------------------------------- ----------------------------------------------
SUBURBAN SUBURBAN
BEFORE PRO FORMA FOR COMPARABLE BEFORE PRO FORMA FOR COMPARABLE
RECAPITALIZATION RECAPITALIZATION GROUP RECAPITALIZATION RECAPITALIZATION GROUP
---------------- ---------------- ---------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Market Capitalization
Divided by EBITDA.......... 9.7x 9.2x 10.1x 8.8x 8.3x 9.5x
EBITDA Minus Capital
Expenditures Divided
by Net Interest plus
Common Unit Distribution... 1.1x 1.0x 1.0x 1.2x 1.1x 1.2x
DCF Divided by Common Unit
Distribution............... 1.2x 1.0x 1.0x 1.4x 1.2x 1.6x
DCF Per Unit Divided by
Annualized MQD............. 0.9x 1.0x 0.6x 1.0x 1.2x 0.9x
Net Debt Divided by EBITDA... 3.9x 4.7x 4.9x -- -- --
EBITDA Divided by Net
Interest Expense........... 3.2x 2.7x 2.4x -- -- --
Net Debt Divided by Market
Capitalization............. 40.2% 51.1% 48.5% -- -- --
<CAPTION>
FORECASTED 2000
----------------------------------------------
SUBURBAN
BEFORE PRO FORMA FOR COMPARABLE
RECAPITALIZATION RECAPITALIZATION GROUP
---------------- ---------------- ----------
<S> <C> <C> <C>
Market Capitalization
Divided by EBITDA.......... 8.1x 7.7x 8.5x
EBITDA Minus Capital
Expenditures Divided
by Net Interest plus
Common Unit Distribution... 1.3x 1.2x 1.3x
DCF Divided by Common Unit
Distribution............... 1.5x 1.4x 1.8x
DCF Per Unit Divided by
Annualized MQD............. 1.1x 1.3x 1.0x
Net Debt Divided by EBITDA... -- -- --
EBITDA Divided by Net
Interest Expense........... -- -- --
Net Debt Divided by Market
Capitalization............. -- -- --
</TABLE>
38
<PAGE>
<PAGE>
The following chart provides the quantitative results of the Suburban
Comparable Group's LTM, forecasted 1999 and 2000 financial information.
<TABLE>
<CAPTION>
LTM
--------------------------------------------------------------------
CORNERSTONE HERITAGE
AMERIGAS FERRELLGAS PROPANE PROPANE STAR GAS
PARTNERS, PARTNERS, PARTNERS, PARTNERS, PARTNERS,
L.P. L.P. L.P. L.P. L.P. AVERAGE
-------- ---------- ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Market Capitalization Divided by EBITDA............ 11.2x 10.0x 10.6x 10.0x 8.9x 10.1x
EBITDA Minus Capital Expenditures Divided by Net
Interest plus Common Unit Distribution........... 1.0x 1.1x 1.0x 1.1x 0.9x 1.0x
DCF Divided by Common Unit Distribution............ 0.9x 1.3x 1.0x 1.2x 0.8x 1.0x
DCF Per Unit Divided by Annualized QD.............. 0.5x 0.6x 0.7x 0.6x 0.6x 0.6x
Net Debt Divided by EBITDA......................... 5.3x 5.2x 4.9x 4.8x 4.4x 4.9x
EBITDA Divided by Net Interest Expense............. 2.2x 2.3x 2.6x 2.5x 2.2x 2.4x
Net Debt Divided by Market Capitalization.......... 47.4% 52.0% 46.2% 48.2% 48.9% 48.5%
</TABLE>
<TABLE>
<CAPTION>
FORECASTED 1999
--------------------------------------------------------------------
CORNERSTONE HERITAGE
AMERIGAS FERRELLGAS PROPANE PROPANE STAR GAS
PARTNERS, PARTNERS, PARTNERS, PARTNERS, PARTNERS,
L.P. L.P. L.P. L.P. L.P. AVERAGE
-------- ---------- ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Market Capitalization Divided by EBITDA............ 9.6x 9.0x 11.8x 9.4x 7.8x 9.5x
EBITDA Minus Capital Expenditures Divided by Net
Interest plus Common Unit Distribution........... 1.4x 1.5x 0.9x 1.4x 1.0x 1.2x
DCF Divided by Common Unit Distribution............ 2.0x 2.2x 0.9x 1.9x 1.0x 1.6x
DCF Per Unit Divided by Annualized QD.............. 1.0x 1.0x 0.6x 1.0x 0.8x 0.9x
</TABLE>
<TABLE>
<CAPTION>
FORECASTED 2000
--------------------------------------------------------------------
CORNERSTONE HERITAGE
AMERIGAS FERRELLGAS PROPANE PROPANE STAR GAS
PARTNERS, PARTNERS, PARTNERS, PARTNERS, PARTNERS,
L.P. L.P. L.P. L.P. L.P. AVERAGE
-------- ---------- ----------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Market Capitalization Divided by EBITDA............ 8.9x 8.8x 9.7x 8.8x 6.5x 8.5x
EBITDA Minus Capital Expenditures Divided by Net
Interest plus Common Unit Distribution........... 1.5x 1.5x 1.1x 1.4x 1.2x 1.3x
DCF Divided by Common Unit Distribution............ 2.1x 2.3x 1.2x 2.0x 1.3x 1.8x
DCF Per Unit Divided by Annualized QD.............. 1.1x 1.1x 0.8x 1.1x 1.0x 1.0x
</TABLE>
Present Value of Subordinated Units/APUs. A $69 million purchase price and
$9.5 million of expenses (a total of $78.5 million) for the Subordinated Units
implies a per unit price of $10.96. On April 9, 1999, Suburban's Common Units
traded at $19.00 per unit. The implied discount to the trading value of the
Public Common Units would be approximately 42.3%. Including the redemption of
the APUs, the implied price per Common Unit would be $7.89 (a 58.5% discount).
Rothschild analyzed the present value of the projected Subordinated Unit
distributions and the APU repayments under both the Management Case and the
Rothschild Base Case. Using a 15% discount rate, the present value of the total
payments under the Management Case is $136.3 million and under the Rothschild
Base Case is $125.5 million.
Present Value of General Partner Interest. Rothschild analyzed the present
value of the projected General Partner distributions under both the Management
Case and the Rothschild Base Case. Using a 15% discount rate, the present value
of the total distributions under the Management Case is $28.4 million and under
the Rothschild Base Case is $16.2 million. This includes distributions arising
from the incentive distributions above the 2% general partner interest up to
15%. The analysis did not consider the possible impact of the ability of the
Board of Supervisors to cause the conversion of the Incentive
39
<PAGE>
<PAGE>
Distribution Rights into Common Units after the fifth anniversary of the date of
the Closing which may substantially reduce the present value of the GP
Interests, and did not consider the risks to management arising out of their
deferral of distributions on the Restricted Units.
The description set forth above is a summary which sets forth the material
information in connection with the analyses that Rothschild performed and
presented to the Special Committee on April 14, 1999, and does not purport to be
a complete description of all such analyses. The preparation of a fairness
opinion is a complex process involving various subjective determinations as to
the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances, and therefore,
such an opinion is not readily susceptible to a partial analysis or summary
description. Accordingly, notwithstanding the separate factors summarized above,
Rothschild believes that its analyses must be considered in their entirety and
that selecting portions of its analyses and factors considered by it, without
considering all analyses and factors, or attempting to ascribe relative weights
to some or all such analyses and factors, could create an incomplete view of the
evaluation process underlying Rothschild's opinions.
In its analyses, Rothschild relied upon numerous assumptions made by
Suburban with respect to industry performance, general business and economic
conditions, and other matters, many of which are beyond the control of Suburban.
Analyses based upon forecasts of future results are not necessarily indicative
of actual values, which may be significantly more or less favorable than that
suggested by such analyses. No company used as a comparison in the analyses is
identical to Suburban and no transaction used as a comparison is identical to
the Recapitalization. Additionally, estimates of the value of businesses do not
purport to be appraisals or necessarily to reflect the prices at which
businesses actually may be sold. Because such estimates are inherently subject
to uncertainty, none of the Special Committee, Board of Supervisors, Rothschild
or Suburban, or any other person assumes responsibility for the accuracy of such
estimates. Rothschild's analyses were prepared solely for purposes of the
Rothschild Opinion and do not purport to be appraisals or necessarily to reflect
the prices at which Common Units actually may be sold.
Terms of Rothschild's Engagement. Under the terms of the engagement letter
dated November 20, 1998, pursuant to which the Special Committee engaged
Rothschild to deliver the Rothschild Opinion, Rothschild will receive a fee of
(i) $200,000 in connection with the Rothschild opinion delivered on November 20,
1998 and (ii) $200,000 in connection with the Rothschild Opinion delivered on
the date of this Proxy Statement. In addition, Suburban has agreed to reimburse
Rothschild for all reasonable out-of-pocket expenses incurred in connection with
its engagement and to indemnify Rothschild and certain related persons against
certain liabilities in connection with its engagement.
Rothschild has previously acted as financial advisor to Suburban,
Millennium Chemicals Inc. (which is the General Partner's parent company) and
certain of their former affiliated entities (the 'Former Affiliated Entities').
Pursuant to the terms of the engagement letter dated October 17, 1997 between
Rothschild and Suburban, Suburban paid $600,000 to Rothschild for financial
advisory services rendered previously to Suburban, including certain preliminary
advice rendered to Suburban in connection with the Recapitalization. Rothschild
also has received customary compensation for financial advisory services
rendered previously to the Former Affiliated Entities. Rothschild has neither
received nor is owed any fee from Millennium Chemicals Inc. or its affiliates
for financial advisory services. Although it anticipates that it may render such
services to Millennium Chemicals Inc. and its affiliates in the future,
Rothschild is not currently providing any such services to such persons pursuant
to any agreement in effect or contemplated. Rothschild has advised Suburban
that, in the ordinary course of its business, Rothschild may, subject to certain
restrictions, actively trade the equity securities of Suburban and/or Millennium
Chemicals Inc. for its own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
OPINION OF A.G. EDWARDS & SONS, INC.
On December 14, 1998, the Special Committee engaged A.G. Edwards to render
an opinion as to the fairness, from a financial point of view, of the
Recapitalization to the Public Common Unitholders.
40
<PAGE>
<PAGE>
A.G. Edwards, as part of its investment banking business, is regularly
engaged in, among other things, the valuation of businesses and their securities
in mergers and acquisitions, initial public offerings, secondary distributions
of listed and unlisted securities, private placements, and valuations for
estate, corporate and other purposes. A.G. Edwards is familiar with Suburban
through acting as a representative of the underwriters in Suburban's initial
public offering of Common Units and through its on-going securities research
coverage of Suburban, and some of A.G. Edwards' customers own Common Units. A.G.
Edwards is not aware of any relationship between A.G. Edwards and Suburban,
Suburban's affiliates or Suburban's unitholders, between A.G. Edwards and
Millennium or Millennium's shareholders, or between A.G. Edwards and the
Successor General Partner and its owners, which, in its opinion, would affect
its ability to render a fair and independent opinion in this matter.
On January 22, 1999, A.G. Edwards rendered its written opinion to the
Special Committee that, as of that date, the Recapitalization was fair, from a
financial point of view, to the Public Common Unitholders.
On April 14, 1999, A.G. Edwards rendered its written opinion to the Special
Committee that, as of that date, the Recapitalization was fair, from a financial
point of view, to the Public Common Unitholders (the 'A.G. Edwards Opinion').
THE FULL TEXT OF THE A.G. EDWARDS OPINION, WHICH SETS FORTH THE PRINCIPAL
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS OF THE
SCOPE OF THE REVIEW UNDERTAKEN BY A.G. EDWARDS IN RENDERING ITS OPINION, IS
ATTACHED AS ANNEX E TO THIS PROXY STATEMENT AND IS INCORPORATED IN THIS PROXY
STATEMENT BY REFERENCE. COMMON UNITHOLDERS ARE URGED TO, AND SHOULD, READ THE
A.G. EDWARDS OPINION CAREFULLY AND IN ITS ENTIRETY. THE A.G. EDWARDS OPINION WAS
DIRECTED TO THE SPECIAL COMMITTEE AND ADDRESSES ONLY THE FAIRNESS, FROM A
FINANCIAL POINT OF VIEW, OF THE RECAPITALIZATION TO THE PUBLIC COMMON
UNITHOLDERS, AND DOES NOT CONSTITUTE TAX ADVICE OR A RECOMMENDATION TO ANY
PUBLIC COMMON UNITHOLDER AS TO HOW TO VOTE WITH RESPECT TO THE RECAPITALIZATION.
THE SUMMARY OF THE A.G. EDWARDS OPINION IN THIS PROXY STATEMENT IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE A.G. EDWARDS OPINION.
In connection with rendering the A.G. Edwards Opinion, A.G. Edwards
reviewed the following:
a draft dated April 10, 1999 of Amendment No. 3 to Suburban's Preliminary
Proxy Statement;
the Recapitalization Agreement, the GP Interest Purchase Agreement, the
forms of Amended Partnership Agreements, the form of agreement terminating
the Distribution Support Agreement, the term sheet for the Mellon Loan,
the commitment letter for the proposed amendments to the Existing Credit
Agreement and the form of amendment to Senior Note Agreement, and the form
of the new deferred compensation plan;
certain publicly available historical audited financial statements and
certain unaudited interim financial statements of Suburban;
certain financial analyses and forecasts of Suburban prepared by, and
reviewed with, management of Suburban and the views of management of
Suburban regarding Suburban's past and current business, operating
results, financial condition and future prospects, including the impact of
the Recapitalization, as well as information relating to the retail
propane distribution industry and the potential strategic, financial and
operational benefits and challenges anticipated from the Recapitalization;
the pro forma impact of the Recapitalization on Suburban;
the publicly reported historical price and trading activity for the Common
Units, including a comparison of certain financial and stock market
information for Suburban with similar publicly available information for
certain other partnerships with publicly traded securities;
the current market environment generally, and the retail propane
distribution environment in particular;
information relating to the financial terms of certain transactions,
including selected transactions involving subordinated units;
conversations with Rothschild regarding the nature and extent of
development of the terms of the Recapitalization; and
41
<PAGE>
<PAGE>
other information, financial studies, analyses and investigations, and
financial, economic, and market criteria that A.G. Edwards considered
relevant.
In rendering the A.G. Edwards Opinion, A.G. Edwards has relied on and
assumed, without independent verification, the accuracy and completeness of all
financial and other information, publicly available, furnished to, or otherwise
discussed with A.G. Edwards for the purposes of the A.G. Edwards Opinion. With
respect to financial projections and other information provided to or otherwise
discussed with A.G. Edwards, A.G. Edwards assumed and was advised by the
management of Suburban that the projections and other information were
reasonably prepared on a basis that reflects their best currently available
estimates and judgments. A.G. Edwards used a set of projections based on
Suburban management's downside case operating projections for 1999 to 2003 (the
'Downside Case') and a set of projections based on Suburban management's base
case operating projections for 1999 to 2003 (the 'Base Case'). A.G. Edwards
assumed that the Redemption Price and the fees and expenses of the
Recapitalization will be financed with $43.8 million of cash and the remainder
through borrowings by Suburban. The cash-financed portion of this assumption was
based on a full twelve-month business cycle and not a particular cash balance at
one point in time due to the variations in Suburban's cash balance over the
twelve-month business cycle.
The Special Committee did not engage A.G. Edwards to, and therefore A.G.
Edwards did not, verify the accuracy or completeness of any information. A.G.
Edwards has relied on the assurances of the management of Suburban that they are
not aware of any facts that would make such information inaccurate or
misleading. A.G. Edwards did not conduct a physical inspection of the properties
or facilities of Suburban nor did it make or obtain any independent evaluation
or appraisals of any such properties or facilities or assets and liabilities.
A.G. Edwards also assumed that the Recapitalization will be completed on the
terms contained in the Proxy Statement, the Recapitalization Agreement, the GP
Interest Purchase Agreement and the Amended Partnership Agreements, and that the
final form of these documents would be substantially similar to the last draft
or version reviewed by A.G. Edwards, without waiver of any material term or
condition. The A.G. Edwards Opinion is necessarily based on economic and other
conditions as in effect on, and the information made available to A.G. Edwards
as of, April 14, 1999 (except market data, which was as of April 9, 1999).
The preparation of a fairness opinion is a complex process and is not
readily susceptible to partial analysis or summary description. In rendering the
A.G. Edwards Opinion, A.G. Edwards applied its judgment to a variety of complex
analyses and assumptions, considered the results of all its analyses as a whole
and did not attribute any particular weight to any analysis or factor considered
by it. Furthermore, selecting any portion of its analyses, without considering
all analyses, would create an incomplete view of the process underlying the A.G.
Edwards Opinion. In addition, A.G. Edwards may have given various analyses and
factors more or less weight than other analyses and factors, and may have deemed
various assumptions more or less probable than other assumptions, so that the
ranges of valuations resulting from any particular analysis described below
should not be taken to be A.G. Edwards' view of the actual value of Suburban. In
performing its analyses, A.G. Edwards made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Suburban. The assumptions made
and judgments applied by A.G. Edwards in rendering the A.G. Edwards Opinion are
not readily susceptible to description beyond that in the written text of the
A.G. Edwards Opinion itself. Any estimates are not necessarily indicative of
future results or actual values, which may be significantly more or less
favorable than those suggested by the estimates. A.G. Edwards does not assume
responsibility if future results are different from those projected. The
analyses performed were prepared solely as part of A.G. Edwards' analysis of the
fairness, from a financial point of view, of the Recapitalization to the Public
Common Unitholders and were conducted for the delivery of the A.G. Edwards
Opinion. The decision to enter into the Recapitalization was solely that of the
Special Committee and the Board of Supervisors.
The following is a summary of the material analyses performed by A.G.
Edwards in arriving at the A.G. Edwards Opinion:
Discounted Cash Flow Analysis of Purchase Price and Purchase Price
Allocation. A.G. Edwards analyzed the pre-tax present value of potential MQDs
plus any potential excess distributions (excess distributions defined as
distributable cash flow ('EDCF') less the MQD paid on Common Units,
42
<PAGE>
<PAGE>
Subordinated Units and General Partner Interests, and less the repurchase of any
outstanding APUs) (EDCF defined as EBITDA less interest expense, capital
expenditures and cash taxes)) to the Common Units, Subordinated Units, APUs and
GP Interests on a pre-recapitalization basis utilizing the Downside Case and
Base Case projections. The potential distributions were discounted back to
September 1998, based on Suburban's fiscal year end, using discount rate ranges
based on the weighted average cost of equity for each of the particular
securities. A.G. Edwards compared the following:
the $69.0 million redemption price for all outstanding Subordinated Units
and APUs plus an estimated $8.6 million of fees and expenses related to
the Recapitalization, including the GP Interest Purchase, for a total of
$77.6 million to the present value of the potential distributions to the
Subordinated Units plus 98% of the present value of the potential
distributions on the APUs;
the $6.0 million purchase price that the Successor General Partner, which
is owned by members of management, is paying for the GP Interests to the
present value of the potential distributions to the General Partner plus
2% of the present value of the potential distributions on the APUs; and
the percentages of the $83.6 million (total purchase price plus estimated
fees and expenses related to the Recapitalization) that will be paid by
Suburban ($77.6 million or 92.8%) and by the Successor General Partner
($6.0 million or 7.2%) to the percentages of the total present value
allocated to (1) the Subordinated Units plus 98% of the APUs and (2) the
GP Interests plus 2% of the APUs.
The results are as follows (dollars in millions):
<TABLE>
<CAPTION>
DOWNSIDE CASE BASE CASE
----------------- -----------------
$ RANGE $ RANGE MEAN %
----------------- ----------------- ------
<S> <C> <C> <C>
Present Value of Subordinated Units................................ $ 108.5 - $138.0 $ 123.1 - $153.4
98% of Present Value of APUs....................................... 6.6 - 7.9 12.1 - 13.3
----------------- -----------------
Total......................................................... $ 115.1 - $145.8 $ 135.1 - $166.6 91.9%
Present Value of General Partner's Interests....................... $ 10.5 - $ 12.8 $ 11.3 - $ 14.0
2% of Present Value of APUs........................................ 0.1 - 0.2 0.2 - 0.3
----------------- ------
Total......................................................... $ 10.6 - $ 12.9 $ 11.5 - $ 14.3 8.1%
----------------- ----------------- ------
Total Present Value................................................ $ 125.7 - $158.8 $ 146.7 - $180.9 100.0%
----------------- ----------------- ------
----------------- ----------------- ------
</TABLE>
Subordinated Unit Discount Analysis. A.G. Edwards analyzed the implied
discount of subordinated units to common units in transactions by three master
limited partnerships (EOTT Energy Partners, L.P., Ferrellgas Partners, L.P. and
National Propane Partners, L.P.) on the final trading date of the subordinated
units, the one-month average leading up to the final trading date, and the
three-month average leading up to the final trading date. A.G. Edwards also
noted that, beginning on March 29, 1999, Star Gas Partners, L.P. has two classes
of units trading in the public market. A.G. Edwards compared these discounts to
the implied discount of Suburban's Subordinated Units to its Common Units in the
Recapitalization based on Suburban's Common Unit price as of April 9, 1999, the
one-month average leading up to April 9, 1999 and the three-month average
leading up to April 9, 1999. The results are as follows:
<TABLE>
<CAPTION>
IMPLIED SUBORDINATED UNIT DISCOUNT
TO COMMON UNIT
-----------------------------------------
FINAL TRADING ONE-MONTH THREE-MONTH
DATE AVERAGE AVERAGE
------------- --------- -----------
<S> <C> <C> <C>
EOTT Energy Partners, L.P. ................................. 48.7% 50.6% 56.6%
Ferrellgas Partners, L.P. .................................. 53.9% 53.0% 53.7%
National Propane Partners, L.P.............................. 72.2%(a) NA NA
Star Gas Partners, L.P...................................... 40.8%(b) 43.1%(c) NA
Proposed Suburban Recapitalization ($69 million)............ 49.3%(b) 48.8% 49.8%
Proposed Suburban Recapitalization including estimated
transaction costs ($8.6 million) and excluding value of
APUs (98% of $22 million)................................. 58.8%(b) 58.5% 59.2%
</TABLE>
- ------------
(a) Using $12.00 per common unit takeover price as announced April 5, 1999.
(b) Common Unit price on April 9, 1999.
(c) Average from March 29, 1999 to April 9, 1999.
43
<PAGE>
<PAGE>
A.G. Edwards also noted that Kaneb Pipe Line Partners, L.P. had two classes
of units trading in the public market between September 19, 1995 and August 14,
1998. A.G. Edwards observed that the discount between the two units averaged
5.0% during this period with a maximum discount of 12.5%.
Pro Forma Recapitalization Analysis. A.G. Edwards analyzed the impact of
the Recapitalization on Suburban utilizing the Downside Case and Base Case
management projections. The financial information reviewed included, among other
things, the following:
EBITDA;
EDCF;
cash available for distributions in excess of the MQD;
potential distributions to Common Units;
EDCF per Common Unit (EDCF divided by the number of Common Units);
EDCF per total unit (EDCF divided by the number of Common Units,
Subordinated Units and implied General Partner Units);
Common Unit MQD coverage (EDCF divided by (the product of (a) the number
of Common Units and implied General Partner Units and (b) the $2.00
annualized MQD));
total unit MQD coverage (EDCF divided by (the product of (a) the number of
Common Units, Subordinated Units and implied General Partner Units and
(b) the $2.00 annualized MQD));
potential pre-tax cash yield to Common Units (the quotient of (a)
potential distributions to Common Units divided by the number of Common
Units and (b) the market price per unit as of April 9, 1999);
potential after-tax cash yield to Common Units (the result obtained by
dividing potential distributions to Common Units by the number of Common
Units, subtracting therefrom estimated taxes payable per Common Unit, and
dividing that result by the market price per unit as of April 9, 1999);
EBITDA divided by net interest expense; and
EBITDA less capital expenditures divided by net interest expense.
The results for 1999 and 2000 are as follows (dollars in millions except on
a per unit basis). In light of the uncertainties inherent in any projected data,
unitholders are cautioned not to place undue reliance on these pro forma
effects. See 'Disclosure Regarding Forward-Looking Statements.'
<TABLE>
<CAPTION>
DOWNSIDE CASE BASE CASE
------------------------------------ ------------------------------------
BEFORE PRO FORMA FOR BEFORE PRO FORMA FOR
CAPITALIZATION RECAPITALIZATION CAPITALIZATION RECAPITALIZATION
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
EBITDA
1999..................................... $ 105.86 $ 105.86 $ 105.86 $ 105.86
2000..................................... 103.74 103.74 114.68 114.68
EDCF
1999..................................... $ 60.77 $ 56.22 $ 60.77 $ 56.22
2000..................................... 55.65 51.10 66.59 62.04
Cash available for excess distributions
1999..................................... $ 0.00 $ 10.82 $ 0.00 $ 10.82
2000..................................... 0.00 5.70 0.00 16.64
Potential Distributions to Common Units
1999..................................... $ 43.15 $ 54.28 $ 43.15 $ 54.28
2000..................................... 43.19 49.93 43.19 59.22
EDCF per Common Unit
1999..................................... $ 2.82 $ 2.53 $ 2.82 $ 2.53
2000..................................... 2.58 2.30 3.08 2.79
</TABLE>
(table continued on next page)
44
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
DOWNSIDE CASE BASE CASE
------------------------------------ ------------------------------------
BEFORE PRO FORMA FOR BEFORE PRO FORMA FOR
CAPITALIZATION RECAPITALIZATION CAPITALIZATION RECAPITALIZATION
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
EDCF per total unit
1999..................................... $ 2.07 $ 2.48 $ 2.07 $ 2.48
2000..................................... 1.90 2.25 2.27 2.73
Common Unit MQD coverage
1999..................................... 1.37x 1.24x 1.37x 1.24x
2000..................................... 1.25 1.13 1.50 1.37
Total unit MQD coverage
1999..................................... 1.04x 1.24x 1.04x 1.24x
2000..................................... 0.95 1.13 1.13 1.37
Potential pre-tax cash yield to Common Units
1999..................................... 10.53% 12.84% 10.53% 12.84%
2000..................................... 10.53 11.81 10.53 14.01
Potential after-tax cash yield to Common Units
1999..................................... 10.53% 12.79% 10.53% 12.79%
2000..................................... 10.53 11.81 10.53 13.36
EBITDA/Net interest expense
1999..................................... 3.52x 3.06x 3.52x 3.06x
2000..................................... 3.45 2.99 3.81 3.31
(EBITDA - Capital expenditures)/Net interest
expense
1999..................................... 3.02x 2.62x 3.02x 2.62x
2000..................................... 2.85 2.47 3.21 2.79
</TABLE>
Comparable Public Partnership Analysis. A.G. Edwards used publicly
available information to compare selected financial and market trading
information of Suburban to Suburban pro forma for the Recapitalization and to a
group of selected retail propane distributors, all of which are also master
limited partnerships (the 'Partnership Comparable Group'). The retail propane
distributors in the Partnership Comparable Group were selected by A.G. Edwards
based on the similarity of their businesses to that of Suburban. The Partnership
Comparable Group was comprised of:
AmeriGas Partners, L.P.;
Cornerstone Propane Partners, L.P.;
Ferrellgas Partners, L.P.;
Heritage Propane Partners, L.P.; and
Star Gas Partners, L.P.
No partnership used in A.G. Edwards' analysis is identical to Suburban.
A.G. Edwards' analysis involves complex consideration and judgments concerning
differences in the potential financial and operating characteristics of the
Partnership Comparable Group and other factors regarding the trading values of
the Partnership Comparable Group. The financial information reviewed included,
among other things, the following:
distribution yield;
firm value (equity market capitalization (which for the purposes of this
analysis only is defined as common units plus subordinated units and
implied general partner units multiplied by the market price of the common
units) plus the book value of debt plus minority interest less cash) to
the LTM EBITDA and 1999 estimated EBITDA based on currently available
research estimates;
equity market capitalization to LTM EDCF and 1999 estimated EDCF;
LTM and 1999 estimated common unit MQD coverage;
45
<PAGE>
<PAGE>
LTM and 1999 estimated total unit MQD coverage;
total net debt divided by firm value; and
total net debt divided by LTM EBITDA and by 1999 estimated EBITDA.
Such analysis for Suburban and Suburban pro forma for the Recapitalization
was based on the Downside Case and Base Case projections. The following table
compares the financial information referred to above based on such projections
both before the Recapitalization of Suburban and Suburban pro forma for the
Recapitalization and also sets forth comparable information on the medians and
ranges of the Partnership Comparable Group.
<TABLE>
<CAPTION>
BEFORE THE BEFORE THE
RECAPITALIZATION PRO FORMA RECAPITALIZATION PRO FORMA PUBLIC PUBLIC
SUBURBAN SUBURBAN SUBURBAN SUBURBAN PARTNERSHIP PARTNERSHIP
DOWNSIDE CASE DOWNSIDE CASE BASE CASE BASE CASE MEDIANS RANGES
---------------- ------------- ---------------- --------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Distribution Yield................ 10.5% 10.8% 10.5% 10.8% 12.2% 10.1% to 16.5%
Firm value/LTM EBITDA............. 10.0x 8.9x 10.0x 8.9x 10.4x 9.2x to 16.3x
Firm value/1999E EBITDA........... 9.0x 8.1x 9.0x 8.1x 9.6x 7.0x to 12.0x
Equity market cap/LTM EDCF........ 10.9x 8.7x 10.9x 8.7x 9.9x 8.9x to 19.6x
Equity market cap/1999E EDCF...... 9.5x 7.7x 9.5x 7.7x 9.4x 5.6x to 12.8x
LTM common unit MQD coverage...... 1.2x 1.1x 1.2x 1.1x 1.3x 0.5x to 1.7x
1999E common unit MQD coverage.... 1.4x 1.3x 1.4x 1.3x 1.7x 0.9x to 2.2x
LTM total unit MQD coverage....... 0.9x 1.1x 0.9x 1.1x 0.7x 0.4x to 1.0x
1999E total unit MQD coverage..... 1.0x 1.2x 1.0x 1.2x 1.0x 0.6x to 1.1x
Total net debt/firm value......... 39.2% 49.7% 39.2% 49.7% 50.1% 46.2% to 55.0%
Total net debt/LTM EBITDA......... 3.9x 4.4x 3.9x 4.4x 5.2x 5.0x to 7.5x
Total net debt/1999E EBITDA....... 3.5x 4.0x 3.5x 4.0x 4.7x 3.9x to 5.6x
</TABLE>
Discounted Cash Flow Analysis of Potential Common Unit Distributions. A.G.
Edwards analyzed the pre-tax and after-tax present value of potential
distributions to the Common Units before the Recapitalization and pro forma for
the Recapitalization utilizing the Downside Case and Base Case projections. The
potential distributions were discounted back to September 1998, based on
Suburban's fiscal year end, using discount rate ranges based upon the Common
Units' weighted average cost of equity for each of the analyzed scenarios. A.G.
Edwards compared the present value of the potential distributions to the Common
Units before the Recapitalization to the present value of the potential
distributions to the Common Units pro forma for the Recapitalization. The
results are as follows (dollars in millions):
<TABLE>
<CAPTION>
DOWNSIDE CASE BASE CASE
----------------------------------------- -----------------------------------------
BEFORE THE PRO FORMA FOR BEFORE THE PRO FORMA FOR
RECAPITALIZATION THE RECAPITALIZATION RECAPITALIZATION THE RECAPITALIZATION
------------------ --------------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
Total Pre-tax Present Value Range $386.4 - $472.4 $428.7 - $527.3 $403.4 - $494.9 $460.1 - $567.3
Total After-tax Present Value Range 271.2 - $323.3 $310.8 - $374.4 $287.1 - $345.1 $328.4 - $397.1
</TABLE>
Terms of A.G. Edwards' Engagement. Pursuant to the terms of an engagement
letter among Suburban, the Special Committee and A.G. Edwards, Suburban agreed
to pay A.G. Edwards a fee of $300,000 as compensation for rendering its opinions
to the Special Committee. Of this amount, $200,000 was due upon the delivery of
the A.G. Edwards opinion on January 22, 1999 and has been paid, and $100,000 was
due upon delivery of the A.G. Edwards Opinion. Suburban has agreed to reimburse
A.G. Edwards for all reasonable out-of-pocket expenses incurred in its
engagement. Suburban has also agreed to indemnify A.G. Edwards against certain
liabilities in connection with the engagement of A.G. Edwards.
46
<PAGE>
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE RECAPITALIZATION
Certain officers and directors of Suburban have interests in the
Recapitalization that are different from, or may conflict with, the interests of
the Public Common Unitholders generally, as described below.
ACCELERATION OF RESTRICTED UNITS
As of the date of this Proxy Statement, Suburban has granted rights to
receive 681,320 Restricted Units under the Restricted Unit Plan to certain of
its executives and other key employees, including Mark A. Alexander and Michael
J. Dunn, Jr., and to the Management Supervisors. Suburban has 50,387 additional
Restricted Units available for issuance, none of which have been granted. All
681,320 Restricted Units outstanding as of the date of this Proxy Statement are
unvested. (On March 1, 1999, Messrs. Alexander and Simonowicz waived their
vesting rights to 12,073 Restricted Units and 1,610 Restricted Units,
respectively, that would have vested on March 5, 1999). The substitution of the
Successor General Partner as the general partner of Suburban will result in a
'change of control' under the terms of the Restricted Unit Plan that will cause
all of these unvested Restricted Units to automatically vest and convert on the
Recapitalization into an equal number of Common Units for no additional
consideration (representing an approximate 3.1% increase in the number of Common
Units outstanding after the Recapitalization on a fully diluted basis). If the
Recapitalization did not occur, the Restricted Units would vest as follows: (i)
25% of the Restricted Units would vest over time with one-third of such units
vesting at the end of the third, fifth and seventh anniversaries of the date of
grant and (ii) the remaining 75% of the Restricted Units would vest
automatically upon, and in the same proportions as, the conversion of
Subordinated Units to Common Units.
All of the executives and key employees of Suburban who will be members of
the Successor General Partner and own Restricted Units will agree to surrender
substantially all of their Restricted Units, prior to their vesting, in exchange
for the right to participate in a new compensation deferral plan of the
Partnerships. Suburban will deposit a number of Common Units equal to the number
of Restricted Units surrendered by these members into a trust. The total number
of Common Units deposited in the trust is expected to be approximately 592,000.
Suburban will also deposit all quarterly distributions it may pay on these
Common Units into the trust. Pursuant to the compensation deferral plan, the
members of the Successor General Partner will defer receipt of these Common
Units and related distributions until the date the GP Loan is repaid in full or
the seventh anniversary of the Closing, whichever date the deferring party may
choose, but subject to the earlier distribution and forfeiture provisions of the
compensation deferral plan. As part of the Management Cash Reserve, the members
also will defer receipt of $930,000 per year of quarterly distributions on these
deferred Common Units to support the Minimum Quarterly Distribution through the
fiscal quarter ending March 31, 2001. In addition, if the Operating Partnership
elects or is required to purchase the GP Loan from Mellon, the terms of the
compensation deferral plan provide that the members' deferred Common Units may,
at Suburban's or the Operating Partnership's discretion, be forfeited and
cancelled (and the related distributions may also be forfeited). Notwithstanding
the foregoing, if a 'change of control' of Suburban occurs (as defined in the
compensation deferral plan), all of the deferred Common Units (and related
distributions) held in the trust automatically will become distributable to the
members of the Successor General Partner. The remaining Restricted Units, which
consist of unsurrendered Restricted Units and units held by supervisors and
other employees and former employees of the Partnerships, will accelerate and
convert into Common Units at the Closing. Also see 'The Successor General
Partner.'
The Elected Supervisors also hold Restricted Units that will accelerate and
convert into an equal number of Common Units at the closing of the
Recapitalization. The Elected Supervisors received the Restricted Units in
connection with Suburban's initial public offering as part of their compensation
for serving on the Board of Supervisors. As the Elected Supervisors are not
members of the Successor General Partner, they will not be deferring their
receipt of converted Common Units.
The following table sets forth information with respect to the Restricted
Units that will accelerate and convert into Common Units on a one-for-one basis
as a result of the Recapitalization (based on the number of Restricted Units
outstanding as of the date of this Proxy Statement) for (i) each of the members
of the Board of Supervisors holding Restricted Units, (ii) the chief executive
officer and each
47
<PAGE>
<PAGE>
of the four other most highly compensated executive officers and (iii) all of
Suburban's supervisors and employees as a group. No other executive officers of
Suburban hold Restricted Units.
<TABLE>
<CAPTION>
NUMBER OF
COMMON
UNITS TO BE
ISSUED UPON
CONVERSION OF CURRENT
CURRENT NUMBER OF RESTRICTED VALUE OF
NAME(1) RESTRICTED UNITS UNITS AT CLOSING UNITS(2)
- ------------------------------------------------------------ ----------------- ---------------- -----------
<S> <C> <C> <C>
Mark A. Alexander........................................... 243,902 243,902 $ 4,664,626
Michael J. Dunn, Jr. ....................................... 48,780 48,780 932,918
Anthony M. Simonowicz....................................... 48,780 48,780 932,918
Michael M. Keating.......................................... 29,268 29,268 559,751
Edward J. Grabowiecki....................................... 19,512 19,512 373,167
John Hoyt Stookey........................................... 14,634 14,634 279,875
Harold R. Logan, Jr......................................... 14,634 14,634 279,875
Dudley C. Mecum............................................. 14,634 14,634 279,875
All of Suburban's supervisors and employees as a group...... 642,432 642,432 $12,286,512
</TABLE>
- ------------
(1) Except for Messrs. Stookey, Logan, and Mecum, who will not be members of the
Successor General Partner, all the other listed persons, in connection with
their ownership of the Successor General Partner, have elected to surrender
all of their Restricted Units that would vest and be converted into Common
Units at the Closing in exchange for an equal number of Common Units to be
deposited into the trust being created in connection with the formation of
the Successor General Partner. See 'The Successor General Partner.'
(2) Represents the current 'fair market value' of Restricted Units based upon
the average of the high and low sales prices per Common Unit of
approximately $19 1/8 as reported on the New York Stock Exchange composite
tape on April 12, 1999. Final value will be determined based on the 'fair
market value' per unit on the date of the Closing which means the average of
the high and low sales prices per Common Unit on such date as reported on
the New York Stock Exchange composite tape.
Except for the 50,387 Restricted Units currently available for issuance,
Suburban has no authority to grant additional Restricted Units under the
Restricted Unit Plan. Suburban does not intend to seek authority to issue
additional Restricted Units as part of the Recapitalization.
EMPLOYMENT AGREEMENT WITH MARK A. ALEXANDER
The substitution of the Successor General Partner as the general partner of
the Partnerships will result in a 'change of control' under the terms of Mr.
Alexander's Employment Agreement with the Operating Partnership. As a result,
upon completion of the Recapitalization, Mr. Alexander would be entitled to a
change of control payment in excess of three times his annual base salary and
his target bonus compensation if he voluntarily terminated employment between
the six-month and twelve-month anniversary of the Recapitalization. As of April
15, 1998, Mr. Alexander and the Operating Partnership entered into an amendment
to his employment agreement under which Mr. Alexander agreed to waive his right
to receive this change of control payment solely in connection with the
Recapitalization. Mr. Alexander also agreed in this amendment that upon
completion of the Recapitalization, a sale or transfer of the Successor General
Partner after the Recapitalization would not constitute a change of control
under his Employment Agreement.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Operating Partnership maintains a Supplemental Executive Retirement
Plan (the 'SERP'). The SERP is a non-qualified, unfunded retirement plan
designed to provide a level of retirement income for certain executive officers
of the Operating Partnership, without regard to statutory maximums. Currently
Messrs. Alexander, Dunn and Simonowicz participate in the SERP. The substitution
of the Successor General Partner as the general partner of the Partnerships will
result in a
48
<PAGE>
<PAGE>
'change of control' under the SERP, entitling Messrs. Alexander and Dunn to lump
sum payments. Both Mr. Alexander and Mr. Dunn have waived their rights to
receive change of control payments under the SERP solely in connection with the
Recapitalization. The Operating Partnership amended the SERP on April , 1999
to provide that upon completion of the Recapitalization, a sale or transfer of
the Successor General Partner after the Recapitalization would not constitute a
change of control under the SERP.
SUCCESSOR GENERAL PARTNER OWNERSHIP
The Successor General Partner, which will purchase the GP Interests and the
Incentive Distribution Rights from the General Partner for $6 million, is a
newly formed limited liability company owned by members of Suburban's current
management group and other key employees. As a result, the owners of the
Successor General Partner will become indirect beneficial owners of the GP
Interests and the Incentive Distribution Rights. The Successor General Partner
will finance the purchase of the GP Interests and the Incentive Distribution
Rights with the proceeds of the $6 million GP Loan from Mellon. The Operating
Partnership will agree to purchase the note from Mellon in the event the
Successor General Partner defaults on the note. See 'The Successor General
Partner.'
MILLENNIUM AND THE GENERAL PARTNER
The General Partner will receive $69 million from the redemption of the
Subordinated Units and the APUs and $6 million from the sale of the GP Interests
and the Incentive Distribution Rights. In addition, the General Partner and
Millennium will be relieved of their obligations under the Distribution Support
Agreement. The General Partner is an indirect wholly-owned subsidiary of
Millennium Chemicals Inc. and the two Appointed Supervisors are executive
officers of Millennium Chemicals Inc. who were appointed to the Board by the
General Partner. Suburban will also pay the General Partner a $1 million fee for
extending the automatic termination date of the Recapitalization Agreement from
May 15, 1999 to June 15, 1999. This fee was approved by the Board of Supervisors
and agreed to at the time the Recapitalization Agreement was signed.
COMPENSATION OF THE SPECIAL COMMITTEE
The members of the Special Committee will not receive any additional
compensation for serving on the Special Committee. Effective as of January 1,
1999, the annual compensation paid to Harold R. Logan, Jr. and Dudley C. Mecum
for serving on the Board of Supervisors increased from $15,000 to $50,000 each.
At the same time, their entitlement to a $1,000 meeting fee was eliminated. John
Hoyt Stookey's annual compensation for serving on the Board of Supervisors
remained unchanged at $75,000. See ' -- Acceleration of Restricted Units' above
for a discussion of the vesting of the Elected Supervisors' Restricted Units as
a result of the Recapitalization.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO SUBURBAN AND TO COMMON
UNITHOLDERS
The following discussion summarizes all material federal income tax
consequences of the implementation of the Recapitalization to Suburban and the
Common Unitholders.
The following summary is based on the Internal Revenue Code of 1986, as
amended (the 'Tax Code'), Treasury regulations promulgated and proposed
thereunder, judicial decisions and published administrative rules and
pronouncements of the Internal Revenue Service (the 'Service') as in effect on
the date hereof. Changes in such rules or new interpretations thereof may have
retroactive effect and could significantly affect the federal income tax
consequences described below.
The federal income tax consequences of the Recapitalization are complex and
are subject to significant uncertainties. Suburban has not requested a ruling
from the Service or an opinion of counsel with respect to any of the tax aspects
of the Recapitalization, other than an opinion from Baker & Botts, L.L.P.
required under the Partnership Agreement in connection with the GP Interest
Purchase to the effect that the GP Interest Purchase will not cause Suburban to
be treated as an association taxable as a corporation or otherwise to be taxed
as an entity for federal income tax purposes. Thus, no assurance can be given as
to the interpretation that the Service will adopt. In addition, this summary
does not address foreign, state or local tax consequences of the
Recapitalization, nor does it purport to address the federal income tax
consequences of the Recapitalization to special classes of taxpayers (such
49
<PAGE>
<PAGE>
as foreign taxpayers, members of management or other taxpayers who acquired
their units in compensatory transactions, broker-dealers, banks, mutual funds,
insurance companies, financial institutions, small business investment
companies, regulated investment companies, tax-exempt organizations, and
investors in pass-through entities). This summary addresses only the federal
income tax consequences to Common Unitholders whose interests in Suburban have
been held (i) as capital assets and (ii) for more than one year.
ACCORDINGLY, THE FOLLOWING SUMMARY OF ALL MATERIAL FEDERAL INCOME TAX
CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR
CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES
PERTAINING TO EACH COMMON UNITHOLDER. ALL COMMON UNITHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS FOR THE FEDERAL, STATE, LOCAL AND OTHER TAX
CONSEQUENCES APPLICABLE UNDER THE RECAPITALIZATION.
1. Nonrecognition to Common Unitholders. The Public Common Unitholders do
not participate in the Recapitalization (other than to vote on its approval)
and, therefore, with the possible exception discussed in paragraph 5 below,
should not recognize income, gain or loss as a result of the Recapitalization.
2. Transaction Costs. Suburban expects to use approximately $9.5 million to
pay transaction costs of the Recapitalization, including the GP Interest
Purchase, all or a significant portion of which will be capitalized and will not
result in current deduction.
3. Special Distribution. As described in the Recapitalization Agreement, at
the Closing the Operating Partnership shall make a special distribution to
Suburban, as limited partner of the Operating Partnership, or shall make a loan
to Suburban in an amount sufficient for Suburban to pay the Redemption Price and
transaction expenses of the Partnerships not paid directly by the Operating
Partnership (the 'Special Distribution'). The Special Distribution will be
funded out of the Operating Partnership's then existing cash resources and, if
necessary, borrowings under the Existing Credit Agreement.
If the Special Distribution is made to Suburban in its capacity as a
limited partner of the Operating Partnership, the following discussion applies:
In general, the Tax Code provides for nonrecognition of gain or loss upon a
distribution of property or money. An exception to this rule applies when a
partner receives a distribution of money in excess of its basis in its
partnership interest ('outside basis'). In the event the Special Distribution
were to exceed Suburban's outside basis in its Operating Partnership interest,
Suburban would recognize gain in the amount of such excess, which gain would be
allocated to the Common Unitholders in accordance with the Partnership
Agreement. The General Partner, however, does not anticipate that the Special
Distribution will exceed Suburban's outside basis. Accordingly, subject to
paragraph 5 below, the General Partner does not anticipate that Suburban will
recognize income or gain as a result of the Recapitalization.
If the Special Distribution is made as a loan, and is respected as a loan
for federal income tax purposes, Suburban will not have taxable income as a
result of such loan.
4. Basis Adjustment. In general, the Tax Code provides that a partnership,
if it has a special election in effect (which both Suburban and the Operating
Partnership have in effect), must adjust the basis of its assets following a
distribution if the distributee has recognized gain or loss. In such event, the
basis adjustment is assigned to the partnership's capital assets and certain
other business assets. It is anticipated that the General Partner will recognize
gain, but not loss, as a result of the Redemption, which would result in a
positive (i.e., favorable) basis adjustment.
a. Suburban's Interest in the Operating Partnership. At the Closing,
Suburban will redeem all 7,163,750 outstanding Subordinated Units and all
220,000 outstanding APUs (all of which are owned by the General Partner),
together with any additional APUs that may be purchased by the General
Partner pursuant to the Distribution Support Agreement prior to the
Closing, for the Redemption Price. If the Redemption results in recognition
of gain to the General Partner, Suburban will have a positive adjustment to
its outside basis in its interest in the Operating Partnership (and any
other capital assets or certain business assets that it owns) in the amount
of such gain. If the Redemption results in a loss, the basis adjustment
would be negative (i.e., unfavorable).
50
<PAGE>
<PAGE>
b. The Operating Partnership's Assets. The Service's published
position is that an upper-tier partnership's adjustment to the basis of its
interest in a lower-tier partnership will filter down as an adjustment to
the upper-tier partnership's share of the lower-tier partnership's capital
assets and certain business assets (provided that the lower-tier
partnership also has the special election in effect). Therefore, the basis
adjustment to Suburban's interest in the Operating Partnership will
similarly adjust the basis of Suburban's share of the Operating
Partnership's capital assets and certain business assets.
c. President's Budget Proposal. The President's budget proposal
offered earlier this year would make technical changes to the manner in
which the basis adjustment described above is computed, and in how such
adjustment is allocated among a partnership's assets. These changes would
be effective for distributions made on or after the date of enactment of
any legislation.
5. Recognition of Ordinary Income. The Tax Code provides for a partner's
recognition of ordinary income upon certain 'disproportionate' distributions. If
a partner's share of unrealized receivables (including certain depreciation
recapture items) or substantially appreciated inventory ('hot assets') changes
as a result of the distribution, such partner is deemed to have engaged in a
taxable exchange with the partnership with respect to such hot assets.
As a result of the Special Distribution, the Service may argue that
Suburban's share of the Operating Partnership's hot assets may change. However,
Suburban intends to take the position that such a change does not occur.
Although Suburban believes this to be a sound and supportable position, there
can be no assurance that Suburban would prevail if challenged. If Suburban were
successfully challenged by the Service, Suburban would have ordinary income,
some portion of which might arguably be allocated to Common Unitholders.
Similarly, as a result of the Redemption, the General Partner's share of
Suburban's hot assets may change. In such event, the General Partner would have
ordinary income upon the part of the distribution which is deemed to be a
taxable exchange. As a result of these ordinary income inclusions, the basis of
the portion of the assets acquired in the deemed exchange by the Operating
Partnership or Suburban, as the case may be, will be adjusted to equal fair
market value, resulting in greater depreciation deductions for the Common
Unitholders where fair market value exceeds the pre-existing basis of the hot
assets.
The President's budget proposal offered earlier this year would repeal the
rules governing exchanges of hot assets, effective for distributions made on or
after the date of enactment of any legislation.
6. Borrowing -- Allocation of Interest Deduction. As described in the
Recapitalization Agreement, if the Operating Partnership is required to borrow
funds under its Existing Credit Agreement to fund the Recapitalization, Suburban
and the Common Unitholders will be allocated interest deductions.
7. Redemption Discount. The Redemption Price is less than the General
Partner's capital account in Suburban relating to the Subordinated Units and
APUs immediately prior to the Redemption. The General Partner intends to take
the position that such discount reflects the current fair market value of the
Subordinated Units and the APUs, and, accordingly, that upon the Redemption, the
General Partner was allocated a book loss equal to such discount. Such a
position would preclude any argument that the discount represents a taxable gain
to the Common Unitholders. There can be no assurance that the Service would
agree with such position.
8. Effect on Tax Benefit to Common Unitholders. The General Partner
anticipates that as a result of a combination of the greater depreciation
deductions attributable to any positive basis adjustments under paragraph 4
above, and any interest deductions attributable to any borrowings at the
Operating Partnership level discussed in paragraph 6 above, the Common
Unitholders will be allocated a greater amount of deductions in the immediately
following years as a result of the Recapitalization. However, at this point in
time the General Partner cannot predict the effect of the Recapitalization on
the so-called 'tax shield' -- the excess of distributions to Common Unitholders
over their respective distributive shares of Suburban's taxable
income -- because the size of the tax shield depends in part on economic factors
over which the General Partner has no control. It is possible that the tax
shield would be reduced in certain years following the Recapitalization.
51
<PAGE>
<PAGE>
THE SUCCESSOR GENERAL PARTNER
The new general partner will be Suburban Energy Services Group LLC, a
Delaware limited liability company owned by approximately 45 executives and
other key employees of Suburban. Mark A. Alexander, Michael J. Dunn, Jr.,
Anthony M. Simonowicz, Michael M. Keating and Edward J. Grabowiecki, executive
officers of the Operating Partnership, will own approximately a 38.0%, 7.6%,
7.6%, 4.6% and 3.0% member interest (based on estimates as of the date of this
Proxy Statement), respectively, in the Successor General Partner. As members of
the Successor General Partner, such individuals will have an indirect ownership
interest in the GP Interests and the Incentive Distribution Rights after the
Recapitalization.
The members of the Successor General Partner will acquire their interests
in the Successor General Partner pursuant to a private placement under Section
4(2) and Rule 506 of Regulation D under the Securities Act of 1933, as amended.
Only those employees of the Partnerships who hold Restricted Units and continue
to be employees of the Operating Partnership or Suburban at the Closing are
eligible to become members of the Successor General Partner. In addition, a
limited number of interests have been reserved for issuance to certain future
officers of the Partnerships. In order to subscribe for their interests, members
were required to pay their pro rata share of $2,000 and make an election to
surrender their Restricted Units, prior to their vesting, in exchange for the
right to participate in a new compensation deferral plan of the Partnerships.
The members' percentage ownership interests in the Successor General Partner
were determined by dividing the total number of Restricted Units surrendered by
a member by the sum of the total number of Restricted Units surrendered by all
members and the percentage ownership interests reserved for issuance to certain
future officers of the Partnerships. Suburban will deposit a number of Common
Units equal to the number of Restricted Units surrendered by these members into
a trust. The total number of Common Units deposited in the trust is expected to
be approximately 592,000. Suburban will also deposit all quarterly distributions
it may pay on these Common Units into the trust. Under the compensation deferral
plan, receipt of the Common Units will be deferred until the date on which the
GP Loan is repaid in full (other than by way of a refinancing or refunding) or
the seventh anniversary of the Closing, whichever the deferring member may
choose, but subject to the earlier distribution and forfeiture provisions of the
compensation deferral plan. Receipt of $930,000 per year of quarterly
distributions on these Common Units will be deferred by the members as part of
the Management Cash Reserve under the compensation deferral plan to support the
Minimum Quarterly Distribution through the fiscal quarter ending March 31, 2001.
Notwithstanding the foregoing, if a 'change of control' of Suburban occurs (as
defined in the compensation deferral plan), all of the deferred Common Units
(and related distributions) held in the trust automatically will become
distributable to the members of the Successor General Partner.
The address of the Successor General Partner is One Suburban Plaza, 240
Route 10 West, Whippany, NJ 07981-0206.
For a description of certain agreements of the Operating Partnership in
connection with the Successor General Partner's financing arrangements for the
GP Interest Purchase, see 'Financing of the Transactions -- Financing
Arrangements of the Successor General Partner for the GP Interest Purchase.'
52
<PAGE>
<PAGE>
BALANCE SHEET INFORMATION CONCERNING THE SUCCESSOR GENERAL PARTNER
Report of Independent Accountants
To the Members of Suburban Energy Services LLC
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of Suburban Energy Services LLC (the
'Company') at March 31, 1999, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Company's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this statement in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
PRICEWATERHOUSECOOPERS LLP
Florham Park, New Jersey
April 13, 1999
SUBURBAN ENERGY SERVICES GROUP LLC
BALANCE SHEET
March 31, 1999
<TABLE>
<S> <C>
Assets
Cash...................................................................................... $1,150
------
Total assets......................................................................... $1,150
------
------
Stockholder's Equity
Common Stock, $1 par value 1,150 shares issued and outstanding............................ $1,150
------
------
</TABLE>
Notes to the Balance Sheet:
The Successor General Partner was formed on October 26, 1998 as a limited
liability company pursuant to the Delaware Limited Liability Company Act. It was
formed to purchase the GP Interests from the General Partner and to become the
Successor General Partner.
The Successor General Partner will be owned by approximately 45 executives
and key employees of Suburban.
The Successor General Partner has entered into a commitment letter, dated
as of December 22, 1998, with Mellon pursuant to which Mellon will make the $6
million GP Loan to the Successor General Partner to finance the purchase of the
GP Interests and Incentive Distribution Rights.
The $6 million purchase price for the GP Interests and the Incentive
Distribution Rights was determined based on the anticipated future discounted
cash flows of the Successor General Partner from its combined 2% ownership
interest in the Partnerships.
The GP Loan will be secured by a pledge of the GP Interests to Mellon. The
Operating Partnership has agreed to, and has the right to, purchase the GP Loan
from Mellon if an event of default occurs under the GP Loan.
The members of the Successor General Partner will acquire their membership
interests in the Successor General Partner pursuant to a private placement.
Under the terms of the private placement, the members will be required to pay
their pro rata share of $2,000 as their initial capital contributions and to
surrender substantially all of their Restricted Units, prior to their vesting,
in exchange for the right to participate in a new compensation deferral plan of
the Partnerships. See 'The Successor General Partner.' The members' percentage
ownership interests in the Successor General Partner were determined by dividing
the total number of Restricted Units surrendered by a member by the sum of the
total number of Restricted Units surrendered by all members and the percentage
ownership interests reserved for issuance by the Successor General Partner to
certain future officers of the Partnerships who will become members of the
Successor General Partner.
On March 24, 1999, certain members of management of Suburban Propane
Partners, L.P. made initial capital contributions aggregating $1,150. There have
been no other transactions involving the Successor General Partner.
53
<PAGE>
<PAGE>
PRICE RANGE OF COMMON UNITS AND DISTRIBUTIONS OF SUBURBAN
The Common Units of Suburban are listed and traded on the New York Stock
Exchange under the symbol 'SPH.' The following table sets forth for the periods
indicated the reported high and low sales prices per Common Unit as reported on
the New York Stock Exchange composite tape and the cash distributions declared
per Common Unit. Also see 'Cash Distribution Policy.'
<TABLE>
<CAPTION>
CASH
DISTRIBUTIONS
HIGH LOW DECLARED
------ ------ -------------
<S> <C> <C> <C>
1997 FISCAL YEAR
First Quarter.................................................... $21.88 $18.75 $0.50
Second Quarter................................................... 20.63 17.75 0.50
Third Quarter.................................................... 18.75 17.00 0.50
Fourth Quarter................................................... 20.19 18.06 0.50
1998 FISCAL YEAR
First Quarter.................................................... $20.56 $15.38 $0.50
Second Quarter................................................... 20.00 17.50 0.50
Third Quarter.................................................... 19.50 18.00 0.50
Fourth Quarter................................................... 20.00 17.56 0.50
1999 FISCAL YEAR
First Quarter.................................................... $19.68 $17.44 $0.50
Second Quarter................................................... 20.13 18.00 0.50
Third Quarter (through April 12, 1999)........................... 19.50 17.94 --
</TABLE>
On April 12, 1999, the most recent practicable date prior to the printing
of this Proxy Statement, the closing price per Common Unit on the New York Stock
Exchange composite tape was $19.13.
Suburban will continue to make quarterly distributions to its partners in
an aggregate amount equal to its Available Cash for such quarter. Available Cash
generally means all cash on hand at the end of the fiscal quarter plus all
additional cash on hand as a result of working capital borrowings subsequent to
the end of such quarter less cash reserves established by the Board of
Supervisors in its reasonable discretion for future cash requirements. See 'Cash
Distribution Policy.'
Suburban has paid the Minimum Quarterly Distribution on the Common Units
(plus proportionate distributions on the GP Interests) for each quarter of its
existence. Since November 1996, no distributions have been paid on the
Subordinated Units.
Suburban is a publicly traded limited partnership which is not subject to
federal income tax. Instead, holders of Common Units are required to report
their allocable share of Suburban's earnings or loss, regardless of whether
Suburban makes distributions.
54
<PAGE>
<PAGE>
THE TRANSACTION AGREEMENTS
THE RECAPITALIZATION AGREEMENT
THE DESCRIPTION OF THE RECAPITALIZATION AGREEMENT SET FORTH BELOW IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE TEXT OF THE
RECAPITALIZATION AGREEMENT, A COPY OF WHICH IS ATTACHED AS ANNEX A TO THIS PROXY
STATEMENT.
THE RECAPITALIZATION
Article III of the Recapitalization Agreement sets forth the transactions
that will occur at the Closing to effect the Recapitalization.
Amendment of the Partnership Agreements. At the Closing, the Amended
Partnership Agreement and the Amended Operating Partnership Agreement will be
entered into by the parties thereto. Other than as a departing partner
thereunder, the General Partner will not have any obligation or liability under
the Amended Partnership Agreement or the Amended Operating Partnership
Agreement.
Amendment of the Existing Credit Agreement. At the Closing, the Existing
Credit Agreement will be amended and restated to, among other things, (i) extend
its maturity date to the fiscal quarter ending March 31, 2001, (ii) amend the
minimum adjusted consolidated net worth covenant to reduce the required minimum
net worth of the Operating Partnership from $125 million to $50 million, (iii)
provide for a $22 million liquidity subfacility to be available for the payment
of the Minimum Quarterly Distribution in certain circumstances, (iv) exclude
from the mandatory prepayment provisions an amount sufficient to purchase the GP
Loan if an event of default under such loan occurs, (v) decrease the maximum
ratio of consolidated total indebtedness to EBITDA from 5.25 to 1.00 to 5.10 to
1.00, (vi) modify certain definitions and covenants relating to the ownership of
the General Partner and the Operating Partnership, (vii) increase the Applicable
Margins (as defined in the Existing Credit Agreement) of the interest rates
payable with respect to borrowings under the Existing Credit Agreement and
(viii) provide for the lenders' consents to the amendments to the Partnership
Agreement and the Senior Note Agreement contemplated by the Recapitalization and
to the termination of the Distribution Support Agreement.
Redemption. At the Closing, Suburban will redeem all 7,163,750 outstanding
Subordinated Units and all 220,000 outstanding APUs (all of which are owned by
the General Partner) (the 'Redemption') for $69 million. The Redemption Price
will be reduced dollar-for-dollar for any distributions on the Subordinated
Units or the APUs pursuant to the Partnership Agreement prior to the Closing and
shall be increased dollar-for-dollar for any contributions to Suburban that the
General Partner or Millennium America Inc. may be obligated to make in exchange
for additional APUs required to be purchased pursuant to the Distribution
Support Agreement prior to the Closing (which additional APUs also will be
redeemed at the Closing).
Payment of Special Distribution by Operating Partnership. Pursuant to the
Amended Operating Partnership Agreement, at the Closing the Operating
Partnership will make the Special Distribution to Suburban. The Special
Distribution will be funded out of the Operating Partnership's then existing
cash resources and, if necessary, borrowings under the Existing Credit
Agreement.
Admission of Successor General Partner to Partnerships; GP Interest
Purchase. At the Closing, immediately prior to the consummation of the GP
Interest Purchase, the Successor General Partner will be admitted as a general
partner of Suburban and of the Operating Partnership in accordance with the
terms of the Amended Partnership Agreements and will assume the rights and
duties of the General Partner thereunder. Immediately thereafter, the General
Partner and the Successor General Partner will consummate the GP Interest
Purchase upon the terms and conditions set forth in the GP Interest Purchase
Agreement.
Termination of Distribution Support Agreement. At the Closing, the parties
to the Distribution Support Agreement will enter into a letter terminating the
Distribution Support Agreement and the rights and obligations of the parties
under the Distribution Support Agreement.
55
<PAGE>
<PAGE>
REPRESENTATIONS AND WARRANTIES
Each of the parties has made certain customary representations and
warranties as to themselves and their subsidiaries with respect to, among other
things: partnership or corporate organization, standing and power; power and
authority to enter into and consummate the Recapitalization; absence of
conflicts with organizational documents, certain material agreements or laws or
orders; no government consents or approvals; absence of brokers' fees (other
than financial advisors); absence of litigation challenging the
Recapitalization; and accuracy and completeness of the Proxy Statement. In
addition, (i) each of the Partnerships made certain representations and
warranties with respect to its capitalization, absence of voting arrangements
the amendments to the Existing Credit Agreement, the Rothschild opinion and A.G.
Edwards opinion; (ii) each of Millennium and the General Partner made certain
representations and warranties with respect to ownership of the Subordinated
Units and the APUs; and (iii) the Successor General Partner made certain
representations and warranties with respect to the contemplated ownership of the
Successor General Partner.
Each of the representations and warranties will survive the Closing for a
period of one year, other than the representations and warranties with respect
to the accuracy and completeness of the Proxy Statement, which will survive the
Closing for a period of three years, and the representations and warranties by
Millennium and the General Partner with respect to the ownership of the
Subordinated Units and the APUs, which will survive the Closing indefinitely.
COVENANTS
No Sale, Solicitation or Pledge. The Recapitalization Agreement provides
that until the earlier of the Closing or the termination of the Recapitalization
Agreement, Millennium and the General Partner will (i) keep the Subordinated
Units and the APUs registered in the General Partner's name and will not sell,
lease, transfer, pledge, create any lien on, or otherwise encumber or dispose of
any portion of the Subordinated Units and the APUs or the Assets and (ii) will
not merge, consolidate or enter into any similar transaction with any other
person (each of the transactions referred to in (i) or (ii) above, an
'Acquisition Proposal'). The Recapitalization Agreement further provides that
until the earlier of the Closing or the termination of the Recapitalization
Agreement, neither Millennium, the General Partner, nor any of their respective
affiliates, directors, officers, employees, agents or other representatives
(including legal and financial advisors) will directly or indirectly solicit,
initiate or encourage the submission of any Acquisition Proposal or take any
other action to facilitate any Acquisition Proposal.
The foregoing prohibitions shall not prohibit the General Partner's Board
of Directors from furnishing information to, or entering into discussions or
negotiations prior to the mailing of the Proxy Statement with, any person that
makes an unsolicited bona fide written Acquisition Proposal for cash, provided
that the General Partner's Board of Directors determines in good faith that such
Acquisition Proposal, if accepted, would be reasonably likely to be consummated
and would be financially superior to the Recapitalization (a 'Superior
Proposal') and, provided further, that prior to taking such action, the General
Partner provides reasonable notice of such Superior Proposal to the Elected
Supervisors and the Successor General Partner and receives from such bona fide
offeror an executed confidentiality agreement in reasonably customary form
containing terms at least as stringent as those contained in any confidentiality
agreement between the General Partner and any person which made an Acquisition
Proposal in 1998.
Voting of Subordinated Units. The Recapitalization Agreement provides that
Millennium and the General Partner will vote all Subordinated Units entitled to
vote in favor of the Recapitalization.
Other Covenants. The Recapitalization Agreement also contains customary
covenants, including covenants relating to: the convening of the Meeting; the
preparation, filing with the Securities and Exchange Commission (the 'SEC') and
clearance by the SEC of the Proxy Statement; the recommendation by the Board of
Supervisors in the Proxy Statement for the approval of the Recapitalization,
subject to their fiduciary duties; the parties' obligations to use their
commercially reasonable efforts to consummate the Recapitalization and not take
any actions that would reasonably be expected to result in any of the
representations and warranties set forth in the Recapitalization Agreement
becoming untrue in any material respect or any of the conditions of the other
parties to the consummation of the transactions contemplated by the
Recapitalization Agreement not being satisfied;
56
<PAGE>
<PAGE>
cooperation with respect to necessary filings; and updating information
contained in the Proxy Statement.
CONDITIONS TO CONSUMMATION OF THE RECAPITALIZATION
The obligations of each party to the Recapitalization Agreement are subject
to the satisfaction or waiver (by the party entitled to the benefits thereof) at
or prior to the Closing of the following conditions: (i) approval of the
Recapitalization by a Unit Majority (as defined in the Recapitalization
Agreement) and the holders of at least a majority of the Public Common Units;
(ii) approval of the Note Majority (as defined in the Recapitalization
Agreement) of the amendment of the Senior Note Agreement to permit and effect
the Recapitalization; (iii) approval of the lenders under the Existing Credit
Agreement to permit and effect the Recapitalization; (iv) all filings, consents,
approvals, permits and authorizations provided in the Recapitalization Agreement
shall have been made or obtained and shall be in full force and effect; (v) no
temporary restraining order, preliminary or permanent injunction or other
similar order or decree of any governmental entity shall be in effect, pending
or threatened that would impair in any material respect the consummation of the
Recapitalization or impose any material requirements on Suburban or the
Operating Partnership or cause any of the parties or their respective affiliates
to owe material damages to any third party; (vi) the Operating Partnership shall
have paid to Suburban the Special Distribution; (vii) the GP Interest Purchase
shall be consummated concurrently with the Closing; (viii) the Amended
Partnership Agreements shall have been executed and delivered by the parties
thereto; (ix) the termination of the Distribution Support Agreement shall have
been executed and delivered by the parties thereto; (x) Baker & Botts, L.L.P.
shall have delivered to Suburban, the Operating Partnership, the General Partner
and the Successor General Partner an opinion to the effect that the sale of the
GP Interests would not result in the loss of limited liability of any limited
partner or cause Suburban to be treated as an association taxable as a
corporation or otherwise to be taxed as an entity for federal income tax
purposes; (xi) the supervisors appointed by the General Partner shall have
tendered their resignations from the Board of Supervisors; (xii) the
representations and warranties of each of the other parties contained in the
Recapitalization Agreement shall be true and correct in all material respects on
the date of the Recapitalization Agreement and the Closing, except to the extent
such representations and warranties speak as of a specified date; (xiii) each of
the other parties shall have performed in all material respects all of its
obligations under the Recapitalization Agreement; (xiv) the parties shall have
received officers' certificates from the other parties to the effect set forth
in clauses (xii) and (xiii) above; and (xv) the receipt of partnership or
corporate resolutions and, if required, resolutions of stockholders or members,
from the other parties authorizing the Recapitalization.
The obligations of Suburban and the Operating Partnership under the
Recapitalization Agreement are further subject to the satisfaction or waiver at
or prior to the Closing of the following additional conditions: (i) the
Operating Partnership must have existing cash resources and, if necessary, the
availability of borrowings under the Existing Credit Agreement in an amount
sufficient to pay the Redemption Price and transaction expenses; (ii) receipt
from the General Partner of the certificates representing the Subordinated Units
and the APUs; (iii) Rothschild and A.G. Edwards shall not have withdrawn their
respective opinions; and (iv) the Special Committee shall not have withdrawn its
recommendation to the Board of Supervisors to approve the Recapitalization at
any time prior to the mailing of the Proxy Statement.
The obligations of Millennium and the General Partner to the
Recapitalization Agreement are further subject to the receipt of the Redemption
Price at the Closing.
TERMINATION
The Recapitalization Agreement may be terminated and abandoned at any time
prior to the Closing: (i) by written consent of the parties; (ii) by any of the
parties if the Closing shall have not occurred on or before May 15, 1999, unless
extended by the Elected Supervisors and payment of an extension fee by Suburban
to Millennium or otherwise extended by written consent of the parties; (iii) if
the Special Committee shall have withdrawn its recommendation to the Board of
Supervisors to approve the Recapitalization and subject to the payment of a
termination fee, by Suburban or the Successor General Partner at any time prior
to the mailing of the Proxy Statement and by Millennium
57
<PAGE>
<PAGE>
or the General Partner at any time prior to the Meeting; (iv) if Millennium, the
General Partner or any of their affiliates is concurrently entering into a
definitive written agreement for a Superior Proposal and subject to the payment
of a termination fee, by Millennium or the General Partner at any time prior to
the mailing of the Proxy Statement; (v) by any of the parties if any
governmental entity shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting the
Recapitalization and such order, decree, ruling or other action shall have
become final and nonappealable; or (vi) by any of the parties if any of the
other parties materially breaches its agreements and covenants under the
Recapitalization Agreement or any other agreement entered into in connection
with the Recapitalization or any representation or warranty shall fail to be
true and correct and such breach or failure shall continue for 30 days without
cure after notice thereof and such breach or failure would reasonably be
expected to have a material adverse effect on the party invoking its termination
right or would materially impair the Recapitalization.
The right to terminate the Recapitalization Agreement under the foregoing
termination provisions will not be available to any party (i) which is in
material breach of its obligations under the Recapitalization Agreement or (ii)
whose failure to fulfill its obligations under the Recapitalization Agreement
has been the cause of, or resulted in, the failure to satisfy any of the
conditions to the consummation of the Closing (and such right to terminate also
shall not be available to either Suburban or the Operating Partnership, if the
other, or to the General Partner or Millennium, if the other, is in such breach
or if such other's failure to fulfill its obligations under the Recapitalization
Agreement has been the cause of, or resulted in, the failure to satisfy any of
the conditions to the consummation of the Closing).
TERMINATION FEES AND EXPENSE REIMBURSEMENTS
Termination Fee and Expense Reimbursements Payable by Suburban. The
Recapitalization Agreement requires Suburban to pay $2 million to Millennium
upon (and as a condition to) the termination of the Recapitalization Agreement
by Suburban or the Successor General Partner pursuant to clause (iii) of the
first paragraph under ' -- Termination' above. Suburban must pay all of the
out-of-pocket expenses of Millennium and the General Partner relating to the
preparation, negotiation, execution and delivery by Millennium and the General
Partner of the Recapitalization Agreement and the documents to be delivered
pursuant thereto upon (and as a condition to) the termination of the
Recapitalization Agreement by Millennium or the General Partner pursuant to
clause (iii) of the first paragraph under ' -- Termination' above.
Termination Fee Payable by Millennium or the General Partner. The
Recapitalization Agreement requires Millennium or the General Partner to pay $3
million to Suburban upon (and as a condition to) the termination of the
Recapitalization Agreement by Millennium or the General Partner pursuant to
clause (iv) of the first paragraph under ' -- Termination' above.
EXTENSION FEE
If the Elected Supervisors wish to extend the automatic termination date of
the Recapitalization Agreement for the purpose of allowing either (i) an
extension beyond such date of the solicitation period under the Proxy Statement
with respect to the vote of the Common Unitholders at the Meeting or (ii) a
resolicitation of the vote of the Common Unitholders, then the Elected
Supervisors have the right to extend such date until the close of business on
June 15, 1999 by written notice to Millennium and the General Partner given
prior to the close of business on May 15, 1999 and by payment by or on behalf of
Suburban to Millennium of an extension fee of $1 million in cash concurrently
with the giving of such notice (the Elected Supervisors have elected to pay this
$1 million fee and extend the termination date of the Recapitalization Agreement
from May 15, 1999 to June 15, 1999).
AMENDMENT
Subject to the approval of a majority of the Elected Supervisors, the
Recapitalization Agreement may be amended by written agreement of all the
parties at any time prior to or after the approval of the Recapitalization
Agreement by a Unit Majority and by the holders of at least a majority of the
Public Common Units, but after any such approval, no amendment may be made
without the approval of a
58
<PAGE>
<PAGE>
Unit Majority and the holders of at least a majority of the Public Common Units
if such approvals are required by law or by the Partnership Agreement or if such
amendment shall materially and adversely affect the rights of the holders of
Common Units.
Suburban will resolicit the vote of the Common Unitholders if the
Recapitalization Agreement is amended in any material respect after this Proxy
Statement is mailed to Common Unitholders but before the vote of the Common
Unitholders at the Meeting.
TERMINATION OF THE DISTRIBUTION SUPPORT AGREEMENT
At the Closing, the parties to the Distribution Support Agreement will
enter into a termination agreement to terminate the Distribution Support
Agreement as of the Closing. The Distribution Support Agreement will be replaced
with the Liquidity Arrangement. See 'Cash Distribution Policy.'
THE GP INTEREST PURCHASE AGREEMENT
THE DESCRIPTION OF THE GP INTEREST PURCHASE AGREEMENT SET FORTH BELOW IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE TEXT OF THE GP INTEREST
PURCHASE AGREEMENT, A COPY OF WHICH IS ATTACHED AS ANNEX B TO THIS PROXY
STATEMENT.
THE GP INTEREST PURCHASE
At the Closing, the General Partner will sell its entire GP Interests and
its Incentive Distribution Rights to the Successor General Partner for a total
price of $6 million to be paid by the Successor General Partner. The Successor
General Partner will assume and, following the Closing, will be solely liable
for, all liabilities of the General Partner as general partner under the
Partnership Agreements and applicable law, excluding any liabilities arising out
of the General Partner's breach or default as a general partner under the
Partnership Agreements at or prior to Closing, and will be bound by the
provisions of the Amended Partnership Agreements.
REPRESENTATIONS AND WARRANTIES
Each of the parties has made certain customary representations and
warranties with respect to, among other things: corporate organization, standing
and power; power and authority to enter into and consummate the GP Interest
Purchase; no government consents or approvals; absence of conflicts with
organizational documents, certain material agreements or laws or orders; and
absence of brokers' fees. In addition, (i) each of Millennium and the General
Partner made certain representations and warranties with respect to ownership of
the General Partner, ownership of and title to the GP Interests and Incentive
Distribution Rights (the 'Assets'), creations of liens on the Assets, absence of
conflicts with the Partnership Agreements and certain other agreements with the
Partnerships, financial statements, absence of litigation relating to the
Assets, and transactions with affiliates; and (ii) the Successor General Partner
has made certain representations and warranties with respect to its business
purpose and formation.
Each of the representations and warranties will survive the Closing for a
period of one year, other than the representations and warranties with respect
to the General Partner's title to the Assets, which will survive the Closing
indefinitely.
ADDITIONAL AGREEMENTS
The GP Interest Purchase Agreement sets forth certain additional customary
agreements of the parties, including agreements relating to the access to
information; the parties' obligations to use their commercially reasonable
efforts and to cooperate to consummate the GP Interest Purchase and make any
necessary filings; mutual notification of certain matters; further assurances;
public announcements; the obligation of Millennium and the General Partner to
delete 'Suburban Propane' from their respective names and the names of their
affiliates; the obligations of each party to bear its own expenses in connection
with the GP Interest Purchase Agreement; and the allocation of all Partnership
and Operating Partnership income taxes accrued prior to the Closing to
Millennium and the General Partner and all Partnership and Operating Partnership
income taxes accrued after the Closing to the Successor General Partner.
59
<PAGE>
<PAGE>
CONDITIONS TO CONSUMMATION OF THE GP INTEREST PURCHASE
The obligations of each party under the GP Interest Purchase Agreement are
conditioned upon satisfaction or waiver (by the party entitled to the benefits
thereof) at or prior to the Closing of the following conditions: (i) any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, shall have expired or been terminated; (ii) no temporary
restraining order, preliminary or permanent injunction or other similar order or
decree of any governmental entity shall be in effect, pending or threatened that
would impair in any material respect the consummation of the GP Interest
Purchase or impose any material requirements on Suburban or the Operating
Partnership or cause any of the parties or their respective affiliates to owe
material damages to any third party; (iii) no statute, rule, or regulation by
any governmental entity shall be in effect prohibiting the GP Interest Purchase;
(iv) the representations and warranties of each of the other parties contained
in the GP Interest Purchase Agreement shall be true and correct in all material
respects on the date of the GP Interest Purchase Agreement and the Closing; (v)
each of the other parties shall have performed in all material respects all of
its covenants and agreements under the GP Interest Purchase Agreement; and
(viii) the Recapitalization Agreement shall be in full force and effect, all of
the respective conditions precedent to the obligations of each of the parties
thereunder shall have been or will be concurrently satisfied or waived and the
Recapitalization shall occur concurrently with the GP Interest Purchase. In
addition, the obligations of the Successor General Partner are subject to the
satisfaction or waiver prior to the Closing of the following additional
conditions: (i) no statute, rule, or regulation by any governmental authority
shall be in effect which materially changes the tax status of the Partnerships;
(ii) no changes in the Assets or business of the Partnerships since the date of
the GP Interest Purchase Agreement which would have a material adverse effect on
the Assets or business; (iii) the delivery of instruments of assignment and
title; and (iv) the receipt of financing in an amount sufficient to pay the
purchase price for the Assets.
TERMINATION
The GP Interest Purchase Agreement may be terminated at any time prior to
the Closing: (i) by consent of the parties; (ii) by any of the parties if the
Closing shall have not been consummated on or before May 15, 1999, unless the
failure to consummate the Closing by such date shall be due to the willful
failure of the party seeking to terminate the GP Interest Purchase Agreement to
fulfill its obligations; (iii) by any of the parties if any court or
governmental entity shall have issued a statute, rule, regulation, order, decree
or injunction or taken any other action permanently restraining, enjoining or
otherwise prohibiting the GP Interest Purchase and such statute, rule,
regulation, order, decree or injunction or other action shall have become final
and nonappealable; or (iv) by any of the parties if the Recapitalization
Agreement is terminated by its terms.
60
<PAGE>
<PAGE>
SUMMARY OF AMENDMENTS TO THE PARTNERSHIP AGREEMENTS
SET FORTH BELOW IS A SUMMARY OF THE PROPOSED AMENDMENTS TO THE PARTNERSHIP
AGREEMENTS. THE FOLLOWING DISCUSSION OF THE AMENDMENTS AND THE RESULTING AMENDED
PARTNERSHIP AGREEMENTS IS A SUMMARY OF THE MATERIAL AMENDMENTS BEING PROPOSED AS
PART OF THE AMENDED PARTNERSHIP AGREEMENTS. FOR A MORE COMPLETE UNDERSTANDING OF
THE AMENDMENTS, SEE THE AMENDED PARTNERSHIP AGREEMENT ATTACHED TO THIS PROXY
STATEMENT AS ANNEX C, WHICH SHOWS THE PORTIONS OF THE PARTNERSHIP AGREEMENT THAT
WILL BE DELETED OR CHANGED IF THE RECAPITALIZATION IS COMPLETED.
INTRODUCTION; REQUIRED VOTE BY UNITHOLDERS
Pursuant to the Partnership Agreement, the Board of Supervisors proposes
the adoption of the amendments to the Partnership Agreement and the Operating
Partnership Agreement described in this Proxy Statement. If each of the
Recapitalization proposals are approved by the holders of at least a majority of
the outstanding Common Units, including the holders of at least a majority of
the outstanding Public Common Units, the proposed amendments to the Partnership
Agreements will become effective.
SUMMARY OF AMENDMENTS TO THE PARTNERSHIP AGREEMENT
Redemption of Subordinated Units and APUs. The proposed amendments will
permit the redemption of the Subordinated Units and APUs, which is currently
prohibited by the Partnership Agreement. The Redemption will have the following
effects on the legal rights of the Common Unitholders:
As a result of the elimination of the Subordinated Units and the APUs, the
Common Unitholders will participate in all distributions of Available Cash
from Operating Surplus. Under the Partnership Agreement as currently in
effect, once the Minimum Quarterly Distribution has been paid on the
Common Units (including any arrearages), the Common Units are not entitled
to any further distributions with respect to such quarter until the
Subordinated Units have received the Minimum Quarterly Distribution and
all outstanding APUs have been redeemed. Under the Amended Partnership
Agreement, the Common Unitholders will receive 98% of all distributions up
to the Target Distribution of $0.55 per Common Unit and 85% of all
distributions in excess of the Target Distribution. See 'Cash Distribution
Policy -- Distributions from Operating Surplus.'
Under the Partnership Agreement as currently in effect, certain matters,
including the merger or consolidation of Suburban with another person, the
sale of substantially all the assets of Suburban, the transfer by the
General Partner of its general partner interest, the withdrawal or removal
of the General Partner and certain amendments to the Partnership
Agreement, require the approval of the holders of at least a majority of
the outstanding Common Units and the holders of at least a majority of the
outstanding Subordinated Units entitled to vote, each voting as a separate
class (a 'Unit Majority'). Therefore, there may be matters favored by the
holders of a majority of the outstanding Common Units that are not adopted
because the holders of a majority of the Subordinated Units do not approve
them. As a result of the elimination of the Subordinated Units, these
matters will now require only the approval of the holders of at least a
majority of the outstanding Common Units.
Reduction of Incentive Distributions. Currently, the General Partner, in
its capacity as holder of the Incentive Distribution Rights, is entitled to an
additional 13% of all Available Cash from Operating Surplus distributed over
$0.55 per unit in any quarter, 23% of all Available Cash from Operating Surplus
distributed over $0.633 per unit in any quarter and 48% of all Available Cash
from Operating Surplus distributed over $0.822 per unit in any quarter. The
proposed amendments will limit the distributions on the Incentive Distribution
Rights to 13% of all Available Cash from Operating Surplus distributed over the
Target Distribution of $0.55 per unit per quarter.
Conversion of Incentive Distribution Rights. The proposed amendments will
provide that at any time after the fifth anniversary of the Closing, the Board
of Supervisors (with the approval of a majority of the Elected Supervisors) will
have the option to cause all, but not less than all, of the Incentive
Distribution Rights to be converted into that number of Common Units having a
value equal to the fair
61
<PAGE>
<PAGE>
market value of the Incentive Distribution Rights as agreed to by the Board of
Supervisors and the holders of such rights or, failing that, as determined by an
independent investment banking firm. See 'Description of the Amended Partnership
Agreements -- Conversion of Incentive Distribution Rights.'
Termination of Distribution Support Agreement; New Liquidity Arrangement.
At the Closing, the proposed amendments will provide that the Distribution
Support Agreement will be terminated and the General Partner and Millennium will
be released from all of their obligations thereunder with respect to Suburban.
Under that agreement, the General Partner and Millennium were obligated through
March 31, 2001 to contribute cash to Suburban, up to an aggregate maximum of
$43.6 million, in exchange for APUs if the amount of Available Cash from
Operating Surplus was insufficient to pay the Minimum Quarterly Distribution on
all Common Units and the related distribution on the general partner interest
with respect to any quarter. The General Partner and Millennium have contributed
$22.0 million to date in exchange for APUs, leaving their current potential
obligation under the Distribution Support Agreement at $21.6 million. To replace
the Distribution Support Agreement, Suburban will establish the $22.0 million
Liquidity Arrangement at the Closing.
Although the duration of the Liquidity Arrangement is the same as the
Distribution Support Agreement, there are a number of differences between them:
(1) The Distribution Support Agreement commits the resources of a
third party with greater financial resources than Suburban, whereas the
Liquidity Arrangement sets aside Suburban's own resources for the sole
purpose of enhancing Suburban's ability to make distributions at a time
when operating cash flow is not sufficient. In addition, borrowing
availability committed to the Liquidity Arrangement will not be available
to Suburban for distributions, working capital needs or other purposes
until the end of the fiscal quarter ending on March 31, 2001, which may
adversely affect Suburban's operations. Consequently, the cost of the
Liquidity Arrangement, if used, would be indirectly borne by the Common
Unitholders.
(2) Further, the ability of Suburban to borrow to make payments under
the Liquidity Arrangement depends on whether Suburban is in compliance at
such time with the covenants and other provisions of the Existing Credit
Agreement and the Senior Note Agreement. If Suburban is not generating
sufficient operating cash flow to pay the Minimum Quarterly Distribution,
there is a heightened risk that Suburban will not be in a position to meet
the conditions for borrowing under the working capital line of the Existing
Credit Agreement.
(3) APUs issued in exchange for contributions under the Distribution
Support Agreement do not bear interest and have no fixed redemption date,
so there is no risk that Suburban would be obligated to make payments on
the APUs at a time when it did not have sufficient liquidity. On the other
hand, borrowings under the working capital line to fund the Liquidity
Arrangement, if used, would bear interest and have a fixed maturity date.
(4) Suburban's obligation under the Liquidity Arrangement is
permanently reduced by the amount drawn, even if Suburban repays the
amounts borrowed with cash from operations. Furthermore, the Liquidity
Arrangement will be reduced to $11.6 million for the quarter ending March
31, 2001, which is the currently estimated amount of the Minimum Quarterly
Distribution for such quarter. In contrast, the obligations of the General
Partner and Millennium America will be replenished back up to $43.6 million
if the APUs are repaid in accordance with the terms of the Partnership
Agreement. See 'Cash Distribution Policy -- Liquidity Arrangement.'
Right to Approve Issuances of Additional Units. Under the Partnership
Agreement as currently in effect, the right of the Common Unitholders to vote on
certain issuances of Common Units and securities ranking senior to or on a
parity with the Common Units would cease upon completion of the Recapitalization
as a result of the termination of the subordination period. The proposed
amendments provide that this right to vote will continue following the
Recapitalization through the quarter ending March 31, 2001. See 'Description of
the Amended Partnership Agreements -- Issuance of Additional Securities.'
Payment of Common Units Arrearages. Under the Partnership Agreement as
currently in effect, the right of the Common Unitholders to arrearages on the
Minimum Quarterly Distribution would cease upon completion of the
Recapitalization as a result of the termination of the subordination period. The
proposed amendments provide that this right to arrearages will continue
following the Recapitalization
62
<PAGE>
<PAGE>
through the quarter ending March 31, 2001. The effect will be to prevent
payments on the Incentive Distribution Rights during this period if there are
any arrearages outstanding on the Common Units.
Designation of General Partner Interests as General Partner Units. The
combined 2% GP Interests will be designated as 453,956 General Partner Units
(determined based on 681,320 Restricted Units outstanding as of the date of this
Proxy Statement). (This number could change if the number of Restricted Units
changes before the Closing either as a result of a lapse of unvested Restricted
Units or a new grant under the Restricted Unit Plan, neither of which is
presently expected to occur). The percentage ownership interests of the
Successor General Partner in the Partnerships will remain as a 1.0% general
partner interest in Suburban and a 1.0101% general partner interest in the
Operating Partnership. The designation of the 1.0% general partner interest in
Suburban and 1.0101% general partner interest in the Operating Partnership will
not have any economic or other effect on the GP Interests or the Common Units.
This amendment is being made in conjunction with the amendment eliminating the
requirement that the general partner of Suburban maintain a fixed percentage
general partner interest in Suburban.
General Partner Capital Contribution Requirement. The proposed amendments
will relieve the General Partner of its obligation to make contributions of
capital to Suburban upon the issuance of additional units in order to maintain a
fixed percentage general partner interest in Suburban. The General Partner will
retain its preemptive right to maintain its existing ownership interest. If the
General Partner does not make a contribution of capital upon the issuance of
additional units, its claim on distributions of Available Cash will be
proportionately reduced.
Deletion of the Provision Regarding the Net Worth of the General Partner.
The proposed amendments will delete the prohibition against the General Partner
from taking any action that would cause its net worth, independent of its
interest in Suburban and the Operating Partnership, to be less than $28.0
million. The primary purpose of the net worth requirement was to ensure that
Suburban would be treated as a partnership and not as an association taxable as
a corporation for federal income tax purposes. Counsel has advised Suburban that
the failure of the General Partner to maintain a specific net worth will not
result in Suburban being treated as an association taxable as a corporation for
federal income tax purposes under current regulations under the Tax Code.
Changes in Board of Supervisors. The Board of Supervisors currently has
seven members, consisting of three Elected Supervisors elected by the Common
Unitholders and Subordinated Unitholders at a Tri-Annual Meeting held every
three years commencing in 1997, two Appointed Supervisors appointed by the
General Partner in its sole discretion and two Management Supervisors appointed
by a majority of the Elected Supervisors and Appointed Supervisors voting as a
single class. The proposed amendments will reduce the size of the Board of
Supervisors to five members by eliminating the positions of the two Management
Supervisors. As a result, the Elected Supervisors, who may not be employees,
officers or directors of the General Partner, Suburban or any of its
subsidiaries or any affiliate of the General Partner or Suburban, will
constitute a majority of the Board of Supervisors.
Pledge of GP Interests. The Partnership Agreement generally prohibits a
transfer of the GP Interests without a vote of the unitholders prior to
September 30, 2006. The proposed amendments will permit the Successor General
Partner to pledge the GP Interests to Mellon in connection with the GP Loan and
will also permit Mellon to foreclose on and sell the GP Interests if an event of
default occurs and is continuing under the GP Loan. The purchaser in the
foreclosure sale would become the general partner of the Partnerships with all
the rights and duties of the general partner and the existence of the
Partnerships would continue in accordance with the terms of the Amended
Partnership Agreements.
SUMMARY OF AMENDMENTS TO THE OPERATING PARTNERSHIP AGREEMENT
Under the Partnership Agreement neither the General Partner nor the Board
of Supervisors may consent to any amendment to the Operating Partnership
Agreement as currently in effect that would have a material adverse effect on
Suburban as a partner of the Operating Partnership or cause Suburban to elect a
successor general partner to the Operating Partnership without the approval of
the holders of at least a majority of the outstanding Common Units and the
holders of at least a majority of the outstanding Subordinated Units entitled to
vote.
63
<PAGE>
<PAGE>
The General Partner and the Board of Supervisors consents to and proposes
that the Common Unitholders approve (i) the election of Suburban Energy Services
Group LLC as successor general partner to the Operating Partnership, (ii) the
deletion of the prohibition against the General Partner from taking any action
that would cause its net worth to be less than $28 million, (iii) the amendment
to the Operating Partnership Agreement permitting the Successor General Partner
to pledge the GP Interests to Mellon as security for the GP Loan and (iv) such
other amendments to the Operating Partnership Agreement that the Board of
Supervisors deems necessary in connection with the consummation of the
Recapitalization.
CONFORMING CHANGES
Certain additional changes will be required to conform the Partnership
Agreement and the Operating Partnership Agreement to the foregoing amendments
and to facilitate the consummation of the Recapitalization. It is the good faith
opinion of the Board of Supervisors that such conforming changes do not
adversely affect the unitholders in any material respect, and thus pursuant to
the Partnership Agreement, as currently in effect, the Board of Supervisors may
make any or all conforming changes without the consent of the holders of Common
Units.
FINANCING OF THE TRANSACTIONS
FINANCING ARRANGEMENTS OF THE OPERATING PARTNERSHIP FOR THE RECAPITALIZATION
FUNDING OF THE RECAPITALIZATION
Suburban estimates that the Redemption Price for the Subordinated Units and
APUs and the transaction fees and expenses in connection with the
Recapitalization, including the GP Interest Purchase, will be approximately
$78.5 million. Suburban expects to fund the Redemption Price and the fees and
expenses of the Recapitalization, including the GP Interest Purchase, entirely
from its cash on hand at the time of the Closing. Actual cash and cash
equivalents on hand as of March 27, 1999 were approximately $75 million and net
accounts receivable was approximately $65 million. Suburban presently
anticipates that the cash generated from accounts receivable, together with the
current levels of cash on hand, will be sufficient to fund the cost of the
Recapitalization and maintain sufficient levels of available cash to meet
immediate cash distribution needs. If Suburban's actual cash and cash
equivalents on hand at the time of the Closing is less than $79.5 million
(Suburban would expect to retain at least $1 million in cash on hand), Suburban
will borrow an amount under the Existing Credit Facility at least equal to the
difference between $79.5 million and the actual cash and cash equivalents on
hand.
AMENDMENTS TO THE EXISTING CREDIT AGREEMENT
In connection with the Recapitalization, the Operating Partnership will
amend and restate the Existing Credit Agreement to, among other things, (i)
extend its maturity date to the fiscal quarter ending March 31, 2001, (ii) amend
the minimum adjusted consolidated net worth covenant to reduce the required
minimum net worth of the Operating Partnership from $125 million to $50 million,
(iii) provide for a $22 million liquidity subfacility for the payment of the
minimum quarterly distribution in certain circumstances, (iv) exclude from the
mandatory prepayment provisions an amount sufficient to purchase the GP Loan if
an event of default under such loan occurs, (v) decrease the maximum ratio of
consolidated total indebtedness to EBITDA from 5.25 to 1.00 to 5.10 to 1.00,
(vi) modify certain definitions and covenants relating to the ownership of the
General Partner and the Operating Partnership, (vii) increase the Applicable
Margins (as defined in the Existing Credit Agreement) of the interest rates
payable with respect to borrowings under the Existing Credit Agreement and
(viii) provide for the lenders' consents to the amendments to the Partnership
Agreement and the Senior Note Agreement contemplated by the Recapitalization and
to the termination of the Distribution Support Agreement.
AMENDMENTS TO THE SENIOR NOTE AGREEMENT
The Senior Note Agreement will be amended to, among other things, (i)
reduce the minimum adjusted consolidated net worth requirement from $125 million
to $50 million, (ii) create a financial covenant exception for non-recurring,
non-cash charges to be incurred in connection with the
64
<PAGE>
<PAGE>
Recapitalization, (iii) decrease the maximum ratio of consolidated total
indebtedness to EBITDA from 5.25 to 5.10, with a further decrease to 5.00
effective as of April 1, 2001, and (iv) include a new interest coverage
maintenance test requiring the Operating Partnership to maintain a ratio of
consolidated EBITDA for any four fiscal quarters to consolidated interest
expense for such period of at least 2.50 to 1.0. In addition, prior to the
Closing the Partnership will obtain the consent of a majority of the holders of
the Senior Notes to (i) the replacement of the General Partner with the
Successor General Partner, (ii) the amendments to the Partnership Agreements
necessary for the Recapitalization, (iii) the termination of the Distribution
Support Agreement and (iv) the distribution by the Operating Partnership to the
Partnership to permit the Partnership to pay the Redemption Price. In
consideration for granting their consent to the foregoing, the Operating
Partnership will pay a fee to each holder of Senior Notes in an amount equal to
0.375% of the outstanding principal amount of Senior Notes held by such holder.
The total amount of such fees is approximately $1.6 million.
FINANCING ARRANGEMENTS OF THE SUCCESSOR GENERAL PARTNER FOR THE GP INTEREST
PURCHASE
The Successor General Partner has entered into a commitment letter, dated
as of December 22, 1998, with Mellon pursuant to which Mellon has agreed to lend
the Successor General Partner $6 million to purchase the GP Interests and the
Incentive Distribution Rights. The GP Loan will be secured by a pledge of the
GP Interests held by the Successor General Partner.
The GP Loan will have a term of five years from the date of the Closing.
The GP Loan will bear interest at a rate equal to LIBOR plus 2% with such
interest to be paid no less frequently than quarterly. A $30,000 fee will be
paid by the Operating Partnership to Mellon in connection with the GP Loan as
part of the Recapitalization expenses. The Operating Partnership will also pay
the other fees and expenses of the GP Interest Purchase as part of the
Recapitalization expenses. The total fees and expenses of the GP Interest
Purchase are estimated to be $ .
The agreement for the GP Loan will contain various covenants limiting the
ability of the Successor General Partner to (i) incur indebtedness, (ii) grant
liens, (iii) acquire assets, other than the GP Interests, and (iv) merge,
consolidate or sell its assets. The principal amount of the GP Loan will be
payable in full in five years.
Upon the occurrence and continuance of an event of default under the GP
Loan (a 'GP Default'), Mellon will have the right to cause the Operating
Partnership to purchase the note evidencing the GP Loan (the 'GP Note'). The
Operating Partnership has agreed to maintain borrowing availability under the
Existing Credit Agreement sufficient to enable it to repurchase the GP Note in
these circumstances. The GP Note will also cross-default to the obligations of
the Operating Partnership under the Senior Note Agreement and the Existing
Credit Agreement. Upon a GP Default, the Operating Partnership also will have
the right to purchase the GP Note from Mellon.
If the Operating Partnership elects or is required to purchase the GP Note
from Mellon, Suburban or the Operating Partnership each have the right,
exercisable in its sole discretion pursuant to the new compensation deferral
plan being established for the members of the Successor General Partner, to
cause all of the Common Units deposited in the trust related to the compensation
deferral plan to be forfeited and cancelled (and to cause all of the related
distributions to be forfeited), regardless of the amount paid by the Operating
Partnership to purchase the GP Note.
65
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Consolidated Financial
Statements are presented as if the Recapitalization had been consummated at
December 26, 1998 in the case of the Unaudited Pro Forma Condensed Consolidated
Balance Sheet at December 26, 1998 and as of September 27, 1998 and September
28, 1997 in the case of the Unaudited Pro Forma Condensed Consolidated Statement
of Operations for the three months ended December 26, 1998 and the fiscal year
ended September 26, 1998, respectively. The Recapitalization has been accounted
for in the Pro Forma Condensed Consolidated Financial Statements as the
redemption of two classes of securities at historical cost (Subordinated Units
and APUs). As the Recapitalization does not result in a change of control due to
the fact that the Common Unitholders will continue to hold a majority of the
voting power of Suburban after the Recapitalization, the redemption is reflected
at historical cost with no change in accounting basis. The unaudited pro forma
adjustments are based on currently available information and certain estimates
and assumptions and, therefore, the actual results may differ from the unaudited
pro forma results. Management of Suburban nevertheless believes that the
assumptions provide a reasonable basis for presenting the significant effects of
the Recapitalization and that the unaudited pro forma adjustments give
appropriate effect to those assumptions and are properly applied in the
unaudited pro forma information.
The historical information at and for the three months ended December 26,
1998 was derived from the unaudited consolidated financial statements of
Suburban contained in Suburban's Quarterly Report on Form 10-Q for the three
months ended December 26, 1998 and the historical information at and for the
fiscal year ended September 26, 1998 was derived from audited consolidated
financial statements of Suburban contained in Suburban's Annual Report on Form
10-K for the year ended September 26, 1998 incorporated by reference in this
Proxy Statement. See 'Where You Can Find More Information.'
66
<PAGE>
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 26, 1998
<TABLE>
<CAPTION>
DECEMBER 26, PRO FORMA PARTNERSHIP
1998 ADJUSTMENTS PRO FORMA
------------ ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 54,188 $ 25,312(A)
(69,000)(B)
(9,500)(C) 1,000
Accounts receivable, less allowance
for doubtful accounts of $2,382............................. 58,081 58,081
Inventories................................................... 30,239 30,239
Prepaid expenses and other current assets..................... 4,476 4,476
------------ ----------- -----------
Total current assets..................................... 146,984 (53,188) 93,796
Property, plant and equipment, net................................. 339,015 339,015
Net prepaid pension cost........................................... 34,268 34,268
Goodwill and other intangible assets, net.......................... 213,162 2,000(C) 215,162
Other assets....................................................... 4,779 4,779
------------ ----------- -----------
Total assets............................................. $738,208 $ (51,188) $ 687,020
------------ ----------- -----------
------------ ----------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable.............................................. $ 33,789 $ 33,789
Accrued employment and benefit costs.......................... 15,853 15,853
Accrued insurance............................................. 5,330 5,330
Customer deposits and advances................................ 15,120 15,120
Accrued interest.............................................. 16,312 16,312
Other current liabilities..................................... 9,083 $ 25,312 (A) 34,395
------------ ----------- -----------
Total current liabilities................................ 95,487 25,312 120,799
Long-term debt..................................................... 427,850 427,850
Postretirement benefits obligation................................. 35,758 35,758
Accrued insurance.................................................. 16,285 16,285
Other liabilities.................................................. 9,504 9,504
------------ ----------- -----------
Total liabilities........................................ 584,884 25,312 610,196
Partners' capital:
Common Unitholders............................................ 87,222 6,141 (B)
(7,350)(C)
(10,988)(D)
(422)(D) 74,603
Subordinated Unitholder....................................... 53,141 (53,141)(B) 0
General Partner............................................... 24,595 (22,000)(B)
(150)(C)
(224)(D) 2,221
Common units held in trust, at cost........................... 11,064 (H) 11,064
Deferred compensation trust................................... (11,064)(H) (11,064)
Unearned compensation......................................... (11,634) 11,212 (D)
422 (D) 0
------------ ----------- -----------
Total partners' capital.................................. 153,324 (76,500) 76,824
------------ ----------- -----------
Total liabilities and partners' capital.................. $738,208 $ (51,188) $ 687,020
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements
67
<PAGE>
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
THREE MONTHS ENDED DECEMBER 26, 1998
<TABLE>
<CAPTION>
THREE MONTHS
ENDED PRO FORMA PARTNERSHIP
DECEMBER 26, 1998 ADJUSTMENTS PRO FORMA
----------------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C>
Revenues
Propane................................................... $ 138,790 $ 138,790
Other..................................................... 22,426 22,426
----------------- -----------
161,216 161,216
Costs and Expenses
Cost of sales............................................. 68,871 68,871
Operating................................................. 52,274 52,274
Depreciation and amortization............................. 8,782 8,782
Selling, general and administrative expenses.............. 7,326 $ (155) (E) 7,171
----------------- ----------- -----------
137,253 (155) 137,098
Income before interest expense and income taxes................ 23,963 24,118
Interest expense, net.......................................... 7,586 1,118 (F) 8,704
----------------- ----------- -----------
Income before provision for income taxes....................... 16,377 (963) 15,414
Provision for income taxes..................................... 7 7
----------------- ----------- -----------
Net income................................................ $ 16,370 $ (963) $ 15,407
----------------- ----------- -----------
----------------- ----------- -----------
General Partner's interest in net income....................... $ 327 $ 308
----------------- -----------
Limited Partners' interest in net income....................... $ 16,043 $ 15,099
----------------- -----------
----------------- -----------
Basic and diluted net income per Unit.......................... $ 0.56 $ 0.68
----------------- -----------
----------------- -----------
Weighted average number of Units outstanding................... 28,726 22,244 (G)
----------------- -----------
----------------- -----------
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements
68
<PAGE>
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 26, 1998
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT
AMOUNTS)
<S> <C> <C> <C>
Revenues
Propane............................................................ $ 598,599 $598,599
Other.............................................................. 68,688 68,688
---------- ---------
667,287 667,287
Costs and Expenses
Cost of sales...................................................... 326,440 326,440
Operating.......................................................... 202,946 202,946
Depreciation and amortization...................................... 36,531 36,531
Selling, general and administrative expenses....................... 37,646 $ (626)(E) 37,020
Gain on sale of investment in Dixie Pipeline Co.................... (5,090) (5,090)
---------- ----------- ---------
598,473 (626) 597,847
Income before interest expense and income taxes......................... 68,814 69,440
Interest expense, net................................................... 30,614 4,494 (F) 35,108
---------- ----------- ---------
Income before provision for income taxes................................ 38,200 (3,868) 34,332
Provision for income taxes.............................................. 35 35
---------- ----------- ---------
Net income......................................................... $ 38,165 $(3,868) $ 34,297
---------- ----------- ---------
---------- ----------- ---------
General Partner's interest in net income................................ $ 763 $ 686
---------- ---------
---------- ---------
Limited Partners' interest in net income................................ $ 37,402 $ 33,611
---------- ---------
Basic and diluted net income per Unit................................... $ 1.30 $ 1.51
---------- ---------
Weighted average number of Units outstanding............................ 28,726 22,244 (G)
---------- ---------
---------- ---------
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements
69
<PAGE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
In connection with the transactions, Suburban anticipates non-recurring
charges of approximately $20.7 million of which $11.2 million relates to
accelerated vesting of Restricted Units under the Restricted Unit Plan and $9.5
million relates to other transactional costs. Due to the non-recurring nature of
such costs, the amount is excluded from the Unaudited Pro Forma Condensed
Consolidated Statement of Operations.
(A) Reflects short-term borrowing under the Existing Credit Agreement to fund a
portion of the Redemption Price. Borrowings under the Existing Credit
Agreement, as amended, bear interest at a rate based upon either LIBOR plus
a margin, First Union National Bank's prime rate or the Federal Funds rate
plus 1/2 of 1%. The Existing Credit Agreement, as amended, will terminate
on March 31, 2001.
(B) Reflects the redemption of 7,163,750 of outstanding Subordinated Units and
$22.0 million or 220,000 APUs for the aggregate redemption price of $69.0
million. The difference between the carrying amounts and the Redemption
Price is reflected as an adjustment to Common Unitholders' capital.
(C) Reflects estimated fees and expenses (aggregating $9.5 million), including
costs to amend the Existing Credit Agreement and Senior Note Agreement,
financial advisory fees, proxy solicitation fees, expenses associated with
the GP Interest Purchase, $1.0 million payable to the General Partner to
extend the termination date of the Recapitalization Agreement to June 15,
1999, and legal, accounting and tax service fees. Suburban anticipates $2.0
million of such fees will relate to the Senior Notes and will be deferred
and amortized over the remaining term of the Senior Notes (approximately 12
years at December 26, 1998) and $6.5 million will be expensed.
(D) Reflects compensation expense recognized upon accelerated vesting of
681,320 issued and outstanding Restricted Units as of the date of this
Proxy Statement pursuant to the change of control provisions of the
Restricted Unit Plan ($11.2 million) and an adjustment to fair market value
at December 26, 1998 ($422,000). Total compensation expense is allocated
between the Common Unitholders and the General Partner based on their
respective ownership percentages.
(E) Reflects elimination of previously recorded compensation expense under the
Restricted Unit Plan.
(F) Reflects (i) additional interest expense at a weighted average rate of
8.0%, in effect during such period, associated with assumed borrowings to
fund a portion of the Recapitalization under the Existing Credit Agreement,
as amended, (ii) the reduction of interest income attributable to the
decrease in available cash on hand (assuming a 5% return on invested funds
and a minimum cash balance on hand of $1.0 million) used to fund the
remainder of the Recapitalization and (iii) the amortization of $2.0
million of fees related to the Senior Notes, which are being amortized over
the remaining term of the Senior Notes (13.5 years at the beginning of
fiscal 1998). The resulting effect is an increase in interest expense of
$4.5 million for the year ended September 26, 1998 (comprised of a $2.3
million increase in interest expense on borrowings, a $2.1 million
reduction in interest income due to lower cash balances available for
investment and $150,000 increase in amortization expense for fees). The
resulting effect is an increase in interest expense of $1.1 million for the
three months ended December 26, 1998 (comprised of a $400,000 increase in
interest expense on borrowings, a $600,000 reduction in interest income due
to lower cash balances for investment and $40,000 increase in amortization
expense for fees).
(G) The weighted average number of units on a pro forma basis is calculated as
the existing total of 28,723,811 units outstanding less 7,163,750
Subordinated Units to be redeemed plus 681,320 additional Common Units
issuable upon conversion of the Restricted Units or into the trust for the
benefit of members of the Successor General Partner (based on the number of
Restricted Units outstanding as of the date of this Proxy Statement).
(H) Reflects the establishment of a deferred compensation trust arrangement for
the benefit of members of the Successor General Partner which will hold the
Common Units deposited in exchange for Restricted Units surrendered by the
holders thereof in connection with acquiring an ownership interest in the
Successor General Partner.
70
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is a discussion of the historical financial condition and
results of operations of Suburban and its predecessor company. The discussion
should be read in conjunction with the historical consolidated financial
statements and notes thereto included in Suburban's Quarterly Report on Form
10-Q for the three months ended December 26, 1998 and its Annual Report on Form
10-K for the year ended September 26, 1998 each incorporated by reference in
this Proxy Statement. Since the Operating Partnership and Suburban's service
subsidiary account for substantially all of the assets, revenues and earnings of
Suburban, a separate discussion of Suburban's results of operations from other
sources is not presented.
GENERAL
Suburban is engaged in the retail, wholesale marketing and trading of
propane and related sales of appliances and services. Suburban believes it is
the third largest retail marketer of propane in the United States, serving more
than 700,000 active residential, commercial, industrial and agricultural
customers from more than 340 customer service centers in over 40 states.
Suburban's annual retail propane sales volumes were approximately 530 million,
541 million and 567 million gallons during the fiscal years ended September 26,
1998, September 27, 1997 and September 28, 1996, respectively.
The retail propane business of Suburban consists principally of
transporting propane purchased on the contract and spot markets, primarily from
major oil companies, to its retail distribution outlets and then to storage
tanks located on the customers' premises. In the residential and commercial
markets, propane is primarily used for space heating, water heating, clothes
drying and cooking purposes. Industrial customers primarily use propane as a
motor fuel burned in internal combustion engines that power over-the-road
vehicles, forklifts and stationary engines, to fire furnaces, as a cutting gas
and in other process applications. In the agricultural market, propane is
primarily used for tobacco curing, crop drying, poultry brooding and weed
control. In its wholesale operations, Suburban sells propane principally to
large industrial end-users and other propane distributors.
Product Costs. The retail propane business is a 'margin-based' business
where the level of profitability is largely dependent on the difference between
retail sales prices and product cost. The unit cost of propane is subject to
volatile changes as a result of product supply or other market conditions.
Propane unit cost changes can occur rapidly over a short period of time and can
impact retail margins. There is no assurance that Suburban will be able to pass
on product cost increases fully, particularly when product costs increase
rapidly.
Seasonality. The retail propane distribution business is seasonal because
of propane's primary use for heating in residential and commercial buildings.
Historically, approximately two-thirds of Suburban's retail propane volume is
sold during the six-month peak heating season of October through March.
Consequently, sales and operating profits are concentrated in Suburban's first
and second fiscal quarters. Cash flows from operations, therefore, are greatest
during the second and third fiscal quarters when customers pay for propane
purchased during the winter heating season. To the extent necessary, Suburban
will reserve cash from the second and third quarters for distribution to
unitholders in the first and fourth fiscal quarters.
Weather. Weather conditions have a significant impact on the demand for
propane for both heating and agricultural purposes. Many customers of Suburban
rely heavily on propane as a heating fuel. Accordingly, the volume of propane
sold is directly affected by the severity of the winter weather which can vary
substantially from year to year.
71
<PAGE>
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
Due to the seasonality of the retail propane business, first and second
quarter revenues, gross profit and earnings are consistently greater than the
comparable third and fourth quarter results. The following presents Suburban's
selected quarterly financial data for the two years ended September 26, 1998 and
the three months ended December 26, 1998.
Three months ended December 26, 1998 (unaudited) (in thousands, except per Unit
amounts)
<TABLE>
<S> <C>
Revenues........................ $161,216
Income (Loss) before Interest
Expense and Income Taxes...... 23,963
Net Income (Loss)............... 16,370
Net Income (Loss) per Unit...... .56
EBITDA.......................... 32,745
Retail Gallons Sold............. 137,603
</TABLE>
Fiscal year ended September 26, 1998 (unaudited) (in thousands, except per Unit
amounts)
<TABLE>
<CAPTION>
FISCAL
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER 1998
------------- -------------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Revenues............................. $ 204,886 $230,429 $ 125,109 $106,863 $ 667,287
Income (Loss) before Interest Expense
and Income Taxes................... 35,025 44,757 (2,925) (8,043) 68,814
Net Income (Loss).................... 26,901 37,011 (10,235) (15,512) 38,165
Net Income (Loss) per Unit........... .92 1.26 (.35) (.53) 1.30
EBITDA............................... 44,317 53,930 6,154 944 105,345
Retail Gallons Sold.................. 158,278 180,139 100,735 90,644 529,796
</TABLE>
Fiscal year ended September 27, 1997 (unaudited) (in thousands, except per Unit
amounts)
<TABLE>
<CAPTION>
FISCAL
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER 1997
------------- -------------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Revenues............................. $ 246,028 $277,631 $ 132,363 $115,109 $ 771,131
Income (Loss) before Interest Expense
and Income Taxes................... 25,900 39,459 (10,953) (6,643) 47,763
Net Income (Loss).................... 17,338 30,281 (19,181) (14,844) 13,594
Net Income (Loss) per Unit........... .59 1.03 (.65) (.51) .46
EBITDA............................... 35,181 48,647 (1,611) 2,853 85,070
Retail Gallons Sold.................. 158,996 183,307 102,899 95,597 540,799
</TABLE>
EBITDA (earnings before interest, taxes, depreciation and amortization) is
calculated as income (loss) before interest expense and income taxes plus
depreciation and amortization. EBITDA should not be considered as an alternative
to net income (as an indicator of operating performance) or as an alternative to
cash flow (as a measure of liquidity or ability to service debt obligations) and
is not in accordance with or superior to generally accepted accounting
principles, but provides additional information for evaluating Suburban's
ability to pay the minimum quarterly distribution. Because EBITDA excludes some,
but not all, items that affect net income and this measure may vary among
companies, the EBITDA data presented above may not be comparable to similarly
titled measures of other companies.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 26, 1998
COMPARED TO THREE MONTHS ENDED DECEMBER 27, 1997
Revenues. Revenues decreased 21.3% or $43.7 million to $161.2 million for
the three months ended December 26, 1998 as compared to $204.9 million for the
three months ended December 27, 1997. The
72
<PAGE>
<PAGE>
overall decrease is primarily attributable to a decline in retail volumes and
lower propane costs resulting in lower sales prices to customers. Propane sold
to retail customers decreased 13.1% or 20.7 million gallons to 137.6 million
gallons, as compared to 158.3 million gallons in the prior period's quarter. The
decrease in retail gallons is principally due to warmer temperatures which
nationwide were 12% warmer than normal during the quarter and 14% warmer than
the prior period's quarter. Wholesale gallons sold and gallons sold related to
price risk management activities decreased 10.5% or 5.1 million gallons to 43.4
million gallons principally resulting from the Operating Partnership's reduced
emphasis on the wholesale market due to the low-margin nature of such sales.
Operating Expenses. Operating expenses decreased 3.1% or $1.7 million to
$52.3 million for the three months ended December 26, 1998 as compared to $53.9
million for the three months ended December 27, 1997. The decrease in operating
expenses is principally attributable to lower payroll and benefit costs and
vehicle fuel expenses.
General and Administrative Expenses. General and administrative expenses
increased 20.7% or $1.3 million to $7.3 million for the three months ended
December 26, 1998 as compared to $6.1 million for the three months ended
December 27, 1997. The increase is primarily attributable to the absence of
offsetting dividend income earned in the prior year's quarter on the sold
investment in the Dixie Pipeline Company and higher information systems
expenses.
Income Before Interest Expense and Income Taxes and EBITDA. Results for the
prior year's first quarter include a $5.1 million gain from the sale of an
investment in the Dixie Pipeline Company, which the Operating Partnership sold
after determining it did not offer any strategic business advantages. Excluding
this one-time item, income before interest expense and income taxes decreased
$6.0 million to $24.0 million in the three months ended December 26, 1998
compared to $29.9 million in the prior year's first quarter. EBITDA, excluding
the one-time item, decreased $6.5 million to $32.7 million. The decrease in
income before interest expense and income taxes and EBITDA is primarily
attributable to decreased retail volumes partially offset by lower period
expenses and higher retail margins.
EBITDA should not be considered as an alternative to net income (as an
indicator of operating performance) or as an alternative to cash flow (as a
measure of liquidity or ability to service debt obligations) and is not in
accordance with or superior to generally accepted accounting principles but
provides additional information for evaluating Suburban's ability to distribute
the Minimum Quarterly Distribution. Because EBITDA excludes some, but not all,
items that affect net income and this measure may vary among companies, the
EBITDA data presented may not be comparable to similarly titled measures of
other companies.
Interest Expense. Net interest expense decreased $0.5 million to $7.6
million in the three months ended December 26, 1998 compared with $8.1 million
in the prior period. The decrease is attributable to higher interest income on
significantly increased cash investments.
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
Revenues. Revenues decreased $103.8 million or 13.5% to $667.3 million in
fiscal 1998 compared to $771.1 million in fiscal 1997. Revenues from retail
activities decreased $77.1 million or 12.8% to $523.4 million in fiscal 1998
compared to $600.5 million in fiscal 1997. This decrease is primarily
attributable to lower product costs which resulted in lower selling prices and,
to a lesser extent, a decrease in retail gallons sold.
Overall, higher nationwide inventories of propane, coupled with warmer than
normal temperatures during the winter of fiscal 1998, resulted in a significant
decrease in the cost of propane when compared to the winter of fiscal 1997.
Temperatures during fiscal 1998 were 4% warmer than normal and 4% warmer than
fiscal 1997, as reported by NOAA, which is attributable to the El Nino weather
phenomenon. Temperatures during January and February of the fiscal 1998 heating
season were the warmest on record according to the NOAA, which began keeping
records over 100 years ago.
Retail gallons sold decreased 2.0% or 11.0 million gallons to 529.8 million
gallons in fiscal 1998 compared to 540.8 million gallons in the prior year. The
decline in retail gallons sold is principally attributable to warmer
temperatures, principally during the winter heating season, in all areas of
Suburban's operations.
73
<PAGE>
<PAGE>
Revenues from wholesale and hedging activities decreased $25.1 million or
25.0% to $75.2 million in fiscal 1998 compared to $100.2 million in fiscal 1997.
This decrease is attributed to Suburban's reduced emphasis on wholesale
marketing, due to the low margin nature of the wholesale market. The decrease in
wholesale revenues was partially offset by the increase in Suburban's product
procurement and price risk management activities which began in the fourth
quarter of fiscal 1997. Revenues from hedging activities increased $5.6 million
to $13.8 million in 1998 compared to $8.2 million in fiscal 1997. The gallons
sold for hedging purposes in fiscal 1998 and 1997 were 40.8 million and 17.0
million, respectively.
Operating Expenses. Operating expenses decreased $6.9 million or 3.3% to
$202.9 million in fiscal year 1998 compared to $209.8 million in the prior year.
The decrease is primarily attributable to the continued favorable impact of
restructuring activities undertaken during 1997, principally lower payroll and
benefit costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $5.0 million or 15.3% to $37.6 million in
fiscal 1998 compared to $32.6 million in the prior year. The increase is
primarily attributable to a $1.4 million write-off of certain impaired
information systems assets, an increase in professional consulting services,
primarily in the information systems area, and a $2.0 million charge related to
insurance claims for which insurance coverage was denied. The $1.4 million
write-off of impaired assets principally represents software and implementation
costs incurred under a project to replace Suburban's retail/sales system. The
project was aborted when Suburban's management determined that the software did
not have the functionality and flexibility originally presented by the software
vendor. As a result, Suburban never installed the new software. It is therefore
continuing to use its existing retail/sales software system. Suburban is
currently evaluating alternatives to replace the retail/sales system. The
insurance claim resulted from the collapse of Suburban's underground propane
storage cavern and associated fire that occurred in Hainesville, Texas in
November 1995. Third parties who owned interests in nearby oil and gas wells
sued Suburban, Millennium and other parties and claimed damage to the wells
resulting from the collapse of the underground cavern and alleged brine water
migration. Suburban's insurance carrier denied coverage based upon the pollution
exclusion endorsement of its policy. Suburban settled this claim in December
1998 for $1.6 million, $300,000 of which was paid by Millennium. Suburban is
currently addressing with its insurance carrier the issue of responsibility for
outstanding legal and expert expenses.
Income Before Interest Expense and Income Taxes and EBITDA. Results for the
fiscal year 1998 include a $5.1 million gain from the sale of an investment in
the Dixie Pipeline Co. and a $1.8 million write-off of certain impaired assets.
Results for the prior year period include a restructuring charge of $6.9
million. Excluding these one-time items from both periods, income before
interest expense and income taxes increased 19.7% or $10.8 million to $65.5
million compared to $54.7 million in the prior period. EBITDA, excluding the
one-time items from both periods, increased 10.9% or $10.0 million to $102.0
million compared to $92.0 million in the prior period.
The improvement in income before interest expense and income taxes and
EBITDA is primarily attributable to higher overall gross profit and lower
operating expenses partially offset by higher selling, general and
administrative expenses. The increase in gross profit principally resulted from
overall higher average propane unit margins and the expansion of Suburban's
product procurement and price risk management activities, including hedging
transactions, partially offset by reduced volume of retail propane gallons sold.
The overall higher average propane unit margins were attributable to lower
product costs, resulting from a less volatile propane market during 1998 and
more favorable purchasing contracts which were not fully reflected in lower
retail selling prices. EBITDA should not be considered as an alternative to net
income (as an indicator of operating performance) or as an alternative to cash
flow (as a measure of liquidity on ability to service debt obligations) but
provides additional information for evaluating Suburban's ability to distribute
the Minimum Quarterly Distribution.
Interest Expense. Net interest expense decreased $3.4 million to $30.6
million in fiscal 1998 compared with $34.0 million in the prior year. The
decrease is attributable to higher interest income on significantly increased
cash investments in fiscal 1998 resulting from higher net income, proceeds from
the sale of Suburban's investment in the Dixie Pipeline Co. and, to a lesser
extent, improved working capital management and lower product costs.
74
<PAGE>
<PAGE>
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
Suburban acquired the propane business and assets of the Predecessor
Company on March 5, 1996. The following discussion of revenues compares the
results of the Partnership for the year ended September 27, 1997 with the pro
forma results of the Predecessor Company for the year ended September 26, 1996
and the discussion of operating expenses, selling, general and administrative
expenses and interest expense compares the results of the Partnership for the
year ended September 27, 1997 with the seven months ended September 26, 1996.
Revenues. Revenues increased $63.2 million or 8.9% to $771.1 million in
fiscal 1997 compared to $707.9 million in fiscal 1996. The increase is primarily
attributable to higher average retail and wholesale selling prices resulting
from higher propane product costs. Retail gallons sold decreased 4.6% or 26.1
million gallons to 540.8 million gallons in fiscal 1997 compared to 566.9
million gallons in the prior year, while wholesale gallons sold decreased 2.4%
or 4.5 million gallons to 184.5 million gallons compared to 189.0 million in the
prior year. The decrease in gallons sold is primarily due to warmer temperatures
during the winter heating season in all areas of Suburban's operations.
Operating Expenses. Operating expenses increased $95.4 million or 83.4% to
$209.8 million in fiscal year 1997 compared to $114.4 million in the prior
period. The increase is primarily due to fiscal 1997 representing twelve months
of Suburban's operations and fiscal 1996 representing seven months of
operations, commencing from the initial public offering date.
Restructuring Charges. Fiscal 1997 results reflect a restructuring charge
of $6.9 million compared to a $2.3 million restructuring charge in fiscal 1996.
In fiscal 1997, Suburban recorded the restructuring charge to reorganize its
product procurement and logistics group, redesign its fleet maintenance, field
support and corporate office organizations and to provide for facilities to be
closed and for impaired assets whose carrying amounts would not be recovered. In
connection with this restructuring initiative, Suburban terminated 307 employees
and paid termination benefits of $1.6 million and $2.5 million in fiscal years
1997 and 1998, respectively, which were charged against the restructuring
liability. In addition, Suburban paid $1.0 million in fiscal 1997, primarily
related to the closure of excess facilities, which was charged against the
restructuring liability. The 1997 restructuring includes a charge of $1.8
million for impaired assets consisting of $1.2 million in information system
assets and $0.6 million in excess fleet vehicles. The impaired asset write-offs
reflect the remaining book value of certain information system assets as
management believed the assets to be technologically obsolete with a minimal
fair market value, and in the case of vehicles, the difference between the
estimated trade-in value and book value.
In fiscal 1996, Suburban reorganized its corporate office and terminated 53
employees principally related to Corporate Support positions including the areas
of Engineering, Marketing, Executive Management and Technical Training. Suburban
recorded a $2.3 million restructuring charge related to this effort and paid
associated termination benefits of $1.0 million in fiscal 1997 and $0.3 million
in fiscal 1998 which were charged against this provision. In addition, Suburban
paid $0.7 million in fiscal 1997 and $0.3 million in fiscal 1998 principally
related to outplacement and legal costs related to the restructuring which were
charged against the provision.
Suburban anticipates future reductions in operating and general and
administrative expenses as a result of the restructuring efforts.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses, excluding restructuring charges, increased $16.2
million or 98.8% to $32.6 million in fiscal 1997 compared to $16.4 million in
the prior year. The increase is primarily due to fiscal 1997 representing twelve
months of Suburban's operations and fiscal 1996 representing seven months of
operations, commencing from the initial public offering date.
Interest Expense. Net interest expense increased $16.8 million to $34.0
million in fiscal 1997 compared with $17.2 million in fiscal 1996. The increase
is principally due to the issuance of $425.0 million in Senior Notes in
connection with Suburban's initial public offering in March 1996.
75
<PAGE>
<PAGE>
RISK MANAGEMENT
Suburban engages in hedging transactions to reduce the effect of price
volatility on its product costs and to help ensure the availability of propane
during periods of short supply. Suburban is currently a party to propane futures
contracts on the New York Mercantile Exchange and enters into agreements to
purchase and sell propane at fixed prices in the future. These activities are
monitored by management through enforcement of Suburban's Commodity Trading
Policy. Hedging does not always result in increased product margins and Suburban
does not consider hedging activities to be material to operations or liquidity
for the three months ended December 26, 1998 or the years ended September 26,
1998 and September 27, 1997. For additional information, see ' -- Quantitative
and Qualitative Disclosures about Market Risk.'
LIQUIDITY AND CAPITAL RESOURCES
Due to the seasonal nature of the propane business, cash flows from
operating activities are greater during the winter and spring seasons as
customers pay for propane purchased during the heating season. For the three
months ended December 26, 1998, net cash provided by operating activities was
$7.5 million compared to cash provided by operating activities of $8.4 million
in the three months ended December 27, 1997. The decrease of $0.9 million was
primarily due to lower net income and payment of accrued incentive compensation
partially offset by a decrease in working capital requirements arising from
lower retail gallons sold and a decline in the cost of propane.
Net cash used in investing activities was $2.1 million during the three
months ended December 26, 1998 consisting of capital expenditures of $2.9
million (including $1.5 million for maintenance expenditures and $1.4 million to
support the growth of operations) and acquisition payments of $0.1 million,
offset by proceeds from the sales of property, plant and equipment of $0.9
million. Net cash provided by investing activities was $8.8 million for the
three months ended December 27, 1997 which included proceeds of $13.1 million
from the sale of Suburban's minority interest in the Dixie Pipeline Co., $2.5
million from the sale of property, plant and equipment, offset by business
acquisition payments of $3.7 million and capital expenditures of $3.1 million
(including $1.1 million for maintenance expenditures and $2.0 million to support
the growth of operations).
Net cash used in financing activities for the three months ended December
26, 1998 was $11.0 million, principally reflecting Suburban's distribution. Net
cash provided by financing activities for the three months ended December 27,
1997 was $1.1 million, arising from the proceeds of the General Partner's APU
contributions exceeding the Partnership's fiscal 1997 fourth quarter
distribution.
In fiscal 1998, net cash provided by operating activities increased $11.2
million to $70.1 million compared to $58.8 million in fiscal 1997. The increase
is primarily due to an increase in net income, exclusive of non-cash items, of
$11.2 million. Changes in operating assets and liabilities reflect decreases in
accounts receivable of $2.3 million, inventories of $6.3 million and accounts
payable of $3.5 million principally due to the lower cost of propane. These
decreases were partially offset by an increase in accrued employment and benefit
costs of $6.6 million reflecting higher performance-related payroll accruals and
an increase in deferred credits and other non-current liabilities of $3.0
million.
Net cash provided by investing activities was $2.9 million in fiscal 1998,
reflecting $12.6 million in capital expenditures (including $6.0 million for
maintenance expenditures and $6.6 million to support the growth of operations)
and $4.0 million of payments for acquisitions, offset by net proceeds of $6.5
million from the sale of property, plant and equipment and $13.1 million from
the sale of the investment in the Dixie Pipeline Co. Net cash used in investing
activities was $20.7 million in fiscal 1997, consisting of capital expenditures
of $24.9 million (including $13.3 million for maintenance expenditures and $11.6
million to support the growth of operations) and acquisition payments of $1.9
million, offset by proceeds from the sale of property and equipment of $6.1
million. The decrease in cash used for capital expenditures of $12.3 million in
fiscal 1998, when compared to the prior year, is primarily due to reductions in
new customer equipment purchases and new vehicle purchases, as Suburban has
elected to lease new vehicles rather than purchase new vehicles.
For fiscal year 1997, net cash provided by operating activities decreased
$0.3 million or 0.6% to $58.8 million compared to $59.2 million for fiscal year
1996. Cash provided by operating activities during fiscal 1997 reflects
increases in cash from accounts receivable of $23.1 million, prepaid and other
current
76
<PAGE>
<PAGE>
assets of $4.9 million and inventories of $11.8 million principally due to lower
sales volumes and a resulting decline in propane purchases. These increases were
offset by an aggregate decrease in accounts payable, accrued interest and
accrued employment and benefit costs of $37.9 million and $4.3 million of cash
expenditures incurred in connection with Suburban's restructuring.
Net cash used in investing activities was $52.4 million for fiscal year
1996, reflecting $25.9 million in capital expenditures and $28.5 million of
payments for acquisitions offset by net proceeds of $2.0 million from the sale
of property, plant and equipment.
In March 1996, the Operating Partnership issued $425.0 million aggregate
principal amount of Senior Notes with an interest rate of 7.54%. The Senior
Notes mature June 30, 2011. The Senior Note Agreement requires that the
principal be paid in equal annual payments of $42.5 million starting June 30,
2002.
Suburban has available a $25.0 million acquisition facility and a $75.0
million working capital facility. Borrowings under the Existing Credit Agreement
bear interest at a rate based upon either LIBOR plus a margin, First Union
National Bank's prime rate or the Federal Funds rate plus 1/2 of 1%. An annual
fee ranging from .20% to .25% based upon certain financial tests is payable
quarterly whether or not borrowings occur. The Existing Credit Agreement, which
expires on September 30, 2000, is unsecured, as are the Operating Partnership's
obligations under the Senior Notes. At December 26, 1998 and December 27, 1997,
there were no amounts outstanding under the Existing Credit Agreement.
The Senior Note Agreement and the Existing Credit Agreement contain various
restrictive and affirmative covenants applicable to the Operating Partnership,
including (a) maintenance of certain financial tests, (b) restrictions on the
incurrence of additional indebtedness, and (c) restrictions on certain liens,
investments, guarantees, loans, advances, payments, mergers, consolidations,
distributions, sales of assets and other transactions. The Operating Partnership
was in compliance with all covenants and terms as of December 26, 1998.
As a result of lower than anticipated earnings for fiscal 1997 and the
costs associated with the restructuring efforts, Suburban utilized $22.0 million
of cash proceeds available under the Distribution Support Agreement between
Suburban and the General Partner in connection with the payment of the Minimum
Quarterly Distribution on the Common Units with respect to the third and fourth
fiscal quarters of 1997. Suburban did not utilize proceeds available under the
Distribution Support Agreement with respect to the funding of the Minimum
Quarterly Distributions for fiscal 1998. The Distribution Support Agreement
provides for a maximum of approximately $43.6 million in cash in return for APUs
($22.0 million of which has been utilized) to support the Minimum Quarterly
Distributions to holders of Common Units through the quarter ending March 31,
2001. Suburban has not made a distribution on its Subordinated Units since the
first fiscal quarter of 1997 and does not intend to make a distribution on the
Subordinated Units prior to consummation of the Recapitalization.
Suburban will make distributions in an amount equal to all of its Available
Cash approximately 45 days after the end of each fiscal quarter to holders of
record on the applicable record dates. Suburban has made distributions to
holders of its Common Units for each of the quarters in fiscal 1998 and the
first quarter of fiscal 1999.
Suburban's anticipated cash requirements for fiscal 1999 include
maintenance and growth capital expenditures of approximately $15.0 million for
the repair and replacement of property, plant and equipment and approximately
$32.0 million of interest payments on the Senior Notes. In addition, Suburban
intends to pay approximately $45.4 million in Minimum Quarterly Distributions to
its Common Unitholders and in distributions to its General Partner during fiscal
1999. Based on its current cash position, available borrowing capacity under the
Existing Credit Agreement and expected cash from operating activities, Suburban
expects to have sufficient funds to meet these obligations for fiscal 1999, as
well as all of its current obligations and working capital needs during fiscal
1999.
In connection with the Recapitalization, the Operating Partnership will
amend the Existing Credit Agreement to, among other things, (i) extend its
maturity date to March 31, 2001, (ii) amend the minimum adjusted consolidated
net worth covenant to reduce the required minimum net worth of the Operating
Partnership from $125 to $50 million, (iii) provide for a $22 million liquidity
subfacility for the payment of the minimum quarterly distribution in certain
circumstances, (iv) exclude from the mandatory prepayment provisions an amount
sufficient to purchase the GP Loan if an event of default
77
<PAGE>
<PAGE>
occurs under such loan, (v) decrease the maximum ratio of consolidated total
indebtedness to EBITDA from 5.25 to 1.00 to 5.10 to 1.00, (vi) modify certain
definitions and covenants relating to the ownership of the General Partner and
the Operating Partnership, (vii) increase the Applicable Margins (as defined in
the Existing Credit Agreement) of the interest rates payable with respect to
borrowings under the Existing Credit Agreement and (viii) obtain the lenders'
consents to the amendments to the Partnership Agreement and the Senior Note
Agreement contemplated by the Recapitalization and to the termination of the
Distribution Support Agreement.
In addition, in connection with the Recapitalization, the Senior Note
Agreement will be amended to, among other things, (i) reduce the minimum
adjusted consolidated net worth requirement from $125 million to $50 million,
(ii) create a financial covenant exception for non-recurring, non-cash charges
to be incurred in connection with the Recapitalization, (iii) decrease the
maximum ratio of consolidated total indebtedness to EBITDA from 5.25 to 5.10,
with a further decrease to 5.00 effective as of April 1, 2001, and (iv) include
a new interest coverage maintenance test requiring the Operating Partnership to
maintain a ratio of consolidated EBITDA for any four fiscal quarters to
consolidated interest expense for such period of at least 2.50 to 1.0. In
addition, prior to the Closing the Partnership will obtain the consent of a
majority of the holders of the Senior Notes to (i) the replacement of the
General Partner with the Successor General Partner, (ii) the amendments to the
Partnership Agreements necessary for the Recapitalization, (iii) the termination
of the Distribution Support Agreement and (iv) the distribution by the Operating
Partnership to the Partnership to permit the Partnership to pay the Redemption
Price. In consideration for granting their consent to the foregoing, the
Operating Partnership will pay a fee to each holder of Senior Notes in an amount
equal to 0.375% of the outstanding principal amount of Senior Notes held by such
holder. The total amount of such fees is approximately $1.6 million.
READINESS FOR YEAR 2000
The following disclosure is being made pursuant to the Year 2000 Readiness
and Disclosure Act of 1998.
Many information technology ('IT') and non-information technology
('non-IT') systems in use throughout the world today may not be able to properly
interpret date related data from the year 1999 into the year 2000 (the 'Y2K'
issue). As a result, the Y2K issue could have adverse consequences upon the
operations and information processing of many companies, including Suburban.
In the second half of 1997, Suburban began to identify the Y2K exposure of
its IT systems by focusing upon those systems and applications it considered
critical to its ability to operate its business, supply propane to its
customers, and accurately account for those services. The critical systems
identified were the retail/sales, the human resources/payroll and the general
ledger/financial accounting systems. Based upon the reasonable assurances of the
software developers and vendors, Suburban believes that it has replaced the
human resources/payroll and the general ledger/financial accounting systems with
Y2K compliant versions. In addition, Suburban has retained the services of a
third party vendor to assist in the remediation of its retail/sales system, as
well as the majority of the programs supporting this system. Suburban
anticipates that the retail/sales system will be Y2K compliant by July 1999.
Suburban has also developed and is currently implementing a comprehensive
Y2K project plan to identify and address both its non-critical IT and non-IT
systems that could potentially be impacted by Y2K. In conjunction with this plan
and in an effort to improve its business efficiency, Suburban made the decision
to replace all its computer hardware and PC-based computer software, as well as
to migrate the majority of its network-based software to a server environment.
According to the reasonable representations of the manufacturers, software
developers and vendors, all of the newly purchased IT hardware and PC software
are functionally Y2K compliant with some minor issues outstanding.
Suburban has addressed the non-IT systems utilized by its field locations
to determine the Y2K compliance of those systems. With limited exceptions which
are being addressed, the safety related devices at Suburban's field locations do
not incorporate electronic components and, as such, do not require Y2K
remediation. Suburban does not believe that the failure of any of its non-IT
systems at any field location would have a material adverse impact upon it.
78
<PAGE>
<PAGE>
As of December 17, 1998, Suburban has incurred approximately $0.3 million
to address its Y2K issues. It is currently estimated that Suburban will spend
between $1.5 and $2.0 million to complete its Y2K compliance program. This
figure does not include the amounts spent to upgrade and replace computer
hardware and PC-based software. Suburban does not view the foregoing costs as
having a material impact upon its overall financial position and has not delayed
or eliminated any other scheduled computer upgrades or replacements due to the
Y2K compliance project.
In addition to testing the individual systems, Suburban anticipates
conducting an overall IT system Y2K compliance test by May 1999. Suburban is
developing a formal Y2K contingency plan that is to be in place prior to June
30, 1999, which will be based upon its overall disaster recovery plan. At this
time, Suburban anticipates that its Y2K contingency plan will be based upon
manual processes and procedures.
While propane itself is not date-dependent, the supply, transportation and
consumption of propane is dependent upon third parties, beyond the control of
Suburban, which may have systems potentially impacted by the Y2K issue. Suburban
has contacted the 335 vendors/suppliers identified as being significant to its
business and to date has received 249 written responses regarding Y2K from these
parties. Within the group of significant vendors/suppliers, 78 firms have been
identified as critical to Suburban's business; 76 of these 78 firms have, to
date, responded in writing to Suburban's requests regarding Y2K. The responses
received by Suburban typically outline Y2K compliance programs in effect at
these firms and disclose anticipated compliance dates ranging from the first to
the fourth calendar quarters of 1999. No vendor/supplier has, to date, indicated
that it will not be Y2K compliant by the fourth quarter of 1999. Suburban
intends to continue to follow up with vendors/suppliers who have not provided
written responses and address potential issues contained in responses through
the third calendar quarter of 1999. Suburban believes that by obtaining these
responses, it will be able to minimize any potential business interruption
arising out of Y2K's impact upon these vendors/suppliers. Further, although the
Y2K failure of any one customer will not have a material adverse effect upon
Suburban, if a significant percentage of either its customers and/or
vendors/suppliers fail in achieving Y2K compliance, the Y2K issue may have a
material adverse impact upon Suburban's operations.
Although Suburban currently anticipates that its internal mission critical
IT and non-IT systems will be Y2K compliant, it has taken steps to identify and
mitigate Y2K compliance issues with its vendors/suppliers and customers and has
begun to work on a Y2K contingency plan, the failure of a mission critical IT or
non-IT system or the combined failure of vendors/suppliers and/or customers to
achieve Y2K compliance could have a material adverse impact on Suburban's
operations and financial condition.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 26, 1998, Suburban was party to propane forward contracts
with various third parties and futures traded on the New York Mercantile
Exchange ('NYMEX'). Such contracts provide that Suburban sell or acquire propane
at a fixed price at fixed future dates. At expiration, the contracts are settled
by the delivery of propane to the respective party or are settled by the payment
of a net amount equal to the difference between the then current price of
propane and the fixed contract price. The contracts are entered into for
purposes other than trading in anticipation of market movements, and to manage
and hedge exposure to fluctuating propane prices as well as to help ensure the
availability of propane during periods of high demand.
Market risks associated with the trading of futures and forward contracts
are monitored daily for compliance with Suburban's trading policy which includes
volume limits for open positions. Open inventory positions are reviewed and
managed daily as to exposures to changing market prices.
MARKET RISK
Suburban is subject to commodity price risk to the extent that propane
market prices deviate from fixed contract settlement amounts. Futures contracts
traded with brokers of the NYMEX require daily cash settlements in margin
accounts. Forward contracts are generally settled at the expiration of the
contract term.
79
<PAGE>
<PAGE>
CREDIT RISK
Futures contracts are guaranteed by the NYMEX and as a result have minimal
credit risk. Suburban is subject to credit risk with forward contracts to the
extent the counterparties do not perform. Suburban evaluates the financial
condition of each counterparty with which it conducts business and establishes
credit limits to reduce exposure to credit risk of non-performance.
SENSITIVITY ANALYSIS
In an effort to estimate Suburban's exposure to unfavorable market price
changes in propane related to its open inventory positions, Suburban developed a
model which incorporated the following data and assumptions:
A. The actual fixed price contract settlement amounts were utilized
for each of the future periods.
B. The estimated future market prices were derived from the New York
Mercantile Exchange for traded propane futures for each of the
future periods as of September 26, 1998.
C. The market prices determined in B above were adjusted adversely by
a hypothetical 10% and 25% change in each of the future periods and
compared to the fixed contract settlement amounts in A above to
project the additional loss in earnings which would be recognized
for the respective scenario.
Based on the sensitivity analysis described above, the hypothetical 10% and
25% adverse change in market prices for each of the future months for which a
future and/or forward contract exists indicate potential losses in future
earnings of $1.8 million and $4.5 million, respectively, as of September 26,
1998.
The above hypothetical change does not reflect the worst case scenario.
Actual results may be significantly different depending on market conditions and
the composition of the open position portfolio.
As of September 26, 1998, Suburban's open position portfolio reflected a
net long position (purchase) aggregating $21.6 million.
As of December 17, 1998, the posted price of propane at Mont Belvieu, Texas
(a major storage point) was 21 cents per gallon as compared to 26 cents per
gallon at September 28, 1998, representing a 19% decline. Such decline is
attributable to factors including warmer weather patterns, high national propane
inventory levels and decreases in the market price of crude oil.
80
<PAGE>
<PAGE>
MANAGEMENT OF SUBURBAN FOLLOWING THE RECAPITALIZATION
PARTNERSHIP MANAGEMENT
Following the Recapitalization, the Amended Partnership Agreement will
continue to provide that all management powers over the business and affairs of
Suburban are exclusively vested in its Board of Supervisors and, subject to the
direction of the Board of Supervisors, the officers of Suburban. Neither the
Successor General Partner nor any Common Unitholder will have any management
power over the business and affairs of Suburban or actual or apparent authority
to enter into contracts on behalf of, or otherwise to bind, Suburban.
CHANGES TO BOARD OF SUPERVISORS
The Amended Partnership Agreement to be adopted in connection with the
Recapitalization will provide that, immediately following the Closing, the size
of the Board of Supervisors will be reduced from seven to five by eliminating
the positions of the two Management Supervisors. As a result, if the
Recapitalization is approved, there will be three Elected Supervisors and two
Appointed Supervisors and the Elected Supervisors will hold a majority of seats
on the Board of Supervisors. The Elected Supervisors will continue to be John
Hoyt Stookey, Harold R. Logan, Jr. and Dudley C. Mecum. The Appointed
Supervisors will be Mark A. Alexander, President and Chief Executive Officer of
Suburban, and Michael J. Dunn, Jr., Senior Vice President of Suburban. Messrs.
Alexander and Dunn currently serve as the two Management Supervisors. George H.
Hempstead and John E. Lushefski, who currently serve as the Appointed
Supervisors and who are executive officers of Millennium Chemicals Inc., will
resign from the Board of Supervisors at the Closing.
The three Elected Supervisors will continue to serve on the Audit Committee
with the authority to review, at the request of the Board of Supervisors,
specific matters as to which the Board of Supervisors believes there may be a
conflict of interest in order to determine if the resolution of such conflict
proposed by the Board of Supervisors is fair and reasonable to the Common
Unitholders. Any matters approved by the Audit Committee will be conclusively
deemed to be fair and reasonable to Suburban and the Common Unitholders,
approved by all partners of Suburban and not a breach by the Successor General
Partner or the Board of Supervisors of any duties they may owe Suburban or the
Common Unitholders. In addition, the Audit Committee will review external
financial reporting of Suburban, will recommend engagement of Suburban's
independent accountants and will review Suburban's procedures for internal
auditing and the adequacy of Suburban's internal accounting controls.
MEMBERS OF THE BOARD OF SUPERVISORS AND EXECUTIVE OFFICERS OF SUBURBAN
The following table sets forth certain information with respect to those
persons who are expected to be members of the Board of Supervisors and executive
officers of Suburban following the consummation of the Recapitalization.
Executive officers are elected for one-year terms. After the Recapitalization,
the Elected Supervisors will be elected by a plurality of the Common Units
voting at the tri-annual meeting. The next tri-annual meeting will be held in
2000. The Appointed Supervisors will serve until they resign or are removed by
the Successor General Partner.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH SUBURBAN
- ------------------------------ --- ---------------------------------------------------------------------------
<S> <C> <C>
Mark A. Alexander............. 40 President and Chief Executive Officer; Member of the Board of Supervisors
(Appointed Supervisor)
Michael J. Dunn, Jr........... 49 Senior Vice President; Member of the Board of Supervisors (Appointed
Supervisor)
Anthony M. Simonowicz......... 48 Vice President and Chief Financial Officer
Michael M. Keating............ 45 Vice President -- Human Resources and Administration
Edward J. Grabowiecki......... 37 Controller and Chief Accounting Officer
John Hoyt Stookey............. 69 Member of the Board of Supervisors (Chairman and Elected Supervisor)
Harold R. Logan, Jr........... 54 Member of the Board of Supervisors (Elected Supervisor)
Dudley C. Mecum............... 64 Member of the Board of Supervisors (Elected Supervisor)
</TABLE>
81
<PAGE>
<PAGE>
Mr. Alexander has served as President and Chief Executive Officer and as a
Management Supervisor of Suburban since October 1996. He served as Executive
Vice Chairman and Chief Executive Officer of Suburban from March 1996 until
September 1996. Mr. Alexander was Senior Vice President -- Corporate Development
of Hanson Industries, the management division of Hanson PLC ('Hanson') in the
United States, from January 1995 until March 1996, where he was responsible for
mergers and acquisitions, real estate and divestitures, and was Vice President
of Acquisitions from 1989 to December 1994. He was an Associate Director of
Hanson from 1993 and a Director of Hanson Industries from June 1995 until March
1996. Mr. Alexander is also a director of the National Propane Gas Association.
Mr. Dunn has served as Senior Vice President and a Management Supervisor of
Suburban since July 1998. He was Vice President -- Procurement and Logistics of
Suburban from March 1997 until June 1998. Prior to joining Suburban, Mr. Dunn
was Vice President of Commodity Trading for the investment banking firm of
Goldman, Sachs & Co. from 1981 until January 1997.
Mr. Simonowicz has served as Vice President and Chief Financial Officer of
Suburban since March 1997. He served as Vice President -- Business Development
of Suburban from March 1996 to March 1997, Vice President -- Business
Development of Suburban Propane from September 1995 until March 1996 and
Director -- Financial Planning and Analysis of Suburban from 1991 to September
1995. Mr. Simonowicz was employed as Controller at Lifecodes Corporation (a
genetic identification and research company), then a subsidiary of Quantum
Chemical Corporation ('Quantum'), from 1989 to 1991.
Mr. Keating has served as Vice President -- Human Resources and
Administration of Suburban since August 1996. He served as Director of Human
Resources at Hanson Industries from December 1993 until July 1996 and Director
of Human Resources and Corporate Personnel at Quantum from 1989 until November
1993.
Mr. Grabowiecki has served as the Controller and Chief Accounting Officer
of Suburban since October 1996. He served as Director of Accounting Services of
Suburban from January 1996 until September 1996. Prior to joining Suburban, Mr.
Grabowiecki was a regional controller for Discovery Zone, Inc. from June 1993
until January 1996. Mr. Grabowiecki held several positions at Ernst & Young LLP
from 1984 until May 1993, including Senior Manager from 1992 until May 1993.
Mr. Stookey has served as an Elected Supervisor and Chairman of the Board
of Supervisors of Suburban since March 5, 1996. He served as the non-executive
Chairman and a director of Quantum from the time it was acquired by Hanson in
September 1993 until October 1995 and Chairman, President and Chief Executive
Officer of Quantum from 1986 until September 1993. He is also a director of
United States Trust Company of New York, ACX Technologies, Inc. and Cyprus Amax
Minerals Company.
Mr. Logan has served as an Elected Supervisor of Suburban since March 5,
1996. Mr. Logan has served as Executive Vice President -- Finance, Treasurer and
a director of TransMontaigne Inc. since 1995. TransMontaigne Inc. was formed to
provide logistical services, i.e., pipeline, terminaling and marketing to
producers and end users of refined petroleum products. He served as Senior Vice
President of Finance and a director of Associated Natural Gas Corporation, an
independent gatherer and marketer of natural gas, natural gas liquids and crude
oil which in 1994 was acquired by Panhandle Eastern Corporation, from 1987 until
1995. Mr. Logan is also a director of Snyder Oil Corporation and Union
Bankshares Ltd.
Mr. Mecum has served as an Elected Supervisor of Suburban since June 1996.
He has been a managing director of Capricorn Holdings, LLC, a sponsor of and
investor in leveraged buyouts, since June 1997. He was a partner of G. L.
Ohrstrom & Co., a sponsor of and investor in leveraged buyouts, from 1989 until
December 1996. Mr. Mecum is also a director of CITIGROUP, Travelers Property
Casualty Corp., Lyondell, Dyncorp, Vicorp Restaurants, Inc., Metris Industries,
Inc. and CCC Information Systems, Inc.
82
<PAGE>
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to Suburban, as of
the Record Date and as of the Closing of the Recapitalization, regarding the
beneficial ownership of Common Units, Subordinated Units, APUs and Incentive
Distribution Rights by (i) each person or group of persons known by Suburban to
own beneficially more than 5% thereof, (ii) each member of the Board of
Supervisors, (iii) Suburban's chief executive officer and the four other most
highly compensated executive officers and (iv) all current members of the Board
of Supervisors and executive officers as a group. Common Units and Subordinated
Units have voting rights. APUs and Incentive Distribution Rights do not have
voting rights.
<TABLE>
<CAPTION>
AS OF RECORD DATE AS OF CLOSING
--------------------- --------------------------
TITLE OF CLASS BENEFICIAL OWNER AMOUNT PERCENTAGE AMOUNT PERCENTAGE
- --------------------------- ----------------------------------------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Common Units............... Mark A. Alexander (a).................... 20,000 * 20,000 *(c)
Michael J. Dunn, Jr. (a)................. -- -- -- --(c)
Anthony M. Simonowicz (a)................ 2,000 * 2,000 *(c)
Michael M. Keating (a)................... -- -- -- --(c)
Edward J. Grabowiecki(a)................. 200 * 200 *(c)
George H. Hempstead, III (b)............. -- -- -- --
John E. Lushefski (b).................... -- -- -- --
John Hoyt Stookey........................ 10,000 * 24,634 *
Harold R. Logan, Jr...................... 2,500 * 17,134 *
Dudley C. Mecum.......................... 1,000 * 15,634 *
All supervisors and executive officers as
a group (10 persons)..................... 35,700 * 79,602 *
Subordinated Units......... Suburban Propane GP, Inc................. 7,163,750 100% -- --
APUs....................... Suburban Propane GP, Inc................. 220,000 100% -- --
Incentive Distribution
Rights................... Suburban Propane GP, Inc................. N/A 100% -- --
Suburban Energy Services Group LLC....... -- -- N/A 100%
</TABLE>
- ------------
* Less than 1%.
(a) Excludes the following numbers of Common Units resulting from the
accelerated vesting of Restricted Units as to which such individuals have
deferred receipt: Mr. Alexander, 243,902, Mr. Dunn, 48,780, Mr. Simonowicz,
48,780, Mr. Keating, 29,268 and Mr. Grabowiecki, 19,512. These individuals
will have the following ownership interests in Suburban Energy Services
Group LLC: Mr. Alexander, 38.0%; Mr. Dunn, 7.6%; Mr. Simonowicz, 7.6%; Mr.
Keating, 4.6%; and Mr. Grabowiecki, 3.0%.
(b) Excludes Subordinated Units, APUs and Incentive Distribution Rights owned
as of the Record Date by Suburban Propane GP, Inc., an indirect wholly
owned subsidiary of Millenium Chemicals Inc., of which Messrs. Hempstead
and Lushefski are executive officers. Pursuant to the Recapitalization
Agreement, Messrs. Hempstead and Lushefski will resign as supervisors
effective as of the Closing.
(c) Upon accelerated conversion of their Restricted Units to Common Units, the
percentage ownership of outstanding Common Units (including Common Units as
to which they have deferred receipt) by the following individuals will be:
Mr. Alexander, 1.19%; Mr. Dunn, 0.22%; Mr. Simonowicz, 0.23%; Mr. Keating,
0.13%; and Mr. Grabowiecki, 0.09%.
83
<PAGE>
<PAGE>
CASH DISTRIBUTION POLICY
GENERAL
AVAILABLE CASH
Suburban distributes all Available Cash within 45 days after the last day
of each fiscal quarter to unitholders of record on the applicable record date.
Available Cash is defined in the Amended Partnership Agreement and generally
means, with respect to any quarter of Suburban, all cash on hand at the end of
such quarter less the amount of cash reserves necessary or appropriate in the
reasonable discretion of the Board of Supervisors to (i) provide for the proper
conduct of Suburban's business, (ii) comply with applicable law or any debt
instrument or other agreement of Suburban or (iii) provide funds for
distributions to unitholders in respect of any one or more of the next four
quarters.
The discussion in this section assumes that the Successor General Partner
maintains its combined 2% general partner interest in Suburban and the Operating
Partnership and that no other class of partnership securities is issued. To the
extent Suburban issues additional limited partner interests, the percentage of
the distributions of Available Cash to which the Common Units are entitled will
be reduced below 98%. To the extent that the Successor General Partner does not
exercise its preemptive right to purchase additional General Partner Units in
the event of the issuance by Suburban of additional partnership securities, the
percentage of the distributions of Available Cash to which the General Partner
Units are entitled will be reduced below 2%. Suburban does not presently intend
to issue any additional partnership securities.
OPERATING SURPLUS AND CAPITAL SURPLUS
Distributions of Available Cash are made either from Operating Surplus or
from Capital Surplus, which affects the amounts distributed to unitholders
relative to the holders of Incentive Distribution Rights.
'Operating Surplus' is defined in the Amended Partnership Agreement and
generally refers to (i) the cash balance of Suburban on the date Suburban
commenced operations, plus $40 million, plus all cash receipts of Suburban from
its operations (including working capital borrowings but excluding cash receipts
from Interim Capital Transactions), less (ii) all operating expenses of
Suburban, debt service payments (including reserves therefor but not including
payments required in connection with the sale of assets or any refinancing with
the proceeds of new indebtedness or an equity offering), maintenance capital
expenditures and reserves established for future operations of Suburban, in each
case since commencement of Suburban. Any costs or expenses by the Partnerships
incurred in connection with the Recapitalization will not reduce Operating
Surplus.
'Interim Capital Transactions' is also defined in the Amended Partnership
Agreement and includes borrowings (other than for working capital purposes),
sales of debt and equity securities and sales or other dispositions of assets
for cash (other than inventory, accounts receivable and other assets, all as
disposed of in the ordinary course of business).
All Available Cash distributed by Suburban from any source will be treated
as distributed from Operating Surplus until the sum of all Available Cash
distributed since the commencement of Suburban equals the Operating Surplus as
of the end of the quarter prior to such distribution. Any excess Available Cash
(irrespective of its source) will be deemed to be from 'Capital Surplus' and
distributed accordingly.
If Available Cash from Capital Surplus is distributed in respect of each
Common Unit issued March 5, 1996 (an 'Initial Common Unit') in an aggregate
amount per Initial Common Unit equal to $20.50 per Common Unit (which was the
initial public offering price of the Initial Common Units) (the 'Initial Unit
Price'), the distinction between Operating Surplus and Capital Surplus will
cease, and all distributions of Available Cash will be treated as if they were
from Operating Surplus. Suburban has not made any distributions of Available
Cash from Capital Surplus and does not expect to make distributions from Capital
Surplus in the foreseeable future.
84
<PAGE>
<PAGE>
DISTRIBUTIONS FROM OPERATING SURPLUS
Available Cash from Operating Surplus with respect to any quarter will be
distributed 98% to the Common Unitholders and 2% to the Successor General
Partner until there has been distributed the Target Distribution of $0.55 per
unit for such quarter. Thereafter, Available Cash from Operating Surplus will be
distributed 85% to the Common Unitholders, 13% to the holders of Incentive
Distribution Rights and 2% to the Successor General Partner. Following the
Recapitalization, the Successor General Partner will own all of the Incentive
Distribution Rights, but the Successor General Partner may transfer the
Incentive Distribution Rights freely to one or more persons. Holders of Common
Units will be entitled to arrearages if the full Minimum Quarterly Distribution
is not paid with respect to any quarter prior to payment of any distributions on
the Incentive Distribution Rights through the fiscal quarter ending on March 31,
2001.
DISTRIBUTIONS FROM CAPITAL SURPLUS
Distributions by Suburban of Available Cash from Capital Surplus will be
made 98% to the Common Units, pro rata, and 2% to the Successor General Partner,
until Suburban shall have distributed, in respect of each Initial Common Unit,
Available Cash from Capital Surplus in an amount per Initial Common Unit equal
to the Initial Unit Price. Thereafter, all distributions from Capital Surplus
will be distributed as if they were from Operating Surplus.
As a distribution of Available Cash from Capital Surplus is made, it is
treated as if it were a repayment of the Initial Unit Price. To reflect such
repayment, the Minimum Quarterly Distribution and the Target Distribution will
be adjusted downward by multiplying each such amount by a fraction, the
numerator of which is the unrecovered portion of the Initial Unit Price
immediately after giving effect to such repayment and the denominator of which
is the unrecovered portion of the Initial Unit Price immediately prior to such
repayment.
When 'payback' of the Initial Unit Price has occurred, i.e., when the
unrecovered portion of the Initial Unit Price is zero, then in effect the
Minimum Quarterly Distribution and the Target Distribution will have been
reduced to zero for subsequent quarters. Thereafter, all distributions of
Available Cash from all sources will be treated as if they were from Operating
Surplus. Because the Minimum Quarterly Distribution and the Target Distribution
will have been reduced to zero, the holders of the Incentive Distribution Rights
then will be entitled to receive 13% of all distributions of Available Cash.
Distributions of Available Cash from Capital Surplus will not reduce the
Minimum Quarterly Distribution or the Target Distribution for the quarter with
respect to which they are distributed.
ADJUSTMENT OF MINIMUM QUARTERLY DISTRIBUTION AND TARGET DISTRIBUTION LEVEL
In addition to reductions of the Minimum Quarterly Distribution and Target
Distribution made upon a distribution of Available Cash from Capital Surplus,
the Minimum Quarterly Distribution, the Target Distribution, the unrecovered
portion of the Initial Unit Price and other amounts calculated on a per Unit
basis will be proportionately adjusted upward or downward, as appropriate, in
the event of any combination or subdivision of Units (whether effected by a
distribution payable in Units or otherwise), but not by reason of the issuance
of additional Units for cash or property. For example, in the event of a
two-for-one split of the Units (assuming no prior adjustments), the Minimum
Quarterly Distribution, the Target Distribution and the unrecovered portion of
the Initial Unit Price would each be reduced to 50% of its initial level.
The Minimum Quarterly Distribution and the Target Distribution may also be
adjusted if legislation is enacted or if existing law is modified or interpreted
by the relevant governmental authority in a manner that causes Suburban to
become taxable as a corporation or otherwise subjects Suburban to taxation as an
entity for federal income tax purposes. In such event, the Minimum Quarterly
Distribution and the Target Distribution would be reduced to an amount equal to
the product of (i) the Minimum Quarterly Distribution and the Target
Distribution, respectively, multiplied by (ii) one minus the sum of (x) the
highest marginal federal income tax rate to which Suburban is then subject as an
entity plus (y) any increase that results from such legislation in the effective
overall state and local income tax rate to which Suburban is subject as an
entity for the taxable year in which such event
85
<PAGE>
<PAGE>
occurs (after taking into account the benefit of any deduction allowable for
federal income tax purposes with respect to the payment of state and local
income taxes). For example, assuming Suburban was not previously subject to
state and local income tax, if Suburban were to become taxable as an entity for
federal income tax purposes and Suburban became subject to a maximum marginal
federal, and effective state and local, income tax rate of 38%, then the Minimum
Quarterly Distribution and the Target Distribution would each be reduced to 62%
of the amount thereof immediately prior to such adjustment.
DISTRIBUTIONS OF CASH UPON LIQUIDATION
Following the commencement of the dissolution and liquidation of Suburban,
assets will be sold or otherwise disposed of from time to time and the partners'
capital account balances will be adjusted to reflect any resulting gain or loss.
The proceeds of such liquidation will, first, be applied to the payment of
creditors of Suburban in the order of priority provided in the Amended
Partnership Agreement and by law and, thereafter, be distributed to the
Unitholders in accordance with their respective capital account balances as so
adjusted.
Any net gain (or unrealized gain attributable to assets distributed in
kind) will be allocated to the partners as follows:
first, to the Successor General Partner and the holders of Common
Units having negative balances in their capital accounts to the extent of
and in proportion to such negative balances;
second, to all unitholders, pro rata, to the extent required to
entitle the Common Unitholders to receive liquidating distributions equal
to the sum of (i) the unrecovered portion of the Initial Unit Price, (ii)
any unpaid amount of the Minimum Quarterly Distribution for the quarter
during which liquidation of Suburban occurs, (iii) any unpaid Common Unit
arrearages and (iv) the excess of the Target Distribution for each quarter
of Suburban's existence over the cumulative per unit amount of any
distributions of Available Cash from Operating Surplus in an amount equal
to the excess of the Target Distribution over the Minimum Quarterly
Distribution; and
thereafter, 85% to the Common Unitholders, pro rata, 13% to the
holders of Incentive Distribution Rights, pro rata, and 2% to the Successor
General Partner.
Upon liquidation of Suburban, any loss will generally be allocated to all
unitholders, pro rata, except that any loss or deduction otherwise allocable to
a Common Unitholder that would create or add to a deficit in such unitholder's
capital account shall instead be allocated to the holders of the General Partner
Units, pro rata.
Interim adjustments to capital accounts will be made at the time Suburban
issues additional interests in Suburban or makes distributions of property. Such
adjustments will be based on the fair market value of the interests or the
property distributed and any gain or loss resulting therefrom will be allocated
to the unitholders in the same manner as gain or loss is allocated upon
liquidation.
CASH AVAILABLE FOR DISTRIBUTION
Suburban believes that it will generate sufficient Available Cash from
Operating Surplus (including, if necessary, from working capital borrowings and
the Liquidity Arrangement) for the first four-quarter period following the date
of the Closing to cover the full Minimum Quarterly Distribution for such four-
quarter period on all then outstanding Units. Suburban's belief is based on a
number of assumptions, including the assumptions that normal weather conditions
will prevail in Suburban's operating areas, that Suburban's operating margins
will remain constant and that market and overall economic conditions will not
change substantially. Although Suburban believes its assumptions are within a
range of reasonableness, whether the assumptions are realized is not, in a
number of cases, within the control of Suburban and cannot be predicted with any
degree of certainty and propane supply costs may be subject to volatility. For
example, in any particular year or even series of years, weather may deviate
substantially from the norm. In the event that Suburban's assumptions are not
realized, the actual Available Cash from Operating Surplus generated by Suburban
could be substantially less than that currently expected and could, therefore,
be insufficient to permit Suburban to make cash distributions at
86
<PAGE>
<PAGE>
the levels described above. Accordingly, no assurance can be given that
distributions of the Minimum Quarterly Distribution or any other amounts will be
made. Suburban does not intend to update the expression of belief set forth
above.
The amount of Available Cash from Operating Surplus needed to distribute
the Minimum Quarterly Distribution for four quarters on the Common Units and
General Partner Units to be outstanding immediately after the Closing is
approximately $45.4 million. After giving pro forma effect to the
Recapitalization, the amount of pro forma Available Cash constituting Operating
Surplus generated during the year ended September 26, 1998 would have been $55.3
million.
Suburban is required by the Senior Notes and the Existing Credit Agreement
to establish reserves for the future payment of principal and interest. There
are other provisions in such agreements which will, under certain circumstances,
indirectly have the effect of restricting Suburban's ability to make
distributions to its partners. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources.'
LIQUIDITY ARRANGEMENT
The Distribution Support Agreement for the Minimum Quarterly Distribution
currently provided by the General Partner and its indirect parent, Millennium
America Inc., will be replaced at the Closing with the Liquidity Arrangement
provided by Suburban. The Liquidity Arrangement will consist of a requirement in
the Partnership Agreement that Suburban maintain, through the quarter ending
March 31, 2001, $22.0 million of committed availability under the working
capital line under the Existing Credit Agreement or any replacement facility to
support the Minimum Quarterly Distribution. The committed availability will be
reduced to $11.6 million on January 1, 2001 (reduced by any amounts in excess of
$10.4 million previously drawn), which is the currently estimated amount of the
Minimum Quarterly Distribution for the last quarter in which the Liquidity
Arrangement is in effect.
Generally, if Adjusted Operating Surplus is less than the aggregate Minimum
Quarterly Distribution for the previous four fiscal-quarter period, i.e., a
'Distribution Shortfall,' or if there is no Distribution Shortfall but Suburban
has insufficient borrowing capacity under its general working capital facility,
any borrowings to pay the Minimum Quarterly Distribution, which borrowings will
be distributed to the extent permitted by Suburban's contracts and securities,
will be deemed to be drawdowns of the Liquidity Arrangement and will permanently
reduce the Liquidity Arrangement. Any other borrowings to pay the Minimum
Quarterly Distribution will be deemed to be regular working capital borrowings
and, therefore, will not reduce the Liquidity Arrangement.
The amount of required availability under the Liquidity Arrangement will be
permanently reduced by any amount borrowed thereunder, even if the amount
borrowed is repaid. Suburban is in effect setting aside some of its own
resources that could otherwise have been used for distributions, working capital
needs or other purposes, which may adversely affect Suburban's operations.
Consequently, the cost of the Liquidity Arrangement, if used, would be
indirectly borne by the Common Unitholders. See 'Risk Factors -- Risks Relating
to the Recapitalization -- The General Partner's Distribution Support Agreement
Will Be Terminated and Replaced with a Liquidity Arrangement Provided by
Suburban.'
Notwithstanding the foregoing, if the amount of Available Cash from
Operating Surplus is insufficient to distribute the Minimum Quarterly
Distribution in any fiscal quarter when, looking back over the preceding four
fiscal quarters (including such fiscal quarter) the aggregate amount of
Available Cash from adjusted Operating Surplus for such four-fiscal quarter
period was less than the aggregate Minimum Quarterly Distribution for such
four-fiscal quarter period, then the Management Cash Reserve will be drawn on
prior to using the Liquidity Arrangement.
87
<PAGE>
<PAGE>
DESCRIPTION OF THE AMENDED PARTNERSHIP AGREEMENTS
IF THE RECAPITALIZATION IS COMPLETED, THE AMENDED PARTNERSHIP AGREEMENTS
WILL BE ADOPTED AND ALL HOLDERS OF COMMON UNITS WILL BE BOUND BY THE PROVISIONS
OF THE AMENDED PARTNERSHIP AGREEMENT, AS IT MAY BE FURTHER AMENDED FROM TIME TO
TIME. THE DESCRIPTION OF THE AMENDED PARTNERSHIP AGREEMENT SET FORTH BELOW IS
QUALIFIED BY REFERENCE TO THE COMPLETE TEXT OF THE AMENDED PARTNERSHIP
AGREEMENT, A COPY OF WHICH IS ATTACHED AS ANNEX C TO THIS PROXY STATEMENT. ALSO
SEE 'CASH DISTRIBUTION POLICY.'
ORGANIZATION AND DURATION
Suburban and the Operating Partnership were organized in 1995 as Delaware
limited partnerships. Suburban will dissolve on September 30, 2085, unless
sooner dissolved pursuant to the terms of the Amended Partnership Agreement.
PURPOSE
The purpose of Suburban is limited to serving as the limited partner of the
Operating Partnership and engaging in any business activity that may be engaged
in by the Operating Partnership or that is approved by the Board of Supervisors.
The Operating Partnership Agreement as it will be amended to permit and effect
the Recapitalization (the 'Amended Operating Partnership Agreement' and,
together with the Amended Partnership Agreement, the 'Amended Partnership
Agreements') provides that the Operating Partnership may engage in any activity
approved by its board of supervisors (whose members will be the members of the
Board of Supervisors). Although the Board of Supervisors has the ability under
the Amended Partnership Agreement to cause Suburban and the Operating
Partnership to engage in activities other than propane marketing and related
businesses, the Board of Supervisors has not done so and has no intention of
doing so. The Board of Supervisors is authorized in general to perform all acts
deemed necessary to carry out such purposes and to conduct the business of
Suburban. The Board of Supervisors may not, without the approval of the
Successor General Partner, which approval may be given or withheld in its sole
discretion, cause Suburban to incur any indebtedness that is recourse to the
Successor General Partner or any of its affiliates.
POWER OF ATTORNEY
Each limited partner of Suburban ('Limited Partner'), and each person who
acquires a Common Unit from a Common Unitholder and executes and delivers a
transfer application with respect thereto, grants to the Vice Chairman and
President of Suburban and, if a liquidator of Suburban has been appointed, such
liquidator, a power of attorney to, among other things, execute and file certain
documents required in connection with the qualification, continuance or
dissolution of Suburban, or the amendment of the Amended Partnership Agreement
in accordance with the terms thereof and to make consents and waivers contained
in the Amended Partnership Agreement.
MANAGEMENT
BOARD OF SUPERVISORS
Generally, the business and activities of Suburban is managed by, or under
the direction of, the Board of Supervisors of Suburban. The Board of Supervisors
is comprised of five supervisors. See 'Management of Suburban Following the
Recapitalization.' The members of the Board of Supervisors consist of two
Appointed Supervisors appointed by the Successor General Partner in its sole
discretion and three Elected Supervisors elected by the holders of a majority of
the outstanding Common Units at the Tri-Annual Meeting (with the next Tri-Annual
Meeting to be held in 2000). A majority of the supervisors in office constitutes
a quorum and a majority of a quorum is needed to adopt a resolution or take any
other board action. In general, each member of the Board of Supervisors serves a
term of three years and until his successor is duly elected and qualified.
Elected Supervisors may not be employees, officers or directors of the Successor
General Partner or any affiliate of the Successor General Partner.
88
<PAGE>
<PAGE>
Holders of Common Units vote in any election of Elected Supervisors with
each outstanding Common Unit having one vote; provided, however, that if at any
time any person or group (including, without limitation, the Successor General
Partner) beneficially owns more than 20% of the total Common Units then
outstanding, such person or group may vote not more than 20% of all Common Units
then outstanding in any election of Elected Supervisors. For purposes of
determining the number of outstanding Common Units that have cast votes in
respect of any such matter, the number of Common Units held by such persons that
exceeds 20% shall not be counted. The three nominees receiving the most votes
are elected as the Elected Supervisors.
The Board of Supervisors is entitled to nominate individuals to stand for
election as Elected Supervisors at a Tri-Annual Meeting. In addition, any
Limited Partner or group of Limited Partners that holds beneficially 10% or more
of the outstanding Common Units is entitled to nominate one or more individuals
to stand for election as Elected Supervisors at a Tri-Annual Meeting by
providing written notice thereof to the Board of Supervisors not more than 120
days and not less than 90 days prior to such meeting; provided, however, that in
the event that the date of the Tri-Annual Meeting was not publicly announced by
Suburban by mail, press release or otherwise more than 100 days prior to the
date of such meeting, such notice, to be timely, must be delivered to the Board
of Supervisors not later than the close of business on the tenth day following
the date on which the date of the meeting is publicly announced. Such notice
shall set forth (i) the name and address of the Limited Partner or Limited
Partners making the nomination or nominations, (ii) the number of Common Units
beneficially owned by such Limited Partner or Limited Partners, (iii) such
information regarding the nominee(s) proposed by such Limited Partner or Limited
Partners as would be required to be included in a proxy statement relating to
the solicitation of proxies for the election of directors filed pursuant to the
proxy rules of the SEC, (iv) the written consent of the nominee(s) to serve as a
member of the Board of Supervisors if so elected and (v) a certification that
such nominee(s) qualify as Elected Supervisors.
The Successor General Partner may remove an Appointed Supervisor with or
without Cause at any time. 'Cause' generally means a court's finding a person
liable for actual fraud, gross negligence or willful or wanton misconduct in its
capacity with Suburban. Any and all of the Elected Supervisors may be removed at
any time with Cause by the affirmative vote of a majority of the Elected
Supervisors and with or without Cause, at a properly called meeting of the
Limited Partners by the affirmative vote of the holders of a majority of the
outstanding Common Units, provided, however, if at any time any person or group
owns more than 20% of the total Common Units then outstanding, such person or
group may vote not more than 20% of the total Common Units then outstanding in
any such election. For purposes of determining the number of outstanding Common
Units that have cast votes in respect of any such matter, the number of units
held by such persons that exceeds 20% shall not be counted.
If any Appointed Supervisor is removed, resigns or is otherwise unable to
serve as a supervisor, the Successor General Partner may fill the vacancy. If
any Elected Supervisor is removed, resigns or is otherwise unable to serve as a
supervisor, the vacancy may be filled by a majority of the Elected Supervisors
then serving (or, if no Elected Supervisors are then serving, by a majority of
the supervisors then serving).
OFFICERS
The Board of Supervisors has the authority to appoint the officers of
Suburban. Suburban may have a Chairman of the Board of Supervisors or a Vice
Chairman and such persons shall be officers of Suburban unless the Board of
Supervisors provides otherwise. In addition, Suburban will have a President and
a Secretary and may have one or more Vice Presidents, a Treasurer and one or
more Assistant Secretaries and Assistant Treasurers, if appointed from time to
time by the Board of Supervisors, and such other officers and agents as may from
time to time appear to be necessary or advisable as shall be determined from
time to time by the Board of Supervisors. See 'Management of Suburban Following
the Recapitalization' for a discussion of Suburban's current officers. Each
officer of Suburban has certain authority by virtue of being appointed an
officer and may be further authorized from time to time by the Board of
Supervisors to take any action that the Board delegates to such officer. The
Successor General Partner has agreed to take any and all action necessary (at
the expense of Suburban) and appropriate to effect any duly authorized actions
by the Board of Supervisors or any
89
<PAGE>
<PAGE>
officer of Suburban, including, without limitation, executing or filing any
agreements, instruments or certificates.
MEETINGS; VOTING
Common Unitholders or assignees who are record holders of Common Units on
the record date set pursuant to the Amended Partnership Agreement will be
entitled to notice of, and to vote at, meetings of Limited Partners of Suburban
and to act with respect to matters as to which approvals may be solicited. With
respect to voting rights attributable to Common Units that are owned by an
assignee who is a record holder but who has not yet been admitted as a Limited
Partner, the Successor General Partner shall be deemed to be the Limited Partner
with respect thereto and shall, in exercising the voting rights in respect of
such Common Units on any matter, vote such Common Units at the written direction
of such record holder. Absent such direction, such Common Units will not be
voted (except that, in the case of Common Units held by the Successor General
Partner on behalf of non-citizen assignees, the Successor General Partner shall
distribute the votes in respect of such Common Units in the same ratios as the
votes of Limited Partners in respect of other Common Units are cast).
Every three years, commencing in 1997, there will be a Tri-Annual Meeting
of the Limited Partners. In addition, a special meeting of Limited Partners may
be called by the Board of Supervisors or by Limited Partners owning in the
aggregate at least 20% of the outstanding Common Units. Any action that is
required or permitted to be taken by the Limited Partners may be taken either at
a meeting of the Limited Partners or, if authorized by the Board of Supervisors,
without a meeting if consents in writing setting forth the action so taken are
signed by holders of such number of limited partner interests as would be
necessary to authorize or take such action at a meeting of the Limited Partners.
Limited Partners may vote either in person or by proxy at meetings. The holders
of a majority of the outstanding Common Units represented in person or by proxy
will constitute a quorum at a meeting of Common Unitholders, unless any such
action by the Common Unitholders requires approval by holders of a greater
percentage of such Common Units, in which case the quorum shall be such greater
percentage. In the case of elections for Elected Supervisors, any person and its
affiliates (including, without limitation, the Successor General Partner) that
owns more than 20% of the total Common Units then outstanding may vote not more
than 20% of the total units then outstanding in such election.
Each record holder of a Common Unit has a vote according to his percentage
interest in Suburban, although additional limited partner interests having
special voting rights could be issued by Suburban. The Amended Partnership
Agreement provides that Common Units held in nominee or street name account will
be voted by the broker (or other nominee) pursuant to the instruction of the
beneficial owner unless the arrangement between the beneficial owner and his
nominee provides otherwise.
Any notice, demand, request, report or proxy material required or permitted
to be given or made to record holders of Common Units (whether or not such
record holder has been admitted as a Limited Partner) under the terms of the
Amended Partnership Agreement will be delivered to the record holder by Suburban
or by Suburban's transfer agent at the request of Suburban.
LIMITED LIABILITY
Assuming that a Limited Partner does not participate in the control of the
business of Suburban within the meaning of the Delaware Revised Uniform Limited
Partnership Act (the 'Delaware Act') and that he otherwise acts in conformity
with the provisions of the Amended Partnership Agreement, his liability under
the Delaware Act is limited, subject to certain possible exceptions, to the
amount of capital he is obligated to contribute to Suburban in respect of his
Common Units plus his share of any undistributed profits and assets of Suburban.
If it were determined, however, that the right or exercise of the right by the
Limited Partners as a group to elect the Elected Supervisors, to remove or
replace the Successor General Partner, to approve certain amendments to the
Amended Partnership Agreement or to take other action pursuant to the Amended
Partnership Agreement constituted 'participation in the control' of Suburban's
business for the purposes of the Delaware Act, then the Limited Partners could
be held personally liable for Suburban's obligations under the laws of the State
90
<PAGE>
<PAGE>
of Delaware to the same extent as the Successor General Partner with respect to
persons who transact business with Suburban reasonably believing, based on the
Limited Partner's conduct, that the Limited Partner is a general partner.
Under the Delaware Act, a limited partnership may not make a distribution
to a partner to the extent that at the time of the distribution, after giving
effect to the distribution, all liabilities of the partnership, other than
liabilities to partners on account of their partnership interests and
liabilities for which the recourse of creditors is limited to specific property
of the partnership, exceed the fair value of the assets of the limited
partnership. For the purpose of determining the fair value of the assets of a
limited partnership, the Delaware Act provides that the fair value of property
subject to liability for which recourse of creditors is limited shall be
included in the assets of the limited partnership only to the extent that the
fair value of that property exceeds that nonrecourse liability. The Delaware Act
provides that a limited partner who receives such a distribution and knew at the
time of the distribution that the distribution was in violation of the Delaware
Act shall be liable to the limited partnership for the amount of the
distribution for three years from the date of the distribution. Under the
Delaware Act, an assignee who becomes a substituted limited partner of a limited
partnership is liable for the obligations of his assignor to make contributions
to the partnership, except the assignee is not obligated for liabilities unknown
to him at the time he became a limited partner and which could not be
ascertained from the partnership agreement.
The Operating Partnership conducts business in over 40 states. Maintenance
of limited liability may require compliance with legal requirements in such
jurisdictions in which the Operating Partnership conducts business, including
qualifying the Operating Partnership to do business there. Limitations on the
liability of limited partners for the obligations of a limited partnership have
not been clearly established in many jurisdictions. If it were determined that
Suburban was, by virtue of its limited partner interest in the Operating
Partnership or otherwise, conducting business in any state without compliance
with the applicable limited partnership statute, or that the right or exercise
of the right by the Limited Partners as a group to elect the Elected
Supervisors, to remove or replace the Successor General Partner, to approve
certain amendments to the Amended Partnership Agreement or to take other action
pursuant to the Amended Partnership Agreement constituted 'participation in the
control' of Suburban's business for the purposes of the statutes of any relevant
jurisdiction, then the Limited Partners could be held personally liable for
Suburban's obligations under the law of such jurisdiction to the same extent as
the Successor General Partner under certain circumstances. Suburban is operated
in such manner as the Board of Supervisors deems reasonable and necessary or
appropriate to preserve the limited liability of the Limited Partners.
STATUS AS LIMITED PARTNER OR ASSIGNEE
Except as described above under ' -- Limited Liability,' the Common Units
will be fully paid and Common Unitholders will not be required to make
additional contributions to Suburban.
An assignee of a Common Unit, subsequent to executing and delivering a
transfer application, but pending its admission as a substituted Limited Partner
in Suburban, is entitled to an interest in Suburban equivalent to that of a
Limited Partner with respect to the right to share in allocations and
distributions from Suburban, including liquidating distributions. The Successor
General Partner will vote and exercise other powers attributable to Common Units
owned by an assignee who has not become a substituted Limited Partner at the
written direction of such assignee. Transferees who do not execute and deliver a
transfer application will be treated neither as assignees nor as record holders
of Common Units, and will not receive cash distributions, federal income tax
allocations or reports furnished to record holders of Common Units.
NON-CITIZEN ASSIGNEES; REDEMPTION
If Suburban is or becomes subject to federal, state or local laws or
regulations that, in the reasonable determination of the Board of Supervisors,
create a substantial risk of cancellation or forfeiture of any property in which
Suburban has an interest because of the nationality, citizenship, residency or
other related status of any Limited Partner or assignee, Suburban may redeem the
91
<PAGE>
<PAGE>
Common Units held by such Limited Partner or assignee at their Current Market
Price (as defined in the Amended Partnership Agreement). In order to avoid any
such cancellation or forfeiture, the Board of Supervisors may require each
Limited Partner or assignee to furnish information about his nationality,
citizenship, residency or related status. If a Limited Partner or assignee fails
to furnish information about such nationality, citizenship, residency or other
related status within 30 days after a request for such information, such Limited
Partner or assignee may be treated as a non-citizen assignee. In addition to
other limitations on the rights of an assignee who is not a substituted Limited
Partner, a non-citizen assignee does not have the right to direct the voting of
his Common Units and may not receive distributions in kind upon liquidation of
Suburban.
MERGER, SALE OR OTHER DISPOSITION OF ASSETS
Suburban is prohibited, without the prior approval of holders of at least a
majority of the outstanding Common Units, from, among other things, selling,
exchanging or otherwise disposing of all or substantially all of its assets in a
single transaction or a series of related transactions (including by way of
merger, consolidation or other combination) or approving the sale, exchange or
other disposition of all or substantially all of the assets of the Operating
Partnership; provided, however, that Suburban may mortgage, pledge, hypothecate
or grant a security interest in all or substantially all of Suburban's assets
without such approval. Suburban may also sell all or substantially all of its
assets pursuant to a foreclosure or other realization upon the foregoing
encumbrances without such approval. The Common Unitholders are not entitled to
dissenters' rights of appraisal under the Amended Partnership Agreement or
applicable Delaware law in the event of a merger or consolidation of Suburban, a
sale of substantially all of Suburban's assets or any other transaction or
event.
ISSUANCE OF ADDITIONAL SECURITIES
The Amended Partnership Agreement authorizes Suburban to issue an unlimited
number of additional limited partner interests and other equity securities of
Suburban for such consideration and on such terms and conditions as are
established by the Board of Supervisors in its sole discretion without the
approval of any Limited Partners, including securities that may have special
voting rights to which the Common Units are not entitled. However, Suburban may
not issue equity securities of Suburban ranking senior to the Common Units or
more than an aggregate of 9,375,000 additional Common Units or equivalent units
at any time prior to March 31, 2001 without the approval of the holders of at
least a majority of the outstanding Common Units (unless the Common Units are
issued in certain accretive acquisitions or to repay certain indebtedness).
The Successor General Partner has the right, which it may from time to time
assign in whole or in part to any of its affiliates, to purchase Common Units,
or other equity securities of Suburban from Suburban whenever, and on the same
terms that, Suburban issues such securities or rights to persons other than the
Successor General Partner and its affiliates, to the extent necessary to
maintain the percentage interest of the Successor General Partner and its
affiliates in Suburban that existed immediately prior to each such issuance. The
holders of Common Units will not have preemptive rights to acquire additional
Common Units or other partnership interests that may be issued by Suburban.
TRANSFER OF GENERAL PARTNER INTERESTS AND INCENTIVE DISTRIBUTION RIGHTS
Except for a transfer by the Successor General Partner of all, but not less
than all, of its general partner interest in Suburban and the Operating
Partnership to (a) an affiliate of the Successor General Partner or (b) another
person in connection with the merger or consolidation of the Successor General
Partner with or into another person or the transfer by the Successor General
Partner of all or substantially all of its assets to another person, the
Successor General Partner may not transfer all or any part of its aggregate
general partner interest in Suburban and the Operating Partnership to another
person prior to September 30, 2006, without the approval of the holders of at
least a majority of the outstanding Common Units; provided that, in each case,
such transferee assumes the rights and duties of the Successor General Partner
to whose interest such transferee has succeeded, agrees to be bound by the
provisions of the Amended Partnership Agreement, furnishes an opinion of counsel
acceptable
92
<PAGE>
<PAGE>
to the Board of Supervisors ('Opinion of Counsel') and agrees to acquire all (or
the appropriate portion thereof, as applicable) of the Successor General
Partner's interests in the Operating Partnership and agrees to be bound by the
provisions of the Amended Operating Partnership Agreement. Notwithstanding the
foregoing, the Successor General Partner may pledge its interests as general
partner of the Partnerships to Mellon solely for the purpose of securing,
directly or indirectly, indebtedness of the Successor General Partner in
connection with the GP Loan. In addition, the Successor General Partner shall
have the right at any time to transfer its Incentive Distribution Rights to one
or more persons (as an assignment of such rights or as a special limited partner
interest in Suburban) subject only to any reasonable restrictions on transfer
and requirements for registering the transfer of such right as may be adopted by
the Board of Supervisors; provided that no such restrictions or requirements
that adversely affect the holders of the Incentive Distribution Rights in any
material respect may be adopted without the approval of the holders of at least
a majority of the Incentive Distribution Rights. At any time, the members of the
Successor General Partner may sell or transfer all or part of their interests in
the Successor General Partner to an affiliate or a third party without the
approval of the Common Unitholders.
CONVERSION OF INCENTIVE DISTRIBUTION RIGHTS
At any time after the fifth anniversary of the date of the Closing, upon 30
days prior written notice, the Board of Supervisors (with the concurrence of the
Elected Supervisors) will have the option to cause all, but not less than all,
of the Incentive Distribution Rights to be converted into that number of Common
Units having a value equal to the fair market value of the Incentive
Distribution Rights. The fair market value of the Incentive Distribution Rights
shall be determined by agreement between the Board of Supervisors (with the
concurrence of the Elected Supervisors) and the holders of a majority of the
Incentive Distribution Rights or, failing agreement within 30 days after the
conversion notice has been given by the Board of Supervisors, by an independent
investment banking firm or other independent expert selected by the Board of
Supervisors (with the concurrence of the Elected Supervisors) and the holders of
a majority of the Incentive Distribution Rights (or if no expert can be agreed
upon, by an expert chosen by agreement of the experts selected by each of them).
In connection with any merger, consolidation or sale of all or substantially all
of the assets of Suburban or the Operating Partnership in which the Common
Unitholders are entitled to receive cash, securities or other property in
exchange for their Common Units, the holders of the Incentive Distribution
Rights shall be entitled to receive in exchange for such rights that amount of
cash, securities or other property that such holder would have been entitled to
receive had the Incentive Distribution Rights been converted into Common Units
immediately prior to the consummation of such transaction, where the number of
Common Units issuable upon such deemed conversion shall be based on the fair
market value of the Incentive Distribution Rights at the time of the deemed
conversion. Fair market value for such purposes shall be determined in the same
manner described above with respect to the Board of Supervisors' option to
convert the Incentive Distribution Rights after the fifth anniversary of the
date of the Closing.
WITHDRAWAL OR REMOVAL OF THE SUCCESSOR GENERAL PARTNER
The Successor General Partner has agreed not to withdraw voluntarily as a
general partner of the Partnership and the Operating Partnership prior to
September 30, 2006 (with limited exceptions described below), without obtaining
the approval of the holders of at least a majority of the outstanding Common
Units and furnishing an Opinion of Counsel. On or after September 30, 2006, the
Successor General Partner may withdraw as the general partner (without first
obtaining approval from any Common Unitholder) by giving 90 days' written
notice, and such withdrawal will not constitute a violation of the Amended
Partnership Agreement. Notwithstanding the foregoing, the Successor General
Partner may withdraw without Common Unitholder approval upon 90 days' notice to
the Limited Partners if at least 50% of the outstanding Common Units are held or
controlled by one person and its affiliates (other than the Successor General
Partner and its affiliates). In addition, the Amended Partnership Agreement
permits the Successor General Partner (in certain limited instances) to sell or
93
<PAGE>
<PAGE>
otherwise transfer all of its general partner interests in Suburban without the
approval of the Common Unitholders. See ' -- Transfer of General Partner
Interests and Incentive Distributions Rights.'
Upon the withdrawal of the Successor General Partner under any
circumstances (other than as a result of a transfer by the Successor General
Partner of all or a part of its general partner interest in Suburban), the
holders of at least a majority of the outstanding Common Units may select a
successor to such withdrawing general partner. If such a successor is not
elected, or is elected but an Opinion of Counsel cannot be obtained, Suburban
will be dissolved, wound up and liquidated, unless within 180 days after such
withdrawal the holders of at least a majority of the outstanding Common Units
agree in writing to continue the business of Suburban and to the appointment of
a successor general partner. See ' -- Termination and Dissolution.'
The Sucessor General Partner may not be removed unless such removal is
approved by the vote of the holders of at least a majority of the outstanding
Common Units and Suburban receives an Opinion of Counsel. Any such removal is
also subject to the approval of a successor general partner by the vote of the
holders of at least a majority of the outstanding Common Units. The Amended
Partnership Agreement also provides that if the Successor General Partner is
removed as general partner of Suburban under circumstances where Cause does not
exist and Units held by the Successor General Partner and its affiliates are not
voted in favor of such removal, the Successor General Partner will have the
right to convert its general partner interests and all the Incentive
Distribution Rights into Common Units or to receive cash in exchange for such
interests.
Withdrawal or removal of the Successor General Partner as the general
partner of Suburban also constitutes withdrawal or removal, as the case may be,
of the Successor General Partner as a general partner of the Operating
Partnership.
In the event of withdrawal of the general partner where such withdrawal
violates the Amended Partnership Agreement, a successor general partner will
have the option to purchase the general partner interest of the departing
general partner (the 'Departing Partner') in Suburban and the Operating
Partnership and all the Incentive Distribution Rights for a cash payment equal
to the fair market value of such interests. Under all other circumstances where
the Successor General Partner withdraws or is removed by the Limited Partners,
the Departing Partner will have the option to require the successor general
partner to purchase such general partner interest of the Departing Partner and
the Incentive Distribution Rights for such amount. In each case, such fair
market value will be determined by agreement between the Departing Partner and
the successor general partner, or, if no agreement is reached, by an independent
investment banking firm or other independent experts selected by the Departing
Partner and the successor general partner (or if no expert can be agreed upon,
by an expert chosen by agreement of the experts selected by each of them). In
addition, Suburban will be required to reimburse the Departing Partner for all
amounts due the Departing Partner, including, without limitation, all
employee-related liabilities, including severance liabilities, incurred in
connection with the termination of any employees employed by the Departing
Partner for the benefit of Suburban.
If the above-described option is not exercised by either the Departing
Partner or the successor general partner, as applicable, the Departing Partner
will have the right to convert its general partner interests in Suburban and the
Operating Partnership and its Incentive Distribution Rights into Common Units
equal to the fair market value of such interests as determined by an investment
banking firm or other independent expert selected in the manner described in the
preceding paragraph or to receive cash in exchange for such interests.
Any successor general partner will be deemed to have irrevocably delegated
to the Board of Supervisors the authority to manage, or direct the management
of, Suburban to the same extent as the Successor General Partner.
AMENDMENT OF AMENDED PARTNERSHIP AGREEMENT
Amendments to the Amended Partnership Agreement may be proposed only by or
with the consent of the Board of Supervisors. In order to adopt a proposed
amendment, Suburban is required to seek written approval of the holders of the
number of Common Units required to approve such
94
<PAGE>
<PAGE>
amendment or call a meeting of the Common Unitholders to consider and vote upon
the proposed amendment, except as described below.
Prohibited Amendments. Proposed amendments (unless otherwise specified)
must be approved by holders of at least a majority of the outstanding Common
Units, except that no amendment may be made that would:
(i) enlarge the obligations of any Limited Partner, without its
consent;
(ii) enlarge the obligations of, restrict in any way any action by or
rights of, or reduce in any way the amounts distributable, reimbursable or
otherwise payable by Suburban to the Successor General Partner or any of
its affiliates without the Successor General Partner's consent, which may
be given or withheld in its sole discretion;
(iii) change the term of Suburban;
(iv) provide that Suburban is not dissolved upon the expiration of its
term; or
(v) give any person the right to dissolve Suburban other than the
Board of Supervisors' right to dissolve Suburban with the approval of
holders of at least a majority of the outstanding Common Units.
No Unitholder Approval. The Board of Supervisors may generally make
amendments to the Partnership Agreement without the approval of any Limited
Partner or assignee to reflect:
(i) a change in the name of Suburban, the location of the principal
place of business of Suburban, the registered agent of Suburban or the
registered office of Suburban;
(ii) admission, substitution, withdrawal or removal of partners in
accordance with the Amended Partnership Agreement;
(iii) a change that, in the discretion of the Board of Supervisors, is
necessary or advisable to qualify or continue the qualification of Suburban
as a limited partnership or a partnership in which the Limited Partners
have limited liability or to ensure that neither Suburban nor the Operating
Partnership will be treated as an association taxable as a corporation or
otherwise taxed as an entity for federal income tax purposes (except
approval of a majority of the holders of outstanding Common Units of any
class will be required if such amendment would result in a delisting or a
suspension of trading of such Common Units);
(iv) an amendment that is necessary, in the opinion of counsel to
Suburban, to prevent Suburban, members of the Board of Supervisors or the
officers or agents of Suburban, or the Successor General Partner or its
directors, officers, agents or trustees from in any manner being subjected
to the provisions of the Investment Company Act of 1940, as amended, the
Investment Advisors Act of 1940, as amended, or 'plan asset' regulations
adopted under the Employee Retirement Income Security Act of 1974, as
amended, whether or not substantially similar to plan asset regulations
currently applied or proposed;
(v) an amendment that in the discretion of the Board of Supervisors is
necessary or advisable in connection with the authorization of additional
limited or general partner interests or the conversion of Incentive
Distribution Rights into Common Units;
(vi) any amendment expressly permitted in the Amended Partnership
Agreement to be made by the Board of Supervisors acting alone;
(vii) an amendment effected, necessitated or contemplated by a merger
agreement that has been approved pursuant to the terms of the Amended
Partnership Agreement;
(viii) any amendment that, in the discretion of the Board of
Supervisors, is necessary or advisable in connection with the formation by
Suburban of, or its investment in, any corporation, partnership or other
entity (other than the Operating Partnership) as otherwise permitted by the
Amended Partnership Agreement;
(ix) a change in the fiscal year and/or taxable year of Suburban and
changes related thereto;
95
<PAGE>
<PAGE>
(x) an amendment that, in the discretion of the Board of Supervisors,
is necessary or advisable to effect the irrevocable delegation by the
Successor General Partner to the Board of Supervisors of all management
powers over the business and affairs of Suburban; and
(xi) any other amendments substantially similar to any of the
foregoing.
In addition, the Board of Supervisors may make amendments to the Amended
Partnership Agreement without the approval of any Limited Partner or assignee if
such amendments:
(i) do not adversely affect the Limited Partners in any material
respect;
(ii) are necessary or advisable (in the discretion of the Board of
Supervisors) to satisfy any requirements, conditions or guidelines
contained in any opinion, directive, ruling or regulation of any federal or
state agency or judicial authority or contained in any federal or state
statute;
(iii) are necessary or advisable to facilitate the trading of the
Common Units or to comply with any rule, regulation, guideline or
requirement of any securities exchange on which the Common Units are or
will be listed for trading, compliance with any of which the Board of
Supervisors deems to be in the best interests of Suburban and the Common
Unitholders;
(iv) are necessary or advisable in connection with any action taken by
the Successor General Partner relating to splits or combinations of Common
Units pursuant to the provisions of the Amended Partnership Agreement; or
(v) are required to effect the intent contemplated by the Amended
Partnership Agreement.
Opinion of Counsel and Unitholder Approval. The Board of Supervisors is not
required to obtain an Opinion of Counsel in the event of the amendments
described in the two immediately preceding paragraphs. No other amendments to
the Amended Partnership Agreement will become effective without the approval of
holders of at least 90% of the outstanding Common Units unless the Board of
Supervisors has obtained an Opinion of Counsel to the effect that such amendment
will not affect the limited liability under applicable law of any limited
partner in Suburban or the limited partner of the Operating Partnership.
Any amendment that materially and adversely affects the rights or
preferences of any type or class of outstanding partnership interests in
relation to other classes of partnership interests will require the approval of
at least a majority of the type or class of partnership interests so affected.
Any amendment that reduces the voting percentage required to take any action is
required to be approved by the affirmative vote of Limited Partners constituting
not less than the voting requirements sought to be reduced.
LIMITED CALL RIGHT
If at any time less than 20% of the then-issued and outstanding limited
partner interests of any class are held by persons other than the Successor
General Partner and its affiliates, the Successor General Partner will have the
right, which it may assign in whole or in part to any of its affiliates or to
Suburban, to acquire all, but not less than all, of the remaining limited
partner interests of such class held by such unaffiliated persons as of a record
date to be selected by the Successor General Partner, on at least 10 but not
more than 60 days' notice. The purchase price in the event of such a purchase
shall be the greater of (i) the highest price paid by the Successor General
Partner or any of its affiliates for any limited partner interests of such class
purchased within the 90 days preceding the date on which the Successor General
Partner first mails notice of its election to purchase such limited partner
interests and (ii) the Current Market Price as of the date three days prior to
the date such notice is mailed. As a consequence of the Successor General
Partner's right to purchase outstanding limited partner interests, a holder of
limited partner interests may have his limited partner interests purchased even
though he may not desire to sell them, or the price paid may be less than the
amount the holder would desire to receive upon the sale of his limited partner
interests. The tax consequences to a Common Unitholder of the exercise of this
call right are the same as a sale by such Common Unitholder of his Common Units
in the market.
96
<PAGE>
<PAGE>
TERMINATION AND DISSOLUTION
Suburban will continue until September 30, 2085, unless sooner terminated
pursuant to the Amended Partnership Agreement. Suburban will be dissolved upon
(i) the election of the Board of Supervisors to dissolve Suburban, if approved
by the holders of at least a majority of the outstanding Common Units, (ii) the
sale, exchange or other disposition of all or substantially all of the assets
and properties of Suburban and the Operating Partnership, (iii) the entry of a
decree of judicial dissolution of Suburban or (iv) the withdrawal or removal of
the Successor General Partner or any other event that results in its ceasing to
be the general partner (other than by reason of a transfer of its general
partner interest in accordance with the Amended Partnership Agreement or
withdrawal or removal following approval and admission of a successor).
Upon a dissolution pursuant to clause (iv) above, the holders of at least a
majority of the outstanding Common Units may also elect, within certain time
limitations, to reconstitute Suburban and continue its business on the same
terms and conditions set forth in the Amended Partnership Agreement by forming a
new limited partnership on terms identical to those set forth in the Amended
Partnership Agreement and having as general partner an entity approved by the
holders of at least a majority of the outstanding Common Units subject to
receipt by Suburban of an Opinion of Counsel to the effect that (x) such action
would not result in the loss of limited liability of any Limited Partner and (y)
neither Suburban, the reconstituted limited partnership nor any subsidiary of
Suburban would be treated as an association taxable as a corporation or
otherwise be taxable as an entity for federal income tax purposes upon the
exercise of such right to continue.
LIQUIDATION AND DISTRIBUTION OF PROCEEDS
Upon dissolution of Suburban, unless Suburban is reconstituted and
continued as a new limited partnership, the Person authorized to wind up the
affairs of Suburban (the 'Liquidator') will, acting with all of the powers of
the Successor General Partner and the Board of Supervisors that such Liquidator
deems necessary or desirable in its good faith judgment in connection therewith,
liquidate Suburban's assets and apply the proceeds of the liquidation as
provided in 'Cash Distribution Policy -- Distributions of Cash Upon
Liquidation.' Under certain circumstances and subject to certain limitations,
the Liquidator may defer liquidation or distribution of Suburban's assets for a
reasonable period of time or distribute assets to partners in kind if it
determines that a sale would be impractical or would cause undue loss to the
partners.
INDEMNIFICATION
The Amended Partnership Agreement provides that Suburban will indemnify
(i) the members of the Board of Supervisors or the members of the board of
supervisors of the Operating Partnership or any subsidiary of the Operating
Partnership, (ii) the Successor General Partner, (iii) any Departing Partner,
(iv) any person who is or was an affiliate of the Successor General Partner or
any Departing Partner, (v) any person who is or was a member, partner, director,
officer, employee, agent or trustee of Suburban, the Operating Partnership or
any other subsidiary of the Operating Partnership, (vi) any person who is or was
a member, partner, officer, director, employee, agent or trustee of the
Successor General Partner or any Departing Partner or any affiliate of the
Successor General Partner or any Departing Partner, or (vii) any person who is
or was serving at the request of the Board of Supervisors, the Successor General
Partner or any Departing Partner or any affiliate of the Successor General
Partner or any Departing Partner as a member, partner, director, officer,
employee, partner, agent, fiduciary or trustee of another person
('Indemnitees'), to the fullest extent permitted by law, from and against any
and all losses, claims, damages, liabilities (joint or several), expenses
(including legal fees, expenses and other disbursements), judgments, fines,
penalties, interest, settlements or other amounts arising from any and all
claims, demands, actions, suits or proceedings, whether civil, criminal,
administrative or investigative, in which any Indemnitee may be involved, or is
threatened to be involved, as a party or otherwise, by reason of its status as
an Indemnitee; provided that in each case the Indemnitee acted in good faith and
in a manner that such Indemnitee reasonably believed to be in or not opposed to
the best interests of Suburban and, with respect to any criminal proceeding, had
no reasonable cause to believe its conduct was unlawful. Any indemnification
under these provisions will be only out of the assets of Suburban, and the
Successor General Partner shall not be personally liable
97
<PAGE>
<PAGE>
for, or have any obligation to contribute or loan funds or assets to Suburban to
enable it to effectuate, such indemnification. Suburban is authorized to
purchase (or to reimburse the Successor General Partner or its affiliates for
the cost of) insurance against liabilities asserted against and expenses
incurred by such persons in connection with Suburban's activities, regardless of
whether Suburban would have the power to indemnify such person against such
liabilities under the provisions described above.
BOOKS AND REPORTS
Suburban is required to keep appropriate books of the business of Suburban
at the principal offices of Suburban. The books are maintained for both tax and
financial reporting purposes on an accrual basis. For tax purposes, the fiscal
year of Suburban is the calendar year. For financial reporting purposes,
however, the fiscal year of Suburban is a 52-53 week fiscal year concluding on
the Saturday nearest to September 30.
As soon as practicable, but in no event later than 120 days after the close
of each fiscal year, Suburban will furnish or make available to each record
holder of Common Units (as of a record date selected by the Board of
Supervisors) an annual report containing audited financial statements of
Suburban for the past fiscal year, prepared in accordance with generally
accepted accounting principles. As soon as practicable, but in no event later
than 90 days after the close of each quarter (except the last quarter of each
fiscal year), Suburban will furnish or make available to each record holder of
Common Units (as of a record date selected by the Board of Supervisors) a report
containing unaudited financial statements of Suburban with respect to such
quarter and such other information as may be required by law.
Suburban will use all reasonable efforts to furnish each record holder of a
Common Unit information reasonably required for tax reporting purposes within 90
days after the close of each calendar year. Such information is expected to be
furnished in summary form so that certain complex calculations normally required
of partners can be avoided. Suburban's ability to furnish such summary
information to Common Unitholders will depend on the cooperation of such Common
Unitholders in supplying certain information to Suburban. Every Common
Unitholder (without regard to whether he supplies such information to Suburban)
will receive information to assist him in determining his federal and state tax
liability and filing his federal and state income tax returns.
RIGHT TO INSPECT PARTNERSHIP BOOKS AND RECORDS
The Amended Partnership Agreement provides that a Limited Partner can for a
purpose reasonably related to such Limited Partner's interest as a limited
partner, upon reasonable demand and at his own expense, have furnished to him
(i) a current list of the name and last known address of each partner, (ii) a
copy of Suburban's tax returns, (iii) information as to the amount of cash, and
a description and statement of the agreed value of any other property or
services, contributed or to be contributed by each partner and the date on which
each became a partner, (iv) copies of the Amended Partnership Agreement, the
certificate of limited partnership of Suburban, amendments thereto and powers of
attorney pursuant to which the same have been executed, (v) information
regarding the status of Suburban's business and financial condition and (vi)
such other information regarding the affairs of Suburban as is just and
reasonable. Suburban has kept, and intends to keep, confidential from the
Limited Partners trade secrets or other information the disclosure of which
Suburban believes in good faith is not in the best interests of Suburban or
which Suburban is required by law or by agreements with third parties to keep
confidential.
REGISTRATION RIGHTS
Pursuant to the terms of the Amended Partnership Agreement and subject to
certain limitations described therein, Suburban has agreed to register for
resale under the Securities Act of 1933 and applicable state securities laws any
Common Units or other securities of Suburban proposed to be sold by the
Successor General Partner or any of its affiliates if an exemption from such
registration requirements is not otherwise available for such proposed
transaction. Suburban is obligated to pay all expenses incidental to such
registration, excluding underwriting discounts and commissions.
98
<PAGE>
<PAGE>
FUTURE UNITHOLDER PROPOSALS
Suburban expects to hold its next Tri-Annual Meeting in the second calendar
quarter of 2000. Any holder of Common Units who intends to submit a proposal for
inclusion in the proxy materials for the next Tri-Annual Meeting of Suburban
must submit such proposal to the Secretary of Suburban at a reasonable time
prior to the time Suburban prints and mails its proxy materials for such
Tri-Annual Meeting. In addition, the Partnership Agreement provides, and, if
adopted, the Amended Partnership Agreement will provide, that beneficial owners,
including groups thereof, of 10% or more of the outstanding units are entitled
to nominate one or more individuals to stand for election as Elected Supervisors
at a Tri-Annual Meeting by providing written notice thereof to the Board of
Supervisors not more than 120 days and not less than 90 days prior to the date
of such Tri-Annual Meeting. If such Tri-Annual Meeting is not publicly announced
by Suburban at least 100 days prior to the date of such meeting, such notice
must be delivered to the Board of Supervisors not later than the close of
business on the tenth day following the date on which the date of the Tri-Annual
Meeting is announced. The notice of nomination must contain certain information
about both the nominee and the unitholder or unitholders making the nomination.
A nomination that does not comply with the above procedure will be disregarded.
See 'Description of the Amended Partnership Agreements -- Management -- Board of
Supervisors.'
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. Our SEC filings also are available to the public at the SEC's
web site at http://www.sec.gov.
The SEC allows us to 'incorporate by reference' the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Proxy Statement, and later information that we
file with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934:
our Annual Report on Form 10-K for the fiscal year ended September
26, 1998;
our Current Report on Form 8-K, filed on December 3, 1998; and
our Quarterly Report on Form 10-Q for the three months ended
December 26, 1998.
YOU MAY OBTAIN A COPY OF THESE FILINGS, AT NO COST, BY WRITING OR
TELEPHONING:
SUBURBAN PROPANE PARTNERS, L.P.
240 ROUTE 10 WEST
WHIPPANY, NEW JERSEY 07981-0206
ATTN: INVESTOR RELATIONS
TEL: (973) 887-5300
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. THIS PROXY STATEMENT IS DATED APRIL , 1999. YOU
SHOULD ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE
AS OF THAT DATE ONLY. OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS
AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.
99
<PAGE>
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE(S)
- -------------------------------------------------------------------------------------------------------- --------
<S> <C>
Acquisition Proposal.................................................................................... 56
Adjusted 1998........................................................................................... 35
A.G. Edwards............................................................................................ 6
A.G. Edwards Opinion.................................................................................... 41
Amended Operating Partnership Agreement................................................................. 88
Amended Partnership Agreement........................................................................... 9
Amended Partnership Agreements.......................................................................... 88
Appointed Supervisors................................................................................... 6
APUs.................................................................................................... 4
Assets.................................................................................................. 59
Available Cash.......................................................................................... 11
Base Case............................................................................................... 42
Capital Surplus......................................................................................... 84
Cause................................................................................................... 89
Closing................................................................................................. 4
Common Unitholders...................................................................................... 6
Common Units............................................................................................ 4
DCF..................................................................................................... 35
Delaware Act............................................................................................ 90
Departing Partner....................................................................................... 94
Distribution Shortfall.................................................................................. 12
Distribution Support Agreement.......................................................................... 4
Diversified Energy Company A............................................................................ 25
Diversified Energy Company B............................................................................ 25
Downside Case........................................................................................... 42
EBITDA.................................................................................................. 16
EDCF.................................................................................................... 42
Elected Supervisors..................................................................................... 6
Existing Credit Agreement............................................................................... 8
Financial Services Company.............................................................................. 26
Former Affiliated Entities.............................................................................. 40
General Partner......................................................................................... 1
General Partner Units................................................................................... 11
GP Default.............................................................................................. 65
GP Interest Purchase.................................................................................... 4
GP Interest Purchase Agreement.......................................................................... 7
GP Interests............................................................................................ 4
GP Loan................................................................................................. 10
GP Note................................................................................................. 65
Hanson.................................................................................................. 82
hot assets.............................................................................................. 51
Incentive Distribution Rights........................................................................... 4
Indemnitees............................................................................................. 97
Initial Common Unit..................................................................................... 84
Initial Unit Price...................................................................................... 84
Interim Capital Transactions............................................................................ 84
Investment Firm......................................................................................... 25
IT...................................................................................................... 78
Letter of Intent........................................................................................ 26
Limited Partner......................................................................................... 88
Liquidator.............................................................................................. 97
Liquidity Arrangement................................................................................... 12
LTM..................................................................................................... 37
Management Case......................................................................................... 35
Management Cash Reserve................................................................................. 11
Management Supervisors.................................................................................. 6
Meeting................................................................................................. 7
Mellon.................................................................................................. 10
Millennium.............................................................................................. 7
</TABLE>
100
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE(S)
- -------------------------------------------------------------------------------------------------------- --------
<S> <C>
Millennium America...................................................................................... 12
Minimum Quarterly Distribution.......................................................................... 11
MQD..................................................................................................... 35
NOAA.................................................................................................... 19
non-IT.................................................................................................. 78
NYMEX................................................................................................... 79
Operating Partnership................................................................................... 1
Operating Partnership Agreement......................................................................... 9
Operating Surplus....................................................................................... 84
Opinion of Counsel...................................................................................... 93
outside basis........................................................................................... 50
Partnership Agreement................................................................................... 9
Partnership Agreements.................................................................................. 9
Partnership Comparable Group............................................................................ 45
Partnerships............................................................................................ 1
Propane Company A....................................................................................... 24
Propane Company B....................................................................................... 25
Propane Company C....................................................................................... 25
Propane Company D....................................................................................... 25
Public Common Unitholders............................................................................... 6
Public Common Units..................................................................................... 22
Quantum................................................................................................. 82
Recapitalization........................................................................................ 1
Recapitalization Agreement.............................................................................. 7
Record Date............................................................................................. 22
Redemption.............................................................................................. 55
Redemption Price........................................................................................ 17
Restricted Units........................................................................................ 7
Restricted Unit Plan.................................................................................... 7
Rothschild.............................................................................................. 6
Rothschild Base Case.................................................................................... 35
Rothschild Opinion...................................................................................... 34
RSPA.................................................................................................... 21
RSPA Final Rule......................................................................................... 21
SEC..................................................................................................... 56
Senior Note Agreement................................................................................... 8
Senior Notes............................................................................................ 8
SERP.................................................................................................... 48
Service................................................................................................. 49
Solicitation Agent...................................................................................... 23
Special Committee....................................................................................... 2
Special Distribution.................................................................................... 50
Subordinated Units...................................................................................... 4
Suburban................................................................................................ 1
Suburban Comparable Group............................................................................... 37
Successor General Partner............................................................................... 2
Superior Proposal....................................................................................... 56
Target Distribution..................................................................................... 11
Tax Code................................................................................................ 49
Unit Majority........................................................................................... 61
Y2K..................................................................................................... 78
</TABLE>
101
<PAGE>
ANNEX A
================================================================================
SUBURBAN PROPANE PARTNERS, L.P.
AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
BY AND AMONG
SUBURBAN PROPANE PARTNERS, L.P.,
SUBURBAN PROPANE, L.P.,
SUBURBAN PROPANE GP, INC.,
MILLENNIUM PETROCHEMICALS INC.
AND
SUBURBAN ENERGY SERVICES GROUP LLC
------------------------
DATED AS OF MARCH 15, 1999
------------------------
================================================================================
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
DEFINITIONS....................................................................................... A-2
1.01 Defined Terms............................................................................... A-2
ARTICLE II
THE RECAPITALIZATION.............................................................................. A-4
2.01 Amended Agreements; Termination of Distribution Support Agreement; Amended Credit
Agreement................................................................................... A-4
(a) Amended Agreements.................................................................... A-4
(b) Termination of Distribution Support Agreement......................................... A-4
(c) Amended Credit Agreement.............................................................. A-4
2.02 Payment of Special Distribution by Operating Partnership.................................... A-5
2.03 Redemption.................................................................................. A-5
(a) Redemption of Subordinated Units and APUs............................................. A-5
(b) Payment of the Redemption Price....................................................... A-5
(c) Delivery of Redeemed Securities....................................................... A-5
2.04 Admission of Successor General Partner to Partnerships; Asset Purchase...................... A-5
(a) Admission............................................................................. A-5
(b) Asset Purchase........................................................................ A-5
ARTICLE III
CLOSING........................................................................................... A-5
3.01 Closing..................................................................................... A-5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES.................................................................... A-6
4.01 Representations and Warranties of Each of the MLP and the Operating Partnership............. A-6
(a) Organization, Standing and Power...................................................... A-6
(b) Authority; Noncontravention........................................................... A-6
(c) Brokers............................................................................... A-7
(d) Litigation............................................................................ A-7
(e) Capitalization........................................................................ A-7
(f) Proxy Statement....................................................................... A-7
(g) Fairness Opinions..................................................................... A-7
4.02 Representations and Warranties of Each of Millennium and the General Partner................ A-8
(a) Organization, Standing and Power...................................................... A-8
(b) Authority; Noncontravention........................................................... A-8
(c) Brokers............................................................................... A-8
(d) Litigation............................................................................ A-8
(e) Ownership of Redeemed Securities...................................................... A-8
(f) Proxy Statement....................................................................... A-9
4.03 Representations and Warranties of the Successor General Partner............................. A-9
(a) Organization, Standing and Power...................................................... A-9
(b) Authority; Noncontravention........................................................... A-9
(c) Brokers............................................................................... A-9
(d) Litigation............................................................................ A-10
(e) Contemplated Ownership of Successor General Partner................................... A-10
(f) Proxy Statement....................................................................... A-10
ARTICLE V
ADDITIONAL COVENANTS.............................................................................. A-10
5.01 No Sale, Solicitation or Pledge; Voting of Subordinated Units............................... A-10
5.02 Meeting of Holders; Proxy Statement......................................................... A-11
</TABLE>
A-i
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
5.03 Commercially Reasonable Efforts............................................................. A-11
5.04 Consents, Approvals and Filings; Cooperation................................................ A-12
5.05 Updating of Information..................................................................... A-12
5.06 Resignation of Appointed Supervisors........................................................ A-12
ARTICLE VI
CONDITIONS PRECEDENT.............................................................................. A-12
6.01 Conditions to Obligations of Each Party..................................................... A-12
(a) Approval by Unitholders............................................................... A-12
(b) Approval by Note Majority; Amendment of Note Agreement................................ A-12
(c) Required Consents..................................................................... A-13
(d) No Injunctions or Restraints; Actions................................................. A-13
(e) Payment of Special Distribution....................................................... A-13
(f) Concurrent Consummation of the Asset Purchase......................................... A-13
(g) Amended Agreements.................................................................... A-13
(h) Termination Agreement................................................................. A-13
(i) Opinion of Counsel.................................................................... A-13
(j) Resignations of Appointed Supervisors................................................. A-13
6.02 Additional Conditions to Obligations of the MLP and the Operating Partnership............... A-13
(a) Representations and Warranties........................................................ A-13
(b) Performance of Obligations............................................................ A-14
(c) Officer's Certificates................................................................ A-14
(d) Financing............................................................................. A-14
(e) Delivery of Redeemed Securities....................................................... A-14
(f) Millennium, General Partner and Successor General Partner Certified Resolutions and
Incumbency Certificates............................................................. A-14
(g) Fairness Opinions..................................................................... A-14
(h) No Withdrawal of Recommendation by Special Committee.................................. A-14
6.03 Additional Conditions to Obligations of Each of Millennium and the General Partner.......... A-14
(a) Representations and Warranties........................................................ A-14
(b) Performance of Obligations............................................................ A-14
(c) Officer's Certificates................................................................ A-14
(d) Redemption Price...................................................................... A-14
(e) MLP, Operating Partnership and Successor General Partner Certified Resolutions and
Incumbency Certificates............................................................. A-14
6.04 Additional Conditions to Obligations of the Successor General Partner....................... A-15
(a) Representations and Warranties........................................................ A-15
(b) Performance of Obligations............................................................ A-15
(c) Officer's Certificates................................................................ A-15
(d) MLP, Operating Partnership, Millennium and General Partner Certified Resolutions and
Incumbency Certificates............................................................. A-15
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER................................................................. A-15
7.01 Termination................................................................................. A-15
7.02 Effect of Termination....................................................................... A-16
7.03 Amendment................................................................................... A-16
7.04 Extension; Waiver........................................................................... A-16
7.05 Procedure for Termination, Amendment, Extension or Waiver by the MLP........................ A-16
7.06 Termination Fees; Expense Reimbursement..................................................... A-17
(a) Section 7.01(c) Termination Fee or Expense Reimbursement.............................. A-17
(b) Section 7.01(d) Termination Fee....................................................... A-17
(c) Liquidated Damages.................................................................... A-17
</TABLE>
A-ii
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
7.07 Extension Fee............................................................................... A-17
ARTICLE VIII
GENERAL PROVISIONS................................................................................ A-17
8.01 Survival of Representations and Warranties.................................................. A-17
8.02 Fees and Expenses........................................................................... A-17
8.03 Notices..................................................................................... A-18
8.04 Interpretation.............................................................................. A-18
8.05 Counterparts................................................................................ A-18
8.06 Entire Agreement; No Third-Party Beneficiaries; Contribution, Conveyance and Assumption
Agreement................................................................................... A-18
8.07 Governing Law............................................................................... A-18
8.08 Assignment.................................................................................. A-18
8.09 Enforcement; Severability................................................................... A-19
8.10 Further Assurances.......................................................................... A-19
8.11 Public Announcements........................................................................ A-19
</TABLE>
SCHEDULES
Schedule 2.01(a) -- Amended Agreements
Schedule 4.01(b) -- MLP Consents
Schedule 4.01(e) -- Plan Units
Schedule 4.02(b) -- General Partner/Millennium Consents
Schedule 4.03(b) -- Successor General Partner Consents
Schedule 4.03(e) -- Contemplated Ownership of Successor General Partner
Schedule 6.01(c) -- Required Consents
EXHIBITS
Exhibit A -- Form of Purchase Agreement
Exhibit B -- Form of Termination Agreement
A-iii
<PAGE>
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P.
AMENDED AND RESTATED RECAPITALIZATION AGREEMENT
AMENDED AND RESTATED RECAPITALIZATION AGREEMENT dated as of March 15, 1999
by and among: (i) SUBURBAN PROPANE PARTNERS, L.P., a Delaware limited
partnership (the 'MLP'); (ii) SUBURBAN PROPANE, L.P., a Delaware limited
partnership of which the MLP is the sole limited partner (the 'Operating
Partnership'); (iii) SUBURBAN PROPANE GP, INC., a Delaware corporation which is
the general partner of the MLP and the general partner of the Operating
Partnership (collectively in such capacities, the 'General Partner'); (iv)
MILLENNIUM PETROCHEMICALS INC., a Virginia corporation and the sole stockholder
of the General Partner ('Millennium'); and (v) SUBURBAN ENERGY SERVICES GROUP
LLC, a Delaware limited liability company (the 'Successor General Partner').
Capitalized terms used herein but not defined where used have the meanings
assigned to such terms in Article I.
W I T N E S S E T H:
WHEREAS, as of the date hereof, 7,163,750 Subordinated Units and 220,000
APUs of the MLP are outstanding, all of which are owned of record and
beneficially by the General Partner;
WHEREAS, the Board of Supervisors, upon the unanimous recommendation of the
Special Committee, has determined that it is in the best interests of the
holders of Common Units to effect, and accordingly has unanimously approved, a
recapitalization of the MLP, which recapitalization includes a redemption by the
MLP from the General Partner of all of the outstanding Subordinated Units and
APUs (the 'Redemption') and the other transactions contemplated in Article II
(the Redemption and such other transactions, collectively, the
'Recapitalization'), upon the terms and subject to the conditions set forth
herein;
WHEREAS, the MLP will finance the Redemption and certain expenses of the
Recapitalization with its then existing cash resources and, if necessary,
borrowings under the Amended and Restated Credit Agreement, dated as of
September 30, 1997, by and among the Operating Partnership and First Union
National Bank, as a lender and administrative agent (the 'Existing Credit
Agreement'), as it will be amended in connection with the Recapitalization as
contemplated hereby (the 'Amended Credit Agreement');
WHEREAS, the parties hereto entered into a Recapitalization Agreement dated
as of November 27, 1998 to effect the transactions referred to herein (the
'Original Agreement');
WHEREAS, concurrently with the execution and delivery of the Original
Agreement, Millennium, the General Partner and the Successor General Partner
entered into a Purchase Agreement substantially in the form of Exhibit A
attached hereto (the 'Purchase Agreement'), pursuant to which, among other
things, the General Partner is selling to the Successor General Partner, and the
Successor General Partner is purchasing from the General Partner, all of the
General Partner's right, title and interest (i) as a general partner of the MLP,
(ii) in and to the Incentive Distribution Rights held by the General Partner
pursuant to the Partnership Agreement and (iii) as a general partner in the
Operating Partnership (collectively, the 'Assets'), and the Successor General
Partner is assuming certain specified liabilities in connection therewith (the
'Asset Purchase'), upon the terms and subject to the conditions therein;
WHEREAS, concurrently with the consummation of the Recapitalization, the
Partnership Agreements will be amended and restated to permit and effect the
Recapitalization and the Asset Purchase; and
WHEREAS, the parties hereto wish to amend and restate the Original
Agreement and establish the terms and conditions under which the
Recapitalization shall occur.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
A-1
<PAGE>
<PAGE>
ARTICLE I.
DEFINITIONS
1.01 Defined Terms. Unless the context otherwise requires, the following
capitalized terms, as used herein, shall have the following meanings:
'APU Guarantor' has the meaning set forth in the Distribution Support
Agreement.
'APUs' has the meaning set forth in the Partnership Agreement.
'Acquisition Proposal' has the meaning set forth in Section 5.01(a).
'Affiliate' of any specified Person means any other Person directly or
indirectly controlling, controlled by, or under common control with, such
specified Person; provided that the Partnerships, Equistar Chemicals, LP and
their respective Subsidiaries, officers and employees shall not be considered
Affiliates of the General Partner for purposes of this Agreement. For purposes
of this definition of Affiliate, 'control' means the possession, direct or
indirect, of the power to direct or cause the direction of the management of the
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise; 'controlling' and 'controlled' have corollary meanings.
'Agreement' means this Amended and Restated Recapitalization Agreement, as
amended, modified or supplemented from time to time.
'Amended Agreements' means, collectively, the Amended Partnership Agreement
and the Amended Operating Partnership Agreement.
'Amended Credit Agreement' has the meaning set forth in the recitals of
this Agreement.
'Amended Operating Partnership Agreement' means the Second Amended and
Restated Partnership Agreement of the Operating Partnership, to be entered into
by the parties thereto (which shall not include the General Partner) in a form
to permit and effect the Recapitalization as agreed to by the Elected
Supervisors and the Successor General Partner.
'Amended Partnership Agreement' means the Second Amended and Restated
Partnership Agreement of the MLP, to be entered into by the parties thereto
(which shall not include the General Partner) in a form to permit and effect the
Recapitalization as agreed to by the Elected Supervisors and the Successor
General Partner.
'Appointed Supervisors' has the meaning set forth in the Partnership
Agreement.
'Asset Purchase' has the meaning set forth in the recitals of this
Agreement.
'Assets' has the meaning set forth in the recitals of this Agreement.
'Board of Supervisors' has the meaning set forth in the Partnership
Agreement.
'Certificates' has the meaning set forth in Section 2.03(b).
'Closing' has the meaning set forth in Section 3.01.
'Common Units' has the meaning set forth in the Partnership Agreement.
'Contribution, Conveyance and Assumption Agreement' means the Contribution,
Conveyance and Assumption Agreement dated as of March 4, 1996 by and among the
MLP, the Operating Partnership, Quantum Chemical Corporation, the General
Partner and Suburban Propane Inc.
'Delaware LP Act' has the meaning set forth in Section 4.01(a).
'Departing Partner' has the meaning set forth in the Partnership Agreement.
'Distribution Support Agreement' means the Distribution Support Agreement
dated as of March 5, 1996 among the General Partner, Millennium America Inc.
(formerly Hanson America Inc.) and the MLP.
'Elected Supervisors' has the meaning set forth in the Partnership
Agreement.
'Exchange Act' has the meaning set forth in Section 4.01(b).
'Existing Credit Agreement' has the meaning set forth in the recitals of
this Agreement.
'Fairness Opinion' and 'Fairness Opinions' have the meanings set forth in
Section 4.01(g).
A-2
<PAGE>
<PAGE>
'General Partner' has the meaning set forth in the preamble of this
Agreement.
'Governmental Entity' has the meaning set forth in Section 4.01(b).
'Incentive Distribution Rights' has the meaning set forth in the
Partnership Agreement.
'Laws' has the meaning set forth in Section 4.01(b).
'Liens' means any and all liens, mortgages, claims, charges, pledges,
licenses, leases, easements, rights of first offer or first refusal,
restrictions under any stockholders' or similar agreement, voting trusts or
voting agreements or encumbrances of any kind whatsoever.
'Liquidity Arrangement' has the meaning set forth in the Amended
Partnership Agreement.
'Material Adverse Effect' means, with respect to any Person, a material
adverse effect on the assets, properties, liabilities, business, results of
operations or condition (financial or otherwise) of such Person and its
Subsidiaries, taken as a whole.
'Meeting' has the meaning set forth in Section 5.02.
'Millennium' has the meaning set forth in the preamble of this Agreement.
'MLP' has the meaning set forth in the preamble of this Agreement.
'Note Agreement' means the Note Agreement dated as of February 28, 1996, as
amended, relating to the issuance by the Operating Partnership of $425 million
aggregate original principal amount of 7.54% Senior Notes Due June 30, 2011 (the
'Notes').
'Note Majority' means the approval of the holders of at least 51% of the
aggregate principal amount of the Notes.
'Operating Partnership' has the meaning set forth in the preamble of this
Agreement.
'Operating Partnership Agreement' means the Amended and Restated Agreement
of Limited Partnership of Suburban Propane, L.P. dated as of March 4, 1996 by
and among the General Partner, as general partner, and the MLP, as limited
partner, as in effect immediately prior to the Closing.
'Orders' has the meaning set forth in Section 4.01(b).
'Original Agreement' has the meaning set forth in the recitals of this
Agreement.
'Outstanding' has the meaning set forth in the Partnership Agreement.
'Partner' has the meaning set forth in the Partnership Agreement.
'Partnership Agreement' means the Amended and Restated Agreement of Limited
Partnership of Suburban Propane Partners, L.P. dated as of March 4, 1996 by and
among the General Partner, the MLP's organizational limited partner and each
other Person which is a partner in the MLP, as in effect immediately prior to
the Closing.
'Partnership Agreements' means, collectively, the Partnership Agreement and
the Operating Partnership Agreement.
'Partnerships' means, collectively, the MLP and the Operating Partnership.
'Person' means an individual, partnership, limited liability company, joint
venture, corporation, trust, unincorporated association, any other entity, or a
government or any department or agency or other unit thereof.
'Plan Units' has the meaning set forth in Section 4.01(e).
'Proxy Statement' has the meaning set forth in Section 4.01(f).
'Public Common Units' means all Outstanding Common Units, other than those
held by the General Partner and its Affiliates and the Successor General Partner
and its Affiliates.
'Purchase Agreement' has the meaning set forth in the recitals of this
Agreement.
'Recapitalization' has the meaning set forth in the recitals of this
Agreement.
'Redeemed Securities' has the meaning set forth in Section 2.03(a).
'Redemption' has the meaning set forth in the preamble of this Agreement.
A-3
<PAGE>
<PAGE>
'Redemption Price' has the meaning set forth in Section 2.03(a).
'SEC' has the meaning set forth in Section 4.01(b).
'Special Committee' means a special committee of the Board of Supervisors
established to evaluate the Recapitalization consisting of the Elected
Supervisors, John Hoyt Stookey, Harold R. Logan, Jr. and Dudley C. Mecum.
'Special Distribution' has the meaning set forth in Section 2.02.
'Subordinated Units' has the meaning set forth in the Partnership
Agreement.
'Subsidiary' means, with respect to any specified Person, any corporation
or other legal entity of which such Person or any of its Subsidiaries Controls
or owns, directly or indirectly, more than 50% of the stock or other equity
interests entitled to vote on the election of the members to the board of
directors or similar governing body.
'Successor General Partner' has the meaning set forth in the preamble of
this Agreement.
'Superior Proposal' has the meaning set forth in Section 5.01(a).
'Termination Agreement' has the meaning set forth in Section 2.01(b).
'Transaction Expenses' means any and all costs and expenses of the
Partnerships incident to the preparation, negotiation and execution and delivery
of this Agreement, the commitment letter dated October 30, 1998 from the Bank of
New York to the Operating Partnership, the Amended Credit Agreement, the Proxy
Statement and the agreements and other documents or instruments to be entered
into pursuant to this Agreement and the consummation of the transactions
contemplated hereby and thereby, and any modifications or terminations thereof.
'Unit Majority' has the meaning set forth in the Partnership Agreement.
ARTICLE II.
THE RECAPITALIZATION
2.01 Amended Agreements; Termination of Distribution Support Agreement;
Amended Credit Agreement.
(a) Amended Agreements. At the Closing, the Amended Partnership Agreement
and the Amended Operating Partnership Agreement shall be entered into by the
parties thereto. Other than in its capacity as a Departing Partner, from and
after the Closing, the General Partner shall not have any obligation or
liability under the Amended Partnership Agreement or the Amended Operating
Partnership Agreement. The Amended Partnership Agreement, among other things,
shall effect the amendments set forth in Schedule 2.01(a) attached hereto and
such other amendments as the Elected Supervisors and the Successor General
Partner together shall deem necessary or desirable.
(b) Termination of Distribution Support Agreement. At the Closing, the
parties to the Distribution Support Agreement shall enter into a letter
substantially in the form of Exhibit B attached hereto terminating the
Distribution Support Agreement and the rights and obligations of the parties
thereto thereunder (the 'Termination Agreement').
(c) Amended Credit Agreement. At or prior to the Closing, the Operating
Partnership will enter into the Amended Credit Agreement to, among other things,
(i) extend the maturity date of the Existing Credit Agreement to the fiscal
quarter ending on March 31, 2001, (ii) amend the minimum adjusted consolidated
net worth convenant contained in the Existing Credit Agreement to reduce the
required minimum net worth of the Operating Partnership, (iii) exclude from the
mandatory prepayment provision contained in the Existing Credit Agreement an
amount sufficient to provide for the Liquidity Arrangement to be provided by the
MLP and the purchase of the note to be issued by the Successor General Partner
in connection with the financing for the Asset Purchase, as may be contemplated
by the documents related to such financing, (iv) modify certain definitions and
convenants contained in the Existing Credit Agreement relating to the ownership
of the General Partner and the Operating Partnership, (v) increase the
'Applicable Margins' of the interest rates payable for borrowings as contained
in the Existing Credit Agreement, (vi) obtain the lenders' consents under the
A-4
<PAGE>
<PAGE>
Existing Credit Agreement to the amendments to the Partnership Agreements and
the Note Agreement contemplated by this Agreement and (vii) obtain the lenders'
consents under the Existing Credit Agreement to the termination of the
Distribution Support Agreement.
2.02 Payment of Special Distribution by Operating Partnership. At the
Closing and pursuant to the Amended Operating Partnership Agreement, the
Operating Partnership shall make a special distribution to the MLP, as limited
partner of the Operating Partnership, or shall make a loan to the MLP, out of
the Operating Partnership's then existing cash resources and, if necessary,
borrowings under the Amended Credit Agreement or any replacement or other credit
facility, in an amount sufficient for the MLP to pay the Redemption Price and to
pay any and all Transaction Expenses not paid by the Operating Partnership (the
'Special Distribution').
2.03 Redemption.
(a) Redemption of Subordinated Units and APUs. At the Closing, upon the
terms and subject to the conditions set forth in this Agreement, the MLP shall
redeem all 7,163,750 Subordinated Units and all 220,000 APUs and any additional
APUs purchased or to be purchased as described in the last sentence of this
paragraph (a) (such APUs and Subordinated Units together, the 'Redeemed
Securities') for an aggregate cash payment of $69 million (as adjusted as
described below in this paragraph (a), the 'Redemption Price'). The Redemption
Price shall be reduced dollar-for-dollar based on the amount of any and all
distributions pursuant to Section 6.4 or Section 6.5 of the Partnership
Agreement on the Subordinated Units or the APUs on or after the date of this
Agreement but prior to the Closing. In addition, the Redemption Price shall be
increased dollar-for-dollar based on the amount of any and all contributions to
the MLP that the General Partner (or the APU Guarantor) may be obligated to make
in exchange for additional APUs pursuant to the Distribution Support Agreement
on or after the date of this Agreement but prior to the Closing.
(b) Payment of the Redemption Price. The Redemption Price shall be payable
against delivery to the MLP of the certificate(s) representing the Redeemed
Securities (the 'Certificates') by wire transfer of immediately available funds
into an account designated by the General Partner to the MLP in writing prior to
the Closing.
(c) Delivery of Redeemed Securities. At the Closing, and against payment of
the Redemption Price, the General Partner shall deliver to the MLP the
Certificate(s) registered in the General Partner's name against payment of the
Redemption Price, duly endorsed in blank or accompanied by transfer powers duly
executed in blank and otherwise in proper form for transfer, with any required
transfer stamps affixed thereto.
2.04 Admission of Successor General Partner to Partnerships; Asset
Purchase.
(a) Admission. At the Closing, but immediately prior to the consummation of
the Asset Purchase, the Successor General Partner shall be admitted to the MLP
as a general partner in accordance with Sections 4.6 and 10.3 of the Partnership
Agreement, and also shall be admitted to the Operating Partnership as a general
partner in accordance with Sections 4.2 and 10.3 of the Operating Partnership
Agreement, and shall assume the rights and duties of the General Partner under
the Partnership Agreements in accordance therewith.
(b) Asset Purchase. At the Closing, upon the terms and subject to the
conditions set forth in the Purchase Agreement, the General Partner and the
Successor General Partner shall consummate the Asset Purchase upon the terms and
conditions set forth in the Purchase Agreement.
ARTICLE III.
CLOSING
3.01 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated herein shall have been abandoned pursuant to Section
7.01, and subject to the satisfaction or waiver of the conditions set forth in
Article VI, the closing of the Recapitalization (the 'Closing') shall take place
at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, NY
10153 at 10:00 A.M. on the first business day following the date on which the
last of the conditions to be fulfilled or waived set
A-5
<PAGE>
<PAGE>
forth in Article VI shall be fulfilled or waived in accordance with this
Agreement, unless another date, time or place is agreed to in writing by the
parties hereto.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of Each of the MLP and the Operating
Partnership. Each of the MLP and the Operating Partnership, jointly and
severally, hereby represents and warrants to each of the General Partner,
Millennium and the Successor General Partner that:
(a) Organization, Standing and Power. It is a limited partnership duly
organized, validly existing and in good standing under the Delaware Revised
Uniform Limited Partnership Act (as amended, modified or supplemented from
time to time, the 'Delaware LP Act') and has the requisite limited
partnership power and authority to carry on its business as now being
conducted.
(b) Authority; Noncontravention. It has all requisite limited
partnership power and authority to enter into this Agreement and, subject
to the approval of a Unit Majority, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement by it and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary partnership action on its
part, subject to the approval of a Unit Majority. This Agreement has been
duly executed and delivered by it and, assuming this Agreement constitutes
the valid and binding agreement of each of the other parties hereto,
constitutes a valid and binding obligation of it, enforceable against it in
accordance with its terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, moratorium or other similar laws
relating to or affecting creditors' rights and remedies generally. The
execution and delivery by it of this Agreement do not, and the consummation
by it of the transactions contemplated by this Agreement and compliance by
it with the provisions hereof as of the Closing will not, (i) subject to
the approval of a Unit Majority, conflict with any of the provisions of the
Partnership Agreements or the Certificate of Limited Partnership of the MLP
or the Certificate of Limited Partnership of the Operating Partnership,
(ii) subject to the approval of the Note Majority and the governmental
filings and other matters referred to in the following sentence, conflict
with or require the consent of any Person under any indenture or other
agreement, permit, concession, franchise, license or similar instrument or
undertaking to which it or any of its Subsidiaries is a party or by which
it or any of its Subsidiaries or any of their assets is bound, except as
set forth in Schedule 4.01(b) attached hereto, or (iii) subject to the
governmental filings and other matters referred to in the following
sentence, contravene any law, rule or regulation of any state or of the
United States or any political subdivision or agency thereof or therein
(collectively, 'Laws'), or any order, writ, judgment, injunction, decree,
determination or award (collectively, 'Orders') currently in effect and
binding on it or any of its Subsidiaries, the conflict, breach, default or
contravention of which, in the case of clauses (ii) and (iii) above,
individually or in the aggregate, would have, or is reasonably likely to
have, a Material Adverse Effect on the MLP. No consent, approval or
authorization of, or declaration or filing with, or notice to, any
governmental agency, regulatory authority or court (a 'Governmental
Entity') that has not been received or made as of the date hereof is
required by it or any of its Subsidiaries in connection with the execution
and delivery by it of this Agreement or the consummation by it of the
transactions contemplated hereby, except for (A) the filing with the
Securities and Exchange Commission (the 'SEC') of such reports and
statements under the Securities Exchange Act of 1934, as amended (the
'Exchange Act'), as may be required in connection with this Agreement and
the transactions contemplated by this Agreement, (B) the filings of any
amendments to the Certificate of Limited Partnership of the MLP and the
Certificate of Limited Partnership of the Operating Partnership under the
Delaware LP Act in connection with this Agreement and the transactions
contemplated by this Agreement, (C) such other consents, approvals,
authorizations, filings or notices as are set forth in Schedule 4.01(b)
attached hereto and (D) any filings, authorizations, consents or approvals
the failure to make or obtain which, individually or in the aggregate,
would not have a Material Adverse Effect on the MLP.
A-6
<PAGE>
<PAGE>
(c) Brokers. No broker, investment banker, financial advisor or other
Person is entitled to receive from the MLP or the Operating Partnership any
broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement, other
than Rothschild Inc. and A.G. Edwards & Sons, Inc., financial advisors to
the Special Committee. The fees and expenses of Rothschild Inc. and A.G.
Edwards & Sons, Inc. shall be paid by the MLP. The MLP and the Operating
Partnership jointly and severally shall indemnify and hold harmless the
other parties to this Agreement from and against any liability incurred by
such parties (including the fees, disbursements and related charges of
counsel) arising out of any claim by a broker, finder, financial advisor or
similar intermediary for any fee, commission or other compensation as a
result of the MLP or the Operating Partnership entering into this Agreement
and/or consummating the transactions contemplated by this Agreement.
(d) Litigation. As of the date hereof, there is no suit, claim,
action, Order or proceeding (at law or in equity) or, to the knowledge of
the MLP or the Operating Partnership, investigation pending or, to the
knowledge of the MLP or the Operating Partnership, threatened against the
MLP or the Operating Partnership or any of their Subsidiaries before any
Governmental Entity seeking to prevent or challenging the transactions
contemplated by this Agreement.
(e) Capitalization. As of the date hereof, there are (i) 21,562,500
Common Units issued and outstanding, (ii) 7,163,759 Subordinated Units
issued and outstanding, all of which are held of record by the General
Partner, and (iii) 220,000 APUs issued and outstanding, all of which are
held of record by the General Partner. As of the date hereof, the
capitalization of the Operating Partnership consists of (i) a 1.0101%
general partner interest held of record by the General Partner, (ii) a
98.9899% limited partner interest, all right, title and interest to and in
which is held by the MLP and (iii) the Incentive Distribution Rights, all
of which are held of record by the General Partner. Except as set forth
above in this Section 4.01(e) and except for the rights to receive Common
Units and the Common Units issued and issuable pursuant to the Suburban
Propane Partners, L.P. 1996 Restricted Unit Plan (collectively, the 'Plan
Units'), as of the date hereof there are not any, and immediately prior to
the Closing there will not be any, (i) equity securities or other equity
interests of the Partnerships issued by the Partnerships and (ii) other
securities of the Partnerships issued by the Partnerships that are
convertible into or exchangeable or exercisable for any such equity
securities or other equity interests of the Partnerships. Except for the
Plan Units, there are no outstanding options, warrants, subscriptions or
other rights of any kind issued or issuable by the Partnerships giving the
holder thereof the right to acquire, and the Partnerships are not obligated
to issue, transfer or sell, any equity securities or other equity interests
of the Partnerships or other securities of the Partnerships convertible
into or exchangeable or exercisable for any such equity securities or other
equity interests of the Partnerships. The Partnerships are not party to any
agreement or understanding with respect to the voting of any securities or
other equity interests of the Partnerships, other than the Partnership
Agreements. Schedule 4.01(e) attached hereto lists the number and the
owners of the issued and outstanding Plan Units as of the date hereof.
(f) Proxy Statement. None of the information relating to it and its
Affiliates provided by it (other than any provided by the General Partner
and Millennium) for inclusion in the Proxy Statement on Schedule 14A under
the Exchange Act to be filed by the MLP with the SEC and to be used in
soliciting proxies from the holders of Common Units with respect to the
Recapitalization (together with the letter to holders, notice of meeting
and form of proxy or other related materials, the 'Proxy Statement'), at
the time it is filed with the SEC, at any time it is amended or
supplemented, at the time it is mailed and at the time of the Meeting, will
contain any untrue statement of a material fact, or omit to state a
material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
(g) Fairness Opinions. The Special Committee has received the written
opinions of Rothschild Inc. and A.G. Edwards & Sons, Inc. to the effect
that, as of the respective dates thereof, the Recapitalization is fair,
from a financial point of view, to the holders of the Public Common Units
(each, a 'Fairness Opinion' and together, the 'Fairness Opinions').
A-7
<PAGE>
<PAGE>
4.02 Representations and Warranties of Each of Millennium and the General
Partner. Each of Millennium and the General Partner, jointly and severally,
hereby represents and warrants to each of the MLP, the Operating Partnership and
the Successor General Partner that:
(a) Organization, Standing and Power. It is a corporation duly
organized, validly existing and in good standing under its jurisdiction of
incorporation and has the requisite corporate power and authority to carry
on its business as now being conducted.
(b) Authority; Noncontravention. It has all requisite corporate power
and authority to enter into this Agreement and, subject to the approval of
a Unit Majority, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by it and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on its part and on the part of
its stockholders. This Agreement has been duly executed and delivered by it
and, assuming this Agreement constitutes the valid and binding agreement of
each of the other parties hereto, constitutes a valid and binding
obligation of it, enforceable against it in accordance with its terms,
except to the extent enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws relating to or affecting
creditors' rights and remedies generally. The execution and delivery by it
of this Agreement do not, and the consummation by it of the transactions
contemplated by this Agreement and compliance by it with the provisions
hereof as of the Closing will not, (i) conflict with any of the provisions
of its certificate of incorporation or by-laws, (ii) subject to the
governmental filings and other matters referred to in the following
sentence, conflict with or require the consent of any Person under any
indenture or other agreement, permit, concession, franchise, license or
similar instrument or undertaking to which it or any of its Affiliates is a
party or by which it or any of its Affiliates or any of its or their assets
are bound, except any such indenture or other agreement, permit,
concession, franchise, license or similar instrument or undertaking entered
into by the General Partner on behalf of either of the Partnerships acting
in its capacity as general partner thereof and except as set forth in
Schedule 4.02(b) attached hereto, or (iii) subject to the governmental
filings and other matters referred to in the following sentence, contravene
any Law or any Order currently in effect and binding on it or any of its
Affiliates, the conflict, breach, default or contravention of which, in the
case of clauses (ii) and (iii) above, individually or in the aggregate,
would have, or is reasonably likely to have, a Material Adverse Effect on
it. No consent, approval or authorization of, or declaration or filing
with, or notice to, any Governmental Entity that has not been received or
made as of the date hereof is required by or with respect to it or any of
its Affiliates in connection with the execution and delivery by it of this
Agreement or the consummation by it of the transactions contemplated
hereby, except for (A) such consents, approvals, authorizations, filings or
notices as are set forth in Schedule 4.02(b) attached hereto and (B) any
filings, authorizations, consents or approvals the failure to make or
obtain which, individually or in the aggregate, would not have a Material
Adverse Effect on the General Partner.
(c) Brokers. No broker, investment banker, financial advisor or other
Person is entitled to receive from Millennium, the General Partner or any
of their respective Affiliates any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement. Millennium and the General Partner jointly
and severally shall indemnify and hold harmless the other parties to this
Agreement from and against any liability incurred by such parties
(including the fees, disbursements and related charges of counsel) arising
out of any claim by a broker, finder, financial advisor or similar
intermediary for any fee, commission or other compensation as a result of
Millennium and/or the General Partner entering into this Agreement and/or
consummating the transactions contemplated by this Agreement.
(d) Litigation. As of the date hereof, there is no suit, claim,
action, Order or proceeding (at law or in equity) or, to the knowledge of
Millennium or the General Partner, investigation pending or, to the
knowledge of Millennium or the General Partner, threatened against the
General Partner or any of its Affiliates before any Governmental Entity
seeking to prevent or challenging the transactions contemplated by this
Agreement.
(e) Ownership of Redeemed Securities. The General Partner is, and as
of the Closing will be, the sole record and beneficial owner of the
Redeemed Securities, free and clear of any Liens, other
A-8
<PAGE>
<PAGE>
than pursuant to the Partnership Agreements and, immediately prior to the
Closing but not upon the Closing, the Distribution Support Agreement. At
the Closing, the MLP will receive good and valid title to the Redeemed
Securities, free and clear of all Liens.
(f) Proxy Statement. None of the information relating to the General
Partner, Millennium or their respective Affiliates provided in writing by
Millennium or the General Partner for inclusion in the Proxy Statement, at
the time it is filed with the SEC, at any time it is amended or
supplemented, at the time it is mailed and at the time of the Meeting, will
contain any untrue statement of a material fact, or omit to state a
material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
4.03 Representations and Warranties of the Successor General Partner. The
Successor General Partner hereby represents and warrants to each of the MLP, the
Operating Partnership, Millennium and the General Partner that:
(a) Organization, Standing and Power. It is a limited liability
company duly organized, validly existing and in good standing under the
Delaware Limited Liability Company Act and has the requisite limited
liability company power and authority to carry on its business as now being
conducted.
(b) Authority; Noncontravention. It has all requisite limited
liability company power and authority to enter into this Agreement and,
subject to the approval of a Unit Majority, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement by it and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary action on its part and on
the part of its members. This Agreement has been duly executed and
delivered by it and, assuming this Agreement constitutes the valid and
binding agreement of each of the other parties hereto, constitutes a valid
and binding obligation of it, enforceable against it in accordance with its
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws relating to or affecting
creditors' rights and remedies generally. The execution and delivery by it
of this Agreement do not, and the consummation by it of the transactions
contemplated by this Agreement and compliance by it with the provisions
hereof as of the Closing will not, (i) conflict with any of the provisions
of its certificate of formation or limited liability company or operating
agreement, (ii) subject to the governmental filings and other matters
referred to in the following sentence and subject to the approval of a Unit
Majority, conflict with or require the consent of any Person under any
indenture or other agreement, permit, concession, franchise, license or
similar instrument or undertaking to which it or any of its Affiliates is a
party or by which it or any of its Affiliates or any of its or their assets
are bound, except as set forth in Schedule 4.03(b) attached hereto, or
(iii) subject to the governmental filings and other matters referred to in
the following sentence, contravene any Law or any Order currently in effect
and binding on it or any of its Affiliates, the conflict, breach, default
or contravention of which, in the case of clauses (ii) and (iii) above,
individually or in the aggregate, would have, or is reasonably likely to
have, a Material Adverse Effect on it. No consent, approval or
authorization of, or declaration or filing with, or notice to, any
Governmental Entity that has not been received or made as of the date
hereof is required by or with respect to it or any of its Affiliates in
connection with the execution and delivery by it of this Agreement or the
consummation by it of the transactions contemplated hereby, except for (A)
such consents, approvals, authorizations, filings or notices as are set
forth in Schedule 4.03(b) attached hereto and (B) any filings,
authorizations, consents or approvals the failure to make or obtain which,
individually or in the aggregate, would not have a Material Adverse Effect
on it.
(c) Brokers. No broker, investment banker, financial advisor or other
Person is entitled to receive from the Successor General Partner any
broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated by this Agreement. The
Successor General Partner shall indemnify and hold harmless the other
parties to this Agreement from and against any liability incurred by such
parties (including the fees, disbursements and related charges of counsel)
arising out of any claim by a broker, finder, financial advisor or similar
intermediary for any fee, commission or other compensation as a result of
the Successor General
A-9
<PAGE>
<PAGE>
Partner entering into this Agreement and/or consummating the transactions
contemplated by this Agreement.
(d) Litigation. As of the date hereof, there is no suit, claim,
action, Order or proceeding (at law or in equity) or, to the knowledge of
the Successor General Partner, investigation pending or, to the knowledge
of the Successor General Partner, threatened against the Successor General
Partner or any of its Affiliates before any court or governmental or
regulatory authority or body seeking to prevent or challenging the
transactions contemplated by this Agreement.
(e) Contemplated Ownership of Successor General Partner. Schedule
4.03(e) attached hereto sets forth a list of the principal Persons who, as
of the date hereof, are contemplated to be the owners of a majority of its
membership interests as of the Closing.
(f) Proxy Statement. None of the information relating to the Successor
General Partner or its Affiliates provided in writing by the Successor
General Partner for inclusion in the Proxy Statement, at the time it is
filed with the SEC, at any time it is amended or supplemented, at the time
it is mailed and at the time of the Meeting, will contain any untrue
statement of a material fact, or omit to state a material fact necessary in
order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE V.
ADDITIONAL COVENANTS
5.01 No Sale, Solicitation or Pledge; Voting of Subordinated Units. (a)
From the date hereof until the earlier of the Closing and the termination of
this Agreement pursuant to Section 7.01, Millennium shall cause the General
Partner to, and the General Partner shall, (i) keep the Redeemed Securities
registered in the General Partner's name and not sell, lease, transfer, pledge,
grant any right of any kind with respect to, cause to be suffered any Lien on or
otherwise encumber or dispose of, directly or indirectly, all or any portion of
any of the Redeemed Securities or the Assets, and (ii) not merge, consolidate or
enter into any share exchange, recapitalization, business combination or similar
transaction with any other Person (any of the transactions referred to in the
foregoing clauses (i) and (ii), other than the transactions contemplated by this
Agreement, an 'Acquisition Proposal'). In addition, from the date hereof until
the earlier of the Closing and the termination of this Agreement pursuant to
Section 7.01, Millennium shall cause the General Partner not to, and the General
Partner shall not, and each of Millennium and the General Partner shall not
permit or authorize any of its Affiliates or its or any of its Affiliates'
respective directors, officers, employees, agents or other representatives
(including legal and financial advisors) to, directly or indirectly, (i)
solicit, initiate or encourage the submission of any Acquisition Proposal or
(ii) participate in any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or take any other action to facilitate,
any Acquisition Proposal or any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal;
provided, however, that nothing contained in this Section 5.01(a) shall prohibit
the General Partner's Board of Directors from furnishing information to, or
entering into discussions or negotiations with, any Person that makes an
unsolicited bona fide written Acquisition Proposal (which shall be for cash only
and, if such proposal is subject to a financing condition, shall be accompanied
by a commitment letter from a reputable bank or other financial institution to
provide such financing which contains conditions no less favorable to the
borrower in all material respects as those set forth in the commitment letter
dated October 30, 1998 from the Bank of New York to the Operating Partnership
(prior to any modification or termination thereof)) if, and only to the extent
that, (A) the mailing of the Proxy Statement shall not have occurred, (B) the
General Partner's Board of Directors determines in good faith that such
Acquisition Proposal, if accepted, is reasonably likely to be consummated taking
into account all legal, financial, regulatory and other aspects of the proposal
and the Person making the proposal, and has determined in good faith that such
unsolicited bona fide written Acquisition Proposal would, if consummated, result
in a transaction more favorable to Millennium and the General Partner from a
financial point of view, after taking into account the termination fee required
to be paid by Millennium to the MLP pursuant to Section 7.06(b) and after taking
into account the termination of the General Partner's and Millennium's
obligations under the Distribution Support Agreement, than the Recapitalization
(any such more
A-10
<PAGE>
<PAGE>
favorable Acquisition Proposal being referred to herein as a 'Superior
Proposal'), and (C) prior to taking such action, the General Partner (x)
provides reasonable notice to the Elected Supervisors and the Successor General
Partner to the effect that it is taking such action and (y) receives from such
Person an executed confidentiality agreement in reasonably customary form and in
any event containing terms in all material respects at least as stringent as
those contained in any confidentiality agreement between the General Partner and
any Person which made an Acquisition Proposal in the year of the date of this
Agreement. Prior to providing any information to or entering into discussions or
negotiations with any Person to pursue an Acquisition Proposal as permitted
pursuant to the proviso of the immediately preceding sentence, the General
Partner shall notify the Elected Supervisors and the Successor General Partner
of such Acquisition Proposal (including, without limitation, the material terms
and conditions thereof and the identity of the Person making it) as promptly as
practicable (but in no case later than 3 business days) after its receipt
thereof, and shall provide the Elected Supervisors and the Successor General
Partner with a copy of any written Acquisition Proposal or amendments or
supplements thereto, and shall thereafter inform each of the Elected Supervisors
and the Successor General Partner on a prompt basis of the status of any
discussions or negotiations with such a third party, and any material changes to
the terms and conditions of such Acquisition Proposal, and shall promptly give
the Elected Supervisors and the Successor General Partner a copy of any
information delivered to such Person which has not previously been reviewed by
the Elected Supervisors and the Successor General Partner. Immediately after the
execution and delivery of this Agreement, each of Millennium and the General
Partner shall, and shall cause their Affiliates and the respective officers,
directors, employees, investment bankers, attorneys, accountants and other
agents of either of them and their Affiliates to, cease and terminate any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any possible Acquisition Proposal.
(b) At the Meeting, Millennium shall cause the General Partner to, and the
General Partner shall, vote all Subordinated Units entitled to vote in favor of
the Recapitalization and all of the other transactions contemplated by this
Agreement.
5.02 Meeting of Holders; Proxy Statement. (a) The MLP shall take all action
necessary in accordance with applicable Law, the rules of any applicable stock
exchange and the Partnership Agreement to convene a meeting of the holders of
Common Units and, to the extent entitled to vote, the holders of the
Subordinated Units to consider and vote upon the approval of the
Recapitalization and such other matters as may be necessary to effectuate the
transactions contemplated by this Agreement (the 'Meeting'). The Board of
Supervisors shall, subject to the fiduciary duties of the members thereof to the
MLP and the limited partners of the MLP, recommend such approval in the Proxy
Statement and take all lawful action to solicit such approval.
(b) As soon as practicable after the date hereof, the MLP shall (i) cause
to be prepared and filed with the SEC the Proxy Statement and any amendments or
supplements thereto as required under the Exchange Act, (ii) obtain and furnish
the information required to be included therein under the Exchange Act, (iii)
after consultation with the General Partner and the Successor General Partner,
furnish copies of and respond promptly to any comments made by the SEC with
respect to the Proxy Statement, and (iv) cause the Proxy Statement to be cleared
for mailing by the SEC and to be mailed to the holders of Common Units at the
earliest practicable date. The Proxy Statement shall comply as to form in all
material respects with the applicable provisions of the Exchange Act. The
General Partner and the Successor General Partner each shall furnish to the MLP
in connection with the preparation of the Proxy Statement any and all
information reasonably requested concerning it or its officers, directors,
members or stockholders, as applicable. The MLP shall provide to the General
Partner and the Successor General Partner upon request a reasonable number of
copies of drafts and any preliminary or definitive copies of the Proxy Statement
or any amendments or supplements thereto.
5.03 Commercially Reasonable Efforts. (a) Upon the terms and subject to the
conditions and other agreements set forth in this Agreement, each of the parties
agrees to use its commercially reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, including the satisfaction of the
conditions set forth in Article VI.
A-11
<PAGE>
<PAGE>
(b) The parties shall not, and shall not permit any of their respective
Subsidiaries to, take any action that would, or that would reasonably be
expected to, result in (i) any of the representations and warranties of such
party set forth in this Agreement becoming untrue in any material respect or
(ii) any of the conditions of the other parties to the consummation of the
transactions contemplated by this Agreement and set forth in Article VI not
being satisfied.
5.04 Consents, Approvals and Filings; Cooperation. (a) The parties shall
make and cause any Subsidiaries to make all necessary filings, as soon as
practicable, including, without limitation, those required under applicable
antitrust Laws, the Securities Act of 1933, as amended, if any, the Exchange Act
and the Delaware LP Act in order to facilitate the prompt consummation of the
transactions contemplated by this Agreement. In addition, the parties each shall
use its commercially reasonable efforts and shall cooperate fully with each
other (i) to comply as promptly as practicable with all governmental
requirements applicable to the transactions contemplated by this Agreement and
(ii) to obtain as promptly as practicable all necessary permits, orders or other
consents of Governmental Entities and consents of all third parties necessary
for the consummation of the transactions contemplated by this Agreement. Each of
the parties shall use commercially reasonable efforts to provide such
information and communications to Governmental Entities as such Governmental
Entities may reasonably request.
(b) Each of the parties shall provide to the other party copies of all
applications in advance of filing or submission of such applications to
Governmental Entities in connection with this Agreement.
5.05 Updating of Information. (a) The parties shall, and shall cause each
of its Affiliates to, promptly deliver to the MLP any information concerning
material events subsequent to the date of this Agreement which is necessary to
supplement the information contained in or made a part of the representations
and warranties made by such party contained herein, including any schedule
hereto, or delivered by the MLP or any of its Subsidiaries, pursuant to any of
the covenants or agreements contained herein, in order for the information
contained herein or so delivered to be complete and accurate in all material
respects, it being understood and agreed that the delivery of such information
shall not in any manner constitute a waiver by any of the parties of any of the
conditions precedent to the Closing hereunder or cure any breach of any
provision hereof.
(b) In addition, if, at any time prior to the time when the SEC clears the
Proxy Statement for mailing, any of the parties should discover that any
information contained in the Proxy Statement concerning such party or its
Affiliates contains any untrue statement of a material fact, or omits to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading, or if, at any
such time, any of the parties should discover any event or information which
should be set forth in an amendment or supplement to the Proxy Statement, such
party, promptly after such discovery, shall inform the MLP in writing of such
discovery and furnish to the MLP a written correction of any material
misstatement or material omission or a written description of such event or
information, as the case may be.
5.06 Resignation of Appointed Supervisors. At the Closing, the two
Appointed Supervisors shall resign from the Board of Supervisors.
ARTICLE VI.
CONDITIONS PRECEDENT
6.01 Conditions to Obligations of Each Party. The obligations of each party
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction or waiver (by the party entitled to the benefits thereof subject,
in the cases of the MLP and the Operating Partnership, to Section 7.05) prior to
the Closing of the following conditions:
(a) Approval by Unitholders. The MLP shall have obtained the approval
of a Unit Majority and the approval of the holders of a majority of the
Public Common Units with respect to the Recapitalization and the other
transactions contemplated by this Agreement.
(b) Approval by Note Majority; Amendment of Note Agreement. The
Operating Partnership shall have obtained the approval of the Note Majority
with respect to the Amended Credit
A-12
<PAGE>
<PAGE>
Agreement and the Amended Agreements and any other transactions
contemplated by this Agreement requiring such approval and the Note
Agreement shall have been amended to the extent necessary to permit and
effect the Recapitalization and the other transactions contemplated by this
Agreement.
(c) Required Consents. All filings, consents, approvals, permits and
authorizations set forth on Schedule 6.01(c) shall have been made or
obtained, as the case may be, and shall be in full force and effect at the
Closing; provided that this condition may not be invoked by any party whose
failure to fulfill its obligations pursuant to Section 5.03 or 5.04 shall
have been the cause of, or shall have resulted in, the failure of this
condition.
(d) No Injunctions or Restraints; Actions. No temporary restraining
order, preliminary or permanent injunction or other similar order or decree
of any Governmental Entity of competent jurisdiction shall have been issued
and be in effect, and no action, proceeding or investigation (in the case
of any investigation, of which the parties hereto have written notice) by
any Governmental Entity or any other Person shall be pending or threatened
in writing which, if adversely determined, would (i) prevent or impair in
any material respect the consummation of the transactions contemplated by
this Agreement, (ii) impose on the MLP or the Operating Partnership any
material restrictions or requirements or (iii) cause any of the parties or
their respective Affiliates to owe material damages to any third party as a
result of the transactions contemplated hereby; provided, however, that the
party invoking this condition shall use its commercially reasonable efforts
to have any such order, injunction, action or proceeding vacated or
otherwise resolved, and this condition may not be invoked by any party by
reason of its failure to fulfill (and may not be invoked by any of the
Partnerships by reason of the failure of the other to fulfill or by the
General Partner or Millennium by reason of the failure of the other to
fulfill) its obligations pursuant to Section 5.03 or 5.04 if such failure
shall have been the cause of, or shall have resulted in, the failure of
this condition.
(e) Payment of Special Distribution. The Operating Partnership shall
have paid to the MLP the Special Distribution contemplated in Section 2.02.
(f) Concurrent Consummation of the Asset Purchase. Concurrently with
the Closing, the Asset Purchase shall be consummated in accordance with the
Purchase Agreement and the Partnership Agreements.
(g) Amended Agreements. The Amended Agreements shall have been
executed and delivered by the parties thereto.
(h) Termination Agreement. The Termination Agreement shall have been
executed and delivered by the parties thereto.
(i) Opinion of Counsel. Baker & Botts, L.L.P. shall have delivered to
the MLP, the Operating Partnership, the General Partner and the Successor
General Partner the written opinion contemplated by Sections 4.6 and
13.3(d) of the Partnership Agreement.
(j) Resignations of Appointed Supervisors. The Appointed Supervisors
shall have tendered their resignations from the Board of Supervisors.
6.02 Additional Conditions to Obligations of the MLP and the Operating
Partnership. The obligations of the MLP and of the Operating Partnership to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction or waiver (subject to Section 7.05) prior to the Closing of the
following additional conditions:
(a) Representations and Warranties. The representations and warranties
of each of Millennium and the General Partner set forth in Section 4.02,
and the representations and warranties of the Successor General Partner set
forth in Section 4.03, each (i) shall be true and correct in all respects
in the case of the representations and warranties of the General Partner
set forth in Section 4.02(e) and in the case of any representation or
warranty that is qualified as to materiality or 'Material Adverse Effect'
and (ii) shall be true and correct in all material respects in the case of
any representation or warranty not so qualified, in all cases as of the
date of this Agreement and as of
A-13
<PAGE>
<PAGE>
the Closing Date as though made on and as of the Closing Date, except to
the extent such representations and warranties speak as of a specified
date.
(b) Performance of Obligations. Millennium, the General Partner and
the Successor General Partner each shall have performed in all material
respects all of its obligations required to be performed by it under this
Agreement at or prior to the Closing.
(c) Officer's Certificates. The MLP shall have received a certificate
signed on behalf of each of Millennium, the General Partner and the
Successor General Partner by its duly authorized senior executive officer
to the effect set forth in the foregoing paragraphs (a) and (b) of this
Section 6.02.
(d) Financing. The Operating Partnership shall have obtained the
financing for the Redemption and related Recapitalization expenses from
available cash resources or borrowings under the Amended Credit Agreement
or any replacement or other credit facility.
(e) Delivery of Redeemed Securities. The General Partner shall have
delivered to the MLP and the Operating Partnership the Certificates as
contemplated in Section 2.03(b).
(f) Millennium, General Partner and Successor General Partner
Certified Resolutions and Incumbency Certificates. Millennium, the General
Partner and the Successor General Partner each shall have delivered to the
MLP and the Operating Partnership a copy of the resolutions of its Board of
Directors or similar governing body and its stockholders or members (if, in
the latter case, any are required) authorizing this Agreement, the
Recapitalization and the consummation of the transactions contemplated
hereby and thereby, in each case certified by a Secretary, Assistant
Secretary or other similar officer of the delivering party, together with
an appropriate incumbency certificate of the delivering party.
(g) Fairness Opinions. Neither Rothschild Inc. nor A.G. Edwards &
Sons, Inc. shall have withdrawn its Fairness Opinion.
(h) No Withdrawal of Recommendation by Special Committee. The Special
Committee shall not have withdrawn its recommendation to the Board of
Supervisors to approve the Recapitalization and the other transactions
contemplated by this Agreement at any time prior to the mailing of the
Proxy Statement.
6.03 Additional Conditions to Obligations of Each of Millennium and the
General Partner. The obligations of each of Millennium and the General Partner
to consummate the transactions contemplated by this Agreement are subject to the
satisfaction or waiver prior to the Closing of the following additional
conditions:
(a) Representations and Warranties. The representations and warranties
of each of the MLP and the Operating Partnership set forth in Section 4.01,
and the representations and warranties of the Successor General Partner set
forth in Section 4.03, each (i) shall be true and correct in all respects
in the case of any representation or warranty that is qualified as to
materiality or 'Material Adverse Effect' and (ii) shall be true and correct
in all material respects in the case of any representation or warranty not
so qualified, in all cases as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except to the
extent such representations and warranties speak as of a specified date.
(b) Performance of Obligations. The MLP, the Operating Partnership and
the Successor General Partner each shall have performed in all material
respects all of its obligations required to be performed by it under this
Agreement at or prior to the Closing.
(c) Officer's Certificates. The General Partner shall have received a
certificate signed on behalf of each of the MLP, the Operating Partnership
and the Successor General Partner by its duly authorized senior executive
officer to the effect set forth in the foregoing paragraphs (a) and (b) of
this Section 6.03.
(d) Redemption Price. The General Partner shall have received the
Redemption Price as contemplated in Section 2.03(b).
(e) MLP, Operating Partnership and Successor General Partner Certified
Resolutions and Incumbency Certificates. The following shall have been
delivered to the General Partner: (i) a copy
A-14
<PAGE>
<PAGE>
of the resolutions of the Board of Supervisors, the Elected Supervisors and
holders of Common Units; and (ii) a copy of the resolutions of the
governing body of the Successor General Partner and its members (if member
approval is required), in each case authorizing this Agreement, the
Recapitalization and the consummation of the transactions contemplated
hereby and thereby and certified by a Secretary, Assistant Secretary or
other similar officer of the delivering party, together with an appropriate
incumbency certificate of the MLP, the Operating Partnership and the
Successor General Partner.
6.04 Additional Conditions to Obligations of the Successor General Partner.
The obligations of the Successor General Partner to consummate the transactions
contemplated by this Agreement are subject to the satisfaction or waiver prior
to the Closing of the following additional conditions:
(a) Representations and Warranties. The representations and warranties
of each of the MLP and the Operating Partnership set forth in Section 4.01,
and the representations and warranties of each of Millennium and the
General Partner set forth in Section 4.02, each (i) shall be true and
correct in all respects in the case of any representation or warranty that
is qualified as to materiality or 'Material Adverse Effect' and (ii) shall
be true and correct in all material respects in the case of any
representation or warranty not so qualified, in all cases as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except to the extent such representations and warranties
speak as of a specified date.
(b) Performance of Obligations. The MLP, the Operating Partnership,
Millennium and the General Partner each shall have performed in all
material respects all of its obligations required to be performed by it
under this Agreement at or prior to the Closing.
(c) Officer's Certificates. The Successor General Partner shall have
received a certificate signed on behalf of each of the MLP, the Operating
Partnership, Millennium and the General Partner by its duly authorized
senior executive officer to the effect set forth in the foregoing
paragraphs (a) and (b) of this Section 6.04.
(d) MLP, Operating Partnership, Millennium and General Partner
Certified Resolutions and Incumbency Certificates. The following shall have
been delivered to the Successor General Partner: (i) a copy of the
resolutions of the Board of Supervisors, the Elected Supervisors and
holders of Common Units; and (ii) a copy of the resolutions of the Board of
Directors of each of Millennium and the General Partner and its
stockholders (if stockholder approval is required), in each case
authorizing this Agreement, the Recapitalization and the consummation of
the transactions contemplated hereby and thereby and certified by a
Secretary, Assistant Secretary or other similar officer of the delivering
party, together with an appropriate incumbency certificate of the MLP, the
Operating Partnership, Millennium and the General Partner.
ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
7.01 Termination. This Agreement may be terminated and abandoned at any
time prior to the Closing (except in the case of clauses (c) and (d)):
(a) by written consent of the parties; or
(b) by any of the parties, if the Closing shall not have been
consummated on or before May 15, 1999, unless extended pursuant to Section
7.07 or unless otherwise extended by written consent of the parties; or
(c) subject to the conditions set forth in Section 7.06(a), (i) by the
MLP or the Successor General Partner at any time prior to the mailing of
the Proxy Statement and (ii) by Millennium or the General Partner at any
time prior to the Meeting, if the Special Committee shall have withdrawn
its recommendation to the Board of Supervisors to approve the
Recapitalization; or
(d) subject to the conditions set forth in Section 7.06(b), by
Millennium or the General Partner at any time prior to the mailing of the
Proxy Statement, if Millennium, the General Partner or any of their
Affiliates is concurrently entering into a definitive written agreement for
a Superior Proposal; or
A-15
<PAGE>
<PAGE>
(e) by any of the parties, if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable; or
(f) by any of the parties, if (i) any of the other parties shall have
materially breached its agreements and covenants under this Agreement or
any other agreement entered into in connection with the Recapitalization or
(ii) any representation or warranty that is qualified as to materiality or
'Material Adverse Effect' shall fail to be true and correct in all respects
or any representation or warranty not so qualified shall fail to be true
and correct in all material respects, as the case may be, and such breach
or failure shall continue for 30 days without cure after notice thereof and
such breach or failure would have, or would reasonably be expected to have,
a Material Adverse Effect on the party invoking its termination right under
this paragraph or such breach or failure would materially impair the
transactions contemplated by this Agreement or any other agreement entered
into in connection with the Recapitalization.
Notwithstanding anything to the contrary contained in this Agreement, the
right of a party to terminate this Agreement under this Section 7.01 shall not
be available to any party (i) which is in material breach of its obligations
hereunder or (ii) whose failure to fulfill its obligations hereunder has been
the cause of, or resulted in, the failure to satisfy any of the conditions to
the consummation of the Closing set forth in Article VI (and such right to
terminate also shall not be available to either of the Partnerships if the
other, or to the General Partner or Millennium if the other, is in such breach
or if such other's failure to fulfill its obligations hereunder has been the
cause of, or resulted in, the failure to satisfy any of the conditions to the
consummation of the Closing set forth in Article VI).
7.02 Effect of Termination. In the event of a termination of this Agreement
by either the MLP, the General Partner or the Successor General Partner as
provided in Section 7.01, this Agreement, other than Sections 4.01(c), 4.02(c)
and 4.03(c), this Section 7.02, Sections 7.03, 7.04, 7.05 and Article VIII (each
of which shall remain in full force and effect despite such termination), shall
forthwith become void and have no effect, without any liability or obligation on
the part of any party to any other party under this Agreement. Nothing contained
in this Section 7.02 shall be construed so as to relieve any party from any
liability resulting from any willful breach of this Agreement by such party
prior to any termination of this Agreement as provided in Section 7.01.
7.03 Amendment. Subject to Section 7.05 in the cases of the Partnerships
and except as provided in Schedule 2.01(a) attached hereto with respect to the
matters set forth in such schedule, this Agreement may be amended by written
agreement of all the parties hereto at any time prior to or after the approval
of this Agreement and the Recapitalization by a Unit Majority and the holders of
a majority of the Public Common Units but, after any such approval, no amendment
may be made without the approval of a Unit Majority and the holders of a
majority of the Public Common Units if such approvals are required by Law or by
the Partnership Agreement or if such amendment shall materially and adversely
affect the rights of the holders of the Common Units.
7.04 Extension; Waiver. At any time prior to the Closing, any of the
parties may, to the extent permitted by Law, (i) extend the time for performance
of any of the obligations or other acts of the other parties, (ii) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (iii) waive compliance with any of the agreements or conditions
applicable to such party contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights nor shall any single or
partial exercise thereof include any other or further exercise thereof or the
exercise of any other right or privilege.
7.05 Procedure for Termination, Amendment, Extension or Waiver by the MLP.
A termination by the MLP or the Operating Partnership of this Agreement pursuant
to Section 7.01, an amendment by the MLP or the Operating Partnership of this
Agreement pursuant to Section 7.03 or an extension or waiver by the MLP or the
Operating Partnership pursuant to Section 7.04 shall, in order to be effective,
require the approval of a majority of the Elected Supervisors.
A-16
<PAGE>
<PAGE>
7.06 Termination Fees; Expense Reimbursement.
(a) Section 7.01(c) Termination Fee or Expense Reimbursement. Upon (and as
a condition to) the termination of this Agreement by the MLP or the Successor
General Partner pursuant to Section 7.01(c), the MLP shall pay to Millennium $2
million in cash by wire transfer of immediately available funds on the date of
such termination. If there shall be a termination of this Agreement by
Millennium or the General Partner pursuant to Section 7.01(c), the MLP shall pay
or reimburse Millennium and the General Partner for all of their out-of-pocket
expenses incident to the preparation, negotiation, execution and delivery by
Millennium and the General Partner of this Agreement and the documents to be
delivered by them pursuant to this Agreement and the performance by them hereof
and thereof through the date of termination of this Agreement. Such payment or
reimbursement shall be made within two business days of the presentation by
Millennium or the General Partner of written invoices or other evidence of such
expenses from the party entitled to payment thereof.
(b) Section 7.01(d) Termination Fee. Upon (and as a condition to) the
termination of this Agreement by Millennium or the General Partner pursuant to
Section 7.01(d), the General Partner shall, and Millennium shall cause the
General Partner to, pay to the MLP $3 million in cash by wire transfer of
immediately available funds on the date of such termination.
(c) Liquidated Damages. The parties hereto each agree that the payments
required by this Section 7.06 shall constitute liquidated damages in full and
complete satisfaction of, and shall be the sole and exclusive remedy of the
party entitled to such payments and of such party's Affiliates against any of
the other parties to this Agreement, such other parties' Affiliates and the
respective directors, officers, employees, advisors or agents of any of them
for, any loss, liability, damage or claim arising out of or in connection with
any termination and abandonment of this Agreement requiring the payment pursuant
to this Section 7.06 or the facts and circumstances resulting in such
termination or otherwise arising out of or in connection with this Agreement or
any document to be delivered pursuant to this Agreement or the transactions
contemplated hereby or thereby.
7.07 Extension Fee. If the Elected Supervisors wish to extend the automatic
termination date of this Agreement set forth in Section 7.01(b) for the purpose
of allowing either (i) an extension beyond such date of the solicitation period
under the Proxy Statement with respect to the vote of the holders of the Common
Units at the Meeting or (ii) a resolicitation of the vote of the holders of the
Common Units, then the Elected Supervisors shall have the right to extend such
date until the close of business on June 15, 1999 by written notice from the
Elected Supervisors to Millennium and the General Partner given prior to the
close of business on May 15, 1999 and upon the payment by or on behalf of the
MLP to Millennium of an extension fee of $1 million in cash, payable by wire
transfer of immediately available funds concurrently with the giving of such
notice. If the automatic termination date of this Agreement set forth in
Section 7.01(b) is extended pursuant to this Section 7.07 or otherwise by
written consent of the parties, the automatic termination date of the Purchase
Agreement set forth in Section 7.1(b) thereof also shall be deemed to be
extended to the same date.
ARTICLE VIII.
GENERAL PROVISIONS
8.01 Survival of Representations and Warranties. The representations and
warranties of the parties in Article IV of this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Closing for a period of
one year, other than the representations and warranties contained in Sections
4.01(f), 4.02(f) and 4.03(f), which shall survive the Closing for a period of
three years, and the representations and warranties contained in Section
4.02(e), which shall survive the Closing indefinitely. This Section 8.01 does
not apply to and shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Closing.
8.02 Fees and Expenses. Except as provided in the second sentence of
Section 7.06(a), whether or not the transactions contemplated by this Agreement
shall be consummated, each party hereto shall pay its own expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.
A-17
<PAGE>
<PAGE>
8.03 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given when delivered personally, when telecopied, the next business day when
deposited with Federal Express or other overnight courier (with proof of
delivery) or three days after deposit in the U.S. mail when mailed (certified,
return receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to the MLP, the Operating Partnership
or the Elected Supervisors, to
SUBURBAN PROPANE PARTNERS, L.P.
One Suburban Plaza
240 Route 10 West
Whippany, NJ 07981-0206
Attn: General Counsel
Fax: (973) 515-5982
(b) if to the General Partner or Millennium, to:
SUBURBAN PROPANE GP, INC.
230 Half Mile Road
Red Bank, NJ 07701
Attn: General Counsel
Fax: (732) 933-5270
(c) if to the Successor General Partner, to:
SUBURBAN ENERGY SERVICES GROUP LLC
c/o Suburban Propane Partners, L.P.
One Suburban Plaza
240 Route 10 West
Whippany, NJ 07981-0206
Attn: General Counsel
Fax: (973) 515-5982
8.04 Interpretation. When a reference is made in this Agreement to a
Section or Schedule, such reference shall be to a Section of or a Schedule to
this Agreement, unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
'include', 'includes' or 'including' are used in this Agreement, they shall be
deemed to be followed by the words 'without limitation'.
8.05 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Agreement.
8.06 Entire Agreement; No Third-Party Beneficiaries; Contribution,
Conveyance and Assumption Agreement. This Agreement, the Amended Agreements, the
Termination Agreement and the Purchase Agreement constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement. This Agreement is not intended to confer any rights or remedies upon
any Person, other than the parties hereto. The Contribution, Conveyance and
Assumption Agreement and the rights and obligations of the parties thereto shall
remain in full force and effect in accordance with the terms and conditions
thereof.
8.07 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of Delaware, without regard to the
principles or policies of conflicts of law of such state.
8.08 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by any
of the parties without the prior written consent of all of the other parties,
and any such assignment that is not so consented to shall be null and void. This
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and permitted assigns.
A-18
<PAGE>
<PAGE>
8.09 Enforcement; Severability. The parties agree that irreparable damage
would occur in the event that any provision of this Agreement was not performed
in accordance with its specific terms or was otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent breaches of this Agreement and to seek to enforce
specifically the terms and provisions of this Agreement in any federal or state
court, this being in addition to any other remedy to which they are entitled at
law or in equity.
The invalidity or unenforceability of any term or provision of this
Agreement shall not affect the validity or enforceability of this Agreement or
any other term hereof, which shall remain in full force and effect and shall be
enforced and enforceable to the fullest extent possible without regard to the
invalid or unenforceable term or provision.
8.10 Further Assurances. From time to time after the Closing, without
additional consideration, each of the parties shall execute and deliver to each
other such further documents and instruments, and shall take such other action,
as may be necessary to effectuate the transactions contemplated by this
Agreement and the agreements entered into in connection with such transactions.
8.11 Public Announcements. None of the parties to this Agreement shall
issue any press release or make any public statement or announcement with
respect to this Agreement or the transactions contemplated hereby without the
approval of the other parties hereto, except as is required by Law or the rules
of any applicable stock exchange and, in such event, such party, to the extent
practicable, shall consult with the other parties and permit the other parties a
reasonable opportunity to review any such release, statement or announcement
prior to dissemination.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
SUBURBAN PROPANE PARTNERS, L.P.
By: /s/ MARK A. ALEXANDER
...................................
MARK A. ALEXANDER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SUBURBAN PROPANE, L.P.
By: /s/ MARK A. ALEXANDER
...................................
MARK A. ALEXANDER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SUBURBAN PROPANE GP, INC.
By: /s/ GEORGE H. HEMPSTEAD, III
...................................
NAME: GEORGE H. HEMPSTEAD, III
TITLE: SENIOR VICE PRESIDENT
MILLENNIUM PETROCHEMICALS INC.
By: /s/ GEORGE H. HEMPSTEAD, III
...................................
NAME: GEORGE H. HEMPSTEAD, III
TITLE: SENIOR VICE PRESIDENT
SUBURBAN ENERGY SERVICES GROUP LLC
By: /s/ MARK A. ALEXANDER
...................................
MARK A. ALEXANDER
AUTHORIZED PERSON
A-19
<PAGE>
<PAGE>
EXHIBIT A
FORM OF PURCHASE AGREEMENT
[SEE ANNEX B TO THIS PROXY STATEMENT]
A-20
<PAGE>
<PAGE>
EXHIBIT B
FORM OF TERMINATION AGREEMENT
SUBURBAN PROPANE PARTNERS, L.P.
ONE SUBURBAN PLAZA
240 ROUTE 10 WEST
WHIPPANY, NJ 07981-0206
, 199
MILLENNIUM AMERICA INC. (formerly Hanson America Inc.)
Suburban Propane GP, Inc.
230 Half Mile Road
Red Bank, NJ 07701
Attention:
RE: Termination of Distribution Support Agreement
Ladies and Gentlemen:
Reference is made to the Recapitalization Agreement dated as of November
, 1998 by and among the undersigned, Suburban Propane, L.P., Suburban Propane
GP, Inc., Millennium Petrochemicals Inc. and Suburban Energy Services Group LLC
(the 'Recapitalization Agreement'). Pursuant to Section 2.01(b) of the
Recapitalization Agreement, the Distribution Support Agreement dated as of March
5, 1996 by and among us (the 'Distribution Support Agreement') is hereby
terminated effective upon the Closing. From and after the Closing, all of the
rights and obligations of the parties to the Distribution Support Agreement
applicable to any period from and after the Closing shall be terminated and
shall cease to have any further force or effect.
Please indicate your agreement with the foregoing by executing and
delivering to the undersigned at the above address a counterpart of this letter.
Very truly yours,
SUBURBAN PROPANE PARTNERS, L.P.
By ...................................
NAME:
TITLE:
Agreed to as of the date first written
above:
MILLENNIUM AMERICA INC.
By ...................................
NAME:
TITLE:
SUBURBAN PROPANE GP, INC.
By ...................................
NAME:
TITLE:
A-21
<PAGE>
<PAGE>
ANNEX B
================================================================================
PURCHASE AGREEMENT
BY AND AMONG
SUBURBAN ENERGY SERVICES GROUP LLC
MILLENNIUM PETROCHEMICALS INC.
AND
SUBURBAN PROPANE GP, INC.
------------------------
DATED AS OF NOVEMBER 27, 1998
------------------------
================================================================================
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
DEFINITIONS................................................................................................ B-1
SECTION 1.1 Definitions.............................................................................. B-1
ARTICLE II
SALE AND PURCHASE OF ASSETS................................................................................ B-1
SECTION 2.1 Transfer of Assets; Retained Assets...................................................... B-1
SECTION 2.2 Assumption of Specified Liabilities; Retained Liabilities................................ B-2
SECTION 2.3 Purchase Price........................................................................... B-2
SECTION 2.4 Closing.................................................................................. B-2
SECTION 2.5 Deliveries at Closing.................................................................... B-2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS.............................................................. B-3
SECTION 3.1 Organization............................................................................. B-3
SECTION 3.2 Authority Relative to this Agreement..................................................... B-3
SECTION 3.3 Consents and Approvals; No Violations.................................................... B-3
SECTION 3.4 Financial Statements..................................................................... B-4
SECTION 3.5 Litigation............................................................................... B-4
SECTION 3.6 Transactions with Affiliates............................................................. B-5
SECTION 3.7 Title to Assets.......................................................................... B-5
SECTION 3.8 Brokers and Finders...................................................................... B-5
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SUCCESSOR GENERAL PARTNER............................................ B-5
SECTION 4.1 Organization............................................................................. B-5
SECTION 4.2 Authority Relative to this Agreement..................................................... B-5
SECTION 4.3 Consents and Approvals; No Violations.................................................... B-5
SECTION 4.4 Brokers or Finders....................................................................... B-6
SECTION 4.5 Successor General Partner................................................................ B-6
ARTICLE V
ADDITIONAL AGREEMENTS...................................................................................... B-6
SECTION 5.1 Access to Information.................................................................... B-6
SECTION 5.2 Efforts to Close......................................................................... B-6
SECTION 5.3 Further Assurances....................................................................... B-7
SECTION 5.4 Publicity................................................................................ B-7
SECTION 5.5 Name Change.............................................................................. B-7
SECTION 5.6 Fees and Expenses........................................................................ B-7
SECTION 5.7 Certain Tax Matters...................................................................... B-7
ARTICLE VI
CONDITIONS................................................................................................. B-8
SECTION 6.1 Conditions to Successor General Partner's Obligations.................................... B-8
SECTION 6.2 Conditions to Obligation of the Sellers.................................................. B-9
ARTICLE VII
TERMINATION................................................................................................ B-10
SECTION 7.1 Termination.............................................................................. B-10
SECTION 7.2 Effect of Termination.................................................................... B-10
SECTION 7.3 Extension; Waiver........................................................................ B-10
ARTICLE VIII
SURVIVAL................................................................................................... B-11
SECTION 8.1 Survival................................................................................. B-11
</TABLE>
B-i
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE IX
MISCELLANEOUS.............................................................................................. B-11
SECTION 9.1 Notices.................................................................................. B-11
SECTION 9.2 Amendments and Waivers................................................................... B-11
SECTION 9.3 Headings................................................................................. B-11
SECTION 9.4 Counterparts............................................................................. B-12
SECTION 9.5 Entire Agreement......................................................................... B-12
SECTION 9.6 Governing Law............................................................................ B-12
SECTION 9.7 Assignment............................................................................... B-12
SECTION 9.8 Binding Nature........................................................................... B-12
SECTION 9.9 Severability............................................................................. B-12
SECTION 9.10 Specific Performance..................................................................... B-12
SECTION 9.11 Accounting and Financial Terms........................................................... B-12
SECTION 9.12 Construction............................................................................. B-12
SECTION 9.13 Incorporation of Appendices, Exhibits and Schedules...................................... B-12
</TABLE>
APPENDICES
APPENDIX A -- Definitions
EXHIBITS
EXHIBIT A -- Form of Bill of Sale, Assignment and Assumption
B-ii
<PAGE>
<PAGE>
PURCHASE AGREEMENT (this 'Agreement'), dated as of November 27, 1998, by
and among Suburban Energy Services Group LLC, a Delaware limited liability
company (the 'Successor General Partner'), Millennium Petrochemicals Inc., a
Virginia corporation ('Millennium'), and Suburban Propane GP, Inc., a Delaware
corporation (the 'General Partner', and together with Millennium, the
'Sellers').
WHEREAS, the Successor General Partner desires to acquire from the Sellers,
and the Sellers desire to sell to the Successor General Partner, the Assets (as
defined herein), on the terms and subject to the conditions set forth herein;
WHEREAS, simultaneously herewith the General Partner and the MLP and the
Operating Partnership are entering into a Recapitalization Agreement, dated the
date hereof (as amended, modified or supplemented, the 'Recap Agreement')
pursuant to which the MLP will redeem all outstanding Subordinated Units and all
outstanding APUs from the General Partner simultaneously with and as a condition
to the Closing under this Agreement, upon the terms and subject to the
conditions set forth therein; and
WHEREAS, the Sellers and the Successor General Partner have agreed that the
aggregate consideration to be paid by the Successor General Partner for the
purchase and sale of Assets under this Agreement and for the redemption of all
outstanding Subordinated Units and all outstanding APUs from the General Partner
pursuant to the Recap Agreement will total $75 million.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. As used in this Agreement, capitalized terms,
unless otherwise defined herein, shall have the meanings ascribed to such terms
in the Recap Agreement or in Appendix A hereto.
ARTICLE II
SALE AND PURCHASE OF ASSETS
SECTION 2.1 Transfer of Assets; Retained Assets. (a) On the terms and
subject to the conditions of this Agreement, at the Closing, the General Partner
shall sell, convey, assign, transfer and deliver to the Successor General
Partner, and the Successor General Partner shall purchase, acquire and accept
from the General Partner, free and clear of any Liens, all of the General
Partner's right, title and interest in and to the following assets
(collectively, the 'Assets'):
(i) the entire general partner interest in the MLP;
(ii) the entire general partner interest in the Operating Partnership;
and
(iii) the Incentive Distribution Rights.
(b) Notwithstanding Section 2.1(a), all of the Sellers' right, title and
interest in the following assets and rights shall be excluded from the Assets
(collectively, the 'Retained Assets'):
(i) the insurance policies and any rights thereunder set forth in
Section 2.1(b) of the Disclosure Schedule;
(ii) the prepaid expenses, advances, deposits or rights relating to or
arising out of any of the Retained Assets or Retained Liabilities set forth
on Section 2.1(b) of the Disclosure Schedule;
(iii) all Books and Records;
(iv) all refunds, credits or overpayments with respect to Taxes paid
or accrued by Sellers or their Affiliates and all other payments or
deposits made by Sellers or their Affiliates in respect of Taxes in excess
of the amount of Seller's liability therefor; and
B-1
<PAGE>
<PAGE>
(v) all distributions, other than the Special Distribution, paid or to
be paid to the General Partner with respect to any of the Assets with a
record date prior to the Closing; and
(vi) the Note issued by Millennium America Inc. in favor of the
General Partner dated as of March 5, 1996.
SECTION 2.2 Assumption of Specified Liabilities; Retained Liabilities. (a)
At the Closing, the Successor General Partner shall assume, and, following the
Closing, the Successor General Partner shall be solely liable for and shall
fully pay, perform and discharge when due all Liabilities of the General Partner
as general partner under the Partnership Agreement, the Operating Partnership
Agreement, and applicable law (including, without limitation, Liabilities of the
Partnerships for which the General Partner may have Liability in its capacity as
a general partner under the Partnership Law), excluding any Liabilities arising
out of the Sellers' breach or default as general partner under such agreements
at or prior to the Closing (collectively, the 'Assumed Liabilities'). At the
Closing, the Successor General Partner will assume the rights and duties of the
General Partner under the Partnership Agreement and the Operating Partnership
Agreement and will agree to be bound by the provisions of the Partnership
Agreement and the Operating Partnership Agreement, all in accordance with
Section 4.6 of the Partnership Agreement.
(b) Notwithstanding anything in this Agreement to the contrary, the
Successor General Partner shall not assume, and shall be deemed not to have
assumed, any Liabilities of the Sellers except the Assumed Liabilities, and the
Sellers shall be liable with respect to, and shall fully pay, perform or
discharge when due, all Liabilities of the Sellers other than the Assumed
Liabilities, including, without limitation, those Liabilities set forth below
(collectively, the 'Retained Liabilities'):
(i) all Liabilities arising out of or in connection with the Retained
Assets;
(ii) except as otherwise expressly provided under this Agreement or in
the Recap Agreement, all Liabilities of the Sellers arising under or in
connection with the consummation of the transactions contemplated by this
Agreement, including all expenses of the Sellers incurred in connection
with the negotiation, preparation, approval or authorization of this
Agreement; and
(iii) the General Partner's liability for Taxes relating to income of
the MLP and the Operating Partnership allocated to the General Partner by
virtue of the General Partner being a partner in the MLP and the Operating
Partnership as contemplated pursuant to Section 5.7(a).
SECTION 2.3 Purchase Price. In consideration of the sale and transfer of
the Assets and the agreement of the Sellers to enter into this Agreement, the
Successor General Partner shall pay or cause to be paid to the General Partner
at the Closing, in immediately available funds, an aggregate purchase price (the
'Purchase Price') of $6,000,000. The Purchase Price shall be allocated among the
Assets in accordance with the Allocation Schedule (as defined below).
SECTION 2.4 Closing. Upon the terms and subject to the conditions of this
Agreement, the closing of the transactions contemplated by this Agreement (the
'Closing') will take place the first business day following satisfaction or
waiver of the conditions set forth in Article VI hereof, at 10:00 a.m., at the
offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York
10153, or at such other time and place as shall be agreed upon by the parties.
The date on which the Closing occurs is herein referred to as the 'Closing
Date.'
SECTION 2.5 Deliveries at Closing. (a) At the Closing, the Sellers shall
deliver or cause to be delivered to the Successor General Partner (unless
previously delivered), the following:
(i) a bill of sale, assignment and assumption with respect to the
Assets and the Assumed Liabilities duly executed by the General Partner,
substantially in the form of Exhibit A hereto (the 'Assignment and
Assumption'); and
(ii) a certificate of a duly authorized officer of the Sellers
certifying to the satisfaction of the conditions set forth in Sections
6.1(d) and (e); and
(iii) such other documents of title, assignments, instruments of sale,
conveyance or transfer and other documents and certificates duly executed,
as the Successor General Partner may reasonably request prior to the
Closing Date in order to effect the transactions contemplated by this
Agreement.
B-2
<PAGE>
<PAGE>
(b) At the Closing, the Successor General Partner shall deliver or cause to
be delivered to the Sellers (unless previously delivered), the following:
(i) the Purchase Price in accordance with the provisions of Section
2.3 hereof;
(ii) a signed counterpart copy of the Assignment and Assumption duly
executed by the Successor General Partner;
(iii) a certificate of a duly authorized officer of the Successor
General Partner certifying to the satisfaction of the conditions set forth
in Sections 6.1(a) and (b); and
(iv) such other documents and certificates as the Sellers may
reasonably request prior to the Closing Date in order to effect the
transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each of the Sellers jointly and severally represents and warrants to the
Successor General Partner:
SECTION 3.1 Organization. Each of the Sellers is a corporation duly
organized, validly existing and in good standing under the laws of the States of
Delaware and Virginia, as applicable. Each of the Sellers has all requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as currently conducted. The General
Partner is duly qualified and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it makes such
qualification or licensing necessary, except in such jurisdictions in which
applicable law does not provide for such qualification, and except in such
jurisdictions where the failure to be so duly qualified and in good standing
would not have a Material Adverse Effect (as defined below) on the General
Partner. Each of the Sellers has heretofore made available to the Successor
General Partner complete and correct copies of its certificate of incorporation
and by-laws, as the case may be, in each case as currently in effect. All of the
outstanding shares of capital stock of the General Partner are owned of record
and beneficially by Millennium and all of the Assets are owned by the General
Partner. The Assets (together with the assets that are the subject of the Recap
Agreement) constitute all of the interests in the Partnerships owned
beneficially and of record by the Sellers and their Affiliates, except with
respect to Common Units held by officers and directors of the Sellers and
Affiliates of the Sellers, and constitute all or substantially all of the assets
of the General Partner. All of the Assets are owned beneficially and of record
by the General Partner and no Affiliate of the General Partner or any other
Person has any interest therein.
SECTION 3.2 Authority Relative to this Agreement. Each of the Sellers has
full corporate power and authority to execute and deliver this Agreement and,
subject to the approval of a Unit Majority, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
the Sellers and the consummation by the Sellers of the transactions contemplated
by this Agreement have been duly and validly authorized by the board of
directors of each of the Sellers, and no other corporate proceedings on the part
of the Sellers or their respective stockholders are necessary for the Sellers to
authorize this Agreement or to consummate the transactions contemplated by this
Agreement. This Agreement has been duly and validly executed and delivered by
the Sellers and constitutes, assuming the due execution and delivery of this
Agreement by the Successor General Partner, a valid and binding agreement of the
Sellers, enforceable against the Sellers in accordance with its terms.
SECTION 3.3 Consents and Approvals; No Violations. Except as set forth in
Section 3.3 of the Disclosure Schedule, no filing with, and no permit,
authorization, consent, registration, notice, approval or other action of, any
Governmental Entity or any other Person is required to be made, obtained or
given by any of the Sellers or any of their Affiliates on or prior to the
Closing Date in connection with the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, by the
Sellers, assuming the satisfaction of the condition precedent in Section 6.2(f),
except where failure to make such filing, or obtain such permit, authorization,
consent, registration, notice, approval or other action would not result in a
Material Adverse Effect on the Business or the Assets. Except as set forth in
Section 3.3 of the Disclosure Schedule, neither the
B-3
<PAGE>
<PAGE>
execution and delivery of this Agreement by the Sellers nor the consummation by
the Sellers of the transactions contemplated by this Agreement nor compliance by
the Sellers with any of the provisions hereof will (i) conflict with or result
in any breach of any provision of the certificate of incorporation or by-laws,
as the case may be, of either Seller, (ii), subject to the approval of a Unit
Majority and the Approval of a Note Majority, result in a violation or breach
of, or constitute (with or without due notice or the lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, contract, agreement, permit, license, lease, arrangement or other
commitment or obligation (any of the foregoing, a 'Contract') to which any of
the Sellers is a party or by which any of the Assets or the Business may be
bound, except any of the foregoing that arise out of or in connection with any
Contract entered into by the General Partner on behalf of the Partnerships
acting in its capacity as general partner thereof, (iii) violate any order,
writ, injunction, decree, statute, treaty, rule or regulation applicable to any
of the Sellers, the Assets, or the Business, (iv) result in the creation of any
Lien, directly or indirectly, on the Assets or with respect to the Business, or
(v) conflict with or result in a breach of any provision of the Partnership
Agreement, the Operating Partnership Agreement, the Contribution, Conveyance and
Assumption Agreement, the Distribution Support Agreement or any other agreement
entered into by either of the Sellers with the Partnerships, except in the case
of clause (ii), (iii) or (iv) for violations, breaches or defaults which would
not have a Material Adverse Effect on the Business or the Assets and which would
not prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
SECTION 3.4 Financial Statements. (a) Section 3.4 of the Disclosure
Schedule contains true and complete copies of the balance sheets (the 'Year End
Balance Sheets') of the General Partner at December 31, 1997 and 1996 and the
related statements of income for the fiscal years then ended, all of which have
been prepared in accordance with GAAP (except that all footnote disclosure is
omitted) consistently applied during the periods involved. Such balance sheets
present fairly in all material respects the financial position of the General
Partner as of the respective dates thereof, such statements of income present
fairly the results of operations of the General Partner for the respective
periods then ended, and such balance sheets and statements of income are
consistent with books and records of the Sellers (which books and records are
true and complete in all material respects).
(b) Section 3.4 of the Disclosure Schedule contains true and complete
copies of the September 30, 1998 balance sheet ('Interim Balance Sheet') of the
General Partner and the related statements of income for the six months ended
September 30, 1998. Such financial statements have been prepared in accordance
with GAAP (except that all footnote disclosure is omitted) consistently applied
during the periods involved, present fairly in all material respects the
financial position of the General Partner as of such date and the results of
operations of the General Partner for such period, and are consistent with books
and records of the General Partner (which books and records are complete in all
material respects) and such financial statements have been prepared on a basis
consistent with the year-end financial statements referred to in Section 3.4(a).
(c) Since September 30, 1998, there has not been a change or event (other
than with respect to the Partnerships and their Subsidiaries) with respect to
the Assets or the Business which has had or would be reasonably expected to have
a Material Adverse Effect on the Assets or the Business.
SECTION 3.5 Litigation. (a) Except as set forth in Section 3.5(a) of the
Disclosure Schedule, as of the date hereof, there is no claim, action, suit,
charge, proceeding, audit or investigation before or involving any Governmental
Entity or private arbitration tribunal (collectively, a 'Proceeding') pending
or, to the knowledge of the Sellers, threatened in writing (i) against or
related to the Sellers in respect of the Assets or the Business or (ii) to which
the Assets or the Business would otherwise be subject except in either case for
Proceedings that arise out of or in connection with (or are alleged to arise out
of or in connection with) the conduct of MLP or the Operating Partnership or
their respective subsidiaries or their predecessors for which the General
Partner is indemnified pursuant to the Partnership Agreement.
(b) Except as set forth in Section 3.5(b) of the Disclosure Schedule, there
are no outstanding orders, writs, judgments, injunctions, decrees, agreements or
settlements of or with any Governmental Entity to which either of the Sellers is
a party or bound that apply, in whole or in part, to the Assets or
B-4
<PAGE>
<PAGE>
the Business that restrict the ownership, disposition or use of the Assets or
the conduct of the Business in any material respect.
SECTION 3.6 Transactions with Affiliates. Except as set forth in Section
3.6 of the Disclosure Schedule, none of the General Partner's stockholders,
directors, partners, officers, employees or other Affiliates (i) has been
involved in any business arrangement or relationship with the Sellers or the
Business within the past two years other than as employees of Millennium, (ii)
owns any asset, tangible or intangible, which is used in the Business or (iii)
will have any continuing arrangement with respect to, or the right to receive,
any income, profits or other distributions of the Business or relating to the
Assets following the Closing, except as expressly provided in this Agreement.
The General Partner has no full-time employees.
SECTION 3.7 Title to Assets. The Sellers have and at the Closing will have,
and at the Closing the Successor General Partner will receive, good, valid and
marketable title to the Assets, free and clear of all Liens.
SECTION 3.8 Brokers and Finders. Neither the Sellers nor any Affiliate
thereof has employed any broker, financial advisor or finder or incurred any
Liability for any broker, financial advisory or finders' fees in connection with
this Agreement or the transactions contemplated hereby. The Sellers jointly and
severally shall indemnify and hold harmless the Successor General Partner and
its Affiliates from and against any Liability incurred by such Persons
(including the fees, disbursements and related charges of counsel) arising out
of any claim by a broker, finder, financial advisor or similar intermediary for
any fee, commission or other compensation as a result of the Sellers entering
into this Agreement and/or consummating the transactions contemplated by this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SUCCESSOR GENERAL PARTNER
The Successor General Partner represents and warrants to the Sellers as
follows:
SECTION 4.1 Organization. The Successor General Partner is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite power and authority to
own, lease and operate its properties and to conduct its business as now being
conducted.
SECTION 4.2 Authority Relative to this Agreement. The Successor General
Partner has full limited liability company power and authority to execute and
deliver this Agreement and, subject to the approval of a Unit Majority, to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by the Successor General Partner and the consummation
by the Successor General Partner of the transactions contemplated by this
Agreement have been duly and validly authorized by the managers and members of
the Successor General Partner, as applicable, and no other limited liability
company proceedings on the part of the Successor General Partner, as applicable,
or its managers or members are necessary for Successor General Partner to
authorize this Agreement or to consummate the transactions contemplated by this
Agreement. This Agreement has been duly and validly executed and delivered by
the Successor General Partner and, assuming the due execution and delivery of
this Agreement by the Sellers, constitutes a valid and binding agreement of the
Successor General Partner, enforceable against the Successor General Partner in
accordance with its terms.
SECTION 4.3 Consents and Approvals; No Violations. No filing with, and no
permit, authorization, consent, registration, notice, approval or other action
of any Governmental Entity or any other Person is required to be made, obtained
or given by the Successor General Partner or any Affiliate of the Successor
General Partner on or prior to the Closing Date in connection with the
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby, by the Successor General Partner, assuming
the satisfaction of the condition precedent in Section 6.1(i) except where
failure to make such filing, or obtain such permit, authorization, consent,
registration, notice, approval or other action would not result in a Material
Adverse Effect on the Business or the Assets. Neither the execution and delivery
of this Agreement by the Successor General Partner nor the consummation by the
Successor General Partner of the transactions contemplated by this Agreement
B-5
<PAGE>
<PAGE>
nor compliance by the Successor General Partner with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
operating agreement of the Successor General Partner, (ii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, any of the terms, conditions or provisions of any Contract
pursuant to which the Successor General Partner is a party or by which the
Successor General Partner or its assets may be bound or (iii) violate any order,
writ, injunction, decree, statute, treaty, rule or regulation applicable to the
Successor General Partner, except in the case of clause (ii) or (iii) for
violations, breaches or defaults which would not have a Material Adverse Effect
on the Successor General Partner or would not, individually or in the aggregate,
prevent or materially delay the consummation of the transactions contemplated by
this Agreement.
SECTION 4.4 Brokers or Finders. The Successor General Partner has not
retained any agent, broker, investment banker, financial advisor or other firm
or person that is or will be entitled to any brokers' or finder's fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement. The Successor General Partner shall indemnify
and hold harmless each of the Sellers and their Affiliates from and against any
Liability incurred by such Persons (including the fees, disbursements and
related charges of counsel) arising out of any claim by a broker, finder,
financial advisor or similar intermediary for any fee, commission or other
compensation as a result of the Successor General Partner entering into this
Agreement and the transactions contemplated by this Agreement.
SECTION 4.5 Successor General Partner. The Successor General Partner was
recently formed solely for the purpose of engaging in the transactions
contemplated hereby and the Successor General Partner has not engaged in any
other activities.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Access to Information. Prior to the Closing, the Sellers shall
permit the Successor General Partner, and any of its representatives, advisors
and consultants, to have reasonable access during normal business hours to the
General Partner and the Sellers shall cooperate with the Successor General
Partner and furnish promptly to the Successor General Partner all available
information concerning the Assets and the Business the Successor General Partner
may reasonably request.
SECTION 5.2 Efforts to Close. (a) Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto shall use its
commercially reasonable efforts, to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable
including, without limitation, (i) the preparation and execution of all
agreements necessary to effect the transactions contemplated hereby, including
the admission of the Successor General Partner as general partner of the
Partnerships, (ii) the preparation and filing of all forms, registrations and
notices required to be filed to consummate the transactions contemplated by this
Agreement and the taking of such actions as are necessary to obtain any
requisite approvals, consents, orders, exemptions or waivers by any third party
or Governmental Entity and (iii) using commercially reasonable efforts to cause
the satisfaction of all conditions to Closing.
Each party shall promptly consult with the other with respect to, and
provide any necessary information with respect to, all filings made by such
party with any Governmental Entity or any other information supplied by such
party to a Governmental Entity in connection with this Agreement and the
transactions contemplated by this Agreement. The Sellers and the Successor
General Partner shall, with respect to a threatened or pending preliminary or
permanent injunction or other order, decree or ruling or statute, rule,
regulation or executive order that would adversely affect the ability of the
parties hereto to consummate the transactions contemplated by this Agreement,
use their respective commercially reasonable efforts to prevent the entry,
enactment or promulgation thereof, as the case may be.
(b) Prior to the Closing, each of the Sellers and the Successor General
Partner shall promptly notify the other in writing of the occurrence (or
non-occurrence) of any event or the existence of any
B-6
<PAGE>
<PAGE>
circumstance of which any of the parties has knowledge, the occurrence (or
non-occurrence) or the existence of which would be likely to cause any
representation or warranty contained in Article III or Article IV hereof, as the
case may be, to be untrue or inaccurate in any material respect and of any
material failure of any Seller or the Successor General Partner to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that delivery of any notice pursuant to this
Section 5.2(b) shall not affect the conditions set forth in Article VI and shall
not limit or otherwise affect any remedies available to the Successor General
Partner or Sellers, as the case may be.
SECTION 5.3 Further Assurances. From time to time after the Closing,
without additional consideration, each of the Sellers and the Successor General
Partner will execute and deliver such further instruments and take such other
action as may be necessary to make effective the transactions contemplated by
this Agreement.
SECTION 5.4 Publicity. Except as otherwise required by law or the rules and
regulations of the New York Stock Exchange or any other exchange on which shares
of Affiliates of the Sellers are traded, for so long as this Agreement is in
effect, the Successor General Partner and the Sellers shall not, and each of
them shall cause their respective officers, directors, partners, Affiliates,
representatives and agents not to, disclose or cause the disclosure of
information, or issue or cause the publication of any press release or public
announcement, with respect to the transactions contemplated by this Agreement,
without the prior review and approval thereof (which approval shall not be
unreasonably delayed or withheld) by the other parties hereto.
SECTION 5.5 Name Change. Effective as of the Closing, Sellers shall cause
the General Partner and any of Millennium's or the General Partner's Affiliates
to delete 'Suburban Propane' from their respective names (to the extent such
names include 'Suburban Propane') and initiate any necessary legal filings with
the appropriate governmental authority to effectuate a name change to a new name
that does not contain 'Suburban Propane' or a name confusingly similar to
'Suburban Propane.' Within 30 days of the Closing (and, as of the Closing, with
respect to clause (i)), Sellers will cause each such entity to (i) complete any
actions or filings required to delete 'Suburban Propane' as contemplated in the
foregoing sentence and (ii) replace their current names (to the extent such
current names include 'Suburban Propane') to their new company name on all
stationery, business cards, real and personal property, directories, labels,
advertising and promotional material, and any and all applications,
registrations or other documents filed or to be filed with international,
national and local governmental offices, agencies or authorities in any country.
SECTION 5.6 Fees and Expenses. Except as otherwise provided in the Recap
Agreement or in Section 5.7(b) of this Agreement, whether or not the
transactions contemplated by this Agreement are consummated, each party shall
bear its own fees and expenses incident to preparing for, entering into and
carrying out this Agreement and consummation of the transactions contemplated by
this Agreement.
SECTION 5.7 Certain Tax Matters.
(a) The General Partner shall be responsible for the payment of any Taxes
relating to income of the MLP and the Operating Partnership allocated to the
General Partner by virtue of being a partner in the MLP and the Operating
Partnership for periods prior to the Closing. The Successor General Partner
shall be responsible for the payment of any Taxes relating to income of the MLP
and the Operating Partnership allocated to the Successor General Partner by
virtue of being a partner in the MLP and the Operating Partnership for periods
on or after the Closing.
(b) The Successor General Partner and the Sellers shall each pay one-half
of all transfer, recording, sales, use (including all bulk sales taxes) and
other similar taxes and fees (collectively, the 'Transfer Taxes') arising out of
or in connection with the transactions effected pursuant to this Agreement. The
party which has the primary obligation to do so under applicable law shall file
any Tax Return that is required to be filed in respect of Taxes described in
this section. Such party shall pay the Taxes shown on such Tax Return and notify
the other party in writing of the other party's share of Taxes for which it is
responsible, if any, of the Taxes shown on such Tax Return and how such Taxes
and share were
B-7
<PAGE>
<PAGE>
calculated, which the other party shall reimburse by wire transfer of
immediately available funds no later than ten days after receipt of such notice.
(c) The Sellers and the Successor General Partner shall provide each other
with such assistance as reasonably may be requested by either of them (and the
Successor General Partner shall cause the MLP and the Operating Partnership to
provide the Seller with such assistance as reasonably may be requested by the
Seller) in connection with (i) the preparation of any Tax Return, or (ii) any
audit or other examination by any taxing authority, or any judicial or
administrative proceedings relating to liability for Taxes, and each will retain
and provide the requesting party with any records or information which may be
relevant to such return, audit or examination, proceeding or determination. Any
information obtained pursuant to this Section 5.8(c) or pursuant to any other
section hereof providing for the sharing of information or the review of any Tax
Return or other schedule relating to Taxes shall be kept confidential by the
parties hereto. For avoidance of doubt, reflecting on a Tax Return any
information referred to in the preceding sentence does not violate the
confidentiality requirement of the preceding sentence or of the Confidentiality
Agreement.
(d) The Sellers shall deliver to the Successor General Partner at the
Closing an affidavit of the General Partner which meets the requirements of
Treasury Regulation Section 1.1445-2(b)(2) and which attests to General
Partner's non-foreign status (the 'FIRPTA Affidavit'). If the Successor General
Partner receives the FIRPTA Affidavit at the Closing, the Successor General
Partner shall not withhold any of the consideration paid to the Sellers under
this agreement pursuant to Section 1445 of the Code (and regulations
thereunder). If the Sellers shall fail to provide such certificate, the
Successor General Partner shall withhold or, where appropriate, escrow such
amount as necessary based on the Successor General Partner's reasonable estimate
of the amount of such potential liability, or as determined by the appropriate
taxing authority, to cover such Taxes until such time as certificates are
provided.
ARTICLE VI
CONDITIONS
SECTION 6.1 Conditions to Successor General Partner's Obligations. The
obligation of the Successor General Partner to effect the transactions
contemplated by this Agreement shall be subject to the satisfaction or waiver at
or prior to the Closing of the following conditions which are for the benefit of
the Successor General Partner only and may only be waived by the Successor
General Partner at or prior to the Closing in its sole discretion:
(a) Any applicable waiting period under the HSR Act in connection with
the transactions contemplated by this Agreement shall have expired or been
terminated.
(b) No temporary restraining order, preliminary or permanent
injunction or other similar order or decree of any Governmental Entity of
competent jurisdiction shall have been issued and be in effect, and no
action, proceeding or investigation (in the case of any investigation, of
which the parties hereto have written notice) by any Governmental Entity or
any other Person shall be pending or threatened in writing which, if
adversely determined, would (i) prevent or impair in any material respect
the consummation of the transactions contemplated by this Agreement, (ii)
impose on the MLP or the Operating Partnership any material restrictions or
requirements or (iii) cause any of the parties or their respective
Affiliates to owe material damages to any third party as a result of the
transactions contemplated hereby; provided, however, that the party
invoking this condition shall use its commercially reasonably efforts to
have any such order, injunction, action or proceeding vacated or otherwise
resolved and this condition may not be invoked by any party whose failure
to fulfill its obligations pursuant to Section 5.2 hereof shall have been
the cause of, or shall have resulted in, the failure of this condition.
(c) No statute, rule, or regulation of any nature shall have been
enacted, entered, promulgated or enforced by any Governmental Entity, and
shall be in effect, which restrains, prohibits or materially changes the
transactions contemplated by this Agreement or the tax status of the
Partnerships.
B-8
<PAGE>
<PAGE>
(d) The representations and warranties of the Sellers in this
Agreement qualified as to materiality or Material Adverse Effect shall be
true and correct in all respects, in each case as of the date hereof and as
of the Closing Date with the same effect as though such representations and
warranties had been made at and as of the Closing Date, other than any such
representations and warranties that expressly speak as of a specific date
or time (which need only be true and correct as of such date or time), and
the representations and warranties of the Sellers in this Agreement not so
qualified shall be true and correct in all material respects, in each case
as of the date hereof and as of the Closing Date with the same effect as
though such representations and warranties had been made at and as of the
Closing Date, other than representations and warranties that expressly
speak as of a specific date or time (which need only be true and correct as
of such date or time).
(e) The Sellers shall have performed and complied with in all material
respects all of their respective covenants and agreements required by this
Agreement to be performed or complied with by them at or prior to the
Closing.
(f) Except for the transactions contemplated by this Agreement, there
shall not have been any changes in the Assets or the Business since the
date of this Agreement that have had, or are reasonably likely to have, a
Material Adverse Effect on the Assets or Business.
(g) The Sellers shall have delivered or caused to be delivered to the
Successor General Partner each of the documents specified in Section 2.5(a)
hereof.
(h) The Purchaser shall have received financing in an amount
sufficient to pay the Purchase Price.
(i) The Recap Agreement shall be in full force and effect; all
conditions precedent to the obligations of the Successor General Partner
thereunder shall have been satisfied or waived as permitted thereunder, or
will be satisfied concurrently with the Closing; and the transactions
contemplated to occur at the Closing thereunder shall have occurred or will
occur concurrently with the Closing.
SECTION 6.2 Conditions to Obligation of the Sellers. The obligation of the
Sellers to effect the transactions contemplated by this Agreement shall be
subject to the satisfaction at or prior to the Closing of the following
conditions, which are for the benefit of the Sellers only and may only be waived
by the Sellers at or prior to the Closing in their sole discretion:
(a) Any applicable waiting period under the HSR Act in connection with
the transactions contemplated by this Agreement shall have expired or been
terminated.
(b) No temporary restraining order, preliminary or permanent
injunction or other similar order or decree of any Governmental Entity of
competent jurisdiction shall have been issued and be in effect, and no
action, proceeding or investigation (in the case of any investigation, of
which the parties hereto have written notice) by any Governmental Entity or
any other Person shall be pending or threatened in writing which, if
adversely determined, would (i) prevent or impair in any material respect
the consummation of the transactions contemplated by this Agreement, (ii)
impose on the MLP or the Operating Partnership any material restrictions or
requirements or (iii) cause any of the parties or their respective
Affiliates to owe material damages to any third party as a result of the
transactions contemplated hereby; provided, however, that the party
invoking this condition shall use its commercially reasonably efforts to
have any such order, injunction, action or proceeding vacated or otherwise
resolved and this condition may not be invoked by any of the Sellers if the
failure of any Seller to fulfill its obligations pursuant to Section 5.2
hereof shall have been the cause of, or shall have resulted in, the failure
of this condition.
(c) No statute, rule, or regulation of any nature shall have been
enacted, entered, promulgated or enforced by any Governmental Entity, and
shall be in effect, which restrains, prohibits or materially changes the
transactions contemplated by this Agreement.
(d) The representations and warranties of the Successor General
Partner in this Agreement qualified as to materiality or Material Adverse
Effect shall be true and correct in all respects, in each case as of the
date hereof and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date,
other than any such
B-9
<PAGE>
<PAGE>
representations and warranties that expressly speak as of a specific date
or time (which need only be true and correct as of such date or time), and
the representations and warranties of the Successor General Partner in this
Agreement not so qualified shall be true and correct in all material
respects as of the date hereof and as of the Closing Date with the same
effect as though such representations and warranties had been made at and
as of such time, other than representations and warranties that speak as of
a specific date or time (which need only be true and correct in all
material respects as of such date or time).
(e) The Successor General Partner shall have performed and complied
with in all material respects all of its respective covenants and
agreements required by this Agreement to be performed or complied with by
it at or prior to the Closing.
(f) The Recap Agreement shall be in full force and effect; all
conditions precedent to the obligations of the General Partner thereunder
shall have been satisfied or waived as permitted thereunder, or will be
satisfied concurrently with the Closing; and the transactions contemplated
to occur at the closing thereunder shall have occurred or will occur
concurrently with the Closing.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated at any time prior
to the Closing by:
(a) Consent of the Sellers and the Successor General Partner.
(b) Either the Sellers or the Successor General Partner, if the
Closing shall not have occurred on or before May 15, 1999, unless the
failure to consummate the Closing by such date shall be due to the willful
failure of the party seeking to terminate this Agreement to have fulfilled
any of its obligations under this Agreement.
(c) Either the Sellers or the Successor General Partner if any court
of competent jurisdiction or other competent Governmental Entity shall have
issued a statute, rule, regulation, order, decree or injunction or taken
any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement and such
statute, rule, regulation, order, decree or injunction or other action
shall have become final and non-appealable.
(d) Either the Sellers or the Successor General Partner if the Recap
Agreement is terminated under the terms therein.
If the automatic termination date of the Recap Agreement set forth in
Section 7.01(b) therein is extended pursuant to Section 7.07 of the Recap
Agreement or otherwise by the written consent of the parties, the automatic
termination date of this Agreement set forth in Section 7.1(b) above also shall
be deemed to be extended to the same date.
SECTION 7.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1 hereof, this Agreement, except for Sections
3.8, 4.4, 5.4, 5.6 and 9.6 hereof, which shall survive any such termination,
shall forthwith become void and have no effect, without any liability on the
part of any party hereto or its Affiliates, trustees, directors, officers,
partners or stockholders. Nothing contained in this Section 7.2 shall relieve
any party from liability for any willful breach of this Agreement prior to such
termination.
SECTION 7.3 Extension; Waiver. At any time prior to the Closing, each of
the parties hereto may (i) extend the time for the performance of any of the
obligations or acts of the any other party hereto, (ii) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document delivered pursuant hereto, (iii) waive compliance with any of the
agreements of the other party contained herein or (iv) waive any condition to
its obligations hereunder. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
B-10
<PAGE>
<PAGE>
ARTICLE VIII
SURVIVAL
SECTION 8.1 Survival. The representations and warranties contained in
Articles III and IV shall survive the Closing for a period of one year after
Closing (other than Section 3.7 which shall survive the Closing indefinitely).
Any claim arising from a breach of a representation or warranty that survives
the Closing must be asserted by written notice given in accordance with Section
9.1 by the close of business of the date the survival period terminates in order
to be valid. If, prior to the close of business on the date the survival period
terminates with respect to any representation or warranty, Sellers, on the one
hand, or Successor General Partner, on the other hand, shall have notified the
other pursuant to Section 9.1 of a claim hereunder (asserted in good faith and,
to the extent known, with reasonable particularity as to the factual basis
therefor) and such claim shall not have been finally resolved or disposed of at
such date, then such representation or warranty that is the basis for such claim
shall continue to survive as to that claim until such claim is finally resolved.
All of the covenants of the parties set forth in this Agreement shall survive
the Closing and continue in full force and effect according to their respective
terms.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given when delivered personally, when telecopied (with receipt confirmed), the
next business day when deposited with Federal Express or other overnight courier
(with proof of delivery) or three days after deposit in the U.S. mail when
mailed (certified, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to the Successor General Partner, to:
Suburban Energy Services Group LLC
c/o Suburban Propane, L.P.
One Suburban Plaza
240 Route 10 West
Whippany, NJ 07981-0206
Fax: (973) 515-5982
and
(b) if to any Seller, to:
Millennium Petrochemicals Inc.
P.O. Box 7015
230 Half Mile Road
Red Bank, New Jersey 07701
Attention: General Counsel
Telecopy: (732) 933-5270
SECTION 9.2 Amendments and Waivers. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Except
as otherwise provided in this Agreement, any failure of any of the parties to
comply with any obligation, covenant, agreement or condition herein may be
waived by the party or parties entitled to the benefits thereof only by a
written instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
SECTION 9.3 Headings. The article, section, paragraph and other headings
contained in this Agreement are inserted for convenience of reference only and
shall not affect in any way the meaning or interpretation of this Agreement.
B-11
<PAGE>
<PAGE>
SECTION 9.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement.
SECTION 9.5 Entire Agreement. This Agreement, the Disclosure Schedule and
the exhibits hereto, together with the Recap Agreement and the documents to be
delivered pursuant thereto, constitute the entire agreement between the parties
hereto with respect to the subject matter hereof, and supersede and cancel all
prior agreements, negotiations, correspondence, undertakings, understandings and
communications of the parties, oral and written, with respect to the subject
matter hereof.
SECTION 9.6 Governing Law. This Agreement, including all matters of
construction, validity and performance, shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to principles
of conflicts or choice of laws.
SECTION 9.7 Assignment. This Agreement may not be assigned by any party
hereto prior to Closing without the written consent of the other parties.
SECTION 9.8 Binding Nature. This Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their respective successors and
permitted assigns. Except for the provisions of Article VIII which are intended
for the benefit of, and to be enforceable by, any indemnitee and their
respective successors, heirs and personal representatives, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person or persons any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
SECTION 9.9 Severability. This Agreement shall be deemed severable; the
invalidity or unenforceability of any term or provision of this Agreement shall
not affect the validity or enforceability of this Agreement or of any other term
hereof, which shall remain in full force and effect. If it is ever held that any
restriction hereunder is too broad to permit enforcement of such restriction to
its fullest extent, each party agrees that such restriction may be enforced to
the maximum extent permitted by law, and each party hereby consents and agrees
that the scope of such restriction may be judicially modified accordingly in any
proceeding brought to enforce such restriction.
SECTION 9.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specified terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to seek an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof in any court of
competent jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
SECTION 9.11 Accounting and Financial Terms. All references herein to any
financial or accounting terms shall be defined in accordance with GAAP unless
expressly stated to the contrary. All references to dollar amounts shall mean
U.S. dollars unless otherwise noted.
SECTION 9.12 Construction. For the purposes hereof, (i) words in the
singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other genders as the context requires, (ii)
the words 'hereof', 'herein', and 'herewith' and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole
(including the Disclosure Schedule and the exhibits hereto) and not to any
particular provision of this Agreement, and article, section, paragraph, exhibit
and schedule references are to the articles, sections, paragraphs, and exhibits
and schedules of this Agreement unless otherwise specified, and (iii) the words
'including' and words of similar import when used in this Agreement shall mean
'including, without limitation,' unless otherwise specified.
SECTION 9.13 Incorporation of Appendices, Exhibits and Schedules. The
appendices, exhibits and the Disclosure Schedule referred to in this Agreement
are incorporated herein and made a part hereof.
B-12
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SUBURBAN ENERGY SERVICES GROUP LLC
By: /s/ KEVIN T. MCIVER
.................................
NAME: KEVIN T. MCIVER
TITLE: AUTHORIZED PERSON
MILLENNIUM PETROCHEMICALS INC.
By: /s/ GEORGE H. HEMPSTEAD, III
.................................
NAME: GEORGE H. HEMPSTEAD, III
TITLE: SENIOR VICE PRESIDENT
SUBURBAN PROPANE GP, INC.
By: /s/ GEORGE H. HEMPSTEAD, III
.................................
NAME: GEORGE H. HEMPSTEAD, III
TITLE: SENIOR VICE PRESIDENT
B-13
<PAGE>
<PAGE>
APPENDIX A
DEFINITIONS
'Assets' shall have the meaning ascribed to such term in Section 2.1(a).
'Assignment and Assumption' shall have the meaning ascribed to such term in
Section 2.5(a)(i).
'Assumed Liabilities' shall have the meaning ascribed to such term in
Section 2.2(a).
'Books and Records' shall mean originals or certified copies of all books
and records of, or maintained by, Sellers that are in substantial part related
to the Business.
'Business' shall mean the businesses conducted by the General Partner on
the date hereof and until the Closing, including, without limitation, the
ownership, operation and management of the Assets (but excluding the business
conducted by the Partnerships and their Subsidiaries).
'Closing' shall have the meaning ascribed to such term in Section 2.4.
'Closing Date' shall have the meaning ascribed to such term in Section 2.4.
'Code' shall mean the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations thereunder.
'Contract' shall have the meaning ascribed to such term in Section 3.3.
'Contribution, Conveyance and Assumption Agreement' shall mean the
Contribution, Conveyance and Assumption Agreement, dated as of March 4, 1996, by
and among the MLP, the Operating Partnership, Quantum Chemical Corporation, the
General Partner and Suburban Propane Inc.
'Disclosure Schedule' shall mean the disclosure schedule delivered
concurrently with the execution of this Agreement.
'GAAP' shall mean United States generally accepted accounting principles as
in effect on the date hereof.
'HSR Act' shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
'Interim Balance Sheet' shall have the meaning ascribed to such term in
Section 3.4(b).
'Liabilities' shall mean any and all debts, liabilities, commitments and
obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or unaccrued, known or unknown, whether or
not required by GAAP to be reflected in financial statements or disclosed in the
notes thereto.
'Partnership Law' shall mean the Delaware Revised Uniform Limited
Partnership Act, as in effect from time-to-time and other laws (statutory,
common law or otherwise) relating to the assets, liabilities, rights and/or
responsibilities of limited partnerships and/or their partners (in their
capacities as such).
'Proceeding' shall have the meaning ascribed to such term in Section
3.5(a).
'Purchase Price' shall have the meaning ascribed to such term in Section
2.3(a).
'Retained Assets' shall have the meaning ascribed to such term in Section
2.1(b).
'Retained Liabilities' shall have the meaning ascribed to such term in
Section 2.2(b).
'Sellers' shall have the meaning ascribed to such term in the preamble
hereto.
'Successor General Partner' shall have the meaning ascribed to such term in
the preamble hereto.
'Taxes' shall mean any federal, state, local or foreign tax of any kind
whatsoever (and all related interest, additions to tax and penalties),
including, without limitation, income, transfer, gains, gross receipts, excise,
inventory, property (real, personal or intangible), custom duty, sales, use,
license, withholding, payroll, employment, capital stock and franchise taxes
imposed by any Governmental Entity, whether computed on a unitary, combined or
any other basis.
'Tax Return' shall mean any report, return, information return, statement,
declaration or other document (including any related or supporting
documentation) filed or required to be filed with any Governmental Entity in
connection with any determination, assessment or collection of any Tax.
'Transfer Taxes' shall have the meaning ascribed to such term in Section
5.7.
'Year Ended Balance Sheets' shall have the meaning ascribed to such term in
Section 3.4(a).
<PAGE>
<PAGE>
ANNEX B-1
AMENDMENT NO. 1
TO THE PURCHASE AGREEMENT
AMENDMENT NO. 1 TO PURCHASE AGREEMENT, dated as of April 15, 1999 (the
'Purchase Agreement Amendment'), is made by and among: (i) SUBURBAN PROPANE GP,
INC., a Delaware corporation which is the general partner of the MLP and the
general partner of the Operating Partnership (collectively in such capacities,
the 'General Partner'); (ii) MILLENNIUM PETROCHEMICALS INC., a Virginia
corporation and the sole stockholder of the General partner ('Millennium'); and
(iii) SUBURBAN ENERGY SERVICES GROUP LLC, a Delaware limited liability company
(the 'Successor General Partner').
WITNESSETH:
WHEREAS, the parties hereto have entered into that certain Purchase
Agreement, dated as of November 27, 1998 (the 'Original Purchase Agreement')
(certain capitalized terms used in this Purchase Agreement Amendment but not
otherwise defined shall have the meanings ascribed thereto in the Original
Agreement); and
WHEREAS, the parties are entering into this Agreement to amend certain
terms of the Original Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:
1. Consent and Approvals; No Violations. Section 3.3 of the Original
Purchase Agreement is hereby amended by adding after the '(v)' in Section
3.3 the following:
'assuming the satisfaction of the condition precedent in Section 6.2(f),'
2. Confirmation. Except as amended by the terms of this Purchase
Agreement Amendment, each and every other term, condition and covenant of
the Original Purchase Agreement shall remain in full force and effect.
3. Counterparts. This Purchase Agreement Amendment may be executed in
one or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same amendment.
4. Instruments to Read Together. This Purchase Agreement Amendment
shall form a part of the Original Purchase Agreement for all purposes, and
the Original Purchase Agreement and this Purchase Agreement Amendment shall
hereforth be read together.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SUBURBAN ENERGY SERVICES GROUP LLC
By: /s/ MARK A. ALEXANDER
...................................
NAME: MARK A. ALEXANDER
TITLE: AUTHORIZED PERSON
MILLENNIUM PETROCHEMICALS INC.
By: /s/ GEORGE H. HEMPSTEAD, III
...................................
NAME: GEORGE H. HEMPSTEAD, III
TITLE: SENIOR VICE PRESIDENT
SUBURBAN PROPANE GP, INC.
By: /s/ GEORGE H. HEMPSTEAD, III
...................................
NAME: GEORGE H. HEMPSTEAD, III
TITLE: SENIOR VICE PRESIDENT
B-1-1
<PAGE>
<PAGE>
ANNEX C
{SECOND} AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SUBURBAN PROPANE PARTNERS, L.P.
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C>
ARTICLE I
DEFINITIONS
1.1 Definitions.............................................................................. [8] {C-1}
1.2 Construction.............................................................................. [28] {C-17}
ARTICLE II
ORGANIZATION
2.1 Formation................................................................................. [29] {C-17}
2.2 Name...................................................................................... [29] {C-18}
2.3 Registered Office; Registered Agent; Principal Office; Other Offices...................... [30] {C-18}
2.4 Purpose and Business...................................................................... [30] {C-18}
2.5 Powers.................................................................................... [30] {C-18}
2.6 Power of Attorney......................................................................... [31] {C-18}
2.7 Term...................................................................................... [32] {C-20}
2.8 Title to Partnership Assets............................................................... [32] {C-20}
ARTICLE III
RIGHTS OF LIMITED PARTNERS
3.1 Limitation of Liability................................................................... [33] {C-20}
3.2 Management of Business.................................................................... [33] {C-20}
3.3 Outside Activities of the Limited Partners................................................ [33] {C-20}
3.4 Rights of Limited Partners................................................................ [34] {C-21}
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
4.1 Certificates.............................................................................. [35] {C-21}
4.2 Mutilated, Destroyed, Lost or Stolen Certificates......................................... [35] {C-22}
4.3 Record Holders............................................................................ [36] {C-22}
4.4 Transfer Generally........................................................................ [36] {C-22}
4.5 Registration and Transfer of Units........................................................ [37] {C-23}
4.6 Transfer of a General Partner's Partnership Interest...................................... [38] {C-23}
4.7 Transfer of Incentive Distribution Rights................................................. [38] {C-24}
4.8 [Transfer of APUs 39]{[Deleted.]}......................................................... {C-24}
4.9 Restrictions on Transfers................................................................. [39] {C-24}
4.10 Citizenship Certificates; Non-citizen Assignees........................................... [39] {C-25}
4.11 Redemption of Partnership Interests of Non-citizen Assignees.............................. [40] {C-25}
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
5.1 Organizational Contributions.............................................................. [42] {C-26}
[5.2]
{5.2} {Redemption of Subordinated Units and APUs }.............................................. {C-27}
{5.3} [Contributions by General Partner] {Issuance of General Partner Units}.................... [42] {C-27}
[5.3] [Contributions by Initial Limited Partners 42]
5.4 Interest and Withdrawal................................................................... [43] {C-28}
5.5 Capital Accounts.......................................................................... [43] {C-28}
5.6 Issuances of Additional Partnership Securities............................................ [47] {C-30}
5.7 Limitations on Issuance of Additional Partnership Securities.............................. {C-31}
5.8 Conversion of [Subordinated Units 49] {Incentive Distribution Rights}..................... {C-33}
</TABLE>
C-i
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C>
5.9 Limited Preemptive Rights................................................................. [50] {C-34}
5.10 Splits and Combinations................................................................... [51] {C-34}
5.11 Fully Paid and Non-Assessable Nature of Limited Partner [Partnership] Interests........... [52] {C-34}
{5.12} {Loans from Partners}..................................................................... {C-35}
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
6.1 Allocations for Capital Account Purposes.................................................. [52] {C-35}
6.2 Allocations for Tax Purposes.............................................................. [61] {C-41}
6.3 Requirement and Characterization of Distributions; Distributions to Record Holders........ [63] {C-43}
6.4 Distributions of Available Cash from Operating Surplus.................................... [64] {C-44}
6.5 Distributions of Available Cash from Capital Surplus...................................... [66] {C-45}
6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution [Levels]............. [66] {C-46}
[6.7] [Special Provisions Relating to the Holders of Subordinated Units]........................ [67]
{6.7} {Liquidity Arrangement }.................................................................. {C-46}
[6.8] [Special Provisions Relating to the Holders of APUs]...................................... [67]
{6.8} {[Deleted.]}.............................................................................. {C-47}
6.9 Special Provisions Relating to the Holders of Incentive Distribution Rights............... [67] {C-47}
6.10 Entity-Level Taxation..................................................................... [68] {C-47}
ARTICLE {VII}
{MANAGEMENT} [VII] [MANAGEMENT] AND OPERATION OF BUSINESS
7.1 Management................................................................................ [68] {C-48}
7.2 The Board of Supervisors; Election and Appointment; Term; Manner of Acting................ [71] {C-50}
7.3 Nominations of Elected Supervisors........................................................ [72] {C-50}
7.4 Removal of Members of the Board of Supervisors............................................ [73] {C-51}
7.5 Resignations of Members of the Board of Supervisors....................................... [73] {C-51}
7.6 Vacancies on the Board of Supervisors..................................................... [73] {C-51}
7.7 Meetings; Committees; Chairman............................................................ [73] {C-51}
7.8 Officers.................................................................................. [75] {C-52}
7.9 Compensation.............................................................................. [77] {C-54}
7.10 Restrictions on General Partner's and Board of Supervisors' Authority..................... [77] {C-54}
7.11 Reimbursement of the General Partner; Employee Benefit Plans.............................. [78] {C-55}
7.12 Outside Activities of the General Partner................................................. [79] {C-55}
7.13 Loans from the General Partner; Contracts with Affiliates; Certain Restrictions on the
General Partner......................................................................... [80] {C-56}
7.14 Indemnification........................................................................... [82] {C-57}
7.15 Liability of Indemnitees.................................................................. [83] {C-59}
7.16 Resolution of Conflicts of Interest....................................................... [84] {C-59}
7.17 Other Matters Concerning the General Partner and the Board of Supervisors................. [86] {C-60}
7.18 Purchase or Sale of Units................................................................. [87] {C-61}
7.19 Registration Rights of the General Partner and its Affiliates............................. [87] {C-61}
7.20 Reliance by Third Parties................................................................. [89] {C-63}
ARTICLE {VIII}
{BOOKS} [VIII] [BOOKS], RECORDS, ACCOUNTING AND REPORTS
8.1 Records and Accounting.................................................................... [90] {C-63}
8.2 Fiscal Year............................................................................... [90] {C-63}
8.3 Reports................................................................................... [90] {C-64}
</TABLE>
C-ii
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C>
ARTICLE {IX}
{TAX} [IX TAX] MATTERS
9.1 Tax Returns and Information............................................................... [91] {C-64}
9.2 Tax Elections............................................................................. [91] {C-64}
9.3 Tax Controversies......................................................................... [92] {C-64}
9.4 Withholding............................................................................... [92] {C-65}
ARTICLE {X}
{ADMISSION} [X ADMISSION] OF PARTNERS
10.1 Admission of Initial Limited [Partner 92] {Partners}...................................... {C-65}
10.2 Admission of Substituted Limited Partners................................................. [92] {C-65}
10.3 Admission of Successor General Partner.................................................... [93] {C-65}
10.4 Admission of Additional Limited Partners.................................................. [93] {C-66}
10.5 Amendment of Agreement and Certificate of Limited Partnership............................. [94] {C-66}
ARTICLE {XI}
{WITHDRAWAL} [XI] [WITHDRAWAL] OR REMOVAL OF PARTNERS
11.1 Withdrawal of the General Partner......................................................... [94] {C-66}
11.2 Removal of the General Partner............................................................ [96] {C-68}
11.3 Interest of Departing Partner and Successor General Partner; Delegation of Authority to
the Board of Supervisors by Successor General Partner................................... [96] {C-68}
[11.4] [Termination of Subordination Period, Conversion of Subordinated Units, Extinguishment of
Cumulative Common Unit Arrearages and Termination of Distribution Support Obligations
Upon Removal of the General Partner Without Cause]...................................... [98]
{11.4} {[Deleted.]}.............................................................................. {C-69}
11.5 Withdrawal of Limited Partners............................................................ [98] {C-69}
ARTICLE {XII}
{DISSOLUTION} [XII DISSOLUTION] AND LIQUIDATION
12.1 Dissolution............................................................................... [98] {C-69}
12.2 Continuation of the Business of the Partnership After Dissolution......................... [99] {C-70}
12.3 Liquidator................................................................................ [100] {C-70}
12.4 Liquidation............................................................................... [100] {C-71}
12.5 Cancellation of Certificate of Limited Partnership........................................ [101] {C-71}
12.6 Return of {Capital} Contributions......................................................... [101] {C-71}
12.7 Waiver of Partition....................................................................... [102] {C-71}
12.8 Capital Account Restoration............................................................... [102] {C-72}
ARTICLE {XIII}
{AMENDMENT} [XIII AMENDMENT] OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
13.1 Amendment to be Adopted Solely by the Board of Supervisors................................ [102] {C-72}
13.2 Amendment Procedures...................................................................... [104] {C-73}
13.3 Amendment Requirements.................................................................... [104] {C-73}
13.4 Tri-Annual and Special Meetings........................................................... [105] {C-74}
13.5 Notice of a Meeting....................................................................... [106] {C-74}
13.6 Record Date............................................................................... [106] {C-74}
13.7 Adjournment............................................................................... [106] {C-74}
13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes................................ [106] {C-75}
13.9 Quorum.................................................................................... [107] {C-75}
13.10 Conduct of a Meeting...................................................................... [107] {C-75}
</TABLE>
C-iii
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C>
13.11 Action Without a Meeting.................................................................. [107] {C-75}
13.12 Voting and Other Rights................................................................... [108] {C-76}
ARTICLE {XIV}
{MERGER} [XIV MERGER]
14.1 Authority................................................................................. [109] {C-76}
14.2 Procedure for Merger or Consolidation..................................................... [109] {C-76}
14.3 Approval by Limited Partners of Merger or Consolidation................................... [110] {C-77}
14.4 Certificate of Merger..................................................................... [110] {C-77}
14.5 Effect of Merger.......................................................................... [111] {C-78}
ARTICLE {XV}
{RIGHT} [XV RIGHT] TO ACQUIRE UNITS
15.1 Right to Acquire Units.................................................................... [111] {C-78}
ARTICLE {XVI}
{GENERAL} [XVI GENERAL] PROVISIONS
16.1 Addresses and Notices..................................................................... [113] {C-79}
16.2 Further Action............................................................................ [114] {C-80}
16.3 Binding Effect............................................................................ [114] {C-80}
16.4 Integration............................................................................... [114] {C-80}
16.5 Creditors................................................................................. [114] {C-80}
16.6 Waiver.................................................................................... [114] {C-80}
16.7 Counterparts.............................................................................. [114] {C-80}
16.8 Applicable Law............................................................................ [115] {C-80}
16.9 Invalidity of Provisions.................................................................. [115] {C-80}
16.10 Consent of Partners....................................................................... [115] {C-80}
Exhibit A -- Form of Certificate Evidencing Common Unit........................................... [117] {C-82}
</TABLE>
C-iv
<PAGE>
<PAGE>
{SECOND} AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SUBURBAN PROPANE PARTNERS, L.P.
THIS {SECOND} AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
SUBURBAN PROPANE PARTNERS, L.P. dated as of [March 4, 1996] {__________, 1999},
is entered into by and among SUBURBAN [Propane GP, Inc., a Delaware corporation]
{ENERGY SERVICES GROUP LLC, a Delaware limited liability company}, as the
General Partner, and [Quantum Chemical Corporation, as the Organizational
Limited Partner, together with any other Persons who] {those Persons who are or}
become Partners in the Partnership or parties hereto as provided herein. In
consideration of the covenants, conditions and agreements contained herein, the
parties hereto hereby agree as follows:
{R E C I T A L S :}
{WHEREAS, Suburban Propane GP, Inc., a Delaware corporation and the initial
general partner of the Partnership (the 'Initial General Partner'), and certain
other parties organized the Partnership as a Delaware limited partnership
pursuant to an Amended and Restated Agreement of Limited Partnership dated as of
March 4, 1996 (the 'Original Agreement'); and}
{WHEREAS, the Partnership, the Operating Partnership, the Initial General
Partner, Millennium and the General Partner have entered into that Amended and
Restated Recapitalization Agreement dated as of March 15, 1999 (the
'Recapitalization Agreement') providing for a recapitalization of the
Partnership (the 'Recapitalization') that includes, among other things, (i) the
redemption of all outstanding Subordinated Units and APUs, (ii) certain
amendments to the Original Agreement and the Original Operating Partnership
Agreement, (iii) the termination of the Distribution Support Agreement, (iv) the
purchase by the General Partner of the general partner interest in the
Partnership and the Operating Partnership and the Incentive Distribution Rights
pursuant to that Purchase Agreement dated as of November 27, 1998, as amended
(the 'Purchase Agreement'), among the Initial General Partner, Millennium and
the General Partner, and (v) the election of Suburban Energy Services Group LLC
as the successor general partner of the Partnership and the Operating
Partnership; and}
{WHEREAS, the Recapitalization has been submitted to, and approved by the
requisite vote of, the Limited Partners; and
{WHEREAS, the Board of Supervisors has the authority to adopt certain
amendments to this Agreement relating to the Recapitalization without the
approval of any Limited Partner or Assignee to reflect, among other things, a
change that, in the discretion of the Board of Supervisors, does not adversely
affect the Limited Partners in any material respect.}
{NOW, THEREFORE, the Original Agreement is hereby amended and restated in
its entirety as follows:}
ARTICLE I
DEFINITIONS
1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
'Acquisition' means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or business
of another Person for the purpose of increasing the operating capacity of the
Partnership Group from the operating capacity of the Partnership Group existing
immediately prior to such transaction.
'Additional Book Basis' means the portion of any remaining Carrying Value
of an Adjusted Property that is attributable to positive adjustments made to
such Carrying Value as a result of Book-
C-1
<PAGE>
<PAGE>
Up Events. For purposes of determining the extent to which Carrying Value
constitutes Additional Book Basis:
(i) Any negative adjustment made to the Carrying Value of an Adjusted
Property as a result of either a Book-Down Event or a Book-Up Event shall
first be deemed to offset or decrease that portion of the Carrying Value of
such Adjusted Property that is attributable to any prior positive
adjustments made thereto pursuant to a Book-Up Event or Book-Down Event.
(ii) If Carrying Value that constitutes Additional Book Basis is
reduced as a result of a Book-Down Event and the Carrying Value of other
property is increased as a result of such Book-Down Event, an allocable
portion of any such increase in Carrying Value shall be treated as
Additional Book Basis; provided that the amount treated as Additional Book
Basis pursuant hereto as a result of such Book-Down Event shall not exceed
the amount by which the Aggregate Remaining Net Positive Adjustments after
such Book-Down Event exceeds the remaining Additional Book Basis
attributable to all of the Partnership's Adjusted Property after such
Book-Down Event (determined without regard to the application of this
clause (ii) to such Book-Down Event).
'Additional Book Basis Derivative Items' means any Book Basis Derivative
Items that are computed with reference to Additional Book Basis. To the extent
that the Additional Book Basis attributable to all of the Partnership Adjusted
Property as of the beginning of any taxable period exceeds the Aggregate
Remaining Net Positive Adjustments as of the beginning of such period (the
'Excess Additional Book Basis'), the Additional Book Basis Derivative Items for
such period shall be reduced by the amount that bears the same ratio to the
amount of Additional Book Basis Derivative Items determined without regard to
this sentence as the Excess Additional Book Basis bears to the Additional Book
Basis as of the beginning of such period.
'Additional Limited Partner' means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 10.4 and who is shown as such on the books
and records of the Partnership.
'Adjusted Capital Account' means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and
(b) decreased by (i) the amount of all losses and deductions that, as of the end
of such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section
[6.1(d)(i) or 6.1(d)(ii))] {6.1(e)(i) or 6.1(e)(ii))}. The foregoing definition
of Adjusted Capital Account is intended to comply with the provisions of
Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith. The 'Adjusted Capital Account' of a Partner in respect
of a [general partner interest] {General Partner Unit}, a Common Unit, [a
Subordinated Unit, an APU] or an Incentive Distribution Right or any other
specified interest in the Partnership shall be the amount which such Adjusted
Capital Account would be if such [general partner interest] {General Partner
Unit}, Common Unit, [Subordinated Unit, APU,] Incentive Distribution Right or
other interest in the Partnership were the only interest in the Partnership held
by a Partner from and after the date on which such [general partner interest]
{General Partner Unit}, Common Unit, [Subordinated Unit, APU,] Incentive
Distribution Right or other interest was first issued.
'Adjusted Operating Surplus' means, with respect to any period, Operating
Surplus generated during such period as adjusted to (a) exclude Operating
Surplus attributable to (i) any net increase in working capital borrowings
during such period, (ii) any net reduction in cash reserves for Operating
Expenditures during such period not relating to an Operating Expenditure during
such period and (iii) any [capital contributed to purchase APUs pursuant to the
Distribution Support Agreement during such period] {distributions to the
Partnership from the Management Cash Reserve} and (b) include (i) any net
decrease in working capital borrowings during such period and (ii) any net
increase in cash reserves for Operating Expenditures during such period required
by any debt instrument for the subsequent
C-2
<PAGE>
<PAGE>
repayment of principal, interest or premium on indebtedness. Adjusted Operating
Surplus does not include that portion of Operating Surplus included in clause
(a)(i) of the definition of Operating Surplus.
'Adjusted Property' means any property the Carrying Value of which has been
adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). [Once an Adjusted Property
is deemed distributed by, and recontributed to, the Partnership for federal
income tax purposes upon a termination thereof pursuant to Section 708 of the
Code, such property shall thereafter constitute a Contributed Property until the
Carrying Value of such property is subsequently adjusted pursuant to Section
5.5(d)(i) or 5.5(d)(ii).]
'Affiliate' means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term 'control' means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
'Aggregate Remaining Net Positive Adjustments' means, as of the end of any
taxable period, the sum of the Remaining Net Positive Adjustments of all the
Partners.
'Agreed Allocation' means any allocation, other than a Required Allocation,
of an item of income, gain, loss or deduction pursuant to the provisions of
Section 6.1, including, without limitation, a Curative Allocation (if
appropriate to the context in which the term 'Agreed Allocation' is used).
'Agreed Value' of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the Board of Supervisors using such reasonable method of valuation as it may
adopt[; provided, however, that the Agreed Value of any property deemed
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code shall be
determined in accordance with Section 5.5(c)(i). Subject to Section 5.5(c)(i),
the].{ The} Board of Supervisors shall, in its discretion, use such method as it
deems reasonable and appropriate to allocate the aggregate Agreed Value of
Contributed Properties contributed to the Partnership in a single or integrated
transaction among each separate property on a basis proportional to the fair
market value of each Contributed Property.
'Agreement' means this {Second} Amended and Restated Agreement of Limited
Partnership of Suburban Propane Partners, L.P., as it may be amended,
supplemented or restated from time to time.
'Appointed Supervisors' means the two members of the [initial Board of
Supervisors designated as such pursuant to Section 7.2(a), and thereafter the
two members of the] Board of Supervisors appointed by the General Partner in
accordance with the provisions of Article VII.
'{APUs' means the APUs issued to the Initial General Partner in exchange
for a cash contribution} [APU' means a non-voting, limited partner Partnership
Interest issued (at a rate of $100 per APU)] pursuant to [Section 5.6 and in
accordance with] the Distribution Support Agreement[, which non-voting, limited
partner Partnership Interest shall confer upon the holder thereof only the
rights and obligations specifically provided in this Agreement with respect to
APUs (and no other rights otherwise available to holders of a Partnership
Interest).]
'[APU Guarantor' means Hanson America as guarantor of the General Partner's
obligation to contribute cash to the Partnership in exchange for APUs] pursuant
to the Distribution Support Agreement[, unless and until Hanson America has
transferred its obligations under the Distribution Support Agreement to a
transferee pursuant to and in compliance with the terms of the Distribution
Support Agreement, and thereafter shall mean the transferee of such
obligations].
'Assignee' means a Non-citizen Assignee or a Person to whom one or more
Units {representing a Limited Partner Interest} have been transferred in a
manner permitted under this Agreement and who has executed and delivered a
Transfer Application as required by this Agreement, but who has not been
admitted as a Substituted Limited Partner.
'Associate' means, when used to indicate a relationship with any Person,
(a) any corporation or organization of which such Person is a director, officer
or partner or is, directly or indirectly, the owner of 20% or more of any class
of voting stock {or other voting interest}; (b) any trust or other estate in
which such Person has at least a 20% beneficial interest or as to which such
Person serves as trustee or
C-3
<PAGE>
<PAGE>
in a similar fiduciary capacity; and (c) any relative or spouse of such Person,
or any relative of such spouse, who has the same residence as such Person.
'Audit Committee' means a committee of the Board of Supervisors of the
Partnership composed of two or more of the Elected Supervisors then serving.
'Available Cash[,]' means, with respect to any Quarter ending prior to the
Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the Partnership
Group on hand at the end of such Quarter, and (ii) all additional cash and
cash equivalents of the Partnership Group on hand on the date of
determination of Available Cash with respect to such Quarter resulting from
borrowings for working capital purposes [and purchases of APUs, in each
case] {(including pursuant to Section 6.7) and from distributions from the
Management Cash Reserve} subsequent to the end of such Quarter, less
(b) the amount of any cash reserves that is necessary or appropriate
in the reasonable discretion of the Board of Supervisors to (i) provide for
the proper conduct of the business of the Partnership Group (including
reserves for future capital expenditures) subsequent to such Quarter, (ii)
comply with applicable law or any loan agreement, security agreement,
mortgage, debt instrument or other agreement or obligation to which any
[member of the Partnership Group] {Group Member} is a party or by which it
is bound or its assets are subject or (iii) provide funds for distributions
under Section 6.4 or 6.5 in respect of any one or more of the next four
Quarters; provided, however, that the Board of Supervisors may not
establish cash reserves pursuant to (iii) above if the effect of such
reserves would be that the Partnership is unable to distribute the Minimum
Quarterly Distribution on all Common Units with respect to such Quarter;
and, provided further, that disbursements made by a Group Member or cash
reserves established, increased or reduced after the end of such Quarter
but on or before the date of determination of Available Cash with respect
to such Quarter shall be deemed to have been made, established, increased
or reduced, for purposes of determining Available Cash, within such Quarter
if the Board of Supervisors so determines.
Notwithstanding the foregoing, 'Available Cash' with respect to the Quarter
in which the Liquidation Date occurs and any subsequent Quarter shall equal
zero.
'Board of Supervisors' shall mean the [seven] {five}-member board of
supervisors of the Partnership, [initially composed of the seven supervisors
appointed to the initial Board of Supervisors pursuant to Section 7.2(a), and
thereafter] {composed} of the two Appointed Supervisors[,] and three Elected
[Supervisors and two Management] Supervisors appointed or elected, as the case
may be, in accordance with the provisions of Article VII, to whom the General
Partner irrevocably delegates, and in which is vested, pursuant to Section 7.1,
and subject to Section 7.10, the power to manage the business and activities of
the Partnership. The Board of Supervisors shall constitute a committee with the
meaning of Section 17-303(b)(7) of the Delaware Act.
'Book Basis Derivative Items' means any item of income, deduction, gain, or
loss included in the determination of Net Income or Net Loss that is computed
with reference to the Carrying Value of an Adjusted Property (e.g.,
depreciation, depletion, or gain or loss with respect to an Adjusted Property).
'Book-Down Event' means an event which triggers a negative adjustment to
the Capital Accounts of the Partners pursuant to Section 5.5(d).
['Book-Up Event' means an event which triggers a positive adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).]
'Book-Tax Disparity' means with respect to any item of Contributed Property
or Adjusted Property, as of the date of any determination, the difference
between the Carrying Value of such Contributed Property or Adjusted Property and
the adjusted basis thereof for federal income tax purposes as of such date. A
Partner's share of the Partnership's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Partner's Capital Account balance as maintained pursuant to Section
5.5 and the hypothetical balance of such Partner's Capital Account computed as
if it had been maintained strictly in accordance with federal income tax
accounting principles.
C-4
<PAGE>
<PAGE>
{'Book-Up Event' means an event which triggers a positive adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).}
'Business Day' means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the states of New York or New Jersey shall not be regarded as a
Business Day.
'Capital Account' means the capital account maintained for a Partner
pursuant to Section 5.5. The 'Capital Account' of a Partner in respect of a
[general partner interest] {General Partner Unit}, a Common Unit, [a
Subordinated Unit, an APU,] an Incentive Distribution Right or any other
Partnership Interest shall be the amount which such Capital Account would be if
such [general partner interest] {General Partner Unit}, Common Unit,
[Subordinated Unit, APU,] Incentive Distribution Right[,] or other Partnership
Interest were the only interest in the Partnership held by a Partner from and
after the date on which such [general partner interest] {General Partner Unit},
Common Unit, [Subordinated Unit, APU,] Incentive Distribution Right or other
Interest was first issued.
'Capital Contribution' means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes {or has contributed} to
the Partnership pursuant to this Agreement {(or the Original Agreement)} or the
[Distribution Support] {Contribution and Conveyance} Agreement.
'Capital Improvements' means (a) additions or improvements to the capital
assets owned by any Group Member or (b) the acquisition of existing or the
construction of new capital assets (including retail distribution outlets,
propane tanks, pipeline systems, storage facilities and related assets), made to
increase the operating capacity of the Partnership Group from the operating
capacity of the Partnership Group existing immediately prior to such addition,
improvement, acquisition or construction.
'Capital Surplus' has the meaning assigned to such term in Section 6.3(a).
'Capitalized Lease Obligations' means obligations to pay rent or other
amounts under any lease of (or other arrangement conveying the right to use)
real and/or personal property, which obligations are accounted for as a capital
lease on a balance sheet under U.S. GAAP; for the purpose hereof the amount of
such obligations shall be the capitalized amount reflected on such balance
sheet.
'Carrying Value' means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' and
Assignees' Capital Accounts in respect of such Contributed Property, and (b)
with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the Board of
Supervisors.
'Cause' means a court of competent jurisdiction has entered a final,
non-appealable judgment finding a Person liable for actual fraud, gross
negligence or willful or wanton misconduct in its capacity as general partner of
the Partnership or as a member of the Board of Supervisors, as the case may be.
'Certificate' means a certificate, {(a)} substantially in the form of
Exhibit A to this Agreement [or]{, (b) issued in global form in accordance with
the rules and regulations of the Depositary or (c)} in such other form as may be
adopted by the Board of Supervisors in its discretion, issued by the Partnership
evidencing ownership of one or more Common Units or a certificate, in such form
as may be adopted by the Board of Supervisors in its discretion, issued by the
Partnership evidencing ownership of one or more other Partnership Interests.
'Certificate of Limited Partnership' means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the State of
Delaware as referenced in Section 2.1, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
'Citizenship Certification' means a properly completed certificate in such
form as may be specified by the Board of Supervisors by which an Assignee or a
Limited Partner certifies that he (and if he is a nominee holding for the
account of another Person, that to the best of his knowledge such other Person)
is an Eligible Citizen.
'claim' has the meaning assigned to such term in Section 7.19(c).
C-5
<PAGE>
<PAGE>
{'Closing' has the meaning assigned to such term in the Recapitalization
Agreement.}
'Closing Date' means the [first date on which Common Units are sold by the
Partnership to the Underwriters pursuant to the provisions of the Underwriting
Agreement.] {date on which the Closing occurs.}
'Closing Price' has the meaning assigned to such term in Section 15.1(a).
'Code' means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
future law.
'Combined Interest' has the meaning assigned to such term in Section
11.3(a).
{'Common Unitholder' means a Unitholder holding Common Units.}
'Commission' means the United States Securities and Exchange Commission.
{'Committed Amount' means the borrowing availability required under the
Liquidity Arrangement determined as follows: (a) with respect to the period
commencing on the Closing Date and ending on the distribution date for the
Quarter ending December 31, 2000, $22.0 million reduced by any amounts
subsequently borrowed under Sections 6.7(b) and (b) with respect to the period
commencing on the day after the distribution date for the Quarter ending
December 31, 2000 and ending on the distribution date for the Quarter ending
March 31, 2001, the lesser of (i) $11 million and (ii) $22.0 million, less any
amounts previously borrowed under Section 6.7(b), in each case in this clause
(b), reduced by any amounts subsequently borrowed under Section 6.7(b).}
'Common Unit' means a Unit representing a fractional part of the
Partnership Interests of all Limited Partners and Assignees and having the
rights and obligations specified with respect to Common Units in this Agreement.
'Common Unit Arrearage' means, with respect to any Common Unit, whenever
issued, as to any Quarter [within the Subordination Period] {through the Quarter
ending March 31, 2001}, the excess, if any, of (a) the Minimum Quarterly
Distribution with respect to such Common Unit in respect of such Quarter over
(b) the sum of all Available Cash distributed with respect to such Common Unit
in respect of such Quarter pursuant to Section 6.4(a)[(i)].
{'Compensation Deferral Plan' means the Compensation Deferral Plan of the
Partnership and the Operating Partnership effective as of the date of this
Agreement.}
'Contributed Property' means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership [(or deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code)]. Once the Carrying
Value of a Contributed Property is adjusted pursuant to Section 5.5(d), such
property shall no longer constitute a Contributed Property, but shall be deemed
an Adjusted Property.
'Contribution and Conveyance Agreement' means that certain Contribution,
Conveyance and Assumption Agreement, dated as of March 4, 1996, among the
{Initial} General Partner, the Partnership, the Operating Partnership and
certain other parties, together with the additional conveyance documents and
instruments contemplated or referenced thereunder.
'Cumulative Common Unit Arrearage' means, with respect to any Common Unit,
whenever issued, and as of the end of any Quarter, the excess, if any, of (a)
the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each of the Quarters [within the Subordination Period]
{through the Quarter ending March 31, 2001} ending on or before the last day of
such Quarter over (b) the sum of any distributions theretofore made pursuant to
Section [6.4(a)(ii)] {6.4(b)} and the second sentence of Section 6.5 with
respect to an Initial Common Unit (including any distributions to be made in
respect of the last of such Quarters).]
{'Conversion Notice' has the meaning assigned to such term in Section
5.8(a).}
'Curative Allocation' means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section [6.1(d)(xi)]
{6.1(e)(xi)}.
'Current Market Price' has the meaning assigned to such term in Section
15.1(a).
C-6
<PAGE>
<PAGE>
'Delaware Act' means the Delaware Revised Uniform Limited Partnership Act,
6 Del C. 'SS'17-101, et seq., as amended, supplemented or restated from time to
time, and any successor to such statute.
'Departing Partner' means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or 11.2{, including the Initial General Partner from
and after the Closing.}
{'Depositary' means, with respect to any Units issued in global form, The
Depository Trust Company and its successors and permitted assigns.}
'Distribution Support Agreement' means the Distribution Support Agreement[,
dated as of the Closing Date, among the General Partner, the APU Guarantor and
the Partnership, which sets forth the agreement of the General Partner, the APU
Guarantor and the Partnership relating to the purchase of APUs by the] {dated as
of March 5, 1996 among the Partnership, the Initial} General Partner and [the
APU Guarantor's guarantee of the General Partner's obligation to purchase APUs
thereunder.] {Hanson America Inc.}
'Economic Risk of Loss' has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
'Elected Supervisors' means the three members of the [initial] Board of
Supervisors [designated as such pursuant to Section 7.2(a), and thereafter the
three members of the Board of Supervisors] {who are elected or appointed as such
in accordance with the provisions of Article VII and} who may not be employees,
officers or directors of the General Partner, any Group Member or any Affiliate
of the General Partner or any Group Member [and who are elected or appointed as
such in accordance with the provisions of Article VII].
'Eligible Citizen' means a Person qualified to own interests in real
property in jurisdictions in which any Group Member does business or proposes to
do business from time to time, and whose status as a Limited Partner or Assignee
does not or would not subject such Group Member to a significant risk of
cancellation or forfeiture of any of its properties or any interest therein.
'Event of Withdrawal' has the meaning assigned to such term in Section
11.1(a).
['First Liquidation Target Amount' has the meaning assigned to such term in
Section 6.1(c)(i)(E).]
['First Target Distribution' means $0.55 per Unit (or, with respect to the
period commencing on the Closing Date and ending on June 29, 1996, the product
of $0.55 multiplied by the sum of (x) 1.00 and (y) a fraction of which the
numerator is the number of days in the period commencing on the Closing Date and
ending on March 30, 1996, and of which the denominator is 90), subject to
adjustment in accordance with Sections 6.6 and 6.10.]
'General Partner' means Suburban [Propane GP, Inc.] {Energy Services Group
LLC} and its successors as general partner of the Partnership.
{'General Partner Interest' means the ownership interest of the General
Partner in the Partnership (in its capacity as a general partner without
reference to any Limited Partner Interest held by it) which is evidenced by
General Partner Units and includes any and all benefits to which the General
Partner is entitled as provided in this Agreement, together with all obligations
of the General Partner to comply with the terms and provisions of this
Agreement.}
{'General Partner Unit' means a Unit representing a fractional part of the
General Partner Interest and having the rights and obligations specified with
respect to the General Partner Interest.}
{'General Partner Unitholder' means a Unitholder holding General Partner
Units.}
'Group' means a Person [that] {which}, with or through any of its
Affiliates or Associates{,} has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting (except voting pursuant to a revocable
proxy or consent given to such Person in response to a proxy or consent
solicitation made to 10 or more Persons) or disposing of any Partnership
Securities with any other Person that beneficially owns, or whose Affiliates or
Associates beneficially own, directly or indirectly, Partnership Securities.
'Group Member' means a member of the Partnership Group.
C-7
<PAGE>
<PAGE>
['Hanson' means Hanson PLC, a public limited company organized under the
Laws of the United Kingdom.]
['Hanson America' means Hanson America Inc., a Delaware corporation, and
its successors.]
['Holder'] {'Holder',} as used in Section 7.19, has the meaning assigned to
such term in Section 7.19(a).
['Incentive Distributions' means any amount of cash distributed to the
holders of the Incentive Distribution Rights pursuant to Sections 6.4(a)(vi),
(vii) and (viii) and 6.4(b)(iv), (v) and (vi).]
'Incentive Distribution Right' means a non-voting, limited partner
Partnership Interest [issued to the General Partner in connection with the
transfer of its assets to the Partnership pursuant to Section 5.2, which
Partnership Interest]{, which} shall confer upon the holder thereof only the
rights and obligations specifically provided in this Agreement with respect to
Incentive Distribution Rights (and no other rights otherwise available to or
other obligations of holders of a Partnership Interest).
'Indebtedness', as used in Section 7.10(b), means, as applied to any
Person, without duplication, any indebtedness, exclusive of deferred taxes, (i)
in respect of borrowed money (whether or not the recourse of the lender is to
the whole of the assets of such Person or only to a portion thereof); (ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit in support of bonds, notes, debentures or similar instruments; (iii)
representing the balance deferred and unpaid of the purchase price of any
property, if and to the extent such indebtedness would appear as a liability on
a balance sheet of such Person prepared in accordance with U.S. GAAP (but
excluding trade accounts payable arising in the ordinary course of business that
are not overdue by more than 90 days or are being contested by such Person in
good faith); (iv) any Capitalized Lease Obligations of such Person; and (v)
Indebtedness of others guaranteed by such Person, including, without limitation,
every obligation of such Person (A) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Indebtedness, or (B) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness.
'Indemnified Persons' has the meaning assigned to such term in Section
7.19(c).
'Indemnitee' means (a) the members of the Board of Supervisors {or the
members of the board of supervisors of the Operating Partnership or any other
Group Member}, (b) the General Partner, any Departing Partner and any Person who
is or was an Affiliate of the General Partner or any Departing Partner, (c) any
Person who is or was a {member, partner,} director, [supervisor,] officer,
employee, agent or trustee of [the Partnership, the Operating Partnership or any
other Subsidiary, (d)] {any Group Member, the General Partner or any Departing
Partner or any Affiliate of any Group Member, the General Partner or any
Departing Partner and (d)} any Person who is or was [an officer, director,
employee, agent or trustee of]{ serving at the request of the Board of
Supervisors,} the General Partner or any Departing Partner or any [such
Affiliate, (e) any Person who is or was serving at the request of the Board of
Supervisors,] {Affiliate of} the General Partner or any Departing Partner [or
any such Affiliate as a] {as a member, partner,} director, officer, employee,
partner, agent, fiduciary or trustee of another Person{, in each case, acting in
such capacity}; provided, that a Person shall not be an Indemnitee by reason of
providing, on a fee-for-services basis, trustee, fiduciary or custodial
services.
{'Initial Closing Date' means March 5, 1996.}
'Initial Common Units' means the Common Units sold in the Initial Offering.
{'Initial General Partner' has the meaning assigned to such term in the
Recitals to this Agreement.}
'Initial Limited Partners' means the {Initial} General Partner (with
respect to the Subordinated Units and Incentive Distribution Rights [received by
it pursuant to Section 5.2) and the]{) and the Initial} Underwriters, in each
case [upon being] admitted to the Partnership in accordance with Section 10.1.
'Initial Offering' means the initial offering and sale of Common Units to
the public {on March 5, 1996}, as described in the {Initial} Registration
Statement.
'Initial {Option Closing Date' means March 21, 1996.}
C-8
<PAGE>
<PAGE>
{'Initial Registration Statement' means the Registration Statement on Form
S-1 (Registration No. 33-80605) filed by the Partnership with the Commission
under the Securities Act to register the offering and sale of the Initial Common
Units in the Initial Offering as declared effective by the Commission and as
amended or supplemented from time to time.}
{'Initial Underwriter' means each Person named as an underwriter in the
Initial Offering.}
{'Initial} Unit Price' means (a) with respect to the Common Units and the
[Subordinated Units, the initial public offering price per Common Unit at which
the Underwriters offered the Common Units to the public for sale as set forth on
the cover page of the prospectus included as part of the Registration Statement
and first issued at or after the time the Registration Statement first became
effective or] {General Partner Units, $20.50, and} (b) with respect to any other
class or series of Units, the price per Unit at which such class or series of
Units is initially sold by the Partnership, as determined by the Board of
Supervisors, in each case adjusted as the Board of Supervisors determines to be
appropriate to give effect to any distribution, subdivision or combination of
Units.
'Interim Capital Transactions' means the following transactions if they
occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings
of indebtedness and sales of debt securities (other than for working capital
purposes and other than for items purchased on open account in the ordinary
course of business) by any Group Member, (b) sales of equity interests [(other
than sales of APUs)] by any Group Member, and (c) sales or other voluntary or
involuntary dispositions of any assets of any Group Member other than [(x)]{(i)}
sales or other dispositions of inventory{, accounts receivable and other current
assets} in the ordinary course of business, [(y) sales or other dispositions of
other current assets, including receivables and accounts in the ordinary course
of business, and (z)] {and (ii)} sales or other dispositions of assets as part
of normal retirements or replacements.
['Issue Price' means the price at which a Unit is purchased from the
Partnership, after taking into account any sales commission or underwriting
discount charged to the Partnership.]
'Limited Partner' means, unless the context otherwise requires, (a) [the
Organizational Limited Partner,] each Initial Limited Partner, each Substituted
Limited Partner, each Additional Limited Partner and any Departing Partner upon
the change of its status from General Partner to Limited Partner pursuant to
Section 11.3, (b) each holder of an [APU or] Incentive Distribution Right and
(c) solely for purposes of Articles V, VI, VII and IX and Sections 12.3 and
12.4, each Assignee.
{'Limited Partner Interest' means the ownership interest of a Limited
Partner in the Partnership which is evidenced by Common Units or Incentive
Distribution Rights or other Partnership Securities and includes any and all
benefits to which a Limited Partner is entitled as provided in this Agreement,
together with all obligations of a Limited Partner to comply with the terms and
provisions of this Agreement.}
'Liquidation Date' means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 12.2, the date on which the applicable time period
during which the holders of Outstanding {Common} Units have the right to elect
to reconstitute the Partnership and continue its business has expired without
such an election being made, and (b) in the case of any other event giving rise
to the dissolution of the Partnership, the date on which such event occurs.
{'Liquidation Target Amount' means, with respect to each Common Unit, the
sum of (a) its Unrecovered Capital plus (b) the Minimum Quarterly Distribution
for the Quarter during which the Liquidation Date occurs, reduced by any
distribution pursuant to Section 6.4(a) with respect to such Common Unit for
such Quarter plus (c) any then existing Cumulative Common Unit Arrearages plus
(d) the excess of the Target Distribution for each Quarter of the Partnership's
existence over the cumulative per Unit amount of any distributions of Available
Cash from Operating Surplus that was distributed pursuant to Section 6.4(c).}
'Liquidator' means one or more Persons selected by the Board of Supervisors
to perform the functions described in Section 12.3.
{'Liquidity Arrangement' has the meaning assigned to such term in Section
6.7(a).}
C-9
<PAGE>
<PAGE>
{'Management Cash Reserve' means any cash distributed to the Partnership by
the Plan Trustee pursuant to Section 9.1(c) of the Compensation Deferral Plan as
in effect on the date hereof.}
['Maintenance Capital Expenditures' means cash capital expenditures made to
maintain, up to the level thereof that existed at the time of such expenditure,
the operating capacity of the capital assets of the Partnership Group, as such
assets existed at the time of such expenditure and shall, therefore, not include
cash capital expenditures made in respect of Acquisitions and Capital
Improvements. Where cash capital expenditures are made in part to maintain the
operating capacity level referred to in the immediately preceding sentence and
in part for other purposes, the Board of Supervisors' good faith allocation
thereof between the portion used to maintain such operating capacity level and
the portion used for other purposes shall be conclusive.]
['Management Supervisors' means the two members of the initial Board of
Supervisors designated as such pursuant to Section 7.2(a), and thereafter the
two members of the Board of Supervisors who must be executive officers of the
Partnership or the Operating Partnership and may not be employees, officers or
directors of the General Partner or any of its Affiliates (other than a Group
Member) and who are elected or appointed as such in accordance with the
provisions of Article VII.]
'Merger Agreement' has the meaning assigned to such term in Section 14.1.
{'Millennium' means Millennium Petrochemicals Inc., a Virginia corporation
and the sole stockholder of the Initial General Partner.}
'Minimum Quarterly Distribution' means $0.50 per Unit per Quarter [(or with
respect to the period commencing on the Closing Date and ending on June 29,
1996, the product of $0.50 multiplied by the sum of (x) 1.00 and (y) a fraction
of which the numerator is the number of days in the period commencing on the
Closing Date and ending on March 30, 1996, and of which the denominator is 90)],
subject to adjustment in accordance with Sections 6.6 and 6.10.
'National Securities Exchange' means an exchange registered with the
Commission under Section 6(a) of the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to such
statute, or the Nasdaq Stock Market or any successor thereto.
'Net Agreed Value' means, (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by the
Partnership upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Partner or
Assignee by the Partnership, the Partnership's Carrying Value of such property
(as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner or
Assignee upon such distribution or to which such property is subject at the time
of distribution, in either case, as determined under Section 752 of the Code.
'Net Income' means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of loss and deduction (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Income shall be determined in accordance with Section 5.5(b) and shall
not include any items specially allocated under Section [6.1(d)] {6.1(e)};
provided that the determination of the items that have been specially allocated
under Section [6.1(d)] {6.1(e)} shall be made as if Section [6.1(d)(xii)]
{6.1(e)(xii)} were not in the Agreement.
'Net Loss' means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Loss shall be determined in accordance with Section 5.5(b) and shall not
include any items specially allocated under Section [6.1(d)] {6.1(e)}; provided
that the determination of the items that have been specially allocated under
Section [6.1(d)] {6.1(e)} shall be made as if Section [6.1(d)(xii)]
{6.1(e)(xii)} were not in the Agreement.
C-10
<PAGE>
<PAGE>
'Net Positive Adjustments' means, with respect to any Partner, the excess,
if any, of the total positive adjustments over the total negative adjustments
made to the Capital Account of such Partner pursuant to Book-Up Events and
Book-Down Events.
'Net Termination Gain' means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Gain shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
[6.1(d)] {6.1(e)}.
'Net Termination Loss' means, for any taxable year, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Loss shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
[6.1(d)] {6.1(e)}.
'Non-citizen Assignee' means a Person whom the Board of Supervisors has
determined in its discretion does not constitute an Eligible Citizen and as to
whose Partnership Interest the General Partner has become the Substituted
Limited Partner, pursuant to Section 4.10.
'Nonrecourse Built-in Gain' means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and
6.2(b)(iii) if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
'Nonrecourse Deductions' means any and all items of loss, deduction or
expenditures ({including, without limitation, any expenditure} described in
Section 705(a)(2)(B) of the Code) that, in accordance with the principles of
Treasury Regulation Section 1.704-2(b), are attributable to a Nonrecourse
Liability.
'Nonrecourse Liability' has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
['Notes' means the $425 million of unsecured Senior Notes issued by the
Operating Partnership in conjunction with the Initial Offering.]
'Notice of Election to Purchase' has the meaning assigned to such term in
Section 15.1(b).
'Officers' [mean] {means} the Chairman of the Board of Supervisors (unless
the Board of Supervisors provides otherwise), the [Executive Vice Chairman or]
Vice Chairman of the Board of Supervisors (unless the Board of Supervisors
provides otherwise), the President, any Vice Presidents, the Secretary, the
Treasurer, any Assistant Secretaries or Assistant Treasurers, and any other
officers of the Partnership appointed by the Board of Supervisors pursuant to
Section 7.8.
'Operating Expenditures' means all Partnership Group expenditures,
including taxes, reimbursements of the General Partner, debt service payments,
and capital expenditures, subject to the following:
(a) Payments (including prepayments) of principal of and premium on
indebtedness shall not be an Operating Expenditure if the payment is (i)
required in connection with the sale or other disposition of assets or
(ii) made in connection with the refinancing or refunding of indebtedness
with the proceeds from new indebtedness or from the sale of equity
interests. For purposes of the foregoing, at the election and in the
reasonable discretion of the Board of Supervisors, any payment of principal
or premium shall be deemed to be refunded or refinanced by any indebtedness
incurred or to be incurred by the Partnership Group within 180 days before
or after such payment to the extent of the principal amount of such
indebtedness.
(b) Operating Expenditures shall not include (i) capital expenditures
made for Acquisitions or for Capital Improvements, (ii) payment of
transaction expenses relating to Interim Capital Transactions [or (iii)]{,
(iii) payment of transaction fees and expenses related to the
Recapitalization or (iv)} distributions to Partners. Where capital
expenditures are made in part for Acquisitions or for Capital Improvements
and in part for other purposes, the Board of Supervisors' good faith
allocation [between] {among} the amounts paid for each shall be conclusive.
'Operating Partnership' means Suburban Propane, L.P., a Delaware limited
partnership, and any successors thereto.
C-11
<PAGE>
<PAGE>
'Operating Partnership Agreement' means the {Second} Amended {and} Restated
Agreement of Limited Partnership of Suburban Propane, L.P., as it may be
amended, supplemented or restated from time to time.
'Operating Surplus[,]' means, with respect to any period ending prior to
the Liquidation Date, on a cumulative basis and without duplication,
(a) the sum of (i) $40 million plus all cash and cash equivalents of
the Partnership Group on hand as of the close of business on the {Initial}
Closing Date as adjusted by the post-closing adjustment pursuant to section
6.1(a) of the Contribution and Conveyance Agreement to the extent that any
such amount is paid or received by the Partnership after the {Initial}
Closing Date, (ii) all cash receipts of the Partnership Group for the
period beginning on the {Initial} Closing Date and ending with the last day
of such period, other than cash receipts from Interim Capital Transactions
(except to the extent specified in Section 6.5) and (iii) all cash receipts
of the Partnership Group after the end of such period but on or before the
date of determination of Operating Surplus with respect to such period
resulting from borrowings for working capital purposes {(including pursuant
to Section 6.7) and from distributions from the Management Cash Reserve}
[and purchases of APUs], less
(b) the sum of (i) Operating Expenditures for the period beginning on
the {Initial} Closing Date and ending with the last day of such period and
(ii) the amount of cash reserves that is necessary or advisable in the
reasonable discretion of the Board of Supervisors to provide funds for
future Operating Expenditures, provided, however, that disbursements made
(including contributions to a Group Member or disbursements on behalf of a
Group Member) or cash reserves established, increased or reduced after the
end of such period but on or before the date of determination of Available
Cash with respect to such period shall be deemed to have been made,
established, increased or reduced for purposes of determining Operating
Surplus, within such period if the Board of Supervisors so determines.
Notwithstanding the foregoing, 'Operating Surplus' with respect to the Quarter
in which the Liquidation Date occurs and any subsequent Quarter shall equal
zero.
'Opinion of Counsel' means a written opinion of counsel (who may be regular
counsel to [Hanson,] the Partnership or the General Partner or any of their
Affiliates) acceptable to the Board of Supervisors in its reasonable discretion.
['Option Closing Date' has the meaning assigned to such term in the
Underwriting Agreement.]
'Organizational Limited Partner' means Quantum Chemical Corporation, in its
capacity as the organizational limited partner of the Partnership [pursuant to
this Agreement].
{'Original Agreement' has the meaning assigned to such term in the Recitals
to this Agreement.}
{'Original Operating Partnership Agreement' means the Amended and Restated
Agreement of Limited Partnership of the Operating Partnership dated as of March
4, 1996.}
'Outstanding' means, with respect to Partnership Securities, all
Partnership Securities that are issued by the Partnership and reflected as
[Outstanding] {outstanding} on the Partnership's books and records as of the
date of determination; provided, however, that with respect to Sections
7.2(a)(ii) and 7.4(b), if at any time any Person or Group beneficially owns more
than 20% of all {Common} Units then Outstanding, such {Common} Units so owned in
excess of 20% shall not be voted on any matter pursuant to Section 7.2(a)(ii) or
7.4(b) and shall not be considered to be Outstanding when sending notices of a
meeting of Limited Partners to vote on any matter pursuant to Section 7.2(a)(ii)
or 7.4(b) (unless otherwise required by law), calculating required votes,
determining the presence of a quorum or for other similar purposes under this
Agreement.
['Over-allotment Option' means the overallotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.]
'Parity Units' means Common Units and all other Units having rights to
distributions or in liquidation ranking on a parity with the Common Units.
C-12
<PAGE>
<PAGE>
'Partner Nonrecourse Debt' has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(4).
'Partner Nonrecourse Debt Minimum Gain' has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
'Partner Nonrecourse Deductions' means any and all items of loss, deduction
or expenditure (including, without limitation, any expenditure described in
Section 705(a)(2)(B) of the Code) that, in accordance with the principles of
Treasury Regulation Section 1.704-2(i), are attributable to a Partner
Nonrecourse Debt.
'Partners' means the General Partner and the Limited Partners.
'Partnership' means Suburban Propane Partners, L.P., a Delaware limited
partnership, and any successors thereto.
'Partnership Group' means the Partnership, the Operating Partnership and
any Subsidiary of either such entity, treated as a single consolidated entity.
'Partnership Interest' means an interest in the Partnership, which shall
include [general partner interests, Common Units, Subordinated Units, APUs,
Incentive Distribution Rights and other Partnership Securities, or a combination
thereof or interest therein, as the case may be.] {General Partner Interests and
Limited Partner Interests.}
'Partnership Minimum Gain' means that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
'Partnership Security' means any class or series of Unit, any option,
right, warrant or appreciation rights relating thereto, or any other type of
equity interest that the Partnership may lawfully issue, or any unsecured or
secured debt obligation of the Partnership that is convertible into any class or
series of equity interests of the Partnership.
'Percentage Interest' means as of the date of such determination[(a) as to
the General Partner (in its capacity as General Partner without reference to any
limited partner interests held by it), 1.0%, (b) as to any Limited], {(a) as to
any} Partner or Assignee holding Units, the product of (i) [99%] {100%} less the
percentage applicable to [paragraph (c)] {clause (b)} multiplied by (ii) the
quotient of the number of Units held by such [Limited] Partner or Assignee
divided by the total number of all Outstanding Units, and [(c)]{(b)} as to the
holders of additional Partnership Securities issued by the Partnership in
accordance with Section 5.6, the percentage established as a part of such
issuance. The Percentage Interest with respect to an [APU or an] Incentive
Distribution Right shall at all times be zero.
'Person' means an individual or a corporation, limited liability company,
{partnership, limited liability }partnership, joint venture, trust,
unincorporated organization, association, government agency or political
subdivision thereof or other entity.
'Per Unit Capital Amount' means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Person [other than a General Partner or any Affiliate of a General Partner who
holds Units].
{'Plan Trustee' means the Trustee of the Benefits Protection Trust of the
Partnership that relates to the Compensation Deferral Plan.}
'Pro Rata' means (a) when modifying Units or any class thereof, apportioned
equally among all designated Units in accordance with their relative Percentage
Interests, (b) when modifying Partners and Assignees, {apportioned among all
Partners and Assignees} in accordance with their [respective] {relative}
Percentage Interests{, and} (c) when modifying holders of [APUs] {Incentive
Distribution Rights}, apportioned equally among all holders of [APUs] {Incentive
Distribution Rights} in accordance with the relative number of [APUs] {Incentive
Distribution Rights} held by each such holder [and (d) when modifying holders of
Incentive Distribution Rights, apportioned equally among all holders of
Incentive Distribution Rights in accordance with the relative number of
Incentive Distribution Rights held by each such holder].
{'Proxy Statement' means the definitive Proxy Statement of the Partnership
on Schedule 14A under the Securities Exchange Act of 1934, as amended, filed
with the Commission for the purpose of}
C-13
<PAGE>
<PAGE>
{soliciting the votes of the Unitholders with respect to the Recapitalization,
as it has been or as it may be amended or supplemented from time to time.}
{'Purchase Agreement' has the meaning assigned to such term in the Recitals
to this Agreement.}
'Purchase Date' means the date determined by the Board of Supervisors as
the date for purchase of all Outstanding Units {of a certain class} (other than
Units owned by the General Partner and its Affiliates) pursuant to Article XV.
{'Quarter' means,}['Quarter' means] unless the context requires otherwise,
a fiscal quarter of the Partnership.
{'Recapitalization' has the meaning assigned to such term in the Recitals
to this Agreement.}
{'Recapitalization Agreement' has the meaning assigned to such term in the
Recitals to this Agreement.}
'Recapture Income' means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary because it represents the recapture of deductions
previously taken with respect to such property or asset.
'Record Date' means the date established by the Board of Supervisors for
determining (a) the identity of the Record Holders entitled to notice of, or to
vote at, any meeting of Limited Partners or entitled to vote by ballot or give
approval of Partnership action in writing without a meeting or entitled to
exercise rights in respect of any lawful action of Limited Partners or (b) the
identity of Record Holders entitled to receive any report or distribution.
'Record Holder' means the Person in whose name a Common Unit is registered
on the books of the Transfer Agent as of the opening of business on a particular
Business Day, or with respect to a holder of a [general partner interest, a
Subordinated Unit, an APU,] {General Partner Unit,} an Incentive Distribution
Right or other Partnership Interest, the Person in whose name such [general
partner interest, Subordinated Unit, APU,] {General Partner Unit,} Incentive
Distribution Right or other Partnership Interest is registered on the books
which the Board of Supervisors has caused to be kept as of the opening of
business on such Business Day.
'Redeemable Interests' means any Partnership Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.11.
['Registration Statement' means the Registration Statement on Form S-1
(Registration No. 33-80605), as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership with the Commission
under the Securities Act to register the offering and sale of the Common Units
in the Initial Offering.]
'Remaining Net Positive Adjustments' means as of the end of any taxable
period, (i) with respect to the Limited Partners holding [Units or Subordinated]
{Common} Units, the excess of (a) the Net Positive Adjustments of the Limited
Partners holding [Units or Subordinated] {Common} Units as of the end of such
period over (b) the sum of those [Partners ']{Partners'} Share of Additional
Book Basis Derivative['] Items for each prior taxable period, (ii) with respect
to the {Partners holding} General Partner {Units}, the excess of (a) the Net
Positive Adjustments of the {Partners holding} General Partner {Units} as of the
end of such period over (b) the sum of [the General Partner's] {those Partners'}
Share of Additional Book Basis Derivative Items for each prior taxable period,
and (iii) with respect to the Limited Partners holding Incentive Distribution
Rights, the excess of (a) the Net Positive Adjustments of the Limited Partners
holding Incentive Distribution Rights as of the end of such period over (b) the
sum of the Share of Additional Book Basis Derivative Items of the Limited
Partners holding the Incentive Distribution Rights for each prior taxable
period.
'Required Allocations' means (a) any limitation imposed on any allocation
of Net Losses or Net Termination Losses under Section [6.1(b) or 6.1(c)(ii)]
{6.1(c)} and (b) any allocation of an item of income, gain, loss or deduction
pursuant to Section [6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or
6.1(d)(ix).] {6.1(e)(i), 6.1(e)(ii), 6.1(e)(iv), 6.1(e)(vii) or 6.1(e)(ix)}.
C-14
<PAGE>
<PAGE>
'Residual Gain' or 'Residual Loss' means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
['Second Liquidation Target Amount' has the meaning assigned to such term
in Section 6.1(c)(i)(F).]
['Second Target Distribution' means $0.633 per Unit (or, with respect to
the period commencing on the Closing Date and ending on June 29, 1996, the
product of $0.633 multiplied by the sum of (x) 1.0 and (y) a fraction of which
the numerator is equal to the number of days in the period commencing on the
Closing Date and ending on March 30, 1996, and of which the denominator is 90),
subject to adjustment in accordance with Sections 6.6 and 6.10.]
'Securities Act' means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.
'Share of Additional Book Basis Derivative Items' means in connection with
any allocation of Additional Book Basis Derivative Items for any taxable period,
(i) with respect to the Limited Partners holding [Units or Subordinated]
{Common} Units, the amount that bears the same ratio to such Additional Book
Basis Derivative Items as such Partner's Remaining Net Positive Adjustments as
of the end of such period bears to the Aggregate Remaining Net Positive
Adjustments as of that time, (ii) with respect to the {Partners holding} General
Partner {Units}, the amount that bears the same ratio to such additional Book
Basis Derivative Items as such [Partner's] {Partners'} Remaining Net Positive
Adjustments as of the end of such Period bears to the Aggregate Remaining Net
Positive Adjustment as of that time, and (iii) with respect to the Limited
Partners holding Incentive Distribution Rights, the amount that bears the same
ratio to such Additional Book Basis Derivative Items as the Remaining Net
Positive Adjustments of the Limited Partners holding the Incentive Distribution
Rights as of the end of such period bears to the Aggregate Remaining Net
Positive Adjustments as of that time.
'Special Approval' means approval by a majority of the members of the Audit
Committee.
'Subordinated {Units' means the Subordinated Units held by the Initial
General Partner immediately prior to the Closing.} [Unit' means a Unit
representing a fractional part of the Partnership Interests of all Limited
Partners and Assignees and having the rights and obligations specified with
respect to Subordinated Units in this Agreement.]
['Subordination Period' means the period commencing on the Closing Date and
ending on the first to occur of the following dates:]
[(a) the first day of any Quarter beginning after March 31, 2001 in
respect of which (i) (A) distributions of Available Cash from Operating
Surplus on each of the Outstanding Common Units and Subordinated Units with
respect to each of the three consecutive, non-overlapping four-Quarter
periods immediately preceding such date equaled or exceeded the sum of the
Minimum Quarterly Distribution on all Outstanding Common Units and
Subordinated Units during such periods and (B) the Adjusted Operating
Surplus generated during each of the three consecutive, non-overlapping
four-Quarter periods immediately preceding such date equaled or exceeded
the sum of the Minimum Quarterly Distribution on all of the Outstanding
Common Units and Subordinated Units, plus the related distribution on the
general partner interest in the Partnership and the Operating Partnership,
during such periods and (ii) there are no Cumulative Common Unit
Arrearages; and]
[(b) the date on which the General Partner is removed as general
partner of the Partner upon the requisite vote by holders of Outstanding
Units under circumstances where Cause does not exist and Units held by the
General Partner and its Affiliates are not voted in favor of such removal.]
'Subsidiary' means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such
C-15
<PAGE>
<PAGE>
Person is, at the date of determination, a general or limited partner of such
partnership, but only if more than 50% of the partnership interests of such
partnership (considering all of the partnership interests of the partnership as
a single class) is owned, directly or indirectly, at the date of determination,
by such Person, by one or more Subsidiaries of such Person, or a combination
thereof, or (c) any other Person (other than a corporation or a partnership) in
which such Person, one or more Subsidiaries of such Person, or a combination
thereof, directly or indirectly, at the date of determination, has (i) at least
a majority ownership interest or (ii) the power to elect or direct the election
of a majority of the directors or other governing body of such Person.
'Substituted Limited Partner' means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 10.2 in place of and with all the
rights of a Limited Partner and who is shown as a Limited Partner on the books
and records of the Partnership.
'Surviving Business Entity' has the meaning assigned to such term in
Section 14.2(b).
'[Third] Target Distribution' means [$0.822 per Unit (or, with respect to
the period commencing on the Closing Date and ending on June 29, 1996, the
product of $0.822 multiplied by the sum of (x) 1.00 plus (y) a fraction of which
the numerator is equal to the number of days in the period commencing on the
Closing Date and ending on March 30, 1996, and of which the denominator is 90)]
{$0.55 per Unit}, subject to adjustment in accordance with Sections 6.6 and
6.10.
'Trading Day' has the meaning assigned to such term in Section 15.1(a).
'Transfer' has the meaning assigned to such term in Section 4.4(a).
'Transfer Agent' means such bank, trust company or other Person (including
the {Partnership, the} General Partner or one of its Affiliates) as shall be
appointed from time to time by the [Partnership] {Board of Supervisors} to act
as registrar and transfer agent for the [Units] {Common Units or other
Partnership Securities}.
'Transfer Application' means an application and agreement for transfer of
Units in the form set forth on the back of a Certificate or in a form
substantially to the same effect in a separate instrument.
'Tri-Annual Meeting' means the meeting of Limited Partners to be held every
third year commencing in 1997 to elect the Elected Supervisors as provided in
Section 13.4.
['Underwriter' means each Person named as an underwriter in Schedule I to
the Underwriting Agreement who purchases Common Units pursuant thereto.]
['Underwriting Agreement' means the Underwriting Agreement dated February
29, 1996, among the Underwriters, the Partnership and certain other parties,
providing for the purchase of Common Units by such Underwriters.]
'Unit' means a Partnership Interest of a [Limited] Partner or Assignee in
the Partnership and shall include Common Units and [Subordinated] {General
Partner} Units but shall not include [APUs or] Incentive Distribution Rights.
{'Unitholders' means the holders of Common Units and General Partner
Units.} [Unit Majority' means, during the Subordination Period, at least a
majority of the Outstanding Common Units voting as a class and at least a
majority of the Outstanding Subordinated Units voting as a class, and
thereafter, at least a majority of the Outstanding Units.]
['Unpaid MQD' has the meaning assigned to such term in Section
6.1(c)(i)(B).]
'Unrealized Gain' attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property as of such date (as determined under Section 5.5(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date).
'Unrealized Loss' attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5(d)).
C-16
<PAGE>
<PAGE>
'Unrecovered Capital' means at any time, with respect to [(a)] a Unit, the
Initial Unit Price less the sum of all distributions constituting Capital
Surplus theretofore made in respect of an Initial Common Unit and any
distributions of cash (or the Net Agreed Value of any distributions in kind) in
connection with the dissolution and liquidation of the Partnership theretofore
made in respect of an Initial Common Unit, adjusted as the Board of Supervisors
determines to be appropriate to give effect to any distribution, subdivision or
combination of such Units[, and (b) an APU, the excess of (i) the cash amount
contributed to the Partnership in exchange for such APU over (ii) any amounts
previously distributed toward the redemption of such APU pursuant to Section 6.4
or 12.4].
'U.S. GAAP' means United States Generally Accepted Accounting Principles
consistently applied.
'Withdrawal Opinion of Counsel' has the meaning assigned to such term in
Section 11.1(b).
{'Working Capital Facility' means the working capital facility of the
Operating Partnership under the Amended and Restated Credit Agreement dated as
of September 30, 1997, as amended to date or as it may be amended in the future,
between the Operating Partnership and the lenders named therein or any working
capital facility under any replacement credit agreement.}
1.2 Construction.
Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) 'include' or 'includes' means includes,
without limitation, and 'including' means including, without limitation.
ARTICLE II
ORGANIZATION
2.1 Formation.
The {Initial} General Partner and the Organizational Limited Partner [have]
previously formed the Partnership as a limited partnership {upon the filing on
December 18, 1995 of the Certificate of Limited Partnership with the Secretary
of State of the State of Delaware} pursuant to the provisions of the Delaware
Act [and]{. The General Partner and the Limited Partners} hereby amend and
restate the [original Agreement of Limited Partnership of Suburban Propane
Partners, L.P. in its entirety] {Original Agreement in its entirety to continue
the Partnership as a limited partnership pursuant to the provisions of the
Delaware Act and to set forth the rights and obligations of the Partners and
certain matters related thereto.} This amendment and restatement shall become
effective on the date of this Agreement. Except as expressly provided to the
contrary in this Agreement, the rights and obligations of the Partners and the
administration, dissolution and termination of the Partnership shall be governed
by the Delaware Act. All Partnership Interests shall constitute personal
property of the owner thereof for all purposes.
The General Partner has caused the Certificate of Limited Partnership to be
filed with the Secretary of State of the State of Delaware as required by the
Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the Board of Supervisors
to be reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability) in the State of Delaware or any
other state in which the Partnership may elect to do business or own property{,
including an amendment to reflect the admission of the General Partner as a
successor to the Initial General Partner}. To the extent that such action is
determined by the Board of Supervisors to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate of Limited Partnership and do all things to maintain the
Partnership as a limited partnership (or a partnership in which the limited
partners have limited liability) under the laws of the State of Delaware or of
any other state in which the Partnership may elect to do business or own
property{, including in connection with the Recapitalization and the
transactions contemplated thereby}. Subject to the provisions of Section 3.4(a),
the Partnership shall not
C-17
<PAGE>
<PAGE>
be required, before or after filing, to deliver or mail a copy of the
Certificate of Limited Partnership, any qualification document or any amendment
thereto to any Limited Partner or Assignee.
2.2 Name.
The name of the Partnership shall be 'Suburban Propane Partners, L.P.' The
Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the Board of Supervisors, including, if consented to
by the General Partner in its sole discretion, the name of the General Partner.
The words 'Limited Partnership,' 'L.P.,' 'Ltd.' or similar words or letters
shall be included in the Partnership's name where necessary for the purpose of
complying with the laws of any jurisdiction that so requires. The Board of
Supervisors in its discretion may change the name of the Partnership at any time
and from time to time and shall notify the Limited Partners of such change in
the next regular communication to the Limited Partners.
2.3 Registered Office; Registered Agent; Principal Office; Other Offices.
Unless and until changed by the Board of Supervisors, the registered office
of the Partnership in the State of Delaware shall be located at 1209 Orange
Street, New Castle County, Wilmington, Delaware 19801, and the registered agent
for service of process on the Partnership in the State of Delaware at such
registered office shall be CT Corporation System. The principal office of the
Partnership shall be located at One Suburban Plaza, 240 Route 10 West, Whippany,
New Jersey 07981-0206 or such other place as the Board of Supervisors may from
time to time designate by notice to the Limited Partners. The Partnership may
maintain offices at such other place or places within or outside the State of
Delaware as the Board of Supervisors deems necessary or appropriate. The address
of the General Partner shall be [99 Wood Avenue South, 10th Floor, Iselin, New
Jersey 08830] {One Suburban Plaza, 240 Route 10 West, Whippany, New Jersey
07981-0206} or such other place as the General Partner may from time to time
designate by notice to the Limited Partners.
2.4 Purpose and Business.
The purpose and nature of the business to be conducted by the Partnership
shall be to (a) serve as a limited partner in the Operating Partnership and, in
connection therewith, to exercise all the rights and powers conferred upon the
Partnership as a limited partner in the Operating Partnership pursuant to the
Operating Partnership Agreement or otherwise, (b) engage directly in, or [to]
enter into or form any corporation, partnership, joint venture, limited
liability company or other arrangement to engage indirectly in, any business
activity that the Operating Partnership is permitted to engage in by the
Operating Partnership Agreement and, in connection therewith, [to] exercise all
of the rights and powers conferred upon the Partnership pursuant to the
agreements relating to such business activity, (c) engage directly in, or [to]
enter into or form any corporation, partnership, joint venture, limited
liability company or other arrangement to engage indirectly in, any business
activity that is approved by the Board of Supervisors and which lawfully may be
conducted by a limited partnership organized pursuant to the Delaware Act and,
in connection therewith, [to] exercise all of the rights and powers conferred
upon the Partnership pursuant to the agreements relating to such business
activity, and (d) do anything necessary or appropriate to the foregoing,
including the making of capital contributions or loans to a Group Member. The
Board of Supervisors has no obligation or duty to the Partnership, the Limited
Partners, or the Assignees to propose or approve, and in its discretion may
decline to propose or approve, the conduct by the Partnership of any business.
2.5 Powers.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.
2.6 Power of Attorney.
(a) Each Limited Partner and each Assignee hereby constitutes and appoints
the [Executive Vice Chairman,] Vice Chairman and President of the Partnership
and, if a Liquidator shall have been selected pursuant to Section 12.3, the
Liquidator, severally (and any successor to the Liquidator by merger, transfer,
assignment, election or otherwise) and each of their authorized officers and
attorneys-in-fact,
C-18
<PAGE>
<PAGE>
as the case may be, with full power of substitution, as his true and lawful
agent and attorney-in-fact, with full power and authority in his name, place and
stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including this Agreement and the Certificate of Limited
Partnership and all amendments or restatements thereof) that the Board of
Supervisors or the Liquidator deems necessary or appropriate to form,
qualify or continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the limited partners have
limited liability) in the State of Delaware and in all other jurisdictions
in which the Partnership may conduct business or own property; (B) all
certificates, documents and other instruments that the Board of Supervisors
or the Liquidator deems necessary or appropriate to reflect, in accordance
with its terms, any amendment, change, modification or restatement of this
Agreement; (C) all certificates, documents and other instruments (including
conveyances and a certificate of cancellation) that the Board of
Supervisors or the Liquidator deems necessary or appropriate to reflect the
dissolution and liquidation of the Partnership pursuant to the terms of
this Agreement; (D) all certificates, documents and other instruments
relating to the admission, withdrawal, removal or substitution of any
Partner pursuant to, or other events described in, Article IV, X, XI or
XII; (E) all certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of any class or
series of Partnership Securities issued pursuant to Section 5.6; and (F)
all certificates, documents and other instruments (including agreements and
a certificate of merger) relating to a merger or consolidation of the
Partnership pursuant to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the discretion of the Board of
Supervisors or the Liquidator, to make, evidence, give, confirm or ratify
any vote, consent, approval, agreement or other action that is made or
given by the Partners hereunder or is consistent with the terms of this
Agreement or is necessary or appropriate, in the discretion of the Board of
Supervisors or the Liquidator, to effectuate the terms or intent of this
Agreement; provided, that when required by Section 13.3 or any other
provision of this Agreement that establishes a percentage of the Limited
Partners or of the Limited Partners of any class or series required to take
any action, the [Executive Vice Chairman,] Vice Chairman and President of
the Partnership and the Liquidator may exercise the power of attorney made
in this Section 2.6(a)(ii) only after the necessary vote, consent or
approval of the Limited Partners or of the Limited Partners of such class
or series, as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing the
Board of Supervisors to amend this Agreement except in accordance with Article
XIII or as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive and, to the maximum
extent permitted by law, not be affected by the subsequent death, incompetency,
disability, incapacity, dissolution, bankruptcy or termination of any Limited
Partner or Assignee and the transfer of all or any portion of such Limited
Partner's or Assignee's Partnership Interest and shall extend to such Limited
Partner's or Assignee's heirs, successors, assigns and personal representatives.
Each such Limited Partner or Assignee hereby agrees to be bound by any
representation made by the [Executive Vice Chairman,] Vice Chairman or President
of the Partnership or the Liquidator acting in good faith pursuant to such power
of attorney; and each such Limited Partner or Assignee, to the maximum extent
permitted by law, hereby waives any and all defenses that may be available to
contest, negate or disaffirm the action of the [Executive Vice Chairman,] Vice
Chairman or President of the Partnership or the Liquidator taken in good faith
under such power of attorney. Each Limited Partner or Assignee shall execute and
deliver to the [Executive Vice Chairman,] Vice Chairman or President of the
Partnership or the Liquidator, within 15 days after receipt of the request
therefor, such further designation, powers of attorney and other instruments as
the [Executive Vice Chairman,] Vice Chairman or President of the Partnership or
the Liquidator deems necessary to effectuate this Agreement and the purposes of
the Partnership.
C-19
<PAGE>
<PAGE>
2.7 Term.
The Partnership commenced upon the filing of the Certificate of Limited
Partnership in accordance with the Delaware Act and shall continue in existence
until the close of Partnership business on September 30, 2085, or until the
earlier termination of the Partnership in accordance with the provisions of
Article XII.
2.8 Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner or Assignee, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner, or one or more nominees, as the Board of Supervisors may
determine. The General Partner hereby declares and warrants that any Partnership
assets for which record title is held in the name of the General Partner or one
or more nominees shall be held by the General Partner or nominee for the use and
benefit of the Partnership in accordance with the provisions of this Agreement;
provided, however, that the General Partner shall use reasonable efforts to
cause record title to such assets (other than those assets in respect of which
the Board of Supervisors determines that the expense and difficulty of
conveyancing makes transfer of record title to the Partnership impracticable) to
be vested in the Partnership as soon as reasonably practicable; provided,
further, that, prior to the withdrawal or removal of the General Partner or as
soon thereafter as practicable, the General Partner shall use reasonable efforts
to effect the transfer of record title to the Partnership and, prior to any such
transfer, will provide for the use of such assets in a manner satisfactory to
the Board of Supervisors[; provided, further, notwithstanding the foregoing,
with respect to the transfer of assets pursuant to the Contribution and
Conveyance Agreement, the provisions of the Contribution and Conveyance
Agreement shall control]. All Partnership assets shall be recorded as the
property of the Partnership in its books and records, irrespective of the name
in which record title to such Partnership assets is held.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
3.1 Limitation of Liability.
The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or the Delaware Act.
3.2 Management of Business.
No Limited Partner or Assignee (other than the General Partner, or any of
its Affiliates or any {member,} officer, director, employee, partner, agent or
trustee of the General Partner or any of its Affiliates, or any officer, member
of the board of supervisors or directors, employee or agent of a Group Member,
in its capacity as such, if such Person shall also be a Limited Partner or
Assignee) shall participate in the operation, management or control (within the
meaning of the Delaware Act) of the Partnership's business, transact any
business in the Partnership's name or have the power to sign documents for or
otherwise bind the Partnership. Any action taken by any Affiliate of the General
Partner or any {member,} officer, director, employee, partner, agent or trustee
of the General Partner or any of its Affiliates, or any officer, member of the
board of supervisors or directors, {member, partner,} employee or agent of a
Group Member, in its capacity as such, shall not be deemed to be participation
in the control of the business of the Partnership by a limited partner of the
Partnership (within the meaning of Section 17-303(a) of the Delaware Act) and
shall not affect, impair or eliminate the limitations on the liability of the
Limited Partners or Assignees under this Agreement.
3.3 Outside Activities of the Limited Partners.
Subject to the provisions of Section 7.12, which shall continue to be
applicable to the Persons referred to therein, regardless of whether such
Persons shall also be Limited Partners or Assignees, any Limited Partner or
Assignee shall be entitled to and may have business interests and engage in
business activities in addition to those relating to the Partnership, including
business interests and activities in
C-20
<PAGE>
<PAGE>
direct competition with the Partnership Group. Neither the Partnership nor any
of the other Partners or Assignees shall have any rights by virtue of this
Agreement in any business ventures of any Limited Partner or Assignee.
3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or by applicable
law, and except as limited by Section 3.4(b), each Limited Partner shall have
the right, for a purpose reasonably related to such Limited Partner's interest
as a limited partner in the Partnership, upon reasonable demand and at such
Limited Partner's own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local tax returns for each year;
(iii) to have furnished to [him] {such Limited Partner}, upon
notification to the Partnership, a current list of the name and last known
business, residence or mailing address of each Partner;
(iv) to have furnished to [him] {such Limited Partner}, upon
notification to the Partnership, a copy of this Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash
and a description and statement of the Net Agreed Value of any other
Capital Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) The Board of Supervisors may keep confidential from the Limited
Partners and Assignees, for such period of time as the Board of Supervisors
deems reasonable, (i) any information that the Board of Supervisors reasonably
believes to be in the nature of trade secrets or (ii) other information the
disclosure of which the Board of Supervisors in good faith believes (A) is not
in the best interests of the Partnership Group, (B) could damage the Partnership
Group or (C) that any Group Member is required by law or by agreements with
third parties to keep confidential (other than agreements with Affiliates, the
primary purpose of which is to circumvent the obligations set forth in this
Section 3.4).
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
4.1 Certificates.
Upon the Partnership's issuance of Common Units or [Subordinated] {General
Partner} Units to any Person, the Partnership shall issue one or more
Certificates in the name of such Person evidencing the number of such {Common
Units or General Partner} Units being so issued. In addition, [(a) upon the
General Partner's request] {upon the request of any Person owning Incentive
Distribution Rights}, the Partnership shall issue to [it one or more
Certificates in the General Partner's name evidencing its interests in the
Partnership and (b) upon the request of any Person owning APUs or Incentive
Distribution Rights, the Partnership shall issue to] such Person one or more
certificates evidencing such [APUs or] Incentive Distribution Rights.
Certificates shall be executed on behalf of the Partnership by
the [Executive Vice Chairman,] Vice Chairman, President or any Vice President
and the Secretary or any Assistant Secretary of the Partnership. No Common Unit
Certificate shall be valid for any purpose until it has been countersigned by
the Transfer Agent[. The Partners holding Certificates evidencing Subordinated
Units may exchange such Certificates for Certificates evidencing Common Units on
or after the date on which such Subordinated Units are converted into Common
Units pursuant to the terms of Section 5.8.]{; provided, however, that if the
Board of Supervisors elects to issue Common Units}
C-21
<PAGE>
<PAGE>
{in global form, the Common Unit Certificates shall be valid upon receipt of a
certificate from the Transfer Agent certifying that the Common Units have been
duly registered in accordance with the directions of the Partnership.}
4.2 Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate is surrendered to the Transfer Agent, the
appropriate Officers of the Partnership shall execute, and the Transfer Agent
shall countersign and deliver in exchange therefor, a new Certificate evidencing
the same number of Units as the Certificate so surrendered.
(b) The appropriate Officers of the Partnership shall execute, and the
Transfer Agent shall countersign and deliver {(or, in the case of Common Units
issued in global form, register in accordance with the rules and regulations of
the Depositary),} a new Certificate in place of any Certificate previously
issued if the Record Holder of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory to
the Partnership, that a previously issued Certificate has been lost,
destroyed or stolen;
(ii) requests the issuance of a new Certificate before the Partner has
notice that the Certificate has been acquired by a purchaser for value in
good faith and without notice of an adverse claim;
(iii) if requested by the Partnership, delivers to the Partnership a
bond, in form and substance satisfactory to the Partnership, with surety or
sureties and with fixed or open penalty as the Partnership may reasonably
direct, in its sole discretion, to indemnify the Partnership, the Partners,
the Board of Supervisors{, the Partnership's officers, employees, agents
and other representatives} and the Transfer Agent against any claim that
may be made on account of the alleged loss, destruction or theft of the
Certificate; and
(iv) satisfies any other reasonable requirements imposed by the
Partnership.
If a Limited Partner or Assignee fails to notify the Partnership within a
reasonable time after [he] {such Person} has notice of the loss, destruction or
theft of a Certificate, and a transfer of the [Units] {Limited Partner
Interests} represented by the {lost, destroyed or stolen} Certificate is
registered before the Partnership, the Board of Supervisors or the Transfer
Agent receives such notification, the Limited Partner or Assignee shall be
precluded from making any claim against the Partnership, the Board of
Supervisors and the Transfer Agent for such transfer or for a new Certificate.
(c) As a condition to the issuance of any new Certificate under this
Section 4.2, the Partnership may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Transfer
Agent) reasonably connected therewith.
4.3 Record Holders.
The Partnership shall be entitled to recognize the Record Holder as the
Partner or Assignee with respect to any Partnership Interest and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such Partnership Interest on the part of any other Person, regardless of whether
the Partnership shall have actual or other notice thereof, except as otherwise
provided by law or any applicable rule, regulation, guideline or requirement of
any National Securities Exchange on which the Units are listed for trading.
Without limiting the foregoing, when a Person (such as a broker, dealer, bank,
trust company or clearing corporation or an agent of any of the foregoing) is
acting as nominee, agent or in some other representative capacity for another
Person in acquiring and/or holding Units, as between the Partnership on the one
hand, and such other Persons on the other, such representative Person (a) shall
be the Limited Partner or Assignee (as the case may be) of record and
beneficially, (b) must execute and deliver a Transfer Application and (c) shall
be bound by this Agreement and shall have the rights and obligations of a
Limited Partner or Assignee (as the case may be) hereunder and as provided for
herein.
4.4 Transfer Generally.
(a) The term 'transfer,' when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner assigns its [Partnership] {General}
C-22
<PAGE>
<PAGE>
{Partner} Interest [as a general partner in the Partnership] to another
Person[,] {or} by which the holder of a [Unit] {Limited Partner Interest}
assigns such [Unit] {Limited Partner Interest} to another Person who is or
becomes a Limited Partner or an Assignee, [by which a holder of an APU assigns
such Partnership Interest to another Person, or by which the holder of an
Incentive Distribution Right assigns such Partnership Interest to another
Person,] and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or otherwise{,
in whole or in part}.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent a
disposition by any [shareholder] {securityholder} of the General Partner of any
or all of the issued and outstanding [capital stock of] {equity interests in}
the General Partner.
(d) Nothing contained in this [Article IV, or elsewhere in this]
Agreement[,] shall preclude the settlement of any transactions involving
Partnership Interests entered into through the facilities of any National
Securities Exchange on which such Partnership Interests are listed for trading.
4.5 Registration and Transfer of Units.
(a) The Partnership shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable regulations as it
may prescribe and subject to the provisions of Section 4.5(b), the Partnership
will provide for the registration and transfer of Units. The Transfer Agent is
hereby appointed registrar and transfer agent for the purpose of registering
Common Units and transfers of such Common Units as herein provided. The
Partnership shall not recognize transfers of Certificates representing Units
unless such transfers are effected in the manner described in this Section 4.5.
Upon surrender for registration of transfer of any Units evidenced by a
Certificate, and subject to the provisions of Section 4.5(b), the appropriate
officers on behalf of the Partnership shall execute, and in the case of Common
Units, the Transfer Agent shall countersign and deliver {(or, in the case of
Common Units issued in global form, register in accordance with the rules and
regulations of the Depositary)}, in the name of the holder or the designated
transferee or transferees, as required pursuant to the holder's instructions,
one or more new Certificates evidencing the same aggregate number of Units as
was evidenced by the Certificate so surrendered.
(b) Except as otherwise provided in Section 4.10, the Partnership shall not
recognize any transfer of Units until the Certificates evidencing such Units are
surrendered for registration of transfer and such Certificates are accompanied
by a Transfer Application duly executed by the transferee (or the transferee's
attorney-in-fact duly authorized in writing). No charge shall be imposed by the
Partnership for such transfer; provided, that as a condition to the issuance of
any new Certificate under this Section 4.5, the Partnership may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed with respect thereto.
(c) Units may be transferred only in the manner described in this Section
4.5. The transfer of any Units and the admission of any new Partner shall not
constitute an amendment to this Agreement.
(d) Until admitted as a Substituted Limited Partner pursuant to Section
10.2, the Record Holder of a {Common} Unit shall be an Assignee in respect of
such {Common} Unit. Limited Partners may include custodians, nominees, or any
other individual or entity in its own or any representative capacity.
(e) A transferee {of a Common Unit} who has completed and delivered a
Transfer Application shall be deemed to have (i) requested admission as a
Substituted Limited Partner, (ii) agreed to comply with and be bound by and to
have executed this Agreement, (iii) represented and warranted that such
transferee has the right, power and authority and, if an individual, the
capacity to enter into this Agreement, (iv) granted the powers of attorney set
forth in this Agreement and (v) given the consents and approvals and made the
waivers contained in this Agreement.
4.6 Transfer of a General Partner's Partnership Interest.
{Except for (a) any pledge by the General Partner of the General Partner
Interest solely for the purpose of securing, directly or indirectly,
indebtedness of the General Partner in connection with the}
C-23
<PAGE>
<PAGE>
{acquisition loan incurred by the General Partner to purchase the General
Partner Interest at the Closing, (b) any related foreclosure on and resulting
sale thereafter of the General Partner Interest in connection with such pledge
and} [except for] {(c)} a transfer by the General Partner of all, but not less
than all, of its [Partnership] {General Partner} Interest [as a general partner
in the Partnership] to [(a)] {(i)} an Affiliate of the General Partner or [(b)]
{(ii)} another Person in connection with the merger or consolidation of the
General Partner with or into another Person or the transfer by the General
Partner of all or substantially all of its assets to another Person, which in
any such case, shall only be limited by the provisions of this Section 4.6, the
transfer by the General Partner of all or any part of its [Partnership] {General
Partner} Interest [as a general partner in the Partnership] to a Person prior to
September 30, 2006 shall be subject to the prior approval of holders of at least
a [Unit Majority] {majority of the Outstanding Common Units}. Notwithstanding
anything herein to the contrary, no transfer by the General Partner of all or
any part of its [Partnership] {General Partner} Interest [as a general partner
in the Partnership] to another Person shall be permitted unless (i) the
transferee agrees to assume the rights and duties of the General Partner under
this Agreement and the Operating Partnership Agreement and to be bound by the
provisions of this Agreement and the Operating Partnership Agreement, (ii) the
Partnership receives an Opinion of Counsel that such transfer would not result
in the loss of limited liability of any Limited Partner or of any limited
partner of the Operating Partnership or cause the Partnership or the Operating
Partnership to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes (to the
extent not already so treated or taxed) and (iii) such transferee also agrees to
purchase all (or the appropriate portion thereof, if applicable) of the
partnership interest of the General Partner as the general partner of each other
Group Member. In the case of a transfer pursuant to and in compliance with this
Section 4.6, the transferee or successor (as the case may be) shall, subject to
compliance with the terms of Section 10.3, be admitted to the Partnership as a
General Partner immediately prior to the transfer of [the Partnership] {its
General Partner} Interest, and the business of the Partner shall continue
without dissolution.
4.7 Transfer of Incentive Distribution Rights.
A holder of Incentive Distribution Rights may transfer any or all of the
Incentive Distribution Rights held by such holder {without the consent of the
Partnership or any Partner}. The Board of Supervisors shall have the authority
(but shall not be required) to adopt such reasonable restrictions on the
transfer of Incentive Distribution Rights and requirements for registering the
transfer of Incentive Distribution Rights as the Board of Supervisors, in its
sole discretion, shall determine are necessary or appropriate {(and to modify or
repeal any}[.]
[4.8 Transfer of APUs.]
[A holder of APUs may transfer any or all of the APUs held by such holder.
The Board of Supervisors shall have the authority (but shall not be required) to
adopt] such reasonable restrictions [on the transfer of APUs and requirements
for registering the transfer of APUs as the Board of Supervisors, in its sole
discretion, shall determine are necessary or appropriate.] {in like manner);
provided that no such restrictions or requirements that adversely affect the
holders of Incentive Distribution Rights in any material respect may be adopted
without the approval of the holders of at least a majority of the Incentive
Distribution Rights.}
{4.8 [Deleted.]}
4.9 Restrictions on Transfers.
(a) Notwithstanding the other provisions of this Article IV, no transfer of
any Partnership Interest shall be made if such transfer would (i) violate the
then applicable federal or state securities laws or rules and regulations of the
Commission, any state securities commission or any other governmental
authorities with jurisdiction over such transfer, (ii) terminate the existence
or qualification of the Partnership or the Operating Partnership under the laws
of the jurisdiction of its formation, or (iii) cause the Partnership or the
Operating Partnership to be treated as an association taxable as a corporation
or otherwise to be taxed as an entity for federal income tax purposes (to the
extent not already so treated or taxed).
C-24
<PAGE>
<PAGE>
(b) The Board of Supervisors may impose restrictions on the transfer of
Partnership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid a significant risk of the Partnership or the
Operating Partnership becoming taxable as a corporation or otherwise to be taxed
as an entity for federal income tax purposes. The restrictions may be imposed by
making such amendments to this Agreement as the Board of Supervisors may
determine to be necessary or appropriate to impose such restrictions {without
the consent of any Partner}; provided, however, that any amendment that the
Board of Supervisors believes, in the exercise of its reasonable discretion,
could result in the delisting or suspension of trading of any class of Units on
any National Securities Exchange on which such class of Units is then traded
must be approved by the holders of at least a majority of the Outstanding Units
of such class.
[(c) The transfer of a Subordinated Unit that has converted into a Common
Unit shall be subject to the restrictions imposed by Section 6.7(b).]
4.10 Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any federal{,} state or
local law or regulation that, in the reasonable determination of the Board of
Supervisors, creates a substantial risk of cancellation or forfeiture of any
property in which the Group Member has an interest based on the nationality,
citizenship or other related status of a Limited Partner or Assignee, the Board
of Supervisors may request any Limited Partner or Assignee to furnish to the
Board of Supervisors, within 30 days after receipt of such request, an executed
Citizenship Certification or such other information concerning his nationality,
citizenship or other related status (or, if the Limited Partner or Assignee is a
nominee holding for the account of another Person, the nationality, citizenship
or other related status of such Person) as the Board of Supervisors may request.
If a Limited Partner or Assignee fails to furnish to the Board of Supervisors
within the aforementioned 30-day period such Citizenship Certification or other
requested information or if upon receipt of such Citizenship Certification or
other requested information the Board of Supervisors determines, with the advice
of counsel, that a Limited Partner or Assignee is not an Eligible Citizen, the
Partnership Interests owned by such Limited Partner or Assignee shall be subject
to redemption in accordance with the provisions of Section 4.11. In addition,
the General Partner may require that the status of any such Limited Partner or
Assignee be changed to that of a Non-citizen Assignee and, thereupon, the
General Partner shall be substituted for such Non-citizen Assignee as the
Limited Partner in respect of [his] {such Non-citizen Assignee's} Units.
(b) The General Partner shall, in exercising voting rights in respect of
Units held by it on behalf of Non-citizen Assignees, distribute the votes in the
same ratios as the votes of Limited Partners in respect of Units other than
those of Non-citizen Assignees are cast, either for, against or abstaining as to
the matter {being voted upon}.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have
no right to receive a distribution in kind pursuant to Section 12.4 but shall be
entitled to the cash equivalent thereof {as determined in the sole discretion of
the Board of Supervisors}, and the Partnership shall provide cash in exchange
for an assignment of the Non-citizen Assignee's share of the distribution in
kind. Such payment and assignment shall be treated for Partnership purposes as a
purchase by the Partnership from the Non-citizen Assignee of his Partnership
Interest (representing his right to receive his share of such distribution in
kind).
(d) At any time after [he] {a Non-citizen Assignee} can and does certify
that [he] {it} has become an Eligible Citizen, a Non-citizen Assignee may, upon
application to the Board of Supervisors, request admission as a Substituted
Limited Partner with respect to any Units of such Non-citizen Assignee not
redeemed pursuant to Section 4.11, and upon [his] admission pursuant to Section
10.2, the General Partner shall cease to be deemed to be the Limited Partner in
respect of the Non-citizen Assignee's Units.
4.11 Redemption of Partnership Interests of Non-citizen Assignees.
(a) If at any time a Limited Partner or Assignee fails to furnish a
Citizenship Certification or other information requested within the 30-day
period specified in Section 4.9(a), or if upon receipt of such Citizenship
Certification or other information the Board of Supervisors determines, with the
advice of
C-25
<PAGE>
<PAGE>
counsel, that a Limited Partner or Assignee is not an Eligible Citizen, the
Partnership may, unless the Limited Partner or Assignee establishes to the
satisfaction of the Board of Supervisors that such Limited Partner or Assignee
is an Eligible Citizen or has transferred [his] {its} Partnership Interests to a
Person who is an Eligible Citizen and who furnishes a Citizenship Certification
to the Board of Supervisors prior to the date fixed for redemption as provided
below, redeem the Partnership Interest of such Limited Partner or Assignee as
follows:
(i) The Board of Supervisors shall, not later than the 30th day before
the date fixed for redemption, give notice of redemption to the Limited
Partner or Assignee, at [his] {its} last address designated on the records
of the Partnership or the Transfer Agent, by registered or certified mail,
postage prepaid. The notice shall be deemed to have been given when so
mailed. The notice shall specify the Redeemable Interests, the date fixed
for redemption, the place of payment, that payment of the redemption price
will be made upon surrender of the Certificate evidencing the Redeemable
Interests and that on and after the date fixed for redemption no further
allocations or distributions to which the Limited Partner or Assignee would
otherwise be entitled in respect of the Redeemable Interests will accrue or
be made.
(ii) The aggregate redemption price for Redeemable Interests shall be
an amount equal to the Current Market Price (the date of determination of
which shall be the date fixed for redemption) of Partnership Interests of
the class to be so redeemed multiplied by the number of Partnership
Interests of each such class included among the Redeemable Interests. The
redemption price shall be paid, in the discretion of the Board of
Supervisors, in cash or by delivery of a promissory note of the Partnership
in the principal amount of the redemption price, bearing interest at the
rate of 10% annually and payable in three equal annual installments of
principal together with accrued interest, commencing one year after the
redemption date.
(iii) Upon surrender by or on behalf of the Limited Partner or
Assignee, at the place specified in the notice of redemption, of the
Certificate evidencing the Redeemable Interests, duly endorsed in blank or
accompanied by an assignment duly executed in blank, the Limited Partner or
Assignee or his duly authorized representative shall be entitled to receive
the payment therefor.
(iv) After the redemption date, Redeemable Interests shall no longer
constitute issued and Outstanding Partnership Interests.
(b) The provisions of this Section 4.11 shall also be applicable to
Partnership Interests held by a Limited Partner or Assignee as nominee of a
Person determined to be other than an Eligible Citizen.
(c) Nothing in this Section 4.11 shall prevent the recipient of a notice of
redemption from transferring [his] {such Person's} Partnership Interests before
the redemption date if such transfer is otherwise permitted under this
Agreement. Upon receipt of notice of such a transfer, the Board of Supervisors
shall withdraw the notice of redemption, provided the transferee of such
Partnership Interests certifies in the Transfer Application that he is an
Eligible Citizen. If the transferee fails to make such certification, such
redemption shall be effected from the transferee on the original redemption
date.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
5.1 Organizational Contributions.
{(a)} In connection with the formation of the Partnership under the
Delaware Act, the {Initial} General Partner made an initial Capital Contribution
to the Partnership [in the amount of $10.00, for an interest in the Partnership
and has been admitted as the General Partner] {and was admitted as the general
partner} of the Partnership, and the Organizational Limited Partner made an
initial Capital Contribution to the Partnership [in the amount of $990.00 for an
interest in the Partnership and has been] {and was} admitted as a Limited
Partner of the Partnership.
[As of the Closing Date,] {(b) On the Initial Closing Date, the Initial
Underwriters contributed cash to the Partnership in exchange for 18,750,000
Common Units and the Initial General Partner contributed its interests in the
Operating Partnership to the Partnership in exchange for 9,976,250}
C-26
<PAGE>
<PAGE>
{Subordinated Units and the Incentive Distribution Rights. Immediately after
these contributions,} the interest of the Organizational Limited Partner [shall
be redeemed as provided in the Contribution and Conveyance Agreement; the
initial Capital Contributions of each Partner shall thereupon be refunded;[
{]was terminated} and the Organizational Limited Partner [shall cease] {ceased}
to be a Limited Partner [of the Partnership. Ninety-nine percent of any interest
or other profit that may have resulted from the investment or other use of such
initial Capital Contributions shall be allocated and distributed to the
Organizational Limited Partner, and the balance thereof shall be allocated and
distributed to]{. On the Initial Option Closing Date, the Initial Underwriters
contributed cash to the Partnership in exchange for 2,812,500 Common Units, the
proceeds of which were used to redeem 2,812,500 Subordinated Units from} the
General Partner.
5.2[ Contributions by General Partner.] { Redemption of Subordinated Units
and APUs.
On the Closing Date and pursuant to the Recapitalization Agreement,
notwithstanding any other provision of this Agreement but subject to Section
17-607 of the Delaware Act, the Partnership is redeeming all 7,163,750
Outstanding Subordinated Units and all 220,000 Outstanding APUs from the Initial
General Partner for $69 million in cash. Upon such redemption, the Outstanding
Subordinated Units and APUs are being canceled.} [On the Closing Date and
pursuant to the Contribution and Conveyance Agreement the General Partner shall
contribute to the Partnership, as a Capital Contribution, a limited partner
interest in the Operating Partnership together with cash in an amount equal to
$10,000.00 in exchange for (i) the continuation of its Partnership Interest as
general partner in the Partnership, subject to all of the rights, privileges and
duties of the General Partner under this Agreement, (ii) 9,976,250 Subordinated
Units and (iii) the Incentive Distribution Rights. In addition, upon the
issuance of any additional Limited Partner Partnership Interests by the
Partnership (other than the Subordinated Units and Incentive Distribution Rights
issued pursuant to this Section 5.2, the Common Units issued in the Initial
Offering or pursuant to the Over-Allotment Option and APUs), the General Partner
shall be required to make additional Capital Contributions equal to 1/99th of
any amount contributed to the Partnership in exchange for such Units. Except as
set forth in the immediately preceding sentence and Article XII, the General
Partner shall not be obligated to make any additional Capital Contributions to
the Partnership.]
5.3 [Contributions by Initial Limited Partners.] {Issuance of General
Partner Units.
(a) On the Closing Date, the Partnership will issue to the General Partner
224,685 General Partner Units to represent the 1.0% General Partner Interest
held by the General Partner.}
[(a) On the Closing Date and pursuant to the Underwriting Agreement and the
Contribution and Conveyance Agreement, each Underwriter shall contribute to the
Partnership cash in an amount equal to the Issue Price per Initial Common Unit,
multiplied by the number of Common Units specified in the Underwriting Agreement
to be purchased by such Underwriter at the 'Closing Date,' as such term is
defined in the Underwriting Agreement. In exchange for such Capital
Contributions by the Underwriters, the Partnership shall issue Common Units to
each Underwriter on whose behalf such Capital Contribution is made in an amount
equal to the quotient obtained by dividing (i) the cash contribution to the
Partnership by or on behalf of such Underwriter by (ii) the Issue Price per
Initial Common Unit.]
[(b) Upon the exercise of the Over-allotment Option, each Underwriter shall
contribute to the Partnership cash in an amount equal to the Issue Price per
Initial Common Unit, multiplied by the number of Common Units specified in the
Underwriting Agreement to be purchased by such Underwriter at the Option Closing
Date. In exchange for such Capital Contributions by the Underwriters, the
Partnership shall issue Common Units to each Underwriter on whose behalf such
Capital Contribution is made in an amount equal to the quotient obtained by
dividing (i) the cash contributions to the Partnership by or on behalf of such
Underwriter by (ii) the Issue Price per Common Unit.]
[Notwithstanding anything else herein contained, but subject to Section
17-607 of the Delaware Act, all proceeds, net of underwriting discounts,
received by the Partnership from the issuance of Common Units upon the exercise
of the Over-allotment Option will be distributed to the General Partner in]
C-27
<PAGE>
<PAGE>
[redemption of Subordinated Units equal in number to the Common Units issued
upon the exercise of the Over-allotment Option.]
[(c) No Limited Partner Partnership Interests will be issued or issuable
as of or at the Closing Date other than (i) the Common Units issuable pursuant
to subparagraph (a) hereof in aggregate number equal to 18,750,000, (ii) the
'Additional Units' as such term is defined in the Underwriting Agreement in
aggregate number up to 2,812,500 issuable upon exercise of the Over-allotment
Option pursuant to subparagraph (b) hereof, (iii) the 9,976,250 Subordinated
Units issuable to] {(b) Upon the making of any Capital Contribution to the
Partnership by any Person, the General Partner, in its sole discretion, may
make an additional Capital Contribution only to the extent necessary such that
after taking into account the additional Capital Contribution made by such
Person and} the General Partner pursuant to [Section 5.2 hereof and (iv) the
Incentive Distribution Rights issuable to] {this Section 5.3} the General
Partner [pursuant to Section 5.2 hereof ]{will have a Capital Account equal
to at least 1.0% of the sum of the Capital Accounts of all Partners.}
5.4 Interest and Withdrawal.
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any, that distributions made pursuant to
this Agreement or upon termination of the Partnership may be considered [as such
by law] {by applicable law to be withdrawals or returns of Capital
Contributions} and then only to the extent provided for in this Agreement.
Except to the extent expressly provided in this Agreement, no Partner or
Assignee shall have priority over any other Partner or Assignee either as to the
return of Capital Contributions or as to profits, losses or distributions. Any
such return shall be a compromise to which all Partners and Assignees agree
within the meaning of 17-502(b) of the Delaware Act.
5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial owner
of Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the Board of
Supervisors in its sole discretion) owning a Partnership Interest a separate
Capital Account with respect to such Partnership Interest in accordance with the
rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account
shall be increased by (i) the amount of all Capital Contributions made to the
Partnership with respect to such Partnership Interest pursuant to this Agreement
{(or the Original Agreement)} and (ii) all items of Partnership income and gain
(including, without limitation, income and gain exempt from tax) computed in
accordance with Section 5.5(b) and allocated with respect to such Partnership
Interest pursuant to Section 6.1, and decreased by (x) the amount of cash or
{the} Net Agreed Value of all actual and deemed distributions of cash or
property made with respect to such Partnership Interest pursuant to this
Agreement {(or the Original Agreement)} and (y) all items of Partnership
deduction and loss computed in accordance with Section 5.5(b) and allocated with
respect to such Partnership Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income, gain, loss
or deduction which is to be allocated pursuant to Article VI and is to be
reflected in the Partners' Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall be
treated as owning directly its proportionate share (as determined by the
Board of Supervisors based upon the provisions of the Operating Partnership
Agreement) of all property owned by the Operating Partnership {or any other
Subsidiary that is classified as a partnership for federal income tax
purposes}.
(ii) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code, if any, shall, for
purposes of Capital Account maintenance, be treated as an item of deduction
at the time such fees and other expenses are incurred and shall be
allocated among the Partners pursuant to Section 6.1.
C-28
<PAGE>
<PAGE>
[To the extent an adjustment to the adjusted tax basis of any Partnership asset
pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(m) to be taken into account in
determining Capital Accounts, the amount of such adjustment in the Capital
Accounts shall be treated as an item of gain or loss.]
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss
and deduction shall be made without regard to any election under Section
754 of the Code which may be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
regard to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes. {To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or 743(b) of the Code is
required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m) to
be taken into account in determining Capital Accounts, the amount of such
adjustment in the Capital Accounts shall be treated as an item of gain or
loss.}
(iv) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the Code,
any deductions for depreciation, cost recovery or amortization attributable
to any Contributed Property shall be determined as if the adjusted basis of
such property on the date it was acquired by the Partnership were equal to
the Agreed Value of such property. Upon an adjustment pursuant to Section
5.5(d) to the Carrying Value of any Partnership property subject to
depreciation, cost recovery or amortization, any further deductions for
such depreciation, cost recovery or amortization attributable to such
property shall be determined (A) as if the adjusted basis of such property
were equal to the Carrying Value of such property immediately following
such adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal income tax
purposes; provided, however, that, if the asset has a zero adjusted basis
for federal income tax purposes, depreciation, cost recovery or
amortization deductions shall be determined using any reasonable method
that the Board of Supervisors may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is placed
in service and shall be allocated among the Partners pursuant to Section
6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code
shall, to the extent possible, be allocated in the same manner to the
Partners to whom such deemed deduction was allocated.
(c) [(i) Except as otherwise provided in Section 5.5(c)(ii), a] A
transferee of a Partnership Interest shall succeed to a pro rata portion of the
Capital Account of the transferor relating to the Partnership Interest so
transferred[; provided, however, that, if the transfer causes a termination of
the Partnership under Section 708(b)(1)(B) of the Code, the Partnership's
properties shall be deemed to have been distributed in liquidation of the
Partnership to the Partners (including any transferee of a Partnership Interest
that is a party to the transfer causing such termination) pursuant to Section
12.4 (after adjusting the balance of the Capital Accounts of the Partners as
provided in Section 5.5(d)(ii)) and recontributed by such Partners in
reconstitution of the Partnership. Any such deemed distribution shall be treated
as an actual distribution for purposes of this Section 5.5. In such event, the
Carrying Values of the Partnership properties shall be adjusted immediately
prior to such deemed distribution pursuant to Section 5.5(d)(ii) and such
Carrying Values shall then constitute the Agreed Values of such properties upon
such deemed contribution to the reconstituted Partnership. The Capital Accounts
of such reconstituted Partnership shall be maintained in accordance with the
principles of this Section 5.5].
[(ii) Immediately prior to the transfer of a Subordinated Unit or of a
Subordinated Unit that has converted into a Common Unit pursuant to Section 5.8
by a holder thereof, the Capital Account]
C-29
<PAGE>
<PAGE>
[maintained for such Person with respect to its Subordinated Units or converted
Subordinated Units will (A) first, be allocated to the Subordinated Units or
converted Subordinated Units to be transferred in an amount equal to the product
of (x) the number of such Subordinated Units or converted Subordinated Units to
be transferred and (y) the Per Unit Capital Amount for a Common Unit, and (B)
second, any remaining balance in such Capital Account will be retained by the
transferor, regardless of whether it has retained any Subordinated Units or
converted Subordinated Units. Following any such allocation, the transferor's
Capital Account, if any, maintained with respect to the retained Subordinated
Units or converted Subordinated Units, if any, will have a balance equal to the
amount allocated under clause (B) hereinabove, and the transferee's Capital
Account established with respect to the transferred Subordinated Units or
converted Subordinated Units will have a balance equal to the amount allocated
under clause (A) hereinabove.]
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Units for cash or Contributed
Property or the conversion of the General Partner's [Partnership] {Combined}
Interest to Common Units pursuant to Section 11.3(b) {or the conversion of
Incentive Distribution Rights to Common Units pursuant to Section 5.8}, the
Capital Account of all Partners and the Carrying Value of each Partnership
property immediately prior to such issuance shall be adjusted upward or downward
to reflect any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property immediately prior to such
issuance and had been allocated to the Partners at such time pursuant to Section
6.1[(c)]. In determining such Unrealized Gain or Unrealized Loss, the aggregate
cash amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance of
additional Units shall be determined by the Board of Supervisors using such
reasonable method of valuation as it may adopt; provided, however, {that} the
Board of Supervisors, in arriving at such valuation, must take fully into
account the fair market value of the Partnership Interests of all Partners at
such time. The Board of Supervisors shall allocate such aggregate value among
the assets of the Partnership (in such manner as it determines in its discretion
to be reasonable) to arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f),
immediately prior to any actual or deemed distribution to a Partner of any
Partnership property (other than a distribution of cash that is not in
redemption or retirement of a Partnership Interest), the Capital Accounts of all
Partners and the Carrying Value of all Partnership property shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as if such Unrealized Gain or
Unrealized Loss had been recognized in a sale of such property immediately prior
to such distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 6.1[(c)]. In
determining such Unrealized Gain or Unrealized Loss the aggregate cash amount
and fair market value of all Partnership assets (including, without limitation,
cash or cash equivalents) immediately prior to a distribution shall (A) in the
case of an actual distribution which is not made pursuant to Section 12.4 [or in
the case of a deemed distribution occurring as a result of a termination of the
Partnership pursuant to Section 708 of the Code], be determined and allocated in
the same manner as that provided in Section 5.5(d)(i) or (B) in the case of a
liquidating distribution pursuant to Section 12.4, be determined and allocated
by the Liquidator using such reasonable method of valuation as it may adopt.
5.6 Issuances of Additional Partnership Securities.
(a) Subject to Section 5.7, the Partnership may issue additional
Partnership Securities for any Partnership purpose at any time and from time to
time to such Persons for such consideration and on such terms and conditions as
shall be established by the Board of Supervisors in its sole discretion, all
without the approval of any Limited Partners.
(b) Each additional Partnership Security authorized to be issued by the
Partnership pursuant to Section 5.6(a) may be issued in one or more classes, or
one or more series of any such classes, with such designations, preferences,
rights, powers and duties (which may be senior to existing classes and series of
Partnership Securities), as shall be fixed by the Board of Supervisors in the
exercise of its sole discretion, including (i) the right to share Partnership
profits and losses or items thereof; (ii) the right to share in Partnership
distributions; (iii) the rights upon dissolution and liquidation of the
Partnership;
C-30
<PAGE>
<PAGE>
(iv) whether, and the terms and conditions upon which, the Partnership may
redeem the Partnership Security; (v) whether such Partnership Security is issued
with the privilege of conversion and, if so, the terms and conditions of such
conversion; (vi) the terms and conditions upon which each Partnership Security
will be issued, evidenced by certificates and assigned or transferred; and (vii)
the right, if any, of each such Partnership Security to vote on Partnership
matters, including matters relating to the relative rights, preferences and
privileges of such Partnership Security.
(c) The Board of Supervisors is hereby authorized and directed to take all
actions that it deems necessary or appropriate in connection with each issuance
of Partnership Securities pursuant to this Section 5.6 and to amend this
Agreement in any manner that it deems necessary or appropriate to provide for
each such issuance, to admit Additional Limited Partners in connection therewith
and to specify the relative rights, powers and duties of the holders of the
Units or other Partnership Securities being so issued. The Board of Supervisors
shall do all things necessary to comply with the Delaware Act and is authorized
and directed to do all things it deems to be necessary or advisable in
connection with any future issuance of Partnership Securities, including
compliance with any statute, rule, regulation or guideline of any federal, state
or other governmental agency or any National Securities Exchange on which the
Units or other Partnership Securities are listed for trading.
5.7 Limitations on Issuance of Additional Partnership Securities
The issuance of Partnership Securities pursuant to Section 5.6 shall be subject
to the following restrictions and limitations:
(a) [During the Subordination Period] {Prior to the record date for the
quarter ending March 31, 2001}, the Partnership shall not issue {(i)} an
aggregate of more than 9,375,000 additional Parity Units or {(ii) any other}
Partnership Securities having rights to distributions or in liquidation ranking
on a parity with or prior or senior to the [Subordinated] {Common} Units{, in
either case,} without the prior approval of the holders of a [Unit Majority]
{majority of the Outstanding Common Units}. In applying this limitation, there
shall be excluded [(i)] Common Units issued (A) [in connection with the exercise
of the Over-allotment Option, (B)] in accordance with Sections 5.7(b) and
5.7(c)[, (C) upon conversion of Subordinated Units pursuant to Section 5.8 and
(D)] {or (B)} in the event of a combination or subdivision of Common Units.
(b) The Partnership may also issue an unlimited number of Parity Units
[prior to the end of the Subordination Period] {prior to the record date for the
quarter ending March 31, 2001} and without the approval of the Unitholders if
such issuance occurs (i) in connection with an Acquisition or a Capital
Improvement or (ii) within 365 days of, and the net proceeds from such issuance
are used to repay debt incurred in connection with, an Acquisition or a Capital
Improvement, in each case where such Acquisition or Capital Improvement involves
assets that, if acquired by the Partnership as of the date that is one year
prior to the first day of the Quarter in which such Acquisition is to be
consummated or such Capital Improvement is to be completed, would have resulted
in an increase in:
(i) the amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis (for all Outstanding Units) with respect to
each of the four most recently completed Quarters {(on a pro forma basis)}
over
(ii) the actual amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis (for all Outstanding Units) {(excluding
Adjusted Operating Surplus attributable to the Acquisition or the Capital
Improvement)} with respect to each of such four Quarters.
The amount in clause (i) shall be determined on a pro forma basis
assuming that (A) all of the Parity Units to be issued in connection with
or within 365 days of such Acquisition or Capital Improvement had been
issued and outstanding, (B) all indebtedness for borrowed money to be
incurred or assumed in connection with such Acquisition or Capital
Improvement (other than any such indebtedness that is to be repaid with the
proceeds of such offering) had been incurred or assumed, in each case as of
the commencement of such four-Quarter period, (C) the personnel expenses
that would have been incurred by the Partnership in the operation of the
acquired assets are the personnel expenses for employees to be retained by
the Partnership in the operation of the acquired assets, and (D) the
non-personnel costs and expenses are computed on the same basis as
C-31
<PAGE>
<PAGE>
those incurred by the Partnership in the operation of the Partnership's
business at similarly situated Partnership facilities.
(c) The Partnership may also issue an unlimited number of Parity Units
[prior to the end of the Subordination Period] {prior to the record date for the
quarter ending March 31, 2001} [and] without the approval of the Unitholders if
the proceeds from such issuance are used exclusively to repay up to $75 million
of indebtedness of a Group Member where the aggregate amount of distributions
that would have been paid with respect to such newly issued Units, plus the
related distributions on the general partner interest in the Partnership in
respect of the four-Quarter period ending prior to the first day of the Quarter
in which the issuance is to be consummated (assuming such additional Units had
been Outstanding throughout such period and that distributions equal to the
distributions that were actually paid on the Outstanding Units during the period
were paid on such additional Units) did not exceed the interest costs actually
incurred during such period on the indebtedness that is to be repaid (or, if
such indebtedness was not outstanding throughout the entire period, would have
been incurred had such indebtedness been outstanding for the entire period).]
[(d) During the Subordination Period, the Partnership shall not issue
additional Partnership Securities having rights to distributions or in
liquidation ranking prior or senior to the Common Units, without the prior
approval of the holders of a Unit Majority.]
[(e)]{(d)} No fractional Units shall be issued by the Partnership.
[5.8 Conversion of Subordinated Units]
[(a) A total of one-quarter of the Outstanding Subordinated Units
(determined as of the Closing Date or if the Over-allotment Option is exercised,
determined as of the Option Closing Date) will convert into Common Units on a
one-for-one basis on the first day after the Record Date for distribution in
respect of any Quarter ending on or after March 27, 1999, in respect of which:]
[(i) distributions under Section 6.4 in respect of all Outstanding
Common Units and Subordinated Units with respect to each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equals or exceeds the sum of the Minimum Quarterly Distribution
on all of the Outstanding Common Units and Subordinated Units during such
periods;]
[(ii) the Adjusted Operating Surplus generated during each of the two
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equals or exceeds the sum of the Minimum Quarterly Distribution
on all of the Outstanding Common Units and Subordinated Units, plus the
related distribution on the general partner interest in the Partnership and
the Operating Partnership, during such periods; and]
[(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero.]
[(b) A total of one-quarter of the Outstanding Subordinated Units
(determined as of the Closing Date or if the Over-allotment Option is exercised,
determined as of the Option Closing Date) will convert into Common Units on a
one-for-one basis on the first day after the Record Date for distribution in
respect of any Quarter ending on or after April 1, 2000, in respect of which:]
[(i) distributions under Section 6.4 in respect of all Outstanding
Common Units and Subordinated Units with respect to each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equals or exceeds the sum of the Minimum Quarterly Distribution
on all of the Outstanding Common Units and Subordinated Units during such
periods;]
[(ii) the Adjusted Operating Surplus generated during each of the two
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equals or exceeds the sum of the Minimum Quarterly Distribution
on all of the Outstanding Common Units and Subordinated Units, plus the
related distribution on the general partner interest in the Partnership and
the Operating Partnership, during such periods; and]
[(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero;]
{5.8 Conversion of Incentive Distribution Rights.}
{(a) At any time after the fifth anniversary of the Closing Date, upon 30
days prior written notice (the 'Conversion Notice'), the Board of Supervisors
(with Special Approval) will have the option to}
C-32
<PAGE>
<PAGE>
{cause all, but not less than all, of the Incentive Distribution Rights to be
converted into that number of Common Units having a value equal to the fair
market value of such Incentive Distribution Rights on the day immediately prior
to the day specified for conversion in the Conversion Notice.}
{(b) For purposes of this Section 5.8, the fair market value of the
Incentive Distribution Rights shall be determined by agreement between the Board
of Supervisors (with Special Approval) and the holders of at least a majority of
the Incentive Distribution Rights or, failing agreement within 30 days after the
Conversion Notice has been given by the Board of Supervisors, by an independent
investment banking firm or other independent expert selected by the Board of
Supervisors (with Special Approval) and the holders of at least a majority of
the Incentive Distribution Rights, which, in turn, may rely on other experts,
and the determination of which shall be conclusive as to such matter. If such
parties cannot agree upon one independent investment banking firm or other
independent expert within 45 days after the Conversion Notice has been given by
the Board of Supervisors, then the Board of Supervisors (with Special Approval)
shall designate an independent investment banking firm or other independent
expert, the holders of at least a majority of the Incentive Distribution Rights
shall designate an independent investment banking firm or other independent
expert, and such firms or experts shall mutually select a third independent
investment banking firm or independent expert, which third independent
investment banking firm or other independent expert shall determine the fair
market value of the Incentive Distribution Rights. The conversion of Incentive
Distribution Rights into Common} Units pursuant to this Section 5.8[(b) may not
occur until at least one year following the conversion of Subordinated Units
pursuant to Section 5.8(a).] {shall occur on the 10th Business Day following the
determination of their fair market value.}
[(c) In the event that less than all of the Outstanding Subordinated Units
shall convert into Common Units pursuant to Section 5.8(a) or 5.8(b) at a time
when there shall be more than one holder of Subordinated Units, then, unless all
of the holders of Subordinated Units shall agree to a different allocation, the
Subordinated Units that are to be converted into Common Units shall be allocated
among the holders of Subordinated Units pro rata based on the number of
Subordinated Units held by each such holder.]
[(d) Any Subordinated Units that are not converted into Common Units
pursuant to Sections 5.8(a) and (b) shall convert into Common Units on a
one-for-one basis on the first day following the Record Date for distributions
in respect of the final Quarter of the Subordination Period.]
[(e) Notwithstanding any other provision of this Agreement, all the then
Outstanding Subordinated Units will automatically convert into Common Units on a
one-for-one basis if Suburban Propane GP, Inc. (or any Affiliate of Suburban
Propane GP, Inc. that is a successor to Suburban Propane GP, Inc. as General
Partner of the Partnership) is removed as General Partner of the Partnership
under circumstances where Cause does not exist and Units held by] {(c) In making
its determination of fair market value, the determining independent investment
banking firm or other independent expert shall consider the then current price
of Common Units on any National Securities Exchange on which the Common Units
are then listed, the value of the Partnership's assets, the rights and
obligations of} the General Partner and [its Affiliates are not voted in favor
of such removal.] {other factors it may deem relevant.]
[(f) A Subordinated Unit that has converted into a Common Unit shall be
subject to the provisions of Section 6.7(b). ]{(d) For purposes of this
Agreement, conversion of the Incentive Distribution Rights to Common Units will
be characterized as if the holders of Incentive Distribution Rights contributed
their Incentive Distribution Rights to the Partnership in exchange for the newly
issued Common Units, and each such Common Unit shall have a Capital Account
equal to the Capital Account of each other Common Unit.}
{(e) In connection with any merger, consolidation or sale of all or
substantially all of the assets of the Partnership or the Operating Partnership
in which the Common Unitholders are entitled to receive cash, securities or
other property in exchange for their Common Units, the holders of the Incentive
Distribution Rights shall be entitled to receive in exchange for such rights
that amount of cash, securities or other property that such holder would have
been entitled to receive had the Incentive Distribution Rights been converted
into Common Units immediately prior to the consummation of such transaction in
accordance with the terms of this Section 5.8.}
C-33
<PAGE>
<PAGE>
5.9 Limited Preemptive Rights{.}
Except as provided in this Section 5.9 and Section [5.2] {5.3}, no Person
shall have any preemptive, preferential or other similar right with respect to
the issuance of any Partnership Security, whether unissued, held in the treasury
or hereafter created. The General Partner shall have the right, which it may
from time to time assign in whole or in part to any of its Affiliates, to
purchase Partnership Securities from the Partnership whenever, and on the same
terms that, the Partnership issues Partnership Securities to Persons other than
the General Partner and its Affiliates, to the extent necessary to maintain the
Percentage Interests of the General Partner and its Affiliates equal to that
which existed immediately prior to the issuance of such Partnership Securities.
5.10 Splits and Combinations{.}
(a) Subject to Sections 5.10(d), 6.6 and 6.10 (dealing with adjustments of
distribution levels), the Partnership may make a Pro Rata distribution of
Partnership Securities to all Record Holders or may effect a subdivision or
combination of Partnership Securities so long as, after any such event, each
Partner shall have the same Percentage Interest in the Partnership as before
such event, and any amounts calculated on a per Unit basis (including any Common
Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a number of
Units (including the [number of Subordinated Units that may convert prior to the
end of the Subordination Period and the] number of additional Parity Units or
Partnership Securities having rights to distributions or in liquidation ranking
on a parity with [or prior or senior to] the [Subordinated] {Common} Units that
may be issued pursuant to Section 5.7 without a Unitholder vote) are
proportionately adjusted retroactive to the beginning of the Partnership.
(b) Whenever such a distribution, subdivision or combination of Partnership
Securities is declared, the Board of Supervisors shall select a Record Date as
of which the distribution, subdivision or combination shall be effective and
shall send notice thereof at least 20 days prior to such Record Date to each
Record Holder as of the date not less than 10 days prior to the date of such
notice. The Board of Supervisors also may cause a firm of independent public
accountants selected by it to calculate the number of Partnership Securities to
be held by each Record Holder after giving effect to such distribution,
subdivision or combination. The Board of Supervisors shall be entitled to rely
on any certificate provided by such firm as conclusive evidence of the accuracy
of such calculation.
(c) Promptly following any such distribution, subdivision or combination,
the Partnership may issue Certificates to the Record Holders of Partnership
Securities as of the applicable Record Date representing the new number of
Partnership Securities held by such Record Holders, or the Board of Supervisors
may adopt such other procedures as it may deem appropriate to reflect such
changes. If any such combination results in a smaller total number of
Partnership Securities Outstanding, the Partnership shall require, as a
condition to the delivery to a Record Holder of such new Certificate, the
surrender of any Certificate held by such Record Holder immediately prior to
such Record Date.
(d) The Partnership shall not issue fractional Units upon any distribution,
subdivision or combination of Units. If a distribution, subdivision or
combination of Units would result in the issuance of fractional Units but for
the provisions of Section [5.7(e)] {5.6(d)} and this Section 5.10(d), each
fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall
be rounded to the next higher Unit).
5.11 Fully Paid and Non-Assessable Nature of Limited Partner [Partnership]
Interests{.}
All Limited Partner [Partnership] Interests issued pursuant to, and in
accordance with the requirements of, this Article V shall be fully paid and
non-assessable Limited Partner [Partnership] Interests [in the Partnership],
except as such non-assessability may be affected by Section 17-607 of the
Delaware Act.
{5.12 Loans from Partners}.
{Loans by a Partner to the Partnership shall not constitute Capital
Contributions. If any Partner shall advance funds to the Partnership in excess
of the amounts required hereunder to be contributed by it to the capital of the
Partnership, the making of such excess advances shall not result in any increase
in the amount of the Capital Account of such Partner. The amount of any such
excess advances shall be a debt obligation of the Partnership to such Partner
and shall be payable or collectible only out}
C-34
<PAGE>
<PAGE>
{of the Partnership assets in accordance with the terms and conditions upon
which such advances are made.}
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
6.1 Allocations for Capital Account Purposes. [For purposes of maintaining
the Capital Accounts and in determining the rights of the Partners among
themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Section 5.5(b)) shall be allocated among the
Partners in each taxable year (or portion thereof) as provided herein below.]
[(a) Net Income. After giving effect to the special allocations set forth
in Section 6.1(d), Net Income for each taxable year and all items of income,
gain, loss and deduction taken into account in computing Net Income for such
taxable year shall be allocated as follows:]
[(i) First, 100% to the General Partner until the aggregate Net Income
allocated to the General Partner pursuant to this Section 6.1(a)(i) for the
current taxable year and all previous taxable years is equal to the
aggregate Net Losses allocated to the General Partner pursuant to Section
6.1(b)(iv) for all previous taxable years;]
[(ii) Second, 100% to the holders of APUs, in the proportion that the
Capital Account maintained for each holder with respect to such APUs bears
to the aggregate Capital Accounts attributable to all APUs then
Outstanding, until the aggregate Net Income allocated to such holders
pursuant to this Section 6.1(a)(ii) for the current taxable year and all
previous taxable years is equal to the aggregate Net Losses allocated to
such holders pursuant to Section 6.1(b)(ii) for all previous taxable
years;]
[(iii) Third, 100% to the General Partner and the Limited Partners, in
accordance with their respective Percentage Interests, until the aggregate
Net Income allocated to such Partners pursuant to this Section 6.1(a)(iii)
for the current taxable year and all previous taxable years is equal to the
aggregate Net Loss allocated to such Partners pursuant to Section
6.1(b)(ii) for all previous taxable years; and]
[(iv) Fourth, the balance, if any, 100% to the General Partner and the
Limited Partners in accordance with their respective Percentage Interests.]
[(b) Net Losses. After giving effect to the special allocations set forth
in Section 6.1(d), Net Losses for each taxable period and all items of income,
gain, loss and deduction taken into account in computing Net Losses for such
taxable period shall be allocated as follows:]
[(i) First, 100% to the General Partner and the Limited Partners, in
accordance with their respective Percentage Interests, until the aggregate
Net Losses allocated pursuant to this Section 6.1(b)(i) for the current
taxable year and all previous taxable years is equal to the aggregate Net
Income allocated to such Partners pursuant to Section 6.1(a)(iv) for all
previous taxable years, provided that the Net Losses shall not be allocated
pursuant to this Section 6.1(b)(i) to the extent that such allocation would
cause any Limited Partner to have a deficit balance in its Adjusted Capital
Account at the end of such taxable year (or increase any existing deficit
balance in its Adjusted Capital Account);]
[(ii) Second, 100% to the General Partner and the Limited Partners in
accordance with their respective Percentage Interests; provided, that Net
Losses shall not be allocated pursuant to this Section 6.1(b)(ii) to the
extent that such allocation would cause any Limited Partner to have a
deficit balance in its Adjusted Capital Account at the end of such taxable
year (or increase any existing deficit balance in its Adjusted Capital
Account);]
[(iii) Third, 100% to holders of APUs, in the proportion that the
Capital Account maintained for each holder with respect to such APUs bears
to the aggregate Capital Accounts attributable to all APUs then
outstanding; provided, that Net Losses shall not be allocated pursuant to
this Section 6.1(b)(iii) to the extent that such allocation would cause any
holder of APUs to have a deficit balance in its Adjusted Capital Account at
the end of such taxable year (or increase any existing deficit balance in
its Adjusted Capital Account); and]
C-35
<PAGE>
<PAGE>
[(iv) Fourth, the balance, if any, 100% to the General Partner.]
[(c) Net Termination Gains and Losses. After giving effect to the special
allocations set forth in Section 6.1(d), all items of income, gain, loss and
deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Sections 6.4
and 6.5 have been made; provided, however, that solely for purposes of this
Section 6.1(c), Capital Accounts shall not be adjusted for distributions made
pursuant to Section 12.4.]
[(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated
among the General Partner and the Limited Partners in the following manner
(and the Capital Accounts of the Partners shall be increased by the amount
so allocated in each of the following subclauses, in the order listed,
before an allocation is made pursuant to the next succeeding subclause):]
[(A) First, to each Partner having a deficit balance in its
Capital Account, in the proportion that such deficit balance bears to
the total deficit balances in the Capital Accounts of all Partners,
until each such Partner has been allocated Net Termination Gain equal
to any such deficit balance in its Capital Account;]
[(B) Second, 99% to all Limited Partners holding Common Units, in
accordance with their relative Percentage Interests, and 1% to the
General Partner, until the Capital Account in respect of each Common
Unit then Outstanding is equal to the sum of (1) its Unrecovered
Capital plus (2) the Minimum Quarterly Distribution for the Quarter
during which the Liquidation Date occurs, reduced by any distribution
pursuant to Section 6.4(a)(i) or (b)(i) with respect to such Common
Unit for such Quarter (the amount determined pursuant to this clause
(2) is hereinafter defined as the 'Unpaid MQD') plus (3) any then
existing Cumulative Common Unit Arrearage;]
[(C) Third, if such Net Termination Gain is recognized (or is
deemed to be recognized) prior to the expiration of the Subordination
Period, 99% to all Limited Partners holding Subordinated Units, in
accordance with their relative Percentage Interests, and 1% to the
General Partner until the Capital Account in respect of each
Subordinated Unit then Outstanding equals the sum of (1) its
Unrecovered Capital, determined for the taxable year (or portion
thereof) to which this allocation of gain relates, plus (2) the
Minimum Quarterly Distribution for the Quarter during which the
Liquidation Date occurs, reduced by any distribution pursuant to
Section 6.4(a)(iii) with respect to such Subordinated Unit for such
Quarter;]
[(D) Fourth, if such Net Termination Gain is recognized (or is
deemed to be recognized) prior to the redemption of all APUs then
Outstanding, 100% to the holders of Partners holding such APUs, in the
proportion that the Capital Account maintained for each holder with
respect to such APUs bears to the aggregate Capital Accounts
attributable to all APUs then Outstanding, in the amount which will
increase the Capital Account balance of each such holder maintained
with respect to such APUs to that amount which equals its Unrecovered
Capital, determined for the taxable year (or portion thereof) to which
this allocation of gain relates;]
[(E) Fifth, 99% to all Limited Partners, in accordance with their
relative Percentage Interests, and 1% to the General Partner until the
Capital Account in respect of each Common Unit then Outstanding is
equal to the sum of (1) its Unrecovered Capital, plus (2) the Unpaid
MQD, plus (3) any then existing Cumulative Common Unit Arrearage, plus
(4) the excess of (aa) the First Target Distribution less the Minimum
Quarterly Distribution for each Quarter of the Partnership's existence
over (bb) the cumulative per Unit amount of any distributions of
Operating Surplus that was distributed pursuant to Sections 6.4(a)(v)
and 6.4(b)(iii) (the sum of (1) plus (2) plus (3) plus (4) is
hereinafter defined as the 'First Liquidation Target Amount');]
C-36
<PAGE>
<PAGE>
[(F) Sixth, 85.8673% to all Limited Partners, in accordance with
their relative Percentage Interests, 13.1327% to the holders of the
Incentive Distribution Rights, Pro Rata, and 1% to the General Partner
until the Capital Account in respect of each Common Unit then
Outstanding is equal to the sum of (1) the First Liquidation Target
Amount, plus (2) the excess of (aa) the Second Target Distribution
less the First Target Distribution for each Quarter of the
Partnership's existence over (bb) the cumulative per Unit amount of
any distributions of Operating Surplus that was distributed pursuant
to Sections 6.4(a)(vi) and 6.4(b)(iv) (the sum of (1) plus (2) is
hereinafter defined as the 'Second Liquidation Target Amount');]
[(G) Seventh, 75.7653% to all Limited Partners, in accordance
with their relative Percentage Interests, 23.2347% to the holders of
the Incentive Distribution Rights, Pro Rata, and 1% to the General
Partner until the Capital Account in respect of each Common Unit then
Outstanding is equal to the sum of (1) the Second Liquidation Target
Amount, plus (2) the excess of (aa) the Third Target Distribution less
the Second Target Distribution for each Quarter of the Partnership's
existence over (bb) the cumulative per Unit amount of any
distributions of Operating Surplus that was distributed pursuant to
Sections 6.4(a)(vii) and 6.4(b)(v); and]
[(H) Finally, any remaining amount 50.5102% to all Limited
Partners, in accordance with their relative Percentage Interests,
48.4898% to the holders of the Incentive Distribution Rights, Pro
Rata, and 1% to the General Partner.]
[(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated
to the Partners in the following manner:]
[(A) First, if such Net Termination Loss is recognized (or is
deemed to be recognized) prior to the redemption of all Outstanding
APUs, 100% to the holders of APUs, in the proportion that the Capital
Account maintained for each holder with respect to such APUs bears to
the aggregate Capital Accounts attributable to all APUs then
Outstanding, to the extent of the positive balances in their Capital
Accounts maintained with respect to such APUs;]
[(B) Second, if such Net Termination Loss is recognized (or is
deemed to be recognized) prior to the conversion of the last
Outstanding Subordinated Unit, 99% to the Partners holding
Subordinated Units, in accordance with their relative Percentage
Interests, and 1% to the General Partner until the Capital Account in
respect of each Subordinated Unit then Outstanding has been reduced to
zero;]
[(C) Third, 99% to all Limited Partners holding Common Units, in
accordance with their relative Percentage Interests, and 1% to the
General Partner until the Capital Account in respect of each Common
Unit then outstanding has been reduced to zero; and]
[(D) Fourth, the balance, if any, 100% to the General Partner.]
[(d)]{.}
{(a) General. In maintaining the Capital Accounts that determine the rights
of the Partners among themselves, the Partnership's items of income, gain, loss
and deduction (computed in accordance with Section 5.5(b)), including Net
Termination Gain and Net Termination Loss, shall be allocated among the Partners
Pro Rata, except as otherwise provided below.}
{(b) Allocations to Holders of Incentive Distribution Rights. The gross
income of the Partnership for each taxable period prior to the Liquidation Date
shall be allocated to the extent of such gross income to the holders of the
Incentive Distribution Rights, Pro Rata, until the amount so allocated equals
the sum of (i) the amount of distributions made to such holders pursuant to
Section 6.4(d) for such period and (ii) any amounts distributed to such holders
pursuant to Section 6.4(d) in prior periods in excess of gross income allocated
to them pursuant to this Section 6.1(b) in prior periods.}
{(c) Limitation on Losses. Any deduction otherwise allocable to a Common
Unitholder that would create or add to a deficit in his loss or Adjusted Capital
Account shall instead be allocated to the General Partner Unitholders, Pro Rata.
Thereafter, any income that would otherwise be allocable to such Common
Unitholder shall be allocated to the General Partner Unitholders, Pro Rata,
until the}
C-37
<PAGE>
<PAGE>
{aggregate amount so allocated under this sentence equals the aggregate amount
of losses and deductions previously allocated to the General Partner Unitholders
under the preceding sentence.}
{(d) Net Termination Gain. Any Net Termination Gain realized by the
Partnership shall first be allocated to all Unitholders, Pro Rata, to the extent
required to entitle the Common Unitholders to receive liquidating distributions
equal to the Liquidation Target Amount, and any remaining Net Termination Gain
shall be allocated 85.8673% to the Unitholders, Pro Rata, and 13.1327% to the
holders of Incentive Distribution Rights, Pro Rata.}
{(e) Special Allocations}. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership
Minimum Gain during any Partnership taxable period, each Partner shall be
allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For purposes of this Section
[6.1(d)] {6.1(e)}, each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section [6.1(d)] {6.1(e)} with respect to such taxable period (other
than an allocation pursuant to Sections [6.1(d)(vi) and 6.1(d)(vii)).]
{6.1(e)(vi) and 6.1(e)(vii)).} This Section [6.1(d)(i)] {6.1(e)(i)} is
intended to comply with the Partnership Minimum Gain chargeback requirement
in Treasury Regulation Section 1.704-2(f) and shall be interpreted
consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 6.1 (other than
Section [6.1(d)(i))] {6.1(e)(i))}, except as provided in Treasury
Regulation Section 1.704-2(i)(4), if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain during any Partnership taxable period, any
Partner with a share of Partner Nonrecourse Debt Minimum Gain at the
beginning of such taxable period shall be allocated items of Partnership
income and gain for such period (and, if necessary, subsequent periods) in
the manner and amounts provided in Treasury Regulation Sections
1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provisions. For
purposes of this Section [6.1(d)] {6.1(e)}, each Partner's Adjusted Capital
Account balance shall be determined, and the allocation of income or gain
required hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section [6.1(d)] {6.1(e)}, other than Section
[6.1(d)(i)] {6.1(e)(i)} and other than an allocation pursuant to Sections
[6.1(d)(vi) and 6.1(d)(vii)] {6.1(e)(vi) and 6.1(e)(vii)}, with respect to
such taxable period. This Section [6.1(d)(ii)] {6.1(e)(ii)} is intended to
comply with the chargeback of items of income and gain requirement in
Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
(iii) {[Deleted.]} [Priority Allocations.]
[(A) If the amount of cash or the Net Agreed Value of any property
distributed (except cash or property distributed pursuant to Section 12.4) to
any Limited Partner with respect to its Units for a taxable year is greater (on
a per Unit basis) than the amount of cash or the Net Agreed Value of property
distributed to the other Limited Partners with respect to their Units (on a per
Unit basis), then (1) each Limited Partner receiving such greater cash or
property distribution shall be allocated gross income in an amount equal to the
product of (aa) the amount by which the distribution (on a per Unit basis) to
such Limited Partner exceeds the distribution (on a per Unit basis) to the
Limited Partners receiving the smallest distribution and (bb) the number of
Units owned by the Limited Partner receiving the greater distribution; and (2)
the General Partner shall be allocated gross income in an aggregate amount equal
to 1/99 of the sum of the amounts allocated in clause (1) above.]
[(B) After the application of Section 6.1(d)(iii)(A), all or any portion of
the remaining items of Partnership gross income or gain for the taxable period,
if any, shall be allocated 100% to the holders of Incentive Distribution Rights,
Pro Rata, until the aggregate amount of such items allocated to the holders of
Incentive Distribution Rights pursuant to this paragraph 6.1(d)(iii)(B) for the
current taxable year and all previous taxable years is equal to the cumulative
amount of all Incentive Distributions]
C-38
<PAGE>
<PAGE>
[made to the holders of Incentive Distribution Rights from the Closing Date to a
date 45 days after the end of the current taxable year.]
(iv) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership
income and gain shall be specially allocated to such Partner in an amount
and manner sufficient to eliminate, to the extent required by the Treasury
Regulations promulgated under Section 704(b) of the Code, the deficit
balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to Section
[6.1(d)(i)] {6.1(e)(i)} or (ii).
(v) Gross Income Allocations. In the event any Partner has a deficit
balance in its Capital Account at the end of any Partnership taxable period
in excess of the sum of (A) the amount such Partner is required to restore
pursuant to the provisions of this Agreement and (B) the amount such
Partner is deemed obligated to restore pursuant to Treasury Regulation
Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be specially
allocated items of Partnership gross income and gain in the amount of such
excess as quickly as possible; provided, that an allocation pursuant to
this Section [6.1(d)(v)] {6.1(e)(v)} shall be made only if and to the
extent that such Partner would have a deficit balance in its Capital
Account as adjusted after all other allocations provided for in this
Section 6.1 have been tentatively made as if this Section [6.1(d)(v)]
{6.1(e)(v)} were not in this Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners [in accordance with their
respective Percentage Interests] {Pro Rata.} If the Board of Supervisors
determines in its good faith discretion that the Partnership's Nonrecourse
Deductions must be allocated in a different ratio to satisfy the safe
harbor requirements of the Treasury Regulations promulgated under Section
704(b) of the Code, the Board of Supervisors is authorized, upon notice to
the Limited Partners, to revise the prescribed ratio to the numerically
closest ratio that does satisfy such requirements.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any taxable period shall be allocated 100% to the Partner that bears
the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i). If more than one Partner bears
the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such
Partner Nonrecourse Deductions attributable thereto shall be allocated
between or among such Partners in accordance with the ratios in which they
share such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of
the Partnership in excess of the sum of (A) the amount of Partnership
Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be
allocated among the Partners [in accordance with their respective
Percentage Interests.] {Pro Rata.}
(ix) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(c) of the Code is required, pursuant to Treasury Regulation Section
1.704-l(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to
be adjusted pursuant to such Section of the Treasury [regulations.]
{Regulations.}
[(x) Economic Uniformity. At the election of] (x) {Allocations Upon
Conversion of Incentive Distribution Rights. If and when the Incentive
Distribution Rights are converted into Common Units pursuant to Section 5.8
or 11.3, no gain, income or loss will be allocated to the holders thereof,
and any difference between a holder's tax basis attributable to the
Incentive Distribution Rights surrendered and the fair market value of the
Common Units received upon conversion will be accounted for pursuant to the
provisions of Section 6.2 in a manner that will make such}
C-39
<PAGE>
<PAGE>
{Common Units tax-fungible with every other Common Unit; provided, however,
if counsel to the Partnership advises} the Board of Supervisors [with
respect to any taxable period ending upon, or after, the termination of the
Subordination Period, all or a portion of the remaining items of
Partnership gross income or gain for such taxable period, after taking into
account allocations pursuant to Sections 6.1(d)(iii), shall be allocated
100% to each Partner holding Subordinated Units in the proportion of the
number of Subordinated Units held by such Partner to the total number of
Subordinated Units then Outstanding, until each such Partner has been
allocated an amount of gross income or gain which increases the Capital
Account maintained with respect to such Subordinated Units to an amount
equal to the product of (A) the number of Subordinated Units held by such
Partner and (B) the Per Unit Capital Amount for a Common Unit. The purpose
of this allocation is to establish uniformity between the Capital Accounts
underlying Subordinated Units and the Capital Accounts underlying Common
Units held by Persons other than a General Partner and its Affiliates
immediately prior to the conversion of such Subordinated Units into Common
Units. This allocation method for establishing such economic uniformity
will only be available to] {that there is not substantial authority to
report taxable income and deductions in accordance with the foregoing,
allocations shall be made in the manner selected by} the Board of
Supervisors [if the method for allocating the Capital Account maintained
with respect to the Subordinated Units between the transferred and retained
Subordinated Units pursuant to Section 5.5(c)(ii) does not otherwise
provide such economic uniformity to the Subordinated Units.] {for which
counsel advises that there is at least substantial authority.}
(xi) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1,
other than the Required Allocations, the Required Allocations shall be
taken into account in making the Agreed Allocations so that, to the
extent possible, the net amount of items of income, gain, loss and
deduction allocated to each Partner pursuant to the Required
Allocations and the Agreed Allocations, together, shall be equal to
the net amount of such items that would have been allocated to each
such Partner under the Agreed Allocations had the Required Allocations
and the related Curative Allocation not otherwise been provided in
this Section 6.1. Notwithstanding the preceding sentence, Required
Allocations relating to (1) Nonrecourse Deductions shall not be taken
into account except to the extent that there has been a decrease in
Partnership Minimum Gain and (2) Partner Nonrecourse Deductions shall
not be taken into account except to the extent that there has been a
decrease in Partner Nonrecourse Debt Minimum Gain. Allocations
pursuant to this Section [6.1(d)(xi)(A)] {6.1(e)(xi)(A)} shall only be
made with respect to Required Allocations to the extent the General
Partner reasonably determines that such allocations will otherwise be
inconsistent with the economic agreement among the Partners. Further,
allocations pursuant to this Section [6.1(d)(xi)(A)] {6.1(e)(xi)(A)}
shall be deferred with respect to allocations pursuant to clauses (1)
and (2) hereof to the extent the Board of Supervisors reasonably
determines that such allocations are likely to be offset by subsequent
Required Allocations.
(B) The Board of Supervisors shall have reasonable discretion,
with respect to each taxable period, to (1) apply the provisions of
Section [6.1(d)(xi)(A)] {6.1(e)(xi)(A)} in whatever order is most
likely to minimize the economic distortions that might otherwise
result from the Required Allocations, and (2) divide all allocations
pursuant to Section [6.1(d)(xi)(A)] {6.1(e)(xi)(A)} among the Partners
in a manner that is likely to minimize such economic distortions.
(xii) Corrective Allocations. In the event of any allocation of
Additional Book Basis Derivative Items or any Book-Down Event or any
recognition of a Net Termination Loss, the following rules shall apply:
(A) In the case of any allocation of Additional Book Basis
Derivative Items (other than an allocation of Unrealized Gain or
Unrealized Loss under Section 5.5(d) hereof), the Board of Supervisors
shall allocate additional items of gross income and gain away from the
[holders of] {Limited Partners holding} Incentive Distribution Rights
to the [Limited Partners holding Units and the General Partner]
{Unitholders}, or additional items of deduction and loss away
C-40
<PAGE>
<PAGE>
from the [Limited Partners holding Units and the General Partner]
{Unitholders} to the Limited Partners holding Incentive Distribution
Rights, [pro rata] {Pro Rata}, to the extent that the Additional Book
Basis Derivative Items allocated to the [Limited Partners holding
Units or the General Partner] {Unitholders} exceeds their Share of
those Additional Book Basis Derivative Items. For this purpose, the
[Limited Partners holding Units and the General Partner] {Unitholders}
shall be treated as being allocated Additional Book Basis Derivative
Items to the extent that such Additional Book Basis Derivative Items
have reduced the amount of income that would otherwise have been
allocated to the [Limited Partners holding Units or the General
Partner under the Partnership] {Unitholders under this} Agreement
(e.g., Additional Book Basis Derivative Items taken into account in
computing cost of goods sold would reduce the amount of book income
otherwise available for allocation among the Partners). Any allocation
made pursuant to this Section [6.1(d)(xii)(A)] {6.1(e)(xii)(A)} shall
be made after all of the other Agreed Allocations have been made as if
this Section [6.1(d)(xii)] {6.1(e)(xii)} were not in [the Partnership]
{this} Agreement and, to the extent necessary, shall require the
reallocation of items that have been allocated pursuant to such other
Agreed Allocations.
(B) In the case of any negative adjustments to the Capital
Accounts of the Partners resulting from a Book-Down Event or from the
recognition of a Net Termination Loss, such negative adjustment (1)
shall first be allocated, to the extent of the Aggregate Remaining Net
Positive Adjustments, in such a manner, as reasonably determined by
the Board of Supervisors, that to the extent possible the aggregate
Capital Accounts of the Limited Partners holding Incentive
{Distribution} Rights will equal the amount which would have been the
{Capital Account balance of the} Limited Partners holding Incentive
{Distribution} Rights [Capital Account balance] if no prior Book-Up
Events had occurred, and (2) any negative adjustment in excess of the
Aggregate Remaining Net Positive Adjustments shall be allocated
pursuant to Section [6.1(c)] {6.1(d)} hereof.
(C) In making the allocations required under this Section
[6.1(d)(xii)] {6.1(e)(xii)}, the Board of Supervisors, in its sole
discretion, may apply whatever conventions or other methodology it
deems reasonable to satisfy the purpose of this Section [6.1(d)(xii).]
{6.1(e)(xii).}
[(xiii) Over-allotment Option Expenses. All fees, expenses and
commissions associated with the exercise of the Over-allotment Option, if
any, shall be allocated to the holders of Subordinated Units with respect
to Subordinated Units redeemed by the Partnership pursuant to Section
5.3(b).]{(xiii) [Deleted.]}
(xiv) General Economic Corrective Allocation. Notwithstanding any
other provision of this Section 6.1 (other than the Required Allocations),
the General Partner may allocate items of income, gain, loss and deduction
for any taxable year in such manner as it determines, in its reasonable
discretion, is necessary so that, when made, distributions in liquidation
of the Partnership in accordance with Section 12.4 shall correspond as
closely as possible to the economic arrangement reflected in Section
[6.1(c)] {6.1(d).}
6.2 Allocations for Tax Purposes{.}
(a) {General.} Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of 'book' income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) {Contributed Property.} In an attempt to eliminate Book-Tax Disparities
attributable to a Contributed Property or Adjusted Property, items of income,
gain, loss, depreciation, amortization and cost recovery deductions shall be
allocated for federal income tax purposes among the Partners as follows:
(i)(A) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners in the manner provided under
Section 704(c) of the Code that takes into account the variation between
the Agreed Value of such property and its adjusted basis at the time of
contribution; and (B) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of 'book' gain or loss
is allocated pursuant to Section 6.1.
C-41
<PAGE>
<PAGE>
(ii)(A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 5.5(d)(i) or (ii), and (2) second,
in the event such property was originally a Contributed Property, be
allocated among the Partners in a manner consistent with Section
6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Partners
in the same manner as its correlative item of 'book' gain or loss is
allocated pursuant to Section 6.1.
(iii) The Board of Supervisors shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) {Discretionary Allocation Authority.} For the proper administration of
the Partnership and for the preservation of uniformity of the Units (or any
class or classes thereof), the Board of Supervisors shall have sole discretion
to (i) adopt such conventions as it deems appropriate in determining the amount
of depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions; and (iii) amend the provisions of this
Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury
[regulations] {Regulations} under Section 704(b) or Section 704(c) of the Code
or (y) otherwise to preserve or achieve uniformity of the Units (or any class or
classes thereof). The Board of Supervisors may adopt such conventions, make such
allocations and make such amendments to this Agreement as provided in this
Section 6.2(c) only if such conventions, allocations or amendments would not
have a material adverse effect on the Partners, the holders of any class or
classes of Units issued and outstanding or the Partnership, and if such
allocations are consistent with the principles of Section 704 of the Code.
(d) {Discretionary Amortization Authority.} The Board of Supervisors in its
discretion may determine to depreciate or amortize the portion of an adjustment
under Section 743(b) of the Code attributable to unrealized appreciation in any
Adjusted Property (to the extent of the unamortized Book-Tax Disparity) using a
predetermined rate derived from the depreciation or amortization method and
useful life applied to the Partnership's common basis of such property, despite
any inconsistency of such approach with [Proposed Treasury Regulation Section
1.168-2(n),] Treasury Regulation Section 1.167(c)-1(a)(6) [or the legislative
history of] {and Proposed Treasury Regulation} Section [197 of the Code]
{1.197-2(g)(3)}. If the Board of Supervisors determines that such reporting
position cannot reasonably be taken, the Board of Supervisors may adopt
depreciation and amortization conventions under which all purchasers acquiring
Units in the same month would receive depreciation and amortization deductions,
based upon the same applicable rate as if they had purchased a direct interest
in the Partnership's property. If the Board of Supervisors chooses not to
utilize such aggregate method, the Board of Supervisors may use any other
reasonable depreciation and amortization conventions to preserve the uniformity
of the intrinsic tax characteristics of any Units that would not have a material
adverse effect on the Limited Partners or the Record Holders of any class or
classes of Units.
(e) {Recapture Income.} Any gain allocated to the Partners upon the sale or
other taxable disposition of any Partnership asset shall, to the extent
possible, after taking into account other required allocations of gain pursuant
to this Section 6.2, be characterized as Recapture Income in the same
proportions and to the same extent as such Partners (or their predecessors in
interest) have been allocated any deductions directly or indirectly giving rise
to the treatment of such gains as Recapture Income.
(f) {Effect of Section 754 Election.} All items of income, gain, loss,
deduction and credit recognized by the Partnership for federal income tax
purposes and allocated to the Partners in accordance with the provisions hereof
shall be determined without regard to any election under Section 754 of the Code
which may be made by the Partnership; provided, however, that such allocations,
once made, shall be adjusted as necessary or appropriate to take into account
those adjustments permitted or required by Sections 734 and 743 of the Code.
(g) {Assignor/Assignee Proration.} Each item of Partnership income, gain,
loss and deduction attributable to [a transferred Partnership Interest of the
General Partner or to transferred Units,] {transferred Units or} Incentive
Distribution Rights [or APUs,] shall{,} for federal income tax purposes, be
determined on an annual basis and prorated on a monthly basis and shall be
allocated to the Partners as of the opening of the New York Stock Exchange on
the first Business Day of each month; provided,
C-42
<PAGE>
<PAGE>
[however, that (i) if the Underwriter's Over-allotment Option is not exercised,
such items for the period beginning on the Closing Date and ending on the last
day of the month in which the Closing Date occurs shall be allocated to Partners
as of the opening of the New York Stock Exchange on the first Business Day of
the next succeeding month or (ii) if the Underwriters Over-allotment Option is
exercised, such items for the period beginning on the Closing Date and ending on
the last day of the month in which the Second Delivery Date (as defined in the
Underwriting Agreement) occurs shall be allocated to the Partners as of the
opening of the New York Stock Exchange on the first Business Day of the next
succeeding month; and provided, further,] that gain or loss on a sale or other
disposition of any assets of the Partnership other than in the ordinary course
of business shall be allocated to the Partners as of the opening of the New York
Stock Exchange on the first Business Day of the month in which such gain or loss
is recognized for federal income tax purposes. The Board of Supervisors may
revise, alter or otherwise modify such methods of allocation as it determines
necessary, to the extent permitted or required by Section 706 of the Code and
the regulations or rulings promulgated thereunder.
(h) {Nominee.} Allocations that would otherwise be made to a Limited
Partner under the provisions of this Article VI shall instead be made to the
beneficial owner of Units held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the Board of
Supervisors in its sole discretion.
6.3 Requirement and Characterization of Distributions; Distributions to
Record Holders.
(a) Within 45 days following the end of each Quarter commencing with the
Quarter ending on June 29, 1996, an amount equal to 100% of Available Cash with
respect to such Quarter shall[, subject to Section 17-607 of the Delaware Act,]
be distributed in accordance with this Article VI by the Partnership to the
Partners as of the Record Date selected by the Board of Supervisors in its
reasonable discretion. All amounts of Available Cash distributed by the
Partnership on any date from any source shall be deemed to be Operating Surplus
until the sum of all amounts of Available Cash theretofore distributed by the
Partnership to the Partners pursuant to Section 6.4 equals the Operating Surplus
from the {Initial} Closing Date through the close of the immediately preceding
Quarter. Any remaining amounts of Available Cash distributed by the Partnership
on such date shall, except as otherwise provided in Section 6.5, be deemed to be
'Capital Surplus.' All distributions required to be made under this Agreement
shall be made subject to Section 17-607 of the Delaware Act.
(b) In the event of the dissolution and liquidation of the Partnership, all
receipts received during or after the Quarter in which the Liquidation Date
occurs, except as otherwise provided in (a)(ii) of the definition of Available
Cash, shall be applied and distributed solely in accordance with, and subject to
the terms and conditions of, Section 12.4.
(c) The Board of Supervisors shall have the discretion to treat taxes paid
by the Partnership on behalf of, or amounts withheld with respect to, all or
less than all of the Partners, as a distribution of Available Cash to such
Partners.
(d) Each distribution in respect of a Partnership Interest shall be paid by
the Partnership, directly or through the Transfer Agent or through any other
Person or agent, only to the Record Holder of such Partnership Interest as of
the Record Date set for such distribution. Such payment shall constitute full
payment and satisfaction of the Partnership's liability in respect of such
payment, regardless of any claim of any Person who may have an interest in such
payment by reason of an assignment or otherwise.
C-43
<PAGE>
<PAGE>
6.4 Distributions of Available Cash from Operating Surplus[ (a) During
Subordination Period. Available Cash with respect to any Quarter within the
Subordination Period that is deemed to be Operating Surplus pursuant to the
provisions of Section 6.3 or 6.5 shall, subject to Section 17-607 of the
Delaware Act, be distributed as follows, except as otherwise required by Section
5.6(b) in respect of additional Partnership Securities issued pursuant thereto:]
[(i) First, 99% to the Limited Partners holding Common Units, in
accordance with their relative Percentage Interests, and 1% to the General
Partn r until there has been distributed in respect of each Common Unit
then Outstanding an amount equal to the Minimum Quarterly Distribution;]
[(ii) Second, 99% to the Limited Partners holding Common Units, in
accordance with their relative Percentage Interests, and 1% to the General
Partner until there has been distributed in respect of each Common Unit
then Outstanding an amount equal to the Cumulative Common Unit Arrearage
existing with respect to such Quarter;]
[(iii) Third, 99% to the Limited Partners holding Subordinated Units,
in accordance with their relative Percentage Interests, and 1% to the
General Partner until there has been distributed in respect of each
Subordinated Unit then Outstanding an amount equal to the Minimum Quarterly
Distribution;]
[(iv) Fourth, 100% to the holders of APUs, in proportion to the
Unrecovered Capital attributable to the respective APUs held by them, to
redeem Outstanding APUs until all Outstanding APUs have been redeemed
(i.e., until the Unrecovered Capital with respect to each of the APUs is
equal to zero);]
[(v) Fifth, 99% to all Limited Partners, in accordance with their
relative Percentage Interests, and 1% to the General Partner until there
has been distributed in respect of each Unit then Outstanding an amount
equal to the excess of the First Target Distribution over the Minimum
Quarterly Distribution;]
[(vi) Sixth, 85.8673% to all Limited Partners, in accordance with
their relative Percentage Interests, 13.1327% to the holders of the
Incentive Distribution Rights, Pro Rata, and 1% to the General Partner
until there has been distributed in respect of each Unit then Outstanding
an amount equal to the excess of the Second Target Distribution over the
First Target Distribution;]
[(vii) Seventh, 75.7653% to all Limited Partners, in accordance with
their relative Percentage Interests, 23.2347% to the holders of the
Incentive Distribution Rights, Pro Rata, and 1% to the General Partner
until there has been distributed in respect of each Unit then Outstanding
an amount equal to the excess of the Third Target Distribution over the
Second Target Distribution; and]
[(viii) Thereafter, 50.5102% to all Limited Partners, in accordance
with their relative Percentage Interests, 48.4898% to the holders of the
Incentive Distribution Rights, Pro Rata, and 1% to the General Partner;]
[provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6, the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made in accordance with Section 6.4(a)(viii).]
[(b) After Subordination Period. Available Cash with respect to any Quarter
after the Subordination Period that is deemed to be Operating Surplus pursuant
to the provisions of Section 6.3 or 6.5, subject to Section 17-607 of the
Delaware Act, shall be distributed as follows, except as otherwise required by
Section 5.6(b) in respect of additional Partnership Securities issued pursuant
thereto:]
[(i) First, 99% to all Limited Partners, in accordance with their
relative Percentage Interests, and 1% to the General Partner until there
has been distributed in respect of each Unit then Outstanding an amount
equal to the Minimum Quarterly Distribution;]
[(ii) Second, 100% to the holders of APUs, in proportion to the
Unrecovered Capital attributable to the respective APUs held by them, to
redeem Outstanding APUs until all Outstanding APUs have been redeemed
(i.e., until the Unrecovered Capital with respect to each of the APUs is
equal to zero);]
C-44
<PAGE>
<PAGE>
[(iii) Third, 99% to all Limited Partners, in accordance with their
relative Percentage Interests, and 1% to the General Partner until there
has been distributed in respect of each Unit then Outstanding an amount
equal to the excess of the First Target Distribution over the Minimum
Quarterly Distribution;]
[(iv) Fourth, 85.8673% to all Limited Partners, in accordance with
their relative Percentage Interests, and 13.1327% to the holders of the
Incentive Distribution Rights, Pro Rata, and 1% to the General Partner
until there has been distributed in respect of each Unit then Outstanding
an amount equal to the excess of the Second Target Distribution over the
First Target Distribution;]
[(v) Fifth, 75.7653% to all Limited Partners, in accordance with their
relative Percentage Interests, and 23.2347% to the holders of the Incentive
Distribution Rights, Pro Rata, and 1% to the General Partner until there
has been distributed in respect of each Unit then Outstanding an amount
equal to the excess of the Third Target Distribution over the Second Target
Distribution; and]
[(vi) Thereafter, 50.5102% to all Limited Partners, in accordance with
their relative Percentage Interests, and 48.4898% to the holders of the
Incentive Distribution Rights, Pro Rata, and 1% to the General Partner;]
[provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6, the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made in accordance with Section 6.4(b)(vi)].
{Available Cash with respect to any Quarter that is deemed to be Operating
Surplus pursuant to the provisions of Section 6.3 or 6.5 shall be distributed as
follows, except as otherwise required by Section 5.6(b) in respect of additional
Partnership Securities issued pursuant thereto:}
{(a) First, to the Unitholders, Pro Rata, until there has been
distributed in respect of each Common Unit then Outstanding an amount equal
to the Minimum Quarterly Distribution;}
{(b) Second, with respect to any quarter through the quarter ending
March 31, 2001, to the Unitholders, Pro Rata, until there has been
distributed in respect of each Common Unit then outstanding an amount equal
to the Cumulative Common Unit Arrearages existing with respect to such
quarter;}
{(c) Third, to the Unitholders, Pro Rata, until there has been
distributed in respect of each Common Unit then Outstanding an amount equal
to the excess of the Target Distribution over the Minimum Quarterly
Distribution; and}
{(d) Thereafter, 86.8673% to the Unitholders, Pro Rata, and 13.1327%
to the holders of the Incentive Distribution Rights, Pro Rata;}
{provided, however, if the Minimum Quarterly Distribution and the Target
Distribution have been reduced to zero pursuant to the second sentence of
Section 6.6, the distribution of Available Cash that is deemed to be Operating
Surplus with respect to any Quarter will be made in accordance with Section
6.4(d).}
6.5 Distributions of Available Cash from Capital Surplus{.}
Available Cash that is deemed to be Capital Surplus pursuant to the
provisions of Section 6.3 shall[, subject to Section 17-607 of the Delaware
Act,] be distributed, unless the provisions of Section 6.3 require otherwise,
[99% to all Limited Partners, in accordance with their relative Percentage
Interests, and 1% to the General Partner] {to the Unitholders, Pro Rata,} until
a hypothetical holder of a Common Unit acquired on the {Initial} Closing Date
has received with respect to such Common Unit, during the period since the
{Initial} Closing Date through such date, distributions of Available Cash that
are deemed to be Capital Surplus in an aggregate amount equal to the Initial
Unit Price. Available Cash that is deemed to be Operating Surplus shall then be
distributed [99%] {100%} to all [Limited Partners holding Common Units, in
accordance with their relative Percentage Interests, and 1% to the General
Partner,] {Units, Pro Rata,} until there has been distributed in respect of each
Common Unit then Outstanding an amount equal to the Cumulative Common Unit
Arrearage. Thereafter, all Available Cash shall be distributed as if it were
Operating Surplus and shall be distributed in accordance with Section 6.4.
C-45
<PAGE>
<PAGE>
6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution
[Levels]{.}
(a) The Minimum Quarterly Distribution[, First Target Distribution, Second
Target Distribution and Third] {and} Target Distribution shall be
proportionately adjusted in the event of any distribution, combination or
subdivision (whether effected by a distribution payable in Units or otherwise)
of Units or other Partnership Securities in accordance with Section 5.10. In the
event of a distribution of Available Cash that is deemed to be from Capital
Surplus, the Minimum Quarterly Distribution[, First Target Distribution, Second
Target Distribution and Third] {and} Target Distribution shall be adjusted
proportionately downward to equal the product obtained by multiplying the
otherwise applicable Minimum Quarterly Distribution[, First Target Distribution,
Second Target Distribution and Third] {and} Target Distribution, as the case may
be, by a fraction of which the numerator is the Unrecovered Capital of the
Common Units immediately after giving effect to such distribution and of which
the denominator is the Unrecovered Capital of the Common Units immediately prior
to giving effect to such distribution.
(b) The Minimum Quarterly Distribution[, First Target Distribution, Second
Target Distribution and Third] {and} Target Distribution shall also be subject
to adjustment pursuant to Section 6.10.
6.7 [Special Provisions Relating to the Holders of Subordinated Units]
{Liquidity Arrangement.}
{(a) The Partnership will cause the Operating Partnership to maintain
borrowing availability under the Working Capital Facility in an amount equal to
the Committed Amount from the Closing Date through the distribution date for the
Quarter ending March 31, 2001 (the 'Liquidity Arrangement').}
{(b) If the amount of Available Cash from Operating Surplus (including
distributions from the Management Cash Reserve but excluding borrowings under
the Working Capital Facility) with respect to any quarter through the Quarter
ending March 31, 2001 is less than the aggregate Minimum Quarterly Distribution
on all Common Units and General Partner Units Outstanding on the Record Date
with respect to such Quarter (such deficit hereinafter referred to as the
'Distribution Shortfall') and either (i) Adjusted Operating Surplus for the
preceding four-quarter period (including such Quarter) is less than the sum of
the aggregate Minimum Quarterly Distribution on all Common Units and General
Partner Units and the general partner interest in the Operating Partnership for
such four-quarter period or (ii)(A) Adjusted Operating Surplus for the preceding
four-quarter period (including such Quarter) is equal to or greater than the sum
of the aggregate Minimum Quarterly Distribution on all Common Units and General
Partner Units and the general partner interest in the Operating Partnership for
such four-quarter period and (B) the amount unborrowed under the Working Capital
Facility (excluding the Liquidity Arrangement) is less than the amount of the
Distribution Shortfall, then the Partnership will cause the Operating
Partnership to borrow under the Liquidity Arrangement, to the extent borrowings
are otherwise permitted under the Working Capital Facility, an amount equal to
the lesser of (i) the Distribution Shortfall and (ii) the Committed Amount. Any
such borrowing shall be deemed to be Available Cash and will be distributed to
Unitholders in accordance with Section 6.4. Nothing contained in this Section
6.7 shall in any way limit the ability of the Board of Supervisors to borrow
funds under the Working Capital Facility to increase Available Cash from
Operating Surplus.}
[(a) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions made with respect to Common Units, the holder of
a Subordinated Unit shall have all of the rights and obligations of a Limited
Partner holding Common Units hereunder; provided, however, that immediately upon
the conversion of Subordinated Units into Common Units] [pursuant to Section
5.8, the holder of a Subordinated Unit shall possess all of the rights and
obligations of a Limited Partner holding Common Units hereunder, including, the
right to vote as a Common Unitholder and the right to participate in allocations
of income, gain, loss and deduction and distributions made with respect to
Common Units; provided, however, that such converted Subordinated Units shall
remain subject to the provisions of Sections 5.5(c)(ii), 6.1(d)(x) and 6.7(b).]
[(b) The holder of a Subordinated Unit which has converted into a Common
Unit pursuant to Section 5.8 shall not be issued a Common Unit Certificate, and
shall not be permitted to transfer its converted Subordinated Units to a Person
which is not an Affiliate of the holder until such time as the Board of
Supervisors determines, based on advice of counsel, that a converted
Subordinated Unit]
C-46
<PAGE>
<PAGE>
[should have, as a substantive matter, like intrinsic economic and federal
income tax characteristics, in all material respects, to the intrinsic economic
and federal income tax characteristics of an Initial Common Unit. In connection
with the condition imposed by this Section 6.7(b), the Board of Supervisors may
take whatever reasonable steps are required to provide economic uniformity to
the converted Subordinated Units in preparation for a transfer of such converted
Subordinated Units, including the application of Section 5.5(c)(ii) and
6.1(d)(x); provided, however, that no such steps may be taken that would have a
material adverse effect on the Limited Partners holding Common Units represented
by Common Unit Certificates.]
[Notwithstanding anything to the contrary set forth in this Agreement, the
holders of APUs (a) shall (i) possess the rights and obligations provided in
this Agreement with respect to a Limited Partner pursuant to Articles III and
VII and (ii) have a Capital Account as a Partner pursuant to Section 5.5 and all
other provisions related thereto and (b) shall not (i) be entitled to vote on
any matters requiring the approval or vote of the holders of Outstanding Units,
(ii) be entitled to any distributions other than to such holders as specially
provided with respect to Sections 6.4(a)(iv), 6.4(b)(ii) and 12.4 or (iii) be
allocated items of income, gain, loss or deduction other than as specified in
this Article VI.]
{6.8 [Deleted.]}
6.9 Special Provisions Relating to the Holders of Incentive Distribution
Rights{.}
{(a)} Notwithstanding anything to the contrary set forth in this Agreement,
the holders of the Incentive Distribution Rights (a) shall (i) possess the
rights and obligations provided in this Agreement with respect to a Limited
Partner pursuant to Articles III and VII and (ii) have a Capital Account as a
Partner pursuant to Section 5.5 and all other provisions related thereto and (b)
shall not (i) be entitled to vote on any matters requiring the approval or vote
of the holders of Outstanding Units, (ii) be entitled to any distributions other
than as provided in Sections [6.4(a)(vi), (vii) and (viii), 6.4(b)(iv), (v) and
(vi),] {6.4(d)} and 12.4 or (iii) be allocated items of income, gain, loss or
deduction other than as specified in this Article VI; {provided, however, that
immediately upon the conversion of Incentive Distribution Rights into Common
Units pursuant to Section 5.8, the holders of Incentive Distribution Rights
shall possess all of the rights and obligations of a Limited Partner holding
Common Units hereunder, including the right to vote as a Common Unitholder and
the right to participate in allocations of income, gain, loss and deduction and
distributions made with respect to Common Units; provided, however, that such
converted Incentive Distribution Rights shall remain subject to the provisions
of Sections 6.1(e)(x) and 6.9(b).}
{(b) A holder of Incentive Distribution Rights that have converted into
Common Units pursuant to Section 5.8 shall not be issued a Common Unit
Certificate, and shall not be permitted to transfer its converted Incentive
Distribution Rights to a Person which is not an Affiliate of the holder, until
such time as the Board of Supervisors determines, based on advice of counsel,
that converted Incentive Distribution Rights should have, as a substantive
matter, like intrinsic economic and federal income tax characteristics, in all
material respects, to the intrinsic economic and federal income tax
characteristics of an Initial Common Unit. In connection with the condition
imposed by this Section 6.9(b), the Board of Supervisors may take whatever
reasonable steps are required to provide economic uniformity to the converted
Incentive Distribution Rights in preparation for a transfer of such converted
Incentive Distribution Rights, including the application of Section 6.1(e)(x);
provided, however, that no such steps may be taken that would have a material
adverse effect on the class of Limited Partners holding Common Units represented
by Common Unit Certificates.}
6.10 Entity-Level Taxation{.}
If legislation is enacted or the interpretation of existing language is
modified by the relevant governmental authority which causes the Partnership or
the Operating Partnership to be treated as an association taxable as a
corporation or otherwise subjects the Partnership or the Operating Partnership
to entity-level taxation for federal income tax purposes, the Minimum Quarterly
Distribution[, First Target Distribution, Second Target Distribution and Third]
{and} Target Distribution shall be equal to the product obtained by multiplying
(a) the amount thereof by (b) one minus the sum of (i) the highest marginal
federal corporate (or other entity, as applicable) income tax rate of the
Partnership for the taxable year of the Partnership in which such Quarter occurs
(expressed as a percentage) plus (ii) the
C-47
<PAGE>
<PAGE>
effective overall state and local income tax rate (expressed as a percentage)
applicable to the Partnership for the calendar year next preceding the calendar
year in which such Quarter occurs (after taking into account the benefit of any
deduction allowable for federal income tax purposes with respect to the payment
of state and local income taxes), but only to the extent of the increase in such
rates resulting from such legislation or interpretation. Such effective overall
state and local income tax rate shall be determined for the taxable year next
preceding the first taxable year during which the Partnership or the Operating
Partnership is taxable for federal income tax purposes as an association taxable
as a corporation or is otherwise subject to entity-level taxation by determining
such rate as if the Partnership or the Operating Partnership had been subject to
such state and local taxes during such preceding taxable year.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
7.1 Management.
(a) Except as otherwise expressly {provided} in this Agreement, all
management powers over the business and affairs of the Partnership shall be
vested exclusively in the Board of Supervisors and, subject to the direction of
the Board of Supervisors and in accordance with the provisions of Section 7.10,
the Officers. Neither the General Partner (except as otherwise expressly
provided in this Agreement) nor any Limited Partner or Assignee shall have any
management power or control over the business and affairs of the Partnership.
Thus, except as otherwise expressly provided in this Agreement, the business and
affairs of the Partnership shall be managed by or under the direction of the
Board of Supervisors, and the day-to-day activities of the Partnership shall be
conducted on the Partnership's behalf by the Officers, who shall be agents of
the Partnership. In order to enable the Board of Supervisors to manage the
business and affairs of the Partnership, the General Partner, except as
otherwise expressly provided in this Agreement, hereby irrevocably delegates to
the Board of Supervisors all management powers over the business and affairs of
the Partnership that it may now or hereafter possess under applicable law. The
General Partner further agrees to take any and all action necessary and
appropriate, in the sole discretion of the Board of Supervisors, to effect any
duly authorized actions by the Board of Supervisors or any Officer, including
executing or filing any agreements, instruments or certificates, delivering all
documents, providing all information and taking or refraining from taking action
as may be necessary or appropriate to achieve the effective delegation of power
described in this Section 7.1(a). Each of the Partners and Assignees and each
Person who may acquire an interest in a Partnership Interest hereby approves,
consents to, ratifies and confirms such delegation. The delegation by the
General Partner to the Board of Supervisors of management powers over the
business and affairs of the Partnership pursuant to the provisions of this
Agreement shall not cause the General Partner to cease to be a general partner
of the Partnership nor shall it cause the Board of Supervisors or any member
thereof to be a general partner of the Partnership or to have or be subject to
the liabilities of a general partner of the Partnership. Except as otherwise
specifically provided in Sections 7.14, 7.15, 7.16 and 7.17, the authority,
functions, duties and responsibilities of the Board of Supervisors and of the
Officers shall be identical to the authority, functions, duties and
responsibilities of the board of directors and officers, respectively, of a
corporation organized under the Delaware General Corporation Law.
(b) Consistent with the management powers delegated to the Board of
Supervisors pursuant to the provisions of this Agreement, the Board of
Supervisors shall have the powers now or hereafter granted a general partner of
a limited partnership under the Delaware Act or any other applicable law and,
except as otherwise expressly provided in this Agreement, shall have full power
and authority to do all things and on such terms as it may deem necessary or
appropriate to conduct the business of the Partnership, to exercise all powers
set forth in Section 2.5 and to effectuate the purposes set forth in Section
2.4, including the following:
(i) the making of any expenditures, the lending or borrowing of money,
the assumption or guarantee of, or other contracting for, indebtedness and
other liabilities, the issuance of evidences of indebtedness and the
incurring of any other obligations;
C-48
<PAGE>
<PAGE>
(ii) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership or
the merger or other combination of the Partnership with or into another
Person;
(iv) the use of the assets of the Partnership (including cash on hand)
for any purpose consistent with the terms of this Agreement, including the
financing of the conduct of the operations of a Group Member, the lending
of funds to other Persons (including the Operating Partnership), the
repayment of obligations of a Group Member and the making of capital
contributions to a Group Member;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including instruments that limit the
liability of the Partnership under contractual arrangements to all or
particular assets of the Partnership, with the other party to the contract
to have no recourse against the General Partner or its assets other than
its interest in the Partnership, even if same results in the terms of the
transaction being less favorable to the Partnership than would otherwise be
the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including employees
who are Officers) and agents, outside attorneys, accountants, consultants
and contractors and the determination of their compensation and other terms
of employment or hiring;
(viii) the maintenance of such insurance for the benefit of the
Partnership Group and the Partners as it deems necessary or appropriate;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited or
general partnerships, joint ventures, corporations{, limited liability
companies} or other relationships (including the acquisition of interests
in, and the contributions of property to, the Operating Partnership from
time to time);
(x) the control of any matters affecting the rights and obligations of
the Partnership, including the bringing and defending of actions at law or
in equity and otherwise engaging in the conduct of litigation and the
incurring of legal expense and the settlement of claims and litigation;
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(xii) the entering into of listing agreements with any National
Securities Exchange and the delisting of some or all of the Units from, or
requesting that trading be suspended on, any such exchange (subject to any
prior approval that may be required under Section 4.9);
(xiii) the purchase, sale or other acquisition or disposition of
Units; and
(xiv) the undertaking of any action in connection with the
Partnership's participation in the Operating Partnership as the limited
partner.
(c) Notwithstanding any other provision of this Agreement and the Operating
Partnership Agreement, and to the fullest extent permitted by applicable law,
each of the Partners and Assignees and each other Person who may acquire an
interest in a Partnership Interest hereby (i) approves, consents to, ratifies
and confirms the General Partner's delegation of management powers to the Board
of Supervisors pursuant to paragraph (a) of this Section 7.1; (ii) approves,
consents to, ratifies and confirms the execution, delivery and performance by
the parties thereto of the Operating Partnership Agreement, the [Underwriting
Agreement, the Contribution and Conveyance Agreement, the Distribution Support
Agreement, the agreements and other documents filed as exhibits to the
Registration Statement,] {Recapitalization Agreement, the Purchase Agreement}
and the other agreements described in or filed as a part of the [Registration]
{Proxy} Statement; (iii) agrees that the Partnership (through any duly
authorized Officer of the Partnership) is authorized to execute, deliver and
perform the agreements referred to in clause (i) of this sentence and the other
agreements, acts, transactions and matters described in or contemplated by the
[Registration] {Proxy} Statement without any
C-49
<PAGE>
<PAGE>
further act, approval or vote of the Partners or the Assignees or the other
Persons who may acquire an interest in a Partnership Interest; and (iv) agrees
that the execution, delivery or performance by the General Partner, the Board of
Supervisors or any member thereof, any duly authorized Officer of the
Partnership, any Group Member or any Affiliate of any of them, of this Agreement
or any agreement authorized or permitted under this Agreement (including the
exercise by the General Partner or any Affiliate of the General Partner of the
rights accorded pursuant to Article XV), shall not constitute a breach by any
such Person of any duty that any of such Persons may owe the Partnership or the
Limited Partners or the Assignees or any other Persons under this Agreement (or
any other agreements) or of any duty stated or implied by law or equity.
7.2 The Board of Supervisors; Election and Appointment; Term; Manner of
Acting.
(a) The Board of Supervisors shall consist of [seven] {five} individuals,
two of whom shall be Appointed Supervisors[,] {and} three of whom shall be
Elected Supervisors [and two of whom shall be Management Supervisors. The
initial]{. The }Board of Supervisors {upon Closing} shall consist of the
following individuals, each of whom shall hold office until the [first] {next}
Tri-Annual Meeting and until his successor is duly elected or appointed, as the
case may be, and qualified, or until his earlier death, resignation or removal:
Appointed Supervisors: [George H. Hempstead, III and Robert E. Lee] {Mark A.
Alexander and Michael J. Dunn, Jr.}; Elected Supervisors: John Hoyt Stookey [and
two additional individuals to be appointed by the General Partner; provided,
however, that if the General Partner shall fail to appoint either of such
individuals within three months of the Closing Date a majority of the Elected
Supervisors then serving or, if no Elected Supervisors are then serving, a
majority of the members of the Board of Supervisors then serving, shall appoint
such individuals that are not so appointed by the General Partner; Management
Supervisors: Mark A. Alexander and Salvatore M. Quadrino. At the first
Tri-Annual Meeting and at]{, Harold R. Logan, Jr. and Dudley C. Mecum. At} each
Tri-Annual Meeting [thereafter], the members of the Board of Supervisors shall
be appointed or elected, as the case may be, as follows:
(i) The Appointed Supervisors shall be appointed by the General
Partner on the date of the Tri-Annual Meeting; {and}
(ii) The Elected Supervisors shall be elected at the Tri-Annual
Meeting by a plurality of the votes of the Outstanding Common Units [and
Subordinated Units] present in person or represented by proxy at the
Tri-Annual Meeting [voting as a single class] with each Outstanding
{Common} Unit having one vote{.}[; and]
[(iii) The Management Supervisors shall be appointed by a majority of
the Appointed Supervisors and the Elected Supervisors then in office,
voting as a single class, at a meeting to be held on the date of, and
immediately subsequent to, the Tri-Annual Meeting.]
(b) Each member of the Board of Supervisors appointed or elected, as the
case may be, at a Tri-Annual Meeting shall hold office until the next Tri-Annual
Meeting and until his successor is duly elected or appointed, as the case may
be, and qualified, or until his earlier death, resignation or removal.
(c) Each member of the Board of Supervisors shall have one vote. The vote
of the majority of the members of the Board of Supervisors present at a meeting
at which a quorum is present shall be the act of the Board of Supervisors. A
majority of the number of members of the Board of Supervisors then in office
shall constitute a quorum for the transaction of business at any meeting of the
Board of Supervisors, but if less than [such majority] {a quorum} is present at
a meeting, a majority of the members of the Board of Supervisors present at such
meeting may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
7.3 Nominations of Elected Supervisors{.}
The Board of Supervisors shall be entitled to nominate individuals to stand
for election as Elected Supervisors at a Tri-Annual Meeting. In addition, any
Limited Partner or Group of Limited Partners that beneficially owns 10% or more
of the Outstanding {Common} Units shall be entitled to nominate one or more
individuals to stand for election as Elected Supervisors at a Tri-Annual Meeting
by providing written notice thereof to the Board of Supervisors not more than
120 days and not less than
C-50
<PAGE>
<PAGE>
90 days prior to the date of such Tri-Annual Meeting; provided, however, that in
the event that the date of the Tri-Annual Meeting was not publicly announced by
the Partnership by mail, press release or otherwise more than 100 days prior to
the date of such meeting, such notice, to be timely, must be delivered to the
Board of Supervisors not later than the close of business on the tenth day
following the date on which the date of the Tri-Annual Meeting was announced.
Such notice shall set forth (i) the name and address of the Limited Partner or
Limited Partners making the nomination or nominations, (ii) the number of Units
beneficially owned by such Limited Partner or Limited Partners, (iii) such
information regarding the nominee(s) proposed by the Limited Partner or Limited
Partners as would be required to be included in a proxy statement relating to
the solicitation of proxies for the election of directors filed pursuant to the
proxy rules of the Commission had the nominee(s) been nominated or intended to
be nominated to the Board of Supervisors, (iv) the written consent of each
nominee to serve as a member of the Board of Supervisors if so elected and (v) a
certification that such nominee(s) qualify as Elected Supervisors.
7.4 Removal of Members of the Board of Supervisors.
{Members of the Board of Supervisors may only be removed as follows:}
(a) Any Appointed Supervisor may be removed {by the General Partner} at any
time, with or without Cause{, only by the General Partner.}
(b) Any and all of the Elected Supervisors may be removed {at any time},
with Cause, {only} by the affirmative vote of a majority of the Elected
Supervisors and, with or without Cause, at a properly called meeting of the
Limited Partners {only} by the affirmative vote of the holders of a majority of
the Outstanding Common Units{.} [and Subordinated Units, voting as a single
class.]
[(c) Any or all of the Management Supervisors may be removed, with or
without Cause, by the affirmative vote of a majority of the Appointed
Supervisors and the Elected Supervisors, voting as a single class.]
7.5 Resignations of Members of the Board of Supervisors{.}
Any member of the Board of Supervisors may resign at any time by giving
written notice to the Board of Supervisors. Such resignation shall take effect
at the time specified therein.
7.6 Vacancies on the Board of Supervisors{.}
{Vacancies on the Board of Supervisors may be filled only as follows:}
(a) If any Appointed Supervisor is removed, resigns or is otherwise
unable to serve as a member of the Board of Supervisors, the General
Partner shall, in its sole discretion, appoint an individual to fill the
vacancy.
(b) If any Elected Supervisor is removed, resigns or is unable to
serve as a member of the Board of Supervisors, the vacancy shall be filled
by a majority of the Elected Supervisors then serving or, if no Elected
Supervisors are then serving, by a majority of the members of the Board of
Supervisors then serving.
(c) [If any Management Supervisor is removed, resigns or is otherwise
unable to serve as a member of the Board of Supervisors, the vacancy shall
be filled by the affirmative vote of a majority of the Appointed
Supervisors and Elected Supervisors, voting as a single class.]
[(d)] A supervisor appointed or elected pursuant to this Section 7.6
to fill a vacancy shall be appointed or elected, as the case may be, for
the unexpired term of his predecessor in office.
7.7 Meetings; Committees; Chairman{.}
(a) Regular meetings of the Board of Supervisors shall be held at such
times and places as shall be designated from time to time by resolution of the
Board of Supervisors. Notice of such regular meetings shall not be required.
Special meetings of the Board of Supervisors may be called by the Chairman of
the Board of Supervisors or the [Executive Vice Chairman or] Vice Chairman of
the Board of Supervisors and shall be called by the Secretary upon the written
request of two members of the Board of Supervisors, on at least 48 hours prior
written notice to the other members. Any such notice, or waiver thereof, need
not state the purpose of such meeting except as may otherwise be required by
law.
C-51
<PAGE>
<PAGE>
Attendance of a member of the Board of Supervisors at a meeting (including
pursuant to the penultimate sentence of this Section 7.7(a)) shall constitute a
waiver of notice of such meeting, except where such member attends the meeting
for the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened. Any action required
or permitted to be taken at a meeting of the Board of Supervisors may be taken
without a meeting, without prior notice and without a vote if a consent or
consents in writing, setting forth the action so taken, is signed by all the
members of the Board of Supervisors{. Members of the Board of Supervisors} may
participate in and hold meetings by means of conference telephone,
videoconference or similar communications equipment by means of which all
Persons participating in the meeting can hear each other, and participation in
such meetings shall constitute presence in person at the meeting. The Board of
Supervisors may establish any additional rules governing the conduct of its
meetings that are not inconsistent with the provisions of this Agreement.
(b) The Board of Supervisors shall appoint the Audit Committee to consist
solely of two or more of the Elected Supervisors then in office. The Audit
Committee shall perform the functions delegated to it pursuant to the terms of
this Agreement and such other matters as may be delegated to it from time to
time by resolution of the Board of Supervisors. The Board of Supervisors, by a
majority of the whole Board of Supervisors, may appoint one or more additional
committees of the Board of Supervisors to consist of one or more members of the
Board of Supervisors, which committee(s) shall have and may exercise such of the
powers and authority of the Board of Supervisors (including in respect of
Section 7.1) with respect to the management of the business and affairs of the
Partnership as may be provided in a resolution of the Board of Supervisors. Any
committee designated pursuant to this Section 7.7(b) shall choose its own
chairman, shall keep regular minutes of its proceedings and report the same to
the Board of Supervisors when requested, shall fix its own rules or procedures
and shall meet at such times and at such place or places as may be provided by
such rules or by resolution of such committee or resolution of the Board of
Supervisors. At every meeting of any such committee, the presence of a majority
of all the members thereof shall constitute a quorum and the affirmative vote of
a majority of the members present shall be necessary for the taking of any
action. Subject to the first sentence of this Section 7.7(b), the Board of
Supervisors may designate one or more members of the Board of Supervisors as
alternate members of any committee who may replace any absent or disqualified
member at any meeting of such committee. Subject to the first sentence of this
Section 7.7(b), in the absence or disqualification of a member of a committee,
the member or members present at any meeting and not disqualified from voting,
whether or not constituting a quorum, may unanimously appoint another member of
the Board of Supervisors to act at the meeting in the place of the absent or
disqualified member.
(c) The Board of Supervisors may elect one of its members as Chairman of
the Board of Supervisors. The Chairman of the Board of Supervisors, if any, and
if present and acting, shall preside at all meetings of the Board of
Supervisors. In the absence of the Chairman of the Board of Supervisors, the
[Executive Vice Chairman or] Vice Chairman of the Board of Supervisors, if any,
and if present and acting, shall preside at all meetings of the Board of
Supervisors. In the absence of the Chairman of the Board of Supervisors and the
[Executive Vice Chairman or] Vice Chairman of the Board of Supervisors, the
President, if present, acting and a member of the Board of Supervisors, or any
other member of the Board of Supervisors chosen by the Board of Supervisors
shall preside.
7.8 Officers{.}
(a) Generally. The Board of Supervisors, as set forth below, shall appoint
agents of the Partnership, referred to as 'Officers' of the Partnership as
described in this Section 7.8. Unless provided otherwise by resolution of the
Board of Supervisors, the Officers shall have the titles, power, authority and
duties described below in this Section 7.8.
(b) Titles and Number. The Officers [of the Partnership] shall be the
Chairman of the Board of Supervisors (unless the Board of Supervisors provides
otherwise), the [Executive Vice Chairman or] Vice Chairman of the Board of
Supervisors (unless the Board of Supervisors provides otherwise), the
President, any and all Vice Presidents, the Secretary and any and all Assistant
Secretaries and any Treasurer and any and all Assistant Treasurers and any other
Officers appointed pursuant to Section [7.8(i)] {7.8(j)}. There shall be
appointed from time to time, in accordance with this Section 7.8, such Vice
C-52
<PAGE>
<PAGE>
Presidents, Secretaries, Assistant Secretaries, Treasurers and Assistant
Treasurers as the Board of Supervisors may desire. Any person may hold two or
more offices.
(c) Appointment and Term of Office. The Officers shall be appointed by the
Board of Supervisors at such time and for such terms as the Board of Supervisors
shall determine. Any Officer may be removed, with or without Cause, only by the
Board of Supervisors. Vacancies in any office may be filled only by the Board of
Supervisors.
(d) Chairman of the Board of Supervisors. The Board of Supervisors may
elect one of its members as the Chairman of the Board of Supervisors. Unless the
Board of Supervisors provides otherwise, the Chairman of the Board of
Supervisors shall be an Officer [of the Partnership] and shall have the powers,
duties and [authorities] {authority} assigned by the Board of Supervisors.
(e) [Executive Vice Chairman or] Vice Chairman. The Board of Supervisors
may elect one of its members as [Executive Vice Chairman or] Vice Chairman of
the Board of Supervisors. Unless the Board of Supervisors provides otherwise,
the [Executive Vice Chairman or] Vice Chairman of the Board of Supervisors[, as
the case may be,] shall be an Officer [of the Partnership] and shall have the
powers, duties and authority of the chief executive officer of the Partnership
and, as such, shall be responsible for the general and active management and
direction of the Partnership and shall see that all orders and resolutions of
the Board of Supervisors are carried into effect.
(f) President. Subject to the limitations imposed by this Agreement, any
employment agreement, any employee plan or any determination of the Board of
Supervisors, the President, subject to the direction of the Board of
Supervisors, shall have the powers, duties and authority of the chief operating
officer of the Partnership and, as such, shall be responsible for the management
and direction of the day-to-day business and affairs of the Partnership, its
other Officers, employees and agents, shall supervise generally the affairs of
the Partnership and shall have full authority to execute all documents and take
all actions that the Partnership may legally take. The President shall exercise
such other powers and perform such other duties as may be assigned to him by
this Agreement or the Board of Supervisors, including any duties and powers
stated in any employment agreement approved by the Board of Supervisors.
(g) Vice Presidents. In the absence of the President, each Vice President
appointed by the Board of Supervisors shall have all of the powers and duties
conferred upon the President, including the same power as the President to
execute documents on behalf of the Partnership. Each such Vice President shall
perform such other duties and may exercise such other powers as may from time to
time be assigned to him by the Board of Supervisors or the President.
(h) Secretary and Assistant Secretaries. The Secretary shall record or
cause to be recorded in books provided for that purpose the minutes of the
meetings or actions of the Board of Supervisors and [Unitholders] {Partners},
shall see that all notices are duly given in accordance with the provisions of
this Agreement and as required by law, shall be custodian of all records (other
than financial), shall see that the books, reports, statements, certificates and
all other documents and records required by law are properly kept and filed,
and, in general, shall perform all duties incident to the office of Secretary
and such other duties as may, from time to time, be assigned to him by this
Agreement, the Board of Supervisors or the President. The Assistant Secretaries
shall exercise the powers of the Secretary during that Officer's absence or
inability or refusal to act.
(i) Treasurer and Assistant Treasurers. The Treasurer shall keep or cause
to be kept the books of account of the Partnership and shall render statements
of the financial affairs of the Partnership in such form and as often as
required by this Agreement, the Board of Supervisors or the President. The
Treasurer, subject to the order of the Board of Supervisors, shall have the
custody of all funds and securities of the Partnership. The Treasurer shall
perform all other duties commonly incident to his office and shall perform such
other duties and have such other powers as this Agreement, the Board of
Supervisors or the President, shall designate from time to time. The Assistant
Treasurers shall exercise the power of the Treasurer during that Officer's
absence or inability or refusal to act. Each of the Assistant Treasurers shall
possess the same power as the Treasurer to sign all certificates, contracts,
obligations and other instruments of the Partnership. If no Treasurer or
Assistant Treasurer is appointed and serving or in the absence of the appointed
Treasurer and Assistant Treasurer, the Vice
C-53
<PAGE>
<PAGE>
President and Chief Financial Officer, or such other Officer as the Board of
Supervisors shall select, shall have the powers and duties conferred upon the
Treasurer.
(j) Other Officers and Agents. The Board of Supervisors may appoint such
other Officers and agents as may from time to time appear to be necessary or
advisable in the conduct of the affairs of the Partnership, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Supervisors.
(k) Powers of Attorney. The Board of Supervisors may grant powers of
attorney or other authority as appropriate to establish and evidence the
authority of the Officers and other Persons.
(l) Officers' Delegation of Authority. Unless otherwise provided by
resolution of the Board of Supervisors, no Officer shall have the power or
authority to delegate to any Person such Officer's rights and powers as an
Officer to manage the business and affairs of the Partnership.
7.9 Compensation{.}
The Officers shall receive such compensation for their services as may be
designated by the Board of Supervisors. In addition, the Officers shall be
entitled to be reimbursed for out-of-pocket costs and expenses incurred in the
course of their service hereunder. The members of the Board of Supervisors who
are not employees of the Partnership or its Affiliates shall receive such
compensation for their services as members of the Board of Supervisors or
members of a committee of the Board of Supervisors as the Board of Supervisors
shall determine. In addition, the members of the Board of Supervisors shall be
entitled to be reimbursed for out-of-pocket costs and expenses incurred in the
course of their service hereunder.
7.10 Restrictions on General Partner's and Board of Supervisors'
Authority{.}
(a) Except as provided in Articles XII and XIV, neither the General Partner
nor the Board of Supervisors may sell, exchange or otherwise dispose of all or
substantially all of the Partnership's assets in a single transaction or a
series of related transactions or approve on behalf of the Partnership the sale,
exchange or other disposition of all or substantially all of the assets of the
Operating Partnership, without the approval of the holders of [a Unit Majority]
{at least a majority of the Outstanding Common Units}; provided, however that
this provision shall not preclude or limit the Board of Supervisors' ability to
mortgage, pledge, hypothecate or grant a security interest in all or
substantially all of the assets of the Partnership Group and shall not apply to
any forced sale of any or all of the assets of the Partnership Group pursuant to
the foreclosure of, or other realization upon, any such encumbrance. Without the
approval of the holders of [a Unit Majority] {at least a majority of the
Outstanding Common Units}, neither the General Partner nor the Board of
Supervisors shall, on behalf of the Partnership, (i) consent to any amendment to
the Operating Partnership Agreement or, except as expressly permitted by Section
7.16(d), take any action permitted to be taken by a partner of the
Operating Partnership, in either case, that would have a material adverse effect
on the Partnership as a partner of the Operating Partnership or (ii) except as
permitted under Sections 4.6, 11.1 and 11.2, elect or cause the Partnership to
elect a successor general partner of the Operating Partnership.
(b) The Board of Supervisors may not cause the Partnership to incur any
Indebtedness that is recourse to the General Partner or any of its Affiliates
without the approval of the General Partner, which approval may be given or
withheld in the General Partner's sole discretion.
[(c) Until the termination of the Subordination Period, the Board of
Supervisors may not, without the approval of the General Partner which approval
may be given or withheld in its sole discretion, cause the Partnership to make
any distributions in excess of the Minimum Quarterly Distribution on the Common
Units and Subordinated Units and Cumulative Common Unit Arrearages, if any, plus
the related distribution on the general partner interest in the Partnership, and
redemptions of outstanding APUs, if any, unless the Board of Supervisors
establishes a cash reserve in an amount equal to the product of the Minimum
Quarterly Distribution for four Quarters times the number of then Outstanding
Units plus a proportionate distribution on the General Partner's general partner
interest in the Partnership.]
[(d) At all times while serving as the General Partner of the Partnership,
the General Partner shall not make any dividend or distribution on, or
repurchase any shares of, its capital stock or take any]
C-54
<PAGE>
<PAGE>
[other similar action within its control if after giving effect to such action
its net worth, computed on a fair market basis, excluding its interests in the
Partnership Group and in any notes or receivables due from a Group Member, would
be less than $28 million; provided, however, that subject to the provisions of
Article IV, the General Partner shall not be prohibited by this Section 7.10(d)
from (i) making a dividend or distribution of all or any part of its interests
in the Partnership Group and in any notes or receivables due from a Group Member
or (ii) effecting any transaction permitted under Section 4.6.]
7.11 Reimbursement of the General Partner; Employee Benefit Plans{.}
(a) Except as provided in this Section 7.11 and elsewhere in this Agreement
or in the Operating Partnership Agreement, the General Partner shall not be
compensated for its services as general partner of any Group Member.
(b) The General Partner shall be reimbursed on a monthly basis, or such
other basis as the Board of Supervisors may determine, for (i) all direct and
indirect expenses it incurs or payments it makes on behalf of the Partnership
(including salary, bonus, incentive compensation and other amounts paid to any
Person to perform services for the Partnership or for the General Partner or the
Board of Supervisors in the discharge of its duties to the Partnership), and
(ii) all other necessary or appropriate expenses allocable to the Partnership or
otherwise reasonably incurred by the General Partner in connection with
operating the Partnership's business (including expenses allocated to the
General Partner by its Affiliates). Reimbursements pursuant to this Section 7.11
shall be in addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 7.14.
(c) Subject to Section 5.7, the Board of Supervisors, without the approval
of the Limited Partners (who shall have no right to vote in respect thereof),
may propose and adopt on behalf of the Partnership employee benefit plans,
employee programs and employee practices (including plans, programs and
practices involving the issuance of Units), or issue Partnership Securities
pursuant to any employee benefit plan, employee program or employee practice
maintained or sponsored by the Partnership, the General Partner or any of their
Affiliates, in each case for the benefit of the members of the Board of
Supervisors, employees of the Partnership or the Operating Partnership,
employees of the General Partner, any Group Member or any Affiliate, or any of
them, in respect of services performed, directly or indirectly, for the benefit
of the Partnership Group. The Partnership agrees to issue and sell to the
General Partner or any of its Affiliates any Units or other Partnership
Securities that the General Partner or any of its Affiliates are obligated to
provide to any employees pursuant to any such employee benefit plans, employee
programs or employee practices. Expenses incurred by the General Partner in
connection with any such plans, programs and practices (including the net cost
to the General Partner or any of its Affiliates of Units or other Partnership
Securities purchased by the General Partner or any of its Affiliates from the
Partnership to fulfill options or awards under such plans, programs and
practices) shall be reimbursed in accordance with Section 7.11(b). Any and all
obligations of the General Partner under any employee benefit plans, employee
programs or employee practices adopted by the Board of Supervisors as permitted
by this Section 7.11(c) shall constitute obligations of the General Partner
hereunder and shall be assumed by any successor General Partner approved
pursuant to Section 11.1 or 11.2 or the transferee of or successor to all of the
[Partnership] {General Partner} Interest [as a general partner in the
Partnership] pursuant to Section 4.6.
7.12 Outside Activities of the General Partner{.}
(a) After the {Initial} Closing Date, the General Partner, for so long as
it is the general partner of the Partnership, (i) agrees that its sole business
will be to act as a general partner of the Partnership, the Operating
Partnership, and any other partnership of which the Partnership or the Operating
Partnership is, directly or indirectly, a partner and to undertake activities
that are ancillary or related thereto (including being a Limited Partner in the
Partnership), and (ii) shall not enter into or conduct any business or incur any
debts or liabilities except in connection with or incidental to (A) its
performance of the activities required or authorized by this Agreement or the
Operating Partnership Agreement or described in or contemplated by the {Initial}
Registration {Statement or the Proxy} Statement and (B) the acquisition,
ownership or disposition of Partnership Interests or partnership interests in
the Operating Partnership or any other partnership of which the Partnership or
the Operating Partnership is, directly or indirectly, a partner; provided[,
however, that the General Partner may not incur indebtedness in connection with
the acquisition or ownership of Partnership Interests or]
C-55
<PAGE>
<PAGE>
[such other partnership interests; and, provided further, that,] {that}
notwithstanding the foregoing, employees of the General Partner may perform
limited services for other Affiliates of the General Partner in addition to the
Partnership and the Operating Partnership (it being understood that full time
employees of the General Partner shall devote substantially all their employment
services to the Partnership and the Operating Partnership).
(b) Except as described in Section 7.12(a), each Indemnitee (other than the
General Partner) shall have the right to engage in businesses of every type and
description and other activities for profit and to engage in and possess an
interest in other business ventures of any and every type or description,
independently or with others, whether in the businesses engaged in by the
Partnership or the Operating Partnership or anticipated to be engaged in by the
Partnership, the Operating Partnership or otherwise, including, without
limitation, in the case of any Affiliates of the General Partner, business
interests and activities in direct competition with the business and activities
of the Partnership or the Operating Partnership, and none of the same shall
constitute a breach of this Agreement or any duty to the Partnership, the
Operating Partnership or any Partner or Assignee. Neither the Partnership, the
Operating Partnership, any Limited Partner nor any other Person shall have any
rights by virtue of this Agreement, the Operating Partnership Agreement or the
partnership relationship established hereby or thereby in any business ventures
of any Indemnitee and such Indemnitees shall have no obligation to offer any
interest in any such business ventures to the Partnership, the Operating
Partnership, any Limited Partner or any other Person. The General Partner and
any Affiliates of the General Partner may acquire Units[, APUs] or other
Partnership Securities [in addition to those acquired by any of such Persons on
the Closing Date], and, except as otherwise provided in this Agreement, shall be
entitled to exercise all rights of an Assignee, Limited Partner or holder of [an
APU or other] {another} Partnership Security, as applicable, relating to such
Units[, APUs] or Partnership Securities, as the case may be.
(c) Subject to the terms of Sections 7.12(a) and (b) but otherwise
notwithstanding anything to the contrary in this Agreement, (i) the engaging in
competitive activities by any of the Indemnitees (other than the General
Partner) in accordance with Section 7.12(b) is hereby approved by the
Partnership and all Partners and (ii) it shall be deemed not to be a breach of
the General Partner's fiduciary duties or any other obligation of any type
whatsoever of the General Partner for the General Partner to permit its
Affiliates to engage, or for any such Affiliate to engage, in business interests
and activities in preference to or to the exclusion of the Partnership.
(d) The term 'Affiliates' when used in this Section 7.12 with respect to
the General Partner shall not include any Group Member.
7.13 Loans from the General Partner; Contracts with Affiliates; Certain
Restrictions on the General Partner.
(a) The General Partner or any Affiliate of the General Partner may lend to
any Group Member, and any Group Member may borrow from the General Partner and
any Affiliate of the General Partner, funds needed or desired by the Group
Member for such periods of time and in such amounts as the General Partner may
determine; provided, however, that in any such case the lending party may not
charge the borrowing party interest at a rate greater than the rate that would
be charged the borrowing party or impose terms less favorable on the borrowing
party than would be charged or imposed on the borrowing party by unrelated
lenders on comparable loans made on an arms-length basis (without reference to
the lending party's financial abilities or guarantees). The borrowing party
shall reimburse the lending party for any costs (other than any additional
interest costs) incurred by the lending party in connection with the borrowing
of such funds. For purposes of this Section 7.13(a) and Section 7.13(b), the
term 'Group Member' shall include any Affiliate of the Group Member that is
controlled by the Group Member. No Group Member may lend funds to the General
Partner or any of its Affiliates (other than another Group Member).
(b) The Partnership may lend or contribute to any Group Member, and any
Group Member may borrow from the Partnership, funds on terms and conditions
established by the Board of Supervisors; provided, however, that the Partnership
may not charge a Group Member interest at a rate greater than the rate that
would be charged to such Group Member (without reference to the General
[Partners] {Partner's} financial abilities or guarantees), by unrelated lenders
on comparable loans. The foregoing
C-56
<PAGE>
<PAGE>
authority shall be exercised by the Board of Supervisors and shall not create
any right or benefit in favor of any Group Member or any other Person.
(c) The General Partner may itself, or may enter into an agreement with any
of its Affiliates to, render services to a Group Member. Any services rendered
to a Group Member by the General Partner or any of its Affiliates shall be on
terms that are fair and reasonable to the Partnership; provided, however, that
the requirements of this Section 7.13(c) shall be deemed satisfied as to (i) any
transaction approved by Special Approval, (ii) any transaction, the terms of
which are no less favorable to the Partnership Group than those generally being
provided to or available from unrelated third parties or (iii) any transaction
that, taking into account the totality of the relationships between the parties
involved (including other transactions that may be particularly favorable or
advantageous to the Partnership Group), is equitable to the Partnership Group.
The provisions of Section 7.11 shall apply to the rendering of services
described in this Section 7.13(c).
(d) The Partnership may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(e) Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.13(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 5.1, [5.2] and 5.3, the Contribution
and Conveyance Agreement and any other transactions described in or contemplated
by the {Initial} Registration Statement {or the Proxy Statement,} (ii) any
transaction approved by Special Approval, (iii) any transaction, the terms of
which are no less favorable to the Partnership than those generally being
provided to or available from unrelated third parties, or (iv) any transaction
that, taking into account the totality of the relationships between the parties
involved (including other transactions that may be particularly favorable or
advantageous to the Partnership), is equitable to the Partnership. With respect
to any contribution of assets to the Partnership in exchange for Units, the
Audit Committee, in determining whether the appropriate number of Units are
being issued, shall take into account, among other things, the fair market value
of the assets, the liquidated and contingent liabilities assumed, the tax basis
in the assets, the extent to which tax-only allocations to the transferor will
protect the existing partners of the Partnership against a low tax basis, and
such other factors as the Audit Committee deems relevant under the
circumstances.
(f) The General Partner and its Affiliates will have no obligation to
permit any Group Member to use any facilities or assets of the General Partner
and its Affiliates, except as may be provided in contracts entered into from
time to time specifically dealing with such use, nor shall there be any
obligation on the part of the General Partner or its Affiliates to enter into
such contracts.
(g) Without limitation of Sections 7.13(a) through 7.13(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the {Initial} Registration {Statement or the
Proxy} Statement are hereby approved by all Partners.
7.14 Indemnification.
(a) To the fullest extent permitted by law but subject to the limitations
expressly provided in this Agreement, all Indemnitees shall be indemnified and
held harmless by the Partnership from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including legal fees [and
expenses)], {expenses and other disbursements}), judgments, fines, penalties,
interest, settlements or other amounts arising from any and all claims, demands,
actions, suits or proceedings, whether civil, criminal, administrative or
investigative, in which any Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, by reason of its status as an Indemnitee,
provided, that in each case the Indemnitee acted in good faith and in a manner
that such Indemnitee reasonably believed to be in, or not opposed to, the best
interests of the Partnership and, with respect to any criminal proceeding, had
no reasonable cause to believe its conduct was unlawful; provided, further, that
no indemnification pursuant to this Section 7.14 shall be available to the
{Initial} General Partner with respect to its obligations incurred pursuant to
the Underwriting Agreement{,} [or] the Conveyance and Contribution Agreement{,
the Purchase Agreement or the Recapitalization Agreement or otherwise in
connection}
C-57
<PAGE>
<PAGE>
{with the Recapitalization} (other than obligations incurred by the General
Partner on behalf of the Partnership or the Operating Partnership). The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that the Indemnitee acted in a manner contrary to that
specified above. Any indemnification pursuant to this Section 7.14 shall be made
only out of the assets of the Partnership, it being agreed that the General
Partner shall not be personally liable for such indemnification and shall have
no obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal fees
[and expenses)], {expenses and other disbursements}) incurred by an Indemnitee
who is indemnified pursuant to Section 7.14(a) in defending any claim, demand,
action, suit or proceeding shall, from time to time, be advanced by the
Partnership prior to the final disposition of such claim, demand, action, suit
or proceeding upon receipt by the Partnership of any undertaking by or on behalf
of the Indemnitee to repay such amount if it shall be determined {by a final,
non-appealable order of a court of competent jurisdiction} that the Indemnitee
is not entitled to be indemnified as authorized in this Section 7.14.
(c) The indemnification provided by this Section 7.14 shall be in addition
to any other rights to which an Indemnitee may be entitled under any agreement,
pursuant to any vote of the holders of Outstanding {Common} Units, as a matter
of law or otherwise, both as to actions in the Indemnitee's capacity as an
Indemnitee and as to actions in any other capacity (including any capacity under
the Underwriting Agreement), and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the members of
the Board of Supervisors, the General Partner or its Affiliates for the cost of)
insurance, on behalf of the General Partner and the members of the Board of
Supervisors and such other Persons as the Board of Supervisors shall determine,
against any liability that may be asserted against or expense that may be
incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
(e) For purposes of this Section 7.14, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute 'fines'
within the meaning of Section 7.14(a); and action taken or omitted by it with
respect to any employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is in, or
not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.14 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.14 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.14 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligations of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 7.14 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to
C-58
<PAGE>
<PAGE>
matters occurring, in whole or in part, prior to such amendment, modification or
repeal, regardless of when such claims may arise or be asserted.
7.15 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this Agreement,
no Indemnitee shall be liable for monetary damages to the Partnership, the
Limited Partners, the Assignees or any other Persons who have acquired interests
in the Units, for losses sustained or liabilities incurred as a result of errors
in judgment or any act or omission if such Indemnitee acted in good faith
{pursuant to authority granted in this Agreement.}
(b) To the maximum extent permitted by law, the General Partner and its
Affiliates shall not be responsible for any act or omission by the Board of
Supervisors, any member of the Board of Supervisors, or any Officers of the
Partnership.
(c) To the maximum extent permitted by law, the members of the Board of
Supervisors and the Officers of the Partnership shall not be responsible for any
act or omission by the General Partner and its Affiliates.
(d) Subject to its obligations and duties set forth in Section 7.1(a), the
Board of Supervisors may exercise any of the powers granted to it by this
Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through the Officers or other agents of the Partnership, and,
to the maximum extent permitted by law, the Board of Supervisors shall not be
responsible for any misconduct or negligence on the part of any such Officer or
agent appointed by the Board of Supervisors in good faith.
(e) It will not constitute a breach of fiduciary or other duty for an
Officer or member of the Board of Supervisors to engage attorneys, accountants,
engineers and other advisors on behalf of the Partnership, its Board of
Supervisors, or any committee thereof, even though such persons may also be
retained from time to time by the General Partner or any of its Affiliates, and
such persons may be engaged with respect to any matter in which the interests of
the Partnership and the General Partner or any of its Affiliates may differ, or
may be engaged by both the Partnership and the General Partner or any of its
Affiliates with respect to a matter, as long as such Officer or member of the
Board of Supervisors reasonably believes that any conflict between the
Partnership and the General Partner or any of its Affiliates with respect to
such matter is not material[; and].
(f) Any amendment, modification or repeal of this Section 7.15 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership and the Limited Partners, of the
General Partner, its directors, officers and employees {and any other
Indemnitees} under this Section 7.15 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
7.16 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement or the Operating
Partnership Agreement, whenever a potential conflict of interest exists or
arises between the General Partner or any of its Affiliates, or any Officer or
member of the Board of Supervisors, on the one hand, and the Partnership, the
Operating Partnership, any Partner or any Assignee, on the other, any resolution
or course of action in respect of such conflict of interest shall be permitted
and deemed approved by all Partners, and shall not constitute a breach of this
Agreement, of the Operating Partnership Agreement, of any agreement contemplated
herein or therein, or of any duty stated or implied by law or equity, if the
resolution or course of action is, or by operation of this Agreement is deemed
to be, fair and reasonable to the Partnership. The Board of Supervisors shall be
authorized but not required in connection with its resolution of such conflict
of interest to seek Special Approval of a resolution of such conflict or course
of action. Any conflict of interest and any resolution of such conflict of
interest shall be conclusively deemed fair and reasonable to the Partnership if
such conflict of interest or resolution is (i) approved by Special Approval (as
long as the material facts known to the General Partner or any of its Affiliates
or such Officer or member of the Board of Supervisors regarding any proposed
transaction were disclosed to the Audit Committee at the time it gave its
approval), (ii) on terms no less favorable to the Partnership than those
generally being provided to or available from
C-59
<PAGE>
<PAGE>
unrelated third parties or (iii) fair to the Partnership, taking into account
the totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership). The Board of Supervisors may also adopt a resolution or course of
action that has not received Special Approval. The Board of Supervisors
(including the Audit Committee in connection with Special Approval) shall be
authorized in connection with its determination of what is fair and reasonable
to the Partnership and in connection with its resolution of any conflict of
interest to consider (A) the relative interests of any party to such conflict,
agreement, transaction or situation and the benefits and burdens relating to
such interest; (B) any customary or accepted industry practices and any
customary or historical dealings with a particular Person; (C) any applicable
generally accepted accounting practices or principles; and (D) such additional
factors as the Board of Supervisors (including the Audit Committee) determines
in its discretion to be relevant, reasonable or appropriate under the
circumstances. Nothing contained in this Agreement, however, is intended to nor
shall it be construed to require the Board of Supervisors (including the Audit
Committee) to consider the interests of any Person other than the Partnership.
In the absence of bad faith by the Board of Supervisors, the resolution, action
or terms so made, taken or provided by the Board of Supervisors with respect to
such matter shall not constitute a breach of this Agreement or any other
agreement contemplated herein or a breach of any standard of care or duty
imposed herein or therein or, to the extent permitted by law, under the Delaware
Act or any other law, rule or regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the Board of Supervisors is permitted or required to make a
decision (i) in its '{sole discretion' or} 'discretion' that it deems 'necessary
or appropriate' or 'necessary or advisable' or under a grant of similar
authority or latitude, except as otherwise provided herein, the Board of
Supervisors shall make such decision in its sole discretion (regardless of
whether there is a reference to 'sole discretion' or 'discretion') unless
another express standard is provided for, or (ii) in 'good faith' or under
another express standard, the Board of Supervisors shall act under such express
standard and shall not be subject to any other or different standards imposed by
this Agreement, the Operating Partnership Agreement, any other agreement
contemplated hereby or under the Delaware Act or any other law, rule or
regulation. In addition, any actions taken by the Board of Supervisors
consistent with the standards of 'reasonable discretion' set forth in the
definitions of Available Cash or Operating Surplus shall not constitute a breach
of any duty of the Board of Supervisors to the Partnership or the Limited
Partners. The Board of Supervisors shall have no duty, express or implied, to
sell or otherwise dispose of any asset of the Partnership Group. No borrowing by
any Group Member or the approval thereof by the Board of Supervisors shall be
deemed to constitute a breach of any duty of the Board of Supervisors to the
Partnership or the Limited Partners by reason of the fact that the purpose or
effect of such borrowing is directly or indirectly to [(A)] enable distributions
to be made to the holders of the Incentive Distribution Rights[, (B) hasten the
expiration of the Subordination Period or the conversion of any Subordinated
Units into Common Units or (C) enable the General Partner to avoid or reduce its
obligation to purchase APUs pursuant to the Distribution Support Agreement].
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be 'fair and
reasonable' to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The Limited Partners hereby authorize the Board of Supervisors on
behalf of the Partnership as a partner of a Group Member, to approve of actions
by the general partner or the board of supervisors of such Group Member similar
to those actions permitted to be taken by the Board of Supervisors pursuant to
this Section 7.16.
7.17 Other Matters Concerning the General Partner and the Board of
Supervisors.
(a) The General Partner and the Board of Supervisors may rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties.
(b) The General Partner and the Board of Supervisors may consult with legal
counsel, accountants, appraisers, management consultants, investment bankers and
other consultants and advisers selected by
C-60
<PAGE>
<PAGE>
either of them, and any act taken or omitted to be taken in reliance upon the
opinion (including an Opinion of Counsel) of such Persons as to matters that the
General Partner or the Board of Supervisors reasonably believes to be within
such Person's professional or expert competence shall be conclusively presumed
to have been done or omitted in good faith and in accordance with such opinion.
(c) The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers, a duly appointed attorney or attorneys-in-fact or the duly authorized
Officers of the Partnership.
(d) The Board of Supervisors shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of the duly authorized
Officers of the Partnership or a duly appointed attorney or attorneys-in-fact.
(e) Any standard of care and duty imposed by this Agreement or under the
Delaware Act or any applicable law, rule or regulation shall be modified, waived
or limited, to the maximum extent permitted by law, as required to permit the
General Partner and the Board of Supervisors to act under this Agreement or any
other agreement contemplated by this Agreement and to make any decision pursuant
to the authority prescribed in this Agreement, so long as such action is
reasonably believed by the General Partner or the Board of Supervisors to be in,
or not inconsistent with, the best interests of the Partnership.
(f) The General Partner or other holder of Partnership Securities that have
voting rights, when voting its interest in the Partnership on any matter shall
not be acting in a fiduciary capacity and therefore shall be entitled to
consider only such interests and factors as it desires and shall have no duty or
obligation to give any consideration to any interest of, or factors affecting,
the Partnership or any Limited Partner.
7.18 Purchase or Sale of Units{.}
The Partnership may purchase or otherwise acquire Units[; provided that,
except as permitted pursuant to Sections 4.10 and 5.3(b), the Partnership may
not purchase Subordinated Units during the Subordination Period]. As long as
Units are held by any Group Member, such Units shall not be considered
Outstanding for any purpose, except as otherwise provided herein. The General
Partner or any Affiliate of the General Partner may also purchase or otherwise
acquire and sell or otherwise dispose of Units for its own account, subject to
the provisions of Articles IV and X.
7.19 Registration Rights of the General Partner and its Affiliates{.}
(a) If (i) the General Partner or any Affiliate of the General Partner
(including for purposes of this Section 7.19, any Person that is an Affiliate of
the General Partner at the date hereof notwithstanding that it may later cease
to be an Affiliate of the General Partner) holds Units or other Partnership
Securities that it desires to sell and (ii) Rule 144 of the Securities Act (or
any successor rule or regulation to Rule 144) or another exemption from
registration is not available to enable such holder of Units (the 'Holder') to
dispose of the number of Units or other securities it desires to sell at the
time it desires to do so without registration under the Securities Act, then
upon the request of the General Partner or any of its Affiliates, the
Partnership shall file with the Commission as promptly as practicable after
receiving such request, and use all reasonable efforts to cause to become
effective and remain effective for a period of not less than six months
following its effective date or such shorter period as shall terminate when all
Units or other Partnership Securities covered by such registration statement
have been sold, a registration statement under the Securities Act registering
the offering and sale of the number of Units or other securities specified by
the Holder; provided, however, that the Partnership shall not be required to
effect more than three registrations pursuant to this Section 7.19(a); and
provided, further, however, that if the Audit Committee determines in its good
faith judgment that a postponement of the requested registration for up to six
months would be in the best interests of the Partnership and its Partners due to
a pending transaction, investigation or other event, the filing of such
registration statement or the effectiveness thereof may be deferred for up to
six months, but not thereafter. In connection with any registration pursuant to
the immediately preceding sentence, the Partnership shall promptly prepare and
file (x) such documents as may be necessary to register or qualify the
securities subject to such registration under the securities laws of such states
as the Holder
C-61
<PAGE>
<PAGE>
shall reasonably request; provided, however, that no such qualification shall be
required in any jurisdiction where, as a result thereof, the Partnership would
become subject to general service of process or to taxation or qualification to
do business as a foreign corporation or partnership doing business in such
jurisdiction, and (y) such documents as may be necessary to apply for listing or
to list the securities subject to such registration on such National Securities
Exchange as the Holder shall reasonably request, and do any and all other acts
and things that may reasonably be necessary or advisable to enable the Holder to
consummate a public sale of such Units in such states. Except as set forth in
Section 7.19(c), all costs and expenses of any such registration and offering
(other than the underwriting discounts and commissions) shall be paid by the
Partnership, without reimbursement by the Holder.
(b) If the Partnership shall at any time propose to file a registration
statement under the Securities Act for an offering of equity securities of the
Partnership for cash (other than an offering relating solely to an employee
benefit plan), the Partnership shall use all reasonable efforts to include such
number or amount of securities held by the Holder in such registration statement
as the Holder shall request. If the proposed offering pursuant to this Section
7.19(b) shall be an underwritten offering, then, in the event that the managing
underwriter of such offering advises the Partnership and the Holder in writing
that in its opinion the inclusion of all or some of the [Holders] {Holder's}
securities would adversely and materially affect the success of the offering,
the Partnership shall include in such offering only that number or amount, if
any, of securities held by the Holder which, in the opinion of the managing
underwriter, will not so adversely and materially affect the offering. Except as
set forth in Section 7.19(c), all costs and expenses of any such registration
and offering (other than the underwriting discounts and commissions) shall be
paid by the Partnership, without reimbursement by the Holder.
(c) If underwriters are engaged in connection with any registration
referred to in this Section 7.19, the Partnership shall provide indemnification,
representations, covenants, opinions and other assurance to the underwriters in
form and substance reasonably satisfactory to such underwriters. Further, in
addition to and not in limitation of the Partnership's obligation under Section
7.14, the Partnership shall, to the fullest extent permitted by law, indemnify
and hold harmless the Holder, its officers, directors and each Person who
controls the Holder (within the meaning of the Securities Act) and any agent
thereof (collectively, 'Indemnified Persons') against any losses, claims,
demands, actions, causes of action, assessments, damages, liabilities (joint or
several), costs and expenses (including interest, penalties and reasonable
[attorneys] {attorneys'} fees and disbursements), resulting from, imposed upon,
or incurred by the Indemnified Persons, directly or indirectly, under the
Securities Act or otherwise (hereinafter referred to in this Section 7.19(c) as
a 'claim' and in the plural as 'claims') based upon, arising out of or resulting
from any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which any Units were registered
under the Securities Act or any state securities or Blue Sky laws, in any
preliminary prospectus (if used prior to the effective date of such registration
statement), or in any summary or final prospectus or in any amendment or
supplement thereto (if used during the period the Partnership is required to
keep the registration statement current), or arising out of, based upon or
resulting from the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements made therein
not misleading; provided, however, that the Partnership shall not be liable to
any Indemnified Person to the extent that any such claim arises out of, is based
upon or results from an untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, such preliminary,
summary or final prospectus or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Partnership by or on
behalf of such Indemnified Person specifically for use in the preparation
thereof.
(d) The provisions of Section 7.19(a) and 7.19(b) shall continue to be
applicable with respect to the General Partner (and any of its Affiliates) after
it ceases to be a Partner of the Partnership, during a period of two years
subsequent to the effective date of such cessation and for so long thereafter as
is required for the Holder to sell all of the Units or other securities of the
Partnership with respect to which it has requested during such two-year period
that a registration statement be filed; provided, however, that the Partnership
shall not be required to file successive registration statements covering the
same securities for which registration was demanded during such two-year period.
The provisions of Section 7.19(c) shall continue in effect thereafter.
C-62
<PAGE>
<PAGE>
(e) Any request to register Partnership Securities pursuant to this Section
7.19 shall (i) specify the Partnership Securities intended to be offered and
sold by the Person making the request, (ii) express such [Persons] {Person's}
present intent to offer such shares for distribution, (iii) describe the nature
or method of the proposed offer and sale of Partnership Securities, and (iv)
contain the undertaking of such Person to provide all such information and
materials and take all action as may be required in order to permit the
Partnership to comply with all applicable requirements in connection with the
registration of such Partnership Securities.
7.20 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the Board of
Supervisors and any Officer of the Partnership authorized by the Board of
Supervisors to act on behalf of and in the name of the Partnership (including
the General Partner, acting pursuant to the direction of the Board of
Supervisors in accordance with Section 7.1(a)) has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the
Partnership and to enter into any contracts on behalf of the Partnership, and
such Person shall be entitled to deal with the Board of Supervisors or any such
Officer (including the General Partner, acting pursuant to the direction of the
Board of Supervisors in accordance with Section 7.1(a)) as if it were the
[Partnerships] {Partnership's} sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives, to the maximum extent
permitted by law, any and all defenses or other remedies that may be available
against such Person to contest, negate or disaffirm any action of the Board of
Supervisors or any such Officer (including the General Partner, acting pursuant
to the direction of the Board of Supervisors in accordance with Section 7.1(a))
in connection with any such dealing. In no event shall any Person dealing with
the Board of Supervisors or its representatives or any such Officer (including
the General Partner, acting pursuant to the direction of the Board of
Supervisors in accordance with Section 7.1(a)) be obligated to ascertain that
the terms of the Agreement have been complied with or to inquire into the
necessity or expedience of any act or action of the Board of Supervisors or its
representatives or any such Officer (including the General Partner, acting
pursuant to the direction of the Board of Supervisors in accordance with
Section 7.1(a)). Each and every certificate, document or other instrument
executed on behalf of the Partnership by the Board of Supervisors or its
representatives or any such Officer (including the General Partner, acting
pursuant to the direction of the Board of Supervisors in accordance with
Section 7.1(a)) [or] shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (b) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (c) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
8.1 Records and Accounting{.}
The Partnership shall keep or cause to be kept at the principal office of
the Partnership appropriate books and records with respect to the Partnership's
business, including all books and records necessary to provide to the Limited
Partners any information required to be provided pursuant to Section 3.4(a). Any
books and records maintained by or on behalf of the Partnership in the regular
course of its business, including the record of the Record Holders and Assignees
of Units or other Partnership Securities, books of account and records of
Partnership proceedings, may be kept on, or be in the form of, computer disks,
hard drives, punch cards, magnetic tape, photographs, micrographics or any other
information storage device, provided, that the books and records so maintained
are convertible into clearly legible written form within a reasonable period of
time. The books of the Partnership shall be maintained, for financial reporting
purposes, on an accrual basis in accordance with U.S. GAAP.
8.2 Fiscal Year{.}
The fiscal year of the Partnership shall be a 52-53 week fiscal year
concluding on the Saturday nearest to September 30.
C-63
<PAGE>
<PAGE>
8.3 Reports{.}
(a) As soon as practicable, but in no event later than 120 days after the
close of each fiscal year of the Partnership, the Board of Supervisors shall
cause to be mailed or furnished to each Record Holder of a Unit as of a date
selected by the Board of Supervisors in its discretion, an annual report
containing financial statements of the Partnership for such fiscal year of the
Partnership, presented in accordance with U.S. GAAP, including a balance sheet
and statements of operations, Partners equity and cash flows, such statements to
be audited by a firm of independent public accountants selected by the Board of
Supervisors.
(b) As soon as practicable, but in no event later than 90 days after the
close of each Quarter except the last Quarter of each year, the Board of
Supervisors shall cause to be mailed or furnished to each Record Holder of a
Unit, as of a date selected by the Board of Supervisors in its discretion, a
report containing unaudited financial statements of the Partnership and such
other information as may be required by applicable law, regulation or rule of
any National Securities Exchange on which the Units are listed for trading, or
as the Board of Supervisors determines to be necessary or appropriate.
ARTICLE IX
TAX MATTERS
9.1 Tax Returns and Information{.}
The Partnership shall timely file all returns of the Partnership that are
required for federal, state and local income tax purposes on the basis of the
accrual method and a taxable year ending on December 31. The tax information
reasonably required by Record Holders for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the [Partnerships]
{Partnership's} taxable year ends. The classification, realization and
recognition of income, gain, losses and deductions and other items shall be on
the accrual method of accounting for federal income tax purposes.
9.2 Tax Elections{.}
(a) The Partnership [shall make] {has made} the election under Section 754
of the Code in accordance with applicable regulations thereunder, subject to the
reservation of the right to seek to revoke [any] such election upon the Board of
[Supervisors] {Supervisors'} determination that such revocation is in the best
interests of the Limited Partners. For the purposes of computing the adjustments
under Section 743(b) of the Code, the Board of Supervisors shall be authorized
(but not required) to adopt a convention whereby the price paid by a transferee
of Units will be deemed to be the lowest quoted closing price of the Units on
any National Securities Exchange on which such Units are traded during the
calendar month in which such transfer is deemed to occur pursuant to Section
6.2(g) without regard to the actual price paid by such transferee.
(b) The Partnership [shall] {has} elect{ed} to deduct expenses incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
(c) Except as otherwise provided herein, the Board of Supervisors shall
determine whether the Partnership should make any other elections permitted by
the Code.
9.3 Tax Controversies{.}
Subject to the provisions hereof, the General Partner is designated as the
Tax Matters Partner (as defined in {Section 6231(a)(7) of} the Code) and is
authorized and required to represent the Partnership (at the Partnership's
expense) in connection with all examinations of the Partnership's affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs associated
therewith. Each Partner agrees to cooperate with the General Partner and to do
or refrain from doing any or all things reasonably required by the General
Partner to conduct such proceedings.
C-64
<PAGE>
<PAGE>
9.4 Withholding{.}
Notwithstanding any other provision of this Agreement, the Board of
Supervisors is authorized to take any action that it determines in its
discretion to be necessary or appropriate to cause the Partnership and the
Operating Partnership to comply with any withholding requirements established
under the Code or any other federal, state or local law including, without
limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the
extent that the Partnership is required or elects to withhold and pay over to
any taxing authority any amount resulting from the allocation or distribution of
income to any Partner or Assignee (including, without limitation, by reason of
Section 1446 of the Code), the amount withheld may be treated as a distribution
of cash pursuant to Section 6.3 in the amount of such withholding from such
Partner.
ARTICLE X
ADMISSION OF PARTNERS
10.1 Admission of Initial Limited [Partner] {Partners}.
Upon the issuance by the Partnership of Subordinated Units and Incentive
Distribution Rights to the {Initial} General Partner as described in Section
[5.2,] {5.1,} the {Initial} General Partner [shall be deemed to have been] {was}
admitted to the Partnership as a Limited Partner [in respect of the Subordinated
Units and Incentive Distribution Rights issued to it]. Upon the issuance by the
Partnership of {Initial} Common Units to the {Initial} Underwriters as described
in Section [5.3] {5.1} in connection with the Initial Offering and the execution
by each {Initial} Underwriter of a Transfer Application, the [Board of
Supervisors shall admit the] {Initial} Underwriters {were admitted} to the
Partnership as Initial Limited Partners [in respect of the Common Units
purchased by them].
10.2 Admission of Substituted Limited Partners{.}
By transfer of a Unit {representing a Limited Partner Interest} in
accordance with Article IV, the transferor shall be deemed to have given the
transferee the right to seek admission as a Substituted Limited Partner subject
to the conditions of, and in the manner permitted under, this Agreement. A
transferor of a Certificate {representing a Limited Partner Interest} shall,
however, only have the authority to convey to a purchaser or other transferee
who does not execute and deliver a Transfer Application (a) the right to
negotiate such Certificate to a purchaser or other transferee and (b) the right
to transfer the right to request admission as a Substituted Limited Partner to
such purchaser or other transferee in respect of the transferred Units. Each
transferee of a Unit {representing a Limited Partner Interest} (including any
nominee holder or an agent acquiring such Unit for the account of another
Person) who executes and delivers a Transfer Application shall, by virtue of
such execution and delivery, be an Assignee and be deemed to have applied to
become a Substituted Limited Partner with respect to the Units so transferred to
such Person. Such Assignee shall become a Substituted Limited Partner (x) at
such time as the Board of Supervisors consents thereto, which consent may be
given or withheld in the Board of [Supervisors] {Supervisors'} discretion, and
(y) when any such admission is shown on the books and records of the
Partnership. If such consent is withheld, such transferee shall be an Assignee.
An Assignee shall have an interest in the Partnership equivalent to that of a
Limited Partner with respect to allocations and distributions, including
liquidating distributions, of the Partnership. With respect to voting rights
attributable to Units that are held by Assignees, the General Partner shall be
deemed to be the Limited Partner with respect thereto and shall, in exercising
the voting rights in respect of such Units on any matter, vote such Units at the
written direction of the Assignee who is the Record Holder of such Units. If no
such written direction is received, such Units will not be voted. An Assignee
shall have no other rights of a Limited Partner.
10.3 Admission of Successor General Partner{.}
{On the date hereof and simultaneously with the Closing, the General
Partner is being admitted to the Partnership as the successor to the Initial
General Partner.} A successor General Partner approved pursuant to Section 11.1
or 11.2 or the transferee of or successor to all of the General [Partner's
Partnership Interest as a general partner in the Partnership] {Partner Interest}
pursuant to Section 4.6 who is proposed to be admitted as a successor General
Partner shall be admitted to the Partnership as the
C-65
<PAGE>
<PAGE>
General Partner, effective immediately prior to the withdrawal or removal of the
General Partner pursuant to Section 11.1 or 11.2 or the transfer of the General
[Partner's Partnership Interest as a general partner in the Partnership]
{Partner Interest} pursuant to Section 4.6; provided, however, that no such
successor shall be admitted to the Partnership until compliance with the terms
of Section 4.6 has occurred and such successor has executed and delivered such
other documents or instruments as may be required to effect such admission. Any
such successor shall, subject to the terms hereof, carry on the business of the
Partnership and the Operating Partnership without dissolution. The admission of
a successor General Partner shall not be deemed to have affected in any manner
the irrevocable delegation of all management powers over the business and
affairs of the Partnership to the Board of Supervisors pursuant to Section
7.1(a).
10.4 Admission of Additional Limited Partners{.}
(a) A Person (other than the General Partner, an Initial Limited Partner or
a Substituted Limited Partner) who makes a Capital Contribution to the
Partnership in accordance with this Agreement [(other than by virtue of the
purchase of APUs)] shall be admitted to the Partnership as an Additional Limited
Partner only upon furnishing to the Board of Supervisors (i) evidence of
acceptance in form satisfactory to the Board of Supervisors of all of the terms
and conditions of this Agreement, including the {granting of the} power of
attorney granted in Section 2.6, and (ii) such other documents or instruments as
may be required in the discretion of the Board of Supervisors to effect such
[Persons] {Person's} admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 10.4, no
Person shall be admitted as an Additional Limited Partner without the consent of
the Board of Supervisors, which consent may be given or withheld in the Board of
[Supervisors] {Supervisors'} discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded as such in the books and records of the
Partnership, following the consent of the Board of Supervisors to such
admission.
10.5 Amendment of Agreement and Certificate of Limited Partnership{.}
To effect the admission to the Partnership of any Partner, the Board of
Supervisors shall take all steps necessary and appropriate under the Delaware
Act to amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practicable an amendment to this Agreement and,
if required by law, the General Partner shall prepare and file an amendment to
the Certificate of Limited Partnership, and the [Executive Vice Chairman,] Vice
Chairman and President may for this purpose, among others, exercise the power of
attorney granted pursuant to Section 2.6.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
11.1 Withdrawal of the General Partner.
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an 'Event of Withdrawal');
(i) the General Partner voluntarily withdraws from the Partnership (of
which event the General Partner shall give written notice to the other
Partners) (and it shall be deemed that the General Partner has withdrawn
pursuant to this Section 11.1(a)(i) if the General Partner voluntarily
withdraws as general partner of the Operating Partnership);
(ii) the General Partner transfers all of its rights as General
Partner pursuant to Section 4.6;
(iii) the General Partner is removed pursuant to Section 11.2;
(iv) the General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition for relief
under Chapter 7 of the United States Bankruptcy Code; (C) files a petition
or answer seeking for itself a liquidation, dissolution or similar relief
(but not a reorganization) under any law; (D) files an answer or other
pleading admitting or failing to contest
C-66
<PAGE>
<PAGE>
the material allegations of a petition filed against the General Partner in
a proceeding of the type described in clauses (A)-(C) of this Section
11.1(a)(iv); or (E) seeks, consents to or acquiesces in the appointment of
a trustee (but not a debtor in possession), receiver or liquidator of the
General Partner or of all or any substantial part of its properties;
(v) a final and non-appealable order of relief under Chapter 7 of the
United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against
the General Partner;
(vi) a certificate of dissolution or its equivalent is filed for the
General Partner, or 90 days expire after the date of notice to the General
Partner of revocation of its charter without a reinstatement of its
charter, under the laws of its state of incorporation[;] {or formation}; or
(vii) (A) in the event the General Partner is a [partnership]
{corporation, a certificate of dissolution or its equivalent is filed for
the General Partner, or 90 days expire after the date of notice to the
General Partner of revocation of its charter without a reinstatement of its
charter, under the laws of its state of incorporation; (B) in the event the
General Partner is a partnership or limited liability company}, the
dissolution and commencement of winding up of the General Partner;
[(B)]{(C)} in the event the General Partner is acting in such capacity by
virtue of being a trustee of a trust, the termination of the trust;
[(C)]{(D)} in the event the General Partner is a natural person, his death
or adjudication of incompetency; and [(D)]{(E)} otherwise in the event of
the termination of the General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv), (v), (vi) or
(vii)(A), (B){, (C)} or [(D)]{(E)} occurs, the withdrawing General Partner shall
give notice to the Limited Partners within 30 days after such occurrence. The
Partners hereby agree that only the Events of Withdrawal described in this
Section 11.1 shall result in the withdrawal of the General Partner from the
Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the {Initial} Closing Date and ending at 12:00 midnight, Eastern
Standard Time, on September 30, 2006, the General Partner voluntarily withdraws;
provided that prior to the effective date of such withdrawal, the withdrawal is
approved by [Limited Partners] {Unitholders} holding at least a [Unit Majority]
{majority of the Outstanding Common Units} and the General Partner delivers to
the Partnership an Opinion of Counsel ('Withdrawal Opinion of Counsel') that
such withdrawal (following the selection of the successor General Partner) would
not result in the loss of the limited liability of any Limited Partner [as
described in the Registration Statement or of the] {or of a} limited partner of
the Operating Partnership or cause the Partnership or the Operating Partnership
to be treated as an association taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes; (ii) at any time after 12:00
midnight, Eastern Standard Time, on September 30, 2006, the General Partner
voluntarily withdraws by giving at least 90 [days] {days'} advance notice to the
Limited Partners, such withdrawal to take effect on the date specified in such
notice; (iii) at any time that the General Partner ceases to be the General
Partner pursuant to Section 11.1(a)(ii) or is removed pursuant to Section 11.2;
or (iv) notwithstanding clause (i) of this sentence, at any time that the
General Partner voluntarily withdraws by giving at least 90 [days] {days'}
advance notice of its intention to withdraw to the Limited Partners, such
withdrawal to take effect on the date specified in the notice, if at the time
such notice is given one Person and its Affiliates (other than the General
Partner and its Affiliates) own beneficially or of record or control at least
50% of the Outstanding {Common} Units. The withdrawal of the General Partner
from the Partnership upon the occurrence of an Event of Withdrawal shall also
constitute the withdrawal of the General Partner as general partner of the other
Group Members. If the General Partner gives a notice of withdrawal pursuant to
Section 11.1(a)(i), the holders of [a Unit Majority] {at least a majority of the
Outstanding Common Units}, may, prior to the effective date of such withdrawal,
elect a successor General Partner. The Person so elected as successor General
Partner shall automatically become the successor general partner of the other
Group Members. If prior to the effective date of the General Partner's
withdrawal, a successor is not selected by the Limited Partners as provided
herein or the Partnership does not receive a Withdrawal Opinion of Counsel, the
Partnership shall be dissolved in accordance with Section 12.1. Any successor
General Partner elected in accordance with the terms of this Section 11.1 shall
be subject to the provisions of Section 10.3.
C-67
<PAGE>
<PAGE>
11.2 Removal of the General Partner{.}
The General Partner may be removed if such removal is approved by the
holders of [a Unit Majority] {at least a majority of the Outstanding Common
Units}. Any such action by such holders for removal of the General Partner must
also provide for the election of a successor General Partner by the holders of
[a Unit Majority] {at least a majority of the Outstanding Common Units}. Such
removal shall be effective immediately following the admission of a successor
General Partner pursuant to Section 10.3. The removal of the General Partner
shall also automatically constitute the removal of the General Partner as
general partner of the other Group Members. If a Person is elected as a
successor General Partner in accordance with the terms of this Section 11.2,
such Person shall, upon admission pursuant to Section 10.3, automatically become
the successor general partner of the other Group Members. The right of the
holders of Outstanding {Common} Units to remove the General Partner shall not
exist or be exercised unless the Partnership has received an opinion as to the
matters covered by a Withdrawal Opinion of Counsel. Any successor General
Partner elected in accordance with the terms of this Section 11.2 shall be
subject to the provisions of Section 10.3.
11.3 Interest of Departing Partner and Successor General Partner;
Delegation of Authority to the Board of Supervisors by Successor General
Partner{.}
(a) In the event of (i) withdrawal of the General Partner under
circumstances where such withdrawal does not violate this Agreement or (ii)
removal of the General Partner by the holders of Outstanding {Common} Units
under circumstances where Cause does not exist, if a successor General Partner
is elected in accordance with the terms of Section 11.1 or 11.2, the Departing
Partner shall have the option exercisable prior to the effective date of the
departure of such Departing Partner to require its successor to purchase its
[Partnership] {General Partner} Interest [as a general partner in the
Partnership] and its partnership interest as the general partner in the other
Group Members and the Incentive Distribution Rights (collectively, the 'Combined
Interest') in exchange for an amount in cash equal to the fair market value of
such Combined Interest, such amount to be determined and payable as of the
effective date of its departure. If the General Partner is removed by the
[Limited Partners] {holders of Common Units} under circumstances where Cause
exists or if the General Partner withdraws under circumstances where such
withdrawal violates this Agreement or the Operating Partnership Agreement, and
if a successor General Partner is elected in accordance with the terms of
Section 11.1 or 11.2, such successor shall have the option, exercisable prior to
the effective date of the departure of such Departing Partner, to purchase the
Combined Interest of the Departing Partner for such fair market value of such
Combined Interest. In either event, the Departing Partner shall be entitled to
receive all reimbursements due such Departing Partner pursuant to Section 7.11,
including any employee-related liabilities (including severance liabilities),
incurred in connection with the termination of any employees employed by the
General Partner for the benefit of the Partnership or the other Group Members.
For purposes of this Section 11.3(a), the fair market value of the
Departing Partner's Combined Interest shall be determined by agreement between
the Departing Partner and its successor or, failing agreement within 30 days
after the effective date of such Departing [Partners] {Partner's} departure, by
an independent investment banking firm or other independent expert selected by
the Departing Partner and its successor, which, in turn, may rely on other
experts, and the determination of which shall be conclusive as to such matter.
If such parties cannot agree upon one independent investment banking firm or
other independent expert within 45 days after the effective date of such
departure, then the Departing Partner shall designate an independent investment
banking firm or other independent expert, the Departing Partner's successor
shall designate an independent investment banking firm or other independent
expert, and such firms or experts shall mutually select a third independent
investment banking firm or independent expert, which third independent
investment banking firm or other independent expert shall determine the fair
market value of the Combined Interest. In making its determination, such third
independent investment banking firm or other independent expert shall consider
the then current price of Units on any National Securities Exchange on which
Units are then listed, the value of the [Partnerships] {Partnership's} assets,
the rights and obligations of the General Partner and other factors it may deem
relevant.
(b) If the Combined Interest is not purchased in the manner set forth in
Section 11.3(a), the Departing Partner will have the right to convert the
Combined Interest into Common Units or to
C-68
<PAGE>
<PAGE>
receive cash in exchange for such Combined Interest. The Departing Partner's
Combined Interest shall be converted into Common Units pursuant to a valuation
made by an investment banking firm or other independent expert selected pursuant
to Section 11.3(a), without reduction in such Partnership Interest (but subject
to proportionate dilution by reason of the admission of its successor). Any
successor General Partner shall indemnify the Departing Partner as to all debts
and liabilities of the Partnership arising on or after the date on which the
Departing Partner becomes a Limited Partner. For purposes of this Agreement,
conversion of the General Partner's Combined Interest to Common Units will be
characterized as if the General Partner contributed its Combined Interest to the
Partnership in exchange for the newly issued Common Units.
(c) If a successor General Partner is elected in accordance with the terms
of Section 11.1 or 11.2 and the option described in Section 11.3(a) is not
exercised by the party entitled to do so, the successor General Partner shall,
at the effective date of its admission to the Partnership, contribute to the
Partnership cash in an amount equal to [1/99th of the Net Agreed Value of the
Partnership's assets] {the fair market value of the General Partner Units} on
such date. In such event, such successor General Partner shall, subject to the
following sentence, be entitled to such Percentage Interest of all Partnership
allocations and distributions and any other allocations and distributions to
which the Departing Partner was entitled. [In addition, the successor General
Partner shall cause this Agreement to be amended to reflect that, from and after
the date of such successor General Partner's admission, the successor General
Partner's interest in all Partnership distributions and allocations shall be 1%,
and that of the holders of Outstanding Unit shall be 99%.]
(d) Any successor General Partner will be deemed to have delegated
irrevocably to the Board of Supervisors all management powers over the business
and affairs of the Partnership to the same extent that the General Partner
delegated such management power to the Board of Supervisors pursuant to Section
7.1 of this Agreement.
11.4 {[Deleted.]} [Termination of Subordination Period, Conversion of
Subordinated Units, Extinguishment of Cumulative Common Unit Arrearages and
Termination of Distribution Support Obligations Upon Removal of the General
Partner Without Cause]
[Notwithstanding any other provision of this Agreement, if the General
Partner is removed as general partner of the Partnership under circumstances
where Cause does not exist and Units held by the General Partner and its
Affiliates are not voted in favor of such removal, (i) the Subordination Period
will end and all Outstanding Subordinated Units will immediately convert into
Common Units on a one-for-one basis, (ii) all Cumulative Common Unit Arrearages
on the Common Units will be extinguished, and (iii) the General Partner's APU
contribution obligation and the unconditional guarantee of the General Partner's
APU contribution obligation by the APU Guarantor pursuant to the Distribution
Support Agreement will terminate.]
11.5 Withdrawal of Limited Partners.
No Limited Partner shall have any right to withdraw from the Partnership;
provided, however, that when a transferee of a Limited Partner's {Common}
Units[, APUs] or Incentive Distribution Rights becomes a Record Holder of the
{Common} Units[, APUs] or Incentive Distribution Rights so transferred, such
transferring Limited Partner shall cease to be a Limited Partner with respect to
the {Common} Units[, APUs] or Incentive Distribution Rights so transferred.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
12.1 Dissolution.
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the removal or withdrawal of the General Partner, if a successor General Partner
is elected pursuant to Section {10.3,} 11.1 or 11.2, the Partnership shall not
be dissolved and such successor General Partner shall continue the business of
the Partnership. The Partnership shall dissolve, and (subject to Section 12.2)
its affairs shall be wound up, upon:
C-69
<PAGE>
<PAGE>
(a) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the General Partner as provided in
Section 11.1(a) (other than Section 11.l(a)(ii)), unless a successor is
elected and an Opinion of Counsel is received as provided in Section
11.1(b) or 11.2 and such successor is admitted to the Partnership pursuant
to Section 10.3;
(c) an election to dissolve the Partnership by the General Partner
that is approved by the holders of [a Unit Majority;] {at least a majority
of the Outstanding Common Units;}
(d) entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(e) the sale of all or substantially all of the assets and properties
of the Partnership Group.
12.2 Continuation of the Business of the Partnership After Dissolution.
Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the General Partner as provided in
Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi), then, to the maximum extent permitted by law, within 180 days thereafter,
the holders of [a Unit Majority] {at least a majority of the Outstanding Common
Units} may elect to reconstitute the Partnership and continue its business on
the same terms and conditions set forth in this Agreement by forming a new
limited partnership on terms identical to those set forth in this Agreement and
having as the successor general partner a Person approved by the holders of [a
Unit Majority] {at least a majority of the Outstanding Common Units}. Unless
such an election is made within the applicable time period as set forth above,
the Partnership shall conduct only {those} activities necessary to wind up its
affairs. If such an election is so made, then:
(i) the reconstituted Partnership shall continue until the end of the
term set forth in Section 2.7 unless earlier dissolved in accordance with
this Article XII;
(ii) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be treated
in the manner provided in Section 11.3(b); and
(iii) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership and to enter into and, as necessary,
to file a new partnership agreement and certificate of limited partnership,
and the successor [general partner] {General Partner} may for this purpose
exercise the powers of attorney granted the [Executive Vice Chairman,] Vice
Chairman and President pursuant to Section 2.6; provided, that the right of
the holders of [a Unit Majority] {at least a majority of the Outstanding
Common Units} to approve a successor General Partner and to reconstitute
and to continue the business of the Partnership shall not exist and may not
be exercised unless the Partnership has received an Opinion of Counsel that
(x) the exercise of the right would not result in the loss of limited
liability of any Limited Partner and (y) neither the Partnership, the
reconstituted limited partnership nor any other Group Member would be
treated as an association taxable as a corporation or otherwise be taxable
as an entity for federal income tax purposes upon the exercise of such
right to continue.
12.3 Liquidator.
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the Board of Supervisors shall select one or more Persons to act
as Liquidator. The Liquidator shall be entitled to receive such compensation for
its services as may be approved by holders of at least a majority of the
Outstanding Common Units [and Subordinated Units voting as a single class]. The
Liquidator shall agree not to resign at any time without 15 days' prior notice
and may be removed at any time, with or without cause, by notice of removal
approved by holders of at least a majority of the Outstanding Common Units [and
Subordinated Units voting as a single class]. Upon dissolution, removal or
resignation of the Liquidator, a successor and substitute Liquidator (who shall
have and succeed to all rights, powers and duties of the original Liquidator)
shall within 30 days thereafter be approved by holders of at least a majority of
the Outstanding Common Units [and Subordinated Units voting as a single class].
The right to approve a
C-70
<PAGE>
<PAGE>
successor or substitute Liquidator in the manner provided herein shall be deemed
to refer also to any such successor or substitute Liquidator approved in the
manner herein provided. Except as expressly provided in this Article XII, the
Liquidator approved in the manner provided herein shall have and may exercise,
without further authorization or consent of any of the parties hereto, all of
the powers conferred upon the Board of Supervisors under the terms of this
Agreement (but subject to all of the applicable limitations, contractual and
otherwise, upon the exercise of such powers, other than the limitation on sale
set forth in Section 7.10(a)) to the extent necessary or desirable in the good
faith judgment of the Liquidator to carry out the duties and functions of the
Liquidator hereunder for and during such period of time as shall be reasonably
required in the good faith judgment of the Liquidator to complete the winding up
and liquidation of the Partnership as provided for herein.
12.4 Liquidation.
The Liquidator shall proceed to dispose of the assets of the Partnership,
discharge its liabilities, and otherwise wind up its affairs in such manner and
over such period as the Liquidator determines to be in the best interest of the
Partners, subject to Section 17-804 of the Delaware Act and the following:
(a) Disposition of Assets. The assets may be disposed of by public or
private sale or by distribution in kind to one or more Partners on such
terms as the Liquidator and such Partner or Partners may agree. If any
property is distributed in kind, the Partner receiving the property shall
be deemed for purposes of Section 12.4(c) to have received cash equal to
its fair market value; and contemporaneously therewith, appropriate cash
distributions must be made to the other Partners. Under certain
circumstances and subject to certain limitations, the Liquidator may defer
liquidation or distribution of the Partnership's assets for a reasonable
time or distribute assets to [partners] {the Partners} in kind if it
determines that a sale would be impractical or would cause undue loss to
the [partners] {Partners}.
(b) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed to Partners otherwise {than} in respect of their distribution
rights under Article VI. With respect to any liability that is contingent
or is otherwise not yet due and payable, the Liquidator shall either settle
such claim for such amount as it thinks appropriate or establish a reserve
of cash or other assets to provide for its payment. When paid, any unused
portion of the reserve shall be distributed as additional liquidation
proceeds.
(c) Liquidation Distributions. All property and all cash in excess of
that required to discharge liabilities as provided in Section 12.4(b) shall
be distributed to the Partners in accordance with, and to the extent of,
the positive balances in their respective Capital Accounts, as determined
after taking into account all Capital Account adjustments (other than those
made by reason of distributions pursuant to this Section 12.4(c)) for the
taxable year of the Partnership during which the liquidation of the
Partnership occurs (with such date of occurrence being determined pursuant
to Treasury Regulation, Section 1.704-1(b)(2)(ii)(g)), and such
distribution shall be made by the end of such taxable year (or, if later,
within 90 days after said date of such occurrence).
12.5 Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and property as
provided in Section 12.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
12.6 Return of {Capital} Contributions.
The General Partner shall not be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the {Capital} Contributions of the
Limited Partners, or any portion thereof, it being expressly understood that any
such return shall be made solely from Partnership assets.
12.7 Waiver of Partition.
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
C-71
<PAGE>
<PAGE>
12.8 Capital Account Restoration.
No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. The General
Partner shall be obligated to restore any negative balance in its Capital
Account upon liquidation of its interest in the Partnership by the end of the
taxable year of the Partnership during which such liquidation occurs, or, if
later, within 90 days after the date of such liquidation.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
13.1 Amendment to be Adopted Solely by the Board of Supervisors.
Each Limited Partner agrees that the Board of Supervisors, without the
approval of any Limited Partner or Assignee, may amend any provision of this
Agreement, and may authorize any Officer (pursuant to the powers of attorney
granted in Section 2.6) to execute, swear to, acknowledge, deliver, file and
record whatever documents may be required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the discretion of the Board of Supervisors, is
necessary or advisable to qualify or continue the qualification of the
Partnership as a limited partnership or a partnership in which the Limited
Partners have limited liability under the laws of any state or to ensure
that {neither} the Partnership [and] {nor} the Operating Partnership will
[not] be treated as an association taxable as a corporation or otherwise
taxed as an entity for federal income tax purposes;
(d) a change that, in the discretion of the Board of Supervisors, (i)
does not adversely affect the Limited Partners in any material respect,
(ii) is necessary or advisable to (A) satisfy any requirements, conditions
or guidelines contained in any opinion, directive, order, ruling or
regulation of any federal or state agency or judicial authority or
contained in any federal or state statute (including the Delaware Act) or
(B) facilitate the trading of the Units (including the division of
Outstanding Units into different classes to facilitate uniformity of tax
consequences within such classes of Units) or comply with any rule,
regulation, guideline or requirement of any National Securities Exchange on
which the Units are or will be listed for trading, compliance with any of
which the Board of Supervisors determines in its discretion to be in the
best interests of the Partnership and the Limited Partners, (iii) is
necessary or advisable in connection with action taken by the [General
Partner] {Partnership} pursuant to Section 5.10, or (iv) is required to
effect the intent expressed in the {Initial} Registration {Statement or the
Proxy} Statement or the intent of the provisions of this Agreement or is
otherwise contemplated by this Agreement;
(e) a change in the fiscal year or taxable year of the Partnership and
any changes that, in the discretion of the Board of Supervisors, are
necessary or advisable as a result of a change in the fiscal year or
taxable year of the Partnership including, if the Board of Supervisors
shall so determine, a change in the definition of 'Quarter' and the dates
on which distributions are to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership or the members of the Board of Supervisors or the
Officers, or the General Partner or its directors, officers, trustees or
agents from in any manner being subjected to the provisions of the
Investment Company Act of 1940, as amended, the Investment Advisers Act of
1940, as amended, or 'plan asset' regulations adopted under the Employee
Retirement Income Security Act of 1974, as amended, regardless of whether
such are substantially similar to plan asset regulations currently applied
or proposed by the United States Department of Labor;
(g) subject to the terms of Section 5.7, an amendment that, in the
discretion of the Board of Supervisors, is necessary or advisable in
connection with the authorization of issuance of any class
C-72
<PAGE>
<PAGE>
or series of Partnership Securities pursuant to Section 5.6 {or the
conversion of Incentive Distribution Rights into Common Units pursuant to
Section 5.8 or Section 11.3};
(h) any amendment expressly permitted in this Agreement to be made by
the Board of Supervisors acting alone;
(i) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(j) an amendment that, in the discretion of the Board of Supervisors,
is necessary or advisable to reflect, account for and deal with
appropriately the formation by the Partnership of, or investment by the
Partnership in, any corporation, partnership, joint venture, limited
liability company or other entity other than the Operating Partnership, in
connection with the conduct by the Partnership of activities permitted by
the terms of Section 2.4;
(k) an amendment that, in the discretion of the Board of Supervisors,
is necessary or advisable to effect or continue the irrevocable delegation
by the General Partner to the Board of Supervisors of all management powers
over the business and affairs of the Partnership; or
(l) any other amendments substantially similar to the foregoing.
13.2 Amendment Procedures.
Except as provided in Sections 13.1 and 13.3, all amendments to this
Agreement shall be made in accordance with the following requirements.
Amendments to this Agreement may be proposed only by or with the consent of the
Board of Supervisors. A proposed amendment shall be effective upon its approval
by the holders of at least a [Unit Majority] {majority of the Outstanding Common
Units}, unless a greater or different percentage is required under this
Agreement or by Delaware law. Each proposed amendment that requires the approval
of the holders of a specified percentage of Outstanding Units shall be set forth
in a writing that contains the text of the proposed amendment. If such an
amendment is proposed, the Board of Supervisors shall seek the written approval
of the requisite percentage of Outstanding {Common} Units or call a meeting of
the Limited Partners to consider and vote on such proposed amendment. The Board
of Supervisors shall notify all Record Holders upon final adoption of any such
proposed amendments.
13.3 Amendment Requirements.
(a) Notwithstanding the provisions of Sections 13.1 and 13.2, no provisions
of this Agreement that establishes a percentage of Outstanding {Common} Units
required to take any action shall be amended, altered, changed, repealed or
rescinded in any respect that would have the effect of reducing such voting
percentage unless such amendment is approved by the written consent or the
affirmative vote of holders of Outstanding {Common} Units whose aggregate
Outstanding {Common} Units constitute not less than the voting requirement
sought to be reduced.
(b) Notwithstanding the provisions of Sections 13.1 and 13.2, no amendment
to this Agreement may (i) enlarge the obligations of any Limited Partner without
its consent, unless such shall be deemed to have occurred as a result of an
amendment approved pursuant to Section 13.3(c), (ii) enlarge the obligations of,
restrict in any way any action by or rights of, or reduce in any way the amounts
distributable, reimbursable or otherwise payable to the General Partner or any
of its Affiliates without its consent, which may be given or withheld in its
sole discretion, (iii) change Section 12.1(a) or (c), or (iv) change the term of
the Partnership or, except as set forth in Section 12.1(c), give any Person the
right to dissolve the Partnership.
(c) Except as provided in Section 14.3, and except as otherwise provided,
and without limitation of the Board of Supervisor's authority to adopt
amendments to this Agreement as contemplated in Section 13.1, any amendment that
would have a material adverse effect on the rights or preferences of any class
of Partnership Interests in relation to other classes of Partnership Interests
must be approved by the holders of not less than a majority of the Partnership
Interests of the class affected.
(d) Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Section 7.10(a) or 13.1 and except as otherwise provided
by Section 14.3(b), no amendments shall become effective without the approval of
the holders of at least 90% of the Outstanding Common Units [and Subordinated
Units voting as a single class] unless the Partnership obtains an Opinion of
Counsel to
C-73
<PAGE>
<PAGE>
the effect that such amendment will not affect the limited liability of any
Limited Partner or any limited partner of the other Group Members under
applicable law.
(e) This Section 13.3 shall only be amended with the approval of the
holders of at least 90% of the Outstanding Common Units [and Subordinated Units
voting as a single class].
13.4 Tri-Annual and Special Meetings.
All acts of Limited Partners to be taken pursuant to this Agreement shall
be taken in the manner provided in this Article XIII and, in the case of
Tri-Annual Meetings, in the manner provided in Sections 7.2(a)(ii) and 7.3 and
this Article XIII. Tri-Annual Meetings to elect the Elected Supervisors and to
transact such other business as may be properly brought before the Tri-Annual
Meeting shall be held in the second calendar quarter of every third year at such
time and place as the Board of Supervisors may specify in the notice of the
meeting, which shall be delivered to each Limited Partner at least 10 and not
more than 60 days prior to such meeting. The first Tri-Annual Meeting [shall be]
{was} held in 1997. Special meetings of the Limited Partners may be called by
the Board of Supervisors or by Limited Partners owning 20% or more of the
Outstanding {Common} Units of the class or classes for which a meeting is
proposed. Limited Partners shall call a special meeting by delivering to the
Board of Supervisors one or more requests in writing stating that the signing
Limited Partners wish to call a special meeting and indicating the general or
specific purposes for which the special meeting is to be called. Within 60 days
after receipt of such a call from Limited Partners or within such greater time
as may be reasonably necessary for the Partnership to comply with any statutes,
rules, regulations, listing agreements or similar requirements governing the
holding of a meeting or the solicitation of proxies for use at such a meeting,
the Board of Supervisors shall send a notice of the meeting to the Limited
Partners either directly or indirectly through the Transfer Agent. A meeting
shall be held at a time and place determined by the Board of Supervisors on a
date not less than 10 days nor more than 60 days after the mailing of notice of
the meeting. The Chairman of the Board of Supervisors, if any, and if present
and acting, shall preside at all meetings of the Limited Partners. In the
absence of the Chairman of the Board of Supervisors, the [Executive Vice
Chairman or] Vice Chairman of the Board of Supervisors, as chosen by the Board
of Supervisors, shall preside, and in their absence, the President shall
preside. Limited Partners shall not vote on matters that would cause the Limited
Partners to be deemed to be taking part in the management and control of the
business and affairs of the Partnership so as to jeopardize the Limited
Partners' limited liability under the Delaware Act or the law of any other state
in which the Partnership is qualified to do business.
13.5 Notice of a Meeting.
Notice of a meeting called pursuant to Section 13.4 shall be given to the
Record Holders in writing by mail or other means of written communication in
accordance with Section 16.1. The notice shall be deemed to have been given at
the time when deposited in the mail or sent by other means of written
communication.
13.6 Record Date.
For purposes of determining the Limited Partners entitled to notice of or
to vote at a meeting of the Limited Partners or to give approvals without a
meeting as provided in Section 13.11, the Board of Supervisors may set a Record
Date, which shall not be less than 10 nor more than 60 days before (a) the date
of the meeting (unless such requirement conflicts with any rule, regulation,
guideline or requirement of any National Securities Exchange on which the Units
are listed for trading, in which case the rule, regulation, guideline or
requirement of such exchange shall govern) or (b) in the event that approvals
are sought without a meeting, the date by which Limited Partners are requested
in writing by the Board of Supervisors to give such approval.
13.7 Adjournment.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting and a new Record Date need not be fixed, if the
time and place thereof are announced at the meeting at which the adjournment is
taken, unless such adjournment shall be for more than 45 days. At the adjourned
meeting, the Partnership may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than 45 days
or if a new Record Date is fixed for
C-74
<PAGE>
<PAGE>
the adjourned meeting, a notice of the adjourned meeting shall be given in
accordance with this Article XIII.
13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.
The transactions of any meeting of Limited Partners, however called and
noticed, and whenever held, shall be as valid as if occurred at a meeting duly
held after regular call and notice, if a quorum is present either in person or
by proxy, and if, either before or after the meeting, Limited Partners
representing such quorum who were present in person or by proxy and entitled to
vote, sign a written waiver of notice or an approval of the holding of the
meeting or an approval of the minutes thereof. All waivers and approvals shall
be filed with the Partnership records or made a part of the minutes of the
meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver
of notice of the meeting, except when the Partner does not approve, at the
beginning of the meeting, of the transaction of any business because the meeting
is not lawfully called or convened; and except that attendance at a meeting is
not a waiver of any right to disapprove the consideration of matters required to
be included in the notice of the meeting, but not so included, if the
disapproval is expressly made at the meeting.
13.9 Quorum.
The holders of a majority of the Outstanding Units of the class or classes
for which a meeting has been called represented in person or by proxy shall
constitute a quorum at a meeting of Limited Partners of such class or classes
unless any such action by the Limited Partners requires approval by holders of a
greater percentage of such Units, in which case the quorum shall be such greater
percentage (excluding, in either case, if such are to be excluded from the vote,
Outstanding Units owned by the General Partner and its Affiliates). At any
meeting of the Limited Partners duly called and held in accordance with this
Agreement at which a quorum is present, the act of Limited Partners holding
Outstanding Units that in the aggregate represent a majority of the Outstanding
Units entitled to vote and be present in person or by proxy at such meeting
shall be deemed to constitute the act of all Limited Partners, unless a greater
or different percentage is required with respect to such action under the
provisions of this Agreement, in which case the act of the Limited Partners
holding Outstanding Units that in the aggregate represent at least such greater
or different percentage shall be required. The Limited Partners present at a
duly called or held meeting at which a quorum is present may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Limited Partners to leave less than a quorum, if any action taken (other than
adjournment) is approved by the required percentage of Outstanding Units
specified in this Agreement. In the absence of a quorum any meeting of Limited
Partners may be adjourned from time to time by the affirmative vote of holders
of at least a majority of the Outstanding Units represented either in person or
by proxy, but no other business may be transacted, except as provided in Section
13.7.
13.10 Conduct of a Meeting.
The Chairman of the Board of Supervisors, or in his absence, the
[Executive] Vice Chairman [or Vice Chairman, as the case may be,] or, in his
absence, the President, or in his absence, any Vice President, shall have full
power and authority concerning the manner of conducting any meeting of the
Limited Partners or solicitation of approvals in writing, including the
determination of Persons entitled to vote, the existence of a quorum, the
satisfaction of the requirements of Section 13.4, the conduct of voting, the
validity and effect of any proxies and the determination of any controversies,
votes or challenges arising in connection with or during the meeting or voting.
The [Presiding] {presiding} Officer shall designate a Person to take the minutes
of any meeting. All minutes shall be kept with the records of the Partnership
maintained by the Board of Supervisors. The Board of Supervisors may make such
other regulations consistent with applicable law and this Agreement as it may
deem advisable concerning the conduct of any meeting of the Limited Partners or
solicitation of approvals in writing, including regulations in regard to the
appointment of proxies, the appointment and duties of inspectors of votes and
approvals, the submission and examination of proxies and other evidence of the
right to vote, and the revocation of approvals in writing.
13.11 Action Without a Meeting.
If authorized by the Board of Supervisors, any action that may be taken at
a meeting of the Limited Partners may be taken without a meeting if an approval
in writing setting forth the action so
C-75
<PAGE>
<PAGE>
taken is signed by Partners owning not less than the minimum percentage of the
Outstanding Units that would be necessary to authorize or take such action at a
meeting at which all the Limited Partners were present and voted (unless such
provision conflicts with any rule, regular guideline or requirement of any
National Securities Exchange on which the Units are listed for trading, in which
case the rule, regulation, guideline or requirement of such exchange shall
govern). Prompt notice of the taking of action without a meeting shall be given
to the Limited Partners who have not approved in writing. The Board of
Supervisors may specify that any written ballot submitted to Limited Partners
for the purpose of taking any action without a meeting shall be returned to the
Partnership within the time period, which shall be not less than 20 days,
specified by the Board of Supervisors. If a ballot returned to the Partnership
does not vote all of the Units held by the Limited Partner, the Partnership
shall be deemed to have failed to receive a ballot for the Units that were not
voted. If approval of the taking of any action by the Limited Partners is
solicited by any Person other than by or on behalf of the Board of Supervisors,
the written approvals shall have no force and effect unless and until (a) they
are deposited with the Partnership in care of the Board of Supervisors, (b)
approvals sufficient to take the action proposed are dated as of a date not more
than 90 days prior to the date sufficient approvals are deposited with the
Partnership and (c) an Opinion of Counsel is delivered to the Board of
Supervisors to the effect that the exercise of such right and the action
proposed to be taken with respect to any particular matter (i) will not cause
the Limited Partners to be deemed to be taking part in the management and
control of the business and affairs of the Partnership so as to jeopardize the
Limited Partners' limited liability, and (ii) is otherwise permissible under the
state statutes then governing the rights, duties and liabilities of the
Partnership and the Partners.
13.12 Voting and Other Rights.
(a) Only those Record Holders of the Units on the Record Date set pursuant
to Section 13.6 (and also subject to the limitations contained in the definition
of 'Outstanding') shall be entitled to notice of, and to vote at, a meeting of
Limited Partners or to act with respect to matters as to which the holders of
the Outstanding Units have the right to vote or to act. All references in this
Agreement to votes of, or other acts that may be taken by, the Outstanding Units
shall be deemed to be references to the votes or acts of the Record Holders of
such Outstanding Units.
(b) With respect to Units that are held for a Person's account by another
Person (such as a broker, dealer, bank, trust company or clearing corporation,
or an agent of any of the foregoing), in whose name such Units are registered,
such other Person shall, in exercising the voting rights in respect of such
Units on any matter, and unless the arrangement between such Persons provides
otherwise, vote such Units in favor of, and at the direction of, the Person who
is the beneficial owner, and the Partnership shall be entitled to assume it is
so acting without further inquiry. The provisions of this Section 13.12(b) (as
well as all other provisions of this Agreement) are subject to the provisions of
Section 4.3.
ARTICLE XIV
MERGER
14.1 Authority.
The Partnership may merge or consolidate with one or more corporations,
business trusts or associations, real estate investment trusts, common law
trusts or unincorporated businesses, including a general partnership [or],
limited partnership, {limited liability company or limited liability
partnership} formed under the laws of the State of Delaware or any other state
of the United States of America, pursuant to a written agreement of merger or
consolidation ('Merger Agreement') in accordance with this Article XIV.
14.2 Procedure for Merger or Consolidation.
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the Board of Supervisors. If the Board of
Supervisors shall determine, in the exercise of its discretion, to consent to
the merger or consolidation, the Board of Supervisors shall approve the Merger
Agreement, which shall set forth:
C-76
<PAGE>
<PAGE>
(a) The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;
(b) The name and jurisdictions of formation or organization of the
business entity that is to survive the proposed merger or consolidation
(the 'Surviving Business Entity');
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property
or general or limited partner interests, rights, securities or obligations
of the Surviving Business Entity; and (i) if any general or limited partner
interests, securities or rights of any constituent business entity are not
to be exchanged or converted solely for, or into, cash, property or general
or limited partner interests, rights, securities or obligations of the
Surviving Business Entity, the cash, property or general or limited partner
interests, rights, securities or obligations of any limited partnership,
corporation, trust or other entity (other than the Surviving Business
Entity) which the holders of such general or limited partner interests,
securities or rights are to receive in exchange for, or upon conversion of
their general or limited partner interests, securities or rights, and (ii)
in the case of securities represented by certificates, upon the surrender
of such certificates, which cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business
Entity or any general or limited partnership, corporation, trust or other
entity (other than the Surviving Business Entity), or evidences thereof,
are to be delivered;
(e) A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or
agreement of limited partnership, {certificate of formation or agreement of
limited liability company} or other similar charter or governing document)
of the Surviving Business Entity to be effected by such merger or
consolidation;
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 14.4 or a later
date specified in or determinable in accordance with the Merger Agreement
(provided, that if the effective time of the merger is to be later than the
date of the filing of the certificate of merger, the effective time shall
be filed no later than the time of the filing of the certificate of merger
and stated therein); and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the Board of
Supervisors.
14.3 Approval by Limited Partners of Merger or Consolidation.
(a) The Board of Supervisors, upon its approval of the Merger Agreement,
shall direct that the Merger Agreement be submitted to a vote of Limited
Partners, whether at a special meeting or by written consent, in either case in
accordance with the requirements of Article XIII. A copy or a summary of the
Merger Agreement shall be included in or enclosed with the notice of a special
meeting or the written consent.
(b) The Merger Agreement shall be approved upon receiving the affirmative
vote or consent of the holders of [a Unit Majority] {at least a majority of the
Outstanding Common Units} unless the Merger Agreement contains any provision
that, if contained in an amendment to this Agreement, the provisions of this
Agreement or the Delaware Act would require the vote or consent of a greater
percentage of the Outstanding {Common} Units or of any class of Limited
Partners, in which case such greater percentage vote or consent shall be
required for approval of the Merger Agreement.
(c) After such approval by vote or consent of the Limited Partners, and at
any time prior to the filing of the certificate of merger pursuant to Section
14.4, the merger or consolidation may be abandoned pursuant to provisions
therefor, if any, set forth in the Merger Agreement.
14.4 Certificate of Merger.
Upon the required approval by the Board of Supervisors and the Limited
Partners of a Merger Agreement, a certificate of merger shall be executed and
filed with the Secretary of State of the State of Delaware in conformity with
the requirements of the Delaware Act.
C-77
<PAGE>
<PAGE>
14.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities shall be vested in the Surviving Business Entity and after the
merger or consolidation shall be the property of the Surviving Business
Entity to the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in any
of those constituent business entities shall not revert and is not in any
way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests
in property of any of those constituent business entities shall be
preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity, and may be enforced
against it to the same extent as if the debts, liabilities and duties had
been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article shall not
be deemed to result in a transfer or assignment of assets or liabilities from
one entity to another.
ARTICLE XV
RIGHT TO ACQUIRE UNITS
15.1 Right to Acquire Units.
(a) Notwithstanding any other provision of this Agreement, if at any time
not more than 20% of the total Units of any class then Outstanding are held by
Persons other than the General Partner and its Affiliates, the General Partner
shall then have the right, which right it may assign and transfer in whole or in
part to the Partnership or any Affiliate of the General Partner, exercisable in
its sole discretion, to purchase all, but not less than all, of the Units of
such class then Outstanding held by Persons other than the General Partner and
its Affiliates, at the greater of (x) the Current Market Price as of the date
three days prior to the date that the notice described in Section 15.1(b) is
mailed and (y) the highest price paid by the General Partner or any of its
Affiliates for any such Unit purchased during the 90-day period preceding the
date that the notice described in Section 15.1(b) is mailed. As used in this
Agreement, (i) 'Current Market Price' as of any date of any class of Units
listed or admitted to on any National Securities Exchange means the average of
the daily closing Prices (as hereinafter defined) per Unit of such class for the
20 consecutive Trading Days (as hereinafter defined) immediately prior to such
date; (ii) 'Closing Price' for any day means the last sale price on such day,
regular way, or in case no such sale takes place on such day, the average of the
closing bid and asked prices on such day, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted for trading on the principal National
Securities Exchange (other than the Nasdaq Stock Market) on which the Units of
such class are listed or admitted to trading or, if the Units of such class are
not listed or admitted to trading on any National Securities Exchange (other
than the Nasdaq Stock Market), the last quoted price on such day or, if not so
quoted, the average of the high bid and low asked prices on such day in the
over-the-counter market, as reported by the Nasdaq Stock Market or such other
system then in use, or, if on any such day the Units of such class are not
quoted by any such organization, the average of the closing bid and asked prices
on such day as furnished by a professional market maker making a market in the
Units of such class selected by the Board of Supervisors, or if on any such day
no market maker is making a market in the Units of such class, the fair value of
such Units on such day as determined reasonably and in good faith by the Board
of Supervisors; and (iii) 'Trading Day' means a day on which the principal
National Securities Exchange on which the Units of any class are listed or
admitted to trading is open for the transaction of business or, if Units of a
class are not listed or admitted to trading on any National Securities Exchange,
a day on which banking institutions in New York City generally are open.
C-78
<PAGE>
<PAGE>
(b) If the General Partner, any Affiliate of the General Partner or the
Partnership elects to exercise the right to purchase Units pursuant to Section
15.1(a), the General Partner shall deliver to the Transfer Agent notice of such
election to purchase (the 'Notice of Election to Purchase') and shall cause the
Transfer Agent to mail a copy of such Notice of Election to Purchase to the
Record Holders of Units (as of a Record Date selected by the General Partner) at
least 10, but not more than 60, days prior to the Purchase Date. Such Notice of
Election to Purchase shall also be published for a period of at least three
consecutive days in at least two daily newspapers of general circulation printed
in the English language and published in the Borough of Manhattan, New York. The
Notice of Election to Purchase shall specify the Purchase Date and the price
(determined in accordance with Section 15.1(a)) at which Units will be purchased
and state that the General Partner, its Affiliate or the Partnership, as the
case may be, elects to purchase such Units, upon surrender of Certificates
representing such Units in exchange for payment, at such office or offices of
the Transfer Agent as the Transfer Agent may specify, or as may be required by
any National Securities Exchange on which the Units are listed or admitted to
trading. Any such Notice of Election to Purchase mailed to a Record Holder of
Units at his address as reflected in the records of the Transfer Agent shall be
conclusively presumed to have been given regardless of whether the owner
receives such notice. On or prior to the Purchase Date, the General Partner, its
Affiliate or the Partnership, as the case may be, shall deposit with the
Transfer Agent cash in an amount sufficient to pay the aggregate purchase price
of all of the Units to be purchased in accordance with this Section 15.1. If the
Notice of Election to Purchase shall have been duly given as aforesaid at least
10 days prior to the Purchase Date, and if on or prior to the Purchase Date the
deposit described in the preceding sentence has been made for the benefit of the
holders of Units subject to purchase as provided herein, then from and after the
Purchase Date, notwithstanding that any Certificate shall not have been
surrendered for purchase, all rights of the holders of such Units (including any
rights pursuant to Articles IV, V, VI, and XII) shall thereupon cease, except
the right to receive the purchase price (determined in accordance with Section
15.1(a)) for Units therefor, without interest, upon surrender to the Transfer
Agent of the Certificates representing such Units, and such Units shall
thereupon be deemed to be transferred to the General Partner, its Affiliate or
the Partnership, as the case may be, on the record books of the Transfer Agent
and the Partnership, and the General Partner or any Affiliate of the General
Partner, or the Partnership, as the case may be, shall be deemed to be the owner
of all such Units from and after the Purchase Date and shall have all rights as
the owner of such Units (including all rights as owner of such Units pursuant to
Articles IV, V, VI and XII).
(c) At any time from and after the Purchase Date, a holder of an
Outstanding Unit subject to purchase as provided in this Section 15.1 may
surrender his Certificate evidencing such Unit to the Transfer Agent in exchange
for payment of the amount described in Section 15.1(a), therefor, without
interest thereon.
ARTICLE XVI
GENERAL PROVISIONS
16.1 Addresses and Notices.
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee at the address described below. Any
notice, payment or report to be given or made to a Partner or Assignee hereunder
shall be deemed conclusively to have been given or made, and the obligation to
give such notice or report or to make such payment shall be deemed conclusively
to have been fully satisfied, upon sending of such notice, payment or report to
the Record Holder of such Unit at his address as shown on the records of the
Transfer Agent or as otherwise shown on the records of the Partnership,
regardless of any claim of any Person who may have an interest in such Unit or
the Partnership Interest of a General Partner by reason of any assignment or
otherwise. An affidavit or certificate of making of any notice, payment or
report in accordance with the provisions of this Section 16.1 executed by the
Board of Supervisors, the Transfer Agent or the mailing organization shall be
prima facie evidence of the giving or making of such notice, payment or report.
If
C-79
<PAGE>
<PAGE>
any notice, payment or report addressed to a Record Holder at the address of
such Record Holder appearing on the books and records of the Transfer Agent or
the Partnership is returned by the United States [Post Office] {Postal Service}
marked to indicate that the United States Postal Service is unable to deliver
it, such notice, payment or report and any subsequent notices, payments and
reports shall be deemed to have been duly given or made without further mailing
(until such time as such Record Holder or another Person notifies the Transfer
Agent or the Partnership of a change in his address) if they are available for
the Partner or Assignee at the principal office of the Partnership for a period
of one year from the date of the giving or making of such notice, payment or
report to the other Partners and Assignees. Any notice to the Partnership shall
be deemed given if received by the General Partner at the principal office of
the Partnership designated pursuant to Section 2.3. The Board of Supervisors may
rely and shall be protected in relying on any notice or other document from a
Partner, Assignee or other Person if believed by it to be genuine.
16.2 Further Action.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
16.3 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
16.4 Integration.
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
16.5 Creditors.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
16.6 Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach of any other covenant, duty, agreement or condition.
16.7 Counterparts.
This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto or, in the case of a Person acquiring a Unit, upon accepting
the certificate evidencing such Unit or executing and delivering a Transfer
Application as herein described, independently of the signature of any other
party.
16.8 Applicable Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
16.9 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
16.10 Consent of Partners.
Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Partners, such action may be so taken upon
the concurrence of less than all of the Partners and each Partner shall be bound
by the results of such action.
C-80
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
SUBURBAN {ENERGY SERVICES GROUP LLC}
[Propane GP, Inc.]
[By]
[Name:]
[Title:]
[ORGANIZATIONAL LIMITED PARTNER:]
By ..................................
Name:
Title:
LIMITED PARTNERS
All Limited Partners now and
hereafter admitted as Limited Partners
of the Partnership, pursuant to powers
of attorney now and hereafter executed
in favor of, and granted and delivered
to the Board of Supervisors.
By: Mark A. Alexander, [Executive Vice
Chairman] {President} of Suburban
Propane Partners, LP., as
attorney-in-fact for all Limited
Partners pursuant to the Power of
Attorney granted pursuant to
Section 2.6
.................................
Mark A. Alexander
Attorney-in-Fact
C-81
<PAGE>
<PAGE>
EXHIBIT A TO THE {SECOND} AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
SUBURBAN PROPANE PARTNERS, L.P.
CERTIFICATE EVIDENCING COMMON UNITS
REPRESENTING LIMITED PARTNER INTERESTS
SUBURBAN PROPANE PARTNERS, L.P.
No. Common Units
In accordance with Section 4.1 of the {Second} Amended and Restated
Agreement of Limited Partnership of Suburban Propane Partners, L.P., as amended,
supplemented or restated from time to time (the 'Partnership Agreement'),
SUBURBAN PROPANE PARTNERS, L.P., a Delaware limited partnership (the
'Partnership'), hereby certifies that (the
'Holder') is the registered owner of Common Units representing
limited partner interests in the Partnership (the 'Common Units') transferable
on the books of the Partnership, in person or by duly authorized attorney, upon
surrender of this Certificate properly endorsed and accompanied by a properly
executed application for transfer of the Common Units represented by this
Certificate. The rights, preferences and limitations of the Common Units are set
forth in, and this Certificate and the Common Units represented hereby are
issued and shall in all respects be subject to the terms and provisions of, the
Partnership Agreement. Copies of the Partnership Agreement are on file at, and
will be furnished without charge on delivery of written request to the
Partnership at, the principal office of the Partnership located at One Suburban
Plaza, 240 Route 10 West, Whippany, New Jersey 07981-0206. Capitalized terms
used herein but not defined shall have the meaning given them in the Partnership
Agreement.
The Holder, by accepting this Certificate, is deemed to have (i) requested
admission as, and agreed to become, a Limited Partner and to have agreed to
comply with and be bound by and to have executed the Partnership Agreement, (ii)
represented and warranted that the Holder has all right, power and authority
and, if an individual, the capacity necessary to enter into the Partnership
Agreement, (iii) granted the powers of attorney provided for in the Partnership
Agreement and (iv) made the waivers and given the consents and approvals
contained in the Partnership Agreement.
This Certificate shall not be valid for any purpose unless it has been
countersigned and registered by the Transfer Agent and Registrar.
<TABLE>
<S> <C>
Dated: ......................................... SUBURBAN PROPANE PARTNERS, L.P.
Countersigned and Registered by:
[First Chicago Trust Company of By: .................................................
New York,] as Transfer Agent and President
Registrar
By: ............................................ By: .................................................
Authorized Signature Secretary
</TABLE>
C-82
<PAGE>
<PAGE>
[REVERSE OF CERTIFICATE]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as follows according to applicable laws or
regulations:
<TABLE>
<S> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT --
TEN ENT -- as tenants by the entireties ............ Custodian ............
JT TEN -- as joint tenants with right of (CUST) (MINOR)
survivorship and not as tenants under Uniform Gifts to Minors
in common Act................................
STATE
</TABLE>
Additional abbreviations, though not in the above list, may also be used.
ASSIGNMENT OF COMMON UNITS
IN
SUBURBAN PROPANE PARTNERS, L.P.
IMPORTANT NOTICE REGARDING INVESTOR RESPONSIBILITIES
DUE TO TAX SHELTER STATUS OF SUBURBAN PROPANE PARTNERS, L.P.
You have acquired an interest in Suburban Propane Partners, L.P., One
Suburban Plaza, 240 Route 10 West, Whippany, New Jersey 07981-0206, whose
taxpayer identification number is 22-3410353. The Internal Revenue Service has
issued Suburban Propane Partners, L.P. the following tax shelter registration
number: .
YOU MUST REPORT THIS REGISTRATION NUMBER TO THE INTERNAL REVENUE SERVICE IF
YOU CLAIM ANY DEDUCTION, LOSS, CREDIT, OR OTHER TAX BENEFIT OR REPORT ANY INCOME
BY REASON OF YOUR INVESTMENT IN SUBURBAN PROPANE PARTNERS, L.P.
You must report the registration number as well as the name and taxpayer
identification number of SUBURBAN PROPANE PARTNERS, L.P on Form 8271. FORM 8271
MUST BE ATTACHED TO THE RETURN ON WHICH YOU CLAIM THE DEDUCTION, LOSS, CREDIT,
OR OTHER TAX BENEFIT OR REPORT ANY INCOME BY REASON OF YOUR INVESTMENT IN
SUBURBAN PROPANE PARTNERS, L.P.
If you transfer your interest in Suburban Propane Partners, L.P. to another
person, you are required by the Internal Revenue Service to keep a list
containing (a) that person's name, address and taxpayer identification number,
(b) the date on which you transferred the interest and (c) the name, address and
tax shelter registration number of Suburban Propane Partners, LP. If you do not
want to keep such a list, you must (1) send the information specified above to
the Partnership, which will keep the list for this tax shelter, and (2) give a
copy of this notice to the person to whom you transfer your interest. Your
failure to comply with any of the above-described responsibilities could result
in the imposition of a penalty under Section 6707(b) or 6708(a) of the Internal
Revenue Code of 1986, as amended, unless such failure is shown to be due to
reasonable cause.
ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS INVESTMENT OR
THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED, OR APPROVED BY THE
INTERNAL REVENUE SERVICE.
C-83
<PAGE>
<PAGE>
FOR VALUE RECEIVED, hereby assigns,
conveys, sells and transfers unto
<TABLE>
<S> <C>
....................................................... ........................................................
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE) (PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE)
</TABLE>
Common Units representing limited partner interests evidenced
by this Certificate, subject to the Partnership Agreement, and does hereby
irrevocably constitute and appoint ............ .................... as its
attorney-in-fact with full power of substitution to transfer the same on the
books of Suburban Propane Partners, L.P.
<TABLE>
<S> <C>
Date: ................................................. NOTE: The signature to any endorsement hereon must
correspond with the name as written upon the face
of this Certificate in every particular, without
alteration, enlargement or change.
SIGNATURE(S) MUST BE GUARANTEED BY A MEMBER FIRM OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. OR
BY A COMMERCIAL BANK OR TRUST COMPANY.
........................................................
(SIGNATURE)
........................................................
(SIGNATURE)
SIGNATURE(S) GUARANTEED
</TABLE>
No transfer of the Common Units evidenced hereby will be registered on the
books of the Partnership, unless the Certificate evidencing the Common Units to
be transferred is surrendered for registration or transfer and an Application
for Transfer of Common Units has been executed by a transferee either (a) on the
form set forth below or (b) on a separate application that the Partnership will
furnish on request without charge. A transferor of the Common Units shall have
no duty to the transferee with respect to execution of the transfer application
in order for such transferee to obtain registration of the transfer of the
Common Units.
C-84
<PAGE>
<PAGE>
APPLICATION FOR TRANSFER OF COMMON UNITS
The undersigned ('Assignee') hereby applies for transfer to the name of the
Assignee of the Common Units evidenced hereby.
The Assignee (a) requests admission as a Substituted Limited Partner and
agrees to comply with and be bound by, and hereby executes, the Amended and
Restated Agreement of Limited Partnership of Suburban Propane Partners, L.P.
(the 'Partnership'), as amended, supplemented or restated to the date hereof
(the 'Partnership Agreement'), (b) represents and warrants that the Assignee has
all right, power and authority and, if an individual, the capacity necessary to
enter into the Partnership Agreement, (c) appoints [the Executive Vice
Chairman], the Vice Chairman and the President of the Partnership and, if a
Liquidator shall be appointed, the Liquidator of the Partnership as the
Assignee's attorney-in-fact to execute, swear to, acknowledge and file any
document, including, without limitation, the Partnership Agreement and any
amendment thereto, and the Certificate of Limited Partnership of the Partnership
and any amendment thereto, necessary or appropriate for the Assignee's admission
as a Substituted Limited Partner and as a party to the Partnership Agreement,
(d) gives the power of attorney provided for in the Partnership Agreement, and
(e) makes the waivers and gives the consents and approvals contained in the
Partnership Agreement. Capitalized terms not defined herein have the meanings
assigned to such terms in the Partnership Agreement.
<TABLE>
<S> <C>
Date: .....................................
........................................... ............................................
SOCIAL SECURITY OR OTHER IDENTIFYING SIGNATURE OF ASSIGNEE
NUMBER OF ASSIGNEE
........................................... ............................................
PURCHASE PRICE INCLUDING NAME AND ADDRESS OF ASSIGNEE
COMMISSIONS, IF ANY
</TABLE>
Type of Entity (check one):
<TABLE>
<S> <C> <C>
[ ] Individual [ ] Partnership [ ] Corporation
[ ] Trust [ ] Other (specify) ..................
</TABLE>
Nationality (check one):
<TABLE>
<S> <C>
[ ] U.S. Citizen, Resident or Domestic Entity
[ ] Foreign Corporation [ ] Non-resident Alien
</TABLE>
If the U.S. Citizen, Resident or Domestic Entity box is checked, the
following certification must be completed.
C-85
<PAGE>
<PAGE>
Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the
'Code'), the Partnership must withhold tax with respect to certain transfers of
property if a holder of an interest in the Partnership is a foreign person. To
inform the Partnership that no withholding is required with respect to the
undersigned interestholder's interest in it, the undersigned hereby certifies
the following (or, if applicable, certifies the following on behalf of the
interestholder).
Complete Either A or B:
A. Individual Interestholder
1. I am not a non-resident alien for purposes of U.S. income taxation.
2. My U.S. taxpayer identification number (Social Security Number) is .
3. My home address is .
B. Partnership, Corporation or Other Interestholder
1. ...................................................... is not a foreign
NAME OF INTERESTHOLDER
corporation, foreign partnership, foreign trust or foreign estate (as
those terms are defined in the Code and Treasury Regulations).
2. The interestholder's U.S. employer identification number is .
3. The interestholder's office address and place of incorporation (if
applicable) is
.
The interestholder agrees to notify the Partnership within sixty (60) days
of the date the interestholder becomes a foreign person.
The interestholder understands that this certificate may be disclosed to
the Internal Revenue Service by the Partnership and that any false statement
contained herein could be punishable by fine, imprisonment or both.
Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete and, if applicable, I further declare that I have authority to sign
this document on behalf of
.....................................
NAME OF INTERESTHOLDER
.....................................
SIGNATURE AND DATE
.....................................
TITLE (IF APPLICABLE)
Note: If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee holder or an agent of any of the foregoing, and is
holding for the account of any other person, this application should be
completed by an officer thereof or, in the case of a broker or dealer, by a
registered representative who is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.,
or, in the case of any other nominee holder, a person performing a similar
function. If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee owner or an agent of any of the foregoing, the above
certification as to any person for whom the Assignee will hold the Common Units
shall be made to the best of the Assignee's knowledge.
C-86
<PAGE>
<PAGE>
ANNEX D
ROTHSCHILD INC.
April 14, 1999
Special Committee of
the Board of Supervisors
c/o Suburban Propane Partners, L.P.
One Suburban Plaza
240 Route 10
Whippany, New Jersey 07981-2117
Dear Sirs:
You have requested our opinion ('Opinion') as to the fairness, from a
financial point of view, to the public common unitholders of Suburban Propane
Partners, L.P. (the 'Partnership') of a proposed recapitalization of the
Partnership (the 'Recapitalization'), which includes the following transactions:
(a) the redemption (the 'Redemption') by the Partnership from Suburban
Propane GP, Inc. (the 'General Partner') of all outstanding Subordinated
Units and APUs for aggregate cash consideration of $69 million pursuant to
a Recapitalization Agreement (the 'Recapitalization Agreement'), as
amended, among the Partnership, Suburban Propane, L.P. (the 'Operating
Partnership'), the General Partner, Suburban Energy Services Group LLC, a
newly formed limited liability company owned by executive officers and key
employees of the Partnership (the 'Successor General Partner'), and
Millennium Petrochemicals Inc. ('Millennium');
(b) the purchase by the Successor General Partner of the general
partner interest in the Partnership and the Operating Partnership and all
of the Incentive Distribution Rights of the Partnership (collectively, the
'Assets') for $6 million in cash and the assumption of certain liabilities
of the General Partner by the Successor General Partner pursuant to a
Purchase Agreement (the 'Purchase Agreement'), as amended, among
Millennium, the General Partner and the Successor General Partner;
(c) the election of the Successor General Partner as the general
partner of the Partnership and the Operating Partnership upon the transfer
of the Assets by the General Partner;
(d) the termination of the Distribution Support Agreement, dated as of
March 5, 1996, among the Partnership, the General Partner and Millennium
pursuant to a Termination Agreement (the 'Termination Agreement') to be
entered into by such parties; and
(e) the adoption of certain amendments to the Amended and Restated
Agreements of Limited Partnership of the Partnership and the Operating
Partnership, including modifications of the Incentive Distribution Rights.
Capitalized terms used herein but not defined herein have the meanings
assigned to such terms in the Recapitalization Agreement.
In formulating our Opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to the
Partnership and the Operating Partnership, including (a) the consolidated
financial statements of the Partnership for the fiscal years ended September 28,
1996 and September 27, 1997 and the nine-month periods ended June 28, 1997 and
June 27, 1998 and (b) the filed form of the Partnership's Annual Report on Form
10-K for the fiscal year ended September 26, 1998, the filed form of the
Partnership's Quarterly Report on Form 10-Q for the three months ended December
26, 1998 and certain other financial and operating data relating to the
Partnership made available to us from published sources and from the internal
records of the Partnership; (ii) reviewed the latest draft of Amendment No. 3 to
the Partnership's Proxy Statement; (iii) reviewed the Amended and Restated
Recapitalization Agreement dated March 15, 1999, the Purchase Agreement dated
November 10, 1998, the Second Amended and Restated Agreement of Limited
Partnership of the Partnership, the Second Amended and Restated Agreement of
Limited Partnership of the Operating Partnership and the Termination Agreement;
(iv) reviewed current and historical market prices and trading volumes of the
Common Units, the payment history of distributions on the Common Units and the
Subordinated Units and the capitalization and financial condition of the
Partnership; (v) compared the Partnership, from a financial point of view, with
certain other publicly traded partnerships in the propane industry; (vi)
considered the financial terms, to the extent publicly available, of selected
recent transactions in the propane industry; (vii) reviewed and discussed with
the Elected Supervisors and
D-1
<PAGE>
<PAGE>
management of the Partnership certain information of a business and financial
nature regarding the Partnership furnished to us by the Partnership, including
financial forecasts and related assumptions of the Partnership; (viii) reviewed
and discussed with the Partnership's management historical and forecasted
capital expenditure requirements for both maintenance and other operational
purposes; (ix) reviewed and discussed with the Partnership's management the
terms of the amendments to the existing credit agreement and the senior note
agreement; (x) reviewed and discussed with the Partnership's management proposed
arrangements for the purchase of the Assets by the Successor General Partner,
related financing documents and the terms of the Partnerships' new compensation
deferral plan; (xi) made inquiries regarding and discussed the Recapitalization
with respective counsel to the Special Committee and the Partnership; (xii)
performed proforma capitalization analyses and used five-year financial
projections prepared by management for fiscal years 1999 through 2003, in order
to compute pro forma potential distributions and pro forma unit coverage and
compared this to the status quo case; and (xiii) performed such other analyses
and examinations and considered such other financial, economic and market
criteria as we deemed relevant and appropriate.
In connection with our review, we have not assumed any obligation
independently to verify any information utilized, reviewed or considered by us
in formulating our Opinion and have relied on its being accurate and complete in
all material respects. With respect to the financial forecasts for the
Partnership provided to us, we have assumed for purposes of our Opinion that the
forecasts have been reasonably prepared on bases reflecting the best available
estimates and judgments of the Partnership's management at the time of
preparation as to the future financial performance of the Partnership. We have
also assumed that there has not occurred any material change in the
Partnership's assets, financial condition, results of operations, business or
prospects since the respective dates on which the Partnership's most recent
financial statements were made available to us. We have relied on advice of
respective counsel to the Special Committee and the Partnership and independent
accountants to the Partnership as to all legal and financial reporting matters
with respect to the Partnership and the Recapitalization. In addition, we have
not assumed responsibility for making an independent evaluation, appraisal or
physical inspection of any of the assets or liabilities (contingent or
otherwise) of the Partnership, nor have we been furnished with any such
appraisal. Our Opinion is based on economic, monetary, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
We have further assumed that the Recapitalization will be consummated
substantially in accordance with the terms described in the Recapitalization
Agreement and Purchase Agreement without waiver of any of the conditions or
obligations thereunder.
We have been retained to render this Opinion and are being compensated
therefor. Rothschild previously has acted as financial advisor to the
Partnership and Millennium and certain of their former affiliated entities
('Affiliated Entities'). Although Rothschild anticipates that it may render
financial advisory services to Millennium and its affiliates in the future,
Rothschild is not currently providing any such services to Millennium or any of
its affiliates pursuant to any agreement in effect or contemplated. Rothschild
has neither received nor is owed any fee from Millennium or its affiliates for
financial advisory services. Rothschild has received customary compensation for
financial advisory services rendered previously to the Affiliated Entities and
the Partnership, including certain preliminary advice rendered to the
Partnership relating to the Recapitalization.
This Opinion is directed to the Special Committee of the Board of
Supervisors of the Partnership in its consideration of the fairness of the
Recapitalization to the Partnership's public common unitholders and does not
constitute a recommendation to any unitholders of the Partnership as to how any
such unitholders should vote with respect to the Recapitalization proposals at
any meeting called to approve the Recapitalization proposals.
Based upon the foregoing and other factors we deem relevant and in reliance
thereon, it is our Opinion that, as of the date hereof, the Recapitalization is
fair, from a financial point of view, to the public common unitholders of the
Partnership.
Very truly yours,
Rothschild Inc.
D-2
<PAGE>
<PAGE>
[LETTERHEAD OF A.G. EDWARDS & SONS, INC.]
ANNEX E
April 14, 1999
Special Committee of the Board of Supervisors
Suburban Propane Partners, L.P.
One Suburban Plaza
240 Route 10 West
Whippany, New Jersey 07981
Members of the Special Committee of the Board of Supervisors:
You, the Special Committee consisting of the elected members of the Board
of Supervisors (the 'Special Committee') of Suburban Propane Partners, L.P.
('Suburban' or the 'Partnership') have requested the opinion of A.G. Edwards &
Sons, Inc. ('A.G. Edwards') as to the fairness, from a financial point of view,
of the proposed recapitalization of the Partnership (the 'Recapitalization'), as
described in the Amended and Restated Recapitalization Agreement (the
'Recapitalization Agreement') by and among the Partnership, Suburban Propane,
L.P. (the 'Operating Partnership'), Suburban Propane GP, Inc. (the 'General
Partner'), Millennium Petrochemicals Inc. ('Millennium') and Suburban Energy
Services Group LLC (the 'Successor General Partner'), to the common unitholders
of Suburban, excluding those members of management of the Partnership who hold
common units (the 'Public Common Unitholders').
As more fully described in the Partnership's Proxy Statement, the
Recapitalization includes:
(i) Redeeming all outstanding subordinated units and additional
limited partner units from the General Partner for $69 million.
(ii) Replacing the General Partner with a new general partner of the
Partnership and the Operating Partnership (together the 'Partnerships')
which is owned by management.
(iii) Amending the partnership agreements of the Partnerships to
permit and effect the Recapitalization and to reduce the new general
partner's percentage of additional distributions above the minimum
quarterly distribution.
(iv) Terminating the distribution support provided by the General
Partner and its parent and replacing it with a liquidity arrangement
provided by Suburban.
(v) Increasing the quarterly distribution from $0.50 to $0.5125 per
unit per quarter (from $2.00 to $2.05 per unit per year), subject to
completion of the Recapitalization and effective for the fiscal quarter in
which it is completed.
In rendering its Fairness Opinion, A.G. Edwards has assumed that the
Recapitalization will be completed on the terms contained in the Proxy
Statement, the Recapitalization Agreement, the Purchase Agreement by and among
the Successor General Partner, Millennium and the General Partner, as amended
(the 'Purchase Agreement'), the Second Amended and Restated Agreement of Limited
Partnership of the Partnership and the Second Amended and Restated Agreement of
Limited Partnership of the Operating Partnership (collectively, the 'Amended
Partnership Agreements') without waiver of any material term or condition, and
A.G. Edwards has also assumed that the final form of these documents would be
substantially similar to the last draft or version reviewed by A.G. Edwards.
A.G. Edwards is a nationally recognized securities and investment banking
firm regularly engaged in, among other things, the valuation of businesses and
their securities in connection with mergers and acquisitions, initial public
offerings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. A.G. Edwards
is familiar with the Partnership through acting as a representative of the
underwriters in the Partnership's initial public offering of its common units
and through its on-going securities research coverage of the Partnership, and
some of our customers own the Partnership's common units. We are not aware of
any relationships between A.G. Edwards and Suburban, Suburban's affiliates or
Suburban's unitholders, between A.G. Edwards and Millennium or Millennium's
shareholders, or between A.G. Edwards and the
E-1
<PAGE>
<PAGE>
The Special Committee of the Board of Supervisors
Page 2
Successor General Partner and its owners, which, in our opinion, would affect
our ability to render a fair and independent opinion in this matter.
In connection with the opinion, A.G. Edwards' activities included, among
other things:
(i) A review of the draft dated April 10, 1999 of Amendment No. 3 to
the Proxy Statement;
(ii) A review of the Recapitalization Agreement, the Purchase
Agreement, the forms of Amended Partnership Agreements, the form of
agreement terminating the Distribution Support Agreement, the term sheet
for the Mellon Loan, the forms of amendments to the Existing Credit
Agreement and the Senior Note Agreement, and the form of the new deferred
compensation plan;
(iii) A review of certain publicly available historical audited
financial statements and certain unaudited interim financial statements of
Suburban;
(iv) A review of certain financial analyses and forecasts of Suburban
prepared by and reviewed with management of Suburban and the views of
management of Suburban regarding Suburban's past and current business,
operating results, financial condition and future prospects, including the
impact of the Recapitalization, as well as information relating to the
retail propane distribution industry and the potential strategic, financial
and operational benefits and challenges anticipated from the
Recapitalization;
(v) A review of the pro forma impact of the Recapitalization on
Suburban;
(vi) A review of the publicly reported historical price and trading
activity for Suburban's common units, including a comparison of certain
financial and stock market information for Suburban with similar publicly
available information for certain other partnerships with publicly traded
securities;
(vii) A review of the current market environment generally, and the
retail propane distribution environment in particular;
(viii) A review of information relating to the financial terms of
certain transactions, including selected transactions involving
subordinated units;
(ix) Conversations with Rothschild Inc., the Special Committee's
financial advisor in connection with the Recapitalization, regarding the
nature and extent of development of the terms of the Recapitalization; and
(x) A review of such other information, financial studies, analyses
and investigations, and financial, economic and market criteria that A.G.
Edwards considered relevant.
In rendering our opinion, A.G. Edwards has relied upon and assumed, without
independent verification, the accuracy and completeness of all financial and
other information, publicly available, furnished to, or otherwise discussed with
A.G. Edwards for the purposes of the opinion. With respect to financial
projections and other information provided to or otherwise discussed with A.G.
Edwards, A.G. Edwards assumed and was advised by the management of Suburban that
such projections and other information were reasonably prepared on a basis that
reflects their best currently available estimates and judgments. A.G. Edwards
reviewed two sets of projections for Suburban to perform certain of its
analyses. A.G. Edwards used a set of projections based on Suburban management's
downside case operating projections for 1999 to 2003 and a set of projections
based on Suburban management's base case operating projections for 1999 to 2003.
The Special Committee did not engage A.G. Edwards to, and therefore A.G. Edwards
did not, verify the accuracy or completeness of any information. A.G. Edwards
has relied upon the assurances of the management of Suburban that they are not
aware of any facts that would make such information inaccurate or misleading.
A.G. Edwards did not conduct a physical inspection of the properties or
facilities of the Partnership nor did it make or obtain any independent
evaluation or appraisals of any such properties or facilities or assets and
liabilities.
E-2
<PAGE>
<PAGE>
The Special Committee of the Board of Supervisors
Page 3
Our opinion is necessarily based on economic and other conditions as in
effect on, and the information made available to us as of, the date hereof
(except for market data, which was as of April 9, 1999). Our opinion as
expressed herein is limited to the fairness, from a financial point of view, to
the Public Common Unitholders of the Recapitalization and does not constitute
tax advice, or a recommendation to any Public Common Unitholder as to how such
unitholder should vote with respect to the Recapitalization.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Recapitalization is fair, from a financial point of view, to
the Public Common Unitholders.
Very truly yours,
/s/ A.G. EDWARDS & SONS, INC.
.....................................
A.G. EDWARDS & SONS, INC.
E-3
<PAGE>
<PAGE>
ANNEX F
BALANCE SHEET INFORMATION OF
THE DEPARTING GENERAL PARTNER
AND ITS PARENT
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
MILLENNIUM CHEMICALS INC.
In our opinion, the accompanying consolidated balance sheet presents
fairly, in all material respects, the financial position of Millennium America
Inc. and its subsidiaries at December 31, 1998 in conformity with generally
accepted accounting principles. This financial statement is the responsibility
of the Company's management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit of this statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
balance sheet is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the balance
sheet, assessing the accounting principles used and significant estimates made
by management, and evaluating the overall balance sheet presentation. We believe
that our audit of the balance sheet provides a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
FLORHAM PARK, NJ
JANUARY 21, 1999
F-1
<PAGE>
<PAGE>
MILLENNIUM AMERICA INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
(IN MILLIONS)
<S> <C>
ASSETS
Currents assets:
Cash and cash equivalents..................................................................... $ 30
Trade receivables, net........................................................................ 136
Inventories................................................................................... 142
Other current assets.......................................................................... 230
------------
Total current assets..................................................................... 538
Property, plant and equipment, net................................................................. 481
Investment in Equistar............................................................................. 1,519
Other assets....................................................................................... 167
Due from parent and affiliates..................................................................... 491
Goodwill........................................................................................... 412
------------
Total assets............................................................................. $3,608
------------
------------
LIABILITIES AND INVESTED CAPITAL
Current liabilities:
Notes payable................................................................................. $ 9
Current maturities of long-term debt.......................................................... 2
Trade accounts payable........................................................................ 55
Income taxes payable.......................................................................... 1
Accrued expenses and other liabilities........................................................ 144
------------
Total current liabilities................................................................ 211
Non-current liabilities:
Long-term debt................................................................................ 1,013
Deferred income taxes......................................................................... 274
Due to parent and affiliates.................................................................. 713
Other liabilities............................................................................. 345
------------
Total liabilities........................................................................ 2,556
------------
Commitments and contingencies (Note 12 of the Company's 1998 Annual Report to Shareholders)
Invested capital.............................................................................. 1,052
------------
Total liabilities and invested capital................................................... $3,608
------------
------------
</TABLE>
F-2
<PAGE>
<PAGE>
MILLENNIUM AMERICA INC.
NOTES TO CONSOLIDATED BALANCE SHEET
(DOLLARS IN MILLIONS)
NOTE 1 -- BASIS OF PRESENTATION AND DESCRIPTION OF COMPANY
Millennium America, Inc. (the 'Company') is a wholly-owned subsidiary of
Millennium Chemicals, Inc., ('Millennium Chemicals') a major international
chemicals company with leading market positions in a broad range of commodity,
industrial, performance and specialty chemicals throughout the world. Millennium
Chemicals has been publicly owned since October 1, 1996, when Hanson PLC's
('Hanson's') chemical operations were transferred to it, and in consideration,
all of the then outstanding shares of Millennium Chemicals common stock were
distributed pro rata to Hanson's shareholders.
The Company is the holding company for all of Millennium Chemical's
operating subsidiaries and interests other than its operations in the U.K.,
France, Brazil and Australia. Such operations include Millennium Inorganic
Chemicals, Inc., Millennium Petrochemicals Inc., Millennium Specialty Chemicals
Inc., and an interest in Equistar Chemicals, LP ('Equistar'), a joint venture
formed by the Company, Lyondell Chemical Company ('Lyondell') and Occidental
Petroleum Corporation ('Occidental'). See Note 2 for further discussion of the
Company's interest in Equistar. The Company is also the principal parent for
U.S. tax purposes of Millennium's operations and the issuer of publicly traded
notes and debentures and the principal borrower under a revolving credit
agreement on behalf of Millennium Chemicals.
NOTE 2 -- ACQUISITIONS AND DISPOSITIONS
On December 1, 1997, the Company and Lyondell completed the formation of
Equistar, a joint venture partnership created to own and operate the
petrochemical and polymer businesses of the Company and Lyondell. The Company
contributed to Equistar substantially all of the net assets of its polyethylene,
performance polymer and ethyl alcohol businesses. The Company retained $250 from
the proceeds of accounts receivable collections and substantially all the
accounts payable and accrued expenses of its contributed businesses existing on
December 1, 1997, and received proceeds of $750 from borrowings under a new
credit facility entered into by Equistar. The Company used the $750, which it
received to repay debt. A subsidiary of the Company guarantees $750 of
Equistar's credit facility.
Equistar was owned 57% by Lyondell and 43% by the Company until May 15,
1998, when the Company and Lyondell expanded Equistar with the addition of the
ethylene, propylene, ethylene oxide and derivatives businesses of Occidental's
chemical subsidiary. Occidental contributed the net assets of those businesses
(including approximately $205 of related debt) to Equistar. In exchange,
Equistar borrowed an additional $500, $420 of which was distributed to
Occidental and $75 to the Company. Equistar is now owned 41% by Lyondell, 29.5%
by Occidental and 29.5% by the Company. No gain or loss resulted from this
transaction.
Equistar is managed by a Partnership Governance Committee consisting of
representatives of each partner. Approval of Equistar's strategic plans and
other major decisions requires the consent of the representatives of the three
partners. All decisions of Equistar's Governance Committee that do not require
unanimity among the partners may be made by Lyondell's representatives alone.
The investment in Equistar at the date of contribution represented the
carrying value of the Company's contributed net assets, less cash received, and
approximated the fair market value of its interest in Equistar based upon
independent valuation. The difference between the carrying value of the
Company's investment and its underlying equity in the net assets of Equistar is
$404 as a result of adding Occidental as a partner and is being amortized over
25 years. The Company accounts for its interest in Equistar using the equity
method.
On November 16, 1998, the Company entered into agreements with Linde AG
('Linde') relating to the Company's synthesis gas ('syngas') unit in La Porte,
Texas, and a 15% interest in its methanol
F-3
<PAGE>
<PAGE>
MILLENNIUM AMERICA INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
(DOLLARS IN MILLIONS)
business, whereby the Company would receive $122.5 in cash. Linde will operate
the syngas facility under a long-term lease with a purchase option. In addition,
Linde will operate and hold a 15% interest in the methanol facility. As a
result, the assets involved in this transaction, including applicable goodwill
of $42, have been classified at December 31, 1998 in the accompanying balance
sheet in Other current assets. This transaction was subsequently completed on
January 18, 1999. No gain or loss resulted from this transaction.
In March 1996, the Company sold a 73.6% interest in Suburban Propane,
through an initial public offering of 21,562,500 common units in a new master
limited partnership, Suburban Propane Partners, L.P., and received aggregate
proceeds from the sale of the common units and the issuance of notes of the
Suburban Propane operating partnership, Suburban Propane, L.P., (collectively
'Suburban Propane') of approximately $831.
An indirect subsidiary of the Company, Suburban Propane, G.P., serves as
the General Partner of Suburban Propane (the 'General Partner'). The Company,
through the General Partner, has a combined 2% general partner interest and a
24.4% subordinated limited partner interest in Suburban Propane. The General
Partner has agreed, subject to certain limitations, to contribute up to $43.6
million under the Distribution Support Agreement to Suburban Propane in exchange
for additional subordinated limited partner interests to enhance Suburban
Propane's ability to distribute minimum quarterly cash distributions to its
limited partners through March 31, 2001. The Company has fully and
unconditionally guaranteed the General Partner's obligation for these
contributions and has, to date, contributed $22 million pursuant to this
agreement.
The General Partner has no independent operations of its own and may not
have the financial ability to support its obligations under the Distribution
Support Agreement. The General Partner, at December 31, 1998, had assets
consisting of its combined investments in Suburban Propane of $26 and invested
capital, after intercompany balances, of $26.
On November 27, 1998, the Company entered into an agreement to sell its
subordinated limited partner interests and interests under the Distribution
Support Agreement to Suburban Propane and its management for $75 in cash, with
an expected net after-tax gain of approximately $30. The Company's interest in
Suburban Propane at December 31, 1998 is included in Other current assets. This
transaction is expected to be completed in the second quarter of 1999.
As the General Partner has minimal independent operations of its own as
general partner of the Partnerships and does not have the financial position to
support its obligations under the Distribution Support Agreement with Suburban,
the audited balance sheet of the Company is presented because the Company is the
full and unconditional guarantor of the General Partner's obligations under the
Distribution Support Agreement.
NOTE 3 -- SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Cash Equivalents: Cash equivalents represent investments in short-term
deposits and commercial paper with banks which have original maturities of 90
days or less. In addition, investments and other assets include approximately
$31 in restricted cash at December 31, 1998 which is on deposit to satisfy
insurance claims.
Inventories: Inventories are stated at the lower of cost or market value.
For certain operations, cost is determined under the last-in, first-out (LIFO)
method. The first-in, first-out (FIFO) method, or methods which approximate
FIFO, are used by all other subsidiaries.
F-4
<PAGE>
<PAGE>
MILLENNIUM AMERICA INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
(DOLLARS IN MILLIONS)
Property, Plant and Equipment: Property, plant and equipment is stated on
the basis of cost. Depreciation is provided by the straight-line method over the
estimated useful lives of the assets, generally 20 to 40 years for buildings and
5 to 25 years for machinery and equipment.
Goodwill: Goodwill represents the excess of the purchase price over the
fair value of assets allocated to acquired companies. Goodwill is being
amortized using the straight-line method over 40 years. Management periodically
evaluates goodwill for impairment based on the anticipated future cash flows
attributable to its operations. Such expected cash flows, on an undiscounted
basis, are compared to the carrying value of the tangible and intangible assets,
and if impairment is indicated, the carrying value of goodwill is adjusted. In
the opinion of management, no impairment of goodwill exists at December 31,
1998.
Environmental Liabilities and Expenditures: Accruals for environmental
matters are recorded in operating expenses when it is probable that a liability
has been incurred and the amount of the liability can be reasonably estimated.
Accrued liabilities are exclusive of claims against third parties (except where
payment has been received or the amount of liability or contribution by such
other parties, including insurance companies, has been agreed) and are not
discounted. In general, costs related to environmental remediation are charged
to expense. Environmental costs are capitalized if the costs increase the value
of the property and/or mitigate or prevent contamination from future operations.
Federal Income Taxes: Deferred tax assets and liabilities are computed
based on the difference between the financial statement basis and income tax
basis of assets and liabilities using enacted marginal tax rates of the
respective tax jurisdictions.
The Company has entered into tax-sharing and indemnification agreements
with Hanson or its subsidiaries in which the Company and/or its subsidiaries
generally agreed to indemnify Hanson or its subsidiaries for income tax
liabilities attributable to periods when such other operations were included in
the consolidated tax returns of the Company's subsidiaries.
NOTE 4 -- SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
1998
----
<S> <C>
Trade receivables
Trade receivables................................................................ $138
Allowance for doubtful accounts.................................................. (2)
----
$136
----
----
Inventories
Finished products................................................................ $ 49
In-process products.............................................................. 15
Raw materials.................................................................... 56
Other inventories................................................................ 22
----
$142
----
----
</TABLE>
F-5
<PAGE>
<PAGE>
MILLENNIUM AMERICA INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
(DOLLARS IN MILLIONS)
Inventories valued on a LIFO basis were approximately $41 less than the
amount of such inventories valued at current cost at December 31, 1998.
<TABLE>
<CAPTION>
1998
----
<S> <C>
Property, Plant and Equipment
Land and buildings............................................................... $130
Machinery and equipment.......................................................... 765
----
895
Allowance for depreciation and amortization........................................... 414
----
$481
----
----
Goodwill.............................................................................. $480
Accumulated amortization.............................................................. 68
----
$412
----
----
</TABLE>
NOTE 5 -- INCOME TAXES
Significant components of deferred taxes are as follows:
<TABLE>
<CAPTION>
1998
-----
<S> <C>
Deferred tax assets
Environmental and legal obligations.............................................. $ 54
Other post-retirement benefits and pension obligations........................... 47
Net operating loss carryforwards................................................. 20
Capital loss carryforwards....................................................... 136
AMT credits...................................................................... 98
Other accruals................................................................... 40
-----
395
Valuation allowance.............................................................. (136)
-----
Total deferred tax assets................................................... 259
-----
Deferred tax liabilities
Excess of book over tax basis in property, plant and equipment................... 400
Other............................................................................ 143
-----
Total deferred tax liabilities.............................................. 543
-----
Net deferred tax liabilities ($10 classified in other current assets)....... $ 284
-----
-----
</TABLE>
Certain of the income tax returns of the Company's subsidiaries are
currently under examination by the Internal Revenue Service and various state
tax agencies. In the opinion of management, any assessments which may result
will not have a material adverse effect on the financial condition or results of
operations of the Company.
F-6
<PAGE>
<PAGE>
MILLENNIUM AMERICA INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
(DOLLARS IN MILLIONS)
NOTE 6 -- LONG-TERM DEBT AND CREDIT ARRANGEMENTS
<TABLE>
<CAPTION>
1998
------
<S> <C>
Revolving Credit Facility bearing interest at the bank's prime lending rate, or at
LIBOR or NIBOR plus .275% at the option of the Company plus a Facility Fee of .15%
to be paid quarterly............................................................... $ 235
7% Senior Notes due 2006 (net of unamortized discount of $.5 and $.5)................ 500
7.625% Senior Notes due 2026 (net of unamortized discount of $.5 and $.5)............ 249
Debt payable through 2007 at interest rates ranging from 2.4% to 22%................. 31
Less current maturities of long-term debt............................................ (2)
------
$1,013
------
------
</TABLE>
Under the Revolving Credit Agreement, as amended on October 20, 1997,
certain of the Company's subsidiaries may borrow up to $500 under an unsecured
multi-currency revolving credit facility, which matures in July 2001 (the
'Credit Agreement' or the 'Revolving Credit Facility'). Millennium Chemicals is
the guarantor of this facility. Borrowings under the Credit Agreement may
consist of standby loans or uncommitted competitive loans offered by syndicated
banks through an auction bid procedure. Loans may be borrowed in U.S. dollars
and/or other currencies. The proceeds from the borrowings may be used to provide
working capital and for general corporate purposes.
The Credit Agreement contains covenants and provisions that restrict, among
other things, the ability of the Company and its material subsidiaries to: (i)
create liens on any of its property or assets, or assign any rights to or
security interests in future revenues; (ii) engage in sale-and-leaseback
transactions; (iii) engage in mergers, consolidations or sales of all or
substantially all of their assets on a consolidated basis; (iv) enter into
agreements restricting dividends and advances by their subsidiaries; and (v)
engage in transactions with affiliates other than those based on arm's-length
negotiations. The Credit Agreement also limits the ability of certain
subsidiaries of the Company to incur indebtedness or issue preferred stock. In
addition, the Credit Agreement requires the Company to satisfy certain financial
performance criteria.
The Senior Notes and Senior Debentures were issued by the Company and are
guaranteed by Millennium Chemicals. The indenture under which the Senior Notes
and Senior Debentures were issued contains certain covenants that limit, among
other things: (i) the ability of the Company and its Restricted Subsidiaries (as
defined) to grant liens or enter into sale-and-leaseback transactions; (ii) the
ability of the Restricted Subsidiaries to incur additional indebtedness; and
(iii) the ability of the Company and Millennium Chemicals to merge, consolidate
or transfer substantially all of their respective assets.
At December 31, 1998, the Company had outstanding notes payable of $9
bearing interest at an average rate of approximately 12% with maturity of 30
days or less. At December 31, 1998, the Company had outstanding standby letters
of credit amounting to $66 and had unused availability under short-term lines of
credit and its Revolving Credit Facility of $412. In addition, the Company has
guaranteed certain debt obligations of Equistar up to $750.
The maturities of long-term debt during the next five years are as follows:
1999 -- $2; 2000 -- $17; 2001 -- $242; 2002 -- $3; and 2003 and beyond -- $749.
NOTE 7 -- FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments: The fair value of all short-term
financial instruments approximate their carrying value due to their short
maturity. The fair value of long-term financial instruments (excluding forward
exchange contracts, interest rate protection agreements and the Senior
F-7
<PAGE>
<PAGE>
MILLENNIUM AMERICA INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
(DOLLARS IN MILLIONS)
Notes and Senior Debentures) approximates carrying value as they were based on
terms that continue to be available to the Company from its lenders.
The fair value of the Company's other financial instruments at December 31,
1998 are based upon estimates received from independent financial advisors as
follows:
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
-------- -----
<S> <C> <C>
Senior Notes and Debentures........................................................... $749 $695
</TABLE>
NOTE 8 -- PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company has adopted SFAS 132, Employers' Disclosures about Pensions and
Other Postretirement Benefits. SFAS 132 revises the employer's disclosure
presentation but does not change the measurement or recognition of these plans.
The Company has several noncontributory defined benefit pension and other
postretirement benefit plans covering substantially all of its United States
employees. The benefits for these plans are based primarily on years of credited
service and average compensation as defined under the respective plan
provisions. The Company's funding policy is to contribute amounts to the plans
sufficient to meet the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, plus such additional amounts as the
Company may determine to be appropriate from time to time.
The Company also sponsors defined contribution plans for its salaried and
certain union employees. Contributions relating to defined contribution plans
are made based upon the respective plan provisions.
F-8
<PAGE>
<PAGE>
MILLENNIUM AMERICA INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
(DOLLARS IN MILLIONS)
The following table provides a reconciliation of the changes in the benefit
obligations and the fair value of the plan assets for the year period ended
December 31, 1998, and a statement of the funded status as of December 31, 1998.
<TABLE>
<CAPTION>
OTHER
PENSION POSTRETIREMENT
BENEFITS BENEFITS
1998 1998
--------- --------------
<S> <C> <C>
Reconciliation of benefit obligation
Projected benefit obligation at December 31, 1997............. $ 671 $127
Service cost, including interest.............................. 7 10
Interest in PBO............................................... 46 --
Participant contributions..................................... -- 2
Benefit payments.............................................. (79) (14)
Special termination benefits.................................. 6 --
Curtailments.................................................. (2) --
Net experience loss (gain).................................... 42 2
Amendments.................................................... 24 --
Divestiture................................................... -- --
--------- ------
Projected benefit obligation at December 31, 1998............. 715 127
--------- ------
Reconciliation of fair value of plan assets
Fair value of plan assets at December 31, 1997................ 776 --
Return on plan assets......................................... 87 --
Employer contributions........................................ 2 11
Participant contributions..................................... -- 2
Benefit payments.............................................. (75) (13)
--------- ------
Fair value of plan assets at December 31, 1998................ 790 --
Funded status
Funded status at December 31, 1998............................ 75 (127)
Unrecognized net asset........................................ (1) --
Unrecognized prior-service cost............................... 23 --
Unrecognized loss (gain)...................................... 22 (23)
Additional minimum liability.................................. (8) --
--------- ------
Prepaid (accrued) interest......................................... 111 (150)
--------- ------
</TABLE>
The assumptions used in the measurement of the Company's benefit
obligations are shown in the following table:
<TABLE>
<CAPTION>
OTHER
PENSION POSTRETIREMENT
BENEFITS BENEFITS
1998 1998
--------- --------------
<S> <C> <C>
Weighted-average assumptions as of December 31
Discount rate................................................. 7.00% 7.00%
Expected return on plan assets................................ 9.00 --
Rate of compensation increase................................. 4.25 4.25
</TABLE>
The projected benefit obligation, accumulated benefit obligation and the
fair value of plan assets for pension plans with accumulated benefit obligations
in excess of the plan assets were $42, $40 and $28, respectively, for the year
ended December 31, 1998.
F-9
<PAGE>
<PAGE>
MILLENNIUM AMERICA INC.
NOTES TO CONSOLIDATED BALANCE SHEET -- (CONTINUED)
(DOLLARS IN MILLIONS)
NOTE 9 -- RELATED PARTY TRANSACTIONS
One of the Company's subsidiaries purchases ethylene from Equistar at
market-related prices pursuant to an agreement made in connection with the
formation of Equistar. Under the agreement the subsidiary is required to
purchase 100% of its ethylene requirements for its La Porte, Texas, facility up
to a maximum of 330 million pounds per year. The initial term of the contract
expires December 1, 2000. Thereafter, the contract automatically renews
annually. Either party may terminate on one year's notice. The subsidiary
incurred charges of $41 in 1998 under this contract.
One of the Company's subsidiaries and Equistar have entered into various
operating, manufacturing and technical service agreements. These agreements
provide the subsidiary with materials management, certain utilities,
administrative office space, health, safety and environmental services. The
subsidiary incurred charges of $5 in 1998 for such services.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
The Company is subject, among other things, to several proceedings under
the Federal Comprehensive Environmental Response Compensation and Liability Act
and other federal and state statutes or agreements with third parties. These
proceedings are in various stages ranging from initial investigation to active
settlement negotiations to implementation of the clean-up or remediation of
sites. Additionally, certain of the Company's subsidiaries are defendants or
plaintiffs in lawsuits that have arisen in the normal course of business
including those relating to commercial transactions and product liability. While
certain of the lawsuits involve allegedly significant amounts, it is
management's opinion, based on the advice of counsel, that the ultimate
resolution of such litigation will not have a material adverse effect on the
Company's financial position or results of operations. The Company believes that
the range of potential liability for these matters, collectively, which
primarily relate to environmental remediation activities, is between $150 and
$174 and has accrued $174 as of December 31, 1998.
The Company has various contractual obligations to purchase raw materials
used in its production of TiO2 and fragrance and flavor chemicals. Commitments
to purchase ore used in the production of TiO2 are generally 1-to 8-year
contracts with competitive prices generally determined at a fixed amount subject
to escalation for inflation. Total commitments to purchase ore for TiO2
aggregate approximately $1,100 and expire between 1999 and 2002. Commitments to
acquire crude sulfate turpentine, used in the production of fragrance chemicals,
are generally pursuant to 1-to 5-year contracts with prices based on the market
price and which expire between 1999 and 2008.
F-10
<PAGE>
<PAGE>
SUBURBAN PROPANE, G.P.
SUMMARY BALANCE SHEET INFORMATION (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1998
--------------
<S> <C>
ASSETS
Investment in the Partnerships.................................................................... $ 25,526
Receivable from Millennium America Inc............................................................ 415,641
--------------
Total Assets................................................................................. $441,167
--------------
--------------
LIABILITIES AND STOCKHOLDERS EQUITY
Deferred Taxes.................................................................................... $ 46,558
--------------
Total Liabilities............................................................................ 46,558
Common Stock...................................................................................... 30,011
Retained Earnings................................................................................. 364,598
--------------
Total Stockholder Equity..................................................................... 394,609
--------------
Total Liabilities and Stockholders Equity.................................................... $441,167
--------------
--------------
</TABLE>
F-11
<PAGE>
<PAGE>
APPENDIX 1
PRELIMINARY COPY
PROXY
SUBURBAN PROPANE PARTNERS, L.P.
Special Meeting of Common Unitholders-- May 26, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF SUPERVISORS
The undersigned hereby appoints John Hoyt Stookey, Harold R. Logan, Jr. and
Dudley C. Mecum, or any one of them, as proxies of the undersigned, with power
of substitution to each, to vote all common units of SUBURBAN PROPANE PARTNERS,
L.P. ("Suburban") which the undersigned is entitled to vote at the Special
Meeting of Common Unitholders of Suburban to be held at [LOCATION], on [DATE],
1999 at [TIME] and at any adjournment or postponement of the meeting.
When properly executed, this Proxy will be voted as directed. If returned
signed, but no direction is made, this Proxy will be voted FOR Proposals 1(a),
1(b), 1(c) and 1(d). Discretion will be used with respect to other matters as
may properly come before the meeting or any adjournment or postponement of
the meeting.
The Board of Supervisors recommends a vote FOR Proposals 1(a), 1(b), 1(c)
and 1(d).
(Continued and to be signed on reverse side.)
<PAGE>
<PAGE>
1. Approval of the recapitalization described in the proxy statement requires
the approval of all of the following four proposals, each of which will be
implemented only if all of the proposals are approved:
<TABLE>
<S> <C> <C> <C> <C>
a. Proposal permitting Suburban to redeem all 7,163,750 outstanding For Against Abstain
subordinated units and all 220,000 outstanding additional limited [ ] [ ] [ ]
partner units from the current general partner for $69 million.
b. Proposal permitting the current general partner to sell its combined For Against Abstain
2% interest in Suburban and Suburban's operating partnership [ ] [ ] [ ]
(together, the "Partnerships") and to sell its incentive distribution
rights (as reduced by amendment to Suburban's partnership agreement)
to a new entity owned by members of Suburban's management for $6 million
to be paid by such entity. Such entity will become the new general
partner of the Partnerships.
c. Proposal to amend the partnership agreements of the Partnerships For Against Abstain
to permit and effect the recapitalization. [ ] [ ] [ ]
d. Proposal to terminate the Distribution Support Agreement dated as of For Against Abstain
March 5, 1996 among the current general partner, its affiliate, [ ] [ ] [ ]
Millennium America Inc., and Suburban and replace it with a
liquidity arrangement provided by Suburban.
2. Proposal conferring discretionary authority to the proxy holders For Against Abstain
to vote on such other matters as may properly come before the [ ] [ ] [ ]
meeting or any adjournment or postponement of the meeting.
</TABLE>
Please be sure to sign and date this Proxy in the box below.
Date _______________________________________________
____________________________________________________
Unitholder sign above Co-holder (if any) sign above
Note: Please sign and return promptly in the envelope provided. No postage is
required if mailed in the United States.
Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please set forth your
full title. If signer is a corporation, the signature should be that of an
authorized officer and should state his or her title. Joint unitholders must
each sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
STATEMENT OF DIFFERENCES
------------------------
In Annex C (the Form of Second Amended and Restated Agreement of Limited
Partnership) proposed additions shall be enclosed in braces { } and
proposed deletions shall be enclosed in square brackets [ ].
The section symbol shall be expressed as .......................... 'SS'
<PAGE>
