<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1996
REGISTRATION NO. 333-2768
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NATIONAL PROPANE PARTNERS, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 5984 42-1453040
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
------------------------
1101 2ND AVENUE, S.E.
P.O. BOX 2067
CEDAR RAPIDS, IOWA 52406-2067
(319) 365-1550
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RONALD R. ROMINIECKI
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
NATIONAL PROPANE CORPORATION
1101 2ND AVENUE, S.E.
P.O. BOX 2067
CEDAR RAPIDS, IOWA 52406-2067
(319) 365-1550
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
PAUL, WEISS, RIFKIND, ANDREWS & KURTH L.L.P. LATHAM & WATKINS
WHARTON & GARRISON 425 LEXINGTON AVENUE 885 THIRD AVENUE
1285 AVENUE OF THE AMERICAS 10TH FLOOR NEW YORK, NY 10022
NEW YORK, NY 10019-6064 NEW YORK, NY 10017 (212) 906-1200
(212) 373-3000 (212) 850-2800 ATTN: BETH R. NECKMAN
ATTN: PAUL D. GINSBERG ATTN: MICHAEL ROSENWASSER
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING PROSPECTUS LOCATION
- -------------------------------------------------------------------------- ---------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside Front Cover Page
of Prospectus..................................................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Prospectus............. Inside Front and Outside Back Cover
Pages
3. Summary Information, Risk Factors and Ratio of Earnings to Fixed
Charges........................................................... Prospectus Summary; Risk Factors
4. Use of Proceeds..................................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price..................................... Underwriting
6. Dilution............................................................ Dilution
7. Selling Security Holders............................................ *
8. Plan of Distribution................................................ Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered.......................... Prospectus Summary; Risk Factors; Cash
Distribution Policy; Description of
the Common Units; The Partnership
Agreement; Tax Considerations
10. Interest of Named Experts and Counsel............................... *
11. Information with Respect to the Registrant.......................... Outside Front Cover Page; Prospectus
Summary; Risk Factors; The
Transactions; Capitalization;
Selected Historical and Pro Forma
Consolidated Financial and Operating
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business and
Properties; Management; Security
Ownership of Certain Beneficial
Owners and Management; Certain
Relationships and Related
Transactions; Financial Statements
12. Disclosure of Commission Position on Indemnification for Securities
Act Liabilities................................................... *
</TABLE>
- ------------
* Not applicable.
<PAGE>
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 14, 1996
PROSPECTUS
6,190,476 COMMON UNITS
NATIONAL PROPANE PARTNERS, L.P.
REPRESENTING LIMITED PARTNER INTERESTS
------------------------
The Common Units ('Common Units') offered hereby (the 'Offering') represent
limited partner interests in National Propane Partners, L.P., a Delaware limited
partnership (the 'Partnership'). The Partnership was recently formed to acquire,
own and operate the propane business and assets of its managing general partner,
National Propane Corporation ('National Propane' or the 'Managing General
Partner'), which the Partnership believes is the fifth largest retail marketer
of propane in the United States. National Propane is an indirect wholly-owned
subsidiary of Triarc Companies, Inc. ('Triarc').
The Partnership will distribute to its partners, on a quarterly basis, all
of its Available Cash, which is generally all cash on hand at the end of a
quarter, as adjusted for reserves. The Managing General Partner has broad
discretion in making cash disbursements and establishing reserves. The
Partnership intends, to the extent there is sufficient Available Cash, to
distribute to each holder of Common Units at least $0.525 per Common Unit per
quarter (the 'Minimum Quarterly Distribution') or $2.10 per Common Unit on an
annualized basis.
------------------------
LIMITED PARTNER INTERESTS ARE INHERENTLY DIFFERENT FROM CAPITAL STOCK OF A
CORPORATION. PURCHASERS OF COMMON UNITS SHOULD CONSIDER EACH OF THE FACTORS
DESCRIBED UNDER 'RISK FACTORS,' STARTING ON PAGE 33, IN EVALUATING AN INVESTMENT
IN THE PARTNERSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING:
CASH DISTRIBUTIONS ARE NOT GUARANTEED, WILL DEPEND ON FUTURE PARTNERSHIP
OPERATING PERFORMANCE AND WILL BE AFFECTED BY THE FUNDING OF RESERVES,
OPERATING AND CAPITAL EXPENDITURES AND OTHER MATTERS WITHIN THE DISCRETION OF
THE MANAGING GENERAL PARTNER, AS WELL AS REQUIRED INTEREST AND PRINCIPAL
PAYMENTS ON THE PARTNERSHIP'S DEBT. PRO FORMA AVAILABLE CASH FROM OPERATING
SURPLUS (AS DEFINED IN THE GLOSSARY) GENERATED DURING 1994 AND 1995 WOULD HAVE
BEEN SUFFICIENT TO COVER THE MINIMUM QUARTERLY DISTRIBUTION ON ALL OF THE
OUTSTANDING COMMON UNITS AND THE RELATED DISTRIBUTION ON THE GENERAL PARTNER
INTERESTS (AS DEFINED BELOW), BUT WOULD HAVE BEEN INSUFFICIENT BY APPROXIMATELY
$2.2 MILLION AND $7.2 MILLION TO COVER THE MINIMUM QUARTERLY DISTRIBUTION ON
THE SUBORDINATED UNITS (AS DEFINED IN THE GLOSSARY) AND THE RELATED
DISTRIBUTION ON THE GENERAL PARTNER INTERESTS IN 1994 AND 1995, RESPECTIVELY.
FUTURE PARTNERSHIP PERFORMANCE WILL DEPEND UPON THE SUCCESS OF THE PARTNERSHIP
IN MAXIMIZING PROFITS FROM PROPANE SALES. PROPANE SALES ARE AFFECTED BY, AMONG
OTHER THINGS, WEATHER PATTERNS, PRODUCT PRICES AND COMPETITION, INCLUDING
COMPETITION FROM OTHER ENERGY SOURCES.
THE PARTNERSHIP'S PRO FORMA TOTAL INDEBTEDNESS AS A PERCENTAGE OF ITS TOTAL
CAPITALIZATION WOULD HAVE BEEN APPROXIMATELY 82.5% AT DECEMBER 31, 1995. AS A
RESULT, THE PARTNERSHIP WILL HAVE INDEBTEDNESS THAT IS SUBSTANTIAL IN RELATION
TO ITS PARTNERS' CAPITAL. FURTHERMORE, THE MANAGING GENERAL PARTNER MAY CAUSE
THE PARTNERSHIP TO INCUR
(cover continued on page 3)
------------------------
Prior to the Offering there has been no public market for the Common Units.
It is currently anticipated that the initial public offering price per Common
Unit will be between $ and $ . See 'Underwriting' for a discussion of
the factors considered in determining the initial public offering price.
Application will be made to list the Common Units for trading on the New
York Stock Exchange under the symbol 'NPL.'
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[CAPTION]
<TABLE>
<S> <C> <C>
UNDERWRITING
DISCOUNTS
PRICE TO AND
PUBLIC COMMISSIONS(1)
<S> <C> <C>
Per Common Unit.................................................................... $ $
Total(3)........................................................................... $ $
<CAPTION>
PROCEEDS TO
PARTNERSHIP(2)
<S> <C>
Per Common Unit.................................................................... $
Total(3)........................................................................... $
</TABLE>
(1) The Partnership has agreed to indemnify the several Underwriters against
certain liabilities under the Securities Act of 1933. See 'Underwriting.'
(2) Before deducting expenses payable by the Partnership estimated at
$ .
(3) The Partnership has granted the several Underwriters an option to purchase
up to an additional 928,572 Common Units to cover over-allotments. If all
such Common Units are purchased, the total Price to Public, Underwriting
Discount and Proceeds to Partnership will be $ , $ and $ ,
respectively. See 'Underwriting.'
------------------------
The Common Units are offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters. The Underwriters reserve
the right to withdraw, cancel or modify such offer and to reject orders in whole
or in part. It is expected that delivery of the Common Units will be made in New
York, New York on or about , 1996.
------------------------
MERRILL LYNCH & CO. DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
------------------------
The date of this Prospectus is , 1996.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<PAGE>
[ARTWORK TO COME]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON UNITS AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
<PAGE>
(cover continued from page 1)
THE $120 MILLION FIRST MORTGAGE NOTES (AS DEFINED BELOW) AND THE $55 MILLION
BANK CREDIT FACILITY (AS DEFINED BELOW) WILL BE SECURED BY A LIEN ON
SUBSTANTIALLY ALL OF THE ASSETS OF THE OPERATING PARTNERSHIP (AS DEFINED
BELOW). IN THE CASE OF A CONTINUING DEFAULT BY THE OPERATING PARTNERSHIP
THEREUNDER, THE LENDERS WOULD HAVE THE RIGHT TO FORECLOSE ON THE OPERATING
PARTNERSHIP'S ASSETS, WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE
PARTNERSHIP.
A PORTION OF THE PARTNERSHIP'S CASH RECEIPTS WILL BE INTEREST PAYMENTS FROM
TRIARC UNDER A $40.7 MILLION LOAN TO TRIARC (THE 'PARTNERSHIP LOAN'). TRIARC'S
FAILURE TO MAKE INTEREST OR PRINCIPAL PAYMENTS ON THE PARTNERSHIP LOAN WOULD
ADVERSELY AFFECT THE ABILITY OF THE PARTNERSHIP TO MAKE DISTRIBUTIONS TO
UNITHOLDERS. THE PARTNERSHIP LOAN IS RECOURSE TO TRIARC AND IS SECURED BY A
PLEDGE BY TRIARC OF ALL OF THE SHARES OF CAPITAL STOCK OF THE MANAGING GENERAL
PARTNER OWNED BY TRIARC (APPROXIMATELY 75.7% OF THE MANAGING GENERAL PARTNER'S
OUTSTANDING CAPITAL STOCK AS OF THE DATE OF THIS PROSPECTUS).
HOLDERS OF COMMON UNITS WILL HAVE ONLY LIMITED VOTING RIGHTS AND THE MANAGING
GENERAL PARTNER WILL MANAGE AND CONTROL THE PARTNERSHIP. SUBJECT TO CERTAIN
CONDITIONS, THE MANAGING GENERAL PARTNER MAY BE REMOVED ONLY UPON THE APPROVAL
OF THE HOLDERS OF AT LEAST 66-2/3% OF THE OUTSTANDING UNITS (INCLUDING THOSE
UNITS HELD BY THE MANAGING GENERAL PARTNER AND ITS AFFILIATES). IF THE MANAGING
GENERAL PARTNER IS REMOVED OTHER THAN FOR CAUSE, THE SUBORDINATION PERIOD (AS
DEFINED IN THE GLOSSARY) WILL END, ALL ARREARAGES ON THE COMMON UNITS WILL
TERMINATE AND ANY OUTSTANDING SUBORDINATED UNITS WILL CONVERT INTO COMMON UNITS
AND THE GENERAL PARTNERS (AS DEFINED IN THE GLOSSARY) WILL HAVE THE RIGHT TO
CONVERT THE GENERAL PARTNER INTERESTS INTO COMMON UNITS OR TO RECEIVE IN
EXCHANGE FOR SUCH INTERESTS, A CASH PAYMENT EQUAL TO THE FAIR MARKET VALUE OF
SUCH INTERESTS.
THE TAX CONSEQUENCES OF AN INVESTMENT IN THE PARTNERSHIP ARE COMPLEX. IT IS
ANTICIPATED THAT THROUGH 1999, A UNITHOLDER WILL RECEIVE SUBSTANTIAL
DISTRIBUTIONS THAT WILL REDUCE SUCH HOLDER'S TAX BASIS, WITH THE RESULT THAT
SUCH HOLDER MAY RECOGNIZE SUBSTANTIAL GAIN AND A RELATED INCOME TAX LIABILITY
UPON A SUBSEQUENT SALE OF SUCH HOLDER'S UNITS.
PURCHASERS OF COMMON UNITS IN THE OFFERING WILL EXPERIENCE IMMEDIATE AND
SUBSTANTIAL DILUTION IN NET TANGIBLE BOOK VALUE OF $20.38 PER COMMON UNIT FROM
THE INITIAL PUBLIC OFFERING PRICE, THE MANAGING GENERAL PARTNER WILL EXPERIENCE
AN INCREASE IN NET TANGIBLE BOOK VALUE OF $19.86 PER UNIT AND EACH COMMON UNIT
WILL HAVE A PRO FORMA NET TANGIBLE BOOK VALUE OF $0.62 (ASSUMING AN INITIAL
PUBLIC OFFERING PRICE OF $ PER COMMON UNIT).
CONFLICTS OF INTEREST MAY ARISE BETWEEN THE MANAGING GENERAL PARTNER AND ITS
AFFILIATES, ON THE ONE HAND, AND THE PARTNERSHIP AND THE HOLDERS OF COMMON
UNITS, ON THE OTHER. THE PARTNERSHIP AGREEMENT CONTAINS PROVISIONS THAT ALLOW
THE MANAGING GENERAL PARTNER TO TAKE INTO ACCOUNT THE INTERESTS OF PARTIES IN
ADDITION TO THE PARTNERSHIP IN RESOLVING CONFLICTS OF INTEREST, THEREBY
LIMITING THE MANAGING GENERAL PARTNER'S FIDUCIARY DUTY TO THE UNITHOLDERS, AS
WELL AS PROVISIONS THAT MAY RESTRICT THE REMEDIES AVAILABLE TO UNITHOLDERS FOR
ACTIONS THAT MIGHT, WITHOUT SUCH LIMITATIONS, CONSTITUTE BREACHES OF FIDUCIARY
DUTY. HOLDERS OF COMMON UNITS ARE DEEMED TO HAVE CONSENTED TO CERTAIN ACTIONS
AND CONFLICTS OF INTEREST THAT MIGHT OTHERWISE BE DEEMED A BREACH OF FIDUCIARY
OR OTHER DUTIES UNDER APPLICABLE STATE LAW. THE VALIDITY AND ENFORCEABILITY OF
THESE TYPES OF PROVISIONS UNDER DELAWARE LAW ARE UNCERTAIN.
PRIOR TO MAKING ANY DISTRIBUTION ON THE COMMON UNITS, THE PARTNERSHIP WILL
REIMBURSE THE MANAGING GENERAL PARTNER AND ITS AFFILIATES (INCLUDING TRIARC) AT
COST FOR ALL EXPENSES INCURRED ON BEHALF OF THE PARTNERSHIP. ON A PRO FORMA
BASIS, APPROXIMATELY $56.8 MILLION OF EXPENSES WOULD HAVE BEEN REIMBURSED BY
THE PARTNERSHIP TO THE MANAGING GENERAL PARTNER IN 1995. AFFILIATES OF THE
MANAGING GENERAL PARTNER (INCLUDING TRIARC) MAY PROVIDE CERTAIN ADMINISTRATIVE
SERVICES FOR THE MANAGING GENERAL PARTNER ON BEHALF OF THE PARTNERSHIP AND WILL
BE REIMBURSED FOR ALL EXPENSES INCURRED IN CONNECTION THEREWITH. IN ADDITION,
THE MANAGING GENERAL PARTNER AND ITS AFFILIATES MAY PROVIDE ADDITIONAL SERVICES
TO THE PARTNERSHIP, FOR WHICH THE PARTNERSHIP WILL BE CHARGED REASONABLE FEES
AS DETERMINED BY THE MANAGING GENERAL PARTNER.
The Common Units offered in the Offering will represent an aggregate 51.8%
limited partner interest in the Partnership and National Propane, L.P., the
Partnership's subsidiary operating partnership (the 'Operating Partnership'), on
a combined basis (55.3% if the Underwriters' over-allotment option is exercised
in full). The General Partners will own an aggregate 4% unsubordinated general
partner interest (the 'General Partner Interests') in the Partnership and the
Operating Partnership on a combined basis. In addition, the Managing General
Partner will own 5,283,809 Subordinated Units representing an aggregate 44.2%
subordinated general partner interest in the Partnership and the Operating
Partnership on a combined basis (41.0% if the Underwriters' over-allotment
option is exercised in full). All references in this Prospectus to the General
Partner Interests or to distributions of 4% of Available Cash constitute
references to the amount of the General Partners' combined percentage interest
in the Partnership and the Operating Partnership exclusive of any rights
3
<PAGE>
<PAGE>
as holder of Common Units or Subordinated Units or rights to receive Incentive
Distributions (as defined in the Glossary). Upon expiration of the Subordination
Period, Subordinated Units will convert automatically into Common Units on a
one-for-one basis, and will thereafter participate pro rata with the other
Common Units in distributions of Available Cash. Under certain circumstances, up
to 50% of the Subordinated Units may convert into Common Units prior to the
expiration of the Subordination Period. All 5,283,809 Subordinated Units held by
the Managing General Partner and its Affiliates (as defined in the Glossary) are
general partner interests in the Partnership (although the Managing General
Partner and its Affiliates may, at their election, convert such Subordinated
Units into limited partner interests at any time) and all Common Units issued in
the Offering or issued upon the conversion of the Subordinated Units are limited
partner interests. The Common Units and the Subordinated Units are collectively
referred to herein as the 'Units.' Holders of the Common Units and the
Subordinated Units are collectively referred to herein as 'Unitholders.'
To enhance the ability of the Partnership to distribute the Minimum
Quarterly Distribution on the Common Units during the Subordination Period,
which will generally extend at least through June 30, 2001, each holder of
Common Units will be entitled to receive the Minimum Quarterly Distribution plus
any arrearages thereon ('Common Unit Arrearages') before any distributions are
made on the outstanding Subordinated Units.
The sale of the Common Units offered in the Offering is subject to, among
other things, the concurrent completion of a private placement by the Managing
General Partner of $120 million aggregate principal amount of First Mortgage
Notes due 2010 (the 'First Mortgage Notes'). The Operating Partnership will
assume the Managing General Partner's obligations under the First Mortgage Notes
in connection with the conveyance by the Managing General Partner of
substantially all of its assets (which assets will not include an existing
intercompany note from Triarc, approximately $59.3 million of the net proceeds
from the issuance of the First Mortgage Notes and certain other assets of the
Managing General Partner) to the Operating Partnership. The First Mortgage Notes
will be secured by a mortgage on substantially all of the assets of the
Operating Partnership. See 'The Transactions' and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Description of
Indebtedness.'
The Partnership will furnish or make available to record holders of Common
Units (i) within 120 days after the close of each fiscal year of the
Partnership, an annual report containing audited financial statements and a
report thereon by its independent public accountants, and (ii) within 90 days
after the close of each fiscal quarter (other than the fourth quarter), a
quarterly report containing unaudited summary financial information. The
Partnership will also furnish each Unitholder with tax information within 90
days after the close of each calendar year.
4
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY........................................ 6
National Propane Partners, L.P........................ 6
Summary Historical and Pro Forma Consolidated
Financial and Operating Data........................ 21
The Offering.......................................... 24
Summary of Tax Considerations......................... 30
RISK FACTORS.............................................. 33
Risks Inherent in the Partnership's Business.......... 33
Risks Inherent in an Investment in the Partnership.... 35
Conflicts of Interest and Fiduciary Duties............ 42
Tax Risks............................................. 44
THE TRANSACTIONS.......................................... 47
USE OF PROCEEDS........................................... 48
CAPITALIZATION............................................ 49
DILUTION.................................................. 50
CASH DISTRIBUTION POLICY.................................. 51
General............................................... 51
Quarterly Distributions of Available Cash............. 52
Distributions from Operating Surplus during
Subordination Period................................ 52
Distributions from Operating Surplus after
Subordination Period................................ 54
Incentive Distributions -- Hypothetical Annualized
Yield............................................... 54
Distributions from Capital Surplus.................... 55
Adjustment of Minimum Quarterly Distribution and
Target Distribution Levels.......................... 56
Distributions of Cash Upon Liquidation................ 56
Cash Available for Distribution....................... 58
Partnership Loan...................................... 60
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL
AND OPERATING DATA...................................... 66
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................... 68
General............................................... 68
Results of Operations................................. 69
Liquidity and Capital Resources....................... 72
Initial Public Offering of Common Units and Other
Transactions........................................ 73
Legal Contingencies................................... 74
Description of Indebtedness........................... 74
Effects of Inflation.................................. 77
Recently Issued Accounting Pronouncements............. 77
BUSINESS AND PROPERTIES................................... 78
General............................................... 78
Operating Strategy.................................... 79
Strategies for Growth................................. 80
Industry Background................................... 81
Products, Services and Marketing...................... 82
Propane Supply and Storage............................ 83
Pricing Policy........................................ 85
Competition........................................... 86
Properties............................................ 86
Trademarks and Tradenames............................. 88
Government Regulation................................. 88
Employees............................................. 89
Litigation and Contingent Liabilities................. 89
Transfer of the Partnership Assets.................... 90
MANAGEMENT................................................ 91
Partnership Management................................ 91
Directors and Executive Officers of the Managing
General Partner..................................... 92
Reimbursement of Expenses of the Managing General
Partner............................................. 93
Executive Compensation................................ 93
Cash Incentive Plans.................................. 95
Triarc's 1993 Equity Participation Plan............... 96
Unit Option Plan...................................... 97
Compensation of Directors............................. 98
Employment Arrangements with Executive Officers....... 98
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.............................................. 99
Ownership of Triarc Common Stock by the Directors and
Executive Officers of the Managing General
Partner............................................. 99
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............ 100
Rights of the General Partners........................ 100
Transactions Involving Triarc and its Affiliates...... 100
Partnership Note...................................... 101
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY........ 101
Conflicts of Interest................................. 101
Fiduciary Duties of the General Partners.............. 105
DESCRIPTION OF THE COMMON UNITS........................... 106
The Units............................................. 107
Transfer Agent and Registrar.......................... 107
Transfer of Common Units.............................. 107
THE PARTNERSHIP AGREEMENT................................. 109
Organization.......................................... 109
Special General Partner............................... 109
Purpose............................................... 110
Capital Contributions................................. 110
Power of Attorney..................................... 110
Limited Liability..................................... 110
Issuance of Additional Securities..................... 111
Amendment of Partnership Agreement.................... 112
Merger, Sale or Other Disposition of Assets........... 114
Termination and Dissolution........................... 114
Liquidation and Distribution of Proceeds.............. 114
Withdrawal or Removal of the General Partners......... 114
Transfer of General Partners' Interests and Right to
Receive Incentive Distributions and Conversion of
Units held by the Managing General Partner into
Limited Partner Interests........................... 116
Limited Call Right.................................... 116
Meetings; Voting...................................... 117
Status as Limited Partner or Assignee................. 117
Non-citizen Assignees; Redemption..................... 118
Indemnification....................................... 118
Books and Reports..................................... 118
Right to Inspect Partnership Books and Records........ 119
Reimbursement for Services............................ 119
Change of Management Provisions....................... 120
Registration Rights................................... 120
UNITS ELIGIBLE FOR FUTURE SALE............................ 120
TAX CONSIDERATIONS........................................ 121
Legal Opinions and Advice............................. 122
Tax Rates and Changes in Federal Income Tax Laws...... 122
Partnership Status.................................... 123
Limited Partner Status................................ 124
Tax Consequences of Unit Ownership.................... 125
Allocation of Partnership Income, Gain, Loss, and
Deduction........................................... 127
Tax Treatment of Operations........................... 128
Disposition of Common Units........................... 131
Uniformity of Units................................... 133
Administrative Matters................................ 134
State, Local and Other Tax Considerations............. 136
INVESTMENT IN THE PARTNERSHIP BY EMPLOYEE BENEFIT PLANS... 138
UNDERWRITING.............................................. 139
LEGAL MATTERS............................................. 140
EXPERTS................................................... 140
ADDITIONAL INFORMATION.................................... 140
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS................ F-1
Appendix A -- Form of Amended and Restated Agreement of
Limited Partnership of National Propane Partners,
L.P..................................................... A-1
Appendix B -- Form of Application for Transfer of Common
Units................................................... B-1
Appendix C -- Glossary of Certain Terms................... C-1
</TABLE>
5
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and historical and pro forma financial data appearing elsewhere in
this Prospectus and should be read only in conjunction with the entire
Prospectus. Unless otherwise specified, the information in this Prospectus
assumes that the Underwriters' over-allotment option is not exercised. Except as
the context otherwise requires, references to or descriptions of operations of
the Partnership include the operations of the Operating Partnership and any
other subsidiary operating partnership or corporation and the operations of the
Partnership's predecessor, National Propane. For ease of reference, a glossary
of certain terms used in this Prospectus is included as Appendix C to this
Prospectus. Capitalized terms not otherwise defined herein have the meanings
given in the glossary.
NATIONAL PROPANE PARTNERS, L.P.
The Partnership, a Delaware limited partnership recently formed to acquire,
own and operate the business and assets of National Propane, is engaged
primarily in (i) the retail marketing of propane to residential, commercial and
industrial, and agricultural customers and to dealers (located primarily in the
Northeast) that resell propane to residential and commercial customers and (ii)
the retail marketing of propane-related supplies and equipment, including home
and commercial appliances. The Partnership believes it is the fifth largest
retail marketer of propane in terms of volume in the United States, supplying
approximately 250,000 active retail and wholesale customers in 24 states through
its 165 service centers located in 22 states. The Partnership's operations are
concentrated in the Midwest, Northeast, Southeast and Southwest regions of the
United States. The retail propane sales volume of the Partnership was
approximately 150 million gallons in 1995. In 1995, approximately 48.6% of the
Partnership's retail sales volume was to residential customers, 28.2% was to
commercial and industrial customers, 6.3% was to agricultural customers, and
16.9% was to dealers. Sales to residential customers in 1995 accounted for
approximately 64% of the Partnership's gross profit on propane sales, reflecting
the higher margin nature of this segment of the market. Over 90% of the tanks
used by the Partnership's retail customers are owned by the Partnership. In
1995, on a pro forma basis, the Managing General Partner would have had net
income of approximately $11.5 million, and on an historical basis, had a net
loss of approximately $0.6 million. For information regarding pro forma
adjustments to the Managing General Partner's historical operating data, see
'Selected Historical and Pro Forma Consolidated Financial and Operating Data'
and the pro forma consolidated financial statements and notes thereto included
elsewhere in this Prospectus.
National Propane was incorporated in 1953 under the name Conservative Gas
Corporation. In April 1993, there was a change of control of the parent of the
Partnership (the 'Acquisition'). Since the Acquisition, the Partnership's new
management team, headed by Ronald D. Paliughi, who became President and Chief
Executive Officer of National Propane in April 1993, has implemented an
operating plan designed to make the Partnership more efficient, profitable and
competitive.
Since the Acquisition, the Partnership's management has (i) consolidated
nine separately branded businesses into a single company with a new, national
brand and logo; (ii) consolidated eight regional offices into one national
headquarters; (iii) installed the Partnership's first system-wide data
processing system; (iv) implemented system-wide pricing, marketing and
purchasing strategies, thereby reducing the cost duplication and purchasing and
pricing inefficiencies associated with the Partnership's formerly decentralized
structure; and (v) centralized and standardized accounting, administrative and
other corporate services. As a result of these initiatives, the Partnership has
become more efficient and competitive, and believes it is now positioned to
capitalize on opportunities for business growth, both internally and through
acquisitions.
Although management has focused primarily on implementing the new operating
plan, the Partnership has acquired five propane businesses since November 1993,
resulting in an increase in volume sales of approximately 13.4 million gallons
annually. Four of these acquired businesses operate in the Midwest and one
operates in the Southwest.
The Partnership believes that its competitive strengths include: (i) gross
profit and operating margins that it believes to be among the highest of the
major retail propane companies whose financial statements are publicly
available; (ii) the concentration of its operations in colder regions (such as
the
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upper Midwest and Northeast), high margin regions (such as the Northeast and
Florida), and regions experiencing population growth (such as Florida and the
Southwest); (iii) an experienced management team; (iv) a well-trained and
motivated work force; and (v) an effective pricing management system. However,
the propane industry is highly competitive and includes a number of large
national firms that may have greater financial or other resources or lower
operating costs than the Partnership.
BUSINESS STRATEGY
The Partnership's business strategy is to (i) increase its efficiency,
profitability and competitiveness by building on the efforts it has already
undertaken to improve pricing management, marketing and purchasing and to
further consolidate its operations and (ii) increase its market share through
strategic acquisitions and internal growth.
Key elements of this strategy include (i) continuing with the
implementation of centralized price monitoring, (ii) strengthening its image as
a reliable, full service, nationwide propane supplier, (iii) further improving
its propane purchasing and storage, thereby making more efficient use of its
system-wide storage capacity and (iv) further consolidating its operations,
where appropriate. In addition, because the retail propane industry is mature
and overall demand for propane is expected to involve little growth for the
foreseeable future, acquisitions are expected to be an important element of the
Partnership's business strategy. The Partnership intends to take two approaches
to acquisitions: (i) primarily to build on its broad geographic base by
acquiring smaller, independent competitors that operate within the Partnership's
existing geographic areas and incorporating them into the Partnership's
distribution network and (ii) to acquire propane businesses in areas in the
United States outside of its current geographic base where it believes there is
growth potential and where an attractive return on its investment can be
achieved. The Partnership recently entered into a letter of intent to acquire a
propane business for $0.8 million; however, consummation of this transaction is
subject to customary closing conditions and completion of definitive
documentation, and no assurance can be given that this acquisition will be
completed. Although the Partnership expects to continue to evaluate a number of
propane distribution companies, including regional and national firms, as part
of its ongoing acquisition program, except as described in the preceding
sentence, the Partnership does not have any present agreements or commitments
with respect to any acquisition. There can be no assurance that the Partnership
will identify attractive acquisition candidates in the future, will be able to
acquire such candidates on acceptable terms, or will be able to finance such
acquisitions. If the Partnership is able to make acquisitions, there can be no
assurance that such acquisitions will not dilute earnings and distributions or
that any additional debt incurred to finance such acquisitions will not
adversely affect the ability of the Partnership to make distributions to
Unitholders. In addition, to the extent that warm weather adversely affects the
Partnership's operating and financial results, the Partnership's access to
capital and its acquisition activities may be limited. The Managing General
Partner has broad discretion in making acquisitions and it is expected that the
Managing General Partner generally will not seek Unitholder approval of
acquisitions.
In order to facilitate the Partnership's acquisition strategy, concurrently
with the closing of the Offering, the Operating Partnership will enter into a
$55 million bank credit facility (the 'Bank Credit Facility'), including a $40
million facility to be used for acquisitions and improvements (the 'Acquisition
Facility'). See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Description of Indebtedness.' The Partnership will also
have the ability to fund acquisitions through the issuance of additional
partnership interests. See 'The Partnership Agreement -- Issuance of Additional
Securities.'
In addition to pursuing expansion through acquisitions, the Partnership
intends to pursue internal growth at its existing service centers and to expand
its business by opening new service centers. The Partnership believes that it
can attract new customers and expand its market base by providing superior
service, introducing innovative marketing programs and focusing on population
growth areas.
GENERAL
The Partnership is engaged primarily in the domestic retail marketing of
propane and propane-related supplies and equipment, including home and
commercial appliances.
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Propane, a by-product of natural gas processing and petroleum refining is a
clean-burning energy source recognized for its transportability and ease of use
relative to alternative forms of stand-alone energy. The Partnership's retail
customers fall into four broad categories: residential customers, commercial and
industrial customers, agricultural customers and dealers (located primarily in
the Northeast) that resell propane to residential and commercial customers.
Residential customers use propane primarily for space heating, water heating,
cooking and clothes drying. Commercial and industrial customers use propane for
commercial applications such as cooking and clothes drying and industrial uses
such as fueling over-the-road vehicles, forklifts and stationary engines, firing
furnaces, as a cutting gas and in other process applications. Agricultural
customers use propane for tobacco curing, crop drying, poultry brooding and weed
control.
The Partnership distributes propane through a nationwide distribution
network integrating 165 service centers in 22 states. The Partnership's
operations are located primarily in the Midwest, Northeast, Southeast and
Southwest regions of the United States. No single customer accounted for 10% or
more of the Partnership's revenues in 1995. Historically, approximately 66% of
the Partnership's retail propane volume has been sold during the six-month
period from October through March, as many customers use propane for heating.
Consequently, sales, gross profits and cash flows from operations are
concentrated in the Partnership's first and fourth fiscal quarters.
The Partnership also sells, leases and services equipment related to its
propane distribution business. In the residential market, the Partnership sells
household appliances such as cooking ranges, water heaters, space heaters,
central furnaces and clothes dryers, as well as less traditional products such
as barbecue equipment and gas logs.
In addition to its 165 service centers, the Partnership owns underground
storage facilities in Hutchinson, Kansas and Loco Hills, New Mexico, leases
above ground storage facilities in Crandon, Wisconsin and Orlando, Florida and
owns or leases smaller storage facilities in other locations throughout the
United States. As of March 1, 1996, the Partnership's total storage capacity was
approximately 33 million gallons (including approximately one million gallons of
storage capacity currently leased to third parties). As of March 1, 1996, the
Partnership had a fleet of 7 transport truck tractors and approximately 410 bulk
delivery trucks, 400 service and light trucks and 150 cylinder delivery
vehicles.
Propane competes primarily with natural gas, electricity and fuel oil as an
energy source, principally on the basis of price, availability and portability.
Propane serves as an alternative to natural gas in rural and suburban areas
where natural gas is unavailable or portability of product is required. Propane
is generally more expensive than natural gas on an equivalent BTU basis in
locations served by natural gas, although propane is sold in such areas as a
standby fuel for use during peak demand periods and during interruptions in
natural gas service. Propane is generally less expensive to use than electricity
for space heating, water heating, clothes drying and cooking. Although propane
is similar to fuel oil in certain applications and market demand, propane and
fuel oil compete to a lesser extent primarily because of the cost of converting
from one to the other.
RISK FACTORS
Limited partner interests are inherently different from the capital stock
of a corporation, although many of the business risks to which the Partnership
will be subject are similar to those that would be faced by a corporation
engaged in a similar business. Prospective purchasers of the Common Units should
consider the following risk factors in evaluating an investment in the Common
Units:
RISKS INHERENT IN THE PARTNERSHIP'S BUSINESS
Weather conditions, which can vary substantially from year to year, have a
significant impact on the demand for propane for both heating and
agricultural purposes. Many customers of the Partnership rely heavily on
propane as a heating fuel. Accordingly, 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 66% of the Partnership's retail propane volume
has been sold during this peak heating season. Actual weather conditions,
therefore, may significantly affect the Partnership's financial
performance.
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Furthermore, despite the fact that overall weather conditions may be
normal, variations in weather in one or more regions in which the
Partnership operates can significantly affect the total volume of propane
sold by the Partnership and, consequently, the Partnership's results of
operations.
Propane is a commodity, the market price of which is often subject to
volatile changes in response to changes in supply or other market
conditions. Because rapid increases in the wholesale cost of propane may
not be immediately passed on to customers, such increases could reduce
gross profits. Except for occasional opportunistic buying and storage of
propane during periods of low demand, the Partnership has not engaged in
any significant hedging activities with respect to its propane supply
requirements, although it may do so in the future.
The domestic retail propane business is highly competitive, and some of
the Partnership's competitors may be larger or have greater financial and
other resources or lower operating costs than the Partnership. In
addition, propane is sold in competition with other sources of energy,
some of which are less costly for equivalent energy values.
The domestic retail propane industry is mature, and the Partnership
foresees only limited growth in total demand for the product. The
Partnership 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, the growth of the
Partnership's propane business depends in large part on its ability to
acquire other retail distributors. There can be no assurance that the
Partnership will identify attractive acquisition candidates in the future,
will be able to acquire such candidates on acceptable terms or will be
able to finance such acquisitions. If the Partnership is able to make
acquisitions, there can be no assurance that such acquisitions will not
dilute earnings and distributions or that any additional debt incurred to
finance such acquisitions will not adversely affect the ability of the
Partnership to make distributions to Unitholders.
The Partnership's operations are subject to the operating hazards and
risks normally associated with handling, storing and delivering
combustible liquids such as propane. As a result, the Partnership has
been, and will likely continue to be, a defendant in various legal
proceedings and litigation arising in the ordinary course of business. In
addition, the Partnership will assume certain contingent liabilities of
National Propane, including certain potential environmental remediation
costs at properties currently owned by National Propane. Although the
Partnership intends to self insure (as National Propane currently does)
and maintain such insurance policies as the Managing General Partner
believes are reasonable and prudent, future claims or environmental
liabilities not covered by insurance or indemnification, or a large number
of claims incurred by the Partnership in the future that are within the
Partnership's self insured retention, may have a material adverse effect
on the business, results of operations or financial position of the
Partnership, including the Partnership's ability to make the Minimum
Quarterly Distribution.
RISKS INHERENT IN AN INVESTMENT IN THE PARTNERSHIP
Cash distributions to Unitholders are not guaranteed and may fluctuate
based upon the Partnership's performance. Cash distributions are dependent
primarily on cash flow and not on profitability, which is affected by
non-cash items. Therefore, cash distributions may be made during periods
when the Partnership records losses and may not be made during periods
when the Partnership records profits. In addition, the Managing General
Partner may establish reserves that reduce the amount of Available Cash.
Due to the seasonal nature of the Partnership's business, the Managing
General Partner anticipates that it may make additions to reserves during
certain of the Partnership's fiscal quarters in order to fund operating
expenses, interest payments and cash distributions to partners with
respect to future fiscal quarters. As a result of these and other factors,
there can be no assurance regarding the actual levels of cash
distributions by the Partnership.
The amount of Available Cash from Operating Surplus needed to distribute
the Minimum Quarterly Distribution for four quarters on the Common Units
and Subordinated Units to be outstanding immediately after the Offering
and the related distribution on the General Partner
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Interests is approximately $25.1 million (approximately $13.0 million for
the Common Units, $11.1 million for the Subordinated Units and $1.0
million for the General Partner Interests). The amount of pro forma
Available Cash from Operating Surplus generated during 1995 was
approximately $17.9 million. Such amount would have been sufficient to
cover the Minimum Quarterly Distribution for the four quarters in such
year on all of the outstanding Common Units and the related distribution
on the General Partner Interests, but would have been insufficient by
approximately $7.2 million to cover the Minimum Quarterly Distribution on
the Subordinated Units and the related distribution on the General Partner
Interests.
Approximately $5.5 million of the Partnership's annual cash receipts will
be interest payments from Triarc under the Partnership Loan, which will
bear interest at an annual rate of 13.5%. On a pro forma basis, such
amount represents approximately 31% of the Partnership's Available Cash
from Operating Surplus in 1995. Because Triarc is a holding company, its
ability to meet its cash requirements (including required interest and
principal payments on the Partnership Loan) is primarily dependent (in
addition to its cash on hand) upon cash flows from its subsidiaries,
including loans and cash dividends and reimbursement by subsidiaries to
Triarc in connection with its providing certain management services and
payments by subsidiaries under certain tax sharing agreements. Under the
terms of various indentures and credit arrangements, Triarc's principal
subsidiaries are currently unable to pay any dividends or make any loans
or advances to Triarc. In addition, the Partnership Loan does not restrict
Triarc's ability to sell, convey, transfer or encumber the stock or assets
of any of its subsidiaries (other than certain limitations with respect to
the Managing General Partner and Southeastern Public Service Company
('SEPSCO')) or its ability to dispose of its cash on hand or other assets.
The Partnership estimates that Triarc's cash on hand at the closing of the
Offering will be approximately $ . The Partnership believes that
such amount of cash on hand, plus distributions from certain of Triarc's
subsidiaries, will enable Triarc to have adequate cash resources to meet
its short term cash requirements, including required interest payments on
the Partnership Loan. See 'Cash Distribution Policy -- Partnership
Loan -- Certain Information Regarding Triarc.' However, there can be no
assurance that Triarc will continue to have cash on hand or that it will
in the future receive sufficient distributions from its subsidiaries in
order to enable it to satisfy its obligations under the Partnership Loan.
Triarc's failure to make interest or principal payments under the
Partnership Loan would adversely affect the ability of the Partnership to
make distributions to Unitholders. In addition, Triarc is permitted to
prepay the Partnership Loan under certain circumstances. The prepayment by
Triarc of all or a portion of the Partnership Loan and the failure by the
Partnership to reinvest such funds in a manner that generates an
equivalent amount of annual cash flow could have an adverse effect on the
Partnership's ability to make distributions to Unitholders. The
Partnership Loan is recourse to Triarc and is secured by a pledge by
Triarc of all of the shares of capital stock of the Managing General
Partner owned by Triarc (approximately 75.7% of the Managing General
Partner's outstanding capital stock as of the date of this Prospectus).
See 'Cash Distribution Policy -- Partnership Loan.'
On a pro forma basis as of December 31, 1995, assuming consummation of the
transactions contemplated by this Prospectus, the Partnership's total
indebtedness as a percentage of its total capitalization would have been
approximately 82.5%. As a result, the Partnership will be significantly
leveraged and will have indebtedness that is substantial in relation to
its partners' capital. The principal and interest payable on such
indebtedness and compliance with the requirements of such indebtedness
with respect to the maintenance of reserves will reduce the cash available
to make distributions on the Units. Although the Partnership does not
intend to draw on the Bank Credit Facility at the time of the closing of
the Offering, future borrowings could result in a significant increase in
the Partnership's leverage. Furthermore, the Managing General Partner may
cause the Partnership to incur additional indebtedness, including
borrowings that have the purpose or effect of enabling the Managing
General Partner to receive distributions or hastening the conversion of
Subordinated Units into Common Units.
The First Mortgage Notes and the Bank Credit Facility will be secured by a
lien on substantially all of the assets of the Operating Partnership. In
the case of a continuing default by the
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Operating Partnership under such indebtedness, the lenders would have the
right to foreclose on the Operating Partnership's assets, which would have
a material adverse effect on the Partnership. In addition, the First
Mortgage Notes and the Bank Credit Facility contain provisions relating to
change of control. If such provisions are triggered, such outstanding
indebtedness may become immediately due. In such event, there is no
assurance that the Partnership would be able to pay the indebtedness, in
which case the lenders would have the right to foreclose on the Operating
Partnership's assets, which would have a material adverse effect on the
Partnership.
The Partnership's assumptions concerning future operations, including
assumptions that normal weather conditions will prevail in the
Partnership's operating areas, may not be realized. Although the
Partnership believes its assumptions are reasonable, whether such
assumptions are realized is not, in many cases, within the control of the
Partnership. Significant variances between the Partnership's assumptions
and actual conditions, particularly with respect to weather conditions,
could have a significant impact on the business of the Partnership.
The Managing General Partner will manage and operate the Partnership, and
holders of Common Units will have no right to participate in such
management and operation. Holders of Common Units will have no right to
elect the Managing General Partner on an annual or other continuing basis,
and will have only limited voting rights on matters affecting the
Partnership's business.
Purchasers of Common Units in the Offering will experience substantial and
immediate dilution in net tangible book value of $20.38 per Common Unit
from the initial public offering price, the Managing General Partner will
experience an increase in net tangible book value of $19.86 per Unit and
each Common Unit will have a pro forma net tangible book value of $0.62
(assuming an initial public offering price of $ per Common Unit).
Prior to making any distribution on the Common Units, the Partnership will
reimburse the Managing General Partner and its Affiliates (including
Triarc) at cost for all expenses incurred on behalf of the Partnership. On
a pro forma basis, approximately $56.8 million of expenses would have been
reimbursed by the Partnership to the Managing General Partner in 1995.
Affiliates of the Managing General Partner (including Triarc) may provide
certain administrative services for the Managing General Partner on behalf
of the Partnership and will be reimbursed for all expenses incurred in
connection therewith. In addition, the Managing General Partner and its
Affiliates may provide additional services to the Partnership, for which
the Partnership will be charged reasonable fees as determined by the
Managing General Partner.
Subject to certain limitations, the Partnership may issue additional Units
or other interests in the Partnership, the effect of which may be to
dilute the interests of holders of Common Units in distributions by the
Partnership and to make it more difficult for a person or group to remove
the Managing General Partner as general partner or otherwise change the
management of the Partnership.
The Managing General Partner will have the right to acquire all, but not
less than all, of the outstanding Common Units at a price generally equal
to the then current market price of the Common Units in the event that not
more than 20% of the outstanding Common Units are held by persons other
than the Managing General Partner and its Affiliates. Consequently, a
Unitholder may have its Common Units purchased from him even though such
holder does not desire to sell them, and the price paid may be less than
the amount such Unitholder would desire to receive upon such sale.
The Partnership Agreement contains certain provisions that may discourage
a person or group from attempting to remove the Managing General Partner
as general partner or otherwise change the management of the Partnership.
The Partnership Agreement provides that if the Managing General Partner is
removed other than for Cause (as defined in the Glossary), the
Subordination Period will end, all arrearages on the Common Units will
terminate and all outstanding Subordinated Units will convert into Common
Units and the General Partners will have the right to convert the General
Partner Interests into Common Units or to receive, in exchange for such
interests, cash payment equal to the fair market value of such interests.
The
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Managing General Partner's current ownership interest in the Partnership
precludes any vote to remove the Managing General Partner without its
consent. Further, the Partnership Agreement provides that if any person or
group other than the Managing General Partner and its Affiliates acquires
beneficial ownership of 20% or more of the outstanding Units of any class,
such person or group will lose voting rights with respect to all of its
Units. The effect of these provisions may be to diminish the price at
which the Common Units will trade under certain circumstances.
Prior to the Offering, there has been no public market for the Common
Units. The initial public offering price for the Common Units has been
determined through negotiations among Triarc, the Partnership, the
Managing General Partner and the representatives of the Underwriters. No
assurance can be given as to the market prices at which the Common Units
will trade.
Under certain circumstances, holders of Common Units could lose their
limited liability and could become liable for amounts improperly
distributed to them by the Partnership. See 'The Partnership
Agreement -- Limited Liability.'
The Partnership may be unable to obtain consents with respect to the
transfer of certain assets and property of National Propane to the
Partnership. The failure to obtain such consents could adversely affect
the business of the Partnership.
The holders of the Common Units have not been represented by counsel in
connection with the Offering, including the preparation of the Partnership
Agreement or the other agreements referred to herein.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY
The Managing General Partner and its Affiliates may have conflicts of
interest with the Partnership and the holders of Common Units. The
Partnership Agreement permits the Managing General Partner to consider, in
resolving conflicts of interest, the interests of parties (including the
General Partner and its Affiliates) other than the Unitholders, thereby
limiting the Managing General Partner's fiduciary duties to the
Partnership and the Unitholders. The discretion given in the Partnership
Agreement to the Managing General Partner in resolving conflicts of
interest may significantly limit the ability of a Unitholder to challenge
what might otherwise be a breach of fiduciary duty under Delaware law. In
addition, holders of Common Units are deemed to have consented to certain
actions that might otherwise be deemed conflicts of interest or a breach
of fiduciary duty. The validity and enforceability of these types of
provisions under Delaware law are uncertain.
The Partnership Agreement provides that any borrowings by the Partnership
shall not constitute a breach of any duty owed by the Managing General
Partner, including borrowings that have the purpose or effect of enabling
the Managing General Partner to receive Incentive Distributions or
hastening the conversion of the Subordinated Units into Common Units.
The Partnership Agreement permits the Managing General Partner to merge
with and into Triarc (the 'Triarc Merger') without the prior approval of
any Unitholder. The Partnership Note will contain a covenant of Triarc
that, in the event of a Triarc Merger, Triarc will concurrently therewith
pledge as security for the Partnership Loan certain assets of the Managing
General Partner. See 'Cash Distribution Policy -- Partnership Loan.'
The Partnership Agreement does not prohibit the Partnership from engaging
in roll-up transactions. Although the Managing General Partner has no
present intention of causing the Partnership to engage in any such
transaction, it is possible it will do so in the future. There can be no
assurance that a roll-up transaction would not have a material adverse
effect on a Unitholder's investment in the Partnership.
The Managing General Partner (unless merged with and into Triarc) and the
Special General Partner (as defined in the Glossary) are prohibited from
conducting any business or having any operations other than those
incidental to serving as general partners of the Partnership and the
Operating Partnership so long as they are general partners of the
Partnership. The Partnership Agreement does not restrict the ability of
Affiliates of the Managing General Partner (other than the Special General
Partner) to engage in any activities, except for the retail sale of
propane to end users in the continental United States. The Managing
General Partner's Affiliates (other
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than the Special General Partner) may compete with the Partnership in
other propane related activities, such as trading, transportation, storage
and wholesale distribution of propane. Further, in the event of the Triarc
Merger the ability of the Managing General Partner to engage in activities
other than those incidental to serving as a general partner of the
Operating Partnership and the Partnership and to compete in other propane
related activities, such as trading, transportation, storage and wholesale
distribution, will not be restricted. Furthermore, the Partnership
Agreement provides that the Managing General Partner and its Affiliates
have no obligation to present business opportunities to the Partnership.
TAX RISKS
The availability to a Common Unitholder of federal income tax benefits of
an investment in the Partnership depends, in large part, on the
classification of the Partnership as a partnership for federal income tax
purposes. Based on certain representations by the General Partners,
Andrews & Kurth L.L.P., special counsel to the General Partners and the
Partnership ('Counsel'), is of the opinion that, under current law, the
Partnership will be classified as a partnership for federal income tax
purposes.
No ruling has been requested from the Internal Revenue Service (the 'IRS')
with respect to classification of the Partnership as a partnership for
federal income tax purposes or any other matter affecting the Partnership.
A Unitholder will be required to pay income taxes on his allocable share
of the Partnership's income, whether or not he receives cash distributions
from the Partnership.
Investment in Units by certain tax-exempt entities, regulated investment
companies and foreign persons raises issues unique to such persons. For
example, virtually all of the taxable income derived by most organizations
exempt from federal income tax (including individual retirement accounts
and other retirement plans) from the ownership of a Unit will be unrelated
business taxable income and thus will be taxable to such a Unitholder.
In the case of taxpayers subject to the passive loss rules (generally
individuals and closely held corporations), losses generated by the
Partnership, if any, will only be available to offset future income
generated by the Partnership and cannot be used to offset income from
other activities, including passive activities or investments. Passive
losses which are not deductible because they exceed the Unitholder's
income generated by the Partnership may be deducted in full when the
Unitholder disposes of his entire investment in the Partnership in a fully
taxable transaction to an unrelated party.
A Unitholder will be required to file state income tax returns and pay
state income taxes in some or all of the various jurisdictions in which
the Partnership does business or owns property.
The Partnership has been registered with the IRS as a 'tax shelter.' No
assurance can be given that the Partnership will not be audited by the IRS
or that tax adjustments will not be made. Any adjustments in the
Partnership's tax returns will lead to adjustments in the Unitholders' tax
returns and may lead to audits of the Unitholders' tax returns and
adjustments of items unrelated to the Partnership.
See 'Risk Factors,' 'Cash Distribution Policy,' 'Conflicts of Interest and
Fiduciary Responsibility,' 'Description of the Common Units,' 'The Partnership
Agreement' and 'Tax Considerations' for a more detailed description of these and
other risk factors and conflicts of interest that should be considered in
evaluating an investment in the Common Units.
TRANSACTIONS AT CLOSING
Concurrently with the closing of the Offering, the Managing General Partner
will contribute substantially all of its assets (which assets will not include
an existing intercompany note from Triarc, approximately $59.3 million of the
net proceeds from the issuance of the First Mortgage Notes and certain other
assets of the Managing General Partner) to the Operating Partnership (the
'Conveyance') as a capital contribution and the Operating Partnership will
assume substantially all of the liabilities of the Managing General Partner
(other than income tax liabilities), including the First Mortgage Notes and all
indebtedness of the Managing General Partner outstanding under the Existing
Credit Facility (as
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defined below). Immediately thereafter, the Managing General Partner will convey
its limited partner interests in the Operating Partnership to the Partnership in
exchange for 5,283,809 Subordinated Units and will convey to the Special General
Partner a 1.0% general partner interest in the Partnership and a 1.0101% general
partner interest in the Operating Partnership.
Also concurrently with the closing of the Offering, the Managing General
Partner will issue $120 million aggregate principal amount of First Mortgage
Notes to certain institutional investors in a private placement. Approximately
$59.3 million of the net proceeds from the sale of the First Mortgage Notes (the
entire net proceeds of which are estimated to be $116.6 million) will be used by
the Managing General Partner to pay a dividend to Triarc. The remainder of the
net proceeds from the sale of the First Mortgage Notes (approximately $57.3
million) will be contributed by the Managing General Partner to the Operating
Partnership in connection with the Conveyance and will be used by the Operating
Partnership to repay (in the manner described below) a portion of the Managing
General Partner's indebtedness outstanding under the Revolving Credit and Term
Loan Agreement, dated as of October 7, 1994, as amended, among the Managing
General Partner, the Bank of New York, as Administrative Agent, certain
Co-Agents and the several lending institutions party thereto (the 'Existing
Credit Facility'). First, approximately $30 million of such net proceeds will be
used by the Operating Partnership to repay the indebtedness outstanding under
the Existing Credit Facility which is evidenced by the Refunding Notes (as
defined in the Existing Credit Facility), and then the remainder of such net
proceeds (approximately $27.3 million) will be used to repay other indebtedness
outstanding under the Existing Credit Facility. The effective interest rates on
the Refunding Notes and the $27.3 million outstanding under the term loan
facility were 7.56% and 8.43%, respectively, as of March 1, 1996.
After the repayment of the Refunding Notes and such other indebtedness as
described above, the net proceeds of the sale of the Common Units issued in the
Offering (estimated to be approximately $118.2 million) will be contributed to
the Operating Partnership which will use such proceeds to repay all remaining
indebtedness under the Existing Credit Facility, to make the Partnership Loan
and to pay certain accrued management fees and tax sharing payments due to
Triarc from the Managing General Partner. The effective interest rate on the
remaining $13.2 million outstanding under the revolving credit facility and the
remaining $56.8 million outstanding under the term loan facility was 8.20% and
8.43%, respectively, as of March 1, 1996.
Concurrently with the closing of the Offering, the Operating Partnership
will also enter into the Bank Credit Facility, which will include a $15 million
revolving credit facility to be used for working capital and other general
partnership purposes (the 'Working Capital Facility') and the $40 million
Acquisition Facility. It is expected that these facilities will be undrawn at
the time of the consummation of the transactions referred to above
(collectively, the 'Transactions'). For additional information regarding the
terms of the First Mortgage Notes and the Bank Credit Facility, see
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Description of Indebtedness.' For additional information regarding
the terms of the Partnership Loan, see 'Cash Distribution Policy -- Partnership
Loan.'
The following table sets forth the estimated sources of funds to be
received by the General Partner and the Partnership at the closing of the
Offering and the estimated related uses of funds (assuming an initial public
offering price of $ per Common Unit).
14
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SOURCES OF FUNDS AMOUNT(1) USES OF FUNDS
- ------------------------------------------ --------------- --------------------------------------------------
<S> <C> <C>
Proceeds from issuance of First Mortgage
Notes ($120 million).................... $ 59.3 million Cash dividend from the Managing General Partner to
Triarc(2)
57.3 million Repayment by the Operating Partnership of
indebtedness of the Managing General Partner
under Existing Credit Facility (including
indebtedness evidenced by Refunding Notes)(3)
3.4 million Fees and expenses to unaffiliated third parties
incurred in connection with the issuance of the
First Mortgage Notes (including Placement Agent
fees)
---------------
Total................................ $ 120.0 million
---------------
---------------
Proceeds from issuance of Common Units
($130 million).......................... $ 70.0 million Repayment by the Operating Partnership of
indebtedness of the Managing General Partner
under Existing Credit Facility(3)
40.7 million Partnership Loan to Triarc
7.5 million Payment by the Operating Partnership of certain
accrued management fees and tax sharing payments
due from the Managing General Partner to
Triarc(4)
11.8 million Fees and expenses to unaffiliated third parties
incurred in connection with the issuance of the
Common Units (including Underwriters' discounts
and commissions)
---------------
Total................................ $ 130.0 million
---------------
---------------
</TABLE>
- ------------
(1) All amounts are approximate.
(2) In addition to the cash dividend, the Managing General Partner will dividend
to Triarc a portion ($56.4 million) of the existing intercompany note from
Triarc. None of such dividends will be subject to tax to Triarc at the time
of their distribution.
(3) Based on principal amount and accrued interest under the Existing Credit
Facility as of March 1, 1996.
(4) An additional $2.5 million of accrued management fees and tax sharing
payments will be paid to Triarc using Partnership cash on hand at closing.
------------------------
If the Underwriters' over-allotment option is exercised in full, the
estimated additional net proceeds to the Partnership will be approximately $18.1
million (assuming an initial public offering price of $ per Common Unit).
All of the net proceeds from any such exercise will be retained by the
Partnership and used for general partnership purposes. See 'The Partnership
Agreement -- Issuance of Additional Securities.'
DISTRIBUTIONS AND PAYMENTS TO THE MANAGING GENERAL PARTNER AND ITS AFFILIATES
The following table summarizes the distributions and payments to be made by
the Partnership to the Managing General Partner and its Affiliates in connection
with the Transactions and the ongoing operations of the Partnership. Such
distributions and payments were determined by and among affiliated entities and,
consequently, were not the result of arm's length negotiations. See 'Conflicts
of Interest and Fiduciary Responsibility.'
15
<PAGE>
<PAGE>
<TABLE>
<S> <C>
FORMATION STAGE
The consideration paid to the Managing
General Partner, Triarc and their
Affiliates for the transfer of the
propane business and related liabilities
of National Propane to the
Partnership............................. 5,283,809 Subordinated Units, an aggregate 4% unsubordinated general
partner interest in the Partnership and the Operating Partnership
on a combined basis (and the right to receive Incentive
Distributions), the assumption by the Operating Partnership of
substantially all of the liabilities of the Managing General
Partner (other than income tax liabilities), including the First
Mortgage Notes and all indebtedness of the Managing General Partner
outstanding under the Existing Credit Facility. The net proceeds of
the Offering (estimated to be approximately $118.2 million) will be
contributed to the Operating Partnership and used by the Operating
Partnership to make the $40.7 million Partnership Loan to Triarc,
to repay approximately $7.5 million in accrued management fees and
tax sharing payments due to Triarc (in addition to $2.5 million of
such accrued fees and payments to be repaid to Triarc out of cash
on hand at the closing of the Transactions) and to repay
indebtedness of the Managing General Partner assumed by the
Operating Partnership in connection with the Transactions. In
addition, the Managing General Partner will dividend to Triarc a
portion (approximately $56.4 million) of an existing intercompany
note and will dividend approximately $59.3 million in cash from the
net proceeds of the sale of the First Mortgage Notes to Triarc. The
remainder of the net proceeds from the sale of the First Mortgage
Notes will be used to repay indebtedness of the Managing General
Partner. Accordingly, substantially all of the net proceeds of this
offering will be paid to, or otherwise benefit, the Managing
General Partner, Triarc and their Affiliates. See 'The
Transactions.'
OPERATIONAL STAGE
Distributions of Available Cash to the
General Partners........................ Available Cash will generally be distributed 96% to the Unitholders
(including to the Managing General Partner as holder of the
Subordinated Units) and 4% to the General Partners, except that if
distributions of Available Cash from Operating Surplus exceed the
Target Distribution Levels (as defined below), the General Partners
will receive a percentage of such excess distributions that will
increase to up to approximately 50% of the excess distributions
above the highest Target Distribution Level. See 'Cash Distribution
Policy.'
Payments to the Managing General Partner
and its Affiliates...................... Following the Offering, in general, the management and employees of
National Propane who currently manage and operate the propane
business and assets to be owned by the Partnership will continue to
manage and operate the Partnership's business as officers and
employees of the Managing General Partner and its Affiliates. The
Managing General Partner will not receive any management fee or
other compensation in connection with its management of the
Partnership, but will be reimbursed at cost for all direct and
indirect expenses incurred on behalf of the Partnership, including
the costs of compensation and employee benefit plans described
herein properly allocable to the Partnership, and all other
expenses necessary or appropriate to the conduct
</TABLE>
16
<PAGE>
<PAGE>
<TABLE>
<S> <C>
of business of, and allocable to, the Partnership. On a pro forma
basis, an aggregate of approximately $56.8 million of expenses
would have been reimbursed by the Partnership to the Managing
General Partner in 1995 (comprising approximately $33.0 million in
salary, payroll tax and other compensation paid to employees of the
Managing General Partner and approximately $23.8 million for all
other operating expenses).
Affiliates of the Managing General Partner (including Triarc) may
provide certain administrative services for the Managing General
Partner on behalf of the Partnership and will be reimbursed for all
direct and indirect expenses incurred in connection therewith. In
addition, the Managing General Partner and its Affiliates may
provide additional services to the Partnership, for which the
Partnership will be charged reasonable fees as determined by the
Managing General Partner.
See 'Certain Relationships and Related Transactions' for a
description of other ongoing arrangements between the Managing
General Partner and its Affiliates and the Partnership.
Withdrawal or removal of the General
Partners................................ If the General Partners withdraw in violation of the Partnership
Agreement or are removed by the Unitholders for Cause (as defined
in the Glossary), the successor general partner will have the
option to purchase the General Partner Interests (and the right to
receive Incentive Distributions) for a cash payment equal to the
fair market value thereof; if the Managing General Partner
withdraws or is removed without Cause it will have the option to
require the successor general partner to purchase the General
Partner Interests (and the right to receive Incentive
Distributions) from the departing General Partners for such price.
If the General Partner Interests (and the right to receive
Incentive Distributions) are not so purchased by the successor
general partner, the General Partners have the right to convert
such partner interests into a number of Common Units equal in value
to the fair market value thereof as determined by an independent
investment banking firm or other independent experts or to receive
cash in exchange for such interests.
LIQUIDATION STAGE
Liquidation............................... In the event of any liquidation of the Partnership, the partners,
including the General Partners, will be entitled to receive
liquidating distributions in accordance with their respective
capital account balances. See 'Cash Distribution Policy --
Distributions of Cash Upon Liquidation.'
</TABLE>
CASH AVAILABLE FOR DISTRIBUTION
Available Cash will generally be distributed 96% to the Unitholders
(including the Managing General Partner as the holder of Subordinated Units) and
4% to the General Partners, pro rata, except that if distributions of Available
Cash exceed Target Distribution Levels (as defined in the Glossary) above the
Minimum Quarterly Distribution, the General Partners will receive an additional
percentage of such excess distributions that will increase to up to 50% of the
distributions above the highest Target Distribution Level. See 'Cash
Distribution Policy -- Incentive Distributions -- Hypothetical Annualized
Yield.'
Based on the amount of working capital that the Partnership is expected to
have at the time it commences operations in 1996 and the availability of the
Working Capital Facility, the Partnership believes that, if its assumptions
about operating conditions prove correct, the Partnership should have sufficient
Available Cash from Operating Surplus to enable it to distribute the Minimum
Quarterly Distribution on the outstanding Common Units and Subordinated Units
and the related distribution on the General Partner Interests with respect to
each of its quarters at least through the quarter ending December 31, 1997,
although no assurance can be given respecting such distributions or any
distribution
17
<PAGE>
<PAGE>
after such date. The Partnership's belief is based on a number of assumptions,
including the assumptions that normal weather conditions will prevail in the
Partnership's operating areas, that the Partnership's operating margins will
remain constant, that all required interest payments on the Partnership Loan
will be made by Triarc, and that market and overall economic conditions will not
change substantially. Although the Partnership believes its assumptions are
reasonable, whether the assumptions are realized is not, in a number of cases,
within the control of the Partnership and cannot be predicted with any degree of
certainty. For example, in any particular year or even series of years, weather
may deviate substantially from normal. Therefore, certain of the Partnership's
assumptions may prove to be inaccurate. As a result, the actual Available Cash
from Operating Surplus generated by the Partnership could deviate substantially
from that currently expected. See 'Risk Factors.' In addition, the terms of the
Partnership's indebtedness under certain circumstances will restrict the ability
of the Partnership to distribute cash to Unitholders. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Description of Indebtedness.' Accordingly, no assurance can be
given that distributions of the Minimum Quarterly Distribution or any other
amounts will be made. The Partnership 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
Subordinated Units to be outstanding immediately after the Offering and on the
General Partner Interests is approximately $25.1 million (approximately $13.0
million for the Common Units, $11.1 million for the Subordinated Units and $1.0
million for the General Partner Interests). If the Underwriters' over-allotment
option is exercised in full, such amounts would be approximately $15.0 million
for the Common Units, $11.1 million for the Subordinated Units and $1.0 million
for the General Partner Interests, or an aggregate of approximately $27.1
million.
Pro forma Available Cash from Operating Surplus generated during 1994 and
1995 (approximately $22.9 million and $17.9 million, respectively) would have
been sufficient to cover the Minimum Quarterly Distribution on the Common Units
and the related distribution on the General Partner Interests, but would have
been insufficient by approximately $2.2 million and $7.2 million to cover the
Minimum Quarterly Distribution on the Subordinated Units and the related
distribution on the General Partner Interests in 1994 and 1995, respectively.
For the calculation of Available Cash from Operating Surplus, see 'Cash
Distribution Policy -- Cash Available for Distribution.' The decline in pro
forma Available Cash from Operating Surplus generated during 1995 was primarily
due to the fact that temperatures during the winter of 1994-95 across the
markets served by the Partnership were substantially warmer than the prior year.
Based on the Partnership's actual results of operations for the quarter
ended March 31, 1996, limited data about operations in April 1996 and the
Partnership's estimated results of operations for the remainder of 1996, the
Partnership believes that it will generate during 1996 Available Cash from
Operating Surplus of approximately $24.6 million, although there can be no
assurance it will generate such amount. The Partnership's belief is based on the
assumptions about weather, margins and market and economic conditions described
above as they apply to the last three quarters of fiscal 1996. As a result, the
actual Available Cash from Operating Surplus generated by the Partnership for
1996 could deviate substantially from that currently expected.
The amounts of pro forma Available Cash from Operating Surplus for 1994 and
1995 set forth above were derived from the pro forma financial statements of the
Partnership in the manner set forth in the table entitled 'Pro Forma Operating
Surplus' set forth in 'Cash Distribution Policy -- Cash Available for
Distribution.' The pro forma adjustments are based upon currently available
information and certain estimates and assumptions. The pro forma financial
statements do not purport to present the results of operations of the
Partnership had the Partnership actually commenced operations as of the date
indicated. Furthermore, the pro forma financial statements are based on accrual
accounting concepts while Operating Surplus is defined in the Partnership
Agreement on a cash accounting basis. As a consequence, the amounts of pro forma
Available Cash from Operating Surplus shown above should only be viewed as a
general indication of the amounts of Available Cash from Operating Surplus that
may in fact have been generated by the Partnership had it been formed in earlier
periods. Operating Surplus is defined in the Glossary and refers generally to
(i) the cash balance of the Partnership on the date the Partnership commences
operations, plus $16.3 million, plus all cash receipts of the Partnership from
its operations, less (ii) all Partnership operating expenses, 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 any equity offering), maintenance
18
<PAGE>
<PAGE>
capital expenditures and reserves established for future Partnership operations.
For a more complete definition of Operating Surplus, see the Glossary.
In addition, certain provisions in the First Mortgage Notes and the Bank
Credit Facility will, under certain circumstances, restrict the Partnership's
ability to make distributions to its partners. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Description of
Indebtedness.'
Approximately $5.5 million of the Partnership's annual cash receipts will
be interest payments from Triarc under the Partnership Loan. On a pro forma
basis, such amount represents approximately 31% of the Partnership's Available
Cash from Operating Surplus in 1995. Consequently, the Partnership's ability to
make distributions will depend in part on Triarc's ability to make interest
payments under the Partnership Loan. For a description of the Partnership Loan
and certain information regarding Triarc, see 'Cash Distribution
Policy -- Partnership Loan.'
PARTNERSHIP STRUCTURE AND MANAGEMENT
The Partnership's activities will be conducted through the Operating
Partnership and its corporate and partnership subsidiaries. The Managing General
Partner will serve as the managing general partner, and National Propane SGP,
Inc. (the 'Special General Partner'), a wholly owned subsidiary of the Managing
General Partner, will serve as the non-managing general partner, of the
Partnership and the Operating Partnership. The Managing General Partner and the
Special General Partner are together referred to herein as the 'General
Partners.' Each of the General Partners will own a 1.0% and 1.0101% general
partner interest in each of the Partnership and the Operating Partnership,
respectively. The Partnership will own a 97.9798% limited partner interest in
the Operating Partnership. Each of the Managing General Partner and the Special
General Partner will own a 2% General Partner Interest in the Partnership and
the Operating Partnership on a combined basis. Provided that the Managing
General Partner has not merged with and into Triarc, the Special General Partner
may convert all or a portion of its General Partner Interest into a number of
Units equivalent to the General Partner Interest so converted. References herein
to the General Partner Interests or to distributions to the General Partners of
4% of Available Cash are references to the amount of the General Partners'
aggregate unsubordinated percentage interest in the Partnership and the
Operating Partnership on a combined basis.
Following the Offering, the management and employees of National Propane
who currently manage and operate the propane business and assets to be owned by
the Partnership will generally continue to manage and operate the Partnership's
business as officers and employees of the Managing General Partner and its
Affiliates. The Partnership will not have any officers or employees of its own.
The Managing General Partner will not receive any management fee or other
compensation in connection with its management of the Partnership, but will be
reimbursed by the Partnership at cost for all direct and indirect expenses
incurred on behalf of the Partnership, including the costs of compensation and
employee benefit plans described herein properly allocable to the Partnership,
and all other expenses necessary or appropriate to the conduct of the business
of, and allocable to, the Partnership. The Partnership Agreement provides that
the Managing General Partner will determine the expenses that are allocable to
the Partnership in any reasonable manner determined by the Managing General
Partner in its sole discretion. Affiliates of the General Partners' (including
Triarc) may provide administrative services for the General Partners on behalf
of the Partnership and will be reimbursed for all expenses incurred in
connection therewith. In addition, the General Partners and their Affiliates
(including Triarc) may provide additional services to the Partnership, for which
the Partnership will be charged reasonable fees as determined by the Managing
General Partner.
The principal executive office of the Partnership is located at 1101 2nd
Avenue, S.E., Cedar Rapids, Iowa 52406-2067 and its telephone number is (319)
365-1550.
UNIT OPTION PLAN
Effective upon the closing of the Offering, the Managing General Partner
will adopt the National Propane Corporation 1996 Unit Option Plan (the 'Plan'),
which permits the issuance of options (the 'Options') to purchase Units. See
'Management -- Unit Option Plan.'
19
<PAGE>
<PAGE>
The following chart depicts the organization and ownership of the
Partnership, the Operating Partnership and the Operating Partnership's corporate
subsidiary immediately after giving effect to the sale of the Common Units
offered in the Offering. The percentages reflected in the following chart
represent the approximate ownership interest in each of the Partnership and the
Operating Partnership, individually, and not on an aggregate basis. Except in
the following chart, the ownership percentages referred to in this Prospectus
(including those given below in the box entitled 'Effective Aggregate Ownership
of the Partnership and the Operating Partnership') reflect the aggregate
ownership of the Partnership and the Operating Partnership on a combined basis.
[GRAPHICAL REPRESENTATION of the ownership structure of the Partnership,
the Operating Partnership, the General Partners and relevant Affiliates. Triarc
owns the General Partner 75.7% directly and 24.3% through its wholly-owned
subsidiary SEPSCO. Each of the General Partner and the Special General Partner,
its wholly-owned subsidiary, own a 1.0% and 1.0101% unsubordinated general
partner interest in the Partnership and the Operating Partnership,
respectively. The General Partner owns 5,283,809 Subordinated Units representing
a 45.1% general partner interest in the Partnership and the Public Unitholders
own 6,190,476 Common Units representing a 52.9% limited partner interest in the
Partnership. The Partnership owns a 97.9798% limited partner interest in the
Operating Partnership. National Sales is a wholly-owned subsidiary of the
Operating Partnership.]
20
<PAGE>
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth for the periods and as of the dates
indicated summary historical consolidated financial and operating data for
National Propane and consolidated pro forma financial and operating data for the
Partnership after giving effect to the Transactions. The summary historical
consolidated financial data of National Propane presented below are derived from
the financial statements of National Propane and should be read in conjunction
with 'Selected Historical and Pro Forma Consolidated Financial and Operating
Data,' 'Management's Discussion and Analysis of Financial Condition and Results
of Operations' and the consolidated financial statements of National Propane
included elsewhere herein. The Partnership's summary consolidated pro forma
financial data are derived from the unaudited pro forma condensed consolidated
financial statements of the Partnership included elsewhere herein and should be
read in conjunction therewith. The data for all of the periods presented below
have been restated to reflect the effects of the June 1995 merger (the 'Merger')
of Public Gas Company ('Public Gas') with and into National Propane as if the
Merger had occurred on May 4, 1991. This transaction is described further in
Note 3 to the accompanying consolidated financial statements.
<TABLE>
<CAPTION>
PARTNERSHIP
PRO FORMA (b)
HISTORICAL -------------
------------------------------------------------------------------
FISCAL YEAR ENDED TEN MONTHS
APRIL 30, ENDED
YEAR ENDED DECEMBER 31,
----------------------- DECEMBER 31, -------------------------------------
1992 1993 1993 (a) 1994 1995
--------- --------- ------------ -------- ------------------------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues................. $ 144,667 $151,931 $119,249 $151,651 $148,983 $ 148,983
Gross profit....................... 35,338 34,565 26,948 41,968 39,924 39,924
Selling, general and administrative
expenses (other than management
fees charged by parents)......... 16,776 19,578 16,501 18,657 22,423 23,923
Management fees charged by
parents(c)....................... 3,271 2,328 3,485 4,561 3,000 --
Facilities relocation and corporate
restructuring.................... -- 7,647 (d) 8,429(d) -- -- --
Operating profit (loss)............ 15,291 5,012 (d) (1,467)(d) 18,750 14,501 16,001
Interest expense................... (17,696) (16,770 ) (9,949) (9,726) (11,719) (10,713)
Interest income from Triarc(e)..... 16,334 17,127 10,360 9,751 -- 5,500
Provision for income taxes......... 5,833 2,624 1,018 7,923 4,291 200
Extraordinary charge............... -- -- -- (2,116)(f) -- --
Cumulative effect of change in
accounting principles............ -- 6,259 (g) -- -- -- --
Net income (loss).................. 9,795 9,135 (347) 9,905 (605) 11,492
Net income per Unit(h)............. $ 0.96
BALANCE SHEET DATA (AT PERIOD END):
Current assets..................... $ 43,059 $ 55,419 $ 36,923 $ 34,786 $ 34,099 $ 30,299
Due from Triarc(e)................. 92,804 65,999 71,172 -- (e) -- 40,700
Total assets....................... 234,699 218,095 191,955 137,581 139,112 174,715
Current liabilities................ 67,528(i) 42,256 31,444 35,417 38,456 20,359
Long-term debt..................... 78,556 67,511 51,851 98,711 124,266 125,079
Stockholders' equity
(deficit)(e)..................... 81,666 88,063 88,971 (19,502)(e) (48,600) --
Partners' capital.................. -- -- -- -- -- 27,165
OPERATING DATA:
EBITDA(j).......................... $ 23,670 $ 13,087 $ 5,483 $ 28,774 $ 25,146 $ 26,646
Capital expenditures(k)............ 7,039 8,290 11,260 12,593 11,013 11,013
Retail propane gallons sold(l)..... 145,708 154,839 117,415 152,335 150,141 150,141
Reserves(m)........................ 2,400
Available Cash from Operating
Surplus(n)....................... 17,855
</TABLE>
(see footnotes on next page)
21
<PAGE>
<PAGE>
(a) In October 1993 National Propane's fiscal year ended April 30 and Public
Gas' fiscal year ended February 28 were changed to a calendar year ended
December 31. In order to conform the reporting periods of the combined
entities and to select a period deemed to meet the Securities and Exchange
Commission requirement for filing financial statements for a period of one
year, the ten-month period ended December 31, 1993 ('Transition 1993') has
been presented above and in the accompanying consolidated financial
statements. The selected consolidated financial and operating data as of
and for the fiscal years ended April 30, 1992 and 1993 ('Fiscal 1993'),
however, reflect the former year-ends of both National Propane and Public
Gas. Accordingly, Fiscal 1993 and Transition 1993 each include the results
of National Propane for the two-month period ended April 30, 1993 as
follows: Operating revenues -- $28,266; Operating loss -- $(5,190); Net
loss -- $(3,375) (see Note (d) below).
(b) For a description of the adjustments and assumptions used in preparing the
Unaudited Pro Forma Condensed Consolidated Financial and Operating Data,
see Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet
and Statement of Operations included elsewhere herein.
(c) Management fees charged by parents include costs charged to National
Propane by Triarc and to Public Gas by SEPSCO, its parent prior to the
Merger. (See Note 19 to the accompanying consolidated financial
statements).
(d) Includes certain significant pretax charges recorded in April 1993
affecting Fiscal 1993 and Transition 1993 operating profit consisting of
(i) $8.4 million of facilities relocation and corporate restructuring
charges ($7.6 million of which affected both Fiscal 1993 and Transition
1993 due to National Propane's April 1993 being included in both periods
and $0.8 million of which affected only Transition 1993) and (ii) $0.5
million of allocated costs of a payment to the Special Committee of
Triarc's Board of Directors ($0.4 million of which affected both Fiscal
1993 and Transition 1993). (See Note 20 to the accompanying consolidated
financial statements).
(e) In November 1994, National Propane reclassified its receivable from Triarc
as a reduction of stockholders' equity and began reserving all interest
accrued subsequent thereto. Receivables from SEPSCO are classified as a
component of stockholders' equity for all of the above periods. (See Note
13 to the accompanying consolidated financial statements). The pro forma
due from parent is classified as an asset because it will be evidenced by
an interest-bearing note with a fixed maturity.
(f) The extraordinary charge represents the write-off of unamortized deferred
financing costs and original issue discount, net of income taxes,
associated with the early extinguishment of debt.
(g) The cumulative effect of change in accounting principles resulted from
National Propane's adoption of Statement of Financial Accounting Standards
No. 109 ('SFAS No. 109'), 'Accounting for Income Taxes' effective May 1,
1992.
(h) See Note (f) of Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Operations included elsewhere herein for details relating to
the calculation of net income per Unit.
(i) Reflects the classification of $35.0 million of long-term debt, which was
repaid in Fiscal 1993, as a current liability.
(j) EBITDA is defined as operating profit (loss) plus depreciation and
amortization (excluding amortization of deferred financing costs). 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 a measure
of performance or financial condition under generally accepted accounting
principles, but provides additional information for evaluating the
Partnership's ability to distribute the Minimum Quarterly Distribution.
Cash flows in accordance with generally accepted accouting principles
consist of cash flows from (i) operating, (ii) investing and (iii)
financing activities. Cash flows from operating activities reflect net
income (loss) (including charges for interest and income taxes not
reflected in EBITDA), adjusted for (i) all non-cash charges or income
(including, but not limited to, depreciation and amortization) and (ii)
changes in operating assets and liabilities (not reflected in EBITDA).
Further, cash flows from investing and financing activities are not
included in EBITDA. For a discussion of the Partnership's operating
(footnotes continued on next page)
22
<PAGE>
<PAGE>
(footnotes continued from previous page)
performance and cash flows provided by (used in) operating, investing and
financing activities, see 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'
(k) The Partnership's capital expenditures fall generally into three
categories: (i) maintenance capital expenditures, which include
expenditures for replacement of property, plant and equipment, (ii) growth
capital expenditures for the expansion of existing operations and (iii)
acquisition capital expenditures, which include expenditures related to the
acquisition of retail propane operations.
An analysis by category for the years ended December 31, 1994 and 1995 is
as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Maintenance(1)..................................................................... $ 4,228 $ 4,030
Growth............................................................................. 3,672 4,936
Acquisition........................................................................ 4,693 2,047(2)
------- -------
Total.................................................................... $12,593 $11,013
------- -------
------- -------
</TABLE>
--------------------
(1) Includes expenditures not expected to occur on an annual basis as
follows: 1994 -- $1,790 (primarily computer hardware and systems
installation); 1995 -- $590 (primarily the purchase of an airplane).
(2) Includes $1,864 of assets purchased and contributed by Triarc (see
Note 19 to the accompanying consolidated financial statements).
(l) Retail propane gallons sold includes sales to (i) residential customers,
(ii) commercial and industrial customers, (iii) agricultural customers, and
(iv) dealers (located primarily in the Northeast) that resell propane to
residential and commercial customers.
(m) The Partnership will utilize reserves from time to time to facilitate future
funding of, among other things, maintenance capital expenditures, operating
expenditures, interest payments and distributions to partners. For example,
during the first and fourth fiscal quarters, the Partnership may reserve for
operating and capital expenditures to be made in the second and third fiscal
quarters. These reserves may be at their highest at the end of the first
quarter, potentially ranging to up to $2.0 million, assuming normal weather
and operating conditions, as well as the Partnership's existing operations.
By the end of the fourth quarter, these reserves would typically be reduced.
In addition, the Partnership generally must reserve at the end of the first
and third fiscal quarters 50% of the semiannual interest on the First
Mortgage Notes due at the end of the second and fourth fiscal quarters. The
approximate amount required to be reserved for this purpose in such quarters
is $2.4 million. The Partnership may, however, choose to reserve a full
interest payment or $4.8 million, at its discretion. Furthermore, the
Partnership Agreement allows the Managing General Partner, in its
discretion, to reserve for up to four quarters of future distributions of
the Minimum Quarterly Distribution to Unitholders. Except as required by the
terms of the Partnership's indebtedness, the extent and timing of these
reserves, if any, are determinable solely by the Managing General Partner
and will largely depend on the actual results of operations of the
Partnership and other factors beyond the control of the Managing General
Partner. As a result, the amount of such reserves may vary substantially
from those described above and no assurance can be given as to the actual
level of reserves that will be established with respect to any quarter.
(n) For a more complete discussion of pro forma Available Cash from Operating
Surplus, see 'Cash Distribution Policy -- Cash Available for Distribution.'
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THE OFFERING
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<S> <C>
Securities Offered........................ 6,190,476 Common Units (7,119,048 Common Units if the Underwriters'
over-allotment option is exercised in full).
Units to be Outstanding After
the Offering............................ 6,190,476 Common Units representing a 51.8% limited partner interest
in the Partnership and 5,283,809 Subordinated Units representing a
44.2% subordinated general partner interest in the Partnership. If
the Underwriters' over-allotment option is exercised in full,
928,572 additional Common Units will be issued by the Partnership,
resulting in 7,119,048 Common Units and 5,283,809 Subordinated
Units outstanding representing a 55.3% limited partner interest and
a 41.0% subordinated general partner interest in the Partnership,
respectively. All 5,283,809 Subordinated Units held by the Managing
General Partner and its Affiliates are general partner interests
(unless the Managing General Partner or its Affiliates elect
otherwise) and all Common Units issued in the Offering are limited
partner interests. The Subordinated Units will automatically
convert into limited partner interests upon being converted into
Common Units, and may be converted into limited partner interests
earlier upon the election of the Managing General Partner and its
Affiliates or upon a transfer to a non-Affiliate.
Distributions of Available Cash........... The Partnership will distribute all of its Available Cash within
approximately 45 days after the end of each quarter to the
Unitholders (including the Managing General Partner as a holder of
Subordinated Units) of record on the applicable record date and to
the General Partners. 'Available Cash' for any quarter will 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 Glossary. The Managing General Partner has broad
discretion in making cash disbursements and establishing reserves,
thereby affecting the amount of Available Cash that will be
distributed with respect to any quarter. In addition, the terms of
the agreements governing the Partnership's indebtedness are
expected to require that certain reserves be maintained for the
payment of principal and interest. See 'Risk Factors -- Risks
Inherent in an Investment in the Partnership' for a description of
the reserves on payment of principal and interest that the
Partnership will be required to maintain. Available Cash will
generally be distributed 96% to Unitholders and 4% to the General
Partners, pro rata, except that if distributions of Available Cash
from Operating Surplus within a quarter exceed specified target
levels in excess of the Minimum Quarterly Distribution the General
Partners (as holders of the General Partner Interests and the right
to receive Incentive Distributions), will receive a percentage of
such excess distributions that will increase to up to 50% of the
excess distributions above the highest Target Distribution Level.
On a pro forma basis, quarterly distributions of Available Cash
would not have exceeded such target levels and the Partnership
would not have distributed any such excess payments to the General
Partners in fiscal 1994 and 1995. See 'Cash Distribution
Policy -- Incentive Distributions -- Hypothetical Annualized
Yield.' The General Partners will not be required to make
additional capital contributions to the Partnership or the
Operating Partnership in connection with the exercise of the over-
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allotment option, but will nonetheless be entitled to receive 4% of
distributions of Available Cash.
Distributions to Common and
Subordinated Unitholders................ The Partnership intends, to the extent there is sufficient Available
Cash from Operating Surplus, to distribute to each holder of Common
Units at least the Minimum Quarterly Distribution of $0.525 per
Common Unit per quarter. The Minimum Quarterly Distribution is not
guaranteed and is subject to adjustment as described under 'Cash
Distribution Policy -- Adjustment of Minimum Quarterly Distribution
and Target Distribution Levels.' The Minimum Quarterly Distribution
for the period from the closing of the Offering through September
30, 1996 will be adjusted based on the actual length of such
period.
With respect to each quarter during the Subordination Period, which
will generally not end prior to June 30, 2001, the Common
Unitholders will generally have the right to receive the Minimum
Quarterly Distribution, plus Common Unit Arrearages, before any
distribution of Available Cash from Operating Surplus is made to
the Subordinated Unitholders. This subordination feature will
enhance the Partnership's ability to distribute the Minimum
Quarterly Distribution on the Common Units during the Subordination
Period. Subordinated Units will not accrue distribution arrearages.
Upon expiration of the Subordination Period, Common Units will no
longer accrue distribution arrearages. See 'Cash Distribution
Policy.'
Subordination Period...................... The Subordination Period will generally extend from the closing of
the Offering until the first day of any quarter beginning after
June 30, 2001 in respect of which (i) distributions of Available
Cash from Operating Surplus on the Common Units and the
Subordinated Units with respect to each of the three consecutive
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 during such
periods, (ii) the Adjusted Operating Surplus (as defined in the
Glossary) generated during each of the three consecutive
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 and the related
distribution on the General Partner Interests during such periods,
and (iii) there are no outstanding Common Unit Arrearages. Upon
expiration of the Subordination Period, all remaining Subordinated
Units will convert into Common Units on a one-for-one basis and
will thereafter participate pro rata with the other Common Units in
distributions of Available Cash. The Partnership Agreement also
provides that if the Managing General Partner is removed other than
for Cause (as defined in the Glossary), the Subordination Period
will end and all outstanding Subordinated Units will convert into
Common Units. See 'Cash Distribution Policy' and 'The Partnership
Agreement.'
Early Conversion of Subordinated Units.... A portion of the Subordinated Units will convert into Common Units on
the first day after the record date established for the
distribution in respect of any quarter ending on or after (a) June
30, 1999 (with respect to 1,320,952 of the Subordinated Units,
subject to adjustment) and (b) June 30, 2000 (with respect to
1,320,952 Subordinated Units, subject to adjustment), in respect of
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which (i) distributions of Available Cash from Operating Surplus on
the Common Units and the Subordinated Units with respect to each of
the three consecutive 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 during such periods, (ii) the Adjusted Operating
Surplus generated during each of the two consecutive 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 and the related distribution on
the General Partner Interest during such periods, and (iii) there
are no outstanding Common Unit Arrearages; provided, however, that
the early conversion of the second tranche of Subordinated Units
may not occur until at least one year following the early
conversion of the first tranche of Subordinated Units. See 'Cash
Distribution Policy -- Quarterly Distributions from Operating
Surplus during Subordination Period.'
Incentive Distributions................... If quarterly distributions of Available Cash exceed the Target
Distribution Levels, the General Partners (as holders of the
General Partner Interests and the right to receive Incentive
Distributions and not as holders of Subordinated Units) will
receive additional distributions of Available Cash that exceed such
Target Distribution Levels as follows:
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<CAPTION>
MARGINAL
PERCENTAGE
INTEREST IN
QUARTERLY DISTRIBUTIONS
DISTRIBUTION -----------------
TARGET UNIT- GENERAL
AMOUNT HOLDERS PARTNERS
------------ ------- -------
<S> <C> <C> <C>
Minimum Quarterly Distribution......... $0.525 96% 4%
First Target Distribution.............. $0.577 96% 4%
Second Target Distribution............. $0.665 85% 15%
Third Target Distribution.............. $0.863 75% 25%
Thereafter............................. -- 50% 50%
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The Target Distribution Levels are based on the amounts of Available
Cash from Operating Surplus distributed that exceed distributions
made with respect to the Minimum Quarterly Distribution and Common
Unit Arrearages, if any. See 'Cash Distribution Policy -- Incentive
Distributions -- Hypothetical Annualized Yield.' The distributions
to the General Partners described above that are in excess of the
4% General Partner Interests (and not as a holder of Subordinated
Units) are referred to herein as the 'Incentive Distributions'
which are payable to the Managing General Partner. The Managing
General Partner may transfer its right to receive Incentive
Distributions to one or more Persons (as defined in the Glossary).
On a pro forma basis, quarterly distributions of Available Cash
would not have exceeded such target levels and the Partnership
would not have distributed any such excess payments to the Managing
General Partner in 1994 and 1995.
Adjustment of Minimum Quarterly
Distribution and Target Distribution
Levels.................................. The Minimum Quarterly Distribution and the Target Distribution Levels
are subject to downward adjustments in the event that the
Unitholders receive distributions of Available Cash from Capital
Surplus (as defined in the
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<S> <C>
Glossary) or legislation is enacted or existing law is modified or
interpreted by the relevant governmental authority in a manner that
causes the Partnership to be treated as an association taxable as a
corporation or otherwise taxable as an entity for federal, state or
local income tax purposes. If, as a result of distributions of
Available Cash from Capital Surplus, the Unitholders receive a full
return of the initial public offering price of the Common Units and
any unpaid Common Unit Arrearages, the additional distributions of
Available Cash payable to the General Partners will increase to 50%
of all amounts distributed thereafter. See 'Cash Distribution
Policy -- General' and ' -- Distributions from Capital Surplus.'
Partnership's Ability to Issue Additional
Units................................... The Partnership Agreement generally authorizes the Partnership to
issue an unlimited number of additional limited partner interests
and other equity securities of the Partnership for such
consideration and on such terms and conditions as shall be
established by the Managing General Partner in its sole discretion
without the approval of the Unitholders. During the Subordination
Period, however, the Partnership may not issue equity securities
ranking prior or senior to the Common Units or an aggregate of more
than 3,095,238 Common Units or an equivalent number of securities
ranking on parity with the Common Units or ranking prior or senior
to or on parity with the Subordinated Units (excluding Common Units
issued upon exercise of the Underwriters' over-allotment option,
upon conversion of Subordinated Units, upon conversion of the
Special General Partner's combined unsubordinated general partner
interest or in connection with certain acquisitions or capital
additions and improvements, the repayment of certain indebtedness,
or pursuant to employee benefit plans), in either case without the
approval of a Unit Majority (as defined in the Glossary). See 'The
Partnership Agreement -- Issuance of Additional Securities.'
Limited Call Right........................ If at any time less than 20% of the issued and outstanding Common
Units are held by persons other than the General Partners and their
Affiliates, the General Partners (or an Affiliate designated by the
General Partners) may purchase all of the remaining Common Units at
a price generally equal to the then current market price of the
Common Units. See 'The Partnership Agreement -- Limited Call
Right.'
Limited Voting Rights..................... Unitholders will have only limited voting rights on matters affecting
the Partnership's business as specified in the Partnership
Agreement. The approval of at least a majority (and in certain
cases a greater percentage) of the outstanding Units will be
required in such instances. The Managing General Partner will
manage and operate the Partnership. See 'The Partnership
Agreement.'
Removal and Withdrawal of the General
Partners................................ Subject to certain conditions, the Managing General Partner may be
removed upon the approval of the holders of at least 66 2/3% of the
outstanding Units (including Units held by the General Partners and
their Affiliates). A meeting of the holders of the Common Units may
be called only by the Managing General Partner or by the holders of
20% or more of the outstanding Common Units. The Managing General
Partner's current ownership interest in the Partnership precludes
any vote to remove the Managing General Partner or the Special
General Partner without the
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<S> <C>
Managing General Partner's consent. The Special General Partner
shall be removed or withdraw as general partner of the Partnership
and the Operating Partnership upon the removal or withdrawal of the
Managing General Partner. The Managing General Partner has agreed
not to voluntarily withdraw as managing general partner of the
Partnership and the Operating Partnership prior to June 30, 2006,
subject to limited exceptions, without obtaining the approval of a
Unit Majority (as defined in the Glossary) and furnishing an
Opinion of Counsel (as defined in the Glossary). See 'The
Partnership Agreement -- Withdrawal or Removal of the General
Partners' and ' -- Meetings; Voting.'
Change of Management Provisions........... Any person or group (other than the General Partners or their
Affiliates) that acquires beneficial ownership of 20% or more of
the outstanding Units of any class will lose its voting rights with
respect to all of its Units. In addition, if the Managing General
Partner is removed as the managing general partner of the
Partnership other than for Cause, the Subordination Period will
end, all Common Unit Arrearages will terminate, all outstanding
Subordinated Units will immediately convert into Common Units on a
one-for-one basis and the General Partners will have the right to
convert the General Partner Interests into Common Units or to
receive in exchange for such interests, cash payments equal to the
fair market value of such interests. See 'The Partnership
Agreement -- Withdrawal or Removal of the General Partners,'
' -- Meetings; Voting' and ' -- Change of Management Provisions.'
Transfer Restrictions..................... All purchasers of Common Units in the Offering and purchasers of
Common Units in the open market who wish to become Unitholders of
record must deliver an executed transfer application (the 'Transfer
Application,' the form of which is included in this Prospectus as
Appendix B) before the issuance or transfer of such Common Units
will be registered and before cash distributions and federal income
tax allocations will be made to the transferee. See 'Description of
the Common Units -- Transfer of Common Units.'
Distributions Upon Liquidation............ In the event of any liquidation of the Partnership during the
Subordination Period, the outstanding Common Units will be entitled
to receive a distribution out of the net assets of the Partnership
in preference to liquidating distributions on the Subordinated
Units to the extent of their Unrecovered Capital (as defined in the
Glossary) and any unpaid Common Unit Arrearages. Under certain
circumstances, there may be insufficient gain for the holders of
Common Units to fully recover all such amounts, even though there
may be cash available for distribution to holders of Subordinated
Units. Following conversion of the Subordinated Units into Common
Units, all Units will be treated the same upon liquidation of the
Partnership. See 'Cash Distribution Policy -- Distributions of Cash
Upon Liquidation.'
Use of Proceeds........................... The net proceeds to the Partnership from the sale of Common Units
offered in the Offering (assuming an initial public offering price
of $ per Common Unit) are estimated to be approximately $118.2
million, after deducting estimated underwriting discounts and
commissions and fees and expenses of the Offering. Approximately
$70.0 million of such proceeds will be used to repay indebtedness
of National Propane outstanding under the Existing Credit
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<S> <C>
Facility, approximately $40.7 million will be used to make the
Partnership Loan to Triarc and approximately $7.5 million will be
used to pay accrued management fees and tax sharing payments due to
Triarc. If the Underwriters' over-allotment is exercised in full,
the estimated additional net proceeds will be approximately $18.1
million. All of the net proceeds from the exercise, if any, of the
Underwriters' over-allotment option will be retained by the
Partnership and used for general partnership purposes.
Listing................................... Application will be made to list the Common Units for trading on the
New York Stock Exchange, Inc. ('NYSE').
Proposed NYSE Symbol...................... 'NPL'
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SUMMARY OF TAX CONSIDERATIONS
The tax consequences of an investment in the Partnership to a particular
investor will depend in part on the investor's own tax circumstances. Each
prospective investor should consult a tax advisor about the federal, state and
local tax consequences of an investment in Common Units. The following is a
brief summary of certain expected tax consequences of owning and disposing of
Common Units. The following discussion, insofar as it relates to federal income
tax laws, is based in part upon the opinion of Counsel described in 'Tax
Considerations.' This summary is qualified by the discussion in 'Tax
Considerations,' particularly the qualifications on the opinions of Counsel
described therein.
PARTNERSHIP STATUS
In the opinion of Counsel, the Partnership will be classified for federal
income tax purposes as a partnership, and the beneficial owners of Common Units
will generally be considered partners in the Partnership. Accordingly, the
Partnership will pay no federal income taxes, but the Partnership's income,
gains, losses and deductions will be includable in the federal income tax
returns of the Unitholders. In general, cash distributions to a Unitholder will
be taxable only if, and to the extent that, they exceed the tax basis in such
Unitholder's Common Units.
PARTNERSHIP ALLOCATIONS
In general, income and loss of the Partnership will be allocated to the
General Partners and the Unitholders for each taxable year in accordance with
their respective percentage interests in the Partnership, as determined annually
and prorated on a monthly basis and subsequently apportioned among the General
Partners and the Unitholders of record as of the opening of the first business
day of the month to which they relate, even though Unitholders may dispose of
their Units during the month in question. For purposes of determining federal
income tax liability, a Unitholder will be required to take into account income
generated by the Partnership allocable to such Unitholder for each taxable year
of the Partnership ending within or with the Unitholder's taxable year even if
cash distributions are not made to such Unitholder. As a consequence, a
Unitholder's share of taxable income of the Partnership (and possibly the income
tax payable by such Unitholder with respect to such income) may exceed the cash,
if any, actually distributed to such Unitholder.
RATIO OF TAXABLE INCOME TO DISTRIBUTIONS
The Partnership estimates that a purchaser of Common Units in the Offering
who holds such Common Units through December 31, 1999, will be allocated, on a
cumulative basis, an amount of federal taxable income for such period that will
be less than % of the cash distributed with respect to that period. The
Partnership further estimates that for taxable years after the taxable year
ending December 31, 1999, the taxable income allocable to the Unitholders will
represent a significantly higher percentage (and could in certain circumstances
exceed the amount) of cash distributed to them. These estimates are based upon
the assumption that the gross income from operations will approximate an amount
required to make the Minimum Quarterly Distribution with respect to all Units
and other assumptions with respect to capital expenditures, cash flow and
anticipated cash distributions. These estimates and assumptions are subject to,
among other things, numerous business, economic, regulatory, competitive and
political uncertainties which are beyond the control of the Partnership.
Further, the estimates are based on current tax law and certain tax reporting
positions that the Partnership intends to adopt and with which the IRS could
disagree. Accordingly, no assurance can be given that the estimates will prove
to be correct. The actual percentages could be higher or lower than as described
above and any differences could be material. See 'Tax Considerations -- Tax
Consequences of Unit Ownership -- Ratio of Taxable Income to Distributions.'
BASIS OF COMMON UNITS
A Unitholder's initial tax basis for a Common Unit purchased in the
Offering will generally be the amount paid for the Common Units. A Unitholder's
basis is generally increased by such Unitholder's
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share of Partnership income and decreased by such Unitholder's share of
Partnership losses and distributions.
LIMITATIONS ON DEDUCTIBILITY OF PARTNERSHIP LOSSES
In the case of taxpayers subject to the passive loss rules (such as
individuals and closely held corporations), any Partnership losses will be
available only to offset future income generated by the Partnership and cannot
be used to offset income from other activities, including passive activities or
investments. Any losses unused by virtue of the passive loss rules may be
deducted when the Unitholder disposes of all of his Common Units in a fully
taxable transaction with an unrelated party. In addition, a Unitholder may
deduct such Unitholder's share of Partnership losses only to the extent the
losses do not exceed such Unitholder's basis in such Unitholder's Common Units
or, in the case of taxpayers subject to the 'at risk' rules (such as
individuals), the amount the Unitholder is at risk with respect to the
Partnership's activities, if less than such tax basis.
SECTION 754 ELECTION
The Partnership intends to make the election provided for by Section 754 of
the Internal Revenue Code of 1986, as amended (the 'Code'), which will generally
result in a Unitholder being allocated income and deductions calculated by
reference to the portion of that Unitholder's purchase price attributable to
each asset of the Partnership.
DISPOSITION OF COMMON UNITS
A Unitholder who sells Common Units will recognize gain or loss equal to
the difference between the amount realized and the adjusted tax basis in those
Common Units. Thus, distributions of cash from the Partnership to a Unitholder
in excess of the income allocated to such Unitholder will, in effect, become
taxable income if such Unitholder sells the Common Units at or above their
original cost. A portion of the amount realized (whether or not representing
gain) may be ordinary income.
STATE, LOCAL AND OTHER TAX CONSIDERATIONS
In addition to federal income taxes, Unitholders will be subject to other
taxes, such as state and local income taxes, unincorporated business taxes and
estate, inheritance or intangible taxes that are imposed by the various
jurisdictions in which a Unitholder resides or in which the Partnership does
business or owns property. Although an analysis of those various taxes is not
presented here, each prospective Unitholder should consider their potential
impact on such Unitholder's investment in the Partnership. The Partnership will
initially own property and conduct business in New York, Florida, Michigan and
21 other states. A Unitholder will also be required to file state income tax
returns and to pay taxes in various states and may be subject to penalties for
failure to comply with such requirements. Based on 1995 revenues, the Managing
General Partner currently anticipates that substantially all of the
Partnership's income will be generated in Arkansas, Arizona, Colorado,
Connecticut, Florida, Iowa, Illinois, Massachusetts, Michigan, Minnesota,
Missouri, New Hampshire, New Mexico, New York, and Wisconsin. Each of the
states, other than Florida, in which the Managing General Partner currently
anticipates that a substantial portion of the Partnership's income will be
generated currently imposes a personal income tax. In certain states, tax losses
may not produce a tax benefit in the year incurred (if, for example, the
Partnership has no income from sources within that state) and also may not be
available to offset income in subsequent taxable years. Some of the states may
require the Partnership, or the Partnership may elect, to withhold a percentage
of income from amounts to be distributed to a Unitholder who is not a resident
of that state. Withholding, the amount of which may be more or less than a
particular Unitholder's income tax liability to the state, may not relieve the
nonresident Unitholder from the obligation to file an income tax return. Amounts
withheld may be treated as if distributed to Unitholders for purposes of
determining the amounts distributed by the Partnership. Based on current law and
its estimate of future Partnership operations, the Partnership anticipates that
any amounts required to be withheld will not be material.
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It is the responsibility of each prospective Unitholder to investigate the
legal and tax consequences, under the laws of pertinent states and localities,
of such Unitholder's investment in the Partnership. Accordingly, each
prospective Unitholder should consult, and must depend upon, that Unitholder's
own tax counsel or other advisor with regard to those matters. Further, it is
the responsibility of each Unitholder to file all federal, state and local tax
returns that may be required of such Unitholder. Counsel has not rendered an
opinion on the state or local tax consequences of an investment in the
Partnership.
OWNERSHIP OF COMMON UNITS BY TAX-EXEMPT ORGANIZATIONS AND CERTAIN OTHER
INVESTORS
An investment in Common Units by tax-exempt organizations (including
individual retirement accounts and other retirement plans), regulated investment
companies and foreign persons raises issues unique to such persons. Virtually
all of the Partnership income allocated to a Unitholder which is a tax-exempt
organization will be unrelated business taxable income, and thus will be taxable
to such Unitholder; no significant amount of the Partnership's gross income will
be qualifying income for purposes of determining whether a Unitholder will
qualify as a regulated investment company; and a Unitholder who is a nonresident
alien, foreign corporation or other foreign person will be regarded as being
engaged in a trade or business in the United States as a result of ownership of
a Common Unit and thus will be required to file federal income tax returns and
to pay tax on such Unitholder's share of Partnership taxable income. See 'Tax
Considerations -- Uniformity of Units -- Tax-Exempt Organizations and Certain
Other Investors.'
TAX SHELTER REGISTRATION
The Code generally requires that 'tax shelters' be registered with the
Secretary of the Treasury. It is arguable that the Partnership will not be
subject to this registration requirement. Nevertheless, the Partnership will be
registered as a tax shelter with the IRS. ISSUANCE OF THE REGISTRATION NUMBER
DOES NOT INDICATE THAT AN INVESTMENT IN THE PARTNERSHIP OR THE CLAIMED TAX
BENEFITS HAS BEEN REVIEWED, EXAMINED OR APPROVED BY THE IRS. See 'Tax
Considerations -- Administrative Matters -- Registration as a Tax Shelter.'
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RISK FACTORS
A prospective investor should carefully consider the risk factors set forth
below as well as the other information set forth in this Prospectus before
purchasing the Common Units offered in the Offering.
RISKS INHERENT IN THE PARTNERSHIP'S BUSINESS
WEATHER CONDITIONS AFFECT THE DEMAND FOR PROPANE
Weather conditions, which can vary substantially from year to year, have a
significant impact on the demand for propane for both heating and agricultural
purposes. Many customers of the Partnership rely heavily on propane as a heating
fuel. Accordingly, 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 66% of the
Partnership's retail propane volume has been sold during this peak heating
season. Actual weather conditions, therefore, may significantly affect the
Partnership's financial performance. For example, warm weather during the winter
of 1994-95 significantly decreased the overall demand for propane, and adversely
affected the Partnership's operating income. Furthermore, despite the fact that
overall weather conditions may be normal, variations in weather in one or more
regions in which the Partnership operates can significantly affect the total
volume of propane sold by the Partnership and, consequently, the Partnership's
results of operations. Variations in the weather in the Midwest, where the
majority of the Partnership's retail volume is sold, and in the Northeast, where
the Partnership has a greater concentration of higher margin residential
accounts, will generally have a greater impact on the Partnership's EBITDA and
operating income than variations in the weather in other markets. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
THE PARTNERSHIP WILL BE SUBJECT TO PRICING AND INVENTORY RISK
The retail propane business is a 'margin-based' business in which gross
profits depend on the excess of sales prices over propane supply costs.
Consequently, the Partnership's profitability will be sensitive to changes in
wholesale propane prices. 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. The Partnership will have no control over these market conditions.
Consequently, the unit price of propane purchased by the Partnership, as well as
other propane marketers, can change rapidly over a short period of time. In
general, product supply contracts permit suppliers to charge posted prices (plus
transportation costs) at the time of delivery or the current prices established
at major storage points such as Mont Belvieu, Texas, or Conway, Kansas. Since
rapid increases in the wholesale cost of propane may not be immediately passed
on to customers, such increases could reduce the Partnership's gross profits.
See ' -- The Retail Propane Business Is Highly Competitive.'
Propane is available from numerous sources, including integrated
international oil companies, independent refiners and independent wholesalers.
The Partnership purchases propane from a variety of suppliers pursuant to supply
contracts or on the spot market. In 1995, approximately 81% of the propane
purchased by the Partnership was produced domestically and approximately 19% was
produced in Canada. To the extent that the Partnership purchases propane from
foreign (including Canadian) sources, its propane business will be subject to
risks of disruption in foreign supply. The Partnership generally attempts to
minimize inventory risk by purchasing propane on a short-term basis. However,
the Partnership has on occasion purchased, and may in the future purchase, large
volumes of propane during periods of low demand, which generally occur during
the summer months, at the then current market price, for storage both at its
service centers and in the Partnership's major storage facilities for future
resale. As of March 1, 1996, the Partnership's total storage capacity was
approximately 33 million gallons (including approximately one million gallons of
storage capacity currently leased to third parties). See 'Business and
Properties -- Properties.' Because of the potential volatility of propane
prices, the market price for propane could fall below the price at which the
Partnership purchased propane held in inventory, thereby adversely affecting
gross margins or sales or rendering sales from such inventory unprofitable.
Except for the occasional opportunistic buying described above, the Partnership
has not engaged in any significant hedging activities with respect to its
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propane supply requirements, although it may do so in the future. See 'Business
and Properties -- Propane Supply and Storage.'
THE RETAIL PROPANE BUSINESS IS HIGHLY COMPETITIVE
The Partnership's business is highly competitive. Competition within the
propane distribution industry stems primarily from three types of participants:
larger multi-state marketers, local independent marketers and farm cooperatives.
Some of the Partnership's competitors may be larger or have greater financial
and other resources or lower operating costs than the Partnership. Generally,
warmer-than-normal weather further intensifies competition. In addition,
competitive conditions vary by region. Currently, competition is particularly
intense in the Midwest, while the Partnership faces relatively less competition
in the Northeast and Southeast.
Most of the Partnership's service centers compete with several other
marketers or distributors and certain service centers compete with a large
number of marketers or distributors. The principal factors influencing
competition with other retail marketers are price, reliability and quality of
service, responsiveness to customer needs and safety concerns. Each service
center operates in its own competitive environment, as retail marketers are
typically located in close proximity to customers to lower the cost of providing
service. Service centers located in the Midwest face particularly intense
competition in the retail market as retail customers in that region generally
use higher volumes of propane and are therefore more sensitive to price
fluctuations than customers located in other regions. Of the Partnership's 165
service centers, 68 are located in the Midwest where approximately 47.4% of the
Partnership's total retail propane volume was sold in 1995.
THE RETAIL PROPANE BUSINESS IS MATURE AND THE PARTNERSHIP'S ABILITY TO GROW
LARGELY DEPENDS UPON ACQUIRING OTHER RETAIL DISTRIBUTORS
The retail propane industry is mature, and the Partnership foresees only
limited growth in total retail demand for propane. The Partnership 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. Moreover, as a result of long-standing customer relationships that are
typical in the retail home propane industry, the inconvenience of switching
tanks and suppliers and propane's higher cost than certain other energy sources,
such as natural gas, the Partnership may experience difficulty in acquiring new
retail customers. Therefore, while the Partnership's business strategy includes
opening new locations, adding new retail customers and retaining existing
customers, the ability of the Partnership's propane business to grow will depend
in large part on its ability to acquire other retail distributors.
In making acquisitions of other retail distributors, the Partnership will
have to compete with other companies, some of which may be larger or have
greater financial or other resources than the Partnership. In addition, there
can be no assurance that the Partnership will identify attractive acquisition
candidates in the future, will be able to acquire such candidates on acceptable
terms, or will be able to finance such acquisitions. If the Partnership is able
to make acquisitions, there can be no assurance that such acquisitions will not
dilute earnings and distributions on the Units, or that any additional debt
incurred to finance acquisitions will not affect the ability of the Partnership
to make distributions on the Units. Moreover, the Partnership is subject to
certain debt incurrence covenants in certain agreements governing its
indebtedness that might restrict the Partnership's ability to incur indebtedness
to finance acquisitions. For additional information regarding such debt
incurrence covenants and the Partnership's availability under the Working
Capital Facility and the Acquisition Facility, see 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources' and ' -- Description of Indebtedness.' Also, to the extent
that warm weather adversely affects the Partnership's operating and financial
results, the Partnership's access to capital and its acquisition activities may
be limited.
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THE RETAIL PROPANE BUSINESS FACES COMPETITION FROM ALTERNATIVE ENERGY SOURCES
Propane is sold in competition with other sources of energy, some of which
are less costly for equivalent energy value. The Partnership competes for
customers against suppliers of electricity, natural gas and fuel oil.
Electricity is a major competitor of propane, but propane generally enjoys a
competitive price advantage over electricity. Propane is generally not
competitive with natural gas in those areas where natural gas is readily
available because natural gas is a significantly less expensive source of energy
than propane. The gradual expansion of the nation's natural gas distribution
systems has resulted in the availability of natural gas in areas that previously
depended upon propane. To a lesser extent, the Partnership also competes for
customers against suppliers of fuel oil. In addition, the development of
alternative energy sources may have an adverse effect on the operations of the
Partnership. See 'Business and Properties -- Competition.'
ENERGY EFFICIENCY AND TECHNOLOGY TRENDS 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, and
may continue to adversely affect, demand for propane by retail customers. The
Partnership cannot predict the effect of future conservation measures or the
effect that any technological advances in heating, conservation, energy
generation or other devices might have on its operations.
THE PARTNERSHIP IS SUBJECT TO OPERATING AND LITIGATION RISKS WHICH MAY NOT BE
COVERED BY INSURANCE
The Partnership's operations are subject to the operating hazards and risks
normally associated with handling, storing and delivering combustible liquids
such as propane. As a result, the Partnership has been, and is likely to
continue to be, a defendant in various legal proceedings and litigation arising
in its ordinary course of business. The Partnership intends to self-insure (as
National Propane currently does) and maintain insurance policies with insurers
in such amounts and with such coverages and deductibles as the Managing General
Partner believes are reasonable and prudent. However, there can be no assurance
that such insurance will be adequate to protect the Partnership from all
material expenses related to potential future claims or that such levels of
insurance will be available in the future at economical prices. Moreover, there
can be no assurance that future claims within the Partnership's self-insured
retention will not, individually or in the aggregate, have a material adverse
effect on the business of the Partnership.
The Partnership will assume the liabilities of National Propane for certain
potential environmental remediation costs, primarily costs related to
remediation of coal tar contamination at the Partnership's Marshfield, Wisconsin
facility. The Partnership believes the contamination of such property occurred
during its use as a coal gasification plant by a previous owner. To the extent
that there are any environmental liabilities unknown to the Partnership or that
known environmental liabilities result in material costs in excess of amounts
accrued or any environmental laws are made more stringent, there can be no
assurance that the Partnership's results of operations or ability to make
distributions to Unitholders will not be materially and adversely affected. In
addition, future claims or environmental liabilities not covered by insurance or
indemnification, or a large number of claims incurred by the Partnership in the
future that are within the Partnership's self-insured retention, could have a
material adverse effect on the business, results of operations or financial
position of the Partnership and the ability of the Partnership to make the
Minimum Quarterly Distribution. See 'Business and Properties -- Government
Regulation' and ' -- Litigation and Contingent Liabilities.'
RISKS INHERENT IN AN INVESTMENT IN THE PARTNERSHIP
CASH DISTRIBUTIONS ARE NOT GUARANTEED AND MAY FLUCTUATE WITH PARTNERSHIP
PERFORMANCE
Although the Partnership will distribute all of its Available Cash, there
can be no assurance regarding the amounts of Available Cash that the Partnership
will generate. The actual amounts of
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Available Cash will depend upon numerous factors, including profitability of
operations, required principal and interest payments on the Partnership's debt,
interest payments from Triarc on the Partnership Loan, the cost of acquisitions
(including related debt service payments), restrictions contained in the
Partnership's debt instruments, the issuance of debt and equity securities by
the Partnership, fluctuations in working capital, capital expenditures,
adjustments in reserves, prevailing economic conditions and financial, business
and other factors, a number of which may be beyond the control of the
Partnership. Cash distributions are dependent primarily on cash flow and not on
profitability, which is affected by non-cash items. Therefore, cash
distributions may be made during periods when the Partnership records losses and
may not be made during periods when the Partnership records profits. The amount
of Available Cash from Operating Surplus needed to distribute the Minimum
Quarterly Distribution for four quarters on the Common Units and Subordinated
Units to be outstanding immediately after the Offering and on the General
Partner Interests is approximately $25.1 million (approximately $13.0 million
for the Common Units, $11.1 million for the Subordinated Units and $1.0 million
for the General Partner Interests). If the Underwriters' over-allotment option
is exercised in full, such amounts would be approximately $15.0 million for the
Common Units, $11.1 million for the Subordinated Units and $1.0 million for the
General Partner Interests, or an aggregate of approximately $27.1 million. Pro
forma Available Cash from Operating Surplus generated during 1994 and 1995
(approximately $22.9 million and $17.9 million, respectively) would have been
sufficient to cover the Minimum Quarterly Distribution for the four quarters in
each such year on all of the outstanding Common Units and the related
distribution on the General Partner Interests, but would have been insufficient
by approximately $2.2 million and $7.2 million to cover the Minimum Quarterly
Distribution on the Subordinated Units and the related distribution on the
General Partner Interests in 1994 and 1995, respectively. In addition, assuming
that no interest payments were made by Triarc on the Partnership Loan, the
amount of pro forma Available Cash from Operating Surplus generated during 1994
and 1995 would have been approximately $17.4 million and $12.4 million,
respectively. The $17.4 million generated in 1994 would have been sufficient to
cover the Minimum Quarterly Distribution for the four quarters in 1994 on all of
the outstanding Common Units and the related distribution on the General Partner
Interests, but the $12.4 million generated during 1995 would have been
insufficient by approximately $1.1 million to cover the Minimum Quarterly
Distribution for the four quarters in 1995 on all of the Common Units and the
related distribution on the General Partner Interests. See ' -- A Portion of the
Partnership's Cash Receipts will be Interest Payments from Triarc on the
Partnership Loan' and 'Cash Distribution Policy -- Partnership Loan.' In 1994
and 1995, on a pro forma basis, quarterly distributions of Available Cash would
not have exceeded any Target Distribution Level and the Partnership would not
have made any Incentive Distributions to the Managing General Partner.
The Partnership Agreement gives the Managing General Partner discretion in
establishing reserves for the proper conduct of the Partnership's business that
will affect the amount of Available Cash. Due to the seasonal nature of the
Partnership's business, the Managing General Partner expects that it will make
additions to reserves during certain quarters in order to fund operating
expenses and distributions to partners with respect to other quarters. In
addition, the Partnership will be required to make reserves for the future
payment of principal and interest on the First Mortgage Notes and in certain
instances for the future payment of principal and interest under the Bank Credit
Facility. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Description of Indebtedness.' The Partnership
anticipates that reserves for interest on the First Mortgage Notes will be
established at approximately $2.4 million at each March and September,
commencing September, 1996 and the reserves will be eliminated when interest
payments are made on the First Mortgage Notes in June and December. The $2.4
million reserved for interest would be approximately 9.6% (8.9% if the
Underwriters' over-allotment option is exercised in full) of the amount of
Available Cash needed to distribute the Minimum Quarterly Distribution for four
quarters on the Common Units and the Subordinated Units to be outstanding
immediately after the Offering and on the General Partner Interests. Reserves
for repayment of principal on the First Mortgage Notes are not required until
September 2002 and then will equal 25%, 50% and 75%, respectively, of the next
installment of principal at each September, December and March and the reserves
will be eliminated when principal payments are made on the First Mortgage Notes
in June. The $3.75 million reserved quarterly for principal payments would be
approximately 14.9% (13.8% if the Underwriters' over-allotment option is
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exercised in full) of the amount of Available Cash needed to distribute the
Minimum Quarterly Distribution for four quarters on the Common Units and the
Subordinated Units to be outstanding immediately after the Offering and on the
General Partner Interests. Furthermore, the First Mortgage Notes and the Bank
Credit Facility will limit the Operating Partnership's ability to distribute
cash to the Partnership. Distributions from the Operating Partnership will be
the Partnership's primary source of Available Cash. Subsequent refinancing of
the First Mortgage Notes or the Bank Credit Facility, as well as other
indebtedness incurred by the Partnership, may have similar or even more limiting
restrictions. As a result of these and other factors, there can be no assurance
regarding the actual levels of cash distributions by the Partnership, and the
Partnership's ability to distribute cash may be limited during the existence of
any events of default under any of the Partnership's debt instruments.
A PORTION OF THE PARTNERSHIP'S CASH RECEIPTS WILL BE INTEREST PAYMENTS FROM
TRIARC ON THE PARTNERSHIP LOAN
Approximately $5.5 million of the Partnership's annual cash receipts will
be interest payments from Triarc under the Partnership Loan, which bears
interest at an annual rate of 13.5%. On a pro forma basis such amount represents
approximately 31% of the Partnership's Available Cash from Operating Surplus in
1995. Consequently, Triarc's failure to make interest payments under the
Partnership Loan would adversely affect the ability of the Partnership to make
distributions to Unitholders. Assuming that no interest payments were made by
Triarc on the Partnership Loan, the amount of pro forma Available Cash from
Operating Surplus generated during 1995 would have been insufficient by
approximately $1.1 million to cover the Minimum Quarterly Distribution on the
Common Units and the related distribution on the General Partner Interests.
Because Triarc is a holding company, its ability to meet its cash
requirements (including required interest and principal payments on the
Partnership Loan) is primarily dependent (in addition to its cash on hand) upon
cash flows from its subsidiaries, including loans and cash dividends and
reimbursement by subsidiaries to Triarc in connection with its providing certain
management services and payments by subsidiaries under certain tax sharing
agreements. Under the terms of various indentures and credit arrangements,
Triarc's principal subsidiaries are currently unable to pay any dividends or
make any loans or advances to Triarc. In addition, the Partnership Loan does not
restrict Triarc's ability to sell, convey, transfer or encumber the stock or
assets of any of its subsidiaries (other than the Managing General Partner and
SEPSCO), or its ability to dispose of its cash on hand or other assets. The
Partnership estimates that Triarc's cash on hand at the closing of the Offering
will be approximately $ . The Partnership believes that such amount of
cash on hand, plus distributions from certain of Triarc's subsidiaries, will
enable Triarc to have adequate cash resources to meet its short term cash
requirements, including required interest payments on the Partnership Loan. See
'Cash Distribution Policy -- Partnership Loan -- Certain Information Regarding
Triarc.' However, there can be no assurance that Triarc will continue to have
cash on hand or that in the future it will receive sufficient distributions from
its subsidiaries in order to enable it to satisfy its obligations under the
Partnership Loan. Also, the Partnership Loan does not limit Triarc's ability to,
and there can be no assurances that Triarc will not in the future, incur
indebtedness and other obligations that will rank pari passu with Triarc's
obligations under the Partnership Loan or be secured by assets of Triarc that do
not secure the Partnership Loan. The failure of Triarc to make payments of
principal and interest on the Partnership Loan when due would have an adverse
effect on the ability of the Partnership to make distributions to Unitholders.
In addition, Triarc is permitted to prepay the Partnership Loan under certain
circumstances. The prepayment by Triarc of all or a portion of the Partnership
Loan and the failure by the Partnership to reinvest such funds in a manner that
generates an equivalent amount of cash flow could have an adverse effect on the
Partnership's ability to make distributions to Unitholders. The Partnership Loan
is recourse to Triarc and is secured by a pledge by Triarc of all of the shares
of capital stock of the Managing General Partner owned by Triarc (approximately
75.7% of the Managing General Partner's outstanding capital stock as of the date
of this Prospectus). See 'Cash Distribution Policy -- Partnership Loan.'
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THE PARTNERSHIP'S INDEBTEDNESS MAY LIMIT THE PARTNERSHIP'S ABILITY TO MAKE
DISTRIBUTIONS AND MAY AFFECT ITS OPERATIONS
On a pro forma basis as of December 31, 1995, assuming consummation of the
transactions contemplated by this Prospectus, the Partnership would have had
approximately $128.2 million in total consolidated indebtedness and the amount
of such indebtedness as a percentage of total capitalization would have been
approximately 82.5%. As a result, the Partnership will be significantly
leveraged and will have indebtedness that is substantial in relation to its
partners' capital. Although the Partnership does not intend to draw on the Bank
Credit Facility at the time of the closing of this Offering, future borrowings
could result in a significant increase in the Partnership's leverage.
Furthermore, the Managing General Partner may cause the Partnership to incur
additional indebtedness, including borrowings that have the purpose or effect of
enabling the Managing General Partner to receive distributions or hastening the
conversion of Subordinated Units into Common Units. The ability of the
Partnership to make principal and interest payments will depend on future
performance, which is subject to many factors, some of which will be outside the
Partnership's control. Certain of the Partnership's indebtedness contain
provisions relating to change of control. If such provisions are triggered, such
outstanding indebtedness may become immediately due. In such event, there is no
assurance that the Partnership would be able to pay such indebtedness. In
addition, the First Mortgage Notes and the Bank Credit Facility will be secured
by substantially all of the assets of the Operating Partnership and will contain
restrictive covenants that limit the ability of the Operating Partnership to
distribute cash and to incur additional indebtedness. In the case of a
continuing default by the Operating Partnership under such indebtedness, the
lenders would have the right to foreclose on the Operating Partnership's assets,
which would have a material adverse effect on the Partnership. See 'Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Description of Indebtedness.' Payment of principal and interest on such
indebtedness, as well as compliance with the requirements and covenants of such
indebtedness, may limit the Partnership's ability to make distributions to
Unitholders. The Partnership's leverage may also adversely affect the ability of
the Partnership to finance its future operations and capital needs, may limit
its ability to pursue other business opportunities and may make its results of
operations more susceptible to adverse economic conditions. See 'Management's
Discussion and Analysis of Financial Conditions and Results of
Operations -- Description of Indebtedness.'
PARTNERSHIP ASSUMPTIONS CONCERNING FUTURE OPERATIONS AND WEATHER MAY NOT BE
REALIZED
In establishing the terms of the Offering, including the number and initial
offering price of Common Units, the number of Subordinated Units and the amount
of the Minimum Quarterly Distribution, the Partnership relied on certain
assumptions concerning its operations through the quarter ending December 31,
1997, including the assumptions that normal weather conditions will prevail in
the Partnership's operating areas, that the Partnership's operating margins will
remain constant, that all required interest payments on the Partnership Loan
will be made by Triarc, and that market and overall economic conditions will not
change substantially. Although the Partnership believes its assumptions are
reasonable, whether the assumptions are realized is not, in a number of cases,
within the control of the Partnership and cannot be predicted with any degree of
certainty. See 'Cash Distribution Policy -- Cash Available for Distribution.'
Because a substantial portion of the Partnership's propane is used in the
heating-sensitive residential and commercial markets, weather conditions have a
particularly significant effect on the financial performance of the Partnership.
See ' -- Risks Inherent in the Partnership's Business -- Weather Conditions
Affect the Demand for Propane.' In preparing its forecasts of future operations,
management of the Partnership requested each regional and service center manager
to provide a forecast of propane sales volumes based upon the assumption that
normal weather conditions will prevail in such region or locality. Accordingly,
the Partnership's assumptions concerning its future operations are based in
significant part on an aggregate of forecasted regional propane volumes which,
in turn, are based on the assumption that normal weather conditions will prevail
in the Partnership's operating areas.
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There is a substantial risk that the Partnership's assumptions concerning
the weather will not prove to be correct in any year or series of years. Actual
weather conditions can vary substantially from historical averages, and there
can be no assurance that weather conditions in the future will not be warmer
than weather conditions in the past. For example, the Partnership believes that
during the 10 years and the five years ended June 30, 1995, nationwide weather
averaged 3.0% and 3.3% warmer than normal, respectively, compared to the number
of average Degree Days (as defined in the Glossary) on a nationwide basis during
the 30-year period ended June 30, 1991, as determined by the U.S. Department of
Commerce's National Climatic Data Center. During such 10-year period, eight of
such years were warmer than normal (by as much as 10.3% for the year ended June
30, 1991), while two were colder than normal (by as much as 3.6% for the year
ended June 30, 1994).
The Partnership believes that the information from the National Climatic
Data Center shown above regarding nationwide weather is useful in evaluating the
general extent of weather variations in the Partnership's areas of operations.
However, weather conditions in the Partnership's areas of operation may vary
from normal on a year-to-year basis to a greater extent than weather conditions
on a nationwide basis. Should weather conditions in the Partnership's operating
areas be warmer than normal, particularly during the October through March peak
heating season, the Partnership's results of operations would be adversely
affected.
THE MANAGING GENERAL PARTNER WILL MANAGE AND OPERATE THE PARTNERSHIP; HOLDERS OF
COMMON UNITS HAVE LIMITED VOTING RIGHTS
The Managing General Partner will manage and operate the Partnership.
Unlike the holders of common stock in a corporation, holders of outstanding
Common Units will have only limited voting rights on matters affecting the
Partnership's business. Holders of Common Units will have no right to elect the
Managing General Partner on an annual or other continuing basis, and the
Managing General Partner generally may not be removed except pursuant to the
vote of the holders of not less than 66 2/3% of the outstanding Units (including
Units owned by the General Partners and their Affiliates). The Managing General
Partner's current ownership interest in the Partnership precludes any vote to
remove the Managing General Partner without its consent. In addition, if at any
time any person or group other than the General Partners and their Affiliates
beneficially owns more than 20% of the Units of any class then outstanding, such
person or group will lose voting rights with respect to all of its Units. As a
result, holders of Common Units will have limited influence on matters affecting
the operation of the Partnership, and third parties may find it difficult to
attempt to gain control or influence the activities of the Partnership. See 'The
Partnership Agreement.'
PURCHASERS OF COMMON UNITS WILL EXPERIENCE DILUTION
Purchasers of Common Units in the Offering will experience substantial and
immediate dilution in net tangible book value of $20.38 per Common Unit from the
initial public offering price, the Managing General Partner will experience an
increase in net tangible book value of $19.86 per Unit and each Common Unit will
have a pro forma net tangible book value of $0.62 per Common Unit (assuming an
initial public offering price of $ per Common Unit). See 'Dilution.'
COST REIMBURSEMENTS AND FEES DUE TO THE MANAGING GENERAL PARTNER MAY BE
SUBSTANTIAL AND COULD ADVERSELY AFFECT THE PARTNERSHIP'S ABILITY TO MAKE
DISTRIBUTIONS.
Prior to making any distribution on the Common Units, the Partnership will
reimburse the Managing General Partner and its Affiliates (including Triarc) at
cost for all expenses incurred on behalf of the Partnership. On a pro forma
basis, approximately $56.8 million of expenses would have been reimbursed by the
Partnership to the Managing General Partner in 1995 (comprising approximately
$33.0 million in salary, payroll tax and other compensation paid to employees of
the Managing General Partner and approximately $23.8 million for all other
operating expenses). Affiliates of the Managing General Partner (including
Triarc) may perform certain administrative services for the Managing General
Partner on behalf of the Partnership and will be reimbursed for all expenses
incurred in connection therewith. In addition, the Managing General Partner and
its Affiliates may provide
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additional services to the Partnership, for which the Partnership will be
charged reasonable fees as determined by the Managing General Partner. Such cost
reimbursements and fees may be substantial and could adversely affect the
ability of the Partnership to make distributions to Unitholders.
THE PARTNERSHIP MAY ISSUE ADDITIONAL UNITS THEREBY DILUTING EXISTING
UNITHOLDERS' INTERESTS
After the end of the Subordination Period, the Partnership has the
authority to issue an unlimited number of additional Common Units or other
equity securities of the Partnership for such consideration and on such terms as
shall be established by the Managing General Partner in its sole discretion
without the approval of the Unitholders. During the Subordination Period,
however, the Partnership may not issue equity securities ranking senior to the
Common Units or an aggregate of more than 3,095,238 additional Common Units or
an equivalent number of securities ranking on a parity with the Common Units or
ranking prior or senior to or on a parity with the Subordinated Units (excluding
Common Units or in some instances, equity securities ranking on parity with
Common Units or prior or senior to, or ranking on parity with, the Subordinated
Units issued upon exercise of the Underwriters' over-allotment option, upon
conversion of Subordinated Units, upon conversion of the Special General
Partner's combined unsubordinated general partner interest or in connection with
Acquisitions (as defined in the Glossary) or Capital Improvements (as defined in
the Glossary) or the repayment of certain indebtedness or pursuant to employee
benefit plans) without the approval of a Unit Majority. The Partnership
Agreement does not give the holders of Common Units the right to approve the
issuance by the Partnership of equity securities ranking junior to the
Subordinated Units at any time. See 'The Partnership Agreement -- Issuance of
Additional Securities.' The effect of any such issuance may be to dilute the
interests of the then existing holders of Units in the Partnership. In addition,
the conversion of Subordinated Units into Common Units during the Subordination
Period will increase the Partnership's Minimum Quarterly Distribution obligation
with respect to the Common Units while simultaneously reducing the Minimum
Quarterly Distribution with respect to the Subordinated Units. Further, the
exercise of the Underwriters' over-allotment option will increase the
Partnership's Minimum Quarterly Distribution obligation with respect to the
Common Units.
THE MANAGING GENERAL PARTNER WILL HAVE A LIMITED CALL RIGHT WITH RESPECT TO THE
PARTNER INTERESTS
If at any time not more than 20% of the issued and outstanding partner
interests of any class are held by persons other than the General Partners and
their Affiliates, the Managing General Partner will have the right, which it may
assign to any of its Affiliates or the Partnership, to acquire all, but not less
than all, of the remaining partner interests of such class held by such
unaffiliated Persons at a price generally equal to the then current market price
of such partner interests. As a consequence of the Managing General Partner's
right to purchase outstanding partner interests, a holder of partner interests
may have its partner interests purchased from it even though such holder may not
desire to sell them, and the price paid may be less than the amount such holder
would desire to receive upon the sale of such partner interests. See 'The
Partnership Agreement -- Limited Call Right.'
CHANGE OF MANAGEMENT PROVISIONS
Following the Offering, the Managing General Partner will own approximately
46% of the outstanding Units (approximately 43% if the Underwriters'
over-allotment option is exercised in full), and as a result the Unitholders
will not have the required 66 2/3% of the Units necessary to remove the Managing
General Partner. Even if the percentage of outstanding Units held by the
Managing General Partner and its Affiliates were significantly reduced, the
Partnership Agreement contains certain provisions that may have the effect of
discouraging a person or group from attempting to remove the Managing General
Partner. If the Managing General Partner is removed as a general partner of the
Partnership other than for Cause (i) the Subordination Period will end and all
outstanding Subordinated Units will immediately convert into Common Units on a
one-for-one basis, (ii) any existing Common Unit Arrearages will be
extinguished, and (iii) the General Partners will have the right to convert
their General Partner Interests (and the right to receive Incentive
Distributions) into Common Units or to receive in exchange for such interests a
cash payment equal to the fair market
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value of such interests. Also, the Special General Partner will withdraw as a
general partner of the Partnership and the Operating Partnership upon the
removal of the Managing General Partner. Further, if any person or group other
than the General Partners and their Affiliates acquires beneficial ownership of
20% or more of the Units of any class then outstanding, such person or group
will lose voting rights with respect to all of its Units. In addition, the
Partnership has substantial latitude in issuing equity securities without
Unitholder approval. The Partnership Agreement also contains provisions limiting
the ability of Unitholders to call meetings of Unitholders or to acquire
information about the Partnership, the disclosure of which the Partnership
believes is not in the best interests of the Partnership or which the
Partnership is required by law or by agreements with third parties to keep
confidential. Further, the Bank Credit Facility and the First Mortgage Notes
contain provisions that could result in acceleration of the repayment of such
indebtedness upon a change in control of the Partnership. The effect of these
provisions may be to diminish the price at which the Common Units will trade
under certain circumstances. See 'The Partnership Agreement -- Withdrawal or
Removal of the General Partners,' ' -- Meetings; Voting,' ' -- Right to Inspect
Partnership Books and Records' and ' -- Change of Management Provisions.'
NO PRIOR PUBLIC MARKET FOR COMMON UNITS
Prior to the Offering, there has been no public market for the Common
Units. The initial public offering price of the Common Units will be determined
through negotiations among Triarc, the Partnership, the Managing General Partner
and the representatives of the several Underwriters. For a description of the
factors to be considered in determining the initial public offering price, see
'Underwriting.' No assurance can be given as to the market prices at which the
Common Units will trade. An application will be made to list the Common Units
for trading on the NYSE.
UNITHOLDERS MAY NOT HAVE LIMITED LIABILITY IN CERTAIN CIRCUMSTANCES; LIABILITY
FOR THE RETURN OF CERTAIN DISTRIBUTIONS
The limitations on the liability of holders of Common Units for the
obligations of a limited partnership have not been clearly established in some
states. If it were determined that the Partnership had been conducting business
in any state without compliance with the applicable limited partnership statute,
or that the right or the exercise of the right by the holders of Common Units as
a group to remove or replace the Managing General Partner, to make certain
amendments to the Partnership Agreement or to take other action pursuant to the
Partnership Agreement constituted participation in the 'control' of the
Partnership's business, then a holder of Common Units could be held liable under
certain circumstances for the Partnership's obligations to the same extent as a
general partner. In addition, under certain circumstances a Unitholder may be
liable to the Partnership for the amount of a distribution for a period of three
years from the date of the distribution. See 'The Partnership
Agreement -- Limited Liability' for a discussion of the limitations on liability
and the implications thereof to a holder of Common Units.
POSSIBLE INABILITY TO OBTAIN CONSENTS TO ASSET TRANSFERS
Concurrent with the closing of the Offering, National Propane will convey
substantially all of its assets (which assets will not include an existing
intercompany note from Triarc, approximately $59.3 million of the net proceeds
from the issuance of the First Mortgage Notes and certain other assets of the
Managing General Partner) to the Operating Partnership, including leasehold
interests in real and personal property, permits, licenses and other similar
rights. Many of such leases and many of such permits, licenses and other rights
are transferable to the Operating Partnership only with the consent of the
lessor or other third party. The failure by the Operating Partnership to obtain
any such consents and its resulting inability to obtain any such leasehold
rights, permits, licenses or other rights could have a material adverse effect
on the Partnership. However, the Managing General Partner believes that the
Operating Partnership will have the licenses, permits and rights which will
enable the Operating Partnership to conduct its propane business in a manner
which is similar in all material respects to that which was conducted by the
General Partner prior to the closing of the Offering and that any failure to
obtain such licenses, permits or rights will not have a material adverse impact
on the business of the
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<PAGE>
Operating Partnership or the Partnership as described in this Prospectus. See
'Business and Properties -- Transfer of the Partnership Assets.'
COMMON UNITHOLDERS HAVE NOT BEEN REPRESENTED BY COUNSEL
The holders of the Common Units have not been represented by counsel in
connection with the Offering, including the preparation of the Partnership
Agreement or the other agreements referred to herein.
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY
Conflicts of interest could arise as a result of the relationships between
the Partnership, on the one hand, and the Managing General Partner and its
Affiliates, on the other. The directors and officers of the Managing General
Partner have fiduciary duties to manage the Managing General Partner in a manner
beneficial to its stockholders. At the same time, the Managing General Partner,
as general partner, has fiduciary duties to manage the Partnership in a manner
beneficial to the Partnership and the Unitholders. The duties of the Managing
General Partner, as general partner, to the Partnership and the Unitholders,
therefore, may come into conflict with the duties of the directors and officers
of the Managing General Partner to its stockholders.
Such conflicts of interest might arise in the following situations, among
others:
(i) Decisions of the Managing General Partner with respect to the
amount and timing of cash expenditures, borrowings, issuances of additional
Units and reserves in any quarter will affect whether or the extent to
which there is sufficient Available Cash from Operating Surplus to meet the
Minimum Quarterly Distribution and Target Distribution Levels on all Units
in a given quarter. In addition, actions by the Managing General Partner
may have the effect of enabling the Managing General Partner to receive
Incentive Distributions or accelerating the expiration of the Subordination
Period or the conversion of Subordinated Units into Common Units.
(ii) The Partnership will not have any employees and will rely solely
on employees of its subsidiaries, the Managing General Partner and other
Affiliates.
(iii) Under the terms of the Partnership Agreement, the Partnership
will reimburse the Managing General Partner and its Affiliates (including
Triarc) at cost for all expenses incurred on behalf of the Partnership,
including costs incurred in rendering corporate staff and support services
to the Partnership. On a pro forma basis, approximately $56.8 million of
expenses would have been reimbursed by the Partnership to the Managing
General Partner in 1995 (comprising approximately $33.0 million in salary,
payroll tax and other compensation paid to employees of the Managing
General Partner and approximately $23.8 million for all other operating
expenses). In addition, Affiliates of the Managing General Partner
(including Triarc) may provide certain administrative services for the
Managing General Partner on behalf of the Partnership and will be
reimbursed for all expenses incurred in connection therewith. Furthermore,
the Managing General Partner and its Affiliates may provide additional
services to the Partnership for which the Partnership will be charged
reasonable fees as determined by the Managing General Partner.
(iv) Whenever possible, the Managing General Partner intends to limit
the Partnership's liability under contractual arrangements to all or
particular assets of the Partnership, with the other party thereto to have
no recourse against the Managing General Partner, the Special General
Partner, or their respective assets.
(v) Any agreements between the Partnership and the Managing General
Partner and its Affiliates will not grant to the holders of Common Units,
separate and apart from the Partnership, the right to enforce the
obligations of the Managing General Partner and such Affiliates in favor of
the Partnership. Therefore, the Managing General Partner, in its capacity
as a general partner of the Partnership, will be primarily responsible for
enforcing such obligations.
(vi) Under the terms of the Partnership Agreement, the Managing
General Partner is not restricted from causing the Partnership to pay
itself or its Affiliates for any services rendered on terms that are fair
and reasonable to the Partnership or entering into additional contractual
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<PAGE>
arrangements with any of such entities on behalf of the Partnership.
Neither the Partnership Agreement nor any of the other agreements,
contracts and arrangements between the Partnership, on the one hand, and
the Managing General Partner and its Affiliates, on the other, are or will
be the result of arm's-length negotiations.
(vii) The Managing General Partner may exercise its right to call for
and purchase Units as provided in the Partnership Agreement or assign such
right to one of its Affiliates or to the Partnership.
(viii) The Partnership Agreement does not prohibit the Partnership
from engaging in roll-up transactions. Although the Managing General
Partner has no present intention of causing the Partnership to engage in
any such transaction, it is possible it will do so in the future. There can
be no assurance that a roll-up transaction would not have a material
adverse effect on a Unitholder's investment in the Partnership.
(ix) The Managing General Partner (unless the Triarc Merger occurs)
and the Special General Partner are prohibited from conducting any business
or having any operations other than those incidental to serving as general
partners of the Partnership and the Operating Partnership so long as they
are general partners of the Partnership. The Partnership Agreement provides
that it will not constitute a breach of the Managing General Partner's
fiduciary duties to the Partnership or the Unitholders for Affiliates of
the General Partners (other than the Special General Partner) to engage in
certain activities of the type conducted by the Partnership, other than
retail propane sales to end users in the continental United States, even if
in direct competition with the Partnership. However, in the event of the
Triarc Merger, the ability of the Managing General Partner to engage in
activities other than those incidental to serving as a general partner of
the Operating Partnership and the Partnership and to compete with the
Partnership in certain propane related activities, such as trading,
transportation, storage and wholesale distribution, will not be restricted.
Furthermore, the General Partners and their Affiliates have no obligation
to present business opportunities to the Partnership.
Unless provided for otherwise in the partnership agreement, Delaware law
generally requires a general partner of a Delaware limited partnership to adhere
to fiduciary duty standards under which it owes its limited partners duties of
good faith, fairness and loyalty and which generally prohibit such general
partner from taking any action or engaging in any transaction as to which it has
a conflict of interest. The Partnership Agreement expressly permits the Managing
General Partner to resolve conflicts of interest between itself or its
Affiliates, on the one hand, and the Partnership or the Unitholders, on the
other, and to consider, in resolving such conflicts of interest, the interests
of other parties in addition to the interests of the Unitholders. In addition,
the Partnership Agreement provides that a purchaser of Common Units is deemed to
have consented to certain conflicts of interest and actions of the General
Partners and their Affiliates that might otherwise be prohibited, including
those described in paragraphs (i)-(ix) above, and to have agreed that such
conflicts of interest and actions do not constitute a breach by the General
Partners of any duty stated or implied by law or equity. The General Partners
will not be in breach of their obligations under the Partnership Agreement or
their duties to the Partnership or the Unitholders if the resolution of such
conflict is fair and reasonable to the Partnership. The latitude given in the
Partnership Agreement to the Managing General Partner in resolving conflicts of
interest may significantly limit the ability of a Unitholder to challenge what
might otherwise be a breach of fiduciary duty. The Managing General Partner
believes however, that such latitude is necessary and appropriate to enable it
and the Special General Partner to serve as general partners of the Partnership
without undue risk of liability.
The Partnership Agreement expressly limits the liability of the General
Partners by providing that the General Partners, their Affiliates and their
respective officers and directors will not be liable for monetary damages to the
Partnership, the limited partners or assignees for errors of judgment or for any
actual omissions if such General Partner and other persons acted in good faith.
In addition, the Partnership is required to indemnify the General Partners,
their Affiliates and their respective officers, directors, employees and agents
to the fullest extent permitted by law, against liabilities, costs and expenses
incurred by such General Partner or such other persons, if the General Partners
or such persons acted in good faith and in a manner they reasonably believed to
be in, or not opposed to, the
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<PAGE>
best interests of the Partnership and, with respect to any criminal proceedings,
had no reasonable cause to believe the conduct was unlawful.
The provisions of Delaware law that allow the common law fiduciary duties
of a general partner to be waived or modified by a partnership agreement have
not been resolved in a court of law, and the Managing General Partner has not
obtained an opinion of counsel covering the provisions set forth in the
Partnership Agreement that purport to waive or restrict the fiduciary duties of
the General Partners that would be in effect under common law were it not for
the Partnership Agreement. See 'Conflicts of Interest and Fiduciary
Responsibility -- Fiduciary Duties of the General Partners.'
TAX RISKS
For a general discussion of the expected federal income tax consequences of
owning and disposing of Common Units, see 'Tax Considerations.'
TAX TREATMENT IS DEPENDENT ON PARTNERSHIP STATUS
The availability to a holder of Common Units of the federal income tax
benefits of an investment in the Partnership depends, in large part, on the
classification of the Partnership as a partnership for federal income tax
purposes. Moreover, in order for the Partnership to continue to be classified as
a partnership for federal income tax purposes, at least 90% of the Partnership's
gross income for each taxable year must consist of 'qualifying income.' Based on
certain representations made by the General Partners and the Partnership,
Counsel is of the opinion that, under current law, the Partnership will be
classified as a partnership for federal income tax purposes. However, no ruling
from the IRS as to such issues has been or will be requested, and the opinion of
Counsel is not binding on the IRS. See 'Tax Considerations -- Partnership
Status.'
If the Partnership were classified as an association taxable as a
corporation for federal or state income tax purposes, the Partnership would pay
tax on its income at corporate rates (currently at a 35% federal rate),
distributions would generally be taxed again to the Unitholders as corporate
distributions, and no income, gains, losses or deductions would flow through to
the Unitholders. Because a tax would be imposed upon the Partnership as an
entity, the cash available for distribution to the holders of Common Units would
be substantially reduced. Treatment of the Partnership as an association taxable
as a corporation or otherwise as a taxable entity would result in a material
reduction in the anticipated cash flow and after-tax return to the holders of
Common Units and, thus, would likely result in a substantial reduction in the
value of the Common Units. See 'Tax Considerations -- Partnership Status.'
There can be no assurance that the law will not be changed so as to cause
the Partnership to be treated as an association taxable as a corporation for
federal income tax purposes or otherwise to be subject to entity-level taxation.
The Partnership Agreement provides that, if a law is enacted or existing law is
modified or interpreted in a manner that subjects the Partnership to taxation as
a corporation or otherwise subjects the Partnership to entity level taxation for
federal, state or local income tax purposes, certain provisions of the
Partnership Agreement relating to the subordination of distributions on
Subordinated Units will be subject to change, including a decrease in the
Minimum Quarterly Distribution and the Target Distribution Levels to reflect the
impact of such law on the Partnership. See 'Cash Distribution
Policy -- Adjustment of Minimum Quarterly Distribution and Target Distribution
Levels.'
NO IRS RULING WITH RESPECT TO TAX CONSEQUENCES
No ruling has been requested from the IRS with respect to classification of
the Partnership as a partnership for federal income tax purposes, whether the
Partnership's propane operations generate 'qualifying income' under SS7704 of
the Code or any other matter affecting the Partnership. Accordingly, the IRS may
adopt positions that differ from Counsel's conclusions expressed herein. It may
be necessary to resort to administrative or court proceedings in an effort to
sustain some or all of Counsel's conclusions, and some or all of such
conclusions ultimately may not be sustained. Any such contest with the IRS may
materially and adversely impact the market for the Common Units and the
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<PAGE>
prices at which Common Units trade. In addition, the costs of any contest with
the IRS will be borne directly or indirectly by some or all of the Unitholders
and the General Partners.
TAX LIABILITY EXCEEDING CASH DISTRIBUTIONS
A holder of Common Units will be required to pay federal income taxes and,
in certain cases, state and local income taxes on his allocable share of the
Partnership's income, even if he does not receive cash distributions from the
Partnership. There is no assurance that a Unitholder will receive cash
distributions equal to his allocable share of taxable income from the
Partnership or even the tax liability to him resulting from that income.
Further, a holder of Common Units may incur a tax liability, in excess of the
amount of cash received, upon the sale of his Common Units. See 'Tax
Considerations -- State, Local and Other Tax Considerations' for a discussion of
certain state and local tax considerations that may be relevant to prospective
Unitholders.
OWNERSHIP OF COMMON UNITS BY TAX-EXEMPT ORGANIZATIONS AND CERTAIN OTHER
INVESTORS
Investment in Common Units by certain tax-exempt entities, regulated
investment companies and foreign persons raises issues unique to such persons.
For example, virtually all of the taxable income derived by most organizations
exempt from federal income tax (including individual retirement accounts and
other retirement plans) from the ownership of a Unit will be unrelated business
taxable income and thus will be taxable to such a Unitholder. See 'Tax
Considerations -- Uniformity of Units -- Tax-Exempt Organizations and Certain
Other Investors.'
DEDUCTIBILITY OF LOSSES
In the case of taxpayers subject to the passive loss rules (generally
individuals and closely held corporations), any losses generated by the
Partnership will only be available to offset future income generated by the
Partnership and cannot be used to offset income from other activities, including
passive activities or investments. Unused passive losses may be deducted when
the Unitholder disposes of all of his Units in a fully taxable transaction with
an unrelated party. Net passive income from the Partnership may be offset by
unused Partnership losses carried over from prior years, but not by losses from
other passive activities, including losses from other publicly traded
partnerships. See 'Tax Considerations -- Tax Consequences of Unit
Ownership -- Limitations on Deductibility of Partnership Losses.'
TAX SHELTER REGISTRATION; POTENTIAL IRS AUDIT
The Partnership will be registered with the IRS as a 'tax shelter.' There
is no assurance that the Partnership will not be audited by the IRS or that tax
adjustments will not be made. The rights of a Unitholder owning less than a 1%
profits interest in the Partnership to participate in the income tax audit
process are very limited. Further, any adjustments in the Partnership's returns
will lead to adjustments in the Unitholders' returns and may lead to audits of
Unitholders' returns and adjustments of items unrelated to the Partnership. Each
Unitholder would bear the cost of any expenses incurred in connection with an
examination of such Unitholder's personal tax return.
PROPOSED CHANGES IN FEDERAL INCOME TAX LAWS
Legislation passed by Congress in November 1995 (the '1995 Proposed
Legislation') would alter the tax reporting procedures and the deficiency
collection procedures applicable to large partnerships such as the Partnership
(generally defined as electing partnerships with more than 100 partners) and
would make certain additional changes to the treatment of large partnerships.
That legislation was generally intended to simplify the administration of the
tax reporting and deficiency collection rules governing large partnerships.
On March 19, 1996, President Clinton introduced tax legislation, known as
the Revenue Reconciliation Act of 1996, that would impact the taxation of
certain financial products, including partnership interests. One proposal would
treat a taxpayer as having sold an 'appreciated' partnership
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<PAGE>
interest (one in which gain would be recognized if such interest were sold) if
the taxpayer or related persons enters into one or more positions with respect
to the same or substantially identical property which, for some period,
substantially eliminates both the risk of loss and opportunity for gain on the
appreciated financial position (including selling 'short against the box'
transactions). Certain of these proposed changes are also discussed later in
this section under 'Disposition of Common Units.'
The 1995 Proposed Legislation was vetoed by President Clinton on December
6, 1995. As of the date of this Prospectus, it is not possible to predict
whether any of the changes which were set forth in the 1995 Proposed
Legislation, the Revenue Reconciliation Act of 1996 or any other changes in the
federal income tax laws that would impact the Partnership and the holders of
Common Units will ultimately be enacted or, if enacted, what form they will
take, what the effective dates will be and what, if any, transition rules will
be provided.
UNIFORMITY OF COMMON UNITS AND NONCONFORMING DEPRECIATION CONVENTIONS
Because the Partnership cannot match transferors and transferees of Common
Units, uniformity of the economic and tax characteristics of the Common Units to
a purchaser of Common Units must be maintained. To maintain uniformity and for
other reasons, the Partnership will adopt certain depreciation and amortization
conventions that do not conform with all aspects of certain proposed and final
Treasury Regulations which may, or may not, be applicable. The IRS may challenge
those conventions and, if such a challenge were sustained, the uniformity of
Common Units could be affected. Non-uniformity could adversely affect the amount
of tax depreciation available to a purchaser of Common Units and could have a
negative impact on the value of the Common Units. See 'Tax
Considerations -- Uniformity of Units.'
STATE, LOCAL AND OTHER TAX CONSIDERATIONS
In addition to federal income taxes, Unitholders will be subject to other
taxes, such as state and local taxes, unincorporated business taxes, and estate,
inheritance or intangible taxes that may be imposed by the various jurisdictions
in which the Partnership does business or owns property. A Unitholder will be
required to file state income tax returns and to pay state income taxes in some
or perhaps all of such states and may be subject to penalties for failure to
comply with those requirements. It is the responsibility of each Unitholder to
file all state and local, as well as federal, tax returns that may be required
of such Unitholder. Counsel has not rendered an opinion on the state or local
tax consequences of an investment in the Partnership. See 'Tax
Considerations -- State, Local and Other Tax Considerations.'
PARTNERSHIP TAX INFORMATION AND AUDITS
The Partnership will furnish each holder of Common Units with a Schedule
K-1 that sets forth such holder's allocable share of income, gains, losses and
deductions. In preparing these schedules, the Partnership will use various
accounting and reporting conventions and adopt various depreciation and
amortization methods. There is no assurance that these schedules will yield a
result that conforms to statutory or regulatory requirements or to
administrative pronouncements of the IRS. Further, the Partnership's tax return
may be audited, and any such audit could result in an audit of a partner's
individual tax return as well as increased liabilities for taxes because of
adjustments resulting from the audit.
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THE TRANSACTIONS
Concurrently with the closing of the Offering, the Managing General Partner
will contribute substantially all of its assets (which assets will not include
an existing intercompany note from Triarc, approximately $59.3 million of the
net proceeds from the issuance of the First Mortgage Notes and certain other
assets of the Managing General Partner) to the Operating Partnership as a
capital contribution and the Operating Partnership will assume substantially all
of the liabilities of the Managing General Partner (other than income tax
liabilities), including the First Mortgage Notes and all indebtedness of the
Managing General Partner outstanding under the Existing Credit Facility.
Immediately thereafter, the Managing General Partner will convey its limited
partner interests in the Operating Partnership to the Partnership in exchange
for 5,283,809 Subordinated Units and will convey to the Special General Partner
a 1.0% general partner interest in the Partnership and a 1.0101% general partner
interest in the Operating Partnership.
Also concurrently with the closing of the Offering, the Managing General
Partner will issue $120 million aggregate principal amount of First Mortgage
Notes to certain institutional investors in a private placement. Approximately
$59.3 million of the net proceeds from the sale of the First Mortgage Notes (the
entire net proceeds of which are estimated to be $116.6 million) will be used by
the Managing General Partner to pay a dividend to Triarc. The remainder of the
net proceeds from the sale of the First Mortgage Notes (approximately $57.3
million) will be contributed by the Managing General Partner to the Operating
Partnership in connection with the Conveyance and will be used by the Operating
Partnership to repay (in the manner described below) a portion of the Managing
General Partner's indebtedness outstanding under the Existing Credit Facility,
which indebtedness will be assumed by the Operating Partnership in connection
with the Conveyance. First, approximately $30 million of such net proceeds will
be used by the Operating Partnership to repay indebtedness evidenced by the
Refunding Notes, and then the remainder of such net proceeds (approximately
$27.3 million) will be used to repay other indebtedness outstanding under the
Existing Credit Facility. The effective interest rates on the Refunding Notes
and the $27.3 million outstanding under the term loan facility were 7.56% and
8.43%, respectively, as of March 1, 1996.
After the repayment of the Refunding Notes and such other indebtedness as
described above, the net proceeds of the sale of the Common Units issued in the
Offering (estimated to be approximately $118.2 million) will be contributed to
the Operating Partnership which will use such proceeds to repay all remaining
indebtedness under the Existing Credit Facility, to make the Partnership Loan to
Triarc and to pay certain accrued management fees and tax sharing payments due
to Triarc from the Managing General Partner. The effective interest rate on the
remaining $13.2 million outstanding under the revolving credit facility and the
remaining $56.8 million outstanding under the term loan facility was 8.20% and
8.43%, respectively, as of March 1, 1996.
Concurrently with the closing of the Offering, the Operating Partnership
will also enter into the Bank Credit Facility, which will consist of the $15
million Working Capital Facility and the $40 million Acquisition Facility. It is
expected that these facilities will be undrawn at the time of the consummation
of the Transactions.
The Partnership believes that, if its assumptions about operating
conditions are correct, the Partnership will not borrow any funds under the
Working Capital Facility until the fourth quarter of 1996. To the extent that
Available Cash from Operating Surplus is insufficient to make the Minimum
Quarterly Distribution on the Common Units and the related distribution on the
General Partner Interests, the Partnership expects that it would have the
ability to borrow under the Working Capital Facility to make such distributions,
although any decision to do so would be based on circumstances at the time of
such distribution, and cannot be determined at the present time.
In addition, the Managing General Partner will dividend to Triarc a portion
(approximately $56.4 million aggregate principal amount) of an existing
intercompany note of Triarc.
For additional information regarding the terms of the First Mortgage Notes
and the Bank Credit Facility, see 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Description of Indebtedness.'
For additional information regarding the terms of the Partnership Loan, see
'Cash Distribution Policy -- Partnership Loan.'
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USE OF PROCEEDS
The net proceeds to the Partnership from the sale of the Common Units
offered in the Offering are estimated to be approximately $118.2 million,
assuming an initial public offering price of $21.00 per Common Unit and after
deducting the underwriting discounts and commissions and the expenses of the
Offering. Approximately $70.0 million of the net proceeds of the Offering will
be used by the Operating Partnership to repay indebtedness outstanding under the
Existing Credit Facility. See 'The Transactions.' As of March 1, 1996,
approximately $127.3 million of principal was outstanding under the Existing
Credit Facility, of which approximately $84.1 million was outstanding under a
term loan facility (the 'Existing Term Loan') and approximately $43.2 million
was outstanding under a revolving credit facility (the 'Existing Revolving
Loan'), including $30.0 million evidenced by the Refunding Notes. The effective
interest rates on the Existing Term Loan, the Refunding Notes and the remaining
$13.2 million outstanding under the Existing Revolving Loan were 8.43%, 7.56%
and 8.20%, respectively, as of March 1, 1996. Indebtedness under Tranche A,
Tranche B and Tranche C of the Existing Term Loan is scheduled to amortize in
semi-annual installments through March 31, 2000, March 31, 2002 and March 31,
2003, respectively. Indebtedness under the Existing Revolving Loan matures in
March 31, 2000. The balance of the net proceeds of the Offering, approximately
$48.2 million, will be used by the Operating Partnership to make the
approximately $40.7 million Partnership Loan and to pay approximately $7.5
million of accrued management fees and tax sharing payments due to Triarc.
If the Underwriters' over-allotment option is exercised in full, the
estimated additional net proceeds to the Partnership will be approximately $18.1
million. All of the net proceeds from the exercise, if any, of the Underwriters'
over-allotment option, will be retained by the Partnership and used for general
partnership purposes.
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<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of National
Propane as of December 31, 1995, (ii) the pro forma adjustments required to give
effect to the Transactions, including the sale of Common Units offered hereby at
an assumed initial public offering price of $21.00 per Common Unit and the
application of the net proceeds therefrom as described in 'Use of Proceeds', and
(iii) the pro forma capitalization of the Partnership as of December 31, 1995
after giving effect to such adjustments. This table should be read in
conjunction with the historical consolidated financial statements and related
notes and the unaudited pro forma condensed consolidated financial statements
and related notes appearing elsewhere herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------------------
PRO FORMA PARTNERSHIP
HISTORICAL ADJUSTMENTS(a) PRO FORMA
---------- -------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current maturities of long-term debt:
Existing Credit Facility....................................... $ 8,125 $ (8,125) $ -- (b)
Other.......................................................... 3,153 -- 3,153
---------- -------------- ------------
Total current maturities of long-term debt................ 11,278 (8,125) 3,153
---------- -------------- ------------
Long-term debt:
Existing Credit Facility....................................... 119,187 (119,187) -- (b)
Other.......................................................... 5,079 -- 5,079
First Mortgage Notes(b)........................................ -- 120,000 120,000
---------- -------------- ------------
Total long-term debt...................................... 124,266 813 125,079
---------- -------------- ------------
Stockholders' equity (deficit)...................................... (48,600) 48,600 --
---------- -------------- ------------
Partners' capital:
Limited partners............................................... -- 14,069 14,069
General partners............................................... -- 13,096 13,096
---------- -------------- ------------
Total partners' capital................................... -- 27,165 27,165
---------- -------------- ------------
Total capitalization................................................ $ 86,944 $ 68,453 $155,397
---------- -------------- ------------
---------- -------------- ------------
</TABLE>
- ------------
(a) For a description of the adjustments and assumptions used in preparing the
Unaudited Pro Forma Condensed Consolidated Financial and Operating Data,
see Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet
and Statement of Operations included elsewhere herein.
(b) The Partnership expects to enter into the Bank Credit Facility concurrent
with the closing of the Offering and anticipates that there will be no
outstanding borrowings thereunder at closing. See 'Management's Discussion
and Analysis of Financial Condition and Results of Operations --
Description of Indebtedness' for a description of the Bank Credit Facility
and the First Mortgage Notes.
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<PAGE>
DILUTION
On a pro forma basis as of December 31, 1995, after giving effect to the
Transactions contemplated by this Prospectus, the net tangible book value per
Common Unit was $0.62. Purchasers of Common Units in the Offering will
experience substantial and immediate dilution in net tangible book value per
Common Unit for financial accounting purposes, as illustrated in the following
table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per Common Unit.............................. $21.00
------
Net negative tangible book value per Unit before the Offering(1)(2)................ ($19.24)
Increase in book value per Unit attributable to new investors...................... 19.86
------
Less: Pro forma net tangible book value per Unit after the Offering(2)(3).......... 0.62
------
Immediate dilution in net tangible book value per Common Unit to new investors..... $20.38
------
------
</TABLE>
- ------------
(1) Determined by dividing the number of Units (5,283,809 Subordinated Units and
the General Partner Interests having a dilutive effect equivalent to 478,096
Units) to be issued to the General Partners for the contribution of assets
and liabilities of the Managing General Partner to the Partnership into the
net tangible book value of the contributed assets and liabilities (which
reflects the issuance and assumption of the First Mortgage Notes) and the
$59.3 million distribution to Triarc.
(2) The net negative tangible book value does not include intangible assets
contributed to the Partnership having a book value of $19.8 million.
(3) Determined by dividing the total number of Units (6,190,476 Common Units,
5,283,809 Subordinated Units and the General Partner Interests having a
dilutive effect equivalent to 478,096 Units) to be outstanding after this
Offering, into the pro forma net tangible book value of the Partnership,
after giving effect to the application of the net proceeds of the Offering.
------------------------
The following table sets forth the number of Units that will be issued by
the Partnership and the total consideration provided by the General Partners in
respect of their Units and the cash consideration contributed by the Common
Unitholders in the Offering upon the consummation of the Transactions
contemplated by this Prospectus:
<TABLE>
<CAPTION>
UNITS ACQUIRED
-----------------------
NUMBER PERCENT
---------- ------- TOTAL
CONSIDERATION
----------------
($ IN THOUSANDS)
<S> <C> <C> <C>
General Partners........................................ 5,761,905(a) 48.2% $(91,035)(b)
New Investors........................................... 6,190,476 51.8 118,200
---------- ------- ----------------
Total.............................................. 11,952,381 100% $ 27,165
---------- ------- ----------------
---------- ------- ----------------
</TABLE>
- ------------
(a) Upon the consummation of the Transactions contemplated by this Prospectus,
the General Partners will own 5,283,809 Subordinated Units and the 4%
General Partner Interests having a dilutive effect equivalent to 478,096
Units.
(b) Total consideration for the General Partners represents the negative book
value of the net assets and liabilities contributed by the Managing General
Partner to the Partnership at December 31, 1995. The total negative book
value of the consideration provided by the Managing General Partner is as
follows (dollars in thousands):
<TABLE>
<S> <C>
Negative book value of assets and liabilities transferred by
National Propane to the Operating Partnership at
December 31, 1995............................................................. $(31,735)
Add: Distribution to Triarc of a portion of the net proceeds from the issuance
of the First Mortgage Notes.................................................. (59,300)
--------
$(91,035)
--------
--------
</TABLE>
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CASH DISTRIBUTION POLICY
GENERAL
The Partnership will distribute to its partners, on a quarterly basis, all
of its Available Cash in the manner described herein. Available Cash is defined
in the Glossary and generally means, with respect to any fiscal quarter of the
Partnership, all cash on hand at the end of such quarter less the amount of cash
reserves that is necessary or appropriate in the discretion of the Managing
General Partner to (i) provide for the proper conduct of the Partnership's
business, (ii) comply with applicable law or any Partnership debt instrument or
other agreement, or (iii) provide funds for distributions to Unitholders and the
General Partners in respect of any one or more of the next four quarters.
Cash distributions will be characterized as distributions from either
Operating Surplus or Capital Surplus. This distinction affects the amounts
distributed to Unitholders relative to the General Partners, and under certain
circumstances it determines whether holders of Subordinated Units receive any
distributions. See ' -- Quarterly Distributions of Available Cash.'
Operating Surplus is defined in the Glossary and refers generally to (i)
the cash balance of the Partnership on the date the Partnership commences
operations, plus $16.3 million, plus all cash receipts of the Partnership from
its operations, less (ii) all Partnership operating expenses, 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 any equity offering), maintenance capital expenditures and
reserves established for future Partnership operations.
Capital Surplus is also defined in the Glossary and generally will be
generated only by 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 current assets and assets
disposed of in the ordinary course of business).
To avoid the difficulty of trying to determine whether Available Cash
distributed by the Partnership is from Operating Surplus or from Capital
Surplus, all Available Cash distributed by the Partnership from any source will
be treated as distributed from Operating Surplus until the sum of all Available
Cash distributed since the commencement of the Partnership equals the Operating
Surplus as of the end of the quarter prior to such distribution. Any Available
Cash in excess of such amount (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 in an aggregate amount per Common Unit equal to the initial public
offering price of the Common Units (the 'Initial Unit Price'), plus any Common
Unit Arrearages, 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. The Partnership does not anticipate that there will
be significant distributions from Capital Surplus.
The Subordinated Units are separate classes of interests in the
Partnership, and the rights of holders of such interests to participate in
distributions to partners differ from the rights of the holders of Common Units.
For any given quarter, any Available Cash will be distributed to the General
Partners (as holders of the General Partner Interests) and to the holders of
Common Units, and may also be distributed to the holders of Subordinated Units
depending upon the amount of Available Cash for the quarter, the amount of
Common Unit Arrearages, if any, whether the Subordination Period has ended and
other factors discussed below.
Subject to the limitations described under 'The Partnership
Agreement -- Issuance of Additional Securities,' the Partnership has the
authority to issue additional Common Units or other equity securities of the
Partnership for such consideration and on such terms and conditions as are
established by the Managing General Partner, in its discretion without the
approval of the Unitholders. It is possible that the Partnership will fund
acquisitions of other propane businesses through the issuance of additional
Common Units or other equity securities of the Partnership. Holders of any
additional Common Units issued by the Partnership will be entitled to share
equally with the then-existing holders of Common Units in distributions of
Available Cash by the Partnership. In addition, the issuance of additional
partnership interests may dilute the value of the interests of the then-existing
holders of Common Units in the net assets of the Partnership.
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Neither the Managing General Partner nor the Special General Partner will
be required to make an additional capital contribution to the Partnership or the
Operating Partnership in connection with the exercise of the over-allotment
option, but each will nonetheless be entitled to receive 2% of distributions of
Available Cash (except upon liquidation).
The discussion below indicates the percentages of cash distributions
required to be made to the General Partners and the holders of Common Units and
the circumstances under which holders of Subordinated Units are entitled to cash
distributions and the amounts thereof. For a discussion of Available Cash from
Operating Surplus available for distributions with respect to the Common Units
on a pro forma basis, see ' -- Cash Available for Distribution.'
QUARTERLY DISTRIBUTIONS OF AVAILABLE CASH
The Partnership will make distributions to its partners with respect to
each quarter of the Partnership prior to its liquidation in an amount equal to
100% of its Available Cash for such quarter. The Partnership expects to make
distributions of all Available Cash within approximately 45 days after the end
of each fiscal quarter, commencing with the quarter ending September 30, 1996,
to holders of record on the applicable record date. The Minimum Quarterly
Distribution and the Target Distribution Levels for the period from the closing
of the Offering through September 30, 1996 will be adjusted based on the actual
length of such period. The Minimum Quarterly Distribution and the Target
Distribution Levels are also subject to certain other adjustments as described
below under ' -- Distributions from Capital Surplus' and ' -- Adjustment of
Minimum Quarterly Distribution and Target Distribution Levels.'
With respect to each quarter during the Subordination Period, to the extent
there is sufficient Available Cash, the holders of Common Units will have the
right to receive the Minimum Quarterly Distribution, plus any Common Unit
Arrearages, prior to any distribution of Available Cash to the holders of
Subordinated Units. This subordination feature will enhance the Partnership's
ability to distribute the Minimum Quarterly Distribution on the Common Units
during the Subordination Period. There is no guarantee, however, that the
Minimum Quarterly Distribution will be made on the Common Units. Upon expiration
of the Subordination Period, all Subordinated Units will convert on a
one-for-one basis into Common Units and will participate pro rata with all other
Common Units in future distributions of Available Cash. Under certain
circumstances, up to 2,641,904 Subordinated Units may convert into Common Units
prior to the expiration of the Subordination Period. Such number of Subordinated
Units eligible for early conversion may be increased by up to 239,048
Subordinated Units issued upon conversion of all or a portion of the Special
General Partner's 2% General Partner Interest. Common Units will not accrue
arrearages with respect to distributions for any quarter after the Subordination
Period and Subordinated Units will not accrue any arrearages with respect to
distributions for any quarter.
DISTRIBUTIONS FROM OPERATING SURPLUS DURING SUBORDINATION PERIOD
The Subordination Period will generally extend from the closing of the
Offering until the first day of any quarter beginning after June 30, 2001 in
respect of which (i) distributions of Available Cash from Operating Surplus on
the Common Units and the Subordinated Units with respect to each of the three
consecutive 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 during such periods, (ii) the Adjusted
Operating Surplus generated during each of the three consecutive 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 and the related distribution on the General Partner Interests
during such periods and (iii) there are no outstanding Common Unit Arrearages.
Prior to the end of the Subordination Period, a portion of the Subordinated
Units will convert into Common Units on a one-for-one basis on the first day
after the record date established for the distribution in respect of any quarter
ending on or after (a) June 30, 1999 (with respect to 1,320,872 Subordinated
Units, subject to adjustment as discussed below) and (b) June 30, 2000 (with
respect to 1,320,872 Subordinated Units, subject to adjustment as discussed
below) in respect of which
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(i) distributions of Available Cash from Operating Surplus on the Common Units
and the Subordinated Units with respect to each of the three consecutive
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 during such periods, (ii) the Adjusted Operating Surplus
generated during each of the two consecutive 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 and
the related distribution on the General Partner Interests during such periods,
and (iii) there are no outstanding Common Unit Arrearages; provided, however,
that the early conversion of the second tranche of Subordinated Units may not
occur until at least one year following the early conversion of the first
tranche of Subordinated Units. Such number of units eligible for early
conversion on June 30, 1999 and June 30, 2000 shall be subject to increase in
each case by up to 119,524 Subordinated Units issued upon conversion of the
Special General Partner's 2% General Partner Interest.
Upon expiration of the Subordination Period, all remaining Subordinated
Units will convert into Common Units on a one-for-one basis and will thereafter
participate, pro rata, with the other Common Units in distributions of Available
Cash. In addition, if the Managing General Partner is removed as a general
partner of the Partnership other than for Cause (i) the Subordination Period
will end and all outstanding Subordinated Units will immediately convert into
Common Units on a one-for-one basis, (ii) any existing Common Unit Arrearages
will be extinguished and (iii) the General Partners will have the right to
convert their remaining General Partner Interests (and the right to receive
Incentive Distributions) into Common Units or to receive cash in exchange for
such interests.
'Adjusted Operating Surplus' is defined in the Glossary and, for any
period, generally means Operating Surplus generated during such period, less (a)
any net increase in working capital borrowings during such period and (b) any
net reduction in cash reserves for Operating Expenditures that otherwise
increased the Operating Surplus generated during such period, plus (x) any net
decrease in working capital borrowings during such period and (y) any net
increase in cash reserves for Operating Expenditures during such period required
by any debt instrument for the repayment of principal, interest or premium.
Distributions by the Partnership of Available Cash from Operating Surplus
with respect to any quarter during the Subordination Period will be made in the
following manner:
first, 96% to the Common Unitholders, pro rata, and 4% to the General
Partners, pro rata, until there has been distributed in respect of each
outstanding Common Unit an amount equal to the Minimum Quarterly
Distribution for such quarter;
second, 96% to the Common Unitholders, pro rata, and 4% to the General
Partners, pro rata, until there has been distributed in respect of each
outstanding Common Unit an amount equal to any Common Unit Arrearages
accrued and unpaid with respect to any prior quarters during the
Subordination Period;
third, 96% to the Subordinated Unitholders, pro rata, and 4% to the
General Partners, pro rata, until there has been distributed in respect of
each outstanding Subordinated Unit an amount equal to the Minimum Quarterly
Distribution for such quarter;
thereafter, in the manner described in ' -- Incentive
Distributions -- Hypothetical Annualized Yield' below.
The above references to the 4% of Available Cash from Operating Surplus
distributed to the General Partners constitute references to the amount of the
Managing General Partner's and Special General Partner's aggregate percentage
interest in distributions from the Partnership and the Operating Partnership on
a combined basis, exclusive of their rights as holder of Subordinated Units,
Common Units or rights to receive Incentive Distributions. Each of the Managing
General Partner and the Special General Partner will own a 1.0% unsubordinated
general partner interest in the Partnership and a 1.0101% unsubordinated general
partner interest in the Operating Partnership. Other references in this
Prospectus to the General Partner Interests or to distributions of 4% of
Available Cash also constitute references to the amount of the General Partners'
aggregate percentage interest in the Partnership and the Operating Partnership
on a combined basis exclusive of their rights as holder of the Subordinated
Units, Common Units or rights to receive Incentive Distributions. In the event
all or a
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portion of the Special General Partner's 2% General Partner Interest is
converted into Units, the Managing General Partner will be required to amend the
Partnership Agreement and the Operating Partnership Agreement to decrease the
percentage of profits, losses and distributions previously allocated to the
Special General Partner in respect of its General Partner Interest to reflect
such conversion and increase the percentage of profits, losses and distributions
that are allocated to the Unitholders by the same amount. With respect to any
Common Unit, the term 'Common Unit Arrearages' refers to the amount by which the
Minimum Quarterly Distribution in any quarter during the Subordination Period
exceeds the distribution of Available Cash from Operating Surplus actually made
for such quarter on a Common Unit issued in the Offering, cumulative for such
quarter and all prior quarters during the Subordination Period. Common Unit
Arrearages will not accrue interest.
DISTRIBUTIONS FROM OPERATING SURPLUS AFTER SUBORDINATION PERIOD
Distributions by the Partnership of Available Cash from Operating Surplus
with respect to any quarter after the Subordination Period will be made in the
following manner:
first, 96% to all Unitholders, pro rata, and 4% to the General
Partners, pro rata until there has been distributed in respect of each Unit
an amount equal to the Minimum Quarterly Distribution for such quarter;
thereafter, in the manner described in ' -- Incentive
Distributions -- Hypothetical Annualized Yield' below.
INCENTIVE DISTRIBUTIONS -- HYPOTHETICAL ANNUALIZED YIELD
For any quarter for which Available Cash from Operating Surplus is
distributed to the Common and Subordinated Unitholders in an amount equal to the
Minimum Quarterly Distribution on all Units and to the Common Unitholders in an
amount equal to any unpaid Common Unit Arrearages, then any additional Available
Cash from Operating Surplus in respect of such quarter will be distributed among
the Unitholders and the General Partners in the following manner:
first, 96% to all Unitholders, pro rata, and 4% to the General
Partners, pro rata, until the Unitholders have received (in addition to any
distributions to Common Unitholders to eliminate Common Unit Arrearages) a
total of $0.577 for such quarter in respect of each outstanding Unit (the
'First Target Distribution');
second, 85% to all Unitholders, pro rata, and 15% to the General
Partners, until the Unitholders have received (in addition to any
distributions to Common Unitholders to eliminate Common Unit Arrearages) a
total of $0.665 for such quarter in respect of each outstanding Unit (the
'Second Target Distribution');
third, 75% to all Unitholders, pro rata, and 25% to the General
Partners, until the Unitholders have received (in addition to any
distributions to Common Unitholders to eliminate Common Unit Arrearages) a
total of $0.863 for such quarter in respect of each outstanding Unit (the
'Third Target Distribution'); and
thereafter, 50% to all Unitholders, pro rata, and 50% to the General
Partners.
The distributions to the General Partners set forth above (other than in
the Managing General Partner's capacity as a holder of Subordinated Units) that
are in excess of the General Partner Interests represent the Incentive
Distributions which are paid to the Managing General Partner. The Managing
General Partner may transfer its right to receive Incentive Distributions to one
or more Persons.
The following table illustrates the percentage allocation of the additional
Available Cash from Operating Surplus between the Unitholders and the General
Partners up to the various Target Distribution Levels and a hypothetical
annualized percentage yield to be realized by a Unitholder at each different
level of allocation among the Unitholders and the General Partners. For purposes
of the following table, the annualized percentage yield is calculated on a
pretax basis assuming that (i) the Common Unit was purchased at an amount equal
to the assumed initial public offering price of $21.00 per Common Unit and (ii)
the Partnership distributed each quarter during the first year following the
investment the amount set forth under the column 'Quarterly Distribution Target
Amount.' The calculations are also based on the assumption that the quarterly
distribution amounts shown do not
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include any Common Unit Arrearages. The amounts set forth under 'Marginal
Percentage Interest in Distributions' are the percentage interests of the
General Partners and the Unitholders in any Available Cash from Operating
Surplus distributed up to and including the corresponding amount in the column
'Quarterly Distribution Target Amount,' until Available Cash distributed
reaches the next Target Distribution Level, if any. The percentage interests
shown for the Unitholders and the General Partners for the Minimum Quarterly
Distribution are also applicable to quarterly distribution amounts that are
less than the Minimum Quarterly Distribution. The table is presented for
illustrative purposes only; there can be no assurance that the Partnership will
have Available Cash from Operating Surplus in order to make such distributions.
<TABLE>
<CAPTION>
MARGINAL PERCENTAGE
INTEREST IN
QUARTERLY DISTRIBUTIONS
DISTRIBUTION HYPOTHETICAL ----------------------
TARGET ANNUALIZED GENERAL
AMOUNT YIELD UNITHOLDERS PARTNERS
------------------- ------------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Minimum Quarterly Distribution................... $ 0.525 % 96% 4%
First Target Distribution........................ $ 0.577 % 96% 4%
Second Target Distribution....................... $ 0.665 % 85% 15.0%
Third Target Distribution........................ $ 0.863 % 75% 25.0%
Thereafter....................................... above $ 0.863 above % 50.0% 50.0%
</TABLE>
DISTRIBUTIONS FROM CAPITAL SURPLUS
Distributions by the Partnership of Available Cash from Capital Surplus
will be made in the following manner:
first, 96% to all Unitholders, pro rata, and 4% to the General
Partners, pro rata, until the Partnership has distributed, in respect of
each outstanding Unit issued in the Offering, Available Cash from Capital
Surplus in an aggregate amount per Unit equal to the Initial Unit Price;
second, 96% to the Common Unitholders, pro rata, and 4% to the General
Partners, pro rata, until the Partnership has distributed, in respect of
each outstanding Common Unit, Available Cash from Capital Surplus in an
aggregate amount equal to any unpaid Common Unit Arrearages with respect to
such Common Unit; and
thereafter, all distributions of Available Cash 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 Levels
will be adjusted downward by multiplying each such amount by a fraction, the
numerator of which is the Unrecovered Capital of the Common Units (as defined in
the Glossary) immediately after giving effect to such repayment and the
denominator of which is the Unrecovered Capital of the Common Units immediately
prior to such repayment. This adjustment to the Minimum Quarterly Distribution
may accelerate the termination of the Subordination Period, thereby increasing
the likelihood of the conversion of Subordinated Units into Common Units.
When 'payback' of the Initial Unit Price has occurred, i.e., when the
Unrecovered Capital of the Common Units is zero (and any accrued Common Unit
Arrearages have been paid), then in effect the Minimum Quarterly Distribution
and each of the Target Distribution Levels 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 Levels will have been
reduced to zero, the General Partners will be entitled thereafter to receive 50%
of all distributions of Available Cash.
Distributions of Available Cash from Capital Surplus will not reduce the
Minimum Quarterly Distribution or Target Distribution Levels for the quarter
with respect to which they are distributed.
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ADJUSTMENT OF MINIMUM QUARTERLY DISTRIBUTION AND TARGET DISTRIBUTION LEVELS
In addition to reductions of the Minimum Quarterly Distribution and Target
Distribution Levels made upon a distribution of Available Cash from Capital
Surplus, the Minimum Quarterly Distribution, the Target Distribution Levels, the
Unrecovered Capital, the number of additional Common Units issuable during the
Subordination Period without a Unitholder vote, the number of Common Units
issuable upon conversion of the Subordinated Units 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 Common Units
(whether effected by a distribution payable in Common Units or otherwise), but
not by reason of the issuance of additional Common Units for cash or property.
For example, in the event of a two-for-one split of the Common Units (assuming
no prior adjustments), the Minimum Quarterly Distribution, each of the Target
Distribution Levels and the Unrecovered Capital of the Common Units would each
be reduced to 50% of its initial level.
The Minimum Quarterly Distribution and the Target Distribution Levels 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 the
Partnership to become taxable as a corporation or otherwise subjects the
Partnership to taxation as an entity for federal, state or local income tax
purposes. In such event, the Minimum Quarterly Distribution and the Target
Distribution Levels would be reduced to an amount equal to the product of (i)
the Minimum Quarterly Distribution and each of the Target Distribution Levels,
respectively, multiplied by (ii) one minus the sum of (x) the maximum effective
federal income tax rate to which the Partnership 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 the Partnership is subject as
an entity for the taxable year in which such event 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 the Partnership was not previously subject to state and local income
tax, if the Partnership were to become taxable as an entity for federal income
tax purposes and the Partnership 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 Levels 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 the
Partnership, 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 the Partnership in the order of priority provided in the
Partnership Agreement and by law and, thereafter, be distributed to the
Unitholders and the General Partners in accordance with their respective capital
account balances as so adjusted. Partners are entitled to liquidating
distributions in accordance with capital account balances. Although operating
losses are allocated to all Unitholders, the allocations of gains and losses
upon liquidation are intended, to the extent possible, to entitle the holders of
outstanding Common Units to a preference over the holders of outstanding
Subordinated Units upon the liquidation of the Partnership, to the extent
required to permit Common Unitholders to receive their Unrecovered Capital plus
any unpaid Common Unit Arrearages. Thus net losses recognized upon liquidation
of the Partnership will be allocated to the Subordinated Units to the extent of
their capital account balances before any loss is allocated to the Common Units,
and net gains recognized upon liquidation will be allocated first to restore
negative balances in the capital accounts of the General Partners and other
Unitholders and then to the Common Unitholders until their capital account
balances equal their Unrecovered Capital plus unpaid Common Unit Arrearages.
However, no assurance can be given that there will be sufficient gain upon
liquidation of the Partnership to enable the Common Unitholders to fully recover
all of such amounts, even though there may be cash available for distribution to
the Subordinated Unitholders.
The manner of such adjustment is as provided in the Partnership Agreement,
the form of which is included as Appendix A to this Prospectus. If the
liquidation of the Partnership occurs before the end of the Subordination
Period, any net gain (or unrealized gain attributable to assets distributed in
kind) will be allocated to the partners as follows:
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first, to the General Partners and the Unitholders having negative
balances in their capital accounts to the extent of and in proportion to
such negative balances;
second, 96% to the Common Unitholders, pro rata, and 4% to the General
Partners, pro rata, until the capital account for each Common Unit is equal
to the sum of (i) the Unrecovered Capital in respect of such Common Unit,
(ii) the amount of the Minimum Quarterly Distribution for the fiscal
quarter during which liquidation of the Partnership occurs and (iii) any
unpaid Common Unit Arrearages in respect of such Common Unit;
third, 96% to the Subordinated Unitholders, pro rata, and 4% to the
General Partners, pro rata, until the capital account for each Subordinated
Unit is equal to the sum of (i) the Unrecovered Capital in respect of such
Subordinated Unit and (ii) the amount of the Minimum Quarterly Distribution
for the fiscal quarter during which the liquidation of the Partnership
occurs;
fourth, 96% to all Unitholders, pro rata, and 4% to the General
Partners, pro rata, until there has been allocated under this clause fourth
an amount per Common Unit equal to (a) the sum of the excess of the First
Target Distribution per Unit over the Minimum Quarterly Distribution per
Unit for each quarter of the Partnership's existence, less (b) the
cumulative amount per Unit of any distributions of Available Cash from
Operating Surplus in excess of the Minimum Quarterly Distribution per Unit
that were distributed 96% to the Unitholders, pro rata, and 4% to the
General Partners, pro rata for each quarter of the Partnership's existence;
fifth, 85% to all Unitholders, pro rata, and 15% to the General
Partners, until there has been allocated under this clause fifth an amount
per Unit equal to (a) the sum of the excess of the Second Target
Distribution per Unit over the First Target Distribution per Unit for each
quarter of the Partnership's existence, less (b) the cumulative amount per
Unit of any distributions of Available Cash from Operating Surplus in
excess of the First Target Distribution per Unit that were distributed 85%
to the Unitholders, pro rata, and 15% to the General Partners for each
quarter of the Partnership's existence;
sixth, 75% to all Unitholders, pro rata, and 25% to the General
Partners, until there has been allocated under this clause sixth an amount
per Common Unit equal to (a) the sum of the excess of the Third Target
Distribution per Unit over the Second Target Distribution per Unit for each
quarter of the Partnership's existence, less (b) the cumulative amount per
Unit of any distributions of Available Cash from Operating Surplus in
excess of the Second Target Distribution per Unit that were distributed 75%
to the Unitholders, pro rata, and 25% to the General Partners for each
quarter of the Partnership's existence; and
thereafter, 50% to all Unitholders, pro rata, and 50% to the General
Partners.
If the liquidation occurs after the Subordination Period, the distinction
between Common Units and Subordinated Units will disappear, so that clauses (ii)
and (iii) of paragraph second above and all of paragraph third above will no
longer be applicable.
Upon liquidation of the Partnership, any loss will generally be allocated
to the General Partners and the Unitholders as follows:
first, 96% to the Subordinated Unitholders in proportion to the
positive balances in their respective capital accounts and 4% to the
General Partners, pro rata, until the capital accounts of the holders of
the Subordinated Units have been reduced to zero;
second, 96% to the Common Unitholders, in proportion to the positive
balances in their respective capital accounts and 4% to the General
Partners, pro rata, until the capital accounts of the Common Unitholders
have been reduced to zero; and
thereafter, to the General Partners, pro rata.
If the liquidation occurs after the Subordination Period, the distinction
between Common Units and Subordinated Units will disappear, so that all of
paragraph first above will no longer be applicable.
Interim adjustments to capital accounts will be made at the time the
Partnership issues additional interests in the Partnership 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 and the General
Partners in the same manner as gain or loss is
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allocated upon liquidation. In the event that positive interim adjustments are
made to the capital accounts, any subsequent negative adjustments to the capital
accounts resulting from the issuance of additional interests in the Partnership,
distributions of property by the Partnership, or upon liquidation of the
Partnership, will be allocated in a manner which results, to the extent
possible, in the capital account balances of the General Partners equaling the
amount which would have been the General Partners' capital accounts if no prior
positive adjustments to the capital accounts had been made.
CASH AVAILABLE FOR DISTRIBUTION
Based on the amount of working capital that the Partnership is expected to
have at the time it commences operations in 1996 and the availability of the
Working Capital Facility, the Partnership believes that, if its assumptions
about operating and other conditions prove correct, the Partnership should have
sufficient Available Cash from Operating Surplus to enable the Partnership to
distribute the Minimum Quarterly Distribution on the outstanding Common Units
and Subordinated Units and the related distribution on the General Partner
Interests with respect to each of its quarters at least through the quarter
ending December 31, 1997, although no assurance can be given respecting such
distributions or any distribution after such date. The Partnership's belief is
based on a number of assumptions, including the assumptions that normal weather
conditions will prevail in the Partnership's operating areas, that the
Partnership's operating margins will remain constant, that all required interest
payments on the Partnership Loan will be made by Triarc and that market and
overall economic conditions will not change substantially. Although the
Partnership believes its assumptions are reasonable, whether the assumptions are
realized is not, in a number of cases, within the control of the Partnership and
cannot be predicted with any degree of certainty. For example, in any particular
year or even series of years, weather may deviate substantially from normal.
Therefore, certain of the Partnership's assumptions may prove to be inaccurate.
As a result, the actual Available Cash from Operating Surplus generated by the
Partnership could deviate substantially from that currently expected. See 'Risk
Factors.' In addition, the terms of the Partnership's indebtedness under certain
circumstances will restrict the ability of the Partnership to distribute cash to
Unitholders. See ' -- Partnership Loan' and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Description of
Indebtedness.' Accordingly, no assurance can be given that distributions of the
Minimum Quarterly Distribution or any other amounts will be made. The
Partnership 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
Subordinated Units to be outstanding immediately after the Offering and on the
General Partner Interests is approximately $25.1 million (approximately $13.0
million for the Common Units, $11.1 million for the Subordinated Units and $1.0
million for the General Partner Interests). If the Underwriters' over-allotment
option is exercised in full, such amounts would be approximately $15.0 million
for the Common Units, $11.1 million for the Subordinated Units and $1.0 million
for the General Partner Interests, or an aggregate of approximately $27.1
million.
Pro forma Available Cash from Operating Surplus generated during 1994 and
1995 (approximately $22.9 million and $17.9 million, respectively) would have
been sufficient to cover the Minimum Quarterly Distribution on the Common Units
and the related distribution on the General Partner Interests, but would have
been insufficient by approximately $2.2 million and $7.2 million to cover the
Minimum Quarterly Distribution on the Subordinated Units and the related
distribution on the General Partner Interests in 1994 and 1995, respectively.
For the calculation of Pro Forma Operating Surplus, see the table below.
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<PAGE>
<PAGE>
PRO FORMA OPERATING SURPLUS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1994 1995
------- -------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Operating profit as reported................................................................ $18,750 $14,501
Add management fees......................................................................... 4,561 3,000
Less standalone costs....................................................................... (1,500) (1,500)
------- -------
Pro forma operating profit.................................................................. 21,811 16,001
Add pro forma depreciation and amortization................................................. 10,024 10,645
------- -------
Pro forma EBITDA(a)......................................................................... 31,835 26,646
Add: Interest on $40.7 million Partnership Loan............................................. 5,500 5,500
Other income(b)....................................................................... 697 652
Less: Pro forma interest expense............................................................ (10,700) (10,713)
Pro forma capital expenditures -- maintenance(c)...................................... (4,228) (4,030)
Pro forma provision for income taxes.................................................. (200) (200)
------- -------
Pro forma operating surplus................................................................. $22,904 $17,855
------- -------
------- -------
</TABLE>
- ------------
(a) EBITDA is defined as operating income plus depreciation and amortization
(excluding amortization of deferred financing costs). 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 a measure of performance
or financial condition under generally accepted accounting principles, but
provides additional information for evaluating the Partnership's ability to
distribute the Minimum Quarterly Distribution. Cash flows in accordance
with generally accepted accounting principles consist of cash flows from
(i) operating, (ii) investing and (iii) financing activities. Cash flows
from operating activities reflect net income (loss) (including charges for
interest and income taxes not reflected in EBITDA), adjusted for (i) all
non-cash charges or income (including, but not limited to, depreciation and
amortization) and (ii) changes in operating assets and liabilities (not
reflected in EBITDA). Further, cash flows from investing and financing
activities are not included in EBITDA. For a discussion of the
Partnership's operating performance and cash flows provided by (used in)
operating, investing and financing activities, see 'Management's Discussion
and Analysis of Financial Condition and Results of Operations.'
(b) Other income consists of finance fees and rental income.
(c) Includes expenditures not expected to occur on an annual basis as follows:
1994 -- $1,790 (primarily computer hardware and systems installation);
1995 -- $590 (primarily the purchase of an airplane).
The decline in pro forma Available Cash from Operating Surplus generated
during 1995 was primarily due to the fact that temperatures during the winter of
1994-95 across the markets served by the Partnership were substantially warmer
than the prior year. The amount of Available Cash from Operating Surplus
generated during 1994 and 1995 would have been sufficient to cover the Minimum
Quarterly Distribution on the Common Units and the related distribution on the
General Partner Interests in such years, but would have been insufficient to
make the Minimum Quarterly Distribution for four quarters on the Subordinated
Units and the related distribution on the General Partner Interests.
Based on the Partnership's actual results of operations for the quarter
ended March 31, 1996, limited data about operations in April 1996 and the
Partnership's estimated results of operations for the remainder of 1996, the
Partnership believes that it will generate during 1996 Available Cash from
Operating Surplus of approximately $24.6 million, although there can be no
assurance it will generate such amount. The Partnership's belief is based on the
assumptions about weather, margins and market and economic conditions described
above as they apply to the last three quarters of fiscal 1996. As a
59
<PAGE>
<PAGE>
result, the actual Available Cash from Operating Surplus generated by the
Partnership for 1996 could deviate substantially from that currently expected.
The amounts of pro forma Available Cash from Operating Surplus for 1994 and
1995 set forth above were derived from the pro forma financial statements of the
Partnership. The pro forma adjustments are based upon currently available
information and certain estimates and assumptions. The pro forma financial
statements do not purport to present the results of operations of the
Partnership had the Partnership actually commenced operations as of the date
indicated. Furthermore, the pro forma financial statements are based on accrual
accounting concepts while Operating Surplus is defined in the Partnership
Agreement on a cash accounting basis. As a consequence, the amounts of pro forma
Available Cash from Operating Surplus shown above should only be viewed as a
general indication of the amounts of Available Cash from Operating Surplus that
may in fact have been generated by the Partnership had it been formed in earlier
periods. Operating Surplus is defined in the Glossary and refers generally to
(i) the cash balance of the Partnership on the date the Partnership commences
operations, plus $16.3 million, plus all cash receipts of the Partnership from
its operations, less (ii) all Partnership operating expenses, 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 any equity offering), maintenance capital expenditures and
reserves established for future Partnership operations. For a more complete
definition of Operating Surplus, see the Glossary.
In addition, there are provisions in the First Mortgage Notes and the Bank
Credit Facility which will, under certain circumstances, restrict the
Partnership's ability to make distributions to its partners. See 'Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Description of Indebtedness.'
PARTNERSHIP LOAN
GENERAL
A portion of the Partnership's annual cash receipts will be interest
payments from Triarc under the Partnership Loan. On a pro forma basis, $5.5
million of the Partnership's Available Cash from Operating Surplus in 1995 of
approximately $17.9 million would have been derived from interest payments on
the Partnership Loan. Consequently, the Partnership's ability to make
distributions to Unitholders will depend in part on Triarc's ability to make
interest payments under the Partnership Loan.
The Partnership Loan will be a senior obligation of Triarc evidenced by a
note issued by Triarc to the Operating Partnership (the 'Partnership Note') and
secured by a pledge by Triarc of all of the shares of capital stock of the
Managing General Partner that are owned by Triarc (approximately 75.7% of the
Managing General Partner's outstanding capital stock as of the date of this
Prospectus). The following is a summary of the anticipated material terms of the
Partnership Note, the form of which will be filed as an exhibit to the
Registration Statement of which this Prospectus is part. This summary is
qualified in its entirety by reference to the Partnership Note.
The Partnership Note will bear interest at a rate of 13.5% per annum,
payable semi-annually in arrears on each March 1 and September 1. The
Partnership Note will have a 14-year maturity, with required semi-annual
prepayments, without premium, of one-eighth the principal thereof beginning
seven years from the date of issuance. The Partnership Note generally may not be
prepaid in whole or in part prior to the fifth anniversary of the date of
issuance; provided that Triarc shall have the right, but not the obligation, to
prepay the Partnership Note without penalty or premium (i) by an amount equal to
all or a portion of the greater of (x) the cost of an acquisition to be made by
the Operating Partnership or (y) the amount of (and to refinance) debt incurred
in connection with an acquisition consummated by the Operating Partnership; or
(ii) in whole, but not in part, in connection with a transaction (x) that
results in the Managing General Partner no longer being an Affiliate of Triarc
and (y) where the total consideration received in connection therewith indicates
a value for each Subordinated Unit (or Common Unit issued upon conversion
thereof) of not less than the Initial Unit Price, as adjusted for splits,
reclassifications, distributions of Capital Surplus and the like. The
Partnership Note will be pari passu to Triarc's obligations to its other senior
creditors, if any (whose
60
<PAGE>
<PAGE>
debt may be secured with other assets of Triarc) and structurally subordinated
to all creditors of Triarc's subsidiaries.
The Partnership Note will contain various affirmative covenants applicable
to Triarc, including a requirement that Triarc (i) use its best efforts to
prevent the Managing General Partner from issuing any additional shares of
capital stock to any Person other than Triarc, a permitted assignee of the
Partnership Note from Triarc or any other Person that pledges such shares to
secure the Partnership Note; (ii) use its best efforts to prevent SEPSCO, an
indirect wholly owned subsidiary of Triarc and currently the sole other
shareholder of the Managing General Partner, from transferring any of its shares
in the Managing General Partner to any Person other than to Triarc, any of its
wholly owned subsidiaries, a permitted assignee of the Partnership Note from
Triarc or to any other Person that pledges such shares to secure the Partnership
Note; (iii) use its best efforts to prevent any shares of the capital stock of
SEPSCO from being acquired by any Person other than Triarc, any of its wholly
owned subsidiaries, or a permitted assignee of the Partnership Note from Triarc
at any time when SEPSCO owns any shares of capital stock of the General Partner;
(iv) comply in all material respects with all applicable laws; (v) pay its
material obligations when due; (vi) provide the Partnership with certain audited
and unaudited financial statements, proxy statements and other reports and (vii)
notify the Partnership of any Default or Event of Default (each as defined in
the Partnership Note) or event which with notice or lapse of time would become
an Event of Default.
In addition, Triarc will covenant in the Partnership Note to use its best
efforts to prevent the Managing General Partner from (a) incurring any
indebtedness for borrowed money at any time that the Operating Partnership does
not have a security interest in the lesser of (x) all of its Retained Assets (as
defined below) or (y) Retained Assets having an aggregate 'Value' (as defined
below) equal to the then outstanding principal amount on the Partnership Note or
(b) selling, assigning or otherwise transferring any of its Subordinated Units
(or Common Units issued upon conversion thereof) unless immediately after giving
effect thereto the Managing General Partner will hold Units and/or cash or cash
equivalents received on the sale thereof (collectively, the 'Retained Assets')
with a Value equal to or greater than the then outstanding principal amount of
the Partnership Note; provided that, the Managing General Partner will be
permitted to (i) sell, assign or otherwise transfer up to $5 million of
Subordinated Units (or Common Units issued upon conversion thereof) in one or
more transactions in exchange for aggregate net proceeds of not more than $5
million and (ii) consummate the Triarc Merger (as defined below) without
complying with the foregoing restriction. For purposes of the foregoing, the
'Value' of the Units retained by the Managing General Partner shall be deemed to
be equal to one-half the value therefor as determined immediately after each
sale, transfer or assignment of Units of any class by reference to the
consideration received by the Managing General Partner in connection therewith.
If at any time the value of such Retained Assets pledged or so subject to
restriction exceeds the outstanding principal amount on the Partnership Note,
such excess Retained Assets shall be released from the foregoing restriction.
The Managing General Partner may select which of such assets will be released.
Assets other than Retained Assets may be distributed or sold by the Managing
General Partner at any time. The Partnership Note will contain a covenant of
Triarc that, in the event of the merger or consolidation of the Managing General
Partner with and into Triarc (the 'Triarc Merger'), Triarc will concurrently
therewith pledge as security for the Partnership Loan a similar amount of
Retained Assets.
If an Event of Default exists with respect to the Partnership Note, the
Partnership may accelerate the maturity of the Partnership Note and exercise
other rights and remedies. In the case of an Event of Default referred to in (k)
below, the acceleration of the maturity of the Partnership Note will occur
automatically. Events of Default include (a) failure to pay any principal or
premium when due, or interest within five business days of when due, on the
Partnership Note, (b) payment default under (after giving effect to any
applicable grace periods or any extension of any maturity date), or the
acceleration of the maturity of, any indebtedness of Triarc or any guarantee by
Triarc of any indebtedness of any subsidiary, if the principal amount of such
indebtedness or guarantee, together with the principal amount of all other such
indebtedness and guarantees with respect to which a payment default (after the
expiration of any applicable grace period or any extension of the maturity date)
has occurred, or the maturity of which has been so accelerated, exceeds $20
million in the aggregate, (c) failure by Triarc to comply in any material
respect with any of its covenants or agreements contained
61
<PAGE>
<PAGE>
in the Note for a period of 30 days after notice thereof; (d) certain
unsatisfied final judgments in excess of $5 million, (e) the failure of the
pledge by Triarc of its shares in the Managing General Partner to be in full
force and effect, (f) the issuance by the Managing General Partner of any shares
of its capital stock to any Person other than Triarc or a permitted assignee of
the Partnership Note from Triarc (unless such shares are pledged by such Person
to secure the Partnership Note), (g) the transfer by SEPSCO of any of its shares
in the Managing General Partner to any Person other than to Triarc, any of its
wholly owned subsidiaries, or a permitted assignee of the Partnership Note from
Triarc, or any other Person that pledges such shares to secure the Partnership
Note, (h) the incurrence by the Managing General Partner of any indebtedness for
borrowed money at any time that the Partnership does not have a security
interest in the requisite Retained Assets, (i) the sale by the Managing General
Partner of any of its Subordinated Units (or Common Units issued upon conversion
thereof) unless immediately after giving effect thereto the Managing General
Partner will hold the requisite amount of Retained Assets: (j) the failure of
Triarc to pledge concurrently with the Triarc Merger as security for the
Partnership Note the requisite amount of the Retained Assets; and (k) various
bankruptcy or insolvency events involving Triarc. If an Event of Default were to
occur under the Partnership Note and the Partnership accelerated the maturity of
the Partnership Note (or such acceleration occurred automatically in the case of
an Event of Default referred to in clause (k) above), all amounts outstanding
thereunder would become due. In such event, there could be no assurance that
Triarc would be able to satisfy its obligations under the Partnership Note or
that the Operating Partnership would be able to recover any amounts owed by
Triarc by foreclosing on, or otherwise exercising its remedies with respect to,
the capital stock of the Managing General Partner or any other assets of Triarc
securing the Partnership Loan. The Operating Partnership is prohibited from
foreclosing on and owning the capital stock of the Managing General Partner at
any time that the Managing General Partner continues to own its General Partner
Interest. The failure by Triarc to repay the Partnership Loan would have a
material adverse effect on the financial condition of the Partnership and on the
ability the Partnership to make any distributions to Unitholders.
Triarc's obligations under the Partnership Note may be assigned to and
assumed by any Person that acquires the Managing General Partner (whether by
merger, consolidation, acquisition of stock or assets or otherwise). The
Partnership Note may not be assigned by the Operating Partnership without
Triarc's consent.
CERTAIN INFORMATION REGARDING TRIARC
Triarc is a holding company which, through its subsidiaries, is engaged in
four businesses: beverages, restaurants, specialty chemicals and dyes and
propane distribution. The beverage operations are conducted through Royal Crown
Company, Inc. and Mistic Brands, Inc.; the restaurant operations are conducted
through Arby's, Inc.; the specialty chemicals and dyes business is conducted
through C.H. Patrick & Co., Inc. ('C.H. Patrick'); and the propane distribution
operations are conducted through National Propane. On April 29, 1996, Triarc
sold the textile business of its subsidiary, Graniteville Company (the
'Graniteville Sale'), to Avondale Mills, Inc. for approximately $255.0 million
in cash, subject to certain post-closing adjustments. Approximately $186 million
of such proceeds were used to repay Graniteville Company's long-term debt.
The following is the unaudited parent company only pro forma condensed
balance sheet of Triarc as of March 31, 1996, giving effect to the Transactions,
the Graniteville Sale and a new bank financing for C.H. Patrick as if they had
occurred on March 31, 1996. The following unaudited parent company only pro
forma condensed balance sheet does not give effect to the Graniteville Sale.
62
<PAGE>
<PAGE>
TRIARC COMPANIES, INC. (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEET
MARCH 31, 1996
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
AS PRO FORMA PRO
REPORTED ADJUSTMENTS FORMA
-------- ----------- -------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents..................................................... $ $ $
Other current assets..........................................................
Investment in consolidated subsidiaries, at equity............................
Other assets..................................................................
-------- ----------- -------
$ $ $
-------- ----------- -------
-------- ----------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities........................................................... $ $ $
Triarc note...................................................................
Intercompany Note payable to Managing General Partner.........................
Other Notes and loans payable to subsidiaries, net of discount................
9 1/2% promissory note payable(a).............................................
Stockholders' equity..........................................................
-------- ----------- -------
$ $ $
-------- ----------- -------
-------- ----------- -------
</TABLE>
- ------------
(a) Matures in 1996 ($5.3), 1997 ($3.9), 1998 ($2.5), 1999 ($1.7), 2000 ($0.7)
and thereafter ($23.6).
------------------------
Because Triarc is a holding company, its ability to meet its cash
requirements (including required interest and principal payments on the
Partnership Loan) is primarily dependent upon cash flows from its subsidiaries
including loans and cash dividends and reimbursement by subsidiaries to Triarc
in connection with its providing certain management services and payments by
subsidiaries under certain tax sharing agreements.
Under the terms of various indentures and credit arrangements, Triarc's
principal subsidiaries are currently unable to pay any dividends or make any
loans or advances to Triarc. C.H. Patrick anticipates entering into a new bank
credit facility (the 'C.H. Patrick Facility') during the second quarter of 1996
which is expected to restrict its ability to pay dividends or make loans to
Triarc. The stock of Triarc's principal subsidiaries (other than C.H. Patrick,
which shares are expected to be pledged in connection with the C.H. Patrick
Facility) and substantially all of the assets of such subsidiaries are pledged
as security for indebtedness under the various debt agreements of Triarc's
subsidiaries. As of December 31, 1995, Triarc had outstanding external
indebtedness consisting of a $37.7 million 9 1/2% note (the '9 1/2% Note') and
guarantees of indebtedness of its subsidiaries in the aggregate principal amount
of $412.5 million ($86.6 million after giving effect to the Transactions and the
Graniteville Sale). In addition, at December 31, 1995, Triarc owed intercompany
indebtedness of $229.3 million ($60.5 million after giving effect to the
Graniteville Sale and the Transactions). Such intercompany indebtedness at
December 31, 1995 consisted of a 9 1/2% note in the principal amount of $112.4
million to Graniteville Company (which note was canceled in connection with the
Graniteville Sale), notes in the principal amounts of $30.0 million and $5.5
million to SEPSCO and a subsidiary of RC/Arby's Corporation ('RCAC'),
respectively (which bear interest at rates ranging from 9 3/4% to 13%), and an
$81.4 million non-interest bearing advance owed to National Propane (which is
being reduced to $25.0 million in connection with the Transactions). In
connection with all of such debt, the only scheduled principal payments required
during 1996 are $5.3 million on the 9 1/2% Note.
As of December 31, 1995 Triarc had notes receivable from RCAC and its
subsidiaries in the aggregate amount of $18.4 million of which $11.7 million is
due on demand and $6.7 million is due in 1998 and which bear interest at a rate
of 11 7/8%.
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Triarc's significant cash requirements for 1996, in addition to interest
payments on the Partnership Note, are expected to be limited to (i) general
corporate expenses including cash used in operations, (ii) $5.3 million and $3.6
million of principal and interest payments, respectively, on the 9 1/2% Note,
(iii) cash requirements for its facilities relocation and corporate
restructuring accruals of $3.2 million, and (iv) up to $4.6 million of advances
to affiliates under loan agreements and loans to RCAC as necessary. There can be
no assurances, however, that Triarc will not have significant additional cash
requirements in the future that could have a material adverse effect on its
ability to make required payments of principal and interest on the Partnership
Loan.
Triarc anticipates meeting its significant cash requirements through its
cash on hand (approximately $ million as of March 31, 1996), dividends
or advances from the Managing General Partner and the Special General Partner,
reimbursement of general corporate expenses from subsidiaries in connection with
management services agreements to the extent such subsidiaries are able to pay
and net payments received under tax sharing agreements with certain subsidiaries
(which Triarc may not have to remit to the IRS due to the availability of
operating loss depletion and tax carryforwards). However, there can be no
assurances that Triarc's sources of cash will be sufficient to enable Triarc to
meet its cash requirements, including its obligations to make payments of
principal and interest on the Partnership Loan.
Upon consummation of the Transactions, payments received under tax sharing
agreements and the reimbursement of general corporate expenses by National
Propane will be limited. See 'The Partnership Agreement -- Reimbursement for
Services.' As a result of the Graniteville Sale, the textile division will no
longer make any payments under the tax sharing agreement with Triarc or
reimburse Triarc for general corporate expenses. Triarc expects to compensate
for such lower cash availability through additional cash on hand of
approximately $135 million from the cash received from the Graniteville Sale and
the Transactions.
The Federal income tax returns of Triarc and its subsidiaries have been
examined by the Internal Revenue Service ('IRS') for the tax years 1985 through
1988. Triarc and its subsidiaries have resolved all but one issue related to
such audit which they are contesting at the Appellate Division of the IRS and
expect to resolve in 1996 for an amount not to exceed $5.0 million. The IRS is
currently finalizing its examination of the Federal income tax returns of Triarc
and its subsidiaries for the tax years from 1989 through 1992 and has issued
notices of proposed adjustments increasing taxable income by approximately
$145.0 million, the tax effect of which has not yet been determined. Triarc is
contesting the majority of the proposed adjustments and, accordingly, the amount
and timing of any payments required as a result thereof cannot presently be
determined. However, it is not expected that the resolution of the 1989 through
1992 examination will be finalized in 1996 and, accordingly, no tax payments
with respect to such years will be required in 1996.
On a pro forma basis for the Transactions and the Graniteville Sale,
Triarc's liquidity has improved significantly since November 1994, when National
Propane reclassified an existing intercompany note from Triarc as a component of
stockholders' equity because it determined, based upon circumstances at such
time, that Triarc's liquidity position was insufficient to enable Triarc to
repay the note. The factors present that resulted in that determination included
(i) the reduction of Triarc's consolidated cash to $49.0 million at September
30, 1994 from $119 million at December 31, 1993 and (ii) a pending acquisition
transaction which, if completed, would have required the utilization of a
significant amount of Triarc's available cash.
There can be no assurance that Triarc will continue to have cash on hand or
will in the future receive sufficient distributions from its subsidiaries in
order to enable it to satisfy its obligations under the Partnership Loan. The
failure of Triarc to make payments of principal and interest on the Partnership
Loan when due would have an adverse effect on the ability of the Partnership to
make any distributions to Unitholders. Furthermore, as a result of the holding
company structure of Triarc, creditors of Triarc, including the Partnership as
the holder of the Partnership Note, will effectively rank junior to all
creditors of Triarc's subsidiaries. In the event of the dissolution, bankruptcy,
liquidation or reorganization of such subsidiaries, the Partnership as the
holder of the Partnership Note would not receive any amounts in respect
thereof until after the payment in full of the creditors of such subsidiaries.
As of March 31, 1996 on a pro forma basis after giving effect to the Offering,
the
64
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<PAGE>
Transactions and the use of proceeds therefrom, and the closing of the C.H.
Patrick Facility, the aggregate amount of indebtedness and other obligations of
Triarc and its subsidiaries to which the Partnership as the holder of the
Partnership Note would be effectively subordinated would have been approximately
$ million. The failure by Triarc to repay the Partnership Loan would have
a material adverse effect on the financial condition of the Partnership.
Triarc is a public company and its Class A Common Stock is listed on the
New York Stock Exchange under the symbol 'TRY.' Triarc's principal executive
offices are located at 900 Third Avenue, New York, New York 10022 and its
telephone number is (212) 230-3000. Certain reports, proxy statements and other
information filed by Triarc with the Commission can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048; and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such documents can also be
inspected at the office of the NYSE, 20 Broad Street, New York, New York 10005.
65
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<PAGE>
SELECTED HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents selected consolidated financial data of
National Propane for each of the years in the two-year period ended April 30,
1993, the ten-month transition period ended December 31, 1993 and each of the
years in the two-year period ended December 31, 1995. The selected consolidated
statement of operations data for the ten-month transition period ended December
31, 1993 and for the two years ended December 31, 1994 and 1995 and the selected
consolidated balance sheet data as of December 31, 1994 and 1995 have been
derived from the financial statements included elsewhere herein, which financial
statements have been audited by Deloitte & Touche LLP, independent auditors
(whose report makes reference to the report of other auditors), contained
elsewhere herein. The selected consolidated statement of operations data for
each of the years in the two-year period ended April 30, 1993 and the selected
consolidated balance sheet data as of April 30, 1992 and 1993 and December 31,
1993 have been derived from National Propane's unaudited consolidated financial
statements which reflect, in the opinion of National Propane's management, all
adjustments necessary to present fairly the data for such periods. The following
table also presents unaudited selected pro forma consolidated financial data of
the Partnership as of and for the year ended December 31, 1995 reflecting the
Offering and related Transactions as if they had been consummated as of January
1, 1995 with respect to statement of operations data and as of December 31, 1995
with respect to balance sheet data. The unaudited selected pro forma
consolidated financial data is not necessarily indicative of the financial
position or the results of operations of the Partnership had the Offering and
related Transactions been consummated on the dates indicated or of the future
results of operations of the Partnership. The data for all of the periods
presented below have been restated to reflect the effects of the June 1995
merger of Public Gas with and into National Propane which is further described
in Note 3 to the accompanying consolidated financial statements. National
Propane's selected historical and pro forma consolidated financial and operating
data should be read in conjunction with the consolidated financial statements
and notes thereto, the pro forma consolidated financial statements and notes
thereto and 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' included elsewhere herein.
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------------------
FISCAL YEAR ENDED APRIL TEN MONTHS YEAR ENDED DECEMBER
30, ENDED 31,
----------------------- DECEMBER 31, --------------------
1992 1993 1993(a) 1994 1995
-------- -------- ------------ -------- --------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Operating revenues.................................. $144,667 $151,931 $119,249 $151,651 $148,983
Cost of sales....................................... 109,329 117,366 92,301 109,683 109,059
-------- -------- ------------ -------- --------
Gross profit........................................ 35,338 34,565 26,948 41,968 39,924
Selling, general and administrative expenses (other
than management fees charged by parents).......... 16,776 19,578 16,501 18,657 22,423
Management fees charged by parents(c)............... 3,271 2,328 3,485 4,561 3,000
Facilities relocation and corporate restructuring... -- 7,647(d) 8,429(d) -- --
-------- -------- ------------ -------- --------
129,376 146,919 120,716 132,901 134,482
-------- -------- ------------ -------- --------
Operating profit (loss)............................. 15,291 5,012(d) (1,467)(d) 18,750 14,501
-------- -------- ------------ -------- --------
Interest expense.................................... (17,696) (16,770) (9,949) (9,726) (11,719)
Interest income from Triarc(e)...................... 16,334 17,127 10,360 9,751 --
Other income, net................................... 1,699 131 1,727 1,169 904
-------- -------- ------------ -------- --------
337 488 2,138 1,194 (10,815)
-------- -------- ------------ -------- --------
Income before income taxes, extraordinary charge and
cumulative effect of change in accounting
principles........................................ 15,628 5,500 671 19,944 3,686
Provision for income taxes.......................... 5,833 2,624 1,018 7,923 4,291
-------- -------- ------------ -------- --------
Income (loss) before extraordinary charge and
cumulative effect of change in accounting
principles........................................ 9,795 2,876 (347) 12,021 (605)
Extraordinary charge................................ -- -- -- (2,116)(f) --
Cumulative effect of change in accounting
principles........................................ -- 6,259(g) -- -- --
-------- -------- ------------ -------- --------
Net income (loss)................................... $ 9,795 $ 9,135 $ (347) $ 9,905 $ (605)
-------- -------- ------------ -------- --------
-------- -------- ------------ -------- --------
Net income per Unit(h)..............................
Balance Sheet Data (at period end):
Working capital (deficit)........................... $(24,469)(i) $ 13,163 $ 5,479 $ (631) $ (4,357)
Due from Triarc(e).................................. 92,804 65,999 71,172 -- (e) --
Total assets........................................ 234,699 218,095 191,955 137,581 139,112
Long-term debt...................................... 78,556 67,511 51,851 98,711 124,266
Stockholders' equity (deficit)(e)................... 81,666 88,063 88,971 (19,502)(e) (48,600)
Partners' capital................................... -- -- -- -- --
Operating Data:
EBITDA(j)........................................... $ 23,670 $ 13,087 $ 5,483 $ 28,774 $ 25,146
Capital expenditures(k)............................. 7,039 8,290 11,260 12,593 11,013
Retail propane gallons sold(l)...................... 145,708 154,839 117,415 152,335 150,141
<CAPTION>
PARTNERSHIP
PRO FORMA(b)
------------
<S> <C>
Statement of Operations Data:
Operating revenues.................................. $148,983
Cost of sales....................................... 109,059
------------
Gross profit........................................ 39,924
Selling, general and administrative expenses (other
than management fees charged by parents).......... 23,923
Management fees charged by parents(c)............... --
Facilities relocation and corporate restructuring... --
------------
132,982
------------
Operating profit (loss)............................. 16,001
------------
Interest expense.................................... (10,713)
Interest income from Triarc(e)...................... 5,500
Other income, net................................... 904
------------
(4,309)
------------
Income before income taxes, extraordinary charge and
cumulative effect of change in accounting
principles........................................ 11,692
Provision for income taxes.......................... 200
------------
Income (loss) before extraordinary charge and
cumulative effect of change in accounting
principles........................................ 11,492
Extraordinary charge................................ --
Cumulative effect of change in accounting
principles........................................ --
------------
Net income (loss)................................... $ 11,492
------------
------------
Net income per Unit(h).............................. $0.96
------------
------------
Balance Sheet Data (at period end):
Working capital (deficit)........................... $ 9,940
Due from Triarc(e).................................. 40,700
Total assets........................................ 174,715
Long-term debt...................................... 125,079
Stockholders' equity (deficit)(e)................... --
Partners' capital................................... 27,165
Operating Data:
EBITDA(j)........................................... $ 26,646
Capital expenditures(k)............................. 11,013
Retail propane gallons sold(l)...................... 150,141
</TABLE>
(see footnotes on next page)
66
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<PAGE>
(footnotes from preceding page)
(a) In October 1993 National Propane's fiscal year ended April 30 and Public
Gas' fiscal year ended February 28 were changed to a calendar year ended
December 31. In order to conform the reporting periods of the combined
entities and to select a period deemed to meet the Securities and Exchange
Commission requirement for filing financial statements for a period of one
year, the ten-month period ended December 31, 1993 ('Transition 1993') has
been presented above and in the accompanying consolidated financial
statements. The selected consolidated financial and operating data as of
and for the fiscal years ended April 30, 1992 and 1993 ('Fiscal 1993'),
however, reflect the former year-ends of both National Propane and Public
Gas. Accordingly, Fiscal 1993 and Transition 1993 each include the results
of National Propane for the two-month period ended April 30, 1993 as
follows: Operating revenues -- $28,266; Operating loss -- $(5,190); Net
loss -- $(3,375) (see Note (d) below).
(b) For a description of the adjustments and assumptions used in preparing the
Unaudited Pro Forma Condensed Consolidated Financial and Operating Data,
see Notes to the Unaudited Pro Forma Condensed Consolidated Balance
Sheet and Statement of Operations included elsewhere herein.
(c) Management fees charged by parents include costs charged to National
Propane by Triarc and to Public Gas by SEPSCO, its parent prior to the
Merger. (See Note 19 to the accompanying consolidated financial statements
for further discussion).
(d) Includes certain significant pretax charges recorded in April 1993
affecting Fiscal 1993 and Transition 1993 operating profit consisting of
(i) $8.4 million of facilities relocation and corporate restructuring
charges ($7.6 million of which affected both Fiscal 1993 and Transition
1993 due to National Propane's April 1993 being included in both periods
and $0.8 million of which affected only Transition 1993) and (ii) $0.5
million of allocated costs of a payment to the Special Committee of
Triarc's Board of Directors ($0.4 million of which affected both Fiscal
1993 and Transition 1993). (See Note 20 to the accompanying consolidated
financial statements).
(e) In November, 1994, National Propane reclassified its receivable from Triarc
as a component of stockholders' equity and began reserving all interest
accrued subsequent thereto. Receivables from SEPSCO are classified as a
component of stockholders' equity for all of the above periods. (See Note
13 to the accompanying consolidated financial statements). The pro forma
due from parent is classified as an asset because it will be evidenced by
an interest-bearing note with a fixed maturity.
(f) The extraordinary charge represents the write-off of unamortized deferred
financing costs and original issue discount, net of income taxes,
associated with the early extinguishment of debt.
(g) The cumulative effect of change in accounting principles resulted from
National Propane's adoption of SFAS No. 109 effective May 1, 1992.
(h) See Note (f) of Notes to Unaudited Pro Forma Condensed Consolidated
Statement of Operations included elsewhere herein for details relating to
the calculation of net income per Unit.
(i) Reflects the classification of $35.0 million of long-term debt, which was
repaid in Fiscal 1993, as a current liability.
(j) EBITDA is defined as operating profit (loss) plus depreciation and
amortization (excluding amortization of deferred financing costs). 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 a measure
of performance or financial condition under generally accepted accounting
principles, but provides additional information for evaluating the
Partnership's ability to distribute the Minimum Quarterly Distribution.
Cash flows in accordance with generally accepted accounting principles
consist of cash flows from (i) operating, (ii) investing and (iii)
financing activities. Cash flows from operating activities reflect net
income (loss) (including charges for interest and income taxes not
reflected in EBITDA), adjusted for (i) all non-cash charges or income
(including, but not limited to, depreciation and amortization) and (ii)
changes in operating assets and liabilities (not reflected in EBITDA).
Further, cash flows from investing and financing activities are not
included in EBITDA. For a discussion of the Partnership's operating
performance and cash flows provided by (used in) operating, investing and
financing activities, see 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.'
(k) The Partnership's capital expenditures fall generally into three
categories: (i) maintenance capital expenditures, which include
expenditures for replacement of property, plant and equipment, (ii) growth
capital expenditures for the expansion of existing operations, and (iii)
acquisition capital expenditures, which include expenditures related to the
acquisition of retail propane operations.
An analysis by category for the years ended December 31, 1994 and 1995 is
as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Maintenance(1).............................................................................. $ 4,228 $ 4,030
Growth...................................................................................... 3,672 4,936
Acquisition................................................................................. 4,693 2,047(2)
------- -------
Total................................................................................... $12,593 $11,013
------- -------
------- -------
</TABLE>
--------------------
(1) Includes expenditures not expected to occur on an annual basis as
follows: 1994 -- $1,790 (primarily computer hardware and systems
installation); 1995 -- $590 (primarily the purchase of an airplane).
(2) Includes $1,864 of assets purchased and contributed by Triarc (see
Note 19 to the accompanying consolidated financial statements).
(l) Retail propane gallons sold includes sales to (i) residential customers,
(ii) commercial and industrial customers, (iii) agricultural customers, and
(iv) dealers (located primarily in the Northeast) that resell propane to
residential and commercial customers.
67
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
National Propane (referred to as the 'Company' in the audited consolidated
financial statements set forth elsewhere herein) is primarily engaged in (i) the
retail marketing of propane to residential customers, commercial and industrial
customers, agricultural customers and to dealers (located primarily in the
Northeast) that resell propane to residential and commercial customers, and (ii)
the retail marketing of propane-related supplies and equipment, including home
and commercial appliances. National Propane believes it is the fifth largest
retail marketer of propane in terms of retail volume in the United States,
supplying approximately 250,000 active retail and wholesale customers in 24
states through its 165 service centers. National Propane's operations are
concentrated in the Midwest, Northeast, Southeast and Southwest regions of the
United States.
National Propane's residential and commercial customers use propane
primarily for space heating, water heating, clothes drying and cooking. In the
industrial market propane is used as a motor fuel for over-the-road vehicles,
forklifts and stationary engines, to fire furnaces, as a cutting gas and in
other process applications. Agricultural customers use propane for tobacco
curing, crop drying, poultry brooding and weed control. Dealers re-market
propane in small quantities, primarily in cylinders, for residential and
commercial uses.
The retail propane sales volumes are very dependent on weather conditions.
National Propane sells approximately 66% of its retail volume during the first
and fourth quarters, which are the winter heating season. As a result, cash flow
is greatest during the first and fourth quarters as customers pay for their
purchases. Propane sales are also dependent on climatic conditions which may
affect agricultural regions. National Propane believes that its exposure to
regional weather patterns is lessened because of the geographic diversity of its
areas of operations and through sales to commercial and industrial markets,
which are not as sensitive to variations in weather conditions.
Gross profit margins are not only affected by weather patterns but also by
changes in customer mix. In addition, gross profit margins vary by geographical
region. Accordingly, profit margins could vary significantly from year to year
in a period of identical sales volumes.
It should be noted that since National Propane reports on a calendar year
basis its results are affected by two different winter heating seasons: the end
of the first year's heating season, National Propane's first fiscal quarter, and
the beginning of the second heating season, National Propane's fourth fiscal
quarter.
Profitability is also affected by the price and availability of propane.
Worldwide availability of both gas liquids and oil affects the supply of propane
in domestic markets. National Propane does not believe it is overly dependent on
any one supplier. National Propane primarily buys propane on both one year
contracts and the spot market and generally does not enter into any fixed price
take-or-pay contracts. Furthermore, National Propane purchases propane from a
wide variety of sources, with no one provider supplying over 15% of its propane
needs.
Based on demand and weather conditions the price of propane can change
quickly over a short period of time; in most cases the increased cost of propane
is passed on to the customer. However, in cases where increases cannot be passed
on or when the price of propane escalates faster than National Propane's ability
to raise customer prices, margins will be negatively affected.
The propane industry is very competitive. National Propane competes against
other major propane companies as well as local marketers in most of its markets,
with the most competition in the Midwest United States. Propane also competes
against other energy sources, primarily natural gas, oil and electricity.
The following discussion compares the year ended December 31, 1995 with the
year ended December 31, 1994 and the year ended December 31, 1994 with the
twelve months ended December 31, 1993. All of such periods reflect the effects
of the June 1995 merger (the 'Merger') of Public Gas Company with and into
National Propane. Because the Merger was a transfer of assets and liabilities in
exchange for shares among a controlled group of companies, it has been accounted
for in a manner
68
<PAGE>
<PAGE>
similar to a pooling of interests and, accordingly, all prior periods have been
restated to reflect the Merger. In connection with National Propane's change in
fiscal year end during 1993, as described in Note 4 to National Propane's
consolidated financial statements appearing elsewhere herein, National Propane's
audited financial statements include the ten-month transition period ended
December 31, 1993. Solely for purposes of comparing the results of operations of
National Propane for 1994 with those of the comparable twelve-month period, the
statement of operations for the ten-month transition period ended December 31,
1993 has been combined with the results of operations for the two-month period
ended February 28, 1993 to form the combined unaudited twelve months ended
December 31, 1993 which is presented below along with the comparable amounts for
1994 and 1995:
<TABLE>
<CAPTION>
TWELVE MONTHS YEAR ENDED
ENDED DECEMBER 31,
DECEMBER 31, --------------------
1993 1994 1995
------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues....................................................... $ 154,841 $151,651 $148,983
Costs and expenses:
Cost of sales............................................. 117,950 109,683 109,059
Selling, general and administrative expenses.............. 18,881 18,657 22,423
Management fees charged by parents........................ 4,242 4,561 3,000
Facilities relocation and corporate restructuring......... 8,429 -- --
------------- -------- --------
149,502 132,901 134,482
------------- -------- --------
Operating profit..................................... 5,339 18,750 14,501
Other income (expense):
Interest expense.......................................... (12,737) (9,726) (11,719)
Interest income from Triarc............................... 13,342 9,751 --
Other income, net......................................... 1,408 1,169 904
------------- -------- --------
2,013 1,194 (10,815)
------------- -------- --------
Income before income taxes................................ 7,352 19,944 3,686
Provision for income taxes................................ 3,671 7,923 4,291
------------- -------- --------
Income (loss) before extraordinary charge................. 3,681 12,021 (605)
Extraordinary charge...................................... -- (2,116) --
------------- -------- --------
Net income (loss).................................... $ 3,681 $ 9,905 $ (605)
------------- -------- --------
------------- -------- --------
</TABLE>
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Revenues. Revenues declined $2.7 million, or 1.8%, to $149.0 million in
1995 compared with $151.7 million in 1994 with propane revenues decreasing $2.3
million, or 1.6%, to $136.3 million in 1995 (compared with $138.6 million in
1994). This decrease is principally due to reduced propane sales volume as
retail gallons sold for 1995 decreased 2.2 million, or 1.4%, to 150.1 million in
1995 compared with 152.3 million in 1994. This decrease in propane sales volume
is primarily the net effect of an unusually warm winter season in the first
quarter of 1995 partially offset by (i) the impact of acquisitions which were
made in the second half of 1994 and the second half of 1995, and (ii) a slightly
colder fourth quarter in 1995. Based on Degree Days data (the 'Degree Days
Data'), published by the National Climatic Data Center, as applied to the
geographical regions of National Propane's operations, the first quarter of 1995
was 14.4% warmer than the first quarter of 1994. During the first quarter of
1995, excluding the positive impact of increased volumes due to acquisitions,
National Propane sold 8.6 million fewer gallons than during the same quarter in
1994. Partially offsetting the impact of the warmer temperatures was (i) an
increase of 5.9 million gallons from businesses acquired during the second half
of 1994 and the first quarter of 1995, and (ii) higher volume resulting from
slightly colder temperatures in the fourth quarter of 1995. A slight decrease in
National Propane's other lines of revenue, primarily appliance sales, accounted
for the remainder of the decrease in revenues.
69
<PAGE>
<PAGE>
Gross Profit. Gross profit declined $2.0 million, or 4.8%, to $39.9 million
in 1995 compared with $41.9 million in 1994 due principally to (i) the lower
propane sales volume in 1995 compared with 1994, and (ii) lower profit margins
(26.8% in 1995 compared with 27.7% in 1994) reflecting higher product costs.
These higher product costs could be passed along only in part to customers in
the form of higher selling prices and were partially offset by lower overhead
costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $3.8 million, or 20.2%, to $22.4 million in
1995 compared with $18.6 million in 1994. This increase reflects higher costs
for (i) medical benefits, (ii) costs relating to new marketing programs
initiated in 1995 and (iii) increased amortization of costs in excess of net
assets of acquired companies ('Goodwill') and other intangibles. The increased
amortization of Goodwill and other intangibles reflects (i) the full year
effects of acquisitions in 1994 as well as Goodwill 'pushed down' to Public Gas
in April 1994 in connection with the SEPSCO Merger discussed in Note 14 to the
consolidated financial statements included elsewhere herein and (ii) the effect
of acquisitions in 1995.
Management Fees Charged by Parents. Management fees decreased $1.6 million
to $3.0 million in 1995 compared with $4.6 million in 1994. This decrease
resulted from $1.6 million of management fees charged in 1994 by SEPSCO for
services provided to Public Gas Company ('Public Gas'). No such fees were
charged in 1995 since the management services to Public Gas were provided by the
management of National Propane.
Operating Profit. Operating profit declined by $4.2 million, or 22.7%, to
$14.5 million in 1995 compared with $18.7 million in 1994 due to the factors
noted above.
Interest Expense. Interest expense increased $2.0 million, or 20.5%, to
$11.7 million in 1995 compared with $9.7 million in 1994. This increase was due
to higher borrowings under National Propane's revolving credit and term loan
agreement, including the full year 1995 effect of borrowings in October 1994 to
finance a $40.0 million dividend to Triarc, and was only partially offset by
lower interest rates.
Interest Income from Triarc. The interest income from Triarc of $9.8
million in 1994 did not recur in 1995 due to National Propane's reclassification
of its receivable from Triarc as a component of stockholders' equity in November
1994. This reclassification occurred because Triarc's liquidity position was no
longer sufficient to enable it to repay the receivable and, therefore, the
receivable was no longer expected to be repaid except through an equity
transaction. Concurrent with the reclassification, National Propane ceased
accruing interest on the receivable.
Other Income, Net. Other income, net decreased $0.3 million to $0.9 million
in 1995 compared with $1.2 million in 1994 principally due to lower interest
income from finance charges on appliance sales.
Provision for Income Taxes. The provision for income taxes in 1995 and 1994
reflect effective rates of 116% and 40%, respectively. The higher 1995 rate
reflects a $2.5 million provision for income tax contingencies in 1995 relating
to proposed adjustments raised by the Internal Revenue Service for the tax years
1989 through 1992 (see Note 11 of notes to consolidated financial statements).
Extraordinary Charge. In 1994 National Propane recognized an extraordinary
charge of $2.1 million in connection with the early extinguishment of its 13
1/8% senior subordinated debentures due 1999 (the '13 1/8% Debentures')
consisting of the write-off of previously unamortized deferred financing costs
of $0.9 million and previously unamortized original issue discount of $2.6
million, net of income tax benefit of $1.4 million.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 1993
(UNAUDITED)
Revenues. Revenues decreased $3.1 million, or 2.1%, to $151.7 million in
1994 compared with $154.8 million in 1993 with propane revenues decreasing $1.2
million, or 0.8%, to $138.5 million in 1994 compared with $139.7 million in
1993. The decrease is principally due to reduced propane sales volume as gallons
sold for 1994 decreased 1.3 million, or 0.8%, to 152.3 million in 1994 compared
with 153.6 million in 1993. Based on Degree Days Data applicable to the
geographic regions in which National Propane operates, 1994 was 6.2% warmer than
1993. During the fourth quarter of 1994, reflecting the warm winter season and
excluding the positive impact of increased volumes from acquisitions, National
70
<PAGE>
<PAGE>
Propane sold 8.3 million fewer gallons than in the same quarter in 1993. Also,
reflecting the warmer 1994 weather, National Propane sold 2.5 million fewer
gallons during the second and third quarters of 1994 compared to the year ago
period, exclusive of the effect of acquisitions. During the first quarter of
1994, which was colder than in the same quarter in 1993, National Propane sold
3.4 million more gallons than during the same quarter in 1993, excluding the
positive impact of acquisitions. Partially offsetting the impact of the warm
temperatures was an increase in 1994 over 1993 of 6.1 million gallons from
businesses acquired in 1994. Revenues from leasing vehicles and other equipment
to affiliates and former affiliates of National Propane decreased to an
immaterial amount in 1994 from $2.4 million in 1993. Such leasing business was
significantly curtailed after SEPSCO disposed of certain operations which were
the principal customers of the leasing operations.
Gross Profit. Gross profit increased $5.1 million, or 13.8%, to $42.0
million in 1994 despite the decrease in sales volume and leasing activity
revenues noted above. This improvement resulted from (i) lower costs of propane
reflecting economies gained through centralized purchasing (only a small
percentage of which was passed on to customers in the form of lower selling
prices), (ii) lower delivery costs associated with efficiency initiatives
commenced in August 1993 and (iii) increased tank and cylinder rental income
with no significant related costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were relatively unchanged amounting to $18.7 million for
1994 compared with $18.9 million in 1993.
Management Fees Charged by Parents. Management fees increased $0.3 million
to $4.6 million in 1994 compared with $4.3 million in 1993. This increase
reflects a slightly higher relative allocation of costs to National Propane for
management services compared with Triarc's other affiliates.
Facilities Relocation and Corporate Restructuring. The $8.4 million of
facilities relocation and corporate restructuring costs in 1993 relate to the
change in control of National Propane and Triarc that occurred in April 1993.
Included in this charge are (a) National Propane's allocated share of the
estimated costs of (i) terminating the lease on Triarc's then existing corporate
facility and (ii) entering into a consulting agreement with the former Vice
Chairman of Triarc for which no substantial services are required and for which
Triarc has not received and does not expect to receive any services that will
have substantial value to Triarc and its subsidiaries and (b) the estimated
costs of (i) conforming subsidiary identifications to National Propane, (ii)
training employees to use the new management information system necessitated by
National Propane's new centralized operating strategy, (iii) terminating
employees and related severance payments and (iv) relocating and reorganizing
National Propane's corporate headquarters. Such costs are further described in
Note 20 to National Propane's financial statements appearing elsewhere herein.
No similar charges were incurred in 1994.
Operating Profit. Operating profit increased by $13.4 million to $18.7
million in 1994 compared with $5.3 million in 1993 due to the factors noted
above.
Interest Expense. Interest expense decreased by $3.0 million to $9.7
million in 1994 compared with $12.7 million in 1993. This decrease reflects
lower average borrowing levels and, to a lesser extent, the lower interest rates
of a new revolving credit and term loan agreement entered into by National
Propane in 1994.
Interest Income from Triarc. Interest income from Triarc decreased $3.5
million to $9.8 million in 1994 compared with $13.3 million in 1993 principally
reflecting the $40.0 million collection on the receivable from Triarc in April
1993 and, to a lesser extent, lower interest income in 1994 due to the
aforementioned November 1994 reclassification of the receivable from Triarc as a
component of stockholders' equity compared with a full year of such income in
1993.
Provision for Income Taxes. The provision for income taxes in 1994 and 1993
reflects effective rates of 40% and 50%, respectively. The decrease is
principally due to the effects in 1993 of (i) the nondeductible costs allocated
to National Propane of a consulting agreement between Triarc and its former Vice
Chairman referred to above and (ii) the effect on net deferred income tax
liabilities of the 1% increase in the Federal income statutory tax rate to 35%
effective in 1993.
Extraordinary Charge. In 1994 National Propane recognized the previously
discussed extraordinary charge in connection with the early extinguishment of
the 13 1/8% Debentures.
71
<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
National Propane's cash balances decreased $1.2 million to $2.8 million as
of December 31, 1995 from $4.0 million as of December 31, 1994 as cash provided
by operations during 1995 of $15.9 million was more than offset by cash used in
investing and financing activities of $9.5 million and $7.6 million,
respectively.
Cash provided by operating activities during 1995 was $15.9 million
compared with $10.7 million during 1994. The cash flows from operations in 1995
consisted of $0.6 million of net loss, noncash charges of $14.8 million,
principally depreciation and amortization, and a $1.7 million reduction in
working capital (excluding cash and current portion of long-term debt).
Cash used in investing activities during 1995 of $9.5 million included
capital expenditures, excluding capital leases and acquisitions, amounting to
$8.1 million of which $2.6 million was recurring maintenance needed to sustain
National Propane's operations at current levels, $0.6 million was for projects
of a non-recurring nature and $4.9 million was to support growth of operations.
Recurring expenditures consisted primarily of expenditures for maintenance of
equipment to support current business levels. National Propane has budgeted
maintenance capital expenditures for 1996 of approximately $3.5 million, subject
to the availability of cash and other financing sources, and has outstanding
commitments amounting to $0.4 million for such capital expenditures as of
December 31, 1995.
Cash paid for business acquisitions in 1995 amounted to $0.4 million for
three acquisitions. In addition, Triarc acquired a propane distribution business
for approximately $4.2 million in 1995 which it contributed to National Propane.
Subsequent to December 31, 1995, National Propane entered into a letter of
intent to acquire an additional propane distribution business for cash of $0.8
million. As of December 31, 1995, due to debt covenant limitations, National
Propane was unable to borrow under the $13.9 million acquisition sublimit (the
'Acquisition Sublimit') which comprises a portion of the Existing Credit
Facility.
In December 1995, National Propane borrowed $30.0 million under the
Existing Credit Facility, and dividended such amount to subsidiaries of Triarc
($22.7 million) and SEPSCO ($7.3 million) in proportion to their respective
percentage ownership in National Propane. On February 22, 1996, the 11 7/8%
senior subordinated debentures of SEPSCO were redeemed. The cash for such
redemption came from the proceeds of the $30.0 million of borrowings (which were
restricted, under the Existing Credit Facility, to the redemption of the 11 7/8%
Debentures), liquidation of marketable securities and existing cash balances.
The indebtedness incurred in part to finance such redemption is being assumed by
the Operating Partnership and repaid in connection with the Transactions.
Cash used in financing activities during 1995 of $7.6 million reflects the
aggregate $30.0 million dividend paid to subsidiaries of Triarc and SEPSCO and
$0.8 million of deferred financing costs partially offset by net borrowings of
long-term debt of $23.2 million. Such net borrowings principally result from the
$30.0 million borrowing under the Existing Credit Facility in December 1995
discussed above, less $9.5 million of repayments of Existing Credit Facility
term loans.
Total stockholders' deficit increased $29.1 million during 1995 to a
deficit of $48.6 million, from a deficit in 1994 of $19.5 million, principally
reflecting the $30.0 million dividend to subsidiaries of Triarc and SEPSCO
discussed above. In addition, the increase of $2.6 million in the receivable
from SEPSCO, which is classified as a component of stockholders' equity, and the
net loss of $0.6 million incurred during 1995 contributed to the deficit
increase but were more than offset by the capital contribution from Triarc of
two propane gas businesses it had acquired in 1995 amounting to $4.2 million.
National Propane's Existing Credit Facility, as amended, consists of a
revolving credit facility with a maximum availability as of December 31, 1995 of
$57.2 million and three tranches of term loans with an aggregate original
availability of $90.0 million and outstanding amounts aggregating $84.1 million
(net of repayments through December 31, 1995 of $5.9 million) as of December 31,
1995. The aggregate availability of revolving credit loans (assuming full
availability under the Acquisition Sublimit) reduces $3.0 million in 1996, $15.9
million in 1997 and $4.0 million in each of 1998 and 1999 with the remaining
availability of $30.3 million maturing in March 2000. The $84.1 million of term
loans outstanding at December 31, 1995 amortize $6.3 million in 1996, $6.4
million in 1997, $8.2 million in 1998, $8.3 million
72
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<PAGE>
in 1999, $10.3 million in 2000 and $44.6 million thereafter through 2003. Any
outstanding borrowings under the Acquisition Sublimit convert to term loans in
October 1997; such term loans would be due in equal installments from December
1997 through December 2000.
The Existing Credit Facility contains various covenants which (a) require
meeting certain financial amount and ratio tests; (b) limit, among other items,
(i) the incurrence of indebtedness, (ii) the retirement of certain debt prior to
maturity, (iii) investments, (iv) asset dispositions, (v) capital expenditures
and (vi) affiliate transactions other than in the normal course of business; and
(c) restrict the payment of dividends to Triarc. As of December 31, 1995
National Propane had $5.0 million available for the payment of dividends under
the Existing Credit Facility; however, National Propane is effectively prevented
from paying dividends due to the restrictions of the financial amount and ratio
tests noted above. National Propane's debt under the Existing Credit Facility is
guaranteed by Triarc.
The Partnership's principal cash requirements, assuming the closing of the
Offering, are maintenance capital expenditures (currently budgeted at $3.5
million through the quarter ending June 30, 1997), and funds for growth and
business acquisitions, if any. Pro forma interest expense for the period ending
June 30, 1997 is estimated to be approximately $10.7 million. There are no
scheduled principal repayments in 1996 under the Bank Credit Facility or the
First Mortgage Notes.
The Operating Partnership will also enter into a $55 million Bank Credit
Facility, which will include a $15 million Working Capital Facility to be used
for working capital and other general partnership purposes and a $40 million
Acquisition Facility. The Partnership expects that these facilities will be
undrawn at the closing of the Offering. The Partnership expects to meet its
requirements for its capital expenditures, acquisition programs and debt service
through a combination of cash flow from operations, the availability of the Bank
Credit Facility and the interest on the Partnership Loan. On a pro forma basis,
assuming that the transactions had occurred on March 31, 1996, the Operating
Partnership would have approximately $15.0 million and $40.0 million available
under the Working Capital Facility and the Acquisition Facility, respectively.
INITIAL PUBLIC OFFERING OF COMMON UNITS AND OTHER TRANSACTIONS
The Partnership was organized on March 13, 1996 and was formed to acquire,
own and operate National Propane's propane business and substantially all of the
related assets of National Propane. The Partnership's activities will be
conducted through the Operating Partnership (including a wholly-owned corporate
subsidiary of the Operating Partnership). National Propane intends to convey
substantially all of its propane-related assets and liabilities (other than
amounts due from a parent, deferred financing costs and income tax liabilities)
to the Operating Partnership.
The Partnership intends to issue 6,190,476 Common Units at an assumed
offering price of $21.00 per Common Unit, representing limited partner interests
in the Partnership, pursuant to a public offering and to concurrently issue
5,283,809 Subordinated Units, representing subordinated general partner
interests in the Partnership, as well as an aggregate 4% general partner
interest in the Partnership and the Operating Partnership, on a combined basis,
to each of National Propane and the Special General Partner. The Partnership
also intends to issue $120.0 million of First Mortgage Notes and repay all of
the then existing borrowings under the Existing Credit Facility.
Assuming consummation of (i) the Offering, (ii) the issuance of the First
Mortgage Notes, (iii) the repayment of all borrowings under the Existing Credit
Facility, (iv) the Partnership Loan of $40.7 million and dividend to Triarc of
$59.3 million, respectively and (v) certain other related transactions as of
December 31, 1995, the Operating Partnership would have had aggregate partners'
capital of $27.2 million representing an increase of $75.8 million over the
stockholders' deficit of National Propane of $48.6 million as of December 31,
1995 before the effects of such transactions. The Operating Partnership would
also have a cash interest-bearing receivable from Triarc of $40.7 million and
long-term debt equal to that of National Propane, less $7.3 million. The
Partnership's operating cash flows would also reflect (i) interest income on the
receivable from Triarc ($5.5 million annually assuming a 13.5% interest rate),
(ii) reduced interest expense reflecting lower debt levels and lower interest
rates (assuming an interest rate of 8.0% on the First Mortgage Notes) and (iii)
significantly reduced Federal
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income taxes since the Partnership will not be subject to future income taxes on
its propane-related income (such taxes will be borne by its partners).
LEGAL CONTINGENCIES
In May 1994 National Propane was informed of coal tar contamination which
was discovered at one of its properties in Wisconsin. National Propane purchased
the property from a company which had purchased the assets of a utility which
had previously owned the property. National Propane believes that the
contamination occurred during the use of the property as a coal gasification
plant by such utility. In order to assess the extent of the problem, National
Propane engaged environmental consultants who began work in August 1994. In
December 1994 the environmental consultants provided a report to National
Propane which indicated the estimated range of potential remediation costs to be
between approximately $0.4 million and $0.9 million depending upon the actual
extent of impacted soils, the presence and extent, if any, of impacted
groundwater and the remediation method actually required to be implemented. In
February 1996 National Propane's environmental consultants provided a second
report which presented revised estimated costs, based on additional information
obtained since the prior report and the two most likely remediation methods. The
range of estimated costs for the first method, which involves treatment of
groundwater and excavation, treatment and disposal of contaminated soil, is from
$1.6 million to $3.3 million. The range for the second method, which involves
only treatment of groundwater and the building of a soil containment wall is
from $0.4 million to $0.8 million. Based on discussions with National Propane's
environmental consultants, both methods are acceptable remediation plans.
National Propane, however, will have to agree on a final plan with the State of
Wisconsin. Since receiving notice of the contamination, the Partnership has
engaged in discussions of a general nature concerning remediation with the State
of Wisconsin. These discussions are ongoing and there is no indication as yet of
the time frame for a decision by the State of Wisconsin on the method of
remediation. The Partnership is also engaged in ongoing discussions of a general
nature with a successor to the utility that operated a coal gasification plant
on the property. There is as yet no indication that the successor will share the
costs of remediation. The Partnership is in the process of notifying its
insurance carriers of the contamination and the likely incurrence of costs to
undertake remediation. Accordingly, it is unknown which remediation method will
be used. As of December 31, 1995 National Propane had a remaining accrual of
$0.4 million for this contingency at December 31, 1995. National Propane, if
found liable for any of such costs, would attempt to recover such costs from a
successor owner. The ultimate outcome of this matter cannot presently be
determined and, depending upon the cost of remediation required, may have a
material adverse effect on the Partnership's consolidated financial position,
results of operations or ability to make the Minimum Quarterly Distribution.
National Propane is involved in ordinary claims, litigation and
administrative proceedings and investigations of various types in several
jurisdictions incidental to its business. In the opinion of management of
National Propane, the outcome of any such matter, or all of them combined, will
not have a material adverse effect on National Propane's consolidated financial
condition or results of operations.
DESCRIPTION OF INDEBTEDNESS
DESCRIPTION OF FIRST MORTGAGE NOTES
Concurrently with the Offering, the Managing General Partner will issue
$120 million aggregate principal amount of First Mortgage Notes in a private
placement, which First Mortgage Notes will be assumed by the Operating
Partnership in connection with the Conveyance. The following is a summary of the
anticipated material terms of the First Mortgage Notes, all of which will be
issued pursuant to a Note Agreement (the 'Note Agreement'), a form of which will
be filed as an exhibit to the Registration Statement of which this Prospectus is
a part. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE NOTE
AGREEMENT.
The Operating Partnership's obligations under the Note Agreement and the
First Mortgage Notes will be secured, on an equal and ratable basis with the
Operating Partnership's obligations under the
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Bank Credit Facility, by a mortgage on substantially all of the real property
and liens on substantially all of the operating assets, equipment and other
assets of the Operating Partnership, including the capital stock but not the
operating assets and equipment of National Sales and Service, Inc. ('NSSI'), a
wholly-owned corporate subsidiary of the Operating Partnership (collectively,
the 'Mortgaged Property'). It is anticipated that the Notes will mature
approximately 14 years from their date of issuance, and will require eight equal
annual prepayments, without premium, of the principal thereof beginning seven
years from the date of issuance. The Operating Partnership may, at its option,
and under certain circumstances following the disposition of assets may be
required to, offer to prepay the First Mortgage Notes or other pari passu
indebtedness, in whole or in part. Certain of these prepayments may be required
to be made at a premium as defined in the Note Agreement. The per annum interest
rate on the First Mortgage Notes is expected to be %, payable semi-annually
in arrears.
The Note Agreement is expected to contain various restrictive and
affirmative covenants applicable to the Operating Partnership and its Restricted
Subsidiaries (as defined in the Note Agreement), including (i) restrictions on
the incurrence of additional indebtedness other than (a) borrowings permitted
under the Bank Credit Facility provided that the principal amount outstanding
under the Acquisition Facility, together with all outstanding indebtedness
incurred pursuant to clause (g)(z)(A) below, does not exceed $40 million, (b)
certain specified pre-existing indebtedness, (c) certain indebtedness incurred
in connection with additions (including by way of acquisitions of businesses),
repairs or improvements to the Operating Partnership's assets, not to exceed the
net proceeds of any partnership interests sold by the Operating Partnership or
capital contributions to the Operating Partnership to finance such additions,
repairs or improvements, (d) additional indebtedness, if after giving effect to
the incurrence thereof and the repayment of any debt being refinanced or repaid
(x) the pro forma Consolidated Cash Flow Coverage of Debt Service (as defined in
the Note Agreement) is greater than 2.50 for the period of four fiscal quarters
immediately preceding the date of incurrence of such debt, and (y) the pro forma
Consolidated Cash Flow Coverage of Maximum Debt Service (as defined in the Note
Agreement) is greater than 1.25 for the period of four fiscal quarters
immediately preceding the date of incurrence of such debt, (e) unsecured debt
owed to the General Partner or an Affiliate of the General Partner, provided
that such debt is expressly subordinated to the First Mortgage Notes and does
not exceed a total of $20 million in the aggregate at any time outstanding, (f)
certain intercompany subordinated indebtedness and (g) certain pre-existing
indebtedness of acquired Persons or assets, provided that (x) such indebtedness
was not incurred in anticipation of such acquisition, (y) no Default or Event of
Default (each as defined in the Note Agreement) shall have occurred and be
continuing and (z) either (A) such indebtedness, together with the principal
amount outstanding under the Acquisition Facility, does not exceed $40 million
or (B) after giving effect to such acquisition, the Operating Partnership could
incur at least $1 of additional indebtedness pursuant to clause (d) above, (ii)
restrictions on certain liens, investments, guarantees, loans, advances, lines
of business, mergers, consolidations, sales of assets, and transactions with
affiliates and (iii) restrictions on the payment of dividends or other
distributions in respect of any partnership interest if the pro forma ratio of
Consolidated Cash Flow to Consolidated Interest Expense (as defined in the Note
Agreement) is less than 1.75 to 1.0.
The Partnership believes that upon the closing of the Offering, after
giving effect to the Transactions contemplated by this Prospectus, the Operating
Partnership would be in compliance with the restrictive and affirmative
covenants applicable under the First Mortgage Notes.
Under the Note Agreement, so long as no default exists or would result, the
Operating Partnership will be permitted to make cash distributions to the
Partnership not more frequently than quarterly in an amount not to exceed
Available Cash for the immediately preceding quarter. The Note Agreement is
expected to require that in the quarter preceding a quarter in which an interest
payment is to be made with respect to any Indebtedness (as defined in the Note
Agreement) (other than any quarter in which an interest payment on any
indebtedness is required to be made), Available Cash reflect a reserve equal to
50% of the interest to be paid on such Indebtedness on such payment date. In
addition, in the third, second and first quarters preceding a quarter in which a
scheduled principal payment is to be made on the First Mortgage Notes or any
Parity Debt, the Note Agreement will require that Available Cash reflect a
reserve equal to 25%, 50% and 75%, respectively, of the aggregate principal
amount to be repaid on the First Mortgage Notes and such Parity Debt on such
payment date. Such reserves for
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principal payments may be reduced by the aggregate principal amount of all
binding, irrevocable letters of credit established to refinance such principal.
Except as described below, if an Event of Default exists on the First
Mortgage Notes, the holders of a majority in principal amount of the First
Mortgage Notes may accelerate the maturity of the First Mortgage Notes and
exercise other rights and remedies. In the case of an Event of Default referred
to in (a) below, any holder of the First Mortgage Notes may accelerate the
maturity of the First Mortgage Notes. In the case of an Event of Default
referred to in (g) below, the acceleration of the maturity of the Notes will
occur automatically. Events of Default include (a) failure to pay any principal
or premium when due, or interest within five business days of the date due, on
the First Mortgage Notes, (b) a material misrepresentation in the Note
Agreement, (c) failure to perform or otherwise comply with covenants contained
in the First Mortgage Notes, (d) default by the Operating Partnership or any
Restricted Subsidiary in the payment of any interest on or principal of, or
default by any such entity in the performance of any agreement if the effect is
to permit the acceleration of, any indebtedness the aggregate principal amount
of which exceeds $5 million, (e) a material failure of any of the security
documents relating to the Mortgaged Property to be in full force and effect, (f)
certain unsatisfied final judgments in excess of $5 million or requiring a
split-up or divestiture of the Operating Partnership, and (g) various events of
bankruptcy or insolvency involving the Managing General Partner, the Operating
Partnership or any Restricted Subsidiary.
DESCRIPTION OF THE BANK CREDIT FACILITY
Concurrently with the Offering, the Operating Partnership will enter into
the Bank Credit Facility with a group of commercial banks. The following is a
summary of the anticipated material terms of the Bank Credit Facility, the form
of which will be filed as an exhibit to the Registration Statement of which this
Prospectus is a part. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE BANK CREDIT FACILITY.
The Bank Credit Facility consists of a $40 million Acquisition Facility and
a $15 million Working Capital Facility. The agreement governing the Bank Credit
Facility will contain events of default and other provisions typical in
facilities of this type, including requirements relating to partnership
existence, maintenance of property and insurance, conduct of business, payment
of taxes, compliance with laws, use of proceeds and mandatory prepayments and
restrictions on liens, the incurrence of additional indebtedness, investments,
guarantees, loans and advances, formation of new subsidiaries, restricted
payments, permitted distributions, stock repurchases and other distributions,
mergers and consolidations, sale of assets, prepayments or other acquisitions of
indebtedness, change in nature of business conducted, changes to material
agreements, acquisitions (including a maximum aggregate pre-existing debt limit
of $5 million with respect to the acquired entity and a borrowing limit under
the Acquisition Facility of eight times pro forma EBITDA with respect to the
acquired entity) and transactions with affiliates. The Bank Credit Facility will
require that Available Cash reflect certain reserves for the payment of
principal and interest on the Operating Partnership's debt and that all
distributions from the Operating Partnership to the Partnership be distributed
to its partners or used to pay certain operating expenses of the Partnership. In
addition, the Bank Credit Facility will require that the ratio of Funded Debt
(as defined in the Bank Credit Facility) to EBITDA shall be no greater than 4.5
to 1 through June 30, 1997 and 4.25 to 1 thereafter.
The Operating Partnership's obligations under the Bank Credit Facility will
be secured, on an equal and ratable basis, with the Operating Partnership's
obligations under the Note Agreement and the First Mortgage Notes by a mortgage
on the Mortgaged Property. The Bank Credit Facility will bear interest at a rate
based upon, at the Operating Partnership's option, either the London Interbank
Offered Rate plus a margin or an Alternate Base Rate plus a margin (each as
defined in the Bank Credit Facility).
The Working Capital Facility will expire after three years, but may be
extended annually thereafter with the consent of the banks. The Acquisition
Facility will revolve for at least three years, after which time any outstanding
amounts thereunder will be converted to a term loan and will amortize quarterly
in equal principal payments through maturity. Amounts borrowed under both
facilities are due at maturity.
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Certain of the Partnership's indebtedness contain provisions relating to
change of control. The Bank Credit Facility will contain customary covenants
regarding changes in control, including minimum ownership interest provisions
with respect to the Operating Partnership, the Partnership and the Managing
General Partner. Also, the First Mortgage Notes will contain change of control
provisions relating to the Managing General Partner. If such change of control
provisions are triggered, such outstanding indebtedness may become due. In such
event there can be no assurance that the Operating Partnership would be able to
pay such indebtedness, in which case the lenders would have the right to
foreclose on the Operating Partnership's assets, which would have a material
adverse affect on the Partnership.
EFFECTS OF INFLATION
In general, inflation has not had any significant impact on National
Propane in recent years and changes in propane prices, in particular, have been
dependent on factors generally more significant than inflation, such as weather
and availability of supply. However, to the extent inflation affects the amounts
National Propane pays for propane as well as operating and administrative
expenses, National Propane attempts to limit the effects of inflation through
passing on propane cost increases to customers in the form of higher selling
prices to the extent it can do so as well as cost controls and productivity
improvements. As such, inflation has not had a material adverse effect on
National Propane's profitability and National Propane does not believe normal
inflationary pressures will have a material adverse effect on future results of
operations of National Propane or the Partnership.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Effective October 1, 1995 National Propane adopted Statement of Financial
Accounting Standards ('SFAS') No. 121, 'Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of.' This standard requires that
long-lived assets and certain identifiable intangibles held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
adoption of this standard had no effect on National Propane's consolidated
results of operations or financial position.
In October 1995 the Financial Accounting Standards Board issued SFAS No.
123 'Accounting for Stock-Based Compensation' ('SFAS 123') which will be adopted
by National Propane in the year ended December 31, 1996. SFAS 123 defines a fair
value based method of accounting for employee stock-based compensation
(including Units) and encourages adoption of that method of accounting. Such
method would initially apply generally only to awards granted in the year SFAS
123 is adopted. However, SFAS 123 allows entities to continue to measure
compensation cost under the intrinsic value method prescribed by existing
accounting pronouncements. Such entities, however, must make certain pro forma
disclosures as if the fair value method had been applied. Through December 31,
1995 National Propane has not granted any stock options; however, Triarc has
granted stock options to purchase Triarc common stock to certain key employees
of National Propane. Assuming consummation of the Common Unit offering, the
Partnership may grant Common Unit options to certain employees. The adoption of
SFAS 123 will not have any effect on National Propane's results of operations or
financial position since (i) SFAS 123 generally does not apply to stock-based
compensation granted prior to the year of adoption, (ii) National Propane
currently intends to elect to account for stock-based compensation using the
intrinsic value method if its employees are granted any stock-based compensation
and (iii) National Propane understands that Triarc would also elect to account
for stock-based compensation using the intrinsic value method for any further
stock options granted to employees of National Propane.
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BUSINESS AND PROPERTIES
GENERAL
The Partnership, a Delaware limited partnership recently formed to acquire,
own and operate the business and assets of National Propane, is engaged
primarily in (i) the retail marketing of propane to residential, commercial and
industrial, and agricultural customers and to dealers (located primarily in the
Northeast) that resell propane to residential and commercial customers and (ii)
the retail marketing of propane-related supplies and equipment, including home
and commercial appliances. The Partnership believes it is the fifth largest
retail marketer of propane in terms of volume in the United States, supplying
approximately 250,000 active retail and wholesale customers in 24 states through
its 165 service centers located in 22 states. The Partnership's operations are
concentrated in the Midwest, Northeast, Southeast and Southwest regions of the
United States. The retail propane sales volume of the Partnership was
approximately 150 million gallons in 1995. In 1995, approximately 48.6% of the
Partnership's retail sales volume was to residential customers, 28.2% was to
commercial and industrial customers, 6.3% was to agricultural customers, and
16.9% was to dealers. Sales to residential customers in 1995 accounted for
approximately 64% of the Partnership's gross profit on propane sales, reflecting
the higher-margin nature of this segment of the market. Over 90% of the tanks
used by the Partnership's retail customers are owned by the Partnership.
National Propane was incorporated in 1953 under the name Conservative Gas
Corporation. During the period the Partnership was controlled by DWG
Corporation, Triarc's predecessor, the Partnership's business was conducted
through nine regionally branded companies without central management or
coordinated pricing or distribution strategies. In April 1993, a partnership,
the sole general partners of which are Nelson Peltz and Peter W. May, completed
the Acquisition, in which it acquired approximately 28.6% of the then
outstanding shares of Triarc's common stock. Since the Acquisition, the
Partnership's new management team, headed by Ronald D. Paliughi, who became
President and Chief Executive Officer of National Propane in April 1993, has
implemented an operating plan designed to make the Partnership more efficient,
profitable and competitive.
Since the Acquisition, the Partnership's management has (i) consolidated
nine separately branded businesses into a single company with a new, national
brand and logo; (ii) consolidated eight regional offices into one national
headquarters; (iii) installed the Partnership's first system-wide data
processing system; (iv) implemented system-wide pricing, marketing and
purchasing strategies, thereby reducing the cost duplication and purchasing and
pricing inefficiencies associated with the Partnership's formerly decentralized
structure; and (v) centralized and standardized accounting, administrative and
other corporate services. As a result of these initiatives, the Partnership has
become more efficient and competitive, and believes it is now positioned to
capitalize on opportunities for business growth, both internally and through
acquisitions.
Although management has focused primarily on implementing the new operating
plan, the Partnership has acquired five propane businesses since November 1993
resulting in an increase in volume sales of approximately 13.4 million gallons
annually. Four of these acquired businesses operate in the Midwest and one
operates in the Southwest. Generally, National Propane has financed acquisitions
either with cash on hand or through the issuance of debt securities. The
Partnership recently entered into a letter of intent to acquire an additional
propane business for $0.8 million; however, consummation of this transaction is
subject to customary closing conditions and completion of definitive
documentation, and no assurance can be given that this acquisition will be
completed.
The Partnership believes that its competitive strengths include: (i) gross
profit and operating margins that it believes to be among the highest of the
major retail propane companies whose financial statements are publicly
available; (ii) the concentration of its operations in colder regions (such as
the upper Midwest and Northeast), high margin regions (such as the Northeast and
Florida), and regions experiencing population growth (such as Florida and the
Southwest); (iii) an experienced management team; (iv) a well-trained and
motivated work force; and (v) an effective pricing management system. However,
the propane industry is highly competitive and includes a number of large
national firms that may have greater financial or other resources or lower
operating costs than the Partnership.
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Prior to June 1995, the propane business of the Partnership was conducted
through two separate subsidiaries of Triarc, Public Gas Company and National
Propane Corporation (collectively, the 'Propane Companies'). To further
centralize the Partnership's businesses, on June 29, 1995, the operations of the
Propane Companies were formally consolidated by merging Public Gas Company with
and into National Propane.
Concurrently with the closing of the Offering, pursuant to the Conveyance,
National Propane will contribute substantially all of its assets (which assets
will not include an existing intercompany note from Triarc, approximately $59.3
million of the net proceeds from the issuance of the First Mortgage Notes and
certain other assets) and related liabilities (other than income tax
liabilities) to the Operating Partnership. In general, current management of
National Propane will continue to manage and operate the Partnership's business
as officers of the Managing General Partner and its affiliates. The Partnership
will not directly employ any of the persons responsible for managing or
operating the Partnership. See 'The Transactions' and 'Management -- Partnership
Management.' The following discussion of and references to the Partnership
include the business, operations and assets of its predecessor, National
Propane.
OPERATING STRATEGY
The Partnership's operating strategy is to increase its efficiency,
profitability and competitiveness, while better serving its customers, by
building on the efforts it has already undertaken to improve pricing management,
marketing and purchasing and to consolidate its operations.
Improved Pricing Management: The $1.4 million pricing system recently
installed in substantially all of the Partnership's service centers
provides central management with current, system-wide supply, demand and
competitive pricing information. Based on that information, pricing
managers located in Cedar Rapids, Iowa, determine the prices to be charged
to the Partnership's existing residential customers. With respect to
commercial and industrial customers, agricultural customers and new
residential customers, management makes daily pricing recommendations to
local managers who determine prices based on such recommendations as well
as local conditions. The Partnership believes that this combination of
central and local decision making enables it to more effectively manage
prices. In addition, to further enhance its pricing management, the
Partnership intends to equip its delivery personnel with hand-held
computer terminals that simplify customer billing and the collection of
price and volume information.
Improved Marketing: The Partnership intends to differentiate itself from
smaller, local competitors by strengthening its image as a reliable, full
service, nationwide propane supplier. To that end, (i) all of the
Partnership's service centers operate under the National Propane brand
(other than certain service centers obtained by the Partnership in recent
acquisitions) and offer 24 hour/7 day-a-week service for emergency repairs
and deliveries, (ii) the Partnership conducts coordinated advertising and
marketing campaigns, (iii) the Partnership's employees attend training
courses at its new training center or at service centers where they are
employed and (iv) the Partnership is in the process of establishing
appliance showrooms at several service centers in an effort to increase
sales and rental income.
Efficient Purchasing: The Partnership intends to further improve its
propane purchasing and storage strategies, thereby making more efficient
use of its system-wide storage capacity. When conditions are appropriate,
the Partnership intends to purchase and store propane during the summer
months when prices are generally lower and sell these supplies during
periods of higher propane prices. In addition, the Partnership intends to
use its existing storage facilities or acquire additional facilities to
minimize transportation costs by storing propane near large concentrations
of its customers.
Consolidating Operations: The Partnership will continue to look for
opportunities to consolidate its operations. Since July 1993, the
Partnership has reduced its workforce by approximately 16%, from 1,228 to
1,028 full-time employees as of March 31, 1996.
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STRATEGIES FOR GROWTH
The Partnership's strategies for growth involve expanding its operations
and increasing its market share through strategic acquisitions and internal
growth, including the opening of new service centers.
STRATEGIC ACQUISITIONS
The Partnership 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. Accordingly, while the Partnership's
business strategy includes opening new locations, adding new retail customers
and retaining existing customers, the ability of the Partnership's business to
grow will depend in large part on its ability to acquire other retail
distributors. In recent years the Partnership's ability to acquire other propane
companies has been constrained primarily due to (i) management's focus on
implementing the new operating plan, (ii) the need to make significant
maintenance capital expenditures not made in prior years and (iii) limitations
under the Existing Credit Facility. Having successfully implemented much of the
operating plan and significantly improved its capital structure through the
October 1994 refinancing of relatively high cost indebtedness, the Partnership
is now in a better position to pursue acquisition opportunities, although the
Partnership's significant leverage may adversely affect its ability to
consummate such acquisitions. In addition, following the closing of the
Offering, the Partnership will have the flexibility to fund acquisitions by
either drawing on the $40 million Acquisition Facility or issuing additional
Common Units. The Partnership believes there are numerous potential acquisition
candidates because the propane industry is highly fragmented, with approximately
8,000 retailers (according to the National Propane Gas Association (the 'NPGA'))
and with the 10 largest retailers constituting approximately 39% of industry
sales (according to LP-GAS magazine). Moreover, no retailer has more than 10% of
industry sales.
The Partnership intends to take two approaches to acquisitions: (i)
primarily to build on its broad geographic base by acquiring smaller,
independent competitors that operate within the Partnership's existing
geographic areas and incorporating them into the Partnership's distribution
network and (ii) to acquire propane businesses in areas in the United States
outside of its current geographic base where it believes there is growth
potential and where an attractive return on its investment can be achieved. The
Partnership recently entered into a letter of intent to acquire a propane
business for $0.8 million; however, consummation of this transaction is subject
to customary closing conditions and completion of definitive documentation, and
no assurance can be given that this acquisition will be completed. Although the
Partnership expects to continue to evaluate a number of propane distribution
companies, including regional and national firms, as part of its ongoing
acquisition program, except as described in the preceding sentence, the
Partnership does not have any present agreements or commitments with respect to
any acquisition. There can be no assurance, however, that the Partnership will
identify attractive acquisition candidates in the future, that the Partnership
will be able to acquire such candidates on acceptable terms, or will be able to
finance such acquisitions. If the Partnership is able to make acquisitions,
there can be no assurance that such acquisitions will not dilute earnings and
distributions or that any additional debt incurred to finance such acquisitions
will not adversely affect the ability of the Partnership to make distributions
to Unitholders. In addition, to the extent that warm weather adversely affects
the Partnership's operating and financial results, the Partnership's access to
capital and its acquisition activities may be limited. The Managing General
Partner has broad discretion in making acquisitions, and it is expected that the
Managing General Partner generally will not seek Unitholder approval of
acquisitions.
INTERNAL GROWTH
In addition to pursuing expansion through acquisitions, the Partnership
intends to pursue internal growth at its existing service centers and to expand
its business by opening new service centers. The Partnership believes that it
can attract new customers and expand its market base by (i) providing superior
service, (ii) introducing innovative marketing programs and (iii) focusing on
population growth areas.
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The Partnership intends to leverage its position as a reliable, full
service propane company to attract new customers, particularly in those
locations where the Partnership competes against smaller, independent
distributors. For example, many propane customers rely on their suppliers for
technical services and advice because of the increasing complexity of the
equipment such customers use. The Partnership believes that in some areas it is
the only propane company that can fully provide such services and advice. To
enable them to provide such services and advice, the Partnership's employees
attend a training course at the Partnership's new training facility in Cedar
Rapids, Iowa or at the service centers where they are employed. Since the third
quarter of 1995, over 220 employees have attended these eight-hour courses. In
the fourth quarter of 1996, the Partnership expects to establish a second
training center near Great Barrington, Massachusetts for its employees located
in the Northeast.
In addition, the Partnership's marketing programs, in particular, its Water
Heater Program, are designed to attract new customers. In the Water Heater
Program, the Partnership offers to users of electric or fuel oil water heaters a
free propane water heater (excluding installation) in return for signing a
five-year propane purchase agreement. Approximately 2,500 customers have
participated in the Water Heater Program since it was introduced in the first
quarter of 1995.
Furthermore, the Partnership operates in several growth areas of the United
States. The Partnership believes that it is one of the leading propane retailers
in western Colorado, a rapidly growing market. The Partnership also operates in
central Arizona, an area that has experienced a significant rate of population
growth in recent years. In addition, the Partnership is one of the leading
propane retailers in Florida, the population of which has increased by
approximately 9.5% since 1990.
The Partnership also intends to expand its business by opening new service
centers, known as 'scratch-starts,' in areas where there is relatively little
competition. Scratch starts are newly opened service centers generally staffed
with a single employee, which typically involve minimal start up costs because
the infrastructure of the new service center is developed as the customer base
expands and the Partnership can, in many circumstances, transfer existing
assets, such as storage tanks, to the new service center. Under its
'scratch-start' program, the Partnership intends to open new service centers in
specific types of markets, such as resorts and new residential developments,
which have been targeted because of the unavailability of natural gas, the
limited number of competitors and the potential number of relatively high margin
residential accounts. Under this program, the Partnership has recently opened
three new service centers in California and one in each of Idaho, Georgia and
South Carolina.
INDUSTRY BACKGROUND
Propane, a by-product of natural gas processing and petroleum refining, is
a clean-burning energy source recognized for its transportability and ease of
use relative to alternative stand-alone energy sources. Propane is extracted
from natural gas or oil wellhead gas at processing plants or separated from
crude oil during the refining process. Propane is normally transported and
stored in a liquid state under moderate pressure or refrigeration for economy
and ease of handling in shipping and distribution. When the pressure is released
or the temperature is increased, it is useable as a flammable gas. Propane is
colorless and odorless; an odorant is added to allow its detection. Propane is
clean-burning, producing negligible amounts of pollutants when consumed.
The Partnership's retail customers fall into four broad categories:
residential customers, commercial and industrial customers, agricultural
customers and dealers (located primarily in the Northeast) that resell propane
to residential and commercial customers. Residential customers use propane
primarily for space heating, water heating, cooking and clothes drying.
Commercial and industrial customers use propane for commercial applications such
as cooking and clothes drying and industrial uses such as fueling over-the-road
vehicles, forklifts and stationary engines, firing furnaces, as a cutting gas
and in other process applications. Agricultural customers use propane for
tobacco curing, crop drying, poultry brooding and weed control.
Based upon information provided by the NPGA, propane accounts for
approximately 3.0% to 4.0% of household energy consumption in the United States,
an average level that has remained relatively constant for the past ten years.
In addition, propane is now the world's most widely used alternative fuel for
automobiles with approximately 350,000 and 3.5 million vehicles running on
propane in the United States and worldwide, respectively (according to the
NPGA). The Partnership believes,
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based on industry publications, that the domestic retail market for propane is
approximately 9.4 billion gallons annually.
PRODUCTS, SERVICES AND MARKETING
The Partnership distributes its propane through a nationwide distribution
network integrating 165 service centers in 22 states. The Partnership's
operations are located primarily in the Midwest, Northeast, Southeast and
Southwest regions of the United States. The chart below sets forth information
regarding the Partnership's retail volume sales and service centers for each
region:
<TABLE>
<CAPTION>
MIDWEST NORTHEAST SOUTHEAST SOUTHWEST(1) TOTAL
------- --------- --------- -------------- -------
<S> <C> <C> <C> <C> <C>
Volume (in thousands of gallons)(2).......... 71,235 33,193 26,561 19,152 150,141
% of Total Volume............................ 47.4 % 22.1% 17.7% 12.8% 100%
Number of Service Centers(3)................. 68 38 32 27 165
</TABLE>
- ------------
(1) Includes California and Idaho.
(2) For the year ended December 31, 1995.
(3) As of March 1, 1996.
------------------------
Typically, service centers are found in suburban and rural areas where
natural gas is not readily available. Generally, such locations consist of an
office and a warehouse and service facility, with one or more 18,000 to 30,000
gallon storage tanks on the premises. Each service center is managed by a
district manager and also typically employs a customer service representative, a
service technician and one or two bulk truck drivers. However, new service
centers established under the Partnership's 'scratch start' program generally do
not have offices, warehouses or service facilities and are typically staffed by
a single employee.
In 1995 the Partnership served approximately 250,000 active customers. No
single customer accounted for 10% or more of the Partnership's revenues in 1995.
Generally, the number of customers increases during the fall and winter and
decreases during the spring and summer. Historically, approximately 66% of the
Partnership's retail propane volume has been sold during the six-month season
from October through March, as many customers use propane for heating purposes.
Consequently, sales, gross profits and cash flows from operations are
concentrated in the Partnership's first and fourth fiscal quarters. To the
extent necessary, the Partnership may reserve cash from the first and fourth
fiscal quarters for distribution to Unitholders in the second and third fiscal
quarters.
As noted above, year-to-year demand for propane is affected by the relative
severity of the winter and other climatic conditions. For example, while the
frigid temperatures that were experienced by the United States in January and
February of 1994 significantly increased the overall demand for propane, the
warm weather during the winter of 1994-1995 significantly reduced such demand.
The Partnership believes, however, that the geographic diversity of its areas of
operations helps to reduce its exposure to regional weather patterns. In
addition, retail sales to the commercial and industrial markets, while affected
by economic patterns, are not as sensitive to variations in weather conditions
as sales to residential and agricultural markets. For information on the impact
of annual variations in weather on the operations of the Partnership, see
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General.'
Retail deliveries of propane are usually made to customers by means of
bobtail and rack trucks. Propane is pumped from the bobtail truck, which
generally holds 2,800 gallons of propane, into a stationary storage tank on the
customer's premises. The capacity of these tanks usually ranges from
approximately 50 to approximately 1,000 gallons, with a typical tank having a
capacity of 250 to 500 gallons. Typically, service centers deliver propane to
most of their residential customers at regular intervals, based on estimates of
such customers' usage, thereby eliminating the customers' need to make
affirmative purchase decisions. The Partnership also delivers propane to retail
customers in portable cylinders, which typically have a capacity of 23.5
gallons. When these cylinders are delivered to
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customers, empty cylinders are picked up for replenishment at the Partnership's
distribution locations or are refilled in place. The Partnership also delivers
propane to certain other retail customers, primarily dealers and large
commercial accounts, in larger trucks known as transports, which have an average
capacity of approximately 9,000 gallons. Propane is generally transported from
refineries, pipeline terminals and storage facilities (including the
Partnership's underground storage facilities in Hutchinson, Kansas and Loco
Hills, New Mexico) to the Partnership's bulk plants by a combination of common
carriers, owner-operators, railroad tank cars and, in certain circumstances, the
Partnership's own highway transport fleet. See ' -- Properties.'
Although overall demand for propane is affected by climate, availability
and cost of alternative energy sources, changes in price and other factors, the
Partnership believes that residential demand for its propane is relatively
stable for the following reasons. First, residential demand for propane has been
relatively unaffected by general economic conditions due to the largely
non-discretionary nature of most propane purchases by the Partnership's
customers. Second, when the Partnership's customers have switched to natural gas
and other competing energy sources, the Partnership has generally been able to
redeploy its tanks and attract new customers in other areas. Third, while
significant price increases can result in a loss of customers, many of the
Partnership's residential customers, particularly in the Northeast and
Southeast, are relatively less price sensitive because they tend to purchase
significantly less propane on an individual basis than customers in the Midwest.
Finally, the Partnership's residential customers tend to remain with the
Partnership because of the inconvenience of switching tanks and suppliers. In
many states certain fire safety regulations restrict the refilling of a leased
tank solely to the propane supplier that owns the tank and, therefore, customers
who do not own their own tanks are less likely to switch suppliers. Over 90% of
the tanks used by the Partnership's retail customers are leased to them by the
Partnership. Despite these factors, no assurance can be given that demand for
the Partnership's propane will not decline, and any significant decline could
have a material adverse affect on the Partnership.
The Partnership also sells, leases and services equipment related to its
propane distribution business. In the residential market, the Partnership sells
household appliances such as cooking ranges, water heaters, space heaters,
central furnaces and clothes dryers, as well as less traditional products such
as barbecue equipment and gas logs. In the industrial market, the Partnership
sells or leases specialized equipment for the use of propane as fork lift truck
fuel, in metal cutting and atmospheric furnaces and for portable heating for
construction. In the agricultural market, specialized equipment is leased or
sold for the use of propane as engine fuel and for chicken brooding and crop
drying. The sale of specialized equipment, service income and rental income
represented less than 10% of the Partnership's operating revenues during fiscal
1995. In an effort to increase sales and rental income, the Partnership has
recently established a model appliance showroom at its service center in Cedar
Rapids, Iowa, where a broad range of propane-related equipment and appliances
are displayed. The Partnership is in the process of establishing additional
appliance showrooms at a number of other service centers, and expects that
between five and ten showrooms will be fully operational by the end of 1996.
Parts and appliance sales, installation and service activities will be conducted
through a wholly-owned corporate subsidiary of the Operating Partnership.
PROPANE SUPPLY AND STORAGE
The profitability of the Partnership is dependent upon the price and
availability of propane as well as seasonal and climatic factors. Contracts for
propane are typically made on a year-to-year basis, but the price of the propane
to be delivered depends upon market conditions at the time of delivery.
Worldwide availability of both gas liquids and oil affects the supply of propane
in domestic markets, and from time to time the ability to obtain propane at
attractive prices may be limited as a result of market conditions, thus
affecting price levels to all distributors of propane. Should the wholesale cost
of propane decline in the future, the Partnership believes that its margins on
its retail propane distribution business would increase in the short-term
because retail prices tend to change less rapidly than wholesale prices. Should
the wholesale cost of propane increase, for similar reasons, retail marketing
profitability would likely be reduced at least for the short-term until retail
prices can be increased. Since 1993, the Partnership has generally been
successful in maintaining retail gross margins on an annual
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basis despite changes in the wholesale cost of propane. There may be times,
however, when the Partnership will be unable to pass on fully price increases to
its customers. Consequently, the Partnership's profitability will be sensitive
to changes in wholesale propane prices, and a substantial increase in the
wholesale cost of propane could adversely affect the Partnership's margins and
profitability. Except for occasional opportunistic buying and storage of
propane, the Partnership has not engaged in any significant hedging activities
with respect to its propane supply requirements, although it may do so from time
to time in the future. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- General.'
The Partnership purchased propane from over 35 domestic and Canadian
suppliers during 1995, primarily major oil companies and independent producers
of both gas liquids and oil, and it also purchased propane on the spot market.
In 1995, the Partnership purchased approximately 81% and 19% of its propane
supplies from domestic and Canadian suppliers, respectively. Approximately 87%
of propane purchases by the Partnership in 1995 were on a contractual basis
(generally, under one year agreements subject to annual renewal), but the
percentage of contract purchases may vary from year to year as determined by the
Managing General Partner. Supply contracts generally do not lock in prices but
rather provide for pricing in accordance with posted prices at the time of
delivery or the current prices established at major storage points, such as Mont
Belvieu, Texas and Conway, Kansas. Some contracts include a pricing formula that
typically is based on such market prices.The Partnership is not currently a
party to any supply contracts containing 'take or pay' provisions.
Warren Petroleum Company ('Warren'), a division of Chevron U.S.A., and
Conoco Gas Products ('Conoco') supplied 13.5% and 10.2%, respectively, of the
Partnership's propane in 1995. The Partnership believes that if supplies from
either Warren or Conoco were interrupted, it would be able to secure adequate
propane supplies from other sources without a material disruption of its
operations; however, the Partnership believes that the cost of procuring
replacement supplies might be materially higher, at least on a short-term basis,
which could adversely affect the Partnership's margins. No other single supplier
provided more than 10% of the Partnership's total propane supply during 1995.
Although the Partnership has long-standing relations with a number of its
important suppliers and has generally been able to secure sufficient propane to
meet its customers' needs, no assurance can be given that supplies of propane
will be readily available in the future. The Partnership expects a sufficient
supply to continue to be available during 1996. However, increased demand for
propane in periods of severe cold weather, or otherwise, could cause future
propane supply interruptions or significant volatility in the price of propane.
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The following table shows the average monthly prices of propane in the spot
market during the last five years at Mont Belvieu, Texas and Conway, Kansas, two
major storage areas:
[GRAPHICAL REPRESENTATION of the average monthly propane prices in the
Spot-Market at Mont Belvieu, TX and Conway, KS from January 1991 to February
1996. Prices range from a low of approximately $0.25 per gallon to approximately
$0.45 per gallon.]
The Partnership owns underground storage facilities in Hutchinson, Kansas
and Loco Hills, New Mexico, leases above ground storage facilities in Crandon,
Wisconsin and Orlando, Florida, and owns or leases smaller storage facilities in
other locations throughout the United States. As of March 1, 1996, the
Partnership's total storage capacity was approximately 33 million gallons
(including approximately one million gallons of storage capacity currently
leased to third parties). For a further description of these facilities, see
' -- Properties.' By utilizing its ability to store propane, the Partnership
believes that it should be able to lower its annual cost of goods sold by
maximizing supplies purchased during periods of seasonably low prices and
minimizing purchases during periods of seasonally high prices. However, because
of the potential volatility of propane prices, the market price of propane could
fall below the price at which the Partnership purchased propane held in
inventory, thereby adversely affecting gross margins or sales or rendering sales
from such inventory unprofitable.
PRICING POLICY
The Partnership believes that its pricing policy is an essential element in
the marketing of propane. The $1.4 million pricing system recently installed in
substantially all of the Partnership's service centers provides central
management with current, system-wide supply, demand and competitive pricing
information. Based on that information, pricing managers located in Cedar
Rapids, Iowa, determine the prices to be charged to the Partnership's existing
residential customers. With respect to commercial and industrial customers,
agricultural customers and new residential customers, management makes daily
pricing recommendations to local managers who determine prices based on such
recommendations as well as local conditions. The Partnership believes that this
flexible, joint pricing management system enables the Partnership to react more
effectively to cost increases, and will permit it, in most situations, to
respond to changes in supply costs in a manner that protects its gross margins,
to the extent possible.
To further enhance its price management, the Partnership intends to equip
its delivery personnel with hand-held computer terminals ('HHTs') that simplify
customer billing and the collection of customer data, including price and volume
information. The HHTs are also able to print accurate customer delivery
statements that can be provided to the customer by the Partnership's delivery
personnel. The Partnership began testing the HHTs in a limited number of service
centers in the Midwest in March 1996. The results of these tests have been
successful to date, and the Partnership expects to begin deploying the HHTs at
approximately 20 additional locations during 1996.
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COMPETITION
Propane competes primarily with natural gas, electricity and fuel oil as an
energy source, principally on the basis of price, availability and portability.
Propane serves as an alternative to natural gas in rural and suburban areas
where natural gas is unavailable or portability of product is required. Propane
is generally more expensive than natural gas on an equivalent BTU basis in
locations served by natural gas, although propane is sold in such areas as a
standby fuel for use during peak demand periods and during interruptions in
natural gas service. The expansion of natural gas into traditional propane
markets has historically been inhibited by the capital costs required to expand
distribution and pipeline systems. Although the extension of natural gas
pipelines tends to displace propane distribution in the areas affected, the
Partnership believes that new opportunities for propane sales arise as more
geographically remote neighborhoods are developed.
Propane is generally less expensive to use than electricity for space
heating, water heating, clothes drying and cooking. Although propane is similar
to fuel oil in certain applications, as well as in market demand and price,
propane and fuel oil have generally developed their own distinct geographic
markets, reducing competition between such fuels. Because furnaces and
appliances that burn propane will not operate on fuel oil and vice versa, a
conversion from one fuel to the other requires the installation of new
equipment.
In addition to competing with alternative energy sources, the Partnership
competes with other companies engaged in the retail propane distribution
business. Competition in the propane industry is highly fragmented and generally
occurs on a local basis with other large full-service multi-state propane
marketers, thousands of smaller local independent marketers and farm
cooperatives. Based on industry publications, the Partnership believes that the
domestic retail market for propane is approximately 9.4 billion gallons
annually, that the 10 largest retailers, including the Partnership, account for
approximately 39% of the total retail sales of propane in the United States, and
that no single marketer has a greater than 10% share of the total retail market
in the United States. Most of the Partnership's service centers compete with
several marketers or distributors and certain service centers compete with a
large number of marketers or distributors. Each service center operates in its
own competitive environment because retail marketers tend to locate in close
proximity to customers in order to lower the cost of providing service. The
Partnership's typical service center has an effective marketing radius of
approximately 50 miles.
The ability to compete effectively further depends on the reliability of
service, responsiveness to customers and the ability to maintain competitive
prices. The Partnership believes that its reliability and service capabilities
differentiate it from many of its competitors. The Partnership's service centers
offer 24-hour/7-day-a-week service for emergency repairs and deliveries. The
Partnership also believes that its safety procedures are more stringent than
many of its small, independent competitors and that the perceived benefits of
such safety procedures give the Partnership a competitive advantage. In
addition, if legislation is enacted that mandates compliance with similar safety
procedures, the Partnership would not be required to invest as heavily to comply
as would many of its smaller, independent competitors.
PROPERTIES
The Partnership maintains a large number of diverse properties, including
appliance showrooms, maintenance facilities, bulk plants, warehousing space,
garages, storage depots or large gas tanks and related distribution equipment
and underground space for gas storage. The Partnership also owns an office in
Cedar Rapids, Iowa. The Partnership believes that these properties, taken as a
whole, are generally well-maintained and adequate for current and foreseeable
business needs. The majority of these properties are owned by the Partnership.
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Certain information about the major properties of the Partnership as of
March 1, 1996, is set forth in the following table.
<TABLE>
<CAPTION>
DESCRIPTION OF FACILITIES NUMBER OF FACILITIES
- ------------------------------------------------------------------------ --------------------------------------------
<S> <C> <C>
Service Centers located throughout the United States(1) 127 owned
38 leased
---
165
Remote Storage Facilities 59 owned
24 leased
---
83
Above Ground Storage Facilities:
Crandon, Wisconsin(2).............................................. 1 leased
Orlando, Florida(3)................................................ 1 leased
---
2
Underground Storage Facilities:
Hutchinson, Kansas................................................. 1 owned
Loco Hills, New Mexico............................................. 1 owned
---
2
Total.........................................................
<CAPTION>
DESCRIPTION OF FACILITIES
- ------------------------------------------------------------------------
<S> <C>
Service Centers located throughout the United States(1)
7,628
Remote Storage Facilities
2,260
Above Ground Storage Facilities:
Crandon, Wisconsin(2).............................................. 240
Orlando, Florida(3)................................................ 1,020
-------
1,260
Underground Storage Facilities:
Hutchinson, Kansas................................................. 12,000
Loco Hills, New Mexico............................................. 10,000
-------
22,000
-------
Total......................................................... 33,148
-------
-------
</TABLE>
- ------------
(1) Includes six service centers recently established under the Partnership's
'scratch start' program.
(2) The facility is leased on a year-to-year basis, and the lease is terminable
by either party upon 30 days' notice.
(3) The Partnership leases the real property from a third party pursuant to a
ground lease that terminates on October 31, 1996. The Partnership owns the
storage facility located at such property and leases it to Warren Petroleum
pursuant to an agreement that terminates October 31, 1999 and may be
cancelled by National Propane upon 60 days' notice under certain
circumstances.
The transportation of propane requires specialized equipment. The trucks
utilized for this purpose carry specialized steel tanks that maintain the
propane in a liquefied state. As of March 1, 1996, the Partnership had a fleet
of 7 transport truck tractors, all of which are owned by the Partnership and
approximately 410 bulk delivery trucks and 400 service and light trucks, of
which approximately 61% are owned by the Partnership and the balance of which
are leased. In addition, as of March 1, 1996, the Partnership had approximately
150 cylinder delivery vehicles (of which approximately 49% are owned and the
balance of which are leased) and 55 automobiles (of which approximately 84% are
owned and the balance of which are leased). As of March 1, 1996, the Partnership
owned approximately 210,000 customer storage tanks with typical capacities of
250 to 500 gallons.
The Partnership believes that it has satisfactory title to or valid rights
to use all of its material properties. Substantially all of the Partnership's
assets (other than the assets of NSSI) will be pledged to secure the First
Mortgage Notes and indebtedness under the Bank Credit Facility. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Description of Indebtedness.' In addition, some of the
Partnership's properties are subject to liabilities and leases and immaterial
encumbrances, easements and restrictions, although the Partnership does not
believe that any such burdens will materially interfere with the continued use
by the Partnership of its properties, taken as a whole. The Partnership believes
that it has, or in the ordinary course of business will obtain, all required
material approvals, authorizations, orders, licenses, permits, franchises and
consents of, and has obtained or made all required material registrations,
qualifications and filings with, the various state and local governmental and
regulatory authorities which relate to ownership of the Partnership's properties
or the operations of its business.
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TRADEMARKS AND TRADENAMES
The Partnership utilizes a number of trademarks and tradenames which it
owns (including 'National PropaneTM'), some of which have a significant value in
the marketing of its products.
GOVERNMENT REGULATION
The Partnership 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. These laws include the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act ('CERCLA'), the Clean Air Act, the Occupational
Safety and Health Act, the Emergency Planning and Community Right to Know Act,
the Clean Water Act and comparable state statutes. CERCLA, also known as the
'Superfund' law, imposes joint and several liability without regard to fault or
the legality of the original conduct on certain classes of persons that are
considered to have contributed to the release or threatened release of a
'hazardous substance' into the environment. Propane is not a hazardous substance
within the meaning of CERCLA. However, automotive waste products, such as waste
oil, generated by the Partnership's truck fleet, as well as 'hazardous
substances' disposed of during past operations by third parties on the
Partnership's properties, could subject the Partnership to CERCLA. Such laws and
regulations could result in civil or criminal penalties in cases of
non-compliance or impose liability for remediation costs. Also, third parties
may make claims against owners or operators of properties for personal injuries
and property damage associated with releases of hazardous or toxic substances.
National Fire Protection Association Pamphlets No. 54 and No. 58, which
establish rules and procedures governing the safe handling of propane, or
comparable regulations, have been adopted as the industry standard in all of the
states in which the Partnership operates. In some states these laws are
administered by state agencies, and in others they are administered on a
municipal level. With respect to the transportation of propane by truck, the
Partnership is subject to regulations promulgated under the Federal Motor
Carrier Safety Act. These regulations cover the transportation of hazardous
materials and are administered by the United States Department of
Transportation. The Partnership conducts ongoing training programs to help
ensure that its operations are in compliance with applicable regulations. The
Partnership maintains various permits that are necessary to operate some of its
facilities, some of which may be material to its operations. The Partnership
believes that the procedures currently in effect at all of its facilities for
the handling, storage and distribution of propane are consistent with industry
standards and are in compliance in all material respects with applicable laws
and regulations.
In May 1994, the Partnership was informed of coal tar contamination which
was discovered at one of its properties in Marshfield, Wisconsin. The
Partnership purchased the property from a company which had purchased the assets
of a utility that had previously owned the property. The Partnership believes
that the contamination occurred during the use of the property as a coal
gasification plant by such utility. In order to assess the extent of the
problem, the Partnership engaged environmental consultants who began work in
August 1994. In December 1994, the environmental consultants issued a report to
the Partnership which estimated the range of potential remediation costs to be
between approximately $0.4 million and $0.9 million depending upon the actual
extent of impacted soils, the presence and extent, if any, of impacted ground
water and the remediation method actually required to be implemented. In
February 1996, based upon new information the Partnership's environmental
consultants issued a second report which presented the two most likely
remediation methods and revised estimates of the costs of such methods. The
range of estimated costs for the first method, which involves treatment of
groundwater and excavation, treatment and disposal of contaminated soil, is from
$1.6 million to $3.3 million. The range for the second method, which involves
treatment of ground water and building a containment wall, is from $0.4 million
to $0.8 million. Based on discussions with the Partnership's environmental
consultants, both methods are acceptable remediation plans. The Partnership will
have to agree upon the final plan with the State of Wisconsin. Since receiving
notice of the contamination, the Partnership has engaged in discussions of a
general nature concerning remediation with the State of Wisconsin. These
discussions are ongoing and there is no indication as yet
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of the time frame for a decision by the State of Wisconsin on the method of
remediation. The Partnership is also engaged in ongoing discussions of a general
nature with a successor to the utility that operated a coal gasification plant
on the property. There is as yet no indication that the successor will share the
costs of remediation. The Partnership is in the process of notifying its
insurance carriers of the contamination and the likely incurrence of costs to
undertake remediation. If the Partnership is found liable for any of such costs,
it will attempt to recover them from a successor owner. The ultimate outcome of
this matter cannot presently be determined and, depending upon the cost of
remediation required, may have a material adverse effect on the Partnership's
financial position, results of operations or ability to make the Minimum
Quarterly Distribution. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Legal Contingencies.'
In connection with all acquisitions of retail propane businesses that
involve the purchase of real estate, the Partnership conducts an environmental
review in an attempt to determine whether any substance other than propane has
been sold from, or stored on, any such real estate prior to its purchase. Such
review may include questioning the seller, obtaining representations and
warranties concerning the seller's compliance with environmental laws and visual
inspections of the properties, whereby the General Partner's employees, and in
certain cases, independent environmental consulting firms hired by the
Partnership, look for evidence of hazardous substances or the existence of
underground storage tanks.
Future developments, such as stricter environmental, health or safety laws
and regulations thereunder, could affect Partnership operations. It is not
anticipated that the Partnership's compliance with or liabilities under
environmental, health and safety laws and regulations, including CERCLA, will
have a material adverse effect on the Partnership. To the extent that there are
any environmental liabilities unknown to the Partnership or environmental,
health or safety laws or regulations are made more stringent, there can be no
assurance that the Partnership's results of operations will not be materially
and adversely affected.
EMPLOYEES
As of March 1, 1996, the Managing General Partner had 1,028 full time
employees, of whom 78 were general and administrative (including fleet
maintenance personnel), 15 were sales, 438 were transportation and product
supply and 497 were district employees. In addition, at March 1, 1996, the
Managing General Partner had 32 temporary and part-time employees. Approximately
170 of such full-time employees are covered by collective bargaining agreements
that expire on various dates in 1996, 1997 and 1998. The Managing General
Partner believes that its relations with both its union and non-union employees
are satisfactory.
The Partnership has no employees; however, for certain purposes, such as
workers' compensation claims, employees of the Managing General Partner who are
providing services for the benefit of the Partnership may also be considered to
be employees of the Partnership under applicable state law.
LITIGATION AND CONTINGENT LIABILITIES
There are a number of lawsuits pending or threatened against the
Partnership. In general, these lawsuits have arisen in the ordinary course of
the Partnership's business and involve claims for actual damages, and in some
cases punitive damages, arising from the alleged negligence of the Partnership
or as a result of product defects or similar matters. Of the pending or
threatened matters, a number involve property damage, and several involve
serious personal injuries or deaths and the claims made are for relatively large
amounts. Although any litigation is inherently uncertain, based on past
experience, the information currently available to it and the availability of
insurance coverage in certain matters, the Partnership does not believe that the
pending or threatened litigation of which the Partnership is aware will have a
material adverse effect on its results of operations or its financial condition.
However, any one or all of these matters taken together may adversely affect the
Partnership's quarterly or annual results of operations and may limit the
Partnership's ability to make distributions to Unitholders.
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<PAGE>
In addition, certain contingent liabilities related to National Propane's
operations are being assumed by the Partnership in connection with the
Transactions. These contingent liabilities include potential environmental
remediation costs (primarily costs related to the remediation of coal tar
contamination at the Partnership's Marshfield, Wisconsin facility). As of
December 31, 1995, the Partnership has accrued a liability of approximately $0.4
million for contingent liabilities associated with the Marshfield facility.
There can be no assurance that the ultimate liability relating to this matter
will not exceed the $0.4 million reserved or that such matter will not have a
material adverse effect on the Partnership's results of operations, financial
condition or its ability to make the Minimum Quarterly Distribution.
TRANSFER OF THE PARTNERSHIP ASSETS
Immediately prior to the closing of the Offering, the Managing General
Partner will convey substantially all of its assets (which assets will not
include an existing intercompany note from Triarc, approximately $59.3 million
of the net proceeds from the issuance of the First Mortgage Notes and certain
other assets of the Managing General Partner) and related liabilities (other
than income tax liabilities) to the Operating Partnership. These assets include
real estate and fixtures located in 22 states, motor vehicles, tanks, cylinders,
machinery and office furniture, intangible property such as contracts, and
various licenses, permits and other similar rights required in connection with
the ownership and operation of the Managing General Partner's business, and
leasehold interests in real and personal property, including automobiles, light
trucks and service centers. See ' -- Properties.' Parts and appliance sales,
installation and service activities will be conducted through NSSI, a
wholly-owned corporate subsidiary of the Operating Partnership.
Many of the leases for the Managing General Partner's real and personal
property are transferable to the Operating Partnership only with the consent of
the lessor. The Managing General Partner expects to obtain, prior to the closing
of the Offering, third party consents which are sufficient to enable it to
transfer to the Operating Partnership the assets necessary to enable the
Partnership to conduct the Managing General Partner's propane business in all
material respects as described in this Prospectus. In addition, certain of the
Managing General Partner's licenses, permits and other similar rights relating
to the assets to be assigned to the Operating Partnership are not transferable
or are transferable only with the consent of third parties. Such transferable
rights will not be transferred to the Operating Partnership at the closing of
the Offering unless applicable consents have been obtained. In the case of non-
transferable rights or rights where no consent has been obtained by the closing
of the Offering, the Managing General Partner will seek to obtain such consents
in the normal course of business after the closing or seek to have comparable
rights granted to the Operating Partnership. Numerous licenses, permits and
rights will be required for the operation of the Operating Partnership's
business, and no assurance can be given that the Operating Partnership will
obtain all licenses, permits and rights which are required in connection with
the ownership and operation of its business. If consent to the assignment or
reissuance of any lease, license, permit or other similar right being
transferred is not obtained, the Managing General Partner and the Operating
Partnership will develop alternative approaches so that, to the maximum extent
possible, the Operating Partnership will receive the benefits of such lease,
license, permit or right and will discharge the duties and bear the costs and
risks thereunder. The Operating Partnership will bear the risk that such
alternative arrangements will not provide the Operating Partnership with the
full benefits of such lease, license, permit or right. Although failure by the
Operating Partnership to obtain licenses, permits or rights could have a
material adverse effect on the Partnership, the Managing General Partner
believes that the Operating Partnership will have the licenses, permits and
rights which will enable it to conduct its propane business in a manner which is
similar in all material respects to that which was conducted by the Managing
General Partner prior to the closing of the Offering and that any failure to
obtain such licenses, permits or rights will not have a material adverse impact
on the business of the Partnership or the Operating Partnership as described in
this Prospectus. The Operating Partnership will be responsible for the payment
of any transfer taxes and fees owing as a result of the transfer of the Managing
General Partner's assets.
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<PAGE>
MANAGEMENT
PARTNERSHIP MANAGEMENT
The Managing General Partner will manage and operate the activities of the
Partnership. Unitholders will not directly or indirectly participate in the
management or operation of the Partnership and will not have actual or apparent
authority to enter into contracts on behalf of, or to otherwise bind, the
Partnership. The Managing General Partner will owe a fiduciary duty to the
Unitholders. See 'Conflicts of Interest and Fiduciary Responsibility.'
Notwithstanding any limitation on obligations or duties, the Managing General
Partner and the Special General Partner will be liable, as the general partners
of the Partnership, for all debts of the Partnership (to the extent not paid by
the Partnership), except to the extent that indebtedness or other obligations
incurred by the Partnership are made specifically non-recourse to the General
Partners. Whenever possible, the Managing General Partner intends to make any
such indebtedness or other obligations non-recourse to it and the Special
General Partner. However, if the Operating Partnership defaults under the First
Mortgage Notes or the Bank Credit Facility, the General Partners will be liable
for any deficiency remaining after foreclosure on the Operating Partnership's
assets.
The Managing General Partner will appoint two persons who are neither
officers nor employees of the General Partners or any Affiliate of the General
Partners to its Board of Directors within three months after the date of this
Prospectus. Such directors will serve on the Audit Committee with the authority
to review, at the request of the Managing General Partner, specific matters as
to which the Managing General Partner believes there may be a conflict of
interest in order to determine if the resolution of such conflict proposed by
the Managing General Partner is fair and reasonable to the Partnership. Absent
specific delegation from the Board of Directors of the Managing General Partner,
determinations of the Audit Committee are advisory and do not bind the Managing
General Partner. Any matters approved by the Audit Committee will be
conclusively deemed to be fair and reasonable to the Partnership, approved by
all partners of the Partnership and not a breach by the Managing General Partner
of any duties it may owe the Partnership or the Unitholders. In addition, the
Audit Committee will review external financial reporting of the Partnership,
will recommend engagement of the Partnership's independent accountants and will
review the Partnership's procedures for internal auditing and the adequacy of
the Partnership's internal accounting controls. With respect to such additional
matters, the Audit Committee may act on its own initiative to question the
Managing General Partner and, absent the delegation of specific authority by the
entire Board of Directors, its recommendations will be advisory.
The Special General Partner, a wholly owned subsidiary of the Managing
General Partner, is a non-managing general partner of the Partnership and the
Operating Partnership with no operations or business other than acting as a
general partner of the Partnership and the Operating Partnership. In the event
that the Managing General Partner is merged with and into Triarc, the Audit
Committee of the Special General Partner will perform the functions described
above previously performed by the Audit Committee of the Managing General
Partner. The Audit Committee of the Special General Partner will be composed of
the same directors that serve on the Audit Committee of the Managing General
Partner. In addition, if following a merger of the Managing General Partner with
and into Triarc, a bankruptcy event involving Triarc occurs, the Special General
Partner will become the managing general partner of the Partnership, continue
the business of the Partnership and have all the rights, authority and powers of
the Managing General Partner described in this Prospectus.
As is commonly the case with publicly traded limited partnerships, the
Partnership will not directly employ any of the persons responsible for managing
or operating the Partnership. In general, the current management of National
Propane will continue to manage and operate the Partnership's business as
officers and employees of the Managing General Partner and its Affiliates. See
'Business and Properties -- Employees.'
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<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE MANAGING GENERAL PARTNER
The following table sets forth certain information with respect to the
current directors and executive officers of the Managing General Partner.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE MANAGING GENERAL PARTNER
- ----------------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
Nelson Peltz....................... 53 Director
Peter W. May....................... 53 Director
Ronald D. Paliughi................. 52 President, Chief Executive Officer and Director
Ronald R. Rominiecki............... 42 Senior Vice President and Chief Financial Officer
Laurie B. Crawford................. 44 Senior Vice President, Administration, General Counsel and Assistant
Secretary
</TABLE>
Nelson Peltz has been a director of the Managing General Partner and a
director and Chairman of the Board and Chief Executive Officer of Triarc since
April 23, 1993. Since then, he has also been a director and Chairman of the
Board and Chief Executive Officer of certain of Triarc's other subsidiaries,
including RC/Arby's Corporation formerly known as Royal Crown Corporation
('RCAC'). He is also a general partner of DWG Acquisition Group, L.P. ('DWG
Acquisition'), whose principal business is ownership of securities of Triarc.
From its formation in January 1989 until April 23, 1993, Mr. Peltz was Chairman
and Chief Executive Officer of Trian Group, Limited Partnership ('Trian'), which
provided investment banking and management services for entities controlled by
Mr. Peltz and Mr. May. From 1983 to December 1988, he was Chairman and Chief
Executive Officer and a director of Triangle Industries, Inc. ('Triangle'),
which, through wholly-owned subsidiaries, was, at that time, a manufacturer of
packaging products, copper electrical wire and cable and steel conduit and
currency and coin handling products. From November 1989 through May 1992, Mr.
Peltz was director of Mountleigh Group plc, a British property trading and
retailing company ('Mountleigh'). He served in various executive capacities,
including Executive Chairman, of Mountleigh from November 1989 until October
1991.
Peter W. May has been a director of the Managing General Partner and a
director and President and Chief Operating Officer of Triarc since April 23,
1993. Since then, he has also been a director and President and Chief Operating
Officer of certain of Triarc's other subsidiaries, including RCAC. He is also a
general partner of DWG Acquisition. From its formation in January 1989 until
April 23, 1993, Mr. May was President and Chief Operating Officer of Trian. He
was President and Chief Operating Officer and a director of Triangle from 1983
until December 1988. From November 1989 through May 1992, Mr. May was a director
of Mountleigh and served as Joint Managing Director of Mountleigh from November
1989 until October 1991. Mr. May was also named a director on April 29, 1993 of
The Leslie Fay Companies, Inc. following its filing on April 5, 1993 for
protection under Chapter 11 of the United States Bankruptcy Code.
Ronald D. Paliughi has been President and Chief Executive Officer of the
Managing General Partner since April 29, 1993. From May 1992 through April 1993,
Mr. Paliughi was a temporary, full time officer in the U.S. Army National Guard,
serving as an Army Aviator. During 1991, he served on active duty as an Army
Aviator and commissioned officer in Operation Desert Shield/Storm. From 1987 to
1990, Mr. Paliughi was Senior Vice President -- Western Operations of AmeriGas
Propane, Inc. (then a subsidiary of UGI Corporation), the largest propane
company in the U.S. During 1986, Mr. Paliughi was Director of Retail Operations
of CalGas Corporation. For more than 14 years prior, he held various positions
with VanGas, Inc. ('VanGas'), the western subsidiary of Suburban Propane Gas
(then a division of Quantum Chemical Corporation), the third largest U.S.
propane company. He last served as Senior Vice President/General Manager, the
top executive officer at VanGas.
Ronald R. Rominiecki joined the Managing General Partner on December 1,
1995 as Senior Vice President and Chief Financial Officer. From April 1994 to
November 1995, he served as Vice President and Chief Financial Officer of
O'Brien Environmental Energy, Inc. ('O'Brien'), a publicly-owned company engaged
in cogeneration and other energy related businesses. In September 1994 O'Brien
filed a petition in bankruptcy under Chapter 11 of the United States Code. From
June 1988 to March 1994, Mr. Rominiecki was Corporate Controller at Westmoreland
Coal Company, a NYSE listed company.
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<PAGE>
Laurie B. Crawford has been Senior Vice President, Administration, General
Counsel and Assistant Secretary of the Managing General Partner since December
1, 1995. From December 1, 1993 to December 1, 1995 she was Vice President,
Administration, responsible for human resources, legal matters, real estate,
fleet management, plant engineering, safety, risk management, insurance and
public relations. Prior to her employment with the Managing General Partner, she
was employed by Rockwell International as Succession Planning Manager from
November 1991 through November 1993. From August 1986 until November 1991, she
was Director of Human Resources for MCI Communication Corp.
Each director has been elected to serve until the Managing General
Partner's next annual meeting of stockholders and until such director's
successor is duly elected and qualified or until his death, resignation or
removal. The term of office of each executive officer is until the next annual
meeting of the Board of Directors of the Managing General Partner and until his
successor is elected and qualified or until his death, resignation or removal.
REIMBURSEMENT OF EXPENSES OF THE MANAGING GENERAL PARTNER
Following the Offering, in general, the management and employees of
National Propane who currently manage and operate the propane business and
assets to be owned by the Partnership will continue to manage and operate the
Partnership's business as officers and employees of the Managing General Partner
and its Affiliates. The Partnership will not have any officers or employees of
its own. The Operating Partnership's corporate subsidiary will, however, have
its own employees to manage and operate its business. The Managing General
Partner will not receive any management fee or other compensation in connection
with its management of the Partnership, but will be reimbursed at cost for all
direct and indirect expenses incurred on behalf of the Partnership, including
the costs of compensation and employee benefit plans described herein properly
allocable to the Partnership, and all other expenses necessary or appropriate to
the conduct of the business of, and allocable to, the Partnership. The
Partnership Agreement provides that the Managing General Partner shall determine
the expenses that are allocable to the Partnership in any reasonable manner
determined by the Managing General Partner in its sole discretion. Affiliates of
the Managing General Partner (including Triarc) may perform certain
administrative services for the Managing General Partner on behalf of the
Partnership. Such Affiliates will not receive a fee for such services performed
for or on behalf of the Partnership, but will be reimbursed for all direct and
indirect expenses incurred in connection therewith. In addition, the General
Partners and their Affiliates may provide additional services to the
Partnership, for which the Partnership will be charged reasonable fees as
determined by the Managing General Partner.
In addition, the Managing General Partner will receive an aggregate 2%
unsubordinated Managing General Partner Interest and a 44.2% interest as holder
of the Subordinated Units as consideration for its contribution to the
Partnership of its limited partner interest in the Operating Partnership, which
will be received as consideration for its contribution to the Operating
Partnership of the propane business of National Propane. The Managing General
Partner will be entitled to distributions on such Units, and the Managing
General Partner will be entitled to incentive distributions as holder of the
Incentive Distribution rights, as described under 'Cash Distribution Policy.'
EXECUTIVE COMPENSATION
The following table sets forth the annual salaries, bonuses and all other
compensation awards and payouts earned by the President and Chief Executive
Officer and by certain named executive officers of the Managing General Partner
(collectively, the 'Named Officers') for services rendered to the Managing
General Partner and its subsidiaries during the fiscal years ended December 31,
1995 and December 31, 1994 and the ten months ended December 31, 1993.
93
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
AWARDS
------------------------------------
ANNUAL NUMBER OF
COMPENSATION OTHER SECURITIES
---------------------- ANNUAL RESTRICTED STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR(1) SALARY($) BONUS($) COMPENSATION AWARD(S)(#)(2) OPTIONS/SARS(#)(3)
- ------------------------------------- --------- --------- -------- ------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Paliughi .................. 1995 250,000 (5) -- -- 30,000(6)
President and Chief Executive 1994 250,000 300,000 -- 5,000 51,000(6)
Officer 1993 137,180 100,000 (8) -- 5,000 40,000(6)
Ronald R. Rominiecki ................ 1995 13,750(9) -- -- 20,000(6)
Senior Vice President and Chief 1994 -- -- -- --
Financial Officer 1993 -- -- -- --
Laurie B. Crawford .................. 1995 88,333 (5) -- -- 7,500(6)
Senior Vice President, 1994 78,472 20,000 -- -- 10,000(11)
Administration, General Counsel and 1993 5,833(12) -- -- -- --
Assistant Secretary
Terry D. Weikel, .................... 1995 125,000 -- -- -- --
former Senior Vice President and 1994 112,755 50,000 -- -- 7,500(13)
Chief Financial Officer 1993 50,000 15,000 24,950(14) -- 5,000(6)
<CAPTION>
LTIP
PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION ($) COMPENSATION(4)($)
- ------------------------------------- ------- ------------------
<S> <C> <C>
Ronald D. Paliughi .................. -- 2,592
President and Chief Executive -- 96,178(7)
Officer 40,000 (*) --
Ronald R. Rominiecki ................ 63,000(10)
Senior Vice President and Chief --
Financial Officer --
Laurie B. Crawford .................. -- 1,579
Senior Vice President, -- 1,117
Administration, General Counsel and -- --
Assistant Secretary
Terry D. Weikel, .................... -- --
former Senior Vice President and -- 696
Chief Financial Officer -- 16,972(15)
</TABLE>
- ------------
(1) Information set forth opposite 1993 relates to Fiscal 1993 (i.e., the ten
month period ended December 31, 1993), while information set forth opposite
1995 and 1994 relates to Fiscal 1995 (the year ended December 31, 1995) and
Fiscal 1994 (the year ended December 31, 1994), respectively.
(2) All restricted stock awards were made pursuant to Triarc's 1993 Equity
Participation Plan (described below). Based upon the closing price of
Triarc's Class A Common Stock, par value $.10 per share (the 'Class A
Common Stock'), on the NYSE on December 31, 1995 of $11.00, the value of
Mr. Paliughi's restricted stock holdings as of such date is $110,000. On
January 16, 1996 the restrictions on all of these shares lapsed.
(3) All stock option grants were made pursuant to Triarc's 1993 Equity
Participation Plan. The option grants are described below under 'Option/SAR
Grants in Last Fiscal Year, Individual Grants.'
(4) Except as otherwise noted, consists only of life insurance premiums and
401(k) contributions paid by National Propane.
(5) As of the date of this Prospectus, no determination had been made regarding
Mr. Paliughi's and Ms. Crawford's bonuses for 1995.
(6) One-third of the options granted will vest on each of the first, second and
third anniversaries of the date of grant and the options will be
exercisable at any time between the date of vesting and the tenth
anniversary of the date of grant.
(7) Includes $33,333 for certain salary allowances and $60,829 of reimbursed
moving expenses in connection with Mr. Paliughi's relocation to Cedar
Rapids, Iowa.
(8) Represents a bonus of $100,000 pursuant to an employment agreement entered
into effective April 24, 1993 (see ' -- Employment Arrangements with
Executive Officers' below).
(9) Mr. Rominiecki began his employment with the Managing General Partner on
December 1, 1995. The amount reported is based on an annual salary of
$165,000.
(10) Represents a one-time bonus payable in connection with Mr. Rominiecki's
employment by the Managing General Partner.
(11) With respect to 5,000 of the options granted, one-third of such options
will vest on each of the first, second and third anniversary of the date of
grant. With respect to the remaining 5,000 options, one-third of such
options will vest on each of the third, fourth and fifth anniversary of the
date of grant. All of such options will be exercisable at any time between
the date of vesting and the tenth anniversary of the date of grant.
(footnotes continued on next page)
94
<PAGE>
<PAGE>
(footnotes continued from previous page)
(12) Ms. Crawford began her employment with the Managing General Partner on
December 1, 1993. The amount reported is based on an annual salary of
$70,000.
(13) The options will vest on each of the third, fourth and fifth anniversary of
the date of grant. All of such options will be exercisable at any time
between the date of vesting and the tenth anniversary of the date of grant.
(14) Represents payments for consulting services provided by Mr. Weikel in 1993
prior to his being employed by the Managing General Partner.
(15) Includes $16,666 for certain salary allowances in connection with Mr.
Weikel's relocation to Cedar Rapids, Iowa.
(*) $40,000 was accrued for Mr. Paliughi for 1993 under the Mid-Term Incentive
Plan.
CASH INCENTIVE PLANS
Triarc has implemented an annual cash incentive plan (the 'Annual Incentive
Plan') for executive officers and key employees of National Propane and is
presently developing a mid-term cash incentive plan (the 'Mid-Term Incentive
Plan') for executive officers and key employees of National Propane.
The Annual Incentive Plan is designed to provide annual incentive awards to
participants, 50% of which are based on whether National Propane has met certain
pre-determined goals and 50% of which is based on the performance of the
participant during the preceding year. Under the Annual Incentive Plan,
participants may receive awards of a specified percentage of their then current
base salaries, which percentage varies depending upon the level of seniority and
responsibility of the participant. Such percentage is set by National Propane's
management in consultation with management of Triarc. The Board of Directors of
National Propane, in consultation with management of Triarc and the Compensation
Committee of the Triarc Board of Directors (the 'Compensation Committee'), may
elect to adjust awards on a discretionary basis to reflect the relative
individual contribution of the executive or key employee, to evaluate the
'quality' of National Propane's earnings or to take into account external
factors that affect performance results. The Board of Directors of National
Propane also may decide that multiple performance objectives related to National
Propane's and/or the individual's performance may be appropriate and, in such
event, such factors would be weighted in order to determine the amount of the
annual incentive awards. The Annual Incentive Plan is administered by National
Propane's Board of Directors and Triarc's management and may be amended or
terminated by such Board of Directors and Triarc's management at any time.
Under the Mid-Term Incentive Plan, incentive awards will be granted to
participants if National Propane achieves an agreed upon profit over a three
year performance cycle. During each plan year, an amount will be accrued for
each participant based upon the amount by which National Propane's profit for
such year exceeds a minimum return to be determined. A new three-year
performance cycle will begin each year, such that after the third year the
annual cash amount paid to participants pursuant to the Mid-Term Incentive Plan
should equal the target award if National Propane's profit goals have been
achieved for the full three-year cycle. The Board of Directors of National
Propane, together with Triarc's management and the Compensation Committee of
Triarc's Board of Directors, may adjust, upward or downward, an individual's
award based upon an assessment of the individual's relative contribution to
National Propane's longer-term profit performance. The Board of Directors of
Triarc and Triarc's management may amend or terminate the Mid-Term Incentive
Plan at any time. Pursuant to the terms of his employment agreement, under the
Mid-Term Incentive Plan Mr. Paliughi was entitled to have accrued for 1993 a
minimum of $40,000.
From time to time, the Compensation Committee of the Triarc Board may, at
the request of Triarc's or National Propane's management, award discretionary
bonuses based on performance to certain executive officers. The amounts of such
bonuses will be based on the Compensation Committee's evaluation of each such
individual's contribution.
95
<PAGE>
<PAGE>
TRIARC'S 1993 EQUITY PARTICIPATION PLAN
Certain executive officers of the Managing General Partner have
participated in the Triarc Companies, Inc. 1993 Equity Participation Plan which
was adopted on April 24, 1993, and expires by its terms on April 24, 1998. The
plan provides for, among other things, the grant of options to purchase Triarc's
Class A Common Stock, Stock Appreciation Rights ('SARs') and restricted shares
of Class A Common Stock. Directors, selected officers and key employees of, and
key consultants to, Triarc and its subsidiaries, including the Managing General
Partner, are eligible to participate in the plan. The plan is being administered
by the Compensation Committee of the Triarc Board of Directors, which may
determine from time to time to grant options, SARs and restricted stock.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR INDIVIDUAL GRANTS
The following table sets forth certain information with respect to options
to purchase shares of Triarc Class A Common Stock and SARs granted to the Named
Officers in respect of 1995.
<TABLE>
<CAPTION>
GRANT DATE
NUMBER OF PERCENT OF TOTAL VALUE
SECURITIES OPTIONS/SARS -----------
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1)(2) FISCAL YEAR(3) ($/SH) DATE VALUE($)(4)
- ---------------------------------------------- ------------ ---------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Ronald D. Paliughi............................ 30,000 26.8% $10.125 12/07/2005 194,100
Ronald R. Rominiecki.......................... 20,000 17.9% $10.125 12/07/2005 129,400
Laurie B. Crawford............................ 7,500 6.7% $10.125 12/07/2005 48,525
Terry D. Weikel............................... -- -- -- -- --
</TABLE>
- ------------
(1) These options were granted on December 7, 1995 and have an exercise price
equal to the closing price of Triarc Class A Common Stock on the NYSE on the
date of such grant.
(2) One-third of the options granted will vest on each of the first, second and
third anniversaries of the date of grant and the options will be exercisable
at any time between the date of vesting and the tenth anniversary of the
date of grant.
(3) These percentages are based on the total number of Options granted under the
Triarc 1993 Equity Participation Plan to employees of the General Partner
only.
(4) These values were calculated using the Black-Scholes option pricing model.
The actual value, if any, that an executive may realize will depend on the
excess, if any, of the stock price over the exercise price on the date the
options are exercised, and no assurance exists that the value realized by an
executive will be at or near the value estimated by the Black-Scholes model.
The following assumptions were used in the calculations:
(a) assumed option term of 7.5 years;
(b) stock price volatility factor of 0.4844;
(c) 7.6% annual discount rate;
(d) no dividend payment; and
(e) 3% discount to Black-Scholes values for each year an option remains
unvested.
96
<PAGE>
<PAGE>
OPTION/SAR EXERCISES IN 1995 AND YEAR-END OPTION/SAR VALUES
The following table sets forth certain information concerning options to
purchase shares of Triarc Class A Common Stock exercised by any Named Officer
during 1995, and the values at the end of 1995 of unexercised in-the-money
options to purchase shares of Triarc Class A Common Stock granted to the Named
Officers outstanding as of the end of 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT
FISCAL 1995 AT FISCAL 1995
YEAR-END YEAR-END(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ronald D. Paliughi....................................... 8,667 112,333 $ 2,167 $30,583
Ronald R. Rominiecki..................................... -- 20,000 -- 17,500
Laurie B. Crawford....................................... 1,667 15,833 417 7,396
Terry D. Weikel.......................................... 2,500 10,000 625 1,250
</TABLE>
- ------------
(1) On December 31, 1995, the last day of Fiscal 1995, the closing price of the
Triarc Class A Common Stock was $11.00.
UNIT OPTION PLAN
Effective upon the closing of the Offering, the Managing General Partner
will adopt the 1996 National Propane Unit Option Plan (the 'Plan'), which
permits the issuance of options (the 'Options') covering up to [ ] Units,
subject to adjustment in certain circumstances. The Plan has been designed to
furnish additional incentive compensation to selected officers, directors, key
employees and consultants and to increase their personal and proprietary
interest in the future performance of the Partnership measured in terms of
growth in the market value of Units. The Plan will be administered by the
compensation committee (the 'Committee'). The Committee, in its sole discretion
and authority but subject to the terms of the Plan, will determine the employees
who are eligible to participate in the Plan and the date of grant, recipient,
number of Units, exercise price and vesting schedule, duration and other terms
and conditions of each Option granted under the Plan.
Units delivered by the Managing General Partner on exercise of an Option
may consist, in whole or in part, of Units acquired in the open market or from
any Person and the Units that are originally issued by the Partnership to the
Managing General Partner in connection with the Transactions.
With respect to each Unit delivered upon the exercise of an Option, the
Managing General Partner shall be entitled to reimbursement by the Partnership
for the excess, if any, of (i) the fair market value of each such Unit (as of
the date of exercise of such Option) or, in the case of Units purchased in the
open market, the price actually paid by the Managing General Partner therefor
over (ii) the exercise price of the Option relating to such Unit. Thus, the cost
of the Options will be borne by the Partnership.
The Board of Directors of the Managing General Partner in its discretion
may terminate the Plan at any time with respect to any Units for which a grant
has not theretofore been made. The Board of Directors will also have the right
to alter or amend the Plan or any part thereof from time to time; provided, that
no change in any previously granted Option may be made which would impair the
rights of the optionee without the consent of such optionee or grantee; and
provided further, that to the extent necessary to comply with Rule 16b-3 under
the Securities and Exchange Act of 1934, as amended, without the approval of the
Unitholders no such amendment or alteration will be made that would: (i)
increase the total number of Units available for Options under the Plan; (ii)
materially modify the requirements as to eligibility for participation in the
Plan; (iii) extend the maximum period during which Options may be granted under
the Plan; or (iv) materially increase the benefits accruing to participants
under the Plan.
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COMPENSATION OF DIRECTORS
The Managing General Partner pays no additional remuneration to its
employees (or employees of any of its Affiliates) for serving as directors or to
directors who are not employees of the Managing General Partner or any of its
Affiliates. The Managing General Partner may in the future pay remuneration to
its directors. In addition, the Partnership anticipates that directors who are
not employees of the Managing General Partner or its Affiliates will be
compensated for serving as such, will be reimbursed for out-of-pocket expenses
and will be eligible to participate in the Partnership's or Managing General
Partner's Unit purchase or option plans, if any.
EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE OFFICERS
Mr. Paliughi has an employment contract with the Managing General Partner,
effective as of April 24, 1993, as amended, pursuant to which (i) the Managing
General Partner agrees to employ Mr. Paliughi as President and Chief Executive
Officer through January 1, 1997 (subject to automatic renewal for a subsequent
three year period unless either party elects not to renew), (ii) Mr. Paliughi
receives a base salary of $250,000 per annum during his employment (subject to
increase at the discretion of the Board of Directors), (iii) Mr. Paliughi is
eligible to participate in the Annual Incentive Plan, enabling him to receive an
annual cash bonus of up to 75% of his base salary based upon the achievement of
certain individual and Partnership performance objectives, (iv) Mr. Paliughi is
eligible to participate in the Mid-Term Incentive Plan, enabling him to receive
an annual bonus award at least equal to 75% of his base salary based upon the
achievement by the Partnership of certain financial performance objectives over
a three-year performance cycle, (v) Mr. Paliughi is entitled to severance
benefits generally equal to two years base salary and bonuses (approximately
$915,000 if such termination occurred on March 31, 1996) in the event he is
terminated other than for cause (as defined in the agreement) or within one year
of a change of control (as defined in the agreement) of the Managing General
Partner and (vi) Mr. Paliughi is entitled to participate in other generally
available compensation plans and receives various other benefits including
reimbursement of certain expenses. The agreement also restricts Mr. Paliughi
from competing with the General Partner for 24 months after the termination of
the agreement if such termination results from Mr. Paliughi's voluntary
resignation or the Managing General Partner's termination of Mr. Paliughi's
employment for cause (as defined in the agreement).
Mr. Rominiecki has a severance agreement with the Managing General Partner
which provides that in the event he is terminated by the Managing General
Partner other than for cause (as defined in the agreement), he is entitled to
severance benefits generally equal to his annual compensation (approximately
$165,000 if such termination occurred on March 31, 1996) if such termination
occurs prior to December 1, 1996 or within one year of a change of control (as
defined in the agreement) of the Managing General Partner or six month's
compensation if such termination occurs thereafter.
Ms. Crawford has a severance agreement with the Managing General Partner
which provides that in the event she is terminated by the Managing General
Partner other than for cause (as defined in the agreement) and within one year
of a change of control (as defined in the agreement) of the Managing General
Partner, she is entitled to severance benefits generally equal to her annual
compensation (approximately $150,000 if such termination occurred on March 31,
1996).
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF TRIARC COMMON STOCK BY THE DIRECTORS
AND EXECUTIVE OFFICERS OF THE MANAGING GENERAL PARTNER
All of the issued and outstanding shares of common stock of the General
Partner are indirectly owned by Triarc. The table below sets forth the
beneficial ownership as of March 1, 1996, by each person known by the Managing
General Partner to be the beneficial owner of more than 5% of the outstanding
shares of Triarc Class A Common Stock (constituting the only class of voting
capital stock of Triarc), each director and each Named Officer of the Managing
General Partner and the executive officers and directors of the Managing General
Partner as a group. Triarc's Class A Common Stock is traded on the NYSE.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL OWNER OF OWNERSHIP(1) PERCENT OF CLASS
- -------------------------------------------------------------- ----------------- ----------------
<S> <C> <C>
Nelson Peltz ................................................. 6,819,967(2)(3)(4)(5) 27.6%
900 Third Avenue
New York, NY 10022
Peter W. May ................................................. 6,549,667(2)(4)(6) 26.8%
900 Third Avenue
New York, NY 10022
DWG Acquisition Group, L.P. .................................. 5,982,867(4) 25.0%
1201 North Market Street
Wilmington, DE 19801
Ronald D. Paliughi............................................ 18,667 *
Ronald R. Rominiecki.......................................... -- *
Laurie B. Crawford............................................ 1,667 *
All executive officers and directors as a group (5 persons)... 7,407,101 29.3%
</TABLE>
- ------------
* Less than 1%.
(1) Except as otherwise indicated, each person has sole voting and dispositive
power with respect to such shares.
(2) Includes 5,982,867 shares held by DWG Acquisition, of which Mr. Peltz and
Mr. May are the sole general partners.
(3) Includes 200 shares owned by a family trust of which Mr. Peltz is a general
partner. Mr. Peltz disclaims beneficial ownership of such 200 shares.
(4) The Partnership is informed that DWG Acquisition has pledged such shares to
a financial institution on behalf of Messrs. Peltz and May to secure loans
made to them.
(5) Includes options to purchase 810,000 shares of Class A Common Stock which
have vested or will vest within 60 days of March 1, 1996.
(6) Includes options to purchase 540,000 shares of Class A Common Stock which
have vested or will vest within 60 days of March 1, 1996.
------------------------
The foregoing table does not include 5,997,622 shares of Triarc's
non-voting Class B Common Stock owned by Victor Posner or entities related to
Victor Posner as a result of a certain Settlement Agreement dated on January 9,
1995. The shares of Class B Common Stock can be converted without restriction
into an equal number of shares of Class A Common Stock following a transfer to a
non-affiliate of Victor Posner. Triarc has certain rights of first refusal if
such shares are proposed to be sold to an unaffiliated party. If the 5,997,622
currently outstanding shares of the Class B Common Stock were converted into
shares of Class A Common Stock, such shares would constitute approximately 25.1%
of the then outstanding shares of Class A Common Stock as of March 1, 1996.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RIGHTS OF THE GENERAL PARTNERS
The Partnership and the Managing General Partner will have extensive
ongoing relationships with Triarc and its Affiliates. Affiliates of the Managing
General Partner, including Triarc, will perform certain administrative services
for the Managing General Partner on behalf of the Partnership. Such Affiliates
will not receive a fee for such services, but will be reimbursed for all direct
and indirect expenses incurred in connection therewith. See
'Management -- Reimbursement of Expenses of the Managing General Partner.' In
addition, after the Offering, the Managing General Partner will own all of the
Subordinated Units, representing 47% of the outstanding Units. Triarc will
indirectly own 100% of the General Partners. Through the Managing General
Partner's ability to control the management of the Partnership and its right to
vote the Subordinated Units (effectively giving the Managing General Partner the
ability to veto certain actions of the Partnership), the Managing General
Partner and its Affiliates will have the ability to exercise substantial control
over the Partnership. See 'Conflicts of Interest and Fiduciary Responsibility.'
TRANSACTIONS INVOLVING TRIARC AND ITS AFFILIATES
In January 1996, the Partnership entered into a five-year lease, as lessee,
with Graniteville, then a wholly owned subsidiary of Triarc, as lessor, with
respect to certain storage facilities located in Graniteville, South Carolina.
As consideration for the use of the leased premises, the Partnership is required
to provide all of Graniteville's annual propane requirements (up to 700,000
gallons annually) at cost plus delivery expenses. Pursuant to the Graniteville
Sale, such lease was assigned to Avondale and amended to provide that it may be
terminated by either party thereto upon six months' notice.
In August 1995 Triarc, through a wholly owned subsidiary, acquired all of
the outstanding stock of two related propane distribution businesses. The
aggregate purchase price was approximately $4.2 million (including the
assumption of certain existing indebtedness). In September 1995 the stock of the
subsidiary which acquired the two companies was contributed by Triarc to NPC
Holdings, Inc. ('NPC Holdings') which, in turn, contributed such stock to the
Managing General Partner. In consideration for such contribution, NPC Holdings
received an additional 30 shares of the Managing General Partner's common stock,
increasing its ownership of the Managing General Partner to 75.7% from 75.2%.
In December 1995, National Propane borrowed $30 million under the Existing
Credit Facility and dividended such amount to subsidiaries of Triarc ($22.7
millon) and SEPSCO ($7.3 million) in proportion to their respective percentage
ownership in National Propane. On February 22, 1996, the 11 7/8% senior
subordinated debentures of SEPSCO were redeemed. The cash for such redemption
came from the proceeds of the $30 million of borrowings (which, under the
Existing Credit Facility, were restricted to the redemption of the 11 7/8%
Debentures), liquidation of marketable securities and existing cash balances.
The indebtedness incurred in part to finance such redemption is being assumed by
the Operating Partnership and repaid in connection with the Transactions.
In the fourth quarter of 1995, the Managing General Partner sold
approximately $3.9 million face amount of its accounts receivable to Triarc for
approximately $3.8 million. As collections on such accounts receivable are
received by the Managing General Partner they are remitted to Triarc on a
periodic basis. As of December 31, 1995, such remittances aggregated
approximately $1.4 million. Under the agreement pursuant to which the
receivables were sold, the Managing General Partner is obligated to repurchase
any receivables which are determined to be uncollectible, up to a maximum of 10%
of the face amount originally sold. The Manager General Partner believes that
its allowance for doubtful accounts is adequate to allow for any repurchases
that may be required.
The Managing General Partner receives from Triarc certain management
services including legal, accounting, tax, insurance, financial and other
management services. Effective April 23, 1993 the Managing General Partner (and
certain of Triarc's other subsidiaries) entered into a management services
agreement (the 'Management Services Agreement') with Triarc pursuant to which
the allocation method for those costs that cannot be directly allocated, are
allocated based upon the greater of (i) the sum of earnings before income taxes,
depreciation and amortization and (ii) 10% of revenues,
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as a percentage of Triarc's corresponding consolidated amount. Prior to April
23, 1993, the costs of management services were allocated by Triarc to its
subsidiaries under a former management services agreement (the 'Former
Management Services Agreement') based first directly on the cost of the services
provided and then, for those costs which could not be directly allocated, based
upon the relative revenues and tangible assets as a percentage of Triarc's
corresponding consolidated amounts. Additionally, in Transition 1993 the
Managing General Partner was allocated certain costs representing uncollectible
amounts owed to Triarc for similar management services by certain affiliates or
former affiliates. For additional information regarding the Management Services
Agreement and the Former Management Services Agreement, see note 19 to the
consolidated financial statements of National Propane.
Chesapeake Insurance Company Limited ('Chesapeake Insurance'), an indirect
subsidiary of Triarc, provided certain insurance coverage and reinsurance of
certain risks to the Managing General Partner until October 1993 at which time
Chesapeake Insurance ceased writing all insurance and reinsurance. The net
premium expense incurred was approximately $4 million in Transition 1993.
The Managing General Partner holds an intercompany note of Triarc's in the
aggregate principal amount of approximately $81.3 million as of December 31,
1995. Concurrent with the closing of the Offering, the Managing General Partner
will dividend a portion (approximately $56.4 million aggregate principal amount)
of such intercompany note to Triarc. See 'The Transactions.' For additional
information regarding the intercompany note, see note 13 to the consolidated
financial statements of National Propane.
PARTNERSHIP NOTE
Concurrent with the closing of the Offering, the Operating Partnership will
make the Partnership Loan to Triarc. Management believes that, based on the
terms of the Partnership Note, taken as a whole, the Partnership Note, when
issued, will have a fair market value of not less than 100% of its principal
amount. For information regarding the Partnership Loan, see 'Cash Distribution
Policy -- Partnership Loan.'
CONFLICTS OF INTEREST AND FIDUCIARY RESPONSIBILITY
CONFLICTS OF INTEREST
Certain conflicts of interest could arise as a result of the General
Partners' relationships with their stockholders, on the one hand, and the
Partnership, on the other hand. The directors and officers of the Managing
General Partner and the Special General Partner have fiduciary duties to manage
such Managing General Partner, including its investments in its subsidiaries and
Affiliates, in a manner beneficial to their stockholders. In general, the
Managing General Partner has a fiduciary duty to manage the Partnership in a
manner beneficial to the Partnership and the Unitholders. The Partnership
Agreement contains provisions that allow the Managing General Partner to take
into account the interests of parties in addition to the Partnership in
resolving conflicts of interest, thereby limiting its fiduciary duty to the
Unitholders as well as provisions that may restrict the remedies available to
Unitholders for actions taken that might, without such limitations, constitute
breaches of fiduciary duty. The duty of the directors and officers of the
Managing General Partner to the stockholders of the Managing General Partner
may, therefore, come into conflict with the duties of the Managing General
Partner to the Partnership and the Unitholders. The Audit Committee of the Board
of Directors of the Managing General Partner will, at the request of the
Managing General Partner, review conflicts of interest that may arise between
the Managing General Partner or its Affiliates, on the one hand, and the
Partnership, on the other. See 'Management -- Partnership Management' and
' -- Fiduciary Duties of the General Partners.'
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Conflicts of interest could arise in the situations described below, among
others:
CERTAIN ACTIONS TAKEN BY THE MANAGING GENERAL PARTNER MAY AFFECT THE AMOUNT OF
CASH AVAILABLE FOR DISTRIBUTION TO UNITHOLDERS OR ACCELERATE THE RIGHT TO
CONVERT SUBORDINATED UNITS
Decisions of the Managing General Partner with respect to the amount and
timing of cash expenditures, participation in capital expansions and
acquisitions, borrowings, issuance of additional Units and reserves in any
quarter may affect whether, or the extent to which, there is sufficient
Available Cash from Operating Surplus to meet the Minimum Quarterly Distribution
and Target Distribution Levels on all Units in such quarter or subsequent
quarters. The Partnership Agreement provides that any borrowings by the
Partnership or the approval thereof by the Managing General Partner shall not
constitute a breach of any duty owed by the Managing General Partner to the
Partnership or the Unitholders including borrowings that have the purpose or
effect, directly or indirectly, of enabling the the Managing General Partner to
receive Incentive Distributions or hasten the expiration of the Subordination
Period or the conversion of the Subordinated Units into Common Units. The
Partnership Agreement provides that the Partnership may make loans to and borrow
funds from the General Partners and their Affiliates. Further, any actions taken
by the Managing General Partner consistent with the standards of reasonable
discretion set forth in the definitions of Available Cash, Operating Surplus and
Capital Surplus will be deemed not to breach any duty of the Managing General
Partner to the Partnership or the Unitholders. The Managing General Partner
intends to submit any question regarding amendments to the Partnership
Agreement, the enforcement of Triarc's obligations under the Partnership Note
and other matters that could have, in each case, a material adverse affect on
the limited partners to the Audit Committee of the Board of Directors of the
Managing General Partner. See 'Risk Factors -- Conflicts of Interest and
Fiduciary Responsibility' and 'Cash Distribution Policy.'
BORROWINGS BY THE PARTNERSHIP MAY ENABLE THE MANAGING GENERAL PARTNER TO PERMIT
PAYMENTS OF DISTRIBUTIONS ON THE SUBORDINATED UNITS
The Managing General Partner generally must act as a fiduciary to the
Partnership and the Unitholders, and therefore must generally consider the best
interests of the Partnership when deciding whether to make capital or operating
expenditures or take other steps with respect to the business of the
Partnership. However, the Partnership Agreement provides that it will not
constitute a breach of the General Partner's fiduciary duty if Partnership
borrowings are effected that, directly or indirectly, enable the Managing
General Partner to permit the payment of distributions on the Subordinated
Units.
THE GENERAL PARTNER MAY MERGE WITH AND INTO TRIARC
The Partnership Agreement provides that the Managing General Partner may
merge with and into Triarc (the 'Triarc Merger') without the prior approval of
any Unitholder; provided, however, that prior to such merger (a) the Partnership
has received an Opinion of Counsel, (b) the Special General Partner has a 1.0%
general partner interest in the Partnership and a 1.0101% general partner
interest in the Operating Partnership and (c) the Special General Partner has a
net worth equal to at least $15 million independent of its interest in the
Partnership Group (as defined in the Glossary). The Partnership Note will
contain a covenant of Triarc that, in the event of the merger or consolidation
of the Managing General Partner with and into Triarc, Triarc will concurrently
therewith pledge as security for the Partnership Loan certain assets of the
Managing General Partner. See 'Cash Distribution Policy -- Partnership Loan.'
The Partnership Agreement also provides that after a merger of the General
Partner into Triarc, Triarc may conduct businesses and activities of its own in
which the Partnership will have no economic interest.
CERTAIN PARTNERSHIP ACTIONS REQUIRE THE APPROVAL OF THE UNITHOLDERS
The Partnership and the Unitholders may not take certain actions without
the affirmative vote of the holders of 66 2/3% of the outstanding Units or, in
certain cases, a Unit Majority (which, during the Subordination Period, requires
the affirmative vote of the holders of a majority of the Common Units
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and the Subordinated Units each voting as a separate class). The affirmative
vote of 66 2/3% of the outstanding Units (including Units held by the General
Partners and their Affiliates) is required to remove the Managing General
Partner (with or without Cause). Certain amendments to the Partnership
Agreement, a sale, merger or other disposition of substantially all of the
assets of the Partnership and certain issuances of Partnership Securities during
the Subordination Period require the approval of a Unit Majority. Immediately
following the completion of the Offering, the Managing General Partner will own
a sufficient percentage of the outstanding Units to require the Managing General
Partner's affirmative vote to take such actions. The Managing General Partner
may give or withhold its approval of any such action or vote its Subordinated
Units for or against any such action, as the case may be, in its sole discretion
without considering any interest of, or factors affecting, the Partnership or
any Unitholder. See 'The Partnership Agreement.'
EMPLOYEES OF THE MANAGING GENERAL PARTNER AND ITS AFFILIATES WHO PROVIDE
SERVICES TO THE PARTNERSHIP WILL ALSO PROVIDE SERVICES TO OTHER BUSINESSES
The Partnership will not have any employees and will rely on employees of
its subsidiaries, the Managing General Partner and its Affiliates, including
Triarc. Prior to any merger of the Managing General Partner into Triarc, the
Managing General Partner will not conduct any other business as long as it is a
general partner of the Partnership. After any such merger, Triarc, as the
Managing General Partner, may conduct businesses and activities of its own in
which the Partnership will have no economic interest. In addition, Triarc and
other Affiliates of the Managing General Partner, principally direct and
indirect wholly owned subsidiaries of Triarc, will conduct business and
activities of their own in which the Partnership will have no economic interest.
Accordingly, there may be competition between the Partnership and Affiliates of
the Managing General Partner, including Triarc, for the time and effort of
employees who provide services to both. Certain officers of Affiliates of the
Managing General Partner will divide their time between the business of the
Partnership and the business of the Affiliates and will not be required to spend
any specified percentage or amount of their time on the business of the
Partnership.
THE PARTNERSHIP WILL REIMBURSE THE MANAGING GENERAL PARTNER AND ITS AFFILIATES
FOR CERTAIN EXPENSES
Under the terms of the Partnership Agreement, the Managing General Partner
and its Affiliates will be reimbursed by the Partnership for certain expenses
incurred on behalf of the Partnership, including costs incurred in providing
corporate staff and support services to the Partnership (including compensation
costs incurred under employee benefit plans). The Partnership Agreement provides
that the Managing General Partner shall determine the expenses that are
allocable to the Partnership in any reasonable manner determined by the Managing
General Partner in its sole discretion. See 'Management -- Reimbursement of
Expenses of the Managing General Partner' and 'Certain Relationships and Related
Transactions.'
THE MANAGING GENERAL PARTNER INTENDS TO LIMIT ITS LIABILITY WITH RESPECT TO THE
PARTNERSHIP'S OBLIGATIONS
Whenever possible, the Managing General Partner intends to limit the
Partnership's liability under contractual arrangements to all or particular
assets of the Partnership, with the other party thereto to have no recourse
against the Managing General Partner, the Special General Partner or their
respective assets. The Partnership Agreement provides that any action by the
Managing General Partner in so limiting the liability of the General Partners or
that of the Partnership will not be deemed to be a breach of the General
Partners' fiduciary duties, even if the Partnership could have obtained more
favorable terms without such limitation on liability.
COMMON UNITHOLDERS WILL HAVE NO RIGHT TO ENFORCE OBLIGATIONS OF THE MANAGING
GENERAL PARTNER AND ITS AFFILIATES UNDER AGREEMENTS WITH THE PARTNERSHIP
The Partnership will acquire or provide many services from or to the
Managing General Partner and its Affiliates (including Triarc) on an ongoing
basis, including those described above. The
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agreements relating thereto do not grant to the holders of the Common Units,
separate and apart from the Partnership, the right to enforce the obligations of
the Managing General Partner and its Affiliates in favor of the Partnership.
Therefore, the Managing General Partner will be primarily responsible for
enforcing such obligations.
CONTRACTS BETWEEN THE PARTNERSHIP, ON THE ONE HAND, AND THE MANAGING GENERAL
PARTNER AND ITS AFFILIATES, ON THE OTHER, WILL NOT BE THE RESULT OF ARM'S-LENGTH
NEGOTIATIONS
Under the terms of the Partnership Agreement, the Managing General Partner
is not restricted from paying the Managing General Partner or its Affiliates for
any services rendered (provided such services are rendered on terms fair and
reasonable to the Partnership) or entering into additional contractual
arrangements with any of them on behalf of the Partnership. Neither the
Partnership Agreement nor any of the other agreements, contracts and
arrangements between the Partnership, on the one hand, and the Managing General
Partner and its Affiliates, on the other, are or will be the result of
arm's-length negotiations. All of such transactions entered into after the sale
of the Common Units offered in the Offering are to be on terms which are fair
and reasonable to the Partnership, provided that any transaction shall be deemed
fair and reasonable if (i) such transaction is approved by the Audit Committee,
(ii) its terms are no less favorable to the Partnership than those generally
being provided to or available from unrelated third parties or (iii) 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 transaction is fair to the Partnership. The Managing
General Partner and its Affiliates will have no obligation to permit the
Partnership to use any facilities or assets of the Managing General Partner and
such 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 of
the Managing General Partner and its Affiliates to enter into any such
contracts.
POTENTIAL ROLL-UP TRANSACTIONS
The Partnership Agreement does not prohibit the Partnership from engaging
in roll-up transactions. Although the Managing General Partner has no present
intention of causing the Partnership to engage in any such transaction, it is
possible it will do so in the future. There can be no assurance that a roll-up
transaction would not have a material adverse effect on a Unitholder's
investment in the Partnership.
COMMON UNITHOLDERS HAVE NOT BEEN REPRESENTED BY COUNSEL
The Common Unitholders have not been represented by counsel in connection
with the preparation of the Partnership Agreement or other agreements referred
to herein or in establishing the terms of the Offering. The attorneys,
accountants and others who have performed services for the Partnership in
connection with the Offering have been employed by the Managing General Partner
and its Affiliates and may continue to represent the Managing General Partner
and its Affiliates. Attorneys, accountants and others who will perform services
for the Partnership in the future will be selected by the Managing General
Partner or the Audit Committee and may also perform services for the Managing
General Partner and its Affiliates. The Managing General Partner may retain
separate counsel for the Partnership or the Unitholders after the sale of the
Common Units offered in the Offering, depending on the nature of the conflict
that arises, but it does not intend to do so in most cases.
PARTNERSHIP INTERESTS ARE SUBJECT TO THE MANAGING GENERAL PARTNER'S LIMITED CALL
RIGHT
The Partnership Agreement provides that it will not constitute a breach of
the Managing General Partner's fiduciary duties if the Managing General Partner
exercises its right to call for and purchase partnership interests as provided
in the Partnership Agreement or assign this right to its Affiliates or to the
Partnership. The Managing General Partner thus may use its own discretion, free
of fiduciary duty restrictions, in determining whether to exercise such right.
As a consequence, a holder of partnership interests may have his partnership
interests purchased from him even though he may not desire to sell them, and the
price paid may be less than the amount the holder would desire to receive upon
sale of
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his partnership interests. For a description of such right, see 'The Partnership
Agreement -- Limited Call Right.'
THE GENERAL PARTNERS' AFFILIATES MAY COMPETE WITH THE PARTNERSHIP
Following the sale of the Common Units offered in the Offering, Affiliates
of the General Partners will not be restricted from engaging in any business
activities other than the retail sales of propane to end users in the
continental United States, even if they are in competition with the Partnership.
As a result, conflicts of interest may arise between Affiliates of the General
Partners, on the one hand, and the Partnership, on the other. The Partnership
Agreement expressly provides that, subject to certain limited exceptions, it
shall not constitute a breach of the General Partners' fiduciary duties to the
Partnership or the Unitholders for Affiliates of the General Partners to engage
in direct competition with the Partnership, other than with respect to the
retail sale of propane to end users within the continental United States. Such
competition may include the trading, transportation, storage and wholesale
distribution of propane. The Partnership Agreement also provides that the
General Partners and their Affiliates have no obligation to present business
opportunities to the Partnership.
FIDUCIARY DUTIES OF THE GENERAL PARTNERS
The General Partners will be accountable to the Partnership and the
Unitholders as fiduciaries. Consequently, the General Partners must exercise
good faith and integrity in handling the assets and affairs of the Partnership.
In contrast to the relatively well-developed law concerning fiduciary duties
owed by officers and directors to the shareholders of a corporation, the law
concerning the duties owed by general partners to other partners and to
partnerships is relatively undeveloped. Neither the Delaware Revised Uniform
Limited Partnership Act (the 'Delaware Act') nor case law defines with
particularity the fiduciary duties owed by general partners to limited partners
or a limited partnership, but the Delaware Act provides that Delaware limited
partnerships may, in their partnership agreements, restrict or expand the
fiduciary duties that might otherwise be applied by a court in analyzing the
standard of duty owed by general partners to limited partners and the
partnership. The provisions of the Delaware Act that allow the fiduciary duties
of a general partner to be waived or restricted by a partnership agreement have
not been resolved in a court of law, and the General Partners have not obtained
an opinion of counsel covering the provisions set forth in the Partnership
Agreement that purport to waive or restrict fiduciary duties of the General
Partners. Unitholders should consult their own legal counsel concerning the
fiduciary responsibilities of the General Partners and their officers and
directors and the remedies available to the Unitholders.
Fiduciary duties are generally considered to include an obligation to act
with good faith, fairness and loyalty. Such duty of loyalty, in the absence of a
provision in a partnership agreement providing otherwise, would generally
prohibit a general partner of a Delaware limited partnership from taking any
action or engaging in any transaction as to which it has a conflict of interest.
In order to induce the Managing General Partner to manage the business of the
Partnership, the Partnership Agreement, as permitted by the Delaware Act,
contains various provisions intended to have the effect of limiting the
fiduciary duties that might otherwise be owed by the Managing General Partner to
the Partnership and its partners and waiving or consenting to conduct by the
Managing General Partner and its Affiliates that might otherwise raise issues as
to compliance with fiduciary duties or applicable law.
The Partnership Agreement provides that in order to become a limited
partner of the Partnership, a holder of Common Units is required to agree to be
bound by the provisions thereof, including the provisions discussed above. This
is in accordance with the policy of the Delaware Act favoring the principle of
freedom of contract and enforceability of partnership agreements. The Delaware
Act also provides that a partnership agreement is not unenforceable by reason of
its not having been signed by a person being admitted as a limited partner or
becoming an assignee in accordance with the terms thereof.
The Partnership Agreement provides that whenever a conflict of interest
arises between the General Partners or their Affiliates, on the one hand, and
the Partnership or any other partner, on the other, the Managing General Partner
shall resolve such conflict. The General Partners shall not be in breach of
their obligations under the Partnership Agreement or their duties to the
Partnership or the Unitholders if the resolution of such conflict is fair and
reasonable to the Partnership, and any
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resolution shall conclusively be deemed to be fair and reasonable to the
Partnership if such resolution is (i) approved by the Audit Committee (although
no party is obligated to seek such approval and the Managing General Partner may
adopt a resolution or course of action that has not received such approval),
(ii) on terms no less favorable to the Partnership than those generally being
provided to or available from 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). In resolving such conflict, the
Managing General Partner may (unless the resolution is specifically provided for
in the Partnership Agreement) consider the relative interests of the parties
involved in such conflict or affected by such action, any customary or accepted
industry practices or historical dealings with a particular person or entity
and, if applicable, generally accepted accounting or engineering practices or
principles and such other factors as it deems relevant. Thus, unlike the strict
duty of a fiduciary who must act solely in the best interests of his
beneficiary, the Partnership Agreement permits the Managing General Partner to
consider the interests of all parties to a conflict of interests, including the
interests of the General Partners and their stockholders. In connection with the
resolution of any conflict that arises, unless the Managing General Partner has
acted in bad faith, the action taken by the Managing General Partner shall not
constitute a breach of the Partnership Agreement, any other agreement or any
standard of care or duty imposed by the Delaware Act or other applicable law.
The Partnership Agreement also provides that in certain circumstances the
Managing General Partner may act in its sole discretion, in good faith or
pursuant to other appropriate standards.
The Delaware Act provides that a limited partner may institute legal action
on behalf of the partnership (a partnership derivative action) to recover
damages from a third party where the general partner has refused to institute
the action or where an effort to cause the general partner to do so is not
likely to succeed. In addition, the statutory or case law of certain
jurisdictions may permit a limited partner to institute legal action on behalf
of himself or all other similarly situated limited partners (a class action) to
recover damages from a general partner for violations of its fiduciary duties to
the limited partners.
The Partnership Agreement also provides that any standard of care and duty
imposed thereby or under the Delaware Act or any applicable law, rule or
regulation will be modified, waived or limited, to the extent permitted by law,
as required to permit the Managing General Partner and its officers and
directors to act under the Partnership Agreement or any other agreement
contemplated therein and to make any decision pursuant to the authority
prescribed in the Partnership Agreement so long as such action is reasonably
believed by the Managing General Partner to be in, or not inconsistent with, the
best interests of the Partnership. Further, the Partnership Agreement provides
that the Managing General Partner and its officers and directors will not be
liable for monetary damages to the Partnership, the limited partners or
assignees for errors of judgment or for any acts or omissions if the Managing
General Partner and such other persons acted in good faith.
In addition, under the terms of the Partnership Agreement, the Partnership
is required to indemnify the General Partners and their officers, directors,
employees, Affiliates, partners, agents and trustees, to the fullest extent
permitted by law, against liabilities, costs and expenses incurred by the
General Partners or other such persons, if the General Partners or such persons
acted in good faith and in a manner they reasonably believed to be in, or not
opposed to, the best interests of the Partnership and, with respect to any
criminal proceedings, had no reasonable cause to believe the conduct was
unlawful. See 'The Partnership Agreement -- Indemnification.' Thus, the General
Partners could be indemnified for their negligent acts if they meet such
requirements concerning good faith and the best interests of the Partnership.
DESCRIPTION OF THE COMMON UNITS
Upon consummation of the Offering, the Common Units will be registered
under the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and
the rules and regulations promulgated thereunder, and the Partnership will be
subject to the reporting and certain other requirements of the Exchange Act. The
Partnership will be required to file periodic reports containing financial and
other information with the Commission. Purchasers of Common Units in the
Offering and subsequent transferees of Common Units (or their brokers, agents or
nominees on their behalf) will be required to
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execute Transfer Applications, the form of which is included as Appendix B to
this Prospectus. Purchasers in the Offering may hold Common Units in nominee
accounts, provided that the broker (or other nominee) executes and delivers a
Transfer Application and becomes a limited partner. The Partnership will be
entitled to treat the nominee holder of a Common Unit as the absolute owner
thereof, and the beneficial owner's rights will be limited solely to those that
it has against the nominee holder as a result of or by reason of any
understanding or agreement between such beneficial owner and nominee holder.
THE UNITS
The Common Units issued in the Offering and Common Units issued upon
conversion of Subordinated Units represent limited partner interests in the
Partnership. The Subordinated Units held by the Managing General Partner or its
Affiliates are (unless such Persons elect otherwise) general partner interests
in the Partnership. The holders of Common Units and Subordinated Units are
entitled to participate in Partnership distributions and exercise the rights or
privileges available to Common Unitholders and Subordinated Unitholders,
respectively, under the Partnership Agreement. For a description of the relative
rights and preferences of Common Units and Subordinated Units in and to
Partnership distributions, together with a description of the circumstances
under which Subordinated Units may convert into Common Units, see 'Cash
Distribution Policy.' For a description of the rights and privileges of limited
partners under the Partnership Agreement, see 'The Partnership Agreement.'
TRANSFER AGENT AND REGISTRAR
DUTIES
will act as a registrar and transfer agent
(the 'Transfer Agent') for the Common Units and will receive a fee from the
Partnership for serving in such capacities. All fees charged by the Transfer
Agent for transfers of Common Units will be borne by the Partnership and not by
the holders of Common Units, except that fees similar to those customarily paid
by stockholders for surety bond premiums to replace lost or stolen certificates,
taxes and other governmental charges, special charges for services requested by
a holder of a Common Unit and other similar fees or charges will be borne by the
affected holder. There will be no charge to holders for disbursements of the
Partnership's cash distributions. The Partnership will indemnify the Transfer
Agent, its agents and each of their respective shareholders, directors, officers
and employees against all claims and losses that may arise out of acts performed
or omitted in respect of its activities as such, except for any liability due to
any negligence, gross negligence, bad faith or intentional misconduct of the
indemnified person or entity.
RESIGNATION OR REMOVAL
The Transfer Agent may at any time resign, by notice to the Partnership, or
be removed by the Partnership, such resignation or removal to become effective
upon the appointment by the Partnership of a successor transfer agent and
registrar and its acceptance of such appointment. If no successor has been
appointed and accepted such appointment within 30 days after notice of such
resignation or removal, the Managing General Partner is authorized to act as the
transfer agent and registrar until a successor is appointed.
TRANSFER OF COMMON UNITS
Until a Common Unit has been transferred on the books of the Partnership,
the Partnership and the Transfer Agent, notwithstanding any notice to the
contrary, may treat the record holder thereof as the absolute owner for all
purposes, except as otherwise required by law or stock exchange regulations. The
transfer of the Common Units to persons that purchase directly from the
Underwriters will be accomplished through the completion, execution and delivery
of a Transfer Application by such investor in connection with such Common Units.
Any subsequent transfers of a Common Unit will not be recorded by the Transfer
Agent or recognized by the Partnership unless the transferee executes and
delivers a Transfer Application. By executing and delivering a Transfer
Application (the form of which is set forth as Appendix B to this Prospectus and
which is also set forth on the reverse side of the certificates representing the
Common Units), the transferee of Common Units (i) becomes the record holder of
such Common Units and shall constitute an assignee until admitted into the
Partnership as a
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substitute limited partner, (ii) automatically requests admission as a
substituted limited partner in the Partnership, (iii) agrees to be bound by the
terms and conditions of, and executes, the Partnership Agreement, (iv)
represents that such transferee has the capacity, power and authority to enter
into the Partnership Agreement, (v) grants powers of attorney to the Partnership
and any liquidator of the Partnership as specified in the Partnership Agreement,
and (vi) makes the consents and waivers contained in the Partnership Agreement.
An assignee will become a substituted limited partner of the Partnership in
respect of the transferred Common Units upon the consent of the Partnership and
the recordation of the name of the assignee on the books and records of the
Partnership. Such consent may be withheld in the sole discretion of the General
Partner.
Common Units are securities and are transferable according to the laws
governing transfer of securities. In addition to other rights acquired upon
transfer, the transferor gives the transferee the right to request admission as
a substituted limited partner in the Partnership in respect of the transferred
Common Units. A purchaser or transferee of Common Units who does not execute and
deliver a Transfer Application obtains only (a) the right to assign the Common
Units to a purchaser or other transferee and (b) the right to transfer the right
to seek admission as a substituted limited partner in the Partnership with
respect to the transferred Common Units. Thus, a purchaser or transferee of
Common Units who does not execute and deliver a Transfer Application will not
receive cash distributions unless the Common Units are held in a nominee or
'street name' account and the nominee or broker has executed and delivered a
Transfer Application with respect to such Common Units, and may not receive
certain federal income tax information or reports furnished to record holders of
Common Units. The transferor of Common Units will have a duty to provide such
transferee with all information that may be necessary to obtain registration of
the transfer of the Common Units, but a transferee agrees, by acceptance of the
certificate representing Common Units, that the transferor will not have a duty
to insure the execution of the Transfer Application by the transferee and will
have no liability or responsibility if such transferee neglects or chooses not
to execute and forward the Transfer Application to the Transfer Agent. See 'The
Partnership Agreement -- Status as Limited Partner or Assignee.'
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THE PARTNERSHIP AGREEMENT
The following paragraphs are a summary of certain provisions of the
Partnership Agreement. The form of the Partnership Agreement for the Partnership
is included in this Prospectus as Appendix A. The form of Partnership Agreement
for the Operating Partnership (the 'Operating Partnership Agreement') will be
included as an exhibit to the Registration Statement of which this Prospectus
constitutes a part. The Partnership will provide prospective investors with a
copy of the form of the Operating Partnership Agreement upon request at no
charge. The following summary of material provisions of the Partnership
Agreement is qualified in its entirety by reference to the Partnership
Agreements for the Partnership and for the Operating Partnership. The
Partnership will be the sole limited partner of the Operating Partnership, which
will own, manage and operate the Partnership's business. The Managing General
Partner and the Special General Partner will serve as the general partners of
the Partnership and of the Operating Partnership. Unless specifically described
otherwise, references herein to the 'Partnership Agreement' constitute
references to the Partnership Agreement and the Operating Partnership Agreement,
collectively.
Certain material provisions of the Partnership Agreement are summarized
elsewhere in this Prospectus under various headings. With regard to various
transactions and relationships of the Partnership with the General Partners and
their Affiliates, see 'Risk Factors -- Conflicts of Interest and Fiduciary
Responsibility,' 'Certain Relationships and Related Transactions,' and
'Conflicts of Interest and Fiduciary Responsibility.' With regard to the
management of the Partnership, see 'Management.' With regard to the transfer of
Common Units, see 'Description of the Common Units -- Transfer of Common Units.'
With regard to distributions of Available Cash, see 'Cash Distribution Policy.'
With regard to allocations of taxable income and taxable loss, see 'Tax
Considerations.' Prospective investors are urged to review these sections of
this Prospectus and the Partnership Agreement carefully.
ORGANIZATION
The Partnership and the Operating Partnership were organized on March 13,
1996 and March 15, 1996, respectively, as Delaware limited partnerships. The
General Partner and the Special General Partner are the general partners of the
Partnership and the Operating Partnership. Following the issuance of the Common
Units offered in the Offering, the General Partners will own an effective
combined 4% unsubordinated General Partner Interest, the Managing General
Partner will own a 44.2% subordinated general partner interest (as holder of the
Subordinated Units) and the Common Unitholders will own a 51.8% limited partner
interest, in the Partnership and the Operating Partnership on a combined basis.
SPECIAL GENERAL PARTNER
The Special General Partner, a wholly owned subsidiary of the Managing
General Partner, is a non-managing general partner of the Partnership and the
Operating Partnership. Pursuant to the Partnership Agreement, the Special
General Partner is prohibited from conducting any business or having any
operations other than those incidental to serving as a general partner of the
Partnership and the Operating Partnership. The Partnership Agreement also
provides that the Board of Directors of the Special General Partner shall be at
all times composed of the same individuals who compose the Board of Directors of
the Managing General Partner. In the event the Managing General Partner is
merged with and into Triarc, the Audit Committee of the Special General Partner
will perform the functions previously performed by the Audit Committee of the
Managing General Partner. In addition, the Partnership Agreement provides that
if, following a merger of the Managing General Partner with and into Triarc,
Triarc involuntarily withdraws as general partner of the Partnership pursuant to
bankruptcy or certain related events, the Special General Partner shall become
the managing general partner of the Partnership and shall continue the business
of the Partnership, without any Unitholder approval.
Provided that the Triarc Merger has not occurred, the Special General
Partner may convert all or a portion of its combined unsubordinated general
partner interest to Units representing a combined interest in the Partnership
and the Operating Partnership equal to the combined unsubordinated general
partner interest so converted. Such Units shall be issued as Subordinated Units
and/or Common
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Units in the same proportion as Subordinated Units initially issued to the
General Partner are at such time constituted.
PURPOSE
The purpose of the Partnership under the Partnership Agreement 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 Managing General Partner. The Operating Partnership
Agreement provides that the Operating Partnership may engage in any activity
engaged in by National Propane and its subsidiaries immediately prior to the
Offering, and any other activity approved by the Managing General Partner.
Although the Managing General Partner has the ability under the Partnership
Agreement to cause the Partnership and the Operating Partnership to engage in
activities other than propane marketing and related businesses, the Managing
General Partner has no current intention of doing so. The Managing General
Partner is authorized in general to perform all acts deemed necessary to carry
out such purposes and to conduct the business of the Partnership. See
' -- Certain Required Approvals of the General Partner.'
CAPITAL CONTRIBUTIONS
For a description of the initial capital contributions to be made to the
Partnership, see 'The Transactions.' The Unitholders are not obligated to make
additional capital contributions to the Partnership, except as described below
under ' -- Limited Liability.'
POWER OF ATTORNEY
Each Limited Partner (as defined in the Glossary), and each person who
acquires a Unit from a Unitholder and executes and delivers a Transfer
Application with respect thereto, grants to the Managing General Partner and, if
a liquidator of the Partnership 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 the
Partnership, or the amendment of the Partnership Agreement in accordance with
the terms thereof and to make consents and waivers contained in the Partnership
Agreement.
LIMITED LIABILITY
Assuming that a Limited Partner does not participate in the control of the
business of the Partnership within the meaning of the Delaware Act and that such
Limited Partner otherwise acts in conformity with the provisions of the
Partnership Agreement, his liability under the Delaware Act will be limited,
subject to certain possible exceptions, to the amount of capital that such
Limited Partner is obligated to contribute to the Partnership in respect of his
Common Units plus such Limited Partner's share of any undistributed profits and
assets of the Partnership. If it were determined, however, that the right or
exercise of the right by the Limited Partners as a group, to remove or replace
the General Partners, to approve certain amendments to the Partnership Agreement
or to take other action pursuant to the Partnership Agreement constituted
'participation in the control' of the Partnership's business for the purposes of
the Delaware Act, then the Limited Partners could be held personally liable for
the Partnership's obligations under the laws of the State of Delaware to the
same extent as the General Partners with respect to persons who transact
business with the Partnership 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
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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 Partnership expects that the Operating Partnership will initially
conduct business in at least 24 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 the Partnership
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 remove or replace the General
Partners, to approve certain amendments to the Partnership Agreement, or to take
other action pursuant to the Partnership Agreement constituted 'participation in
the control' of the Partnership's business for the purposes of the statutes of
any relevant jurisdiction, then the Limited Partners could be held personally
liable for the Partnership's obligations under the law of such jurisdiction to
the same extent as the General Partners under certain circumstances. The
Partnership will operate in such manner as the Managing General Partner deems
reasonable and necessary or appropriate to preserve the limited liability of the
Limited Partners.
ISSUANCE OF ADDITIONAL SECURITIES
The Partnership Agreement authorizes the Managing General Partner to cause
the Partnership to issue an unlimited number of additional limited and/or
general partner interests and other equity securities of the Partnership for
such consideration and on such terms and conditions as are established by the
Managing General Partner in its sole discretion without the approval of any
Limited Partners; provided that, during the Subordination Period, except as
provided in clauses (i) and (ii) of the following sentence, the Partnership may
not issue equity securities of the Partnership ranking prior or senior to the
Common Units or an aggregate of more than 3,095,238 additional Common Units or
an equivalent number of securities ('parity securities') ranking on a parity
with the Common Units or ranking prior or senior to, or on a parity with, the
Subordinated Units ('non-senior securities') (excluding Common Units issued upon
exercise of the Underwriters' over-allotment option, pursuant to employee
benefit plans, upon conversion of the Special General Partner's combined
unsubordinated general partner interest, upon conversion of Subordinated Units
and subject to adjustment in the event of a combination or subdivision of Common
Units) without the approval of the holders of at least a Unit Majority. During
the Subordination Period the Partnership may also issue (i) an unlimited number
of additional Common Units or parity or non-senior securities without the
approval of the Unitholders if such issuance occurs (A) in connection with an
Acquisition or a Capital Improvement or (B) 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 would have, if acquired by the
Partnership as of the date that is one year prior to the first day of the
quarter in which such transaction is to be effected, resulted in an increase in
(1) 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 (2) the actual amount of
Adjusted Operating Surplus generated by the Partnership on a per-Unit basis for
all outstanding Units with respect to each of such four quarters (or, if the
issuance of Units with respect to an Acquisition or Capital Improvement occurs
within the first four full quarters from the Closing Date, then based on the
Partnership's pro forma Adjusted Operating Surplus for any full quarter for
which there was no actual performance); and (ii) an unlimited number of Units or
parity or non-senior securities prior to the end of the Subordination Period and
without the approval of the Unitholders if the use of proceeds from such
issuance is exclusively to repay up to $50 million in indebtedness of a member
of the Partnership Group (as defined in the Glossary), in each case
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only where the aggregate amount of distributions that would have been paid with
respect to such newly issued Units and the related additional distributions that
would have been made to the General Partners 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). Following the closing of
the Offering, the Partnership may file a registration statement on Form S-1 with
respect to Common Units to be issued from time to time in connection with
Acquisitions or Capital Improvements. In addition, following the closing of the
Offering, the Partnership may file a Registration Statement on Form S-8 with
respect to Units that may be issued pursuant to the Unit Option Plan. In
accordance with Delaware law and the provisions of the Partnership Agreement,
the Partnership may also issue additional partnership interests that, in the
discretion of the Managing General Partner, may have special voting rights to
which the Common Units are not entitled.
The General Partners will have the right, which they may from time to time
assign in whole or in part to any of their Affiliates, to purchase Common Units,
Subordinated Units or other equity securities of the Partnership from the
Partnership whenever, and on the same terms that, the Partnership issues such
securities or rights to Persons other than the General Partners and their
Affiliates, to the extent necessary to maintain the percentage interest of the
General Partners and their Affiliates in the Partnership that existed
immediately prior to each such issuance. Moreover, upon the issuance of
additional Partnership Securities (other than pursuant to the Underwriters'
over-allotment option, which will not require the General Partners to make an
additional capital contribution) the General Partners will be required to make
contributions to the Partnership which, when added to the additional amount
contributed in exchange for such Partnership Securities, will equal 4% of such
additional capital contributions. The holders of Common Units or Subordinated
Units (other than the General Partners and their Affiliates) will not have
preemptive rights to acquire additional Common Units, Subordinated Units or
other partnership interests that may be issued by the Partnership. Furthermore,
the General Partners and any of their Affiliates may acquire Units or other
Partnership Securities in addition to those acquired in the Offering and, except
as otherwise provided in the Partnership Agreement, shall be entitled to
exercise all rights of a holder or assignee of such Units or Partnership
Securities, as the case may be. Additional issuances of Units, including
Subordinated Units or other equity securities of the Partnership ranking junior
to the Common Units, may reduce the likelihood of, and the amount of, any
distributions above the Minimum Quarterly Distribution.
AMENDMENT OF PARTNERSHIP AGREEMENT
Amendments to the Partnership Agreement may be proposed only by or with the
consent of the Managing General Partner. In order to adopt a proposed amendment,
the Partnership is required to seek written approval of the holders of the
number of Units required to approve such amendment or call a meeting of the
Unitholders to consider and vote upon the proposed amendment, except as
described below. Proposed amendments (unless otherwise specified) must be
approved by holders of a majority of the outstanding Units (including Units held
by the General Partners and their Affiliates), except that no amendment may be
made which 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 the Partnership to, the General Partners or any of their
Affiliates without the Managing General Partner's consent, which may be given or
withheld in its sole discretion, (iii) change the term of the Partnership, (iv)
provide that the Partnership is not dissolved upon the expiration of its term or
(v) give any Person the right to dissolve the Partnership other than the
Managing General Partner's right to dissolve the Partnership with the approval
of holders of a Unit Majority.
The Managing General Partner 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 the
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Partnership, the location of the principal place of business of the Partnership,
the registered agent or the registered office of the Partnership, (ii)
admission, substitution, withdrawal or removal of partners in accordance with
the Partnership Agreement, (iii) a change that, in the sole discretion of the
Managing General Partner, 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 or to ensure that neither the
Partnership 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 holders of a Unit Majority will be required if such
amendment would result in a delisting or a suspension of trading of any class of
Units on the principal national securities exchange or over the counter market
where such class of Units is then traded), (iv) an amendment that is necessary,
in the opinion of counsel to the Partnership, to prevent the Partnership, or the
General Partners or their 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) subject to the limitations on the issuance of
additional Common Units or other limited or general partner interests described
above, an amendment that in the sole discretion of the Managing General Partner
is necessary or advisable in connection with the authorization of additional
limited or general partner interests, (vi) any amendment expressly permitted in
the Partnership Agreement to be made by the Managing General Partner acting
alone, (vii) an amendment effected, necessitated or contemplated by a merger
agreement that has been approved pursuant to the terms of the Partnership
Agreement, (viii) any amendment that, in the sole discretion of the Managing
General Partner, is necessary or advisable in connection with the formation by
the Partnership of, or its investment in, any corporation, partnership or other
entity (other than the Operating Partnership) as otherwise permitted by the
Partnership Agreement, (ix) a change in the fiscal year and/or taxable year of
the Partnership and changes related thereto, (x) a conversion of Units held by
the Managing General Partner or its Affiliates at the election of the Managing
General Partner or its Affiliates from general partner interests into limited
partner interests, and (xi) any other amendments substantially similar to any of
the foregoing.
In addition to the Managing General Partner's right to amend the
Partnership Agreement as described above, the Managing General Partner may make
amendments to the Partnership Agreement without the approval of any Unitholder
or assignee if such amendments (i) do not adversely affect the Limited Partners
in any material respect, (ii) are necessary or advisable (in the sole discretion
of the Managing General Partner) 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 (in the sole discretion of the
Managing General Partner) 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 Managing General Partner deems to be in the best interests
of the Partnership and the Unitholders, (iv) are necessary or advisable in
connection with any action taken by the Managing General Partner relating to
splits or combinations of Units pursuant to the provisions of the Partnership
Agreement or (v) are required to effect the intent expressed in this Prospectus
or contemplated by the Partnership Agreement. The Managing General Partner will
not be required to obtain an Opinion of Counsel (as defined in the Glossary) in
the event of the amendments described in the two immediately preceding
paragraphs. No other amendments to the Partnership Agreement will become
effective without the approval of holders of at least 90% of the Units
(including Units held by the General Partners and their Affiliates) unless the
Partnership 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 the Partnership 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 Units in relation to other classes of Units
will require the approval of at least a majority of the type or class of Units
so affected.
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MERGER, SALE OR OTHER DISPOSITION OF ASSETS
The Managing General Partner is prohibited, without the prior approval of
holders of a Unit Majority, from causing the Partnership to, among other things,
sell, exchange or otherwise dispose 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 on behalf of the
Partnership the sale, exchange or other disposition of all or substantially all
of the assets of the Operating Partnership; provided that the Partnership may
mortgage, pledge, hypothecate or grant a security interest in all or
substantially all of the Partnership's assets without such approval. The
Partnership 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 Unitholders are not entitled to dissenters' rights of appraisal
under the Partnership Agreement or applicable Delaware law in the event of a
merger or consolidation of the Partnership, a sale of substantially all of the
Partnership's assets or any other transaction or event.
TERMINATION AND DISSOLUTION
The Partnership will continue until December 31, 2086, unless sooner
terminated pursuant to the Partnership Agreement. The Partnership will be
dissolved upon (i) the election of the Managing General Partner to dissolve the
Partnership, if approved by the holders of a Unit Majority, (ii) the sale,
exchange or other disposition of all or substantially all of the assets and
properties of the Partnership and the Operating Partnership, (iii) the entry of
a decree of judicial dissolution of the Partnership or (iv) the withdrawal or
removal of the Managing General Partner or the occurrence of any other event
that results in its ceasing to be the Managing General Partner (other than (x)
by reason of a transfer of its unsubordinated general partner interest in
accordance with the Partnership Agreement, (y) withdrawal or removal following
approval and admission of a successor or (z) certain bankruptcy-related events
of the Managing General Partner but only if at such time Triarc is the Managing
General Partner and the Special General Partner is not bankrupt at such time).
Upon a dissolution pursuant to (x) or (y) of clause (iv) above, the holders of a
Unit Majority may also elect, within certain time limitations, to reconstitute
the Partnership and continue its business on the same terms and conditions set
forth in the Partnership Agreement by forming a new limited partnership on terms
identical to those set forth in the Partnership Agreement and having as general
partner an entity approved by the holders of at least a Unit Majority subject to
receipt by the Partnership of an Opinion of Counsel. Upon a dissolution pursuant
to (z) of clause (iv) above, the Special General Partner shall automatically
become the Managing General Partner and the Partnership shall continue without
any Unitholder action.
LIQUIDATION AND DISTRIBUTION OF PROCEEDS
Upon dissolution of the Partnership, unless the Partnership is
reconstituted and continued as a new limited partnership, the Person authorized
to wind up the affairs of the Partnership (the 'Liquidator') will, acting with
all of the powers of the Managing General Partner that such Liquidator deems
necessary or desirable in its good faith judgment in connection therewith,
liquidate the Partnership'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 the Partnership'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.
WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNERS
The Managing General Partner has agreed not to withdraw voluntarily as the
managing general partner of the Partnership and the Operating Partnership prior
to June 30, 2006 (with limited exceptions described below), without obtaining
the approval of the holders of a Unit Majority and furnishing an Opinion of
Counsel. On or after June 30, 2006, the Managing General Partner may withdraw as
the Managing General Partner (without first obtaining approval from any
Unitholder) by giving 90 days' written notice, and such withdrawal will not
constitute a violation of the Partnership Agreement. Notwithstanding the
foregoing, the Managing General Partner may withdraw without Unitholder
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approval upon 90 days' notice to the Limited Partners if more than 50% of the
outstanding Common Units are held or controlled by one Person and its Affiliates
(other than the General Partners and their Affiliates). In addition, the
Partnership Agreement permits the Managing General Partner (in certain limited
instances) to sell or otherwise transfer all of its General Partner Interest,
without the approval of the Unitholders. See ' -- Transfer of General Partners'
Interests and Right to Receive Incentive Distributions and Conversion of Units
Held by Managing General Partner into Limited Partner Interests.'
Upon the withdrawal of the Managing General Partner under any circumstances
(other than as a result of (x) a transfer by the Managing General Partner of all
or a part of its General Partner Interest or (y) certain bankruptcy-related
events of the Managing General Partner but only if the Managing General Partner
is Triarc and the Special General Partner is not bankrupt at such time), the
holders of a Unit Majority may select a successor to such withdrawing Managing
General Partner. If such a successor is not elected, or is elected but an
Opinion of Counsel cannot be obtained, the Partnership will be dissolved, wound
up and liquidated, unless within 180 days after such withdrawal the holders of a
Unit Majority agree in writing to continue the business of the Partnership and
to the appointment of a successor Managing General Partner. See ' -- Termination
and Dissolution.'
The Managing General Partner may not be removed unless such removal is
approved by the vote of the holders of not less than 66 2/3% of the outstanding
Units (including Units held by the General Partners and their Affiliates) and
the Partnership 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 not
less than a Unit Majority. Units held by the General Partners and their
Affiliates shall be deemed to be outstanding for purposes of any such vote. The
Partnership Agreement also provides that if the Managing General Partner is
removed as general partner of the Partnership other than for Cause (i) the
Special General Partner shall withdraw as general partner of the Partnership and
the Operating Partnership, (ii) the Subordination Period will end and all
outstanding Subordinated Units will immediately convert into Common Units on a
one-for-one basis, (iii) any existing Common Unit Arrearages will be
extinguished and (iv) the General Partners will have the right to convert their
General Partner Interests and the right to receive Incentive Distributions into
Common Units or to receive in exchange for such interests a cash payment equal
to the fair market value (as determined below) of such interests.
Withdrawal or removal of the Managing General Partner as a general partner
of the Partnership also constitutes withdrawal or removal, as the case may be,
of the Managing General Partner as a general partner of the Operating
Partnership. The withdrawal or removal of the Managing General Partner, as a
general partner of the Partnership, will also constitute a withdrawal or
removal, as the case may be, of the Special General Partner as a general partner
of the Partnership and the Operating Partnership unless such withdrawal of the
Managing General Partner is caused by a bankruptcy of the Managing General
Partner but only if the Managing General Partner is Triarc and the Special
General Partner is not bankrupt at such time (in which case the Special General
Partner will automatically become the managing general partner and the
Partnership will continue without any action by Unitholders).
In the event of withdrawal of the General Partners where such withdrawal
violates the Partnership Agreement, a successor general partner will have the
option to purchase the unsubordinated general partner interests of the departing
General Partners (the 'Departing Partners') in the Partnership and the Operating
Partnership and the right to receive Incentive Distributions for a cash payment
equal to the fair market value of such interests. Under all other circumstances
where the General Partners withdraw or are removed by the Unitholders, the
Departing Partners will have the option to require the successor general partner
to purchase such unsubordinated general partner interests of the Departing
Partners and the right to receive Incentive Distributions for such amount. In
each case, such fair market value will be determined by agreement between the
Departing Partners 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 Partners 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, the Partnership will be required to
reimburse the Departing Partners for all amounts due the Departing Partners,
including, without limitation, all employee-related liabilities, including
severance liabilities,
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incurred in connection with the termination of any employees employed by the
Departing Partners for the benefit of the Partnership.
If neither of the above-described options are exercised by either the
Departing Partners or the successor general partner, as applicable, the
Departing General Partners will have the right to convert their unsubordinated
general partner interests and their right to receive Incentive Distributions
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 from the Partnership in
exchange for such interests.
TRANSFER OF GENERAL PARTNERS' INTERESTS AND RIGHT TO RECEIVE INCENTIVE
DISTRIBUTIONS
AND CONVERSION OF UNITS HELD BY THE MANAGING GENERAL PARTNER INTO LIMITED
PARTNER INTERESTS
Except for (x) a transfer by either of the General Partners of all, but not
less than all, of their General Partner Interests in the Partnership and the
Operating Partnership to (a) an Affiliate (including Triarc) or (b) another
Person in connection with the merger or consolidation of either of the Managing
General Partner with or into another Person, (y) the transfer by either of the
General Partners of all or substantially all of its assets to another Person, or
(z) the transfer by operation of law upon the merger or liquidation of the
Managing General Partner with and into Triarc but only if, (i) the Partnership
has received an Opinion of Counsel, (ii) the Special General Partner has a 1.0%
general partner interest in the Partnership and a 1.0101% general partner
interest in the Operating Partnership and (iii) the Special General Partner has
a net worth equal to at least $15 million independent of its interest in the
Partnership Group, neither of the General Partners may transfer all or any part
of its General Partner Interest in the Partnership to another Person prior to
June 30, 2006, without the approval of the holders of a Unit Majority; provided
that, in each case, such transferee assumes the rights and duties of the
Managing General Partner to whose interest such transferee has succeeded, agrees
to be bound by the provisions of the Partnership Agreement, furnishes an Opinion
of Counsel and agrees to acquire all (or the appropriate portion thereof, as
applicable) of the transferring Managing General Partner's interests in the
Operating Partnership and agrees to be bound by the provisions of the Operating
Partnership Agreement. The Partnership Agreement permits the Managing General
Partner to transfer its Subordinated Units and Common Units to one or more
Persons. The Partnership Note, however, contains certain agreements by Triarc
that could restrict the Managing General Partner's ability to transfer or sell
Subordinated Units. See 'Cash Distribution Policy -- Partnership Loan.' The
Managing General Partner and its Affiliates may each at their election convert
any portion of the Units from general partner interests into limited partner
interests. In addition, the Managing General Partner shall have the right at any
time to transfer its right to receive Incentive Distributions to one or more
Persons (as an assignment of such rights or as a special limited partner
interest in the Partnership) subject only to any reasonable restrictions on
transfer and requirements for registering the transfer of such right as may be
adopted by the Managing General Partner without Unitholder approval. At any
time, the Affiliates of the General Partners (including Triarc) may sell or
transfer all or part of their respective direct or indirect interest in the
General Partners to an Affiliate or an unaffiliated third party without the
approval of the Unitholders.
LIMITED CALL RIGHT
If at any time less than 20% of the then-issued and outstanding partnership
interests of any class are held by Persons other than the General Partners and
their Affiliates, the Managing General Partner will have the right, which it may
assign in whole or in part to any of its Affiliates or to the Partnership, to
acquire all, but not less than all, of the remaining partnership interests of
such class held by such unaffiliated Persons as of a record date to be selected
by the Managing 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 General Partners or any of their Affiliates
for partnership interests purchased within the 90 days preceding the date on
which the Managing General Partner first mails notice of its election to
purchase such partnership interests, and (ii) the Current Market Price (as
defined in the Glossary) of such partnership interests as of the date three days
prior to the date such notice is mailed. As a consequence of the Managing
General Partner's right to purchase outstanding
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partnership interests, a holder of partnership interests may have such
partnership 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 partnership interests. The tax consequences to a Unitholder
of the exercise of this call right are the same as a sale by such Unitholder of
his Common Units in the market. See 'Tax Considerations -- Disposition of Common
Units.'
MEETINGS; VOTING
Except as described below with respect to a Person or group owning 20% or
more of all Units, Unitholders or assignees who are record holders of Units on
the record date set pursuant to the Partnership Agreement will be entitled to
notice of, and to vote at, meetings of Unitholders 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 Managing
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 Managing General Partner on behalf of
Non-citizen Assignees (as defined below), the Managing 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).
The Managing General Partner does not anticipate that any meeting of
Unitholders will be called in the foreseeable future. Any action that is
required or permitted to be taken by the Unitholders may be taken either at a
meeting of the Unitholders or without a meeting if consents in writing setting
forth the action so taken are signed by holders of such number of Units as would
be necessary to authorize or take such action at a meeting of all of the
Unitholders. Meetings of the Unitholders may be called by the Managing General
Partner or by Unitholders owning in the aggregate at least 20% of the
outstanding Common Units of the class for which a meeting is proposed.
Unitholders may vote either in person or by proxy at meetings. The holders of a
majority of the outstanding Units of the class for which a meeting has been
called represented in person or by proxy will constitute a quorum at a meeting
of Unitholders of such class or classes, unless any such action by the
Unitholders requires approval by holders of a greater percentage of such Units,
in which case the quorum shall be such greater percentage.
Each record holder of a Unit has a vote according to his percentage
interest in the Partnership, although additional limited and/or general partner
interests having special voting rights could be issued by the Managing General
Partner. See ' -- Issuance of Additional Securities.' However, if any Person or
group (other than the General Partners and their Affiliates) acquires, in the
aggregate, beneficial ownership of 20% or more of the total Units then
outstanding, such Person or group loses voting rights with respect to all of its
Units and such Units may not be voted on any matter and will not be considered
to be outstanding when sending notices of a meeting of limited partners,
calculating required votes, determining the presence of a quorum or for other
similar Partnership purposes. The 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.
Except as otherwise provided in the Partnership Agreement, Subordinated Units
will vote together with the Common Units as a single class.
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 partner) under the terms of the Partnership
Agreement will be delivered to the record holder by the Partnership or by the
Transfer Agent at the request of the Partnership.
STATUS AS LIMITED PARTNER OR ASSIGNEE
Except as described above under ' -- Limited Liability,' the Common Units
will be fully paid, and Unitholders will not be required to make additional
contributions to the Partnership.
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An assignee of a Common Unit or Subordinated Unit subsequent to executing
and delivering a Transfer Application, but pending its admission as a
substituted Limited Partner in the Partnership, is entitled to an interest in
the Partnership equivalent to that of a Limited Partner with respect to the
right to share in allocations and distributions from the Partnership, including
liquidating distributions. The Managing General Partner will vote and exercise
other powers attributable to Common Units or Subordinated Units, as the case may
be, owned by an assignee who has not become a substitute Limited Partner at the
written direction of such assignee. See ' -- Meetings; Voting.' 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. See 'Description of the Common Units -- Transfer of
Common Units.'
NON-CITIZEN ASSIGNEES; REDEMPTION
If the Partnership is or becomes subject to federal, state or local laws or
regulations that, in the reasonable determination of the Partnership, create a
substantial risk of cancellation or forfeiture of any property in which the
Partnership has an interest because of the nationality, citizenship, residency
or other related status of any Partner or assignee, the Partnership may redeem
the Common Units held by such Partner or assignee at their Current Market Price.
In order to avoid any such cancellation or forfeiture, the Partnership may
require each Partner or assignee to furnish information about his nationality,
citizenship, residency or related status. If a 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 ('Non-citizen
Assignee'). In addition to other limitations on the rights of an assignee who is
not a substituted 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 the Partnership.
INDEMNIFICATION
The Partnership Agreement provides that the Partnership will indemnify each
General Partner, any Departing Partner, any Person who is or was an Affiliate of
either of the General Partners or any Departing Partner, any Person who is or
was an officer, director, partner or trustee of a General Partner or any
Departing Partner or any affiliate of either of the General Partners or any
Departing Partner, or any Person who is or was serving at the request of a
General Partner or any Departing Partner or any Affiliate of either of the
General Partners or any Departing Partner as an officer, director, employee,
partner, agent 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, without limitation, legal
fees and expenses), judgments, fines, penalties, interest, settlements and 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 any of the foregoing; 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. Any indemnification under these
provisions will be only out of the assets of the Partnership, and the General
Partners shall not be personally liable for, or have any obligation to
contribute or loan funds or assets to the Partnership to enable it to
effectuate, such indemnification. The Partnership is authorized to purchase (or
to reimburse the General Partners or their Affiliates for the cost of) insurance
against liabilities asserted against and expenses incurred by such persons in
connection with the Partnership's activities, regardless of whether the
Partnership would have the power to indemnify such person against such
liabilities under the provisions described above.
BOOKS AND REPORTS
The Partnership is required to keep appropriate books of the business of
the Partnership at the principal offices of the Partnership. The books will be
maintained for both tax and financial reporting
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purposes on an accrual basis. For financial reporting and tax purposes, the
fiscal year of the Partnership is the calendar year.
As soon as practicable, but in no event later than 120 days after the close
of each fiscal year, the Managing General Partner will furnish or make available
to each record holder of Units (as of a record date selected by the Managing
General Partner) an annual report containing audited financial statements of the
Partnership 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), the Managing General Partner will furnish or make available to
each record holder of Units (as of a record date selected by the Managing
General Partner) a report containing unaudited financial statements of the
Partnership with respect to such quarter and such other information as may be
required by law.
The Partnership will use all reasonable efforts to furnish each record
holder of a 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. The Partnership's ability to
furnish such summary information to Unitholders will depend on the cooperation
of such Unitholders in supplying certain information to the Partnership. Every
Unitholder (without regard to whether he supplies such information to the
Partnership) 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 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 the Partnership'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 Partnership Agreement, the
certificate of limited partnership of the Partnership, amendments thereto and
powers of attorney pursuant to which the same have been executed, (v)
information regarding the status of the Partnership's business and financial
condition and (vi) such other information regarding the affairs of the
Partnership as is just and reasonable. The Partnership may, and intends to, keep
confidential from the Limited Partners trade secrets or other information the
disclosure of which the Partnership believes in good faith is not in the best
interests of the Partnership or which the Partnership is required by law or by
agreements with third parties to keep confidential.
REIMBURSEMENT FOR SERVICES
The Partnership Agreement provides that the General Partners are not
entitled to receive any compensation for their services as general partners of
the Partnership; the General Partners are, however, entitled to be reimbursed on
a monthly basis (or such other basis as the Managing General Partner may
reasonably determine) for all direct and indirect expenses such General Partner
incurs or payments it makes on behalf of or for the benefit of the Partnership
(including payments made or expenses incurred under employee benefit plans), and
all other necessary or appropriate expenses allocable to the Partnership or
otherwise reasonably incurred by the General Partners in connection with the
operation of the Partnership's business (including expenses allocated to the
General Partners by their Affiliates). The Partnership Agreement provides that
the Managing General Partner shall determine the expenses that are allocable to
the Partnership in any reasonable manner determined by the Managing General
Partner in its sole discretion. In addition, Affiliates of the General Partners
(including Triarc) may perform administrative services for the General Partners
on behalf of the Partnership. Such Affiliates will be reimbursed for all direct
and indirect expenses incurred in connection therewith. Furthermore, the General
Partners and their Affiliates may provide additional services to the
Partnership, for which the Partnership will be charged reasonable fees as
determined by the Managing General Partner.
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CHANGE OF MANAGEMENT PROVISIONS
The Partnership Agreement contains certain provisions that are intended to
discourage a Person or group from attempting to remove the Managing General
Partner as general partner of the Partnership or otherwise change management of
the Partnership. If any Person or group (other than the General Partners and
their Affiliates) acquires, in the aggregate, beneficial ownership of 20% or
more of the Units of any class then outstanding, such Person or group loses
voting rights with respect to all of its Units. In addition, if the Managing
General Partner is removed as Managing General Partner other than for Cause, (i)
the Subordination Period will end and all outstanding Subordinated Units will
immediately convert into Common Units on a one-for-one basis, (ii) any existing
Common Units Arrearages will be extinguished and (iii) the General Partners will
have the right to convert their General Partner Interests and the right to
receive Incentive Distributions into Common Units or to receive in exchange for
such interests a cash payment equal to the fair market value of such interests.
See ' -- Withdrawal or Removal of the General Partners.'
REGISTRATION RIGHTS
Pursuant to the terms of the Partnership Agreement and subject to certain
limitations described therein, the Partnership has agreed to register for resale
under the Securities Act and applicable state securities laws any Common Units
or other securities of the Partnership (including Subordinated Units and
Incentive Rights) proposed to be sold by the Managing General Partner or any of
its Affiliates. The Partnership is obligated to pay all expenses incidental to
such registration, excluding underwriting discounts and commissions. See 'Units
Eligible for Future Sale.'
UNITS ELIGIBLE FOR FUTURE SALE
After the sale of the Common Units offered in the Offering, the Managing
General Partner will hold 5,283,809 Subordinated Units, all of which will
convert into Common Units at the end of the Subordination Period and some of
which may convert earlier. In addition, the Special General Partner may convert
its General Partner Interest into a number of Subordinated Units (or Common
Units after the end of the Subordination Period) equal to a 2% interest in the
Partnership and the Operations Partnership on a combined basis, provided that
the Triarc Merger has not occured. See 'Cash Distribution
Policy -- Distributions from Operating Surplus during Subordination Period.' The
sale of these Units could have an adverse impact on the price of the Common
Units or on any trading market that may develop. For a discussion of the
transactions whereby the General Partner acquired the Subordinated Units in
connection with the organization of the Partnership, see 'The Transactions.'
The Common Units sold in the Offering will generally be transferable
without restriction or further registration under the Securities Act, except
that any Common Units owned by 'an affiliate' of the Partnership (as that term
is defined in the rules and regulations under the Securities Act) may not be
resold publicly except in compliance with the registration requirements of the
Securities Act or pursuant to an exemption therefrom under Rule 144 thereunder
('Rule 144') or otherwise. Rule 144 permits securities acquired by an affiliate
of the issuer in an offering to be sold into the market in an amount that does
not exceed, during any three-month period, the greater of (i) 1% of the total
number of such securities outstanding or (ii) the average weekly reported
trading volume of the Common Units for the four calendar weeks prior to such
sale. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Partnership. A person who is not deemed to have been an
affiliate of the Partnership at any time during the three months preceding a
sale, and who has beneficially owned his Common Units for at least three years,
would be entitled to sell such Common Units under Rule 144 without regard to the
public information requirements, volume limitations, manner of sale provisions
or notice requirements of Rule 144.
Prior to the end of the Subordination Period, the Partnership may not issue
equity securities of the Partnership ranking prior or senior to the Common Units
or an aggregate of more than 3,095,238 additional Common Units or an equivalent
amount of securities ranking on a parity with the Common Units (excluding Common
Units issued upon exercise of the Underwriters' over-allotment option, upon
conversion of Subordinated Units or in connection with Acquisitions or Capital
Improvements or the
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repayment of certain indebtedness or pursuant to employee benefit plans) in
either case without the approval of the holders of at least a Unit Majority,
except under certain circumstances. After the Subordination Period, the
Partnership, without a vote of the Unitholders, may issue an unlimited number of
additional Common Units or other equity securities of the Partnership on a
parity with or senior to the Common Units. The Partnership Agreement does not
impose any restriction on the Partnership's ability to issue equity securities
ranking junior to the Common Units at any time. Any issuance of additional
Common Units or certain other equity securities would result in a corresponding
decrease in the proportionate ownership interest in the Partnership represented
by, and could adversely affect the cash distributions to and market price of,
Common Units then outstanding. See 'The Partnership Agreement -- Issuance of
Additional Securities.'
Pursuant to the Partnership Agreement, the Managing General Partner and its
Affiliates will have the right, upon the terms and subject to the conditions
therein, to cause the Partnership to register under the Securities Act and state
securities laws the offer and sale of any Units or other Partnership Securities
that it holds. Subject to the terms and conditions of the Partnership Agreement,
such registration rights allow the Managing General Partner and its affiliates
or their assigns, holding any Units to require registration of any such Units
and to include any such Units in a registration by the partnership of other
Units, including Units offered by the Partnership or by any Unitholder. Such
registration rights will continue in effect for two years following any
withdrawal or removal of the Managing General Partner as the general partner of
the Partnership. In connection with any such registration, the Partnership will
indemnify each Unitholder participating in such registration and its officers,
directors and controlling Persons from and against any liabilities under the
Securities Act or any state securities laws arising from the registration
statement or prospectus. The Partnership will bear the reasonable costs of any
such registration, excluding underwriting discounts and commissions. In
addition, the Managing General Partner and its Affiliates may sell their Units
in private transactions at any time, subject to compliance with applicable laws.
The Partnership, the Operating Partnership, the Managing General Partner,
Triarc and certain directors and officers of the Managing General Partner have
agreed not to (i) offer, sell, contract to sell or otherwise dispose of any
Common Units or Subordinated Units (other than the issuance of Common Units in
connection with Acquisitions or Capital Improvements or the issuance of Common
Units or Subordinated Units pursuant to employee benefit plans) or (ii) grant
any options or warrants to purchase Common Units or Subordinated Units (other
than the grant of options to purchase Common Units pursuant to employee benefit
plans that are not exercisable for at least 180 days), for a period of 180 days
after the date of this Prospectus without the prior written consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, provided that the Subordinated Units
may be transferred without such consent to an Affiliate of the Managing General
Partner who agrees to be bound by the transfer restrictions contained in this
paragraph.
TAX CONSIDERATIONS
This section is a summary of material tax considerations that may be
relevant to prospective Unitholders and, to the extent set forth below under
' -- Legal Opinions and Advice,' represents the opinion of Andrews & Kurth
L.L.P., special counsel to the General Partners and the Partnership ('Counsel'),
insofar as it relates to matters of law and legal conclusions. A copy of such
opinion has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. This section is based upon current provisions of the
Internal Revenue Code of 1986, as amended ('Code'), existing and proposed
regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. Subsequent changes in such authorities may
cause the tax consequences to vary substantially from the consequences described
below. Unless the context otherwise requires, references in this section to
Partnership are references to both the Partnership and the Operating
Partnership.
No attempt has been made in the following discussion to comment on all
federal income tax matters affecting the Partnership or the Unitholders.
Moreover, the discussion focuses on Unitholders who are individual citizens or
residents of the United States and has only limited application to corporations,
estates, trusts, non-resident aliens or other Unitholders subject to specialized
tax treatment (such as tax-exempt institutions, individual retirement accounts,
REITs or mutual funds).
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Accordingly, each prospective Unitholder should consult, and should depend on,
his own tax advisor in analyzing the federal, state, local and foreign tax
consequences to him of the ownership or disposition of Common Units.
LEGAL OPINIONS AND ADVICE
Counsel has expressed its opinion that, based on the representations and
subject to the qualifications set forth in the detailed discussion that follows,
for federal income tax purposes (i) the Partnership and the Operating
Partnership will each be treated as a partnership and (ii) owners of Common
Units (with certain exceptions, as described in 'Limited Partner Status' below)
will be treated as partners of the Partnership (but not the Operating
Partnership). In addition, all statements as to matters of law and legal
conclusions contained in this section, unless otherwise noted, reflect the
opinion of Counsel.
Although no attempt has been made in the following discussion to comment on
all federal income tax matters affecting the Partnership or prospective
Unitholders, Counsel has advised the Partnership that, based on current law, the
following is a general description of the principal federal income tax
consequences that should arise from the ownership and disposition of Common
Units and, insofar as it relates to matters of law and legal conclusions,
addresses the material tax consequences to Unitholders who are individual
citizens or residents of the United States.
No ruling has been or will be requested from the Internal Revenue Service
(the 'IRS') with respect to classification of the Partnership as a partnership
for federal income tax purposes, whether the Partnership's propane operations
generate 'qualifying income' under SS7704 of the Code or any other matter
affecting the Partnership or prospective Unitholders. An opinion of counsel
represents only that counsel's best legal judgment and does not bind the IRS or
the courts. Thus, no assurance is given that the opinions set forth herein would
be sustained by a court if contested by the IRS. Any such contest with the IRS
may materially and adversely impact the market for the Common Units and the
prices at which Common Units trade. In addition, the costs of any contest with
the IRS will be borne directly or indirectly by the Unitholders and the General
Partners. Furthermore, no assurance is given that the treatment of the
Partnership or an investment therein will not be significantly modified by
future legislative or administrative changes or court decisions. Any such
modification may or may not be retroactively applied.
For the reasons hereinafter described, Counsel has not rendered an opinion
with respect to the following specific federal income tax issues: (i) the
treatment of a Unitholder whose Common Units are loaned to a short seller to
cover a short sale of Common Units (see ' -- Tax Treatment of Operations --
Treatment of Short Sales'), (ii) whether a Unitholder acquiring Common Units in
separate transactions must maintain a single aggregate adjusted tax basis in his
Common Units (see ' -- Disposition of Common Units -- Recognition of Gain or
Loss'), (iii) whether the Partnership's monthly convention for allocating
taxable income and losses is permitted by existing Treasury Regulations (see
' -- Disposition of Common Units -- Allocations Between Transferors and
Transferees'), and (iv) whether the Partnership's method for depreciating
Section 743 adjustments, utilized to maintain the uniformity of the economic and
tax characteristics of the Common Units, is sustainable (see ' -- Uniformity of
Units').
TAX RATES AND CHANGES IN FEDERAL INCOME TAX LAWS
The top marginal income tax rate for individuals is 36% subject to a 10%
surtax on individuals with taxable income in excess of $263,750 per year. The
surtax is computed by applying a 39.6% rate to taxable income in excess of the
threshold. The net capital gain of an individual is subject to a maximum 28% tax
rate.
The 1995 Proposed Legislation that was passed by Congress on November 17,
1995, as part of the Revenue Reconciliation Act of 1995, would alter the tax
reporting system and the deficiency collection system applicable to large
partnerships (generally defined as electing partnerships with more than 100
partners) and would make certain additional changes to the treatment of large
partnerships, such as the Partnership. Certain of the proposed changes are
discussed later in this section. The 1995 Proposed
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Legislation is generally intended to simplify the administration of the tax
rules governing large partnerships such as the Partnership. In addition, the
1995 Proposed Legislation contained provisions which would have reduced the
maximum tax rate applicable to the net capital gains of an individual to 19.8%.
On March 19, 1996, President Clinton introduced tax legislation, known as
the Revenue Reconciliation Act of 1996, that would impact the taxation of
certain financial products, including partnership interests. One proposal would
treat a taxpayer as having sold an 'appreciated' partnership interest (one in
which gain would be recognized if such interest were sold) if the taxpayer or
related persons enters into one or more positions with respect to the same or
substantially identical property which, for some period, substantially
eliminates both the risk of loss and opportunity for gain on the appreciated
financial position (including selling 'short against the box' transactions).
Certain of these proposed changes are also discussed later in this section under
'Disposition of Common Units.'
President Clinton vetoed the 1995 Proposed Legislation on December 6, 1995.
As of the date of this Prospectus, it is not possible to predict whether any of
the changes set forth in the 1995 Proposed Legislation, the Revenue
Reconciliation Act of 1996 or any other changes in the federal income tax laws
that would impact the Partnership and the Unitholders will ultimately be enacted
or, if enacted, what form they will take, what the effective dates will be, and
what, if any, transition rules will be provided.
PARTNERSHIP STATUS
A partnership is not a taxable entity and incurs no federal income tax
liability. Instead, each partner is required to take into account his allocable
share of items of income, gain, loss and deduction of the Partnership in
computing his federal income tax liability, regardless of whether cash
distributions are made. Distributions by a partnership to a partner are
generally not taxable unless the amount of any cash distributed is in excess of
the partner's adjusted basis in his partnership interest.
No ruling has been or will be sought from the IRS as to the status of the
Partnership or the Operating Partnership as a partnership for federal income tax
purposes. Instead the Partnership has relied on the opinion of Counsel that,
based upon the Code, the regulations thereunder, published revenue rulings and
court decisions, the Partnership and the Operating Partnership will each be
classified as a partnership for federal income tax purposes.
In rendering its opinion, Counsel has relied on the accuracy of the
following factual representations made by the Partnership and the General
Partners:
(a) With respect to the Partnership and the Operating Partnership, the
General Partners, at all times while acting as general partners of the
Partnership and the Operating Partnership, will have a combined net worth,
computed on a fair market value basis, excluding interests in the
Partnership and in the Operating Partnership and any amounts due from the
Partnership or the Operating Partnership and deferred taxes, of not less
than $15 million;
(b) The Partnership will be operated in accordance with (i) all
applicable partnership statutes, (ii) the Partnership Agreement, and (iii)
this Prospectus;
(c) The Operating Partnership will be operated in accordance with (i)
all applicable partnership statutes, (ii) the limited partnership agreement
for the Operating Partnership, and (iii) the description thereof in this
Prospectus;
(d) The General Partners will, at all times, act independently of the
limited partners (other than any limited partner interest held by the
General Partners); and
(e) For each taxable year, more than 90% of the gross income of the
Partnership will be derived from (i) marketing of propane, (ii) interest
(from other than a financial business) and dividends, and (iii) other items
of income which, in the opinion of Counsel, constitute 'qualifying income'
within the meaning of Section 7704(d) of the Code.
Counsel's opinion as to the partnership classification of the Partnership
in the event of a change in the general partner is based upon the assumption
that the new general partner will satisfy the foregoing representations.
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Section 7704 of the Code provides that publicly-traded partnerships will,
as a general rule, be taxed as corporations. However, an exception (the
'Qualifying Income Exception') exists with respect to publicly-traded
partnerships of which 90% or more of the gross income for every taxable year
consists of 'qualifying income.' Counsel is of the opinion that qualifying
income includes interest from the Partnership Loan to Triarc, interest on the
Partnership's customer account balances and other interest (from other than a
financial business), dividends (including dividends from the corporate
subsidiary of the Operating Partnership) and income and gains from the
transportation and marketing of crude oil, natural gas, and products thereof,
including the retail and wholesale marketing of propane and the transportation
of propane and natural gas liquids. The Managing General Partner, based on
advice of Counsel, estimates, that at least 90% of the Partnership's gross
income will constitute qualifying income. The Partnership estimates, based on
advice of Counsel, that less than % of its gross income for its taxable
year ending December 31, 1996 will not constitute qualifying income. The
Partnership further estimates that less than % of its gross income for
each subsequent taxable year will not constitute qualifying income.
If the Partnership fails to meet the Qualifying Income Exception (other
than a failure which is determined by the IRS to be inadvertent and which is
cured within a reasonable time after discovery), the Partnership will be treated
as if it had transferred all of its assets (subject to liabilities) to a newly
formed corporation (on the first day of the year in which it fails to meet the
Qualifying Income Exception) in return for stock in that corporation, and then
distributed that stock to the partners in liquidation of their interests in the
Partnership. This contribution and liquidation should be tax-free to Unitholders
and the Partnership, so long as the Partnership, at that time, does not have
liabilities in excess of the basis of its assets. Thereafter, the Partnership
would be treated as a corporation for federal income tax purposes.
If the Partnership or the Operating Partnership were treated as an
association taxable as a corporation in any taxable year, either as a result of
a failure to meet the Qualifying Income Exception or otherwise, its items of
income, gain, loss and deduction would be reflected only on its tax return
rather than being passed through to the Unitholders, and its net income would be
taxed to the Partnership or the Operating Partnership at corporate rates. In
addition, any distribution made to a Unitholder would be treated as either
taxable dividend income (to the extent of the Partnership's current or
accumulated earnings and profits) or (in the absence of earnings and profits or
to the extent any distribution exceeds current and accumulated earnings and
profits) a nontaxable return of capital (to the extent of the Unitholder's tax
basis in his Common Units) or taxable capital gain (after the Unitholder's tax
basis in the Common Units is reduced to zero). Accordingly, treatment of either
the Partnership or the Operating Partnership as an association taxable as a
corporation would result in a material reduction in a Unitholder's cash flow and
after-tax return and thus would likely result in a substantial reduction of the
value of the Units.
The discussion below is based on the assumption that the Partnership will
be classified as a partnership for federal income tax purposes.
LIMITED PARTNER STATUS
Unitholders who have become limited partners of the Partnership will be
treated as partners of the Partnership for federal income tax purposes.
Moreover, the IRS has ruled that assignees of partnership interests who have not
been admitted to a partnership as partners, but who have the capacity to
exercise substantial dominion and control over the assigned partnership
interests, will be treated as partners for federal income tax purposes. On the
basis of this ruling, except as otherwise described herein, Counsel is of the
opinion that (a) assignees who have executed and delivered Transfer
Applications, and are awaiting admission as limited partners, and (b)
Unitholders whose Common Units are held in street name or by a nominee and who
have the right to direct the nominee in the exercise of all substantive rights
attendant to the ownership of their Common Units will be treated as partners of
the Partnership for federal income tax purposes. As this ruling does not extend,
on its facts, to assignees of Common Units who are entitled to execute and
deliver Transfer Applications and thereby become entitled to direct the exercise
of attendant rights, but who fail to execute and deliver Transfer Applications,
Counsel's opinion does not extend to these persons. Income, gain, deductions or
losses would not
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appear to be reportable by a Unitholder who is not a partner for federal income
tax purposes, and any cash distributions received by such a Unitholder would
therefore be fully taxable as ordinary income. These holders should consult
their own tax advisors with respect to their status as partners in the
Partnership for federal income tax purposes. A purchaser or other transferee of
Common Units who does not execute and deliver a Transfer Application may not
receive certain federal income tax information or reports furnished to record
holders of Common Units unless the Common Units are held in a nominee or street
name account and the nominee or broker has executed and delivered a Transfer
Application with respect to such Common Units.
A beneficial owner of Common Units whose Common Units have been transferred
to a short seller to complete a short sale would appear to lose his status as a
partner with respect to such Common Units for federal income tax purposes. See
' -- Tax Treatment of Operations -- Treatment of Short Sales.'
TAX CONSEQUENCES OF UNIT OWNERSHIP
FLOW-THROUGH OF TAXABLE INCOME
No federal income tax will be paid by the Partnership. Instead, each
Unitholder will be required to report on his income tax return his allocable
share of the income, gains, losses and deductions of the Partnership without
regard to whether corresponding cash distributions are received by such
Unitholder. Consequently, a Unitholder may be allocated income from the
Partnership even if he has not received a cash distribution. Each Unitholder
will be required to include in income his allocable share of Partnership income,
gain, loss and deduction for the taxable year of the Partnership ending with or
within the taxable year of the Unitholder.
TREATMENT OF PARTNERSHIP DISTRIBUTIONS
Distributions by the Partnership to a Unitholder generally will not be
taxable to the Unitholder for federal income tax purposes to the extent of his
basis in his Common Units immediately before the distribution. Cash
distributions in excess of a Unitholder's basis generally will be considered to
be gain from the sale or exchange of the Common Units, taxable in accordance
with the rules described under ' -- Disposition of Common Units' below. Any
reduction in a Unitholder's share of the Partnership's liabilities for which no
partner, including the General Partners, bears the economic risk of loss
('nonrecourse liabilities') will be treated as a distribution of cash to that
Unitholder. To the extent that Partnership distributions cause a Unitholder's
'at risk' amount to be less than zero at the end of any taxable year, he must
recapture any losses deducted in previous years. See ' -- Limitations on
Deductibility of Partnership Losses.'
A decrease in a Unitholder's Percentage Interest in the Partnership because
of the issuance by the Partnership of additional Common Units will decrease such
Unitholder's share of nonrecourse liabilities of the Partnership, and thus will
result in a corresponding deemed distribution of cash. A non-pro rata
distribution of money or property may result in ordinary income to a Unitholder,
regardless of his basis in his Common Units, if such distribution reduces the
Unitholder's share of the Partnership's 'unrealized receivables' (including
depreciation recapture) and/or substantially appreciated 'inventory items' (both
as defined in Section 751 of the Code) (collectively, 'Section 751 Assets'). To
that extent, the Unitholder will be treated as having been distributed his
proportionate share of the Section 751 Assets and having exchanged such assets
with the Partnership in return for the non-pro rata portion of the actual
distribution made to him. This latter deemed exchange will generally result in
the Unitholder's realization of ordinary income under Section 751(b) of the
Code. Such income will equal the excess of (1) the non-pro rata portion of such
distribution over (2) the Unitholder's basis for the share of such Section 751
Assets deemed relinquished in the exchange.
RATIO OF TAXABLE INCOME TO DISTRIBUTIONS
The Partnership estimates that a purchaser of Common Units in the Offering
who owns them from the date of the closing of the Offering through December 31,
1999, will be allocated, on a cumulative basis, an amount of federal taxable
income for such period that will be less than % of the cash
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distributed with respect to that period. The Partnership further estimates that
for taxable years after the taxable year ending December 31, 1999, the taxable
income allocable to the Unitholders will represent a significantly higher
percentage (and may in certain circumstances exceed the amount) of cash
distributed to them. These estimates are based upon the assumption that gross
income from operations will approximate an amount required to make the Minimum
Quarterly Distribution with respect to all Units and other assumptions with
respect to capital expenditures, cash flow and anticipated cash distributions.
These estimates and assumptions are subject to, among other things, numerous
business, economic, regulatory, competitive and political uncertainties beyond
the control of the Partnership. Further, the estimates are based on current tax
law and certain tax reporting positions that the Partnership intends to adopt
and with which the IRS could disagree. Accordingly, no assurance is given that
the estimates will prove to be correct. The actual percentage could be higher or
lower and any such differences could be material.
BASIS OF COMMON UNITS
A Unitholder's initial tax basis for his Common Units will be the amount he
paid for the Common Units plus his share of the Partnership's nonrecourse
liabilities. That basis will be increased by his share of Partnership income and
by any increases in his share of Partnership nonrecourse liabilities. That basis
will be decreased (but not below zero) by distributions from the Partnership, by
the Unitholder's share of Partnership losses, by any decrease in his share of
Partnership nonrecourse liabilities and by his share of expenditures of the
Partnership that are not deductible in computing its taxable income and are not
required to be capitalized. A limited partner will have no share of Partnership
debt which is recourse to a partner, but will have a share, generally based on
his share of profits, of Partnership debt which is not recourse to any partner.
The Partnership does not anticipate having nonrecourse liabilities, however. See
' -- Disposition of Common Units -- Recognition of Gain or Loss.'
LIMITATIONS ON DEDUCTIBILITY OF PARTNERSHIP LOSSES
The deduction by a Unitholder of his share of Partnership losses will be
limited to the tax basis in his Units and, in the case of an individual
Unitholder or a corporate Unitholder (if more than 50% in the value of its stock
is owned directly or indirectly by five or fewer individuals or certain
tax-exempt organizations), to the amount which the Unitholder is considered to
be 'at risk' with respect to the Partnership's activities, if that is less than
the Unitholder's basis. A Unitholder must recapture losses deducted in previous
years to the extent that Partnership distributions cause the Unitholder's at
risk amount to be less than zero at the end of any taxable year. Losses
disallowed to a Unitholder or recaptured as a result of these limitations will
carry forward and will be allowable to the extent that the Unitholder's basis or
at risk amount (whichever is the limiting factor) is subsequently increased.
Upon the taxable disposition of a Unit, any gain recognized by a Unitholder can
be offset by losses that were previously suspended by the at risk limitation but
may not be offset by losses suspended by the basis limitation. Any excess loss
(above such gain) previously suspended by the at risk or basis limitations is no
longer utilizable.
In general, a Unitholder will be at risk to the extent of the tax basis of
his Units, excluding any portion of that basis attributable to his share of
Partnership nonrecourse liabilities, reduced by any amount of money the
Unitholder borrows to acquire or hold his Units if the lender of such borrowed
funds owns an interest in the Partnership, is related to such a person or can
look only to Units for repayment. A Unitholder's at risk amount will increase or
decrease as the basis of the Unitholder's Units increases or decreases (other
than basic increases or decreases attributable to increases or decreases in his
share of Partnership nonrecourse liabilities).
The passive loss limitations generally provide that individuals, estates,
trusts and certain closely-held corporations and personal service corporations
can deduct losses from passive activities (generally, activities in which the
taxpayer does not materially participate) only to the extent of the taxpayer's
income from those passive activities. The passive loss limitations are applied
separately with respect to each publicly-traded partnership. Consequently, any
passive losses generated by the Partnership will only be available to offset
future income generated by the Partnership and will not be available to offset
income from other passive activities or investments (including other
publicly-traded partnerships) or
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salary or active business income. Passive losses which are not deductible
because they exceed a Unitholder's income generated by the Partnership may be
deducted in full when he disposes of his entire investment in the Partnership in
a fully taxable transaction to an unrelated party. The passive activity loss
rules are applied after other applicable limitations on deductions such as the
at risk rules and the basis limitation.
A Unitholder's share of net income from the Partnership may be offset by
any suspended passive losses from the Partnership, but it may not be offset by
any other current or carryover losses from other passive activities, including
those attributable to other publicly-traded partnerships. The IRS has announced
that Treasury Regulations will be issued which characterize net passive income
from a publicly-traded Partnership as investment income for purposes of the
limitations on the deductibility of investment interest.
LIMITATIONS ON INTEREST DEDUCTIONS
The deductibility of a non-corporate taxpayer's 'investment interest
expense' is generally limited to the amount of such taxpayer's 'net investment
income.' As noted, a Unitholder's net passive income from the Partnership will
be treated as investment income for this purpose. In addition, the Unitholder's
share of the Partnership's portfolio income will be treated as investment
income. Investment interest expense includes (i) interest on indebtedness
properly allocable to property held for investment, (ii) the Partnership's
interest expense attributed to portfolio income, and (iii) the portion of
interest expense incurred to purchase or carry an interest in a passive activity
to the extent attributable to portfolio income. The computation of a
Unitholder's investment interest expense will take into account interest on any
margin account borrowing or other loan incurred to purchase or own a Unit. Net
investment income includes gross income from property held for investment and
amounts treated as portfolio income pursuant to the passive loss rules less
deductible expenses (other than interest) directly connected with the production
of investment income, but generally does not include gains attributable to the
disposition of property held for investment.
ALLOCATION OF PARTNERSHIP INCOME, GAIN, LOSS AND DEDUCTION
In general, if the Partnership has a net profit, items of income, gain,
loss and deduction will be allocated among the General Partners and the
Unitholders in accordance with their respective percentage interests in the
Partnership. With respect to any taxable year, a class of Unitholders (such as
Common Units) that receives more cash than another class (such as Subordinated
Units), on a per Unit basis, will be allocated additional income equal to that
excess. If the Partnership has a net loss, items of income, gain, loss and
deduction will generally be allocated, first, to the General Partners and the
Unitholders in accordance with their respective Percentage Interests to the
extent of their positive capital accounts (as maintained under the Partnership
Agreement), and, second, to the General Partners.
Certain items of Partnership income, deduction, gain and loss will be
allocated to account for the difference between the tax basis and fair market
value of certain property held by the Partnership ('Contributed Property'). The
effect of these allocations to a Unitholder will be essentially the same as if
the tax basis of the Contributed Property were equal to its fair market value at
the time of contribution. In addition, certain items of recapture income will be
allocated to the extent possible to the partner allocated the deduction giving
rise to the treatment of such gain as recapture income in order to minimize the
recognition of ordinary income by some Unitholders, but these allocations may
not be respected. If these allocations of recapture income are not respected,
the amount of the income or gain allocated to a Unitholder will not change but
instead a change in the character of the income allocated to a Unitholder would
result. Finally, although the Partnership does not expect that its operations
will result in the creation of negative capital accounts, if negative capital
accounts nevertheless result, items of Partnership income and gain will be
allocated in an amount and manner sufficient to eliminate the negative balance
as quickly as possible.
Regulations provide that an allocation of items of partnership income,
gain, loss or deduction, other than an allocation to eliminate the difference
between a partner's 'book' capital account
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(credited with the fair market value of Contributed Property) and 'tax' capital
account (credited with the tax basis of Contributed Property) (the 'Book-Tax
Disparity'), will generally be given effect for federal income tax purposes in
determining a partner's distributive share of an item of income, gain, loss or
deduction only if the allocation has substantial economic effect. In any other
case, a partner's distributive share of an item will be determined on the basis
of the partner's interest in the partnership, which will be determined by taking
into account all the facts and circumstances, including the partner's relative
contributions to the partnership, the interests of the partners in economic
profits and losses, the interest of the partners in cash flow and other
nonliquidating distributions and rights of the partners to distributions of
capital upon liquidation. Counsel is of the opinion that, with the exception of
the allocation of recapture income discussed above, allocations under the
Partnership Agreement will be given effect for federal income tax purposes in
determining a partner's distributive share of an item of income, gain, loss or
deduction. There are, however, uncertainties in the Treasury Regulations
relating to allocations of Partnership income, and investors should be aware
that the allocations of recapture income in the Partnership Agreement may be
successfully challenged by the IRS.
TAX TREATMENT OF OPERATIONS
ACCOUNTING METHOD AND TAXABLE YEAR
The Partnership will use the fiscal year ending December 31 as its taxable
year and will adopt the accrual method of accounting for federal income tax
purposes. Each Unitholder will be required to include in income his allocable
share of Partnership income, gain, loss and deduction for the fiscal year of the
Partnership ending within or with the taxable year of the Unitholder. In
addition, a Unitholder who has a taxable year ending on a date other than
December 31 and who disposes of all of his Units following the close of the
Partnership's taxable year but before the close of his taxable year must include
his allocable share of Partnership income, gain, loss and deduction in income
for his taxable year with the result that he will be required to report in
income for his taxable year his distributive share of more than one year of
Partnership income, gain, loss and deduction. See ' -- Disposition of Common
Units -- Allocations Between Transferors and Transferees.'
INITIAL TAX BASIS, DEPRECIATION AND AMORTIZATION
The tax basis of the assets of the Partnership will be used for purposes of
computing depreciation and cost recovery deductions and, ultimately, gain or
loss on the disposition of such assets. The Partnership assets will initially
have an aggregate tax basis equal to the tax basis of the assets in the hands of
the Managing General Partner immediately prior to the formation of the
Partnership plus the amount of gain recognized by the Managing General Partner
as a result of the formation of the Partnership. The federal income tax burden
associated with the difference between the fair market value of property
contributed by the Managing General Partners and the tax basis established for
such property will be borne by the General Partners. See ' -- Allocation of
Partnership Income, Gain, Loss and Deduction.'
The Partnership may elect to use allowable depreciation and cost recovery
methods that will result in the largest depreciation deductions in the early
years of the Partnership. The Partnership will not be entitled to any
amortization deductions with respect to goodwill conveyed to the Partnership on
formation, other than with respect to goodwill that was amortizable by the
General Partners. Property subsequently acquired or constructed by the
Partnership may be depreciated using accelerated methods permitted by the Code.
If the Partnership disposes of depreciable property by sale, foreclosure,
or otherwise, all or a portion of any gain (determined by reference to the
amount of depreciation previously deducted and the nature of the property) may
be subject to the recapture rules and taxed as ordinary income rather than
capital gain. Similarly, a partner who has taken cost recovery or depreciation
deductions with respect to property owned by the Partnership may be required to
recapture such deductions as ordinary income upon a sale of his interest in the
Partnership. See ' -- Allocation of Partnership Income, Gain, Loss and
Deduction' and ' -- Disposition of Common Units -- Recognition of Gain or Loss.'
Costs incurred in organizing the Partnership may be amortized over any
period selected by the Partnership not shorter than 60 months. The costs
incurred in promoting the issuance of Units must be
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capitalized and cannot be deducted currently, ratably or upon termination of the
Partnership. There are uncertainties regarding the classification of costs as
organization expenses, which may be amortized, and as syndication expenses,
which may not be amortized. For example, under recently proposed regulations,
the Underwriter's spread would be treated as a syndication cost.
SECTION 754 ELECTION
The Partnership will make the election permitted by Section 754 of the
Code. That election is irrevocable without the consent of the IRS. The election
will generally permit the Partnership to adjust a Common Unit purchaser's basis
in the Partnership's assets ('inside basis') pursuant to Section 743(b) of the
Code to reflect his purchase price. The Section 743(b) adjustment belongs to the
purchaser and not to other partners. (For purposes of this discussion, a
partner's inside basis in the Partnership's assets will be considered to have
two components: (1) his share of the Partnership's basis in such assets ('Common
Basis') and (2) his Section 743(b) adjustment to that basis.)
Proposed Treasury Regulation Section 1.168-2(n) generally requires the
Section 743(b) adjustment attributable to recovery property to be depreciated as
if the total amount of such adjustment were attributable to newly-acquired
recovery property placed in service when the purchaser acquires the Unit.
Similarly, the legislative history of Section 197 indicates that the Section
743(b) adjustment attributable to an amortizable Section 197 intangible (such as
goodwill) should be treated as a newly-acquired asset placed in service in the
month when the purchaser acquires the Unit. Under Treasury Regulation Section
1.167(c)-1(a)(6), a Section 743(b) adjustment attributable to property subject
to depreciation under Section 167 of the Code rather than cost recovery
deductions under Section 168 is generally required to be depreciated using
either the straight-line method or the 150% declining balance method. The
depreciation and amortization methods and useful lives associated with the
Section 743(b) adjustment, therefore, may differ from the methods and useful
lives generally used to depreciate the Common Basis in such properties. Pursuant
to the Partnership Agreement, the Partnership is authorized to adopt a
convention to preserve the uniformity of Units even if such convention is not
consistent with Treasury Regulation Section 1.167(c)-1(a)(6), Proposed Treasury
Regulation Section 1.168-2(n) or the legislative history of Section 197 of the
Code. See ' -- Uniformity of Units.'
Although Counsel is unable to opine as to the validity of such an approach,
the Partnership intends to depreciate the portion of a Section 743(b) adjustment
attributable to unrealized appreciation in the value of Contributed Property
including goodwill (to the extent of any unamortized Book-Tax Disparity) using a
rate of depreciation or amortization derived from the depreciation or
amortization method and useful life applied to the Common Basis of such
property, despite its inconsistency with Proposed Treasury Regulation Section
1.168-2(n), Treasury Regulation Section 1.167(c)-l(a)(6) (neither of which is
expected to directly apply to a material portion of the Partnership's assets) or
the legislative history of Section 197 of the Code. To the extent such Section
743(b) adjustment is attributable to appreciation in excess of the unamortized
book-tax disparity, the Partnership will apply the rules described in the
Regulations and legislative history. As a consequence, it is not expected that a
subsequent holder will be entitled to any significant amortization deductions
with respect to goodwill. If the Partnership determines that such position
cannot reasonably be taken, the Partnership may adopt a depreciation or
amortization convention under which all purchasers acquiring Units in the same
month would receive depreciation or amortization, whether attributable to Common
Basis or Section 743(b) adjustment, based upon the same applicable rate as if
they had purchased a direct interest in the Partnership's assets. Such an
aggregate approach may result in lower annual depreciation or amortization
deductions than would otherwise be allowable to certain Unitholders. See
' -- Uniformity of Units.'
The allocation of the Section 743(b) adjustment must be made in accordance
with the Code. The IRS may seek to reallocate some or all of any Section 743(b)
adjustment not so allocated by the Partnership to goodwill, which, as an
intangible asset, would be amortizable over a longer period of time than the
Partnership's tangible assets.
A Section 754 election is advantageous if the transferee's basis in his
Units is higher than such Units' share of the aggregate basis to the Partnership
of the Partnership's assets immediately prior to the transfer. In such a case,
as a result of the election, the transferee would have a higher basis in his
share of the Partnership's assets for purposes of calculating, among other
items, his depreciation and
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depletion deductions and his share of any gain or loss on a sale of the
Partnership's assets. Conversely, a Section 754 election is disadvantageous if
the transferee's basis in such Units is lower than such Unit's share of the
aggregate basis of the Partnership's assets immediately prior to the transfer.
Thus, the fair market value of the Units may be affected either favorably or
adversely by the election.
The calculations involved in the Section 754 election are complex and will
be made by the Partnership on the basis of certain assumptions as to the value
of Partnership assets and other matters. There is no assurance that the
determinations made by the Partnership will not be successfully challenged by
the IRS and that the deductions resulting from them will not be reduced or
disallowed altogether. Should the IRS require a different basis adjustment to be
made, and should, in the Partnership's opinion, the expense of compliance exceed
the benefit of the election, the Partnership may seek permission from the IRS to
revoke the Section 754 election for the Partnership. If such permission is
granted, a subsequent purchaser of Units may be allocated more income than he
would have been allocated had the election not been revoked.
ALTERNATIVE MINIMUM TAX
Each Unitholder will be required to take into account his distributive
share of any items of Partnership income, gain, deduction, or loss for purposes
of the alternative minimum tax.
A Unitholder's alternative minimum taxable income derived from the
Partnership may be higher than his share of Partnership net income because the
Partnership may use accelerated methods of depreciation for purposes of
computing federal taxable income or loss. The minimum tax rate for noncorporate
taxpayers is 26% on the first $175,000 of alternative minimum taxable income in
excess of the exemption amount and 28% on any additional alternative minimum
taxable income. Prospective Unitholders should consult with their tax advisors
as to the impact of an investment in Units on their liability for the
alternative minimum tax.
VALUATION OF PARTNERSHIP PROPERTY AND BASIS OF PROPERTIES
The federal income tax consequences of the ownership and disposition of
Units will depend in part on estimates by the Partnership of the relative fair
market values, and determinations of the initial tax basis, of the assets of the
Partnership. Although the Partnership may from time to time consult with
professional appraisers with respect to valuation matters, many of the relative
fair market value estimates will be made by the Partnership. These estimates and
determinations of basis are subject to challenge and will not be binding on the
IRS or the courts. If the estimates of fair market value or determinations of
basis are subsequently found to be incorrect, the character and amount of items
of income, gain, loss or deductions previously reported by Unitholders might
change, and Unitholders might be required to adjust their tax liability for
prior years.
TREATMENT OF SHORT SALES
A Unitholder whose Units are loaned to a 'short seller' to cover a short
sale of Units may be considered as having disposed of ownership of those Units.
If so, he would no longer be a partner with respect to those Units during the
period of the loan and may recognize gain or loss from the disposition. As a
result, during this period, any Partnership income, gain, deduction or loss with
respect to those Units would not be reportable by the Unitholder, any cash
distributions received by the Unitholder with respect to those Units would be
fully taxable and all of such distributions would appear to be treated as
ordinary income. Unitholders desiring to assure their status as partners and
avoid the risk of gain recognition should modify any applicable brokerage
account agreements to prohibit their brokers from borrowing their Units. The IRS
has announced that it is actively studying issues relating to the tax treatment
of short sales of partnership interests. (See ' -- Tax Rates and Changes in
Federal Income Tax Laws').
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DISPOSITION OF COMMON UNITS
RECOGNITION OF GAIN OR LOSS
Gain or loss will be recognized on a sale of Units equal to the difference
between the amount realized and the Unitholder's tax basis for the Units sold. A
Unitholder's amount realized will be measured by the sum of the cash or the fair
market value of other property received plus his share of Partnership
nonrecourse liabilities. Because the amount realized includes a Unitholder's
share of Partnership nonrecourse liabilities, the gain recognized on the sale of
Units could result in a tax liability in excess of any cash received from such
sale.
Prior Partnership distributions in excess of cumulative net taxable income
in respect of a Common Unit which decreased a Unitholder's tax basis in such
Common Unit will, in effect, become taxable income if the Common Unit is sold at
or above original cost (and may partially become taxable income even if the
Common Unit is sold below original cost).
Gain or loss recognized by a Unitholder (other than a 'dealer' in Units) on
the sale or exchange of a Unit held for more than one year will generally be
taxable as long-term capital gain or loss. A portion of this gain or loss (which
could be substantial), however, will be separately computed and taxed as
ordinary income or loss under Section 751 of the Code to the extent attributable
to assets giving rise to depreciation recapture or other 'unrealized
receivables' or to 'substantially appreciated inventory' owned by the
Partnership. The term 'unrealized receivables' includes potential recapture
items, including depreciation recapture. Inventory is considered to be
'substantially appreciated' if its value exceeds 120% of its adjusted basis to
the Partnership. Ordinary income attributable to unrealized receivables,
substantially appreciated inventory and depreciation recapture may exceed net
taxable gain realized upon the sale of the Unit and may be recognized even if
there is a net taxable loss realized on the sale of the Unit. Thus, a Unitholder
may recognize both ordinary income and a capital loss upon a disposition of
Units. Net capital loss may offset no more than $3,000 of ordinary income in the
case of individuals and may only be used to offset capital gain in the case of
corporations.
The IRS has ruled that a partner who acquires interests in a Partnership in
separate transactions must combine those interests and maintain a single
adjusted tax basis. Upon a sale or other disposition of less than all of such
interests, a portion of that tax basis must be allocated to the interests sold
using an 'equitable apportionment' method. The ruling is unclear as to how the
holding period of these interests is determined once they are combined. If this
ruling is applicable to the holders of Common Units, a Common Unitholder will be
unable to select high or low basis Common Units to sell as would be the case
with corporate stock. It is not clear whether the ruling applies to the
Partnership, because, similar to corporate stock, interests in the Partnership
are evidenced by separate certificates. Accordingly Counsel is unable to opine
as to the effect such ruling will have on the Unitholders. In addition, under
the financial product provisions of the Revenue Reconciliation Act of 1996, in
the case of partnership interests in publicly traded partnerships which are
substantially identical, the basis of such interests and any adjustments to
basis, would be determined on an average basis, and a taxpayer would be treated
as selling such interests on a first-in, first-out basis. A Unitholder
considering the purchase of additional Common Units or a sale of Common Units
purchased in separate transactions should consult his tax advisor as to the
possible consequences of such ruling and subsequent legislation.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES
In general, the Partnership's taxable income and losses will be determined
annually, will be prorated on a monthly basis and subsequently apportioned among
the Unitholders in proportion to the number of Units owned by each of them as of
the opening of the NYSE on the first business day of the month (the 'Allocation
Date'). However, gain or loss realized on a sale or other disposition of
Partnership assets other than in the ordinary course of business will be
allocated among the Unitholders on the Allocation Date in the month in which
that gain or loss is recognized. As a result, a Unitholder transferring Common
Units in the open market may be allocated income, gain, loss and deduction
accrued after the date of transfer.
The use of this method may not be permitted under existing Treasury
Regulations. Accordingly, Counsel is unable to opine on the validity of this
method of allocating income and deductions between the transferors and the
transferees of Units. If this method is not allowed under the Treasury
Regulations (or only applies to transfers of less than all of the Unitholder's
interest), taxable income or
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losses of the Partnership might be reallocated among the Unitholders. The
Partnership is authorized to revise its method of allocation between transferors
and transferees (as well as among partners whose interests otherwise vary during
a taxable period) to conform to a method permitted under future Treasury
Regulations.
A Unitholder who owns Units at any time during a quarter and who disposes
of such Units prior to the record date set for a cash distribution with respect
to such quarter will be allocated items of Partnership income, gain, loss and
deductions attributable to such quarter but will not be entitled to receive that
cash distribution.
NOTIFICATION REQUIREMENTS
A Unitholder who sells or exchanges Units is required to notify the
Partnership in writing of that sale or exchange within 30 days after the sale or
exchange and in any event by no later than January 15 of the year following the
calendar year in which the sale or exchange occurred. The Partnership is
required to notify the IRS of that transaction and to furnish certain
information to the transferor and transferee. However, these reporting
requirements do not apply with respect to a sale by an individual who is a
citizen of the United States and who effects the sale or exchange through a
broker. Additionally, a transferor and a transferee of a Unit will be required
to furnish statements to the IRS, filed with their income tax returns for the
taxable year in which the sale or exchange occurred, that set forth the amount
of the consideration received for the Unit that is allocated to goodwill or
going concern value of the Partnership. Failure to satisfy these reporting
obligations may lead to the imposition of substantial penalties.
CONSTRUCTIVE TERMINATION
The Partnership and the Operating Partnership will be considered to have
been terminated if there is a sale or exchange of 50% or more of the total
interests in Partnership capital and profits within a 12-month period. A
termination results in the closing of a Partnership's taxable year for all
partners and the Partnership's assets are regarded as having been distributed to
the partners and reconveyed to the Partnership, which is then treated as a new
partnership. A termination of the Partnership will cause a termination of the
Operating Partnership and any Subsidiary Partnership. Such a termination could
also result in penalties or loss of basis adjustments under Section 754 of the
Code if the Partnership were unable to determine that the termination had
occurred. (Under the 1995 Proposed Legislation, termination of a large
partnership, such as the Partnership would not occur by reason of the sale or
exchange of interests in the partnership.)
In the case of a Unitholder reporting on a taxable year other than a fiscal
year ending December 31, the closing of the tax year of the Partnership may
result in more than 12 months' taxable income or loss of the Partnership being
includable in his taxable income for the year of termination. In addition, each
Unitholder will realize taxable gain to the extent that any money deemed as a
result of the termination to have been distributed to him exceeds the adjusted
basis of his Units. New tax elections required to be made by the Partnership,
including a new election under Section 754 of the Code, must be made subsequent
to a constructive termination. A termination could also result in a deferral of
Partnership deductions for depreciation. Finally, a termination might either
accelerate the application of or subject the Partnership to any tax legislation
enacted prior to the termination.
ENTITY-LEVEL COLLECTIONS
If the Partnership is required or elects under applicable law to pay any
federal, state or local income tax on behalf of any Unitholder or any General
Partners or any former Unitholder, the Partnership is authorized to pay those
taxes from Partnership funds. Such payment, if made, will be treated as a
distribution of cash to the partner on whose behalf the payment was made. If the
payment is made on behalf of a person whose identity cannot be determined, the
Partnership is authorized to treat the payment as a distribution to current
Unitholders. Alternatively, the Partnership may elect to treat an amount paid on
behalf of the General Partners and Unitholders as an expenditure of the
Partnership if the amount paid on behalf of the General Partners is not
substantially greater than 4% of the total amount paid. The Partnership is
authorized to amend the Partnership Agreement in the manner necessary to
maintain uniformity of intrinsic tax characteristics of Units and to adjust
subsequent distributions, so that after giving effect to such distributions, the
priority and characteriza-
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tion of distributions otherwise applicable under the Partnership Agreement is
maintained as nearly as is practicable. Payments by the Partnership as described
above could give rise to an overpayment of tax on behalf of an individual
partner in which event the partner could file a claim for credit or refund.
UNIFORMITY OF UNITS
Because the Partnership cannot match transferors and transferees of Units,
uniformity of the economic and tax characteristics of the Units to a purchaser
of such Units must be maintained. In the absence of uniformity, compliance with
a number of federal income tax requirements, both statutory and regulatory,
could be substantially diminished. A lack of uniformity can result from a
literal application of Proposed Treasury Regulation Section 1.168-2(n) and
Treasury Regulation Section 1.167(c)-1(a)(6) or the legislative history of
Section 197 and from the application of the 'ceiling limitation' on the
Partnership's ability to make allocations to eliminate book-tax disparities
attributable to Contributed Properties and Partnership property that has been
revalued and reflected in the partners capital accounts ('Adjusted Properties').
Any non-uniformity could have a negative impact on the value of the Units. See
' -- Tax Treatment of Operations -- Section 754 Election.'
The Partnership intends to depreciate the portion of a Section 743(b)
adjustment attributable to unrealized appreciation in the value of Contributed
Property or Adjusted Property (to the extent of any unamortized Book-Tax
Disparity) using a rate of depreciation or amortization derived from the
depreciation or amortization method and useful life applied to the Common Basis
of such property, despite its inconsistency with Proposed Treasury Regulation
Section 1.168-2(n) and Treasury Regulation Section 1.167(c)-l(a)(6) (neither of
which is expected to directly apply to a material portion of the Partnership's
assets) or the legislative history of Section 197. See ' -- Tax Treatment of
Operations Section 754 Election.' To the extent such Section 743(b) adjustment
is attributable to appreciation in excess of the unamortized Book-Tax Disparity,
the Partnership will apply the rules described in the Regulations and
legislative history. If the Partnership determines that such a position cannot
reasonably be taken, the Partnership may adopt a depreciation and amortization
convention under which all purchasers acquiring Units in the same month would
receive depreciation and amortization deductions, whether attributable to common
basis or Section 743(b) basis, based upon the same applicable rate as if they
had purchased a direct interest in the Partnership's property. If such an
aggregate approach is adopted, it may result in lower annual depreciation and
amortization deductions than would otherwise be allowable to certain Unitholders
and risk the loss of depreciation and amortization deductions not taken in the
year that such deductions are otherwise allowable. This convention will not be
adopted if the Partnership determines that the loss of depreciation and
amortization deductions will have a material adverse effect on the Unitholders.
If the Partnership chooses not to utilize this aggregate method, the Partnership
may use any other reasonable depreciation and amortization convention to
preserve the uniformity of the intrinsic tax characteristics of any Units that
would not have a material adverse effect on the Unitholders. The IRS may
challenge any method of depreciating the Section 743(b) adjustment described in
this paragraph. If such a challenge were sustained, the uniformity of Units
might be affected.
TAX-EXEMPT ORGANIZATIONS AND CERTAIN OTHER INVESTORS
Ownership of Units by employee benefit plans, other tax-exempt
organizations, nonresident aliens, foreign corporations, other foreign persons
and regulated investment companies raises issues unique to such persons and, as
described below, may have substantially adverse tax consequences.
Employee benefit plans and most other organizations exempt from federal
income tax (including individual retirement accounts and other retirement plans)
are subject to federal income tax on unrelated business taxable income.
Virtually all of the taxable income derived by such an organization from the
ownership of a Unit will be unrelated business taxable income and thus will be
taxable to such a Unitholder.
A regulated investment company or 'mutual fund' is required to derive 90%
or more of its gross income from interest, dividends, gains from the sale of
stocks or securities or foreign currency or certain related sources. It is not
anticipated that any significant amount of the Partnership's gross income will
include that type of income.
Non-resident aliens and foreign corporations, trusts or estates which hold
Units will be considered to be engaged in business in the United States on
account of ownership of Units. As a consequence they
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will be required to file federal tax returns in respect of their share of
Partnership income, gain, loss or deduction and pay federal income tax at
regular rates on any net income or gain. Generally, a Partnership is required to
pay a withholding tax on the portion of the Partnership's income which is
effectively connected with the conduct of a United States trade or business and
which is allocable to the foreign partners, regardless of whether any actual
distributions have been made to such partners. However, under rules applicable
to publicly-traded partnerships, the Partnership will withhold (currently at the
rate of 39.6%) on actual cash distributions made quarterly to foreign
Unitholders. Each foreign Unitholder must obtain a taxpayer identification
number from the IRS and submit that number to the Transfer Agent of the
Partnership on a Form W-8 in order to obtain credit for the taxes withheld. A
change in applicable law may require the Partnership to change these procedures.
Because a foreign corporation which owns Units will be treated as engaged
in a United States trade or business, such a corporation may be subject to
United States branch profits tax at a rate of 30%, in addition to regular
federal income tax, on its allocable share of the Partnership's income and gain
(as adjusted for changes in the foreign corporation's 'U.S. net equity') which
are effectively connected with the conduct of a United States trade or business.
That tax may be reduced or eliminated by an income tax treaty between the United
States and the country with respect to which the foreign corporate Unitholder is
a 'qualified resident.' In addition, such a Unitholder is subject to special
information reporting requirements under Section 6038C of the Code.
Under a ruling of the IRS, a foreign Unitholder who sells or otherwise
disposes of a Unit will be subject to federal income tax on gain realized on the
disposition of such Unit to the extent that such gain is effectively connected
with a United States trade or business of the foreign Unitholder. Apart from the
ruling, a foreign Unitholder will not be taxed upon the disposition of a Unit if
that foreign Unitholder has held less than 5% in value of the Units during the
five-year period ending on the date of the disposition and if the Units are
regularly traded on an established securities market at the time of the
disposition.
ADMINISTRATIVE MATTERS
PARTNERSHIP INFORMATION RETURNS AND AUDIT PROCEDURES
The Partnership intends to furnish to each Unitholder, within 90 days after
the close of each calendar year, certain tax information, including a Schedule
K-1, which sets forth each Unitholder's allocable share of the Partnership's
income, gain, loss and deduction for the preceding Partnership taxable year. In
preparing this information, which will generally not be reviewed by counsel, the
Partnership will use various accounting and reporting conventions, some of which
have been mentioned in the previous discussion, to determine the Unitholder's
allocable share of income, gain, loss and deduction. There is no assurance that
any of those conventions will yield a result which conforms to the requirements
of the Code, regulations or administrative interpretations of the IRS. The
Partnership cannot assure prospective Unitholders that the IRS will not
successfully contend in court that such accounting and reporting conventions are
impermissible. Any such challenge by the IRS could negatively affect the value
of the Units. The federal income tax information returns filed by the
Partnership may be audited by the IRS. Adjustments resulting from any such audit
may require each Unitholder to adjust a prior year's tax liability, and possibly
may result in an audit of the Unitholder's own return. Any audit of a
Unitholder's return could result in adjustments of non-Partnership as well as
Partnership items.
Partnerships generally are treated as separate entities for purposes of
federal tax audits, judicial review of administrative adjustments by the IRS and
tax settlement proceedings. The tax treatment of partnership items of income,
gain, loss and deduction are determined in a partnership proceeding rather than
in separate proceedings with the partners. The Code provides for one partner to
be designated as the 'Tax Matters Partner' for these purposes. The Partnership
Agreement appoints the Managing General Partner as the Tax Matters Partner of
the Partnership.
The Tax Matters Partner will make certain elections on behalf of the
Partnership and Unitholders and can extend the statute of limitations for
assessment of tax deficiencies against Unitholders with respect to Partnership
items. The Tax Matters Partner may bind a Unitholder with less than a 1% profits
interest in the Partnership to a settlement with the IRS unless that Unitholder
elects, by filing a statement with the IRS, not to give such authority to the
Tax Matters Partner. The Tax Matters Partner
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may seek judicial review (by which all the Unitholders are bound) of a final
partnership administrative adjustment and, if the Tax Matters Partner fails to
seek judicial review, such review may be sought by any Unitholder having at
least a 1% interest in the profits of the Partnership and by the Unitholders
having in the aggregate at least a 5% profits interest. However, only one action
for judicial review will go forward, and each Unitholder with an interest in the
outcome may participate.
A Unitholder must file a statement with the IRS identifying the treatment
of any item on his federal income tax return that is not consistent with the
treatment of the item on the Partnership's return. Intentional or negligent
disregard of the consistency requirement may subject a Unitholder to substantial
penalties. Under the 1995 Proposed Legislation, partners in electing large
partnerships would be required to treat all Partnership items in a manner
consistent with the Partnership return.
Under the reporting provisions of the 1995 Proposed Legislation, each
partner of an electing large partnership would take into account separately his
share of the following items, determined at the partnership level: (1) taxable
income or loss from passive loss limitation activities; (2) taxable income or
loss from other activities (such as portfolio income or loss); (3) net capital
gains to the extent allocable to passive loss limitation activities and other
activities; (4) tax exempt interest; (5) a net alternative minimum tax
adjustment separately computed for passive loss limitation activities and other
activities; (6) general credits; (7) low-income housing credit; (8)
rehabilitation credit; (9) foreign income taxes; (10) credit for producing fuel
from a nonconventional source; and (11) any other items the Secretary of
Treasury deems appropriate. The House version of the 1995 Proposed Legislation
would also make a number of changes to the tax compliance and administrative
rules relating to partnerships. One provision would require that each partner in
a large partnership, such as the Partnership, take into account his share of any
adjustments to partnership items in the year such adjustments are made. Under
current law, adjustments relating to partnership items for a previous taxable
year are taken into account by those persons who were partners in the previous
taxable year. Alternatively, under the 1995 Proposed Legislation, a partnership
could elect to or, in some circumstances, could be required to, directly pay the
tax resulting from any such adjustments. In either case, therefore, Unitholders
could bear significant economic burdens associated with tax adjustments relating
to periods predating their acquisition of Units.
It cannot be predicted whether or in what form the 1995 Proposed
Legislation, or other tax legislation that might affect Unitholders, will be
enacted. However, if tax legislation is enacted which includes provisions
similar to those discussed above, a Unitholder might experience a reduction in
cash distributions.
NOMINEE REPORTING
Persons who hold an interest in the Partnership as a nominee for another
person are required to furnish to the Partnership (a) the name, address and
taxpayer identification number of the beneficial owner and the nominee; (b)
whether the beneficial owner is (i) a person that is not a United States person,
(ii) a foreign government, an international organization or any wholly-owned
agency or instrumentality of either of the foregoing, or (iii) a tax-exempt
entity; (c) the amount and description of Units held, acquired or transferred
for the beneficial owner; and (d) certain information including the dates of
acquisitions and transfers, means of acquisitions and transfers, and acquisition
cost for purchases, as well as the amount of net proceeds from sales. Brokers
and financial institutions are required to furnish additional information,
including whether they are United States persons and certain information on
Units they acquire, hold or transfer for their own account. A penalty of $50 per
failure (up to a maximum of $100,000 per calendar year) is imposed by the Code
for failure to report such information to the Partnership. The nominee is
required to supply the beneficial owner of the Units with the information
furnished to the Partnership.
REGISTRATION AS A TAX SHELTER
The Code requires that 'tax shelters' be registered with the Secretary of
the Treasury. The temporary Treasury Regulations interpreting the tax shelter
registration provisions of the Code are extremely broad. It is arguable that the
Partnership will not be subject to the registration requirement on the basis
that it will not constitute a tax shelter. However, the Managing General
Partner, as a principal organizer of the Partnership, will register the
Partnership as a tax shelter with the IRS in the absence of assurance that the
Partnership will not be subject to tax shelter registration and in light of
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the substantial penalties which might be imposed if registration is required and
not undertaken. The Partnership will apply for a tax shelter registration number
with the IRS. ISSUANCE OF THE REGISTRATION NUMBER DOES NOT INDICATE THAT AN
INVESTMENT IN THE PARTNERSHIP OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED,
EXAMINED OR APPROVED BY THE IRS. The Partnership must furnish the registration
number to the Unitholders, and a Unitholder who sells or otherwise transfers a
Unit in a subsequent transaction must furnish the registration number to the
transferee. The penalty for failure of the transferor of a Unit to furnish the
registration number to the transferee is $100 for each such failure. The
Unitholders must disclose the tax shelter registration number of the Partnership
on Form 8271 to be attached to the tax return on which any deduction, loss or
other benefit generated by the Partnership is claimed or income of the
Partnership is included. A Unitholder who fails to disclose the tax shelter
registration number on his return, without reasonable cause for that failure,
will be subject to a $250 penalty for each failure. Any penalties discussed
herein are not deductible for federal income tax purposes.
ACCURACY-RELATED PENALTIES
An additional tax equal to 20% of the amount of any portion of an
underpayment of tax which is attributable to one or more of certain listed
causes, including negligence or disregard of rules or regulations, substantial
understatements of income tax and substantial valuation misstatements, is
imposed by the Code. No penalty will be imposed, however, with respect to any
portion of an underpayment if it is shown that there was a reasonable cause for
that portion and that the taxpayer acted in good faith with respect to that
portion.
A substantial understatement of income tax in any taxable year exists if
the amount of the understatement exceeds the greater of 10% of the tax required
to be shown on the return for the taxable year or $5,000 ($10,000 for most
corporations). The amount of any understatement subject to penalty generally is
reduced if any portion is attributable to a position adopted on the return (i)
with respect to which there is, or was, 'substantial authority' or (ii) as to
which there is a reasonable basis and the pertinent facts of such position are
disclosed on the return. Certain more stringent rules apply to 'tax shelters,' a
term that in this context does not appear to include the Partnership. If any
Partnership item of income, gain, loss or deduction included in the distributive
shares of Unitholders might result in such an 'understatement' of income for
which no 'substantial authority' exists, the Partnership intends to disclose the
pertinent facts on its return. In addition, the Partnership will make a
reasonable effort to furnish sufficient information for Unitholders to make
adequate disclosure on their returns to avoid liability for this penalty.
A substantial valuation misstatement exists if the value of any property
(or the adjusted basis of any property) claimed on a tax return is 200% or more
of the amount determined to be the correct amount of such valuation or adjusted
basis. No penalty is imposed unless the portion of the underpayment attributable
to a substantial valuation misstatement exceeds $5,000 ($10,000 for most
corporations). If the valuation claimed on a return is 400% or more of the
correct valuation, the penalty imposed increases to 40%.
STATE, LOCAL AND OTHER TAX CONSIDERATIONS
In addition to federal income taxes, Unitholders will be subject to other
taxes, such as state and local income taxes, unincorporated business taxes, and
estate, inheritance or intangible taxes that may be imposed by the various
jurisdictions in which the Partnership does business or owns property, Although
an analysis of those various taxes is not presented here, each prospective
Unitholder should consider their potential impact on his investment in the
Partnership. The Partnership will initially own property and conduct business in
New York, Florida, Michigan and 21 other states. A Unitholder will be required
to file state income tax returns and to pay state income taxes in some or all of
these states and may be subject to penalties for failure to comply with those
requirements. Based on 1995 revenues, the Managing General Partner currently
anticipates that substantially all of the Partnership's income will be generated
in Arkansas, Arizona, Colorado, Connecticut, Florida, Iowa, Illinois,
Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Mexico, New
York and Wisconsin. Each of the states, other than Florida, in which the
Managing General Partner currently anticipates that a substantial portion of the
Partnership's income will be generated currently imposes a personal income tax.
In certain states, tax losses may not produce a tax benefit in the year incurred
(if, for example, the
136
<PAGE>
<PAGE>
Partnership has no income from sources within that state) and also may not be
available to offset income in subsequent taxable years. Some of the states may
require the Partnership, or the Partnership may elect, to withhold a percentage
of income from amounts to be distributed to a Unitholder who is not a resident
of the state. Withholding, the amount of which may be greater or less than a
particular Unitholder's income tax liability to the state, generally does not
relieve the non-resident Unitholder from the obligation to file an income tax
return. Amounts withheld may be treated as if distributed to Unitholders for
purposes of determining the amounts distributed by the Partnership. See ' --
Disposition of Common Units -- Entity-Level Collections.' Based on current law
and its estimate of future Partnership operations, the Managing General Partner
anticipates that any amounts required to be withheld will not be material.
It is the responsibility of each Unitholder to investigate the legal and
tax consequences, under the laws of pertinent states and localities, of his
investment in the Partnership. Accordingly, each prospective Unitholder should
consult, and must depend upon, his own tax counsel or other advisor with regard
to those matters. Further, it is the responsibility of each Unitholder to file
all state and local, as well as federal, tax returns that may be required of
such Unitholder. Counsel has not rendered an opinion on the state or local tax
consequences of an investment in the Partnership.
137
<PAGE>
<PAGE>
INVESTMENT IN THE PARTNERSHIP BY EMPLOYEE BENEFIT PLANS
An investment in the Partnership by an employee benefit plan is subject to
certain additional considerations because the investments of such plans are
subject to the fiduciary responsibility and prohibited transaction provisions of
the Employee Retirement Income Security Act of 1974 as amended ('ERISA'), and
restrictions imposed by Section 4975 of the Code. As used herein, the term
'employee benefit plan' includes, but is not limited to, qualified pension,
profit-sharing and stock bonus plans, Keogh plans, simplified employee pension
plans and tax deferred annuities or Individual Retirement Accounts established
or maintained by an employer or employee organization: Among other things,
consideration should be given to (a) whether such investment is prudent under
Section 404(a)(i)(B) of ERISA; (b) whether in making such investment, such plan
will satisfy the diversification requirement of Section 404(a)(1)(C) of ERISA;
and (c) whether such investment will result in recognition of unrelated business
taxable income by such plan and, if so, the potential after-tax investment
return. See 'Tax Considerations -- Uniformity of Units -- Tax-Exempt
Organizations and Certain Other Investors.' The person with investment
discretion with respect to the assets of an employee benefit plan (a
'fiduciary') should determine whether an investment in the Partnership is
authorized by the appropriate governing instrument and is a proper investment
for such plan.
Section 406 of ERISA and Section 4975 of the Code (which also applies to
Individual Retirement Accounts that are not considered part of an employee
benefit plan) prohibit an employee benefit plan from engaging in certain
transactions involving 'plan assets' with parties that are 'parties in interest'
under ERISA or 'disqualified persons' under the Code with respect to the plan.
In addition to considering whether the purchase of Common Units is a
prohibited transaction, a fiduciary of an employee benefit plan should consider
whether such plan will, by investing in the Partnership, be deemed to own an
undivided interest in the assets of the Partnership, with the result that the
General Partners also would be fiduciaries of such plan and the operations of
the Partnership would be subject to the regulatory restrictions of ERISA,
including its prohibited transaction rules, as well as the prohibited
transaction rules of the Code.
The Department of Labor regulations provide guidance with respect to
whether the assets of an entity in which employee benefit plans acquire equity
interests would be deemed 'plan assets' under certain circumstances. Pursuant to
these regulations, an entity's assets would not be considered to be 'plan
assets' if, among other things, (a) the equity interest acquired by employee
benefit plans are publicly offered securities -- i.e., the equity interests are
widely held by 100 or more investors independent of the issuer and each other,
freely transferable and registered pursuant to certain provisions of the federal
securities laws, (b) the entity is an 'operating company' -- i.e., it is
primarily engaged in the production or sale of a product or service other than
the investment of capital either directly or through a majority owned subsidiary
or subsidiaries, or (c) there is no significant investment by benefit plan
investors, which is defined to mean that less than 25% of the value of each
class of equity interest (disregarding certain interests held by the General
Partner, its affiliates, and certain other persons) is held by the employee
benefit plans referred to above, Individual Retirement Accounts and other
employee benefit plans not subject to ERISA (such as governmental plans). The
Partnership's assets should not be considered 'plan assets' under these
regulations because it is expected that the investment will satisfy the
requirements in (a) and (b) above and may also satisfy the requirements in (c).
Plan fiduciaries contemplating a purchase of Common Units should consult
with their own counsel regarding the consequences under ERISA and the Code in
light of the serious penalties imposed on persons who engage in prohibited
transactions or other violations.
138
<PAGE>
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their representatives, Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Donaldson, Lufkin & Jenrette
Securities Corporation (the 'Representatives') have severally agreed, subject to
the terms and conditions of the Purchase Agreement with the Partnership, to
purchase from the Partnership the number of Common Units set forth below
opposite their respective names. The Underwriters are committed to purchase all
of such Common Units if any are purchased. Under certain circumstances, the
commitments of non-defaulting Underwriters may be increased as set forth in the
Purchase Agreement.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER COMMON UNITS
- ------------------------------------------------------------------------------ ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................................
Donaldson, Lufkin & Jenrette Securities Corporation...........................
------------
Total.................................................................... 6,190,476
------------
------------
</TABLE>
The Representatives of the Underwriters have advised the Partnership that
they propose initially to offer the Common Units to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $ per Common Unit.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $ per Common Unit on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Partnership has granted the Underwriters an option exercisable for 30
days after the date hereof to purchase up to 928,572 additional Common Units to
cover over-allotments, if any, at the initial public offering price, less the
underwriting discount. If the Underwriters exercise this option, each of the
Underwriters will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage thereof which the number of Common
Units to be purchased by it shown in the foregoing table is of the 6,190,476
Common Units initially offered hereby.
The Partnership, the Operating Partnership, the Managing General Partner,
Triarc and certain directors and officers of the Managing General Partner have
agreed not to (i) offer, sell, contract to sell or otherwise dispose of any
Common Units or Subordinated Units (other than the issuance of Common Units in
connection with Acquisitions or Capital Improvements or the issuance of Common
Units or Subordinated Units pursuant to employee benefit plans) or (ii) grant
any options or warrants to purchase Common Units or Subordinated Units (other
than the grant of options to purchase Common Units pursuant to employee benefit
plans that are not exercisable for at least 180 days), for a period of 180 days
after the date of this Prospectus without the prior written consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated; provided that the Subordinated Units
may be transferred without such consent to an Affiliate of the Managing General
Partner who agrees to be bound by the transfer restrictions contained in this
paragraph.
As the National Association of Securities Dealers, Inc. ('NASD') is
expected to view the Common Units offered in the Offering as interests in a
direct participation program, the Offering is being made in compliance with
Article III, Section 34 of the NASD's Rules of Fair Practice. Investor
suitability with respect to the Common Units should be judged similarly to the
suitability of other securities that are listed for trading on a national
securities exchange. The Underwriters do not intend to confirm sales to any
accounts over which they exercise discretionary authority without the prior
written approval of the transaction by the customer.
Prior to the Offering, there has been no public market for the Common Units
of the Partnership. The initial public offering price has been determined
through negotiations among the Partnership, the Managing General Partner, Triarc
and the Representatives. Among the factors described in determining the initial
public offering price, in addition to prevailing market conditions, are
price-earnings ratios of publicly traded companies that the Representatives
believe to be comparable to the Partnership, certain financial information of
the Partnership, the proposed capital structure, assets and liabilities of the
139
<PAGE>
<PAGE>
Partnership, the Partnership's management, its past and present operations, the
prospects for, and timing of, future revenues of the Partnership, the present
state of the Partnership's development, and the above factors in relation to
market values and various valuation measures of other companies engaged in
activities similar to the Partnership. There can be no assurance that an active
trading market will develop for the Common Units or that the Common Units will
trade in the public market subsequent to the Offering at or above the initial
public offering price.
An application will be made to list the Common Units on the NYSE. In order
to meet one of the requirements for listing the Common Units on the NYSE, the
Underwriters have undertaken to sell lots of 100 or more Common Units to a
minimum of 2,000 beneficial holders.
Donaldson, Lufkin & Jenrette Securities Corporation and Merrill Lynch,
Pierce, Fenner & Smith Incorporated are acting as co-placement agents in
connection with the private placement of the First Mortgage Notes for which they
expect to receive customary compensation. In addition Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation have provided investment banking and related services to Triarc and
its Affiliates in the past for which they received customary compensation.
The Partnership has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
LEGAL MATTERS
The validity of the Common Units offered hereby will be passed upon for the
Partnership by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York.
Certain legal matters in connection with the Offering will be passed upon for
the Underwriters by Latham & Watkins, New York, New York. Certain other matters
will be passed upon for the Partnership by Andrews & Kurth L.L.P., New York, New
York.
EXPERTS
The financial statements of National Propane Corporation and its
consolidated subsidiaries as of December 31, 1994 and 1995 and for the ten
months ended December 31, 1993 and for the years ended December 31, 1994 and
1995 (except Public Gas Company for the ten months ended December 31, 1993) and
the balance sheet of National Propane Partners, L.P. as of March 13, 1996
included in this prospectus have been audited by Deloitte & Touche LLP as stated
in their reports appearing herein. The financial statements of Public Gas
Company for the ten months ended December 31, 1993 (consolidated with those of
National Propane and not separately included herein) have been audited by Arthur
Andersen LLP, as stated in their report included herein. Such financial
statements are included herein in reliance upon the respective reports of such
firms given upon their authority as experts in accounting and auditing. Both of
the foregoing firms are independent auditors.
ADDITIONAL INFORMATION
The Partnership has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Form S-1 Registration Statement under the Securities
Act, for the registration of the securities to be offered by this Prospectus.
Certain of the information contained in the Registration Statement is omitted
from this Prospectus, and reference is hereby made to the Registration Statement
and exhibits relating thereto for further information concerning the Partnership
and the General Partner and the securities to which this Prospectus relates.
Statements contained herein concerning the provisions of any document are not
necessarily complete and in each instance reference is made to the copy of the
document filed as an exhibit to the Registration Statement. Each such statement
is qualified in its entirety by this reference.
The Registration Statement and the exhibits thereto are available for
inspection in the principal office of the Commission in Washington, D.C. and
photostatic copies of such material may be obtained from the Commission upon
payment of the fees prescribed by the Commission.
140
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Financial Statements:
National Propane Corporation, General Partner Unaudited Pro Forma Condensed Balance Sheet:
Unaudited Pro Forma Condensed Balance Sheet -- December 31, 1995............................ F-2
Notes to Unaudited Pro Forma Condensed Balance Sheet........................................ F-4
National Propane Partners, L.P. Unaudited Pro Forma Condensed Consolidated
Financial Statements:
Unaudited Pro Forma Condensed Consolidated Balance Sheet -- December 31, 1995............... F-5
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet........................... F-7
Unaudited Pro Forma Condensed Consolidated Statement of Operations --
Year Ended December 31, 1995.............................................................. F-8
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations................. F-9
Historical Financial Statements:
National Propane Partners, L.P.
Independent Auditors' Report................................................................ F-10
Balance Sheet -- March 13, 1996............................................................. F-11
Note to Balance Sheet....................................................................... F-12
National Propane Corporation:
Independent Auditors' Reports............................................................... F-13
Consolidated Balance Sheets -- December 31, 1994 and 1995................................... F-15
Consolidated Statements of Operations -- Ten months ended December 31, 1993 and years ended
December 31, 1994 and 1995................................................................... F-16
Consolidated Statements of Additional Capital -- Ten months ended December 31, 1993 and
years ended December 31, 1994 and 1995....................................................... F-17
Consolidated Statements of Cash Flows -- Ten months ended December 31, 1993 and years ended
December 31, 1994 and 1995................................................................... F-18
Notes to Consolidated Financial Statements.................................................. F-21
</TABLE>
F-1
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION, GENERAL PARTNER
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1995
The unaudited pro forma condensed balance sheet of National Propane
Corporation, General Partner has been prepared by adjusting the consolidated
balance sheet of National Propane as of December 31, 1995 appearing on page F-15
herein, to give effect to the issuance of the First Mortgage Notes, the
conveyance of certain assets and liabilities to the Partnership (the
'Partnership Conveyance') and certain other related transactions as described on
page F-4 as if they had occurred on December 31, 1995. Such unaudited pro forma
balance sheet should also be read in conjunction with National Propane's
consolidated financial statements and notes thereto included elsewhere herein.
The following unaudited pro forma condensed consolidated balance sheet does not
purport to be indicative of the actual financial position that would have
resulted had the transactions noted above actually been consummated on December
31, 1995 or of the future financial position of National Propane Corporation,
General Partner which will result from the consummation of such transactions.
In addition to presenting the pro forma effects of the transactions noted
above, the unaudited pro forma condensed balance sheet of National Propane
Corporation, General Partner has been included in order to detail the
Partnership Conveyance, which represents the first column of the unaudited pro
forma condensed balance sheet of National Propane Partners, L.P. set forth on
page F-6 herein.
F-2
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION, GENERAL PARTNER
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NATIONAL NATIONAL
PROPANE PRO FORMA PARTNERSHIP PROPANE
HISTORICAL ADJUSTMENTS CONVEYANCE(F) PRO FORMA
---------- -------------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash............................................. $ 2,825 $120,000(a) $ (60,125) $ --
(62,700)(b)
Receivables, net................................. 16,391 -- (16,391) --
Inventories...................................... 10,543 -- (10,543) --
Other current assets............................. 4,340 1,879(c) (3,024) 3,195
---------- -------------- ------------- ---------
Total current assets........................ 34,099 59,179 (90,083) 3,195
Due from Triarc....................................... -- 25,000(d) -- 25,000
Properties, net....................................... 83,214 -- (83,214) --
Unamortized costs in excess of net assets of acquired
companies........................................... 15,161 -- (15,161) --
Other assets.......................................... 6,638 (4,697)(c) (5,341) --
3,400(b)
Investment in partnership............................. -- -- 13,096 13,096
---------- -------------- ------------- ---------
$ 139,112 $ 82,882 $(180,703) $41,291
---------- -------------- ------------- ---------
---------- -------------- ------------- ---------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt................ $ 11,278 $-- $ (11,278) $ --
Accounts payable................................. 7,836 -- (7,836) --
Due to Triarc and an affiliate................... 9,972 -- (9,972) --
Accrued expenses................................. 9,370 -- (9,370) --
---------- -------------- ------------- ---------
Total current liabilities................... 38,456 -- (38,456) --
---------- -------------- ------------- ---------
Long-term debt........................................ 124,266 120,000(a) (244,266) --
---------- -------------- ------------- ---------
Deferred income taxes................................. 22,878 (2,500)(e) -- 20,378
---------- -------------- ------------- ---------
Other liabilities..................................... 2,112 -- (2,112) --
---------- -------------- ------------- ---------
Commitments and contingencies
Stockholders' equity (deficit):
Common stock..................................... 1 -- -- 1
Additional paid-in capital....................... 36,270 2,500(e) -- 38,770
Retained earnings (accumulated deficit).......... (3,479) (2,818)(c) 104,131 (17,858)
(56,392)(d)
(59,300)(b)
Due from Triarc.................................. (81,392) 81,392(d) -- --
---------- -------------- ------------- ---------
Total stockholders' equity (deficit)........ (48,600) (34,618) 104,131 20,913
---------- -------------- ------------- ---------
$ 139,112 $ 82,882 $(180,703) $41,291
---------- -------------- ------------- ---------
---------- -------------- ------------- ---------
</TABLE>
See notes to unaudited pro forma condensed balance sheet.
F-3
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION, GENERAL PARTNER
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
(IN THOUSANDS)
(a) To reflect the issuance of the First Mortgage Notes of $120,000.
(b) To reflect the use of proceeds from the issuance of the First Mortgage
Notes for the payment of estimated deferred financing costs associated with
the issuance of the First Mortgage Notes of $3,400, payment of a $59,300
cash dividend to Triarc and the balance of $57,300 which will be
temporarily held for investment pending the Partnership Conveyance.
(c) To reflect the write-off of deferred financing costs of $4,697, net of a
related tax benefit of $1,879, on the early extinguishment of the existing
indebtedness.
(d) To reflect a dividend to Triarc of $56,392 of National Propane's $81,392
receivable from Triarc and the reclassification of the remainder of the
receivable of $25,000 as an asset due to Triarc's improved liquidity
position as a result of the Offering and related transactions.
(e) To reflect the transfer to Triarc of certain income tax liabilities as a
contribution.
(f) To reflect the conveyance of certain assets and liabilities to the
Partnership in exchange for general partnership interests.
F-4
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
The following unaudited pro forma condensed consolidated balance sheet of
the Partnership has been prepared by adjusting the assets and liabilities of the
Partnership resulting from the Partnership Conveyance set forth on page F-3
herein to give effect to the Offering, the issuance of the Partnership Loan to
Triarc and the use of proceeds as described on page 47 of this Prospectus (the
'Transactions') as if they had occurred on December 31, 1995. The pro forma
adjustments are described in the accompanying notes to the pro forma condensed
consolidated balance sheet which should be read in conjunction with such
unaudited pro forma condensed consolidated balance sheet. Such unaudited pro
forma condensed consolidated balance sheet should also be read in conjunction
with National Propane's consolidated financial statements and notes thereto
included elsewhere herein. The following unaudited pro forma condensed
consolidated balance sheet does not purport to be indicative of the actual
financial position that would have resulted had the Transactions actually been
consummated on December 31, or of the future financial position of the
Partnership which will result from the consummation of the Transactions.
F-5
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PARTNERSHIP PRO FORMA PARTNERSHIP
CONVEYANCE ADJUSTMENTS PRO FORMA
----------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................................ $ 60,125 $ 118,200(a) $ 341
(70,012)(b)
(40,700)(c)
(9,972)(d)
(57,300)(e)
Receivables, net................................................ 16,391 -- 16,391
Inventories..................................................... 10,543 -- 10,543
Other current assets............................................ 3,024 -- 3,024
----------- -------------- -----------
Total current assets....................................... 90,083 (59,784) 30,299
Due from Triarc...................................................... -- 40,700(c) 40,700
Properties, net...................................................... 83,214 -- 83,214
Unamortized costs in excess of net assets of acquired companies...... 15,161 -- 15,161
Other assets......................................................... 5,341 -- 5,341
----------- -------------- -----------
$ 193,799 $ (19,084) $ 174,715
----------- -------------- -----------
----------- -------------- -----------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Current portion of long-term debt............................... $ 11,278 $ (8,125)(b) $ 3,153
Accounts payable................................................ 7,836 -- 7,836
Due to Triarc and an affiliate.................................. 9,972 (9,972)(d) --
Accrued expenses................................................ 9,370 -- 9,370
----------- -------------- -----------
Total current liabilities.................................. 38,456 (18,097) 20,359
Long-term debt....................................................... 244,266 (61,887)(b) 125,079
(57,300)(e)
Other liabilities.................................................... 2,112 -- 2,112
Commitments and contingencies
Partners' capital
Limited partners' capital....................................... -- 118,200(a) 14,069
(104,131)(f)
General partners' capital....................................... (91,035) 104,131(f) 13,096
----------- -------------- -----------
Total partners' capital.................................... (91,035) 118,200 27,165
----------- -------------- -----------
$ 193,799 $ (19,084) $ 174,715
----------- -------------- -----------
----------- -------------- -----------
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet.
F-6
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT UNIT AMOUNTS)
(a) To reflect the estimated net proceeds to the Partnership of $118,200 from
the issuance of 6,190,476 Common Units at an assumed offering price of
$21.00 per Common Unit estimating $11,800 for underwriting discount and
other expenses relating to the Offering.
(b) To reflect the repayment of $70,012 of existing indebtedness utilizing a
portion of the proceeds from the sale of Common Units. National Propane
will recognize an extraordinary loss of approximately $2.8 million, net of
tax, on the early extinguishment of the existing indebtedness.
(c) To reflect the issuance of the $40,700 Partnership Loan to Triarc.
(d) To record the payment of liabilities due to Triarc and another affiliate
primarily representing accrued management fees and tax sharing payments.
(e) To reflect the repayment of $57,300 of existing indebtedness utilizing a
portion of the proceeds from the issuance of the First Mortgage Notes.
(f) To record the allocation of partners' capital resulting from the completion
of the Offering.
F-7
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
The following unaudited pro forma condensed consolidated statement of
operations of the Partnership has been prepared by adjusting the consolidated
statement of operations of National Propane for the year ended December 31, 1995
appearing on page F-16 herein, to give effect to the Transactions as if they had
occurred on January 1, 1995. The pro forma adjustments are described in the
accompanying notes to the pro forma condensed consolidated statement of
operations which should be read in conjunction with such unaudited pro forma
condensed consolidated statement of operations. Such pro forma statement should
also be read in conjunction with National Propane's consolidated financial
statements and notes thereto included elsewhere herein. The following unaudited
pro forma condensed consolidated statement of operations does not purport to be
indicative of the actual results of the Partnership that would have occurred had
the Transactions actually been consummated on January 1, 1995 or of future
results of operations which will be obtained as a result of the consummation of
the Transactions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------
NATIONAL
PROPANE PRO FORMA PARTNERSHIP
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- -----------
(IN THOUSANDS, EXCEPT UNIT AMOUNTS)
<S> <C> <C> <C>
Operating revenues.................................................. $ 148,983 $-- $ 148,983
---------- ----------- -----------
Operating costs and expenses:
Cost of sales.................................................. 109,059 -- 109,059
Selling, general and administrative expenses (other than
management fees charged by parent)........................... 22,423 1,500(a) 23,923
Management fees charged by parent.............................. 3,000 (3,000)(b) --
---------- ----------- -----------
134,482 (1,500) 132,982
---------- ----------- -----------
Operating profit............................................... 14,501 1,500 16,001
---------- ----------- -----------
Other income (expense):
Interest expense............................................... (11,719) 1,006(c) (10,713)
Interest income from Triarc.................................... -- 5,500(d) 5,500
Other income, net.............................................. 904 -- 904
---------- ----------- -----------
(10,815) 6,506 (4,309)
---------- ----------- -----------
Income before income taxes.......................................... 3,686 8,006 11,692
Provision for income taxes.......................................... 4,291 (4,091)(e) 200
---------- ----------- -----------
Net income (loss)................................................... $ (605) $12,097 $ 11,492
---------- ----------- -----------
---------- ----------- -----------
General partners' interest in net income(f)......................... $ 460
-----------
-----------
Unitholders' interest in net income(f).............................. $ 11,032
-----------
-----------
Net income per Unit(f).............................................. $ 0.96
-----------
-----------
Weighted average number of Units outstanding(f)..................... 11,474,285
-----------
-----------
</TABLE>
See notes to unaudited pro forma condensed consolidated statement of operations.
F-8
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) To reflect the estimated stand-alone general and administrative costs
associated with the Partnership. The following are primarily based on actual
quotes for third party services and salary levels commensurate with the
market:
<TABLE>
<S> <C>
Cost of tax return preparation and recordkeeping................................................... $ 250
Investor relations................................................................................. 200
Insurance.......................................................................................... 200
Audit and legal services........................................................................... 250
Registrar and stock exchange fees.................................................................. 125
Direct charges from Triarc......................................................................... 175
Other.............................................................................................. 300
------
$1,500
------
------
</TABLE>
(b) To reflect the elimination of the management services fee allocated by
Triarc.
(c) Represents adjustments to interest expense as follows:
<TABLE>
<S> <C>
Interest expense on the Existing Credit Facility.............................................. $9,641
Amortization of deferred financing costs associated with the Existing Credit Facility......... 1,305
Interest expense on the First Mortgage Notes (assumed interest rate of 8.00%)................. (9,600)
Amortization of deferred financing costs associated with the First Mortgage Notes............. (340)
------
$1,006
------
------
</TABLE>
(d) To reflect interest income at 13.5% on the $40,700 Partnership Loan.
(e) To reflect the reduction of the provision for income taxes as income taxes
will be borne by the partners and not the Partnership, except for corporate
income taxes relative to the Partnership's wholly owned subsidiary which
will conduct certain of the Partnership's operations.
(f) The General Partner's allocation of net income is based on its combined
General Partner 4% interest in the Partnership (excluding the Subordinated
Units). The General Partner's 4% allocation of net income has been deducted
before calculating the net income per unit. The allocation of net income for
Common Units and Subordinated Units is based on the terms of the Partnership
Agreement and assumes that 6,190,476 Common Units and 5,283,809 Subordinated
Units were outstanding at all times during the period indicated.
F-9
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
NATIONAL PROPANE PARTNERS, L.P.
We have audited the accompanying balance sheet of National Propane
Partners, L.P. at March 13, 1996. This balance sheet is the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of the Partnership at March 13, 1996 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Cedar Rapids, Iowa
March 13, 1996
F-10
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
BALANCE SHEET
MARCH 13, 1996
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash................................................................................................ $1,000
------
Total assets................................................................................... $1,000
------
------
Partners' Capital........................................................................................ $1,000
------
------
</TABLE>
The accompanying note is an integral part of this balance sheet
F-11
<PAGE>
<PAGE>
NATIONAL PROPANE PARTNERS, L.P.
NOTE TO BALANCE SHEET
NOTE 1 -- ORGANIZATION
National Propane Partners, L.P. (the 'Partnership') was formed on March 13,
1996 as a Delaware limited partnership. The Partnership was formed to acquire,
own and operate the propane business and substantially all of the assets and
liabilities (other than amounts due from a parent, deferred financing costs, and
net deferred income tax liabilities) of National Propane Corporation ('National
Propane'), an indirect wholly-owned subsidiary of Triarc Companies, Inc.
('Triarc'). In order to simplify the Partnership's obligations under the laws of
selected jurisdictions in which the Partnership will conduct business, the
Partnership's activities will be conducted through a subsidiary operating
partnership, National Propane, L.P. (the 'Operating Partnership'). Certain of
the assets and liabilities of National Propane will be conveyed to and assumed
by the Operating Partnership. In addition, the Operating Partnership will form a
wholly-owned subsidiary which will conduct certain operations.
The Partnership intends to offer 6,190,476 Common Units, representing
limited partner interests in the Partnership, pursuant to a public offering and
to concurrently issue to the General Partner 5,283,809 Subordinated Units,
representing subordinated general partner interests in the Partnership, as well
as an aggregate 4% general partner interest in the Partnership and the Operating
Partnership, on a combined basis.
National Propane, as General Partner, contributed $10 and Triarc, as the
organizational limited partner, contributed $990 to the Partnership on March 13,
1996. There have been no other transactions involving the Partnership as of
March 13, 1996.
F-12
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
NATIONAL PROPANE CORPORATION:
We have audited the accompanying consolidated balance sheets of National
Propane Corporation (the 'Company') (75.7% owned by NPC Holdings, Inc. and 24.3%
owned by PGC Holdings, Inc., both of which are wholly-owned by Triarc Companies,
Inc.) and subsidiaries as of December 31, 1994 and 1995, and the related
consolidated statements of operations, additional capital and cash flows for the
ten months ended December 31, 1993 and the years ended December 31, 1994 and
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The consolidated financial statements give
retroactive effect to the merger of the Company and Public Gas Company, which
has been accounted for as a combination of entities under common control in a
manner similar to a pooling of interests as described in Notes 1 and 3 to the
consolidated financial statements. We did not audit the financial statements of
Public Gas Company for the ten months ended December 31, 1993, which statements
(not shown separately herein) reflect total revenues of $23,394,000. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for Public Gas
Company for the ten months ended December 31, 1993, is based solely on the
report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the Company and subsidiaries at
December 31, 1994 and 1995, and the results of their operations and their cash
flows for the ten months ended December 31, 1993 and the years ended December
31, 1994 and 1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Cedar Rapids, Iowa
March 13, 1996
F-13
<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To PUBLIC GAS COMPANY:
We have audited the statements of income and retained earnings and cash
flows for the ten months ended December 31, 1993 of Public Gas Company. These
financial statements (not presented herein) are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above (not presented
herein) present fairly, in all material respects, the results of operations and
cash flows of Public Gas Company for the ten months ended December 31, 1993 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Miami, Florida,
April 14, 1994.
F-14
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................................ $ 3,983 $ 2,825
Receivables, net (Notes 5 and 19)................................................... 17,065 16,391
Inventories......................................................................... 10,182 10,543
Other current assets (Note 11)...................................................... 3,556 4,340
--------- --------
Total current assets (Note 10)................................................. 34,786 34,099
Properties, net (Notes 7, 10 and 14)..................................................... 82,176 83,214
Unamortized costs in excess of net assets of acquired companies (Notes 8, 12, 14, 18 and
19).................................................................................... 13,481 15,161
Other assets (Note 9).................................................................... 7,138 6,638
--------- --------
$ 137,581 $139,112
--------- --------
--------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt (Note 10)......................................... $ 12,298 $ 11,278
Accounts payable.................................................................... 6,759 7,836
Due to a parent and another affiliate (Note 11)..................................... 8,736 9,972
Accrued interest.................................................................... 1,657 2,233
Accrued insurance................................................................... 1,010 2,961
Other accrued expenses.............................................................. 4,957 4,176
--------- --------
Total current liabilities...................................................... 35,417 38,456
--------- --------
Long-term debt (Note 10)................................................................. 98,711 124,266
Deferred income taxes (Notes 11 and 14).................................................. 20,761 22,878
Customer deposits........................................................................ 2,194 2,112
Commitments and contingencies (Notes 2, 11, 16 and 17)
Stockholders' equity (deficit) (Note 10):
Preferred stock, 221,900 shares authorized, no shares issued or outstanding (Note
12)................................................................................ -- --
Common stock, $1 par value; 1,000 and 3,000 shares authorized, 1,000 and 1,360
shares issued and outstanding in 1994 and 1995, respectively (Notes 3 and 19)...... 1 1
Additional paid-in capital.......................................................... 32,164 36,270
Retained earnings (accumulated deficit)............................................. 61,663 (3,479)
Due from parents (Note 13).......................................................... (113,330) (81,392)
--------- --------
Total stockholders' deficit.................................................... (19,502) (48,600)
--------- --------
$ 137,581 $139,112
--------- --------
--------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-15
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues............................................................ $119,249 $151,651 $148,983
------------ ------------ ------------
Costs and expenses:
Cost of sales (including charges from related parties of $4,020
in the ten months ended December 31, 1993 -- Note 19)........ 92,301 109,683 109,059
Selling, general and administrative expenses (including charges
from related parties of $884 in the ten months ended December
31, 1993) (Notes 17, 18 and 20).............................. 16,501 18,657 22,423
Management fees charged by parents (Note 19)................... 3,485 4,561 3,000
Facilities relocation and corporate restructuring (including
charges from related parties of $2,821) (Note 20)............ 8,429 -- --
------------ ------------ ------------
120,716 132,901 134,482
------------ ------------ ------------
Operating profit (loss)................................... (1,467) 18,750 14,501
------------ ------------ ------------
Other income (expense):
Interest expense............................................... (9,949) (9,726) (11,719)
Interest income from Triarc Companies, Inc. (Note 13).......... 10,360 9,751 --
Other income, net (Notes 6 and 20)............................. 1,727 1,169 904
------------ ------------ ------------
2,138 1,194 (10,815)
------------ ------------ ------------
Income before income taxes and extraordinary charge....... 671 19,944 3,686
Provision for income taxes (Note 11)................................ 1,018 7,923 4,291
------------ ------------ ------------
Income (loss) before extraordinary charge...................... (347) 12,021 (605)
Extraordinary charge (Note 15)...................................... -- (2,116) --
------------ ------------ ------------
Net income (loss).............................................. $ (347) $ 9,905 $ (605)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ADDITIONAL CAPITAL
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS
PAID-IN (ACCUMULATED DUE FROM TREASURY
CAPITAL DEFICIT) PARENTS STOCK
---------- ------------ --------- --------
<S> <C> <C> <C> <C>
Balance at February 28, 1993................................... $ 21,505 $ 95,866 $ (27,430) $ (638)
Net loss.................................................. -- (347) -- --
Dividends paid............................................ -- (1,886) -- --
Capital contribution from deferred gain on sale of
interests in Southeastern Public Service Company
('SEPSCO') and CFC Holdings Corp. to Triarc Companies,
Inc. ('Triarc') (Note 6)................................ 2,255 -- -- --
Increase in due from SEPSCO classified in equity (Note
13)..................................................... -- -- (1,605) --
---------- ------------ --------- --------
Balance at December 31, 1993................................... 23,760 93,633 (29,035) (638)
Net income................................................ -- 9,905 -- --
Dividends paid (including $40,030 in cash) (Note 10)...... -- (41,875) -- --
Repurchases of preferred stock (Note 12).................. (62) -- -- (234)
Cancellation of preferred stock (Note 12)................. 378 -- -- 872
Reclassification of due from Triarc to equity (Note 13)... -- -- (81,392) --
Increase in SEPSCO's basis in Public Gas Company ('Public
Gas') resulting from the repurchase of the 28.9%
minority interest in SEPSCO (Note 14)................... 8,088 -- -- --
Increase in due from SEPSCO classified in equity.......... -- -- (2,903) --
---------- ------------ --------- --------
Balance at December 31, 1994................................... 32,164 61,663 (113,330) --
Net loss.................................................. -- (605) -- --
Dividends paid (Note 10).................................. -- (30,000) -- --
Increase in due from SEPSCO classified in equity (Note
13)..................................................... -- -- (2,599) --
Dividend of due from SEPSCO (Note 13)..................... -- (34,537) 34,537 --
Capital contribution (Note 19)............................ 4,240 -- -- --
Repurchase of the 0.3% minority interest in Public Gas
(Note 3)................................................ (134) -- -- --
---------- ------------ --------- --------
Balance at December 31, 1995................................... $ 36,270 $ (3,479) $ (81,392) $ --
---------- ------------ --------- --------
---------- ------------ --------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).............................................. $ (347) $ 9,905 $ (605)
Adjustments to reconcile net income (loss) to net cash and
equivalents provided by (used in) operating activities:
Depreciation and amortization of properties............... 6,917 9,427 9,546
Amortization of original issue discount and deferred
financing costs......................................... 1,046 1,077 1,305
Amortization of costs in excess of net assets of acquired
companies............................................... 33 261 617
Other amortization........................................ -- 336 482
Write-off of deferred financing costs and original issue
discount................................................ -- 3,498 --
Interest income from Triarc accrued and not collected..... (10,360) (9,751) --
Provision for (benefit from) deferred income taxes........ (880) 1,773 1,995
Provision for doubtful accounts........................... 661 685 848
Provision for facilities relocation and corporate
restructuring........................................... 8,429 -- --
Payments on facilities relocation and corporate
restructuring........................................... (1,678) (4,115) --
Equity in net loss of affiliate........................... 430 -- --
Other, net................................................ (639) 2,061 (79)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable........... 1,801 (1,305) (56)
Increase in inventories.............................. (2,248) (1,229) (286)
Increase in other current assets..................... (237) (1,278) (662)
Increase (decrease) in accounts payable and accrued
expenses........................................... (6,163) (624) 2,823
------------ ------------ ------------
Net cash provided by (used in) operating
activities.................................... (3,235) 10,721 15,928
------------ ------------ ------------
Cash flows from investing activities:
Business acquisitions.......................................... (693) (5,203) (373)
Capital expenditures........................................... (7,457) (6,436) (8,082)
Proceeds from sales of properties.............................. 1,452 1,375 599
Proceeds from sale of investments, net of tax.................. 2,424 -- --
Decrease in finance-type lease receivables from affiliates..... 25,670 1,458 32
Decrease in due from affiliates................................ 982 7,754 --
Decrease (increase) in due from parents........................ 46,909 (6,007) (1,643)
------------ ------------ ------------
Net cash provided by (used in) investing
activities......................................... 69,287 (7,059) (9,467)
------------ ------------ ------------
</TABLE>
(table continued on next page)
F-18
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
(table continued from previous page)
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from long-term debt................................... 6,234 100,781 32,729
Repayments of long-term debt................................... (76,997) (60,678) (9,532)
Dividends...................................................... (41) (40,030) (30,000)
Repurchase of National Propane Corporation preferred stock..... -- (234) --
Repurchase of Public Gas Company preferred stock............... -- (704) --
Payment of deferred financing costs............................ -- (5,390) (816)
------------ ------------ ------------
Net cash used in financing activities................ (70,804) (6,255) (7,619)
------------ ------------ ------------
Net decrease in cash................................................ (4,752) (2,593) (1,158)
Cash at beginning of period......................................... 11,328 6,576 3,983
------------ ------------ ------------
Cash at end of period............................................... $ 6,576 $ 3,983 $ 2,825
------------ ------------ ------------
------------ ------------ ------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest.................................................. $ 10,771 $ 11,110 $ 11,158
------------ ------------ ------------
------------ ------------ ------------
Income taxes.............................................. $ 1,309 $ 1,163 $ 1,261
------------ ------------ ------------
------------ ------------ ------------
Supplemental schedule of noncash investing and financing activities:
Capital expenditures:
Total capital expenditures................................ $ 10,588 $ 7,900 $ 8,966
Amounts representing capitalized leases................... (3,131) (1,464) (884)
------------ ------------ ------------
Capital expenditures paid in cash......................... $ 7,457 $ 6,436 $ 8,082
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Due to their non-cash nature, the following are also not reflected in the
respective consolidated statements of cash flows:
During the ten months ended December 31, 1993 and the year ended
December 31, 1994, the Company offset 'Due from Triarc Companies, Inc.'
('Triarc') with amounts otherwise payable for (i) $1,845,000 and
$1,845,000, respectively, in dividends payable to Triarc and (ii)
$1,622,000 and $790,000, respectively, in amounts due to Triarc under a
management services agreement.
In April 1994 Triarc acquired the 28.9% minority interest in its
subsidiary, Southeastern Public Service Company ('SEPSCO'), that it did not
already own through the issuance of its common stock. SEPSCO's increased
basis in Public Gas Company ('Public Gas') (its then wholly-owned
subsidiary) resulting from this transaction was 'pushed down' to Public Gas
resulting in increases to 'Unamortized costs in excess of net assets of
acquired companies' of $5,483,000, 'Properties' of $4,255,000, 'Deferred
income taxes' of $1,650,000 with an offsetting increase to 'Additional
paid-in capital' of $8,088,000. See Note 14 to the consolidated financial
statements for further discussion.
In connection with Public Gas' repurchase of its convertible preferred
stock, SEPSCO's increased basis in Public Gas resulting from this
transaction was 'pushed down' to Public Gas resulting in an increase of
$642,000 in 'Unamortized costs in excess of net assets of acquired
companies' and a charge to 'Additional paid-in capital' of $62,000 with an
offsetting increase in receivables from SEPSCO.
F-19
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
In June 1995 aggregate receivables from SEPSCO of $34,537,000 were
dividended to SEPSCO prior to a merger of Public Gas with and into National
Propane Corporation (see Notes 3 and 13).
In August 1995 the stock of a subsidiary of Triarc which held the
stock of two related entities engaged in the liquefied petroleum gas
distribution business was contributed to National Propane Corporation by
Triarc in September, 1995 resulting in an increase to 'Additional paid-in
capital' of $4,240,000. See Note 19 to the consolidated financial
statements for further discussion.
See accompanying notes to consolidated financial statements.
F-20
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of National
Propane Corporation (referred to herein alone or with its wholly-owned
subsidiaries as the 'Company') and its wholly-owned subsidiaries. The Company is
75.7% owned by NPC Holdings, Inc. ('NPC Holdings') and 24.3% owned by PGC
Holdings, Inc., ('PGC Holdings'), a wholly-owned subsidiary of Southeastern
Public Service Company ('SEPSCO'). NPC Holdings and SEPSCO are wholly-owned
subsidiaries of Triarc Companies, Inc. ('Triarc'). All significant intercompany
balances and transactions have been eliminated in consolidation. In June 1995
Public Gas Company ('Public Gas') was merged (the 'Merger') with and into the
Company as more fully described in Note 3 below. Since the Merger was a transfer
of assets and liabilities in exchange for shares among a controlled group of
companies, it has been accounted for in a manner similar to a pooling of
interests and, accordingly, all prior periods have been restated to reflect the
Merger. 'National Propane' is used herein to refer to National Propane
Corporation, excluding the accounts of Public Gas, prior to the Merger.
INVENTORIES
Inventories, all of which are classified as finished goods, are stated at
the lower of cost (first-in, first-out basis) or market.
PROPERTIES AND DEPRECIATION
Properties are carried at cost less accumulated depreciation. Depreciation
of properties is computed on the straight-line method over their estimated
useful lives of 20 to 45 years for buildings and improvements, 4 to 30 years for
equipment and customer installation costs, 3 to 10 years for office furniture
and fixtures and 3 to 8 years for automotive and transportation equipment.
Leased assets capitalized are amortized over the shorter of their estimated
useful lives or the terms of the respective leases. Gains and losses arising
from disposals are included in current operations.
UNAMORTIZED COSTS IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES
Costs in excess of net assets of acquired companies ('Goodwill') arising
after November 1, 1970 are being amortized on the straight-line basis
principally over 15 to 30 years; Goodwill of $3,560,000 arising prior to that
date is not being amortized. The amount of impairment, if any, in unamortized
Goodwill is measured based on projected future results of operations. To the
extent future results of operations of those acquired companies to which the
Goodwill relates through the period such Goodwill is being amortized are
sufficient to absorb the related amortization, the Company has deemed there to
be no impairment of Goodwill.
IMPAIRMENT OF LONG-LIVED ASSETS
Effective October 1, 1995 the Company adopted Statement of Financial
Accounting Standards No. 121, 'Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed of.' This standard requires that
long-lived assets and certain identifiable intangibles held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
adoption of this standard had no effect on the Company's consolidated results of
operations or financial position.
AMORTIZATION OF DEFERRED FINANCING COSTS AND DEBT DISCOUNT
Deferred financing costs and original issue debt discount are being
amortized as interest expense over the lives of the respective debt using the
interest rate method.
F-21
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACCRUED INSURANCE
Accrued insurance includes reserves for incurred but not reported claims.
Such reserves are based on actuarial studies using historical loss experience.
Adjustments to estimates recorded resulting from subsequent actuarial
evaluations or ultimate payments are reflected in the operations of the periods
in which such adjustments become known.
INCOME TAXES
The Company is included in the consolidated Federal income tax return filed
by Triarc except that, prior to April 14, 1994, Public Gas was included in the
consolidated Federal income tax return of SEPSCO. Under a tax sharing agreement
with Triarc, the Company provides for Federal income taxes on the same basis as
if it filed a separate consolidated return. All Federal income tax payments or
refunds are made through Triarc. Deferred income taxes are provided to recognize
the tax effect of temporary differences between the bases of assets and
liabilities for tax and financial statement purposes.
REVENUE RECOGNITION
The Company records sales of liquefied petroleum gas ('propane') when
inventory is delivered to the customer.
(2) SIGNIFICANT RISKS AND UNCERTAINTIES
NATURE OF OPERATIONS
The Company is engaged primarily in the retail marketing of propane to
residential customers, commercial and industrial customers, agricultural
customers and resellers. The Company also markets propane related supplies and
equipment including home and commercial appliances. The Company's operations are
concentrated in the midwest, northeast, southeast and southwest regions of the
United States.
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 and
disclosure of contingent 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.
SIGNIFICANT ESTIMATES
The Company's significant estimates are for costs related to (i) insurance
loss reserves (see Note 1), (ii) income tax examinations (see Note 11) and (iii)
an environmental contingency (see Note 17).
CERTAIN RISK CONCENTRATIONS
The Company's significant risk concentration arises from propane being its
principal product. Both sales levels and costs of propane are extremely
sensitive to weather conditions, particularly in the residential home heating
market. The Company's profitability depends on the spread between its cost for
propane and the selling price. The Company generally is able to pass on cost
increases to the customer in the form of higher selling prices. However, where
increases cannot be passed on, margins can be adversely affected. The Company is
also impacted by the competitive nature of the propane
F-22
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
industry, as well as by competition from alternative energy sources such as
natural gas, oil and electricity.
(3) PUBLIC GAS MERGER
Effective June 29, 1995, Public Gas, previously a wholly-owned subsidiary
of SEPSCO engaged in the LP gas business, was merged with and into National
Propane, with National Propane continuing as the surviving corporation. In
consideration for their investments in Public Gas and National Propane, PGC
Holdings received 330 shares of the merged corporation representing 24.8% of its
issued and outstanding common stock and NPC Holdings continued to hold 1,000
shares representing 75.2% of the stock of the merged corporation (see Note 19
for discussion of subsequent issuance of 30 shares of the Company). Such
percentages were based upon the relative fair values of Public Gas and National
Propane prior to the Merger. In June 1995 prior to the Merger, Public Gas
acquired the 0.3% of its common stock that SEPSCO did not own for approximately
$134,000.
The following sets forth summary operating results of the combined
entities:
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, --------------------------------------------------
1993 1994 1995
------------ ----------------------- -----------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating revenues:
National Propane...................................... $ 95,911 $ 123,588 $ 133,456(a)
Public Gas............................................ 23,394 28,110 15,542(b)
Eliminations.......................................... (56) (47) (15)
------------ ----------- -----------
$119,249 $ 151,651 $ 148,983
------------ ----------- -----------
------------ ----------- -----------
Income (loss) before extraordinary charge:
National Propane...................................... $ (1,433) $ 10,072 $ (2,287)(a)
Public Gas............................................ 1,086 1,949 1,682(b)
------------ ----------- -----------
$ (347) $ 12,021 $ (605)
------------ ----------- -----------
------------ ----------- -----------
Net income (loss):
National Propane...................................... $ (1,433) $ 7,956 $ (2,287)(a)
Public Gas............................................ 1,086 1,949 1,682(b)
------------ ----------- -----------
$ (347) $ 9,905 $ (605)
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
- ------------
(a) Reflects the results of National Propane prior to the Merger and the
combined Company after the Merger.
(b) Reflects the results of Public Gas prior to the Merger.
(4) CHANGE IN FISCAL YEAR
In October 1993 National Propane's fiscal year ended April 30 and Public
Gas' fiscal year ended February 28 were changed to a calendar year ended
December 31. In order to conform the reporting periods of the combining entities
and to select a period deemed to meet the Securities and Exchange Commission
requirement for filing financial statements for a period of one year, the
ten-month period ended December 31, 1993 ('Transition 1993') has been presented
in the accompanying consolidated financial statements. As used herein, '1994'
and '1995' refer to the years ended December 31, 1994 and 1995, respectively.
F-23
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) RECEIVABLES
The following is a summary of the components of receivables:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Receivables:
Trade........................................................................ $17,896 $16,939
Other........................................................................ 241 432
------- -------
18,137 17,371
Less allowance for doubtful accounts (trade)...................................... 1,072 980
------- -------
$17,065 $16,391
------- -------
------- -------
</TABLE>
The following is an analysis of the allowance for doubtful accounts for the
periods ended December 31:
<TABLE>
<CAPTION>
TRANSITION
1993 1994 1995
---------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period........................................... $1,552 $1,343 $1,072
Provision for doubtful accounts.......................................... 661 685 848
Uncollectible accounts written off....................................... (870) (956) (940)
---------- ------ ------
Balance at end of period................................................. $1,343 $1,072 $ 980
---------- ------ ------
---------- ------ ------
</TABLE>
(6) INVESTMENTS IN AFFILIATES
On April 23, 1993 the Company sold to Triarc all of its ownership in the
common stock of CFC Holdings and in SEPSCO for an aggregate of $3,900,000, or
$3,731,000 in excess of the net book value of the investments of $169,000 at
that date. The $3,731,000 excess less related income taxes of $1,476,000 was
accounted for as a deferred gain and reported as a capital contribution in the
accompanying consolidated financial statements for Transition 1993 since it
resulted from a transaction among a controlled group of companies. The Company's
equity in net loss of affiliates of $430,000 is included in 'Other income, net'
in the accompanying consolidated statement of operations for Transition 1993.
(7) PROPERTIES
The following is a summary of the components of properties:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land............................................................................ $ 5,357 $ 5,303
Buildings and improvements...................................................... 11,498 11,760
Equipment and customer installation costs....................................... 112,576 119,614
Office furniture and fixtures................................................... 4,596 4,947
Automotive and transportation equipment......................................... 19,199 21,937
Leased assets capitalized....................................................... 1,584 1,655
-------- --------
154,810 165,216
Less accumulated depreciation and amortization.................................. 72,634 82,002
-------- --------
$ 82,176 $ 83,214
-------- --------
-------- --------
</TABLE>
F-24
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) UNAMORTIZED COSTS IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES
The following is a summary of the components of unamortized costs in excess
of net assets of acquired companies:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Costs in excess of net assets of acquired companies............................... $14,745 $16,712
Less accumulated amortization..................................................... 1,264 1,551
------- -------
$13,481 $15,161
------- -------
------- -------
</TABLE>
(9) OTHER ASSETS
The following is a summary of the components of other assets:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred financing costs............................................................. $5,390 $6,206
Non-compete agreements............................................................... 1,429 1,929
Long-term receivables, net of unearned interest income............................... 645 300
Other................................................................................ 355 544
------ ------
7,819 8,979
------ ------
Less accumulated amortization:
Deferred financing costs........................................................ 204 1,509
Non-compete agreements.......................................................... 459 761
Other........................................................................... 18 71
------ ------
681 2,341
------ ------
$7,138 $6,638
------ ------
------ ------
</TABLE>
The Company's wholly-owned leasing subsidiary, NPC Leasing Corp. ('NPC
Leasing'), leases vehicles and other equipment to companies that are or were
affiliates of the Company under long-term lease obligations which are accounted
for as finance-type leases and are included in long-term receivables above.
Lease billings by NPC Leasing to current and former affiliates, other than the
Company, which included interest and principal, during Transition 1993, 1994 and
1995 were $8,213,000, $168,000 and $47,000, respectively. Such amounts include
interest of $1,676,000, $25,000 and $3,000 in Transition 1993, 1994 and 1995,
respectively, which are included in 'Revenues' in the accompanying consolidated
statements of operations.
F-25
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
------- --------
(IN THOUSANDS)
<S> <C> <C>
Bank Facility:
Term notes, Tranche A, weighted average interest rate of 8.53% at December
31, 1995, due through March 31, 2000...................................... $60,000 $ 34,333
Term notes, Tranche B, weighted average interest rate of 8.72% at December
31, 1995, due through March 31, 2002...................................... 30,000 29,750
Term note, Tranche C, bearing interest at 9.44% at December 31, 1995, due
through March 31, 2003.................................................... -- 20,000
Revolving loans, weighted average interest rate of 8.09% at December 31,
1995, due March 31, 2000.................................................. 10,500 43,229
------- --------
Total Bank Facility.................................................... 100,500 127,312
Equipment notes, bearing interest at rates of 7% to 12%, due through 2002........ 4,239 2,917
Acquisition notes, bearing interest at rates of 6% to 10%, due through 2004...... 5,090 4,060
Capital lease obligations........................................................ 1,180 1,255
------- --------
Total debt............................................................. 111,009 135,544
Less current portion of long-term debt........................................... 12,298 11,278
------- --------
$98,711 $124,266
------- --------
------- --------
</TABLE>
The aggregate annual maturities of long-term debt are as follows as of
December 31, 1995:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
- -----------
<S> <C>
1996................................................................................. $ 11,278
1997................................................................................. 10,591
1998................................................................................. 13,375
1999................................................................................. 13,494
2000................................................................................. 37,489
Thereafter........................................................................... 49,317
--------------
$135,544
--------------
--------------
</TABLE>
Bank Facility -- In October 1994 the Company entered into a revolving
credit and term loan agreement with a group of banks (the 'Bank Facility'). The
$150,000,000 Bank Facility, as amended, consists of a revolving credit facility
with a current maximum availability as of December 31, 1995 of $57,167,000 and
three tranches of term loans with an original availability of $90,000,000 and
outstanding amounts aggregating $84,083,000 (net of repayments through December
31, 1995 of $5,917,000) as of December 31, 1995. Approximately $13,900,000 of
the revolving credit facility is restricted for niche acquisitions by the
Company (the 'Acquisition Sublimit'); however, the Company is not currently able
to borrow under the Acquisition Sublimit due to debt covenant limitations.
Accordingly, the Company has no availability under the Bank Facility as of
December 31, 1995. Any outstanding borrowings under the Acquisition Sublimit
convert to term loans in October 1997; such term loans would be due in equal
installments from December 1997 through December 2000. Borrowings under the Bank
Facility bear interest, at the Company's option, at rates based either on 30,
60, 90 or 180-day LIBOR (ranging from 5.53% to 5.72% at December 31, 1995) or an
alternate base rate (the 'ABR'). The ABR represents the higher of the prime rate
(8 1/2% at December 31, 1995) or 1/2% over the Federal funds rate (6% at
December 31, 1995). Revolving loans bear interest at 2 1/4% over LIBOR or 1%
over ABR. The
F-26
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
aggregate availability of revolving loans (assuming full availability under the
Acquisition Sublimit) reduces by $3,000,000 in 1996, $15,896,000 in 1997,
$3,958,000 in 1998, $4,042,000 in 1999 with the remaining availability of
$30,271,000 maturing in March 2000. The term loans bear interest at rates
ranging from 2 1/2% to 3 1/2% over LIBOR or 1 1/4% to 2 1/4% over ABR,
respectively, and the $84,083,000 outstanding amount of such loans at December
31, 1995 amortizes $6,250,000 in 1996, $6,417,000 in 1997, $8,167,000 in 1998,
$8,333,000 in 1999, $10,291,000 in 2000 and $44,625,000 thereafter through 2003.
In connection with the closing of the Bank Facility, the Company paid a cash
dividend to Triarc of $40,000,000 in October 1994.
The Bank Facility contains various covenants which (a) require meeting
certain financial amount and ratio tests; (b) limit, among other items, (i) the
incurrence of indebtedness, (ii) the retirement of certain debt prior to
maturity, (iii) investments, (iv) asset dispositions, (v) capital expenditures
and (vi) affiliate transactions other than in the normal course of business; and
(c) restrict the payment of dividends to Triarc. As of December 31, 1995 the
Company had $5,000,000 available for the payment of dividends; however, the
Company is effectively prevented from paying dividends due to the restrictions
of the financial amount and ratio tests noted above. The Company's debt under
the Bank Facility is guaranteed by Triarc.
On December 27, 1995 the Company borrowed $30,000,000 under the revolving
credit facility, and dividended such amount to Triarc ($22,721,000) and SEPSCO
($7,279,000) in proportion to their respective percentage ownership of the
Company. The use of the proceeds of the $30,000,000 borrowing was restricted to
the redemption of the $45,000,000 outstanding principal amount of SEPSCO's
11 7/8% senior subordinated debentures due February 1, 1998; such redemption
occurred on February 22, 1996.
Equipment Notes -- Certain of the equipment notes are issued by the
Company's wholly-owned leasing subsidiary, NPC Leasing, and are collateralized
by vehicles and other equipment which NPC Leasing leases to current and former
affiliates. The equipment notes bear interest at rates which range from 1% to 2%
above the prime rate in effect at the time the obligations are incurred
(combined weighted average rate of 9.1% and 8.6% at December 31, 1994 and 1995,
respectively), and are payable in both equal monthly and quarterly installments
over varying terms of up to 60 months. Payments under certain of the notes are
guaranteed by the Company and/or Triarc.
Under the Company's various debt agreements, substantially all of the
Company's assets and the Company's outstanding common stock are pledged as
collateral.
The fair values of the revolving loans and the term loans under the Bank
Facility at December 31, 1994 and 1995 approximated their carrying values due to
their floating interest rates. The fair values of all other long-term debt were
assumed to reasonably approximate their carrying amounts since the interest
rates approximate current levels.
F-27
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) INCOME TAXES
The provision for income taxes before extraordinary charge consists of the
following components:
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED DECEMBER 31,
ENDED DECEMBER 31, --------------------------------------------------
1993 1994 1995
------------------ ----------------------- -----------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal........................................ $1,562 $ 5,099 $ 1,890
State.......................................... 336 1,051 406
------- ------- -------
1,898 6,150 2,296
------- ------- -------
Deferred:
Federal........................................ (724) 1,456 2,114
State.......................................... (156) 317 (119)
------- ------- -------
(880) 1,773 1,995
------- ------- -------
$1,018 $ 7,923 $ 4,291
------- ------- -------
------- ------- -------
</TABLE>
The difference between the reported tax provision and a computed tax
provision based on income before income taxes and extraordinary charge at the
statutory Federal income tax rate of 35% is reconciled as follows:
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED DECEMBER 31,
ENDED DECEMBER 31, --------------------------------------------------
1993 1994 1995
------------------ ----------------------- -----------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes computed at Federal statutory tax
rate.............................................. $ 235 $ 6,980 $ 1,290
Increase (decrease) in taxes resulting from:
Provision for income tax contingencies......... -- -- 2,500
State income taxes, net of Federal income tax
benefit...................................... 117 889 187
Change in the statutory Federal income tax
rate......................................... 301 -- --
Nondeductible consulting agreement (Note 20)... 352 -- --
Amortization of non-deductible goodwill........ 12 29 126
Other, net..................................... 1 25 188
------- ------- -------
$1,018 $ 7,923 $ 4,291
------- ------- -------
------- ------- -------
</TABLE>
F-28
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The net current deferred income tax asset (included in 'Other current
assets') and the net noncurrent deferred income tax liability are comprised of
the following components:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Allowance for doubtful accounts................................................... $ 424 $ 384
Accrued employee benefit costs.................................................... 300 224
Accrued interest for income tax matters........................................... 198 198
Accrued environmental costs....................................................... 158 171
Casualty insurance loss reserves.................................................. -- 213
Other, net........................................................................ 114 126
------- -------
Net current deferred income tax asset............................................. $ 1,194 $ 1,316
------- -------
------- -------
Accelerated depreciation and other properties basis differences................... $20,922 $20,546
Reserve for income tax contingencies.............................................. -- 2,500
Other, net........................................................................ (161) (168)
------- -------
Net noncurrent deferred income tax liability...................................... $20,761 $22,878
------- -------
------- -------
</TABLE>
As of December 31, 1994 and 1995, accrued income taxes payable to Triarc
are included in 'Due to parent and other affiliates' in the accompanying
consolidated balance sheets and amounted to $2,657,000 and $3,815,000,
respectively.
The Internal Revenue Service (the 'IRS') is currently examining Triarc's
Federal income tax returns for the tax years 1989 through 1992 and has issued to
date notices of proposed adjustments relating to the Company. Such notices
propose increasing the Company's taxable income by approximately $14,000,000, of
which $6,600,000 represent temporary differences and $7,400,000 represent
permanent differences, which will be contested by Triarc, the tax effect of
which has not yet been determined. The temporary items, if settled as proposed,
will result in deductions from taxable income in periods subsequent to the year
to which the adjustment relates, and therefore would not result in additional
tax expense. During 1995 the Company provided $2,500,000 included in 'Provision
for income taxes' relating to the Company's estimate of the tax effect upon
settlement of the $7,400,000 of permanent differences and interest, net of tax
benefit, relative to the settlement of both the permanent and temporary
differences. Such provision was based on the Company's experience with settling
prior audits, discussions with the IRS regarding these adjustments, as well as
evaluating the current issues with outside counsel. The amount and timing of any
payments required as a result of such proposed adjustments cannot presently be
determined. However, the Company believes that adequate provisions have been
made for any income tax liabilities that may result from the resolution of such
proposed adjustments. As such the Company does not believe it is reasonably
possible that the tax contingency will result in a settlement at an amount
substantially in excess of the $2,500,000 provided.
(12) PREFERRED STOCK
COMPANY
On June 20, 1994 the Company repurchased for treasury stock 9,206 shares of
its $21 par value preferred stock (the 'Preferred Stock') and 1,637 shares of
its $25 par value Second Preferred Stock (the 'Second Preferred Stock') at par
value aggregating $234,000 representing all of the remaining issued and
outstanding preferred shares. Such preferred shares, were subsequently cancelled
resulting in an increase to 'Additional paid-in capital' of $378,000.
A summary of the changes in the aggregate number of shares of Preferred
Stock and Second Preferred Stock held in treasury for Transition 1993 and 1994
is as follows:
F-29
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
TRANSITION
1993 1994
---------- -------
(IN THOUSANDS)
<S> <C> <C>
Number of shares at beginning of period........................................... 47,780 47,780
Repurchase of preferred stock..................................................... -- 10,843
Cancellation of preferred stock................................................... -- (58,623)
---------- -------
Number of shares at end of period................................................. 47,780 --
---------- -------
---------- -------
</TABLE>
A summary of the changes in the aggregate number of issued shares of
Preferred Stock and Second Preferred Stock for Transition 1993 and 1994 is as
follows:
<TABLE>
<CAPTION>
TRANSITION
1993 1994
---------- -------
(IN THOUSANDS)
<S> <C> <C>
Number of shares at beginning of period........................................... 58,623 58,623
Cancellation of preferred stock................................................... -- (58,623)
---------- -------
Number of shares at end of period................................................. 58,623 --
---------- -------
---------- -------
</TABLE>
PUBLIC GAS
On June 21, 1994 Public Gas repurchased 70,369 shares of its $1.00 par
value convertible preferred stock (the 'Public Gas Preferred Stock'),
representing all of the then issued and outstanding preferred shares of Public
Gas for $704,000. The carrying value of the Public Gas Preferred Stock of
$62,000 was charged to 'Additional paid-in capital' and the $642,000 excess of
the purchase price over the carrying value represented the reacquisition of a
minority interest in Public Gas at SEPSCO and, as such, was 'pushed down' to
Public Gas and recorded as 'Unamortized costs in excess of net assets of
acquired companies' in the accompanying consolidated balance sheets.
(13) DUE FROM PARENTS
Due from Parents, which has been reflected as a component of stockholders'
equity (deficit) consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Interest-bearing advances to Triarc........................................................ $ 81,392 $81,392
Noninterest-bearing advances to SEPSCO..................................................... 31,938 --
-------- -------
$113,330 $81,392
-------- -------
-------- -------
</TABLE>
The receivables from Triarc and SEPSCO have been classified as a component
of stockholders' equity because they were not expected to be repaid except
through equity transactions and with respect to Triarc, its liquidity position
is not sufficient to enable it to repay the advances. The receivable from SEPSCO
(including additional advances during 1995 of $2,599,000) was dividended to
SEPSCO prior to the Merger (see Note 3). The receivable from Triarc was
reclassified to a component of stockholders' equity at November 30, 1994 at
which time it was determined Triarc's liquidity position may not enable it to
repay the advances. Concurrent with the reclassification, the Company ceased
accruing interest on the receivable. Prior thereto interest income was recorded
on the advances at 8.9% subsequent to October 6, 1994 and at 16.5% prior thereto
except that prior to April 23, 1993 the first $30,000,000 of the receivable bore
interest at 11.75%. Such interest rates represented the Company's cost of debt
capital. Interest income on such advances aggregated $10,360,000 and $9,751,000
during Transition 1993 and 1994, respectively.
F-30
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(14) SEPSCO MERGER
On April 14, 1994, SEPSCO's shareholders other than Triarc approved an
agreement and plan of merger between Triarc and SEPSCO (the 'SEPSCO Merger')
pursuant to which on that date a subsidiary of Triarc was merged into SEPSCO
whereby each holder of shares of SEPSCO's common stock (the 'SEPSCO Common
Stock') other than Triarc, aggregating a 28.9% minority interest in SEPSCO,
received in exchange for each share of SEPSCO common stock, 0.8 shares of
Triarc's class A common stock or an aggregate of 2,691,824 shares. Following the
SEPSCO Merger, SEPSCO became a wholly-owned subsidiary of Triarc and its
subsidiaries.
The fair value as of April 14, 1994 of the 2,691,824 shares of Triarc's
class A common stock issued in the SEPSCO Merger, net of certain related costs,
aggregated $52,105,000 (the 'Merger Consideration'). Triarc had an excess of
$23,888,000 of Merger Consideration over Triarc's minority interest in SEPSCO.
The SEPSCO Merger has been accounted for by Triarc and SEPSCO in accordance with
the 'pushdown' method of accounting and in accordance therewith, $17,004,000 of
such $23,888,000 excess was 'pushed down' to SEPSCO (the remaining $6,884,000
was 'pushed down' to an affiliated subsidiary) reflecting Triarc's increased
basis in SEPSCO. SEPSCO, in turn, 'pushed down' $8,088,000 to Public Gas as an
increase in SEPSCO's basis in Public Gas. Such amount increased the 'Additional
paid-in capital' of the Company reflecting Triarc's and SEPSCO's increased bases
in Public Gas and was assigned as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Goodwill................................................................................ $ 5,483
Properties.............................................................................. 4,255
Deferred income taxes................................................................... (1,650)
--------------
Additional paid-in capital.............................................................. $ 8,088
--------------
--------------
</TABLE>
(15) EXTRAORDINARY CHARGE
In connection with the early extinguishment of the Company's 13 1/8%
Debentures in October 1994, the Company recognized an extraordinary charge of
$2,116,000 consisting of the write-off of previously unamortized deferred
financing costs of $875,000 and previously unamortized original issue discount
of $2,623,000, net of income tax benefit of $1,382,000.
(16) RETIREMENT AND INCENTIVE COMPENSATION PLANS
The Company maintains a 401(k) defined contribution plan (the 'Plan') which
covers all employees meeting certain eligibility requirements including active
eligible employees of Public Gas (whose account balances were transferred into
the Plan) subsequent to the Merger discussed in Note 3. Prior to becoming
participants in the Plan, such Public Gas employees participated in a mirror
plan maintained by SEPSCO (the 'SEPSCO Plan'). The Plan allows eligible
employees to contribute up to 15% of their compensation and the Company makes
matching contributions of 25% of employee contributions up to the first 5% of an
employee's contribution. The Company also makes an annual contribution equal to
1/4 of 1% of employee's compensation. In connection with these employer
contributions, the Company provided $147,000, $157,000 and $142,000 in
Transition 1993, 1994 and 1995, respectively.
Under certain union contracts, the Company is required to make payments to
the unions' pension funds based upon hours worked by the eligible employees. In
connection with these union plans, the Company provided $1,079,000, $726,000 and
$669,000 in Transition 1993, 1994 and 1995, respectively. Information from the
administrators of the union plans is not available to permit the Company to
determine its proportionate share of unfunded vested benefits, if any.
F-31
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(17) LEGAL MATTERS
In May 1994 the Company was informed of coal tar contamination which was
discovered at one of its properties in Wisconsin. The Company purchased the
property from a company which had purchased the assets of a utility which had
previously owned the property. The Company believes that the contamination
occurred during the use of the property as a coal gasification plant by such
utility. In order to assess the extent of the problem the Company engaged
environmental consultants who began work in August 1994. In December 1994 the
environmental consultants provided a report to the Company which indicated the
estimated range of potential remediation costs to be between approximately
$415,000 and $925,000 depending upon the actual extent of impacted soils, the
presence and extent, if any, of impacted groundwater and the remediation method
actually required to be implemented. Since no amount within this range was
determined to be a better estimate, the Company provided a charge in the fourth
quarter of 1994 of $415,000, the minimum gross amount (with no expected
recovery) within the range, which amount was included in 'Selling, general and
administrative expenses' in the accompanying 1994 consolidated statement of
operations. In February 1996 the Company's environmental consultants provided a
second report which presented revised estimated costs, based on additional
information obtained since the prior report and the two most likely remediation
methods. The range of estimated costs for the first method, which involves
treatment of groundwater and excavation, treatment and disposal of contaminated
soil, is from $1,600,000 to $3,300,000. The range for the second method, which
involves only treatment of groundwater and the building of a soil containment
wall, is from $432,000 to $750,000. Based on discussion with the Company's
environmental consultants both methods are acceptable remediation plans. The
Company, however, will have to agree on a final plan with the State of
Wisconsin. Since receiving notice of the contamination, the Company has engaged
in discussions of a general nature concerning remediation with the State of
Wisconsin. The discussions are ongoing and there is no indication as yet of the
time frame for a decision by the State of Wisconsin on the method of
remediation. Accordingly, it is unknown which remediation method will be used.
Since no amount within the ranges can be determined to be a better estimate, the
Company accrued an additional $41,000 in December 1995 in order to provide for
the minimum costs estimated for the second remediation method and legal fees and
other professional costs. The provisions through December 31, 1995 aggregate
$456,000 and payments through December 31, 1995 amounted to $24,000 resulting in
a remaining accrual of $432,000 at that date. The Company, if found liable for
any of such costs, would attempt to recover such costs from a successor owner.
The Company is also engaged in ongoing discussions of a general nature with a
successor owner. There is as yet no indication that a successor owner will share
the costs of remediation. The ultimate outcome of this matter cannot presently
be determined and, depending upon the cost of remediation required, may have a
material adverse effect on the Company's consolidated financial position or
results of operations.
The Company is involved in ordinary claims, litigation and administrative
proceedings and investigations of various types in several jurisdictions
incidental to its business. In the opinion of management of the Company, the
outcome of any such matter, or all of them combined, will not have a material
adverse effect on the Company's consolidated financial condition or results of
operations.
(18) ACQUISITIONS
During Transition 1993, 1994 and 1995 the Company acquired several
companies engaged in the sale of propane and related merchandise. The purchase
prices (including debt issued and assumed) aggregated $1,382,000, $8,967,000 and
$373,000, and resulted in increases in Goodwill of $475,000, $3,096,000 and
$116,000 in Transition 1993, 1994 and 1995, respectively. (See Note 19 for
discussion of Triarc's 1995 acquisition on behalf of the Company).
F-32
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(19) TRANSACTIONS WITH AFFILIATES
In August 1995 Triarc, through a wholly-owned subsidiary, acquired all of
the outstanding stock of two companies engaged in the propane distribution
business. The aggregate purchase price was $4,240,000 (including the assumption
of certain existing indebtedness). In September 1995 the stock of the subsidiary
which acquired the two companies was contributed by Triarc to NPC Holdings
which, in turn, contributed such stock to the Company. Such contribution
resulted in increases in the Company's 'Additional paid-in capital' of
$4,240,000 and Goodwill of $2,181,000. In consideration for such contribution,
NPC Holdings received an additional 30 shares of the Company's common stock,
increasing its ownership of the Company to 75.7% from 75.2%.
In the fourth quarter of 1995 the Company sold certain of its accounts
receivable to Triarc for cash of $3,809,000. As collections on such accounts
receivable are received by the Company they are remitted to Triarc on a periodic
basis. As of December 31, 1995, such remittances aggregated $1,412,000. Under
the agreement pursuant to which the receivables were sold, the Company is
obligated to repurchase any receivables which are determined to be
uncollectible, up to a maximum of 10% of the face amount originally sold. The
Company believes that its allowance for doubtful accounts is adequate to allow
for any repurchases that may be required.
The Company receives from Triarc certain management services including
legal, accounting, tax, insurance, financial and other management services.
Effective April 23, 1993 National Propane (and Triarc's other principal
subsidiaries, including SEPSCO) entered into a new management services agreement
(the 'New Management Services Agreement') with Triarc which revised the
allocation method for those costs which cannot be directly allocated. As
revised, such costs are allocated based upon the greater of (i) the sum of
earnings before income taxes, depreciation and amortization and (ii) 10% of
revenues, as a percentage of Triarc's corresponding consolidated amount. Prior
to the Merger, a portion of the costs allocated to SEPSCO under the New
Management Services Agreement were allocated to Public Gas based on the relative
portion of Public Gas' revenues to SEPSCO's consolidated revenues (the 'SEPSCO
Allocation Method'). Prior to the Merger, Public Gas also received from SEPSCO
operating management services the costs of which were charged to Public Gas also
in accordance with the SEPSCO Allocation Method. Prior to April 23, 1993, the
costs of management services were allocated by Triarc to its subsidiaries under
a former management services agreement (the 'Former Management Services
Agreement') based first directly on the cost of the services provided and then,
for those costs which could not be directly allocated, based upon the relative
revenues and tangible assets as a percentage of Triarc's corresponding
consolidated amounts. Management of the Company believes that all allocation
methods referred to above are reasonable. The Company understands Triarc is a
holding company with no independent operations of its own and substantially all
of the expenses it incurs are for services on behalf of its affiliated companies
and, accordingly, are chargeable to such companies in accordance with management
services agreements including the Former and New Management Services Agreements.
However, the Company believes that the allocated costs discussed above exceed
those which would have been, and are expected to be, incurred by the Company on
a standalone basis. Such costs for services provided by Triarc (including a
portion of the charges allocated by Triarc to SEPSCO and, in turn, from SEPSCO
to the Company) would have approximated amounts not in excess of $1,250,000,
$1,500,000 and $1,500,000 for Transition 1993, 1994 and 1995, respectively. It
is not practicable, however, to estimate the costs that Public Gas would have
incurred on a standalone basis for services provided by SEPSCO in Transition
1993 and 1994. Additionally, in Transition 1993 the Company was allocated
certain costs representing uncollectible amounts owed to Triarc for similar
management services by certain affiliates or former affiliates. The Company's
portion of such allocation under the Former Management Services Agreement
amounted to $98,000 for Transition 1993. These costs were allocated principally
on the same basis as the costs of management services, an allocation method
management of the Company believes was reasonable. Such costs to the Company
would have been lower if the Company had operated as an unaffiliated entity of
Triarc to the extent the cost of such services would not have been incurred had
F-33
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
services not been provided to the entities unable to pay. A summary of the costs
charged to the Company for management services is as follows:
<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1993 1994 1995
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Costs allocated by Triarc to the Company under the New
Management Services Agreement........................... $1,827 $3,000 $3,000
Costs related to the New Management Services Agreement
allocated by SEPSCO to Public Gas....................... 447 -- --
Costs of management services provided by SEPSCO to Public
Gas..................................................... 783 1,561 --
Costs allocated to National Propane and Public Gas under
the Former Management Services Agreement................ 428 -- --
------------ ------------ ------------
$3,485 $4,561 $3,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Until January 31, 1994 the Company, through Triarc and SEPSCO, leased
office space from a trust for the benefit of Victor Posner and his children (the
'Posner Lease'). Rent allocated by Triarc to the Company (including Public Gas
through SEPSCO) amounted to $277,000 for Transition 1993 and is included in
'Selling, general and administrative expenses' in the accompanying consolidated
statement of operations. During Transition 1993, the Company also recorded a
provision of $1,814,000 included in 'Facilities relocation and corporate
restructuring' in the accompanying consolidated statement of operations for its
allocated share of the remaining payments on the Posner Lease due to its
cancellation effective January 31, 1994 (see Note 20). Prior to April 23, 1993
the rent was allocated based on direct square footage utilized and the
allocation methods previously described under the Former Management Services
Agreement. Subsequent to April 23, 1993 the rent allocation method was changed
and was based on direct square footage utilized and the allocation methods of
the New Management Services Agreement. Management of the Company believes such
methods are reasonable and the rent charged for direct usage approximated the
rent the Company would have incurred on a stand-alone basis.
Chesapeake Insurance Company Limited ('Chesapeake Insurance'), an indirect
subsidiary of Triarc, provided certain insurance coverage and reinsurance of
certain risks to the Company until October 1993 at which time Chesapeake
Insurance ceased writing all insurance and reinsurance. The net premium expense
incurred was $4,064,000 in Transition 1993. Such amount is included in 'Cost of
sales' ($3,971,000) and 'Selling, general and administrative expenses' ($93,000)
in the accompanying consolidated statement of operations. Such costs have been
allocated based upon the relative loss experience after consultation with the
Company's insurance broker. Management of the Company believes such allocation
method was reasonable and resulted in insurance charges to the Company which
approximated those the Company would have received directly in the open market.
Insurance and Risk Management, Inc. ('IRM'), which was an affiliate of the
Company until April 23, 1993, acted as agent or broker in connection with
insurance coverage obtained by the Company and provided claims processing
services to the Company. The commissions and payments incurred for such services
were approximately $49,000 in Transition 1993. Such amount is included in 'Cost
of sales' in the accompanying consolidated statement of operations. The
arrangement with IRM was terminated in connection with the change in control
discussed in Note 20.
Also, see Note 9 relative to certain transactions of NPC Leasing and Note
20 relative to certain charges, primarily related to facilities relocation and
corporation restructuring, allocated to the Company by Triarc.
F-34
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(20) SIGNIFICANT TRANSITION 1993 CHARGES
The results of operations for Transition 1993 included certain significant
charges summarized below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Estimated costs allocated to the Company by Triarc to terminate the lease on its
existing corporate facilities (Note 19)............................................... $ 1,814
Estimated costs associated with conforming subsidiaries' identifications to 'National
Propane'.............................................................................. 2,000
Estimated costs associated with systems installation necessitated by National Propane's
new operating strategy................................................................ 1,500
Estimated costs associated with certain employee terminations and related severance
payments.............................................................................. 1,050
Estimated costs to relocate and reorganize the Company's corporate headquarters......... 1,058
Total costs allocated to the Company by Triarc related to a five-year consulting
agreement between Triarc and the former Vice Chairman of Triarc....................... 1,007
--------------
Total facilities relocation and corporate restructuring charges.................... 8,429(a)
Estimated costs allocated to the Company by Triarc for compensation paid to the Special
Committee of the Board of Directors of Triarc......................................... 514(b)
Income tax benefit relating to the above charges........................................ (3,489)
Equity in significant charges of affiliate, net of taxes................................ 281(c)
--------------
$ 5,735
--------------
--------------
</TABLE>
(a) Included in 'Facilities relocation and corporate restructuring.'
(b) Included in 'Selling, general and administrative expenses.'
(c) Included in 'Other income, net.'
------------------------
These charges relate to the change in control (the 'Change in Control') of
the Company and Triarc that resulted from the closing on April 23, 1993 of
transactions contemplated by a stock purchase agreement between DWG Acquisition
Group, L.P. ('DWG Acquisition'), the sole general partners of which are Nelson
Peltz and Peter W. May, the Chairman of the Board and Chief Executive Officer
and the President and Chief Operating Officer, respectively, of Triarc and
directors of the Company, and Victor Posner, the then Chairman and Chief
Executive Officer of the Company and certain entities controlled by him, whereby
DWG Acquisition acquired control of Triarc from Victor Posner.
As part of the Change in Control, the Board of Directors of Triarc was
reconstituted. At the April 24, 1993 meeting of the reconstituted Triarc Board
of Directors, based on a report and recommendations from a management consulting
firm that had conducted an extensive review of Triarc's operations and
management structure, the Triarc Board of Directors approved a plan of
decentralization and restructuring which entailed, among other matters, the
following features: (i) the strategic decision to manage Triarc in the future on
a decentralized, rather than on a centralized, basis; (ii) the hiring of new
executive officers for Triarc and the hiring of new chief executive officers and
new senior management teams for certain subsidiaries of Triarc, including the
Company; (iii) the termination of a significant number of employees as a result
of both the new management philosophy and the hiring of an almost entirely new
management team; and (iv) the relocation of the corporate headquarters of Triarc
and of all of its subsidiaries whose headquarters were located in South Florida,
including NPC Leasing and SEPSCO. Accordingly, the Company's allocable share of
the cost to relocate its corporate headquarters and terminate the lease on its
existing corporate facilities, which extended through April 1997, of $1,814,000,
and estimated corporate restructuring charges of $5,608,000 including personnel
relocation costs and employee severance costs, all stemmed from the
decentralization and restructuring plan formally adopted at the April 24, 1993
meeting of Triarc's reconstituted Board of Directors.
F-35
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Prior to the Change in Control, the Company's business was operated under
various names in different locations throughout the United States. As a part of
the strategy of centralizing the Company's operations, new management ('New
Management') which began with the Change in Control made the decision at the
time of the Change in Control to refocus National Propane's identity by
operating substantially all of its entities and marketing its product under the
name 'National Propane'. Since this decision was made at the time of the Change
in Control, National Propane accrued the estimated costs of implementing the
decision of $2,000,000 in the accompanying Transition 1993 statement of
operations. Such costs consist principally of repainting and replacing decals on
the Company's vehicles and equipment with the 'National Propane' colors and
logo.
New Management also identified various new operating strategies in order to
refocus the Company's direction and manage the Company on a centralized basis.
New Management determined that the management information systems which were in
place at the time of the Change in Control were inadequate to support the
implementation of the new strategies including the centralization of the
Company's operations from six regional centers and two corporate facilities to
one new corporate headquarters. Since the decision to change such systems was
made at the time of the Change in Control, the estimated costs of implementation
of $1,500,000, primarily related to retraining personnel, were accrued in the
accompanying Transition 1993 consolidated statement of operations.
In connection with the Change in Control, Victor Posner and Steven Posner,
the then Vice Chairman of the Company, resigned as officers and directors of
Triarc and its subsidiaries. In order to induce Steven Posner to resign, Triarc
entered into a consulting agreement with him extending through April 1998. The
Company's allocable share of costs of $1,007,000 related to the consulting
agreement was recorded as a charge in Transition 1993 because the consulting
agreement does not require any substantial services and Triarc has not received
nor did it expect to receive any services that will have substantial value to
Triarc and its subsidiaries.
The Company's equity in net loss of affiliates included similar significant
charges which were allocated by Triarc to CFC Holdings amounting to $281,000 and
is included in 'Other income, net' in the accompanying Transition 1993
consolidated statement of operations.
(21) INITIAL PUBLIC OFFERING OF COMMON UNITS AND OTHER TRANSACTIONS
On March 13, 1996 National Propane Partners, L.P. (the 'Partnership') was
formed to acquire, own and operate the Company's propane business and
substantially all of the related assets of the Company. The Partnership's
activities will be conducted through an operating partnership, National Propane
L.P. (the 'Operating Partnership'), the limited partner in which will be the
Partnership. The Company intends to convey substantially all of its
propane-related assets and liabilities other than amounts due from parent
($81,392,000 as of December 31, 1995), deferred financing costs ($4,697,000 as
of December 31, 1995) and net deferred income tax liabilities ($21,562,000 as of
December 31, 1995) to the Operating Partnership.
The Partnership intends to issue 6,190,476 Common Units, representing
limited partner interests in the Partnership, pursuant to a public offering and
to concurrently issue 5,283,809 Subordinated Units, representing subordinated
general partner interests in the Partnership, as well as an aggregate 4% general
partner interest in the Partnership and the Operating Partnership, on a combined
basis, to the Company. In connection therewith the Partnership will issue
$120,000,000 of first mortgage notes to institutional investors and repay all of
its outstanding borrowings under the Bank Facility ($127,312,000 as of December
31, 1995). The early redemption of the Bank Facility will result in an
extraordinary charge for the writeoff of unamortized deferred financing costs,
net of income tax benefit, which as of December 31, 1995 would have approximated
$2,800,000. Concurrently with the Offering, the Company will also pay a cash
dividend to Triarc of $59,300,000 and the Operating Partnership will provide a
loan to Triarc of $40,700,000. There can be no assurance, however, that the
Company will be able to consummate these transactions.
F-36
<PAGE>
<PAGE>
DRAFT 5/8/96
APPENDIX A
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
NATIONAL PROPANE PARTNERS, L.P.
<PAGE>
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions....................................................... A-1
1.2 Construction...................................................... A-21
ARTICLE II
ORGANIZATION
2.1 Formation......................................................... A-21
2.2 Name.............................................................. A-22
2.3 Registered Office; Registered Agent; Principal Office; Other
Offices........................................................... A-22
2.4 Purpose and Business.............................................. A-22
2.5 Powers............................................................ A-23
2.6 Power of Attorney................................................. A-23
2.7 Term.............................................................. A-25
2.8 Title to Partnership Assets....................................... A-25
ARTICLE III
RIGHTS OF LIMITED PARTNERS
3.1 Limitation of Liability........................................... A-25
3.2 Management of Business............................................ A-26
3.3 Outside Activities of the Limited Partners........................ A-26
3.4 Rights of Limited Partners........................................ A-26
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF
PARTNERSHIP INTERESTS; REDEMPTION OF
PARTNERSHIP INTERESTS
4.1 Certificates...................................................... A-27
4.2 Mutilated, Destroyed, Lost or Stolen Certificates................. A-28
4.3 Record Holders.................................................... A-29
4.4 Transfer Generally................................................ A-29
4.5 Registration and Transfer of Units................................ A-30
4.6 Transfer of a General Partner's Unsubordinated General
Partner Interests................................................. A-31
A-i
<PAGE>
<PAGE>
4.7 Merger or Liquidation of the Managing General Partner into
Triarc............................................................ A-31
4.8 Transfer of Incentive Distribution Rights......................... A-32
4.9 Restrictions on Transfers......................................... A-32
4.10 Citizenship Certificates; Non-citizen Assignees................... A-33
4.11 Redemption of Partnership Interests of Non-citizen Assignees...... A-33
4.12 Exchange by Special General Partner of its Unsubordinated
General Partner Interests and its Interest in the Operating
Partnership....................................................... A-35
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF
PARTNERSHIP INTERESTS
5.1 Organizational Contributions...................................... A-35
5.2 Contributions by General Partners................................. A-36
5.3 Contributions by Initial Limited Partners......................... A-36
5.4 Interest and Withdrawal........................................... A-37
5.5 Capital Accounts.................................................. A-37
5.6 Issuances of Additional Partnership Securities.................... A-40
5.7 Limitations on Issuance of Additional Partnership Securities...... A-41
5.8 Conversion of Subordinated Units.................................. A-43
5.9 Limited Preemptive Right.......................................... A-44
5.10 Splits and Combination............................................ A-45
5.11 Fully Paid and Non-Assessable Nature of Limited Partner
Partnership Interests............................................. A-46
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
6.1 Allocations for Capital Account Purpose........................... A-46
6.2 Allocations for Tax Purpose....................................... A-54
6.3 Requirement and Characterization of Distributions; Distributions to
Record Holders.................................................... A-57
6.4 Distributions of Available Cash from Operating Surplus............ A-57
6.5 Distributions of Available Cash from Capital Surplus.............. A-59
6.6 Adjustment of Minimum Quarterly Distribution and Target
Distribution Levels............................................... A-60
A-ii
<PAGE>
<PAGE>
6.7 Special Provisions Relating to the Holders of Subordinated
Units............................................................. A-60
6.8 Entity-Level Taxation............................................. A-61
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
7.1 Management........................................................ A-61
7.2 Certificate of Limited Partnership................................ A-64
7.3 Restrictions on Managing General Partner's Authority.............. A-64
7.4 Reimbursement of the General Partners............................. A-65
7.5 Outside Activities................................................ A-66
7.6 Loans from the General Partners; Loans or Contributions
from the Partnership; Contracts with Affiliates; Certain Restrictions
on the General Partners........................................... A-67
7.7 Indemnification................................................... A-69
7.8 Liability of Indemnitees.......................................... A-70
7.9 Resolution of Conflicts of Interest............................... A-71
7.10 Other Matters Concerning the Managing General Partner............. A-73
Intentionally Deleted............................................. A-73
7.12 Purchase or Sale of Units......................................... A-73
7.13 Registration Rights of the Managing General Partner and its
Affiliates........................................................ A-73
7.14 Reliance by Third Parties......................................... A-76
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
8.1 Records and Accounting............................................ A-76
8.2 Fiscal Year....................................................... A-77
8.3 Reports........................................................... A-77
ARTICLE IX
TAX MATTERS
9.1 Tax Returns and Information....................................... A-77
9.2 Tax Elections..................................................... A-77
9.3 Tax Controversies................................................. A-78
9.4 Withholding....................................................... A-78
A-iii
<PAGE>
<PAGE>
ARTICLE X
ADMISSION OF PARTNERS
10.1 Admission of Initial Limited Partners............................. A-78
10.2 Admission of Substituted Unitholder............................... A-79
10.3 Admission of Successor or Transferee General Partners............. A-79
10.4 Admission of Additional Limited Partners.......................... A-80
10.5 Admission of Substituted Holder of Incentive Distribution
Rights............................................................ A-80
10.6 Amendment of Agreement and Certificate of Limited Partnership..... A-81
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
11.1 Withdrawal of the General Partners................................ A-81
11.2 Removal of the Managing General Partner........................... A-84
11.3 Interest of Departing Partner and Successor General Partner....... A-84
11.4 Termination of Subordination Period, Conversion of Subordinated
Units and Extinguishment of Cumulative Common Unit Arrearages..... A-86
11.5 Withdrawal of Limited Partners.................................... A-86
ARTICLE XII
DISSOLUTION AND LIQUIDATION
12.1 Dissolution....................................................... A-86
12.2 Continuation of the Business of the Partnership After Dissolution. A-87
12.3 Liquidator........................................................ A-88
12.4 Liquidation....................................................... A-88
12.5 Cancellation of Certificate of Limited Partnership................ A-89
12.6 Return of Contributions........................................... A-89
12.7 Waiver of Partition............................................... A-89
12.8 Capital Account Restoration....................................... A-89
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT;
MEETINGS; RECORD DATE
13.1 Amendment to be Adopted Solely by the Managing General
Partner........................................................... A-90
13.2 Amendment Procedures.............................................. A-91
13.3 Amendment Requirements............................................ A-92
13.4 Special Meetings.................................................. A-93
A-iv
<PAGE>
<PAGE>
13.5 Notice of a Meeting............................................... A-93
13.6 Record Date....................................................... A-93
13.7 Adjournment....................................................... A-93
13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes........ A-94
13.9 Quorum............................................................ A-94
13.10 Conduct of a Meeting.............................................. A-95
13.11 Action Without a Meeting.......................................... A-95
13.12 Voting and Other Rights........................................... A-96
ARTICLE XIV
MERGER
14.1 Authority......................................................... A-96
14.2 Procedure for Merger or Consolidation............................. A-96
14.3 Approval by Unitholders of Merger or Consolidation................ A-97
14.4 Certificate of Merger............................................. A-98
14.5 Effect of Merger.................................................. A-98
ARTICLE XV
RIGHT TO ACQUIRE UNITS
15.1 Right to Acquire Units............................................ A-99
ARTICLE XVI
GENERAL PROVISIONS
16.1 Addresses and Notices............................................ A-101
16.2 Further Action................................................... A-101
16.3 Binding Effect................................................... A-102
16.4 Integration...................................................... A-102
16.5 Creditors........................................................ A-102
16.6 Waiver........................................................... A-102
16.7 Counterparts..................................................... A-102
16.8 Applicable Law................................................... A-102
16.9 Invalidity of Provisions......................................... A-102
16.10 Consent of Partners.............................................. A-103
A-v
<PAGE>
<PAGE>
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
NATIONAL PROPANE PARTNERS, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF NATIONAL
PROPANE PARTNERS, L.P., dated as of , 1996, is entered into by and among
National Propane Corporation, a Delaware corporation (the "Managing General
Partner"), National Propane SGP, Inc., a Delaware corporation (the "Special
General Partner," and collectively with the Managing General Partner, the
"General Partners" and also as the Organizational Limited Partner), together
with any other Persons who 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:
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 or
revenues of the Partnership Group above the operating capacity or revenues 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-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-1
<PAGE>
<PAGE>
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's 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)). 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 an Unsubordinated General
Partner Interest, a Common Unit, a Subordinated Unit 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 Unsubordinated
General Partner Interest, Common Unit, Subordinated Unit, 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
Unsubordinated General Partner Interest, Common Unit, Subordinated Unit,
Incentive Distribution Right or other interest was first issued.
A-2
<PAGE>
<PAGE>
"Adjusted Operating Surplus" means, with respect to any period, Operating
Surplus generated during such period (a) less (i) any net increase in working
capital borrowings during such period and (ii) any net reduction in cash
reserves for Operating Expenditures that otherwise increased the Operating
Surplus generated during such period, and (b) plus (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 repayment of principal, interest or premium. 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 Managing General Partner 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 Managing General Partner 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 Amended and Restated Agreement of Limited
Partnership of National Propane Partners, L.P., as it may be amended,
supplemented or restated from time to time.
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"Assignee" means a Non-citizen Assignee or a Person to whom one or more
Units 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 in a similar fiduciary capacity; and (c) any relative or
spouse of such Person, or any relative of such spouse, who has the same
principal residence as such Person.
"Audit Committee" means a committee of the Board of Directors of the
Managing General Partner (or upon the Triarc Merger, of the Special General
Partner) composed entirely of two or more directors who are neither officers nor
employees of the General Partners or officers, directors or employees of any
Affiliate of either of the General Partners.
"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 made 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 Managing General Partner 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 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 Managing General Partner 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 Managing General Partner 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.
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"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.
"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 Iowa 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 an
Unsubordinated General Partner Interest, a Common Unit, a Subordinated Unit, an
Incentive Distribution Right or any other Partnership Interest shall be the
amount which such Capital Account would be if such Unsubordinated General
Partner Interest, Common Unit, Subordinated Unit, 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 Unsubordinated General Partner
Interest, Common Unit, Subordinated Unit, Incentive Distribution Right or other
Partnership Interest was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership
pursuant to this 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, appliance showrooms,
training facilities and related assets), made to increase the operating capacity
of the Partnership Group above the operating capacity of the Partnership Group
existing immediately prior to such addition, improvement, acquisition or
construction.
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"Capital Surplus" has the meaning assigned to such term in Section 6.3(a).
"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 Managing
General Partner.
"Cause" means (x) a court of competent jurisdiction has entered a final,
non-appealable judgment finding the Managing General Partner liable for actual
fraud, gross negligence or willful or wanton misconduct in its capacity as
general partner of the Partnership or (y) the Special General Partner, prior to
the Triarc Merger, does not have the same directors on its Board of Directors as
those of the Managing General Partner.
"Certificate" means a certificate, substantially in the form of Exhibit A
to this Agreement or in such other form as may be adopted by the Managing
General Partner 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 Managing General Partner 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 Managing General Partner 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).
"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.
"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.
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"Combined Interest" has the meaning assigned to such term in Section
11.3(a).
"Commission" means the United States Securities and Exchange Commission.
"Common Unit" means a Unit representing a fractional part of the
Partnership Interests of all Limited Partners and Assignees and of the General
Partner (exclusive of its interest as holder of the Unsubordinated General
Partner Interest or the holder of the Incentive Distribution Rights) and having
the rights and obligations specified with respect to Common Units in this
Agreement. The term "Common Unit" does not refer to a Subordinated Unit prior to
its conversion into a Common Unit pursuant to the terms hereof.
"Common Unit Arrearage" means, with respect to any Common Unit, whenever
issued, as to any Quarter within the Subordination Period, 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).
"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 Conveyance,
Contribution and Assumption Agreement, dated as of the Closing Date, among the
Managing 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
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) 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).
"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).
"Current Market Price" has the meaning assigned to such term in Section
15.1(a).
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"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, whether Managing
General Partner or Special General Partner, from and after the effective date of
any withdrawal or removal of such former Managing General Partner pursuant to
Section 11.1 or 11.2.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"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)(D).
"First Target Distribution" means $0.577 per Unit per Quarter (except with
respect to the period commencing on the Closing Date and ending on September 30,
1996, it means the product of $0.577 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 June 30, 1996, and of which the denominator is
91), subject to adjustment in accordance with Sections 6.6 and 6.8.
"General Partners" means the Managing General Partner and the Special
General Partner and their successors and permitted assigns as general partners
of the Partnership. This term does not refer to the holder of a Unit by virtue
of such Unit ownership even if such Unit is a general partner interest.
"Group" means a Person that 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.
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"Holder" as used in Section 7.13, has the meaning assigned to such term in
Section 7.13(a).
"Incentive Distributions" means any amount of cash distributed to the
holders of the Incentive Distribution Rights pursuant to Sections 6.4(a)(v),
(vi) and (vii) and 6.4(b)(iii), (iv) and (v).
"Incentive Distribution Right" means a non-voting non-managing 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
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). Such Partnership Interest shall be a general
partner interest unless either of the General Partners (or any of their
Affiliates who holds such Partnership Interest) elects to convert such interest
into a limited partner interest at which point the Managing General Partner
shall amend the Partnership Agreement to convert such Partnership Interest into
a limited partner interest.
"Indemnified Persons" has the meaning assigned to such term in Section
7.13(c).
"Indemnitee" means (a) the General Partners, any Departing Partner and any
Person who is or was an Affiliate of one of the General Partners or any
Departing Partner, (b) any Person who is or was a director, officer, employee,
agent or trustee of the Partnership, the Operating Partnership or any other
Subsidiary, (c) any Person who is or was an officer, director, employee, agent
or trustee of the one of General Partners or any Departing Partner or any such
Affiliate, (d) any Person who is or was serving at the request of a General
Partner or any Departing Partner or any such Affiliate as a director, officer,
employee, partner, agent, fiduciary or trustee of another Person; 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 Common Units" means the Common Units sold in the Initial Offering.
"Initial Limited Partners" means the 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, as described in the Registration Statement.
"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 (b) with respect to any other class or series of Units, the price
per Unit at which such
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class or series of Units is initially sold by the Partnership, as determined by
the Managing General Partner, in each case adjusted as the Managing General
Partner 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 by any
Group Member (including Initial Common Units sold to the Underwriters pursuant
to the exercise of the Over-allotment Option); and (c) sales or other voluntary
or involuntary dispositions of any assets of any Group Member other than (w)
sales or other dispositions of inventory in the ordinary course of business, (x)
sales or other dispositions of other current assets, including receivables and
accounts in the ordinary course of business, (y) sales or other dispositions of
assets as part of normal retirements or replacements and (z) like kind exchanges
of operating assets to the extent that the operating assets received are of
equal or greater value.
"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, any Partner upon the change of
its status from General Partner to Limited Partner pursuant to Sections 4.12,
5.8(g), 5.8(h), 11.1(d), 11.3(b) or 13.1(l) and (b) solely for purposes of
Articles V, VI, VII and IX and Sections 12.3 and 12.4, each Assignee.
"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 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.
"Liquidator" means the Managing General Partner or one or more other
Persons selected by the Managing General Partner to perform the functions
described in Section 12.3.
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"Managing General Partner" means National Propane Corporation and its
successors and assigns as Managing General Partner of the Partnership.
"Merger Agreement" has the meaning assigned to such term in Section 14.1.
"Minimum Quarterly Distribution" means $0.525 per Unit per Quarter (except
with respect to the period commencing on the Closing Date and ending on
September 30, 1996, it means the product of $0.525 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 June 30, 1996, and of which
the denominator is 91), subject to adjustment in accordance with Sections 6.6
and 6.8.
"National Propane Corporation" means National Propane Corporation, a
Delaware corporation which is currently the Managing General Partner of the
Partnership.
"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); provided that
the determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xii) were not in this 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
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(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);
provided that the determination of the items that have been specially allocated
under Section 6.1(d) shall be made as if Section 6.1(d)(xii) were not in this
Agreement.
"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).
"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).
"Non-citizen Assignee" means a Person whom the Managing General Partner 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 (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 $120 million of First Mortgage Notes assumed by the
Operating Partnership in conjunction with the Initial Offering.
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"Notice of Election to Purchase" has the meaning assigned to such term in
Section 15.1(b) hereof.
"Operating Expenditures" means all Partnership Group expenditures,
including, but not limited to, taxes, reimbursements of the General Partners,
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 Managing General Partner, 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)
distributions to Partners. Where capital expenditures are made in part for
Acquisitions or for Capital Improvements and in part for other purposes,
the Managing General Partner's good faith allocation between the amounts
paid for each shall be conclusive.
"Operating Partnership" means National Propane, L.P., a Delaware limited
partnership, and any successors thereto.
"Operating Partnership Agreement" means the Amended and Restated Agreement
of Limited Partnership of the Operating Partnership, 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) $16.3 million plus all cash and cash equivalents of
the Partnership Group on hand as of the close of business on the Closing
Date, (ii) all cash receipts of the Partnership Group for the period
beginning on the 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, less
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(b) the sum of (i) Operating Expenditures for the period beginning on
the 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 Managing General Partner 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 Managing General Partner 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 Triarc, the Partnership or the General Partners or any of their
Affiliates) acceptable to the Managing General Partner in its reasonable
discretion.
"Option Closing Date" has the meaning assigned to such term in the
Underwriting Agreement.
"Organizational Limited Partner" means Triarc , in its capacity as the
organizational limited partner of the Partnership pursuant to this Agreement.
"Outstanding" means, with respect to Partnership Securities, all
Partnership Securities that are issued by the Partnership and reflected as
Outstanding on the Partnership's books and records as of the date of
determination; provided, however, that if at any time any Person or Group (other
than the General Partners or their Affiliates) beneficially owns 20% or more of
any Outstanding Units of any class then Outstanding, all Units owned by such
Person or Group shall not be voted on any matter and shall not be considered to
be Outstanding when sending notices of a meeting of Unitholders to vote on any
matter (unless otherwise required by law), calculating required votes,
determining the presence of a quorum or for other similar purposes under this
Agreement, except that such Common Units shall be considered to be Outstanding
for purposes of Section 11.2(b)(iv) (such Common Units shall not, however, be
treated as a separate class of Partnership Securities for purposes of this
Agreement).
"Over-allotment Option" means the over-allotment option to purchase
additional Common Units 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.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(4).
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"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 Partners, the Limited Partners and the holders
of Common Units, Subordinated Units and Incentive Distribution Rights.
"Partnership" means National 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 Unsubordinated General Partner Interests, Common Units, Subordinated
Units, Incentive Distribution Rights and other Partnership Securities, or a
combination thereof or interest therein, as
the case may be.
"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 Partners (in their capacity as General Partners with respect to
their Unsubordinated General Partner Interests without reference to any Units or
limited partner interests held by it), 2.0%, (b) as to any Unitholder or
Assignee holding Units, the product of (i) 98% less the percentage applicable to
clause (c) multiplied by (ii) the quotient of the number of Units held by such
Unitholder or Assignee divided by the total number of all Outstanding Units, and
(c) 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 Incentive
Distribution Right shall at all times be zero.
"Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
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"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.
"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, Unitholders and Assignees, in accordance
with their respective Percentage Interests , (c) 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 and (d) when modifying
the General Partners, apportioned 50% to the Managing General Partner and 50% to
the Special General Partner.
"Purchase Date" means the date determined by the Managing General Partner
as the date for purchase of all Outstanding Units (other than Units owned by the
General Partners and their
Affiliates) pursuant to Article XV.
"Quarter" means, unless the context requires otherwise, a fiscal quarter of
the Partnership.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Sections 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Record Date" means the date established by the Managing General Partner
for determining (a) the identity of the Record Holders entitled to notice of, or
to vote at, any meeting of Unitholders 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 Unitholders or (b) the
identity of Record Holders entitled to receive any report or distribution or to
participate in any offer.
"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 an Unsubordinated General Partner
Interest, a Subordinated Unit, an Incentive Distribution Right or other
Partnership Interest, the Person in whose name such Unsubordinated General
Partner Interest, Subordinated Unit, Incentive Distribution Right or other
Partnership Interest is registered on the books which the Managing General
Partner 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. 333-2768), as it has been or as it may be amended or
supplemented from time to time,
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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 Unitholders holding Common Units or Subordinated
Units, the excess of (a) the Net Positive Adjustments of the Unitholders holding
Common Units or Subordinated Units as of the end of such period over (b) the sum
of those Partners' Share of Additional Book Basis Derivative Items for each
prior taxable period, (ii) with respect to the General Partners as holders of
the Unsubordinated General Partner Interests, the excess of (a) the Net Positive
Adjustments of the General Partners with respect to the Unsubordinated General
Partner Interests as of the end of such period over (b) the sum of the General
Partners' Share of Additional Book Basis Derivative Items with respect to the
Unsubordinated General Partner Interests for each prior taxable period, and
(iii) with respect to the holders of Incentive Distribution Rights, the excess
of (a) the Net Positive Adjustments of the holders of 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 holders of the Incentive Distribution Rights
for each prior taxable period.
"Remaining Subordinated Unit" has the meaning assigned to such term in
Section 6.1(d)(x) hereof.
"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) 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).
"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.
"Restricted Activity" means the retail sales of propane to end users in the
continental United States.
"Second Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(E).
"Second Target Distribution" means $0.665 per Unit (except with respect to
the period commencing on the Closing Date and ending on September 30, 1996, it
means the product of $0.665 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 June 30, 1996, and of which the denominator is
91), subject to adjustment in accordance with Sections 6.6 and 6.8.
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"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 Unitholders holding Common Units or Subordinated 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 General Partners (as holders of the
Unsubordinated General Partner Interests), the amount that bears the same ratio
to such additional Book Basis Derivative Items as such Partners' Remaining Net
Positive Adjustments with respect to the Unsubordinated General Partner
Interests 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 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 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.
"Special General Partner" means National Propane SGP, Inc., a Delaware
corporation and a wholly-owned subsidiary of National Propane Corporation and
its successors and assigns as Special General Partner.
"Subordinated Unit" means a Unit representing a fractional part of the
Partnership Interests of all Limited Partners and Assignees and the Managing
General Partner (other than as holder of the Unsubordinated General Partner
Interests or as holder of the Incentive Distribution Rights) and having the
rights and obligations specified with respect to Subordinated Units in this
Agreement. The term "Subordinated Unit" as used herein does not include a Common
Unit. Such Partnership Interest shall be a non-managing general partner interest
unless (a) pursuant to Section 13.1(l), the Managing General Partner or any of
its Affiliates elects to convert such Units into a limited partner interest, at
which point the Managing General Partner shall amend the Partnership Agreement
to convert such Partnership Interest into a limited partner interest or (b) upon
conversion of such Units into limited partner interests pursuant to Sections
5.8(g) or 5.8(h) hereof, in which case, immediately prior to such transfer such
Unit shall convert into a limited partner interest.
"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 June 30, 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
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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
Unsubordinated General Partner Interests, during such periods and (ii)
there are no Cumulative Common Unit Arrearages; and
(b) the date on which the Managing General Partner is removed as
general partner of the Partnership upon the requisite vote by holders of
Outstanding Units under circumstances where Cause does not exist and Units
held by the Managing 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 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 Holder of Incentive Distribution Rights" means a Person who is
admitted to the Partnership as a holder of Incentive Distribution Rights
pursuant to Section 10.5 in place of and with all the rights of a holder of
Incentive Distribution Rights and who is shown as a holder of Incentive
Distribution Rights on the books and records of the Partnership.
"Substituted Unitholder" means a Person who is admitted as a Unitholder to
the Partnership pursuant to Section 10.2 in place of and with all the rights of
a Unitholder and who is shown as a Unitholder 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 $0.863 per Unit (except with respect to
the period commencing on the Closing Date and ending on September 30, 1996, it
means the product of $0.863 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
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June 30, 1996, and of which the denominator is 91), subject to adjustment in
accordance with Sections 6.6 and 6.8.
"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 Managing General Partner or one of its Affiliates) as shall be appointed
from time to time by the Partnership to act as registrar and transfer agent for
the Units.
"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.
"Triarc" means Triarc Companies, Inc., a Delaware corporation.
"Triarc Loan" means the $40.7 million loan made on the Closing Date from
the Operating Partnership to Triarc .
"Triarc Merger" has the meaning assigned to such term in Section 4.7
hereof.
"Underwriter" means each Person named as an underwriter in Schedule I to
the Underwriting Agreement that purchases Common Units pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement, dated _________,
1996, among the Underwriters, National Propane Corporation, 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 or the
Managing General Partner in the Partnership and shall include Common Units and
Subordinated Units but shall not include (x) the Unsubordinated General Partner
Interests or (y) Incentive Distribution Rights. All Subordinated Units issued to
the Managing General Partner on the Closing Date will constitute general partner
interests until the earlier of (a) the transfer of such Units to a Person who is
not an Affiliate of the Managing General Partner or (b) either of the General
Partners (or any of their Affiliate holding Subordinated Units) elects to
convert such Units to limited partner interests at which point the Managing
General Partner shall amend the Partnership Agreement to convert such Units into
limited partner interests. All Units issued by the Partnership to holders who
are unaffiliated with the General Partners shall be limited partner interests
and shall remain limited partner interests even if subsequently acquired by
either of the General Partners or any of their Affiliates.
"Unitholders" means the holders of Common Units and Subordinated Units.
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"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)).
"Unrecovered Capital" means at any time, with respect to 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 Managing General
Partner determines to be appropriate to give effect to any distribution,
subdivision or combination of such Units.
"U.S. GAAP" means United States Generally Accepted Accounting Principles
consistently applied.
"Unsubordinated General Partner Interests" are the General Partners' rights
to their allocations and distributions described herein exclusive of any right
the General Partners have as holders of Common Units, Subordinated Units or
Incentive Distribution Rights and representing a 2% Percentage Interest. The
Managing General Partner shall possess all management rights of the Partnership.
The Unsubordinated General Partner Interests shall be held Pro-Rata by the
General Partners.
"Withdrawal Opinion of Counsel" has the meaning assigned to such term in
Section 11.1(b).
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
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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 Managing General Partner and the Organizational Limited Partner have
previously formed the Partnership as a limited partnership pursuant to the
provisions of the Delaware Act and hereby amend and restate the original
Agreement of Limited Partnership of National Propane Partners, L.P. in its
entirety. 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 Managing 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 Managing
General Partner 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. To the extent that such action is determined by the Managing
General Partner to be reasonable and necessary or appropriate, the Managing
General Partner shall file amendments to and restatements of the Certificate of
Limited Partnership and do all things necessary or appropriate 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 conduct business or own
property. Subject to the provisions of Section 3.4(a), the Partnership shall not
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 "National Propane Partners, L.P." The
Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the Managing General Partner in its sole discretion,
including the name of the Managing 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 Managing General Partner in its
discretion may change the
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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 Managing General Partner, 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 [1101 2nd Avenue, S.E., P.O. Box 2067, Cedar
Rapids, Iowa 52406-2067] or such other place as the Managing General Partner 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 Managing General Partner deems necessary or appropriate. The
address of the Managing General Partner shall be [1101 2nd Avenue, S.E., P.O.
Box 2067, Cedar Rapids, Iowa 52406-2067] or such other place as the Managing
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 Managing General Partner 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 Managing General
Partner has no obligation or duty to the Partnership, the Unitholders, 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.
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2.6 Power of Attorney
(a) Each Unitholder, Limited Partner and each Assignee hereby
constitutes and appoints the Managing General Partner 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, 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 hereof or thereof) that the
Managing General Partner 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
Managing General Partner 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 Managing General Partner 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 Managing
General Partner 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 Managing
General Partner 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
Unitholders or the Limited Partners or of the Limited Partners of any class
or series required to take any action, the Managing General Partner 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
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of the Unitholders or 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 Managing General Partner 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
Unitholder, Limited Partner or Assignee and the transfer of all or any portion
of such Unitholder's, Limited Partner's or Assignee's Partnership Interest and
shall extend to such Unitholder's, Limited Partner's or Assignee's heirs,
successors, assigns and personal representatives. Each such Unitholder, Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
Managing General Partner or the Liquidator acting in good faith pursuant to such
power of attorney; and each such Unitholder, 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 Managing General
Partner or the Liquidator taken in good faith under such power of attorney. Each
Limited Partner or Assignee shall execute and deliver to the Managing General
Partner or the Liquidator, within 15 days after receipt of the request therefor,
such further designation, powers of attorney and other instruments as the
Managing General Partner or the Liquidator deems necessary to effectuate this
Agreement and the purposes of the Partnership.
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 December 31, 2086, 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,
a General Partner, one or more of its Affiliates or one or more nominees, as the
Managing General Partner may determine. The General Partners hereby declare and
warrant that any Partnership assets for which record title is held in the name
of a General Partner or one or more of its Affiliates or one or more nominees
shall be held by the General Partner or such Affiliate or nominee for the use
and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the Managing General Partner shall use
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reasonable efforts to cause record title to such assets (other than those assets
in respect of which the Managing General Partner 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 holding record title or as soon thereafter as practicable, such
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 Managing General Partner;
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 Managing General Partner, or
any of its Affiliates or any officer, director, employee, partner, agent or
trustee of the Managing General Partner or any of its Affiliates, or any
director, 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 Managing General Partner or any officer, director,
employee, partner, agent or trustee of the Managing General Partner or any of
its Affiliates, or any director, 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 7.5, 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
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interests and activities in 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 written demand
and at such Limited Partner's own expense:
(i) to obtain 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, a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to have furnished to him, 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 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 General Partners may keep confidential from the Limited Partners
and Assignees, for such period of time as the Managing General Partner deems
reasonable, (i) any information that the Managing General Partner reasonably
believes to be in the nature of trade secrets or (ii) other information the
disclosure of which the Managing General Partner 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
agreement with any third party 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).
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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 Units to
any Person, the Partnership shall issue one or more Certificates in the name of
such Person evidencing the number of such Units being so issued. In addition,
(a) upon a General Partner's request, the Partnership shall issue to it one or
more Certificates in the General Partners' name evidencing their Unsubordinated
General Partner Interests in the Partnership and (b) upon the request of any
Person owning Incentive Distribution Rights, the Partnership shall issue to such
Person one or more certificates evidencing such Incentive Distribution Rights.
Certificates shall be executed on behalf of the Partnership by the Managing
General Partner. 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. In addition, the holder of any Partnership Interest that is
converted, pursuant to this Agreement, from a general partner interest into a
limited partner interest may exchange their certificates for new certificates
evidencing their limited partner status.
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 Managing General Partner shall execute, and the Transfer Agent
shall countersign and deliver 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 Partnership
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
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Partnership, the Partners 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 has notice of the loss, destruction or theft of a
Certificate, and a transfer of the Units represented by the Certificate is
registered before the Partnership, the Managing General Partner or the Transfer
Agent receives such notification, the Limited Partner or Assignee shall be
precluded from making any claim against the Partnership, the General Partners
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 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 partner or Assignee (as
the case may be) hereunder and as, and to the extent, 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 a
General Partner assigns its Unsubordinated General Partnership Interests to
another Person, by which the Unitholder assigns a Unit to another Person who is
or becomes a partner or an Assignee, by which the holder of an Incentive
Distribution Right assigns such Partnership Interest to another Person, and
includes a sale, assignment, gift,
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pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition
by law or otherwise.
(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 of a General Partner of any or all of the issued
and outstanding capital stock of a 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, 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.
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(d) Until admitted as a Substituted Unitholder pursuant to Section 10.2,
the Record Holder of a Unit shall be an Assignee in respect of such Unit.
Unitholders may include custodians, nominees or any other individual or entity
in its own or any representative capacity.
(e) A transferee who has completed and delivered a Transfer Application
shall be deemed to have (i) requested admission as a Substituted Unitholder, as
applicable, (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.
(f) The Managing General Partner shall have the right at any time to
transfer its Subordinated Units and Common Units (whether issued upon conversion
of the Subordinated Units or otherwise) to one or more Persons.
4.6 Transfer of a General Partner's Unsubordinated General Partner Interests
Except for (a) an exchange by the Special General Partner of any portion of
its Unsubordinated General Partner Interests pursuant to Section 4.12 or (b) a
transfer by one of the General Partners of all, but not less than all, of its
Unsubordinated General Partner Interests to (i) an Affiliate of such General
Partner or (ii) another Person in connection with the merger or consolidation of
such General Partner with or into another Person or the transfer by such 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 or
4.7 (whichever is applicable), prior to June 30, 2006, a General Partner shall
not transfer all or any part of its Unsubordinated General Partner Interests to
a Person unless such transfer has been approved by the prior written consent or
vote of the holders of at least a Unit Majority. Notwithstanding anything herein
to the contrary, no transfer by a General Partner of all or any part of its
Unsubordinated General Partner Interests to another Person shall be permitted
unless (A) the transferee agrees to assume the rights and duties of such
transferring 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, (B) 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 (C) such transferee
also agrees to purchase all (or the appropriate portion thereof, if applicable)
of the partnership interest of the transferring 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
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Unsubordinated General Partner Interests, and the business of the Partnership
shall continue without dissolution.
4.7 Merger or Liquidation of the Managing General Partner into Triarc
Notwithstanding anything else herein contained (including the provisions of
Section 4.6 hereof), National Propane Corporation as the Managing General
Partner (or an Affiliate of National Propane Corporation that becomes the
successor Managing General Partner) may, without any consent of the Unitholders,
merge or liquidate into Triarc (the "Triarc Merger"); provided, however that
prior to the Triarc Merger (a) the Partnership received 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 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), (b) the Special
General Partner has a 1% Unsubordinated General Partner Interest and 1.0101%
general partner interest in the Operating Partnership and (c) the Special
General Partner has been capitalized by Triarc so that at the time of the Triarc
Merger, the Special General Partner has a net worth equal to at least $15
million independent of its interest in the Partnership Group. Such transfer of
the Managing General Partner's Unsubordinated General Partner Interests upon the
Triarc Merger shall not be an Event of Withdrawal and the surviving entity as a
result of the Triarc Merger shall automatically be admitted hereunder as the
Managing General Partner of the Partnership and as the Managing General Partner
of the other Group Members. If a merger or liquidation does not qualify under
Section 4.7, such merger or liquidation may still not require Unitholder consent
if it qualifies as not requiring consent pursuant to Section 4.6.
4.8 Transfer of Incentive Distribution Rights
A holder of Incentive Distribution Rights may transfer any or all of the
Incentive Distribution Rights held by such holderwithout any consent of the
Unitholders. The Managing General Partner 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 Managing General Partner, in its sole
discretion, shall determine are necessary or appropriate.
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).
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(b) The Managing General Partner 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's or
the Operating Partnership's 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 Managing General
Partner may determine to be necessary or appropriate to impose such
restrictions; provided, however, that any amendment that the Managing General
Partner believes, in the exercise of its reasonable discretion, could result in
the delisting or suspension of trading of any class of Units on the principal
National Securities Exchange on which such class of Units is then traded must be
approved, prior to such amendment being effected, 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 Managing
General Partner, 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 Partner or Assignee, the Managing
General Partner may request any Partner or Assignee to furnish to the General
Partner, 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 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 Managing General Partner may request. If a Partner
or Assignee fails to furnish to the Managing General Partner 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 General Partner determines, with the advice of
counsel, that a Partner or Assignee is not an Eligible Citizen, the Partnership
Interests owned by such Partner or Assignee shall be subject to redemption in
accordance with the provisions of Section 4.11. In addition, the Managing
General Partner may require that the status of any such Partner or Assignee be
changed to that of a Non-citizen Assignee and, thereupon, the Managing General
Partner shall be substituted for such Non-citizen Assignee as the Partner in
respect of his Units.
(b) The Managing 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 Partners (including without limitation
the General Partners) in respect of Units other than those of Non-citizen
Assignees are cast, either for, against or abstaining as to the matter.
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(c) [Intentionally Deleted]
(d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the Managing
General Partner, 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 Managing 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 Partner or Assignee fails to furnish a Citizenship
Certification or other information requested within the 30-day period specified
in Section 4.10(a), or if upon receipt of such Citizenship Certification or
other information the Managing General Partner determines, with the advice of
counsel, that a Partner or Assignee is not an Eligible Citizen, the Partnership
may, unless the Partner or Assignee establishes to the satisfaction of the
Managing General Partner that such Partner or Assignee is an Eligible Citizen or
has transferred his Partnership Interests to a Person who is an Eligible Citizen
and who furnishes a Citizenship Certification to the Managing General Partner
prior to the date fixed for redemption as provided below, redeem the Partnership
Interest of such Partner or Assignee as follows:
(i) The Managing General Partner shall, not later than the 30th day
before the date fixed for redemption, give notice of redemption to the
Partner or Assignee, at his 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 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 Managing General
Partner, 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 8% annually and payable in three equal annual installments of principal
together with accrued and unpaid interest, commencing one year after the
redemption date.
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(iii) Upon surrender by or on behalf of the 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 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 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 Partnership Interests before the redemption
date if such transfer is otherwise permitted under this Agreement. Upon receipt
of notice of such a transfer, the General Partner shall withdraw the notice of
redemption, provided the transferee of such Partnership Interests certifies to
the satisfaction of the Managing General Partner in a Citizenship Certification
delivered in connection with 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.
4.12 Exchange by Special General Partner of its Unsubordinated General Partner
Interests and its Interest in the Operating Partnership.
If the Managing General Partner has not entered into the Triarc Merger
pursuant to Section 4.7, then the Special General Partner may, at any time, in
one or more exchanges and in its sole discretion, exchange all or a portion of
its Unsubordinated General Partner Interest together with an equal portion of
its partnership interest in the Operating Partnership for Units representing a
Percentage Interest in the Partnership equal to the combined effective
percentage interest that the Special General Partner's exchanged partnership
interests in the Partnership and the Operating Partnership represented in
relation to the assets of the Operating Partnership. The Units received by the
Special General Partner pursuant to this Section 4.12 shall be (x) limited
partner interests and (b) issued as a combination of Subordinated Units and
Common Units; the proportion of the Subordinated Units to the total Units
received in this exchange shall be in the same proportion that the unconverted
Subordinated Units initially issued pursuant to Section 5.2 hereof that are
outstanding immediately before such exchange represent in relation to the total
Subordinated Units initially issued pursuant to Section 5.2 hereof.
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ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF
PARTNERSHIP INTERESTS
5.1 Organizational Contributions
In connection with the formation of the Partnership under the Delaware Act,
the Managing 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 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 admitted as a
Limited Partner of the Partnership. As of the Closing Date, 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; and the Organizational Limited Partner shall cease
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 the Managing General Partner.
5.2 Contributions by General Partners
On the Closing Date and pursuant to the Contribution and Conveyance
Agreement, the Managing General Partner shall contribute to the Partnership, as
a Capital Contribution, a limited partner interest in the Operating Partnership
in exchange for (i) the continuation of its 1% Unsubordinated General Partner
Interests, subject to all of the rights, privileges and duties of the Managing
General Partner under this Agreement, (ii) the receipt of an additional 1%
Unsubordinated General Partner Interests relating to the Special General Partner
subject to all of the rights, privileges and duties of the Special General
Partner under this Agreement, (iii) 5,283,809 Subordinated Units and (iv) all of
the Incentive Distribution Rights. Immediately thereafter the Managing General
Partner shall contribute the Unsubordinated General Partner Interests relating
to the Special General Partner (representing a 1% interest in the Partnership)
to the Special General Partner. The Special General Partner upon such transfer
will be admitted to the Partnership as a non-managing Special General Partner.
In addition, upon the issuance of any additional limited partnership interests
by the Partnership (other than (a) the conversion of general partner interests
into limited partner interests pursuant to Sections 4.12, 5.8(g), 5.8(h),
11.1(d), 11.3(b) or 13.1(l) or (b) the issuance of the Common Units issued in
the Initial Offering or pursuant to the Over-Allotment Option), the General
Partners shall be required to make, Pro-Rata, additional Capital Contributions
equal to 2/98th of any amount contributed to the Partnership in exchange for
such Additional Units. Except as set forth in the immediately preceding sentence
and Article XII, the General Partners shall not be obligated to make any
additional Capital Contributions to the Partnership.
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5.3 Contributions by Initial Limited Partners
(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 Initial Common Unit.
(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 6,190,476 and (ii) the
"Additional Units" as such term is defined in the Underwriting Agreement in
aggregate number up to 928,572 issuable upon exercise of the Over-allotment
Option pursuant to subparagraph (b) hereof.
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 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
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method acceptable to the Managing General Partner 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 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 Net Agreed Value of all actual and deemed
distributions of cash or property made with respect to such Partnership Interest
pursuant to this 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
Managing General Partner based upon the provisions of the Operating
Partnership Agreement) of all property owned by the Operating Partnership.
(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. 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.
(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
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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 General Partner 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 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 (other than a
transfer to an Affiliate of the Managing General Partner, unless the Managing
General Partner elects to have this
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subparagraph 5.5(c)(ii) apply) or of a Subordinated Unit that has converted into
a Common Unit pursuant to Section 5.8 by a holder thereof, the Capital Account
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 Combined Interest to Common
Units pursuant to Section 11.3(b), 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
Managing General Partner using such reasonable method of valuation as it may
adopt; provided, however, that the Managing General Partner, 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 Managing General Partner 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
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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 Managing General Partner in its sole discretion, all
without the approval of any Unitholders or 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 Managing General Partner 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; (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 or exchange and, if so, the
terms and conditions of such conversion or exchange; (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 Managing General Partner 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 or in connection
with the conversion of a general partner interest into a limited partner
interest pursuant to the terms of this Agreement and to amend this Agreement in
any manner that it deems necessary or appropriate to provide for each such
issuance or conversion, to admit Additional Limited Partners and 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 Managing
General Partner 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 or in
connection with the conversion of a general partner interest into a limited
partner interest pursuant to the terms of this Agreement, 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:
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(a) During the Subordination Period, the Partnership shall not issue an
aggregate of more than 3,095,238 additional Parity Units or an equivalent number
of Partnership Securities having rights to distributions or in liquidation
ranking on a parity with the Common Units, or ranking on a parity with, or prior
or senior to, the Subordinated Units in either case without the prior approval
of the holders of a Unit Majority. In applying this limitation, there shall be
excluded 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, (D) for purchase
by the Managing General Partner or any other Group Member in respect of, or
otherwise issued upon, the exercise of options granted by the Managing General
Partner or any other Group Member pursuant to any of its employee benefit plan
or otherwise in connection with the employee benefits plans of the Managing
General Partner or any other Group Member, (E) upon the exchange of all or a
portion of the Special General Partner's Unsubordinated General Partner
Interests and of its partnership interest in the Operating Partnership pursuant
to Section 4.12 and (F) in the event of a combination or subdivision of Common
Units.
(b) The Partnership may also issue an unlimited number of Parity Units
or an equivalent number of Partnership's Securities having rights to
distributions or in liquidation ranking on a parity with, or prior or senior to,
the Subordinated Units, in either case, prior to the end of the Subordination
Period and without the prior 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 as compared to
(ii) the actual amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis (for all Outstanding Units) with respect to
each of such four Quarters (or if the issuances of Units with respect to an
Acquisition or Capital Improvement occurs within the first full four
quarters from the Closing Date, then Adjusted Operating Surplus as utilized
in clause (i) and (ii) shall be based on the Partnership's pro forma amount
of Adjusted Operating Surplus for any quarter (as reflected in the
Registration Statement) in which there was no actual performance).
The amount in clause (i) shall be determined on a pro forma basis
assuming that (A) all of the Parity Units or Partnership Securities 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
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that is to be repaid with the proceeds of such debt issuance) 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 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 or
an equivalent number of Partnership Securities having rights to distributions or
in liquidation ranking on a parity with the Common Units or ranking on a parity
with, or prior or senior to, the Subordinated Units, in either case prior to the
end of the Subordination Period and without the approval of the Unitholders if
the proceeds from such issuance are used exclusively to repay up to $50 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 or Partnership
Securities, plus the related distributions on the Unsubordinated General Partner
Interests 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 or Partnership Securities 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) No fractional Units shall be issued by the Partnership.
5.8 Conversion of Subordinated Units
(a) A total of 1,320,952 of the Outstanding Subordinated Units plus
one-quarter (25%) of the Subordinated Units, if any, previously issued pursuant
to Section 4.12 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 June 30, 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;
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(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 Unsubordinated General Partner Interests,
during such periods; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero.
(b) An additional 1,320,952 of the Outstanding Subordinated Units plus a
number of additional Outstanding Subordinated Units equal to one quarter of the
total Units previously issued pursuant to Section 4.12 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 June 30, 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 Unsubordinated General Partner Partnership
Interests, during such periods; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero;
provided, however, that the conversion of Subordinated 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).
(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 owned 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
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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 the Managing General Partner is removed as Managing General
Partner of the Partnership upon the requisite vote by holders of Outstanding
Units under circumstances where Cause does not exist and Units held by the
Managing General Partner and its Affiliates are not voted in favor of such
removal.
(f) A Subordinated Unit that has converted into a Common Unit shall be
subject to the provisions of Section 6.7(b).
(g) A Subordinated Unit (if not previously converted into a limited
partner interest pursuant to the terms hereof) that has converted to a Common
Unit shall automatically become a limited partner interest at the time of such
conversion into a Common Unit. This conversion into a limited partner interest
shall be effective even if such Unit is subject to the restrictions of Section
6.7(b).
(h) A Subordinated Unit (if not previously converted into a limited
partner interest) shall automatically convert into a limited partner interest in
the hands of the transferor immediately prior to the transfer of such Unit to a
Person who is not an Affiliate of the Managing General Partner.
5.9 Limited Preemptive Right
Except as provided in this Section 5.9 and Section 5.2, 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 Managing 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 Managing General Partner and its Affiliates, to the extent necessary to
maintain the Percentage Interests of the General Partners and their Affiliates
equal to that which existed immediately prior to the issuance of such
Partnership Securities.
5.10 Splits and Combination
(a) Subject to Sections 5.10(d), 6.6 and 6.8 (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 Units that may be issued
pursuant to
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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 Managing General Partner 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 a date not less than 10 days prior to the date
of such notice. The Managing General Partner 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 Managing General Partner
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 Managing
General Partner 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) 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 either (A) issued pursuant to,
and in accordance with the requirements of, this Article V or (B) converted from
a general partner interest into a limited partner interest pursuant to the terms
of this Agreement 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.
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ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
6.1 Allocations for Capital Account Purpose
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 hereinbelow.
(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 Partners, Pro Rata, until the aggregate
Net Income allocated to the General Partners 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 Partners
pursuant to Section 6.1(b)(iii) for all previous taxable years;
(ii) Second, 100% to the General Partners, Pro Rata, and the
Unitholders, in accordance with their respective Percentage Interests,
until the aggregate Net Income allocated to such Partners 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 Partners
pursuant to Section 6.1(b)(ii) for all previous taxable years; and
(iii) Third, the balance, if any, 100% to the General Partners, Pro
Rata, and the Unitholders 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 Partners, Pro Rata, and the
Unitholders, 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
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previous taxable years is equal to the aggregate Net Income allocated to
such Partners pursuant to Section 6.1(a)(iii) 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
Unitholder 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 Partners, Pro Rata, and the
Unitholders 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 Unitholder 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, the balance, if any, 100% to the General Partners, Pro
Rata.
(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 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, 98% to all Unitholders holding Common Units, in
proportion to their relative Percentage Interests, and 2% to the General
Partners, Pro Rata, 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
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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,
98% to all Unitholders holding Subordinated Units, in proportion to
their relative Percentage Interests, and 2% to the General Partners, Pro
Rata, 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, 98% to all Unitholders, in accordance with their
relative Percentage Interests, and 2% to the General Partners, Pro Rata,
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)(iv) and 6.4(b)(ii) (the sum of (1) plus (2) plus (3)
plus (4) is hereinafter defined as the "First Liquidation Target
Amount");
(E) Fifth, 86.7347% to all Unitholders, in accordance with their
relative Percentage Interests, 11.2653% to the holders of the Incentive
Distribution Rights, Pro Rata, and 2% to the General Partners, Pro Rata,
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)(v)
and 6.4(b)(iii) (the sum of (1) plus (2) is hereinafter defined as the
"Second Liquidation Target Amount");
(F) Sixth, 75.5306% to all Unitholders, in accordance with their
relative Percentage Interests, 21.4694% to the holders of the Incentive
Distribution Rights, Pro Rata, and 2% to the General Partners, Pro Rata,
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
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(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)(vi) and
6.4(b)(iv); and
(G) Finally, any remaining amount 51.0204% to all Unitholders, in
accordance with their relative Percentage Interests, 49.0204% to the
holders of the Incentive Distribution Rights, Pro Rata, and 2% to the
General Partners, Pro Rata.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated
among the Partners in the following manner:
(A) First, if such Net Termination Loss is recognized (or is deemed
to be recognized) prior to the conversion of the last Outstanding
Subordinated Unit, 98% to the Unitholders holding Subordinated Units, in
proportion to their relative Percentage Interests, and 2% to the General
Partners, Pro Rata, until the Capital Account in respect of each
Subordinated Unit then Outstanding has been reduced to zero;
(B) Second, 98% to all Unitholders holding Common Units, in
proportion to their relative Percentage Interests, and 2% to the General
Partners, Pro Rata, until the Capital Account in respect of each Common
Unit then Outstanding has been reduced to zero; and
(C) Third, the balance, if any, 100% to the General Partners, Pro
Rata.
(d) 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), 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) with respect to such taxable period (other than an
allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii)). This Section
6.1(d)(i) is intended to comply with the
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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)), 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), 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), other than Section 6.1(d)(i) and other than an
allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii), with respect to
such taxable period. This Section 6.1(d)(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) 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 Unitholder 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 Unitholders with respect to
their Units (on a per Unit basis), then (1) each Unitholder 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 Unitholder exceeds the
distribution (on a per Unit basis) to the Unitholders receiving the
smallest distribution and (bb) the number of Units owned by the
Unitholder receiving the greater distribution; and (2) the General
Partners shall be allocated, Pro Rata, gross income in an aggregate
amount equal to 2/98th 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 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.
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(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)
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) 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) 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. If the Managing General Partner 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 Managing General Partner is authorized, upon notice to the
other 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.
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(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
1.704-1(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.
(x) Economic Uniformity. At the election of the Managing General
Partner 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 that are
Outstanding as of the termination of the Subordination Period ("Remaining
Subordinated Units") in the proportion of the number of Remaining
Subordinated Units held by such Partner to the total number of Remaining
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 Remaining Subordinated Units to an
amount equal to the product of (A) the number of Remaining 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 Remaining Subordinated Units and the Capital
Accounts underlying Common Units held by Persons other than a Managing
General Partner and its Affiliates immediately prior to the conversion of
such Remaining Subordinated Units into Common Units. This allocation method
for establishing such economic uniformity will only be available to the
Managing General Partner 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.
(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
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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) shall only be made with respect to Required Allocations to
the extent the Managing 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) shall be deferred with respect to allocations pursuant to
clauses (1) and (2) hereof to the extent the Managing General Partner
reasonably determines that such allocations are likely to be offset by
subsequent Required Allocations.
(B) The Managing General Partner shall have reasonable discretion,
with respect to each taxable period, to (1) apply the provisions of
Section 6.1(d)(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) 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 Managing General
Partner shall allocate, Pro Rata, additional items of gross income and
gain away from the holders of Incentive Distribution Rights to the
Unitholders and the General Partners, or additional items of deduction
and loss away from the Unitholders and the General Partners to the
holders of Incentive Distribution Rights, Pro Rata, to the extent that
the Additional Book Basis Derivative Items allocated to the Unitholders
or the General Partners exceed their Share of Additional Book Basis
Derivative Items. For this purpose, the Unitholders and the General
Partners 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 Unitholders or the General Partners under the
Partnership 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)
shall be made after all of the other Agreed Allocations have been made
as if this Section 6.1(d)(xii) were not in this Agreement and, to the
extent necessary, shall require the reallocation of items that have been
allocated pursuant to such other Agreed Allocations.
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(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 Managing
General Partner, that to the extent possible the aggregate Capital
Accounts of the holders of Incentive Distribution Rights will equal the
amount which would have been the holders of 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)
hereof.
(C) In making the allocations required under this Section
6.1(d)(xii), the Managing General Partner, 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).
6.2 Allocations for Tax Purpose
(a) 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) 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.
(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
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in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1.
(iii) The Managing General Partner shall apply the principles of
Treasury Regulation Section [1.704-3(d)] to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Units (or any class or classes thereof), the
Managing General Partner 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
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
Managing General Partner 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) The Managing General Partner 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)-l(a)(6) or the legislative history of Section 197 of
the Code. If the Managing General Partner determines that such reporting
position cannot reasonably be taken, the Managing General Partner 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 Managing General Partner chooses not to
utilize such aggregate method, the Managing General Partner 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) 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.
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(f) 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) Each item of Partnership income, gain, loss and deduction
attributable to a transferred Unsubordinated General Partner Interests or to
transferred Units or Incentive Distribution Rights, 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, 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 Managing General Partner 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) Allocations that would otherwise be made to a Unitholder 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 Managing General Partner 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 September 30, 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 Managing General Partner 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 Closing Date through the close of the
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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, other than borrowings described 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 Managing General Partner 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.
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, 98% to the Unitholders holding Common Units, in proportion
to their relative Percentage Interests, and 2% to the General Partners, Pro
Rata, until there has been distributed in respect of each Common Unit then
Outstanding an amount equal to the Minimum Quarterly Distribution for such
Quarter;
(ii) Second, 98% to the Unitholders holding Common Units, in
proportion to their relative Percentage Interests, and 2% to the General
Partners, Pro Rata, 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, 98% to the Unitholders holding Subordinated Units, in
proportion to their relative Percentage Interests, and 2% to the General
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Partners, Pro Rata, until there has been distributed in respect of each
Subordinated Unit then Outstanding an amount equal to the Minimum Quarterly
Distribution for such Quarter;
(iv) Fourth, 98% to all Unitholders, in accordance with their relative
Percentage Interests, and 2% to the General Partners, Pro Rata, 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 for such Quarter;
(v) Fifth, 86.7526% to all Unitholders, in accordance with their
relative Percentage Interests, 11.2268% to the holders of the Incentive
Distribution Rights, Pro Rata, and 2.0206% to the General Partners, Pro
Rata, 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 for such Quarter;
(vi) Sixth, 76.5464% to all Unitholders, in accordance with their
relative Percentage Interests, 21.4330% to the holders of the Incentive
Distribution Rights, Pro Rata, and 2.0206% to the General Partners, Pro
Rata, 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 for such Quarter; and
(vii)Thereafter, 51.0309% to all Unitholders, in accordance with their
relative Percentage Interests, 46.9485% to the holders of the Incentive
Distribution Rights, Pro Rata, and 2.0206% to the General Partners, Pro
Rata;
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(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section
6.4(a)(vii).
(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:
First, 98% to all Unitholders, in accordance with their relative Percentage
Interests, and 2% to the General Partners, Pro Rata, until there has been
distributed in respect of each Unit then Outstanding an amount equal to the
Minimum Quarterly Distribution for such Quarter;
(i) Second, 98% to all Unitholders, in accordance with their relative
Percentage Interests, and 2% to the General Partners, Pro Rata, until there
has
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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 for such Quarter;
(ii) Third, 86.7526% to all Unitholders, in accordance with their
relative Percentage Interests, and 11.2268% to the holders of the Incentive
Distribution Rights, Pro Rata, and 2.0206% to the General Partners, Pro
Rata, 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 for such Quarter;
(iii) Fourth, 76.5464% to all Unitholders, in accordance with their
relative Percentage Interests, and 21.4330% to the holders of the Incentive
Distribution Rights, Pro Rata, and 2.0206% to the General Partners, Pro
Rata, 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 for such Quarter; and
(iv) Thereafter, 51.0309% to all Unitholders, in accordance with their
relative Percentage Interests, and 46.9485% to the holders of the Incentive
Distribution Rights, Pro Rata, and 2.0206% to the General Partners, Pro
Rata;
provided, however, that 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(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section 6.4(b)(v).
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, 98% to
all Unitholders, in accordance with their relative Percentage Interests, and 2%
to the General Partners, Pro Rata, until a hypothetical holder of a Common Unit
acquired on the Closing Date has received with respect to such Common Unit,
during the period since the 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 Capital
Surplus shall then be distributed 98% to all Unitholders holding Common Units,
in accordance with their relative Percentage Interests, and 2% to the General
Partners, 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.
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6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution Levels
(a) The Minimum Quarterly Distribution, First Target Distribution,
Second Target Distribution , Third Target Distribution and Common Unit
Arrearages 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 then applicable Minimum Quarterly Distribution,
First Target Distribution, Second Target Distribution and Third 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 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 Target Distribution shall also be subject
to adjustment pursuant to Section 6.8.
6.7 Special Provisions Relating to the Holders of Subordinated Units
(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 Unitholder
holding Common Units hereunder; provided, however, that immediately upon the
conversion of Subordinated Units into Common Units pursuant to Section 5.8, the
Unitholder holding a Subordinated Unit shall possess all of the rights and
obligations of a Unitholder 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 Unitholder holding 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
Managing General Partner determines, based on advice of counsel, that a
converted Subordinated Unit 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 Managing General Partner may take whatever reasonable steps are required to
provide economic uniformity to the converted Subordinated Units in preparation
for a transfer of
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such converted Subordinated Units, including the application of Sections
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 Unitholders holding Common
Units represented by Common Unit Certificates.
6.8 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 then applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution shall be adjusted to 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 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) The Managing General Partner shall conduct, direct and manage all
activities of the Partnership. Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the Managing General Partner, and no
Special General Partner (unless it becomes Managing General Partner pursuant to
Section 11(d) hereof), Unitholder, Limited Partner or Assignee shall have any
management power over the business and affairs of the Partnership. In addition
to the powers now or hereafter granted a general partner of a limited
partnership under applicable law or which are granted to the Managing General
Partner under any other provision of this Agreement, the Managing General
Partner, subject to Section 7.3, shall have full power and authority to do all
things and on
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such terms as it, in its sole discretion, 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;
(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 subject, however, to any prior approval that may be required
pursuant to Section 7.3;
(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 the Partnership Group, the
lending of funds to other Persons (including the Operating Partnership, the
General Partner and its Affiliates), the repayment of obligations of the
Partnership and the Operating Partnership and the making of capital
contributions to the any member of the Partnership Group;
(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
having titles such as "president," "vice president," "secretary" and
"treasurer") 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
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ventures, corporations 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
or, unless restricted or prohibited by Section 5.7, the issuance of
additional Units or other Partnership Securities; and
(xiv) the undertaking of any action in connection with the
Partnership's participation in the Operating Partnership as the limited
partner.
(b) Notwithstanding any other provision of this Agreement, the Operating
Partnership Agreement, the Delaware Act or any applicable law, rule or
regulation, each of the Partners and Assignees and each other Person who may
acquire an interest in Units hereby (i) approves, ratifies and confirms the
execution, delivery and performance by the parties thereto of the Operating
Partnership Agreement, the Underwriting Agreement, the Conveyance and
Contribution Agreement, the Triarc Loan documents, the agreements and other
documents filed as exhibits to the Registration Statement, and the other
agreements described in or filed as a part of the Registration Statement; (ii)
agrees that the Managing General Partner (on its own or through any 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
Statement on behalf of the Partnership without any further act, approval or vote
of the Partners or the Assignees or the other Persons who may acquire an
interest in Units; and (iii) agrees that the execution, delivery or performance
by the Managing General Partner, 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 Managing General Partner or any
Affiliate of the Managing General Partner of the rights accorded pursuant to
Article XV), shall not constitute a breach by the Managing General Partner of
any duty that the Managing General Partner may owe the Partnership , the
Unitholders, the Limited Partners , the Assignees or any other Persons under
this Agreement (or any other agreements) or of any duty stated or implied by law
or equity.
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7.2 Certificate of Limited Partnership
The Managing 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 Managing
General Partner in its sole discretion 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 conduct business or own property. To the extent that such action is
determined by the Managing General Partner in its sole discretion to be
reasonable and necessary or appropriate, the Managing General Partner shall file
amendments to and restatements of the Certificate of Limited Partnership and do
all things necessary or appropriate 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 conduct business or own property. Subject to
the terms of Section 3.4(a) the Managing General Partner shall not 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
Unitholder, Limited Partner or Assignee.
7.3 Restrictions on Managing General Partner's Authority
(a) The Managing General Partner may not, without written approval of
the specific act by holders of all of the Outstanding Units or by other written
instrument executed and delivered by all of the Outstanding Units subsequent to
the date of this Agreement, take any action in contravention of this Agreement,
including, except as otherwise provided in this Agreement, (i) committing any
act that would make it impossible to carry on the ordinary business of the
Partnership; (ii) possessing Partnership property, or assigning any rights in
specific Partnership property, for other than a Partnership purpose; (iii)
admitting a Person as a Partner; (iv) amending this Agreement in any manner; or
(v) transferring all or any part of its Unsubordinated General Partner
Interests.
(b) Except as provided in Articles XII and XIV, the Managing General
Partner may not 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 holders of at least a Unit Majority;
provided, however, that this provision shall not preclude or limit the Managing
General Partner's ability to mortgage, pledge, hypothecate or grant a security
interest in all or substantially all of the assets of the Partnership or
Operating Partnership and shall not apply to any forced sale of any or all of
the assets of the Partnership or Operating Partnership pursuant to the
foreclosure of, or other realization upon, any such encumbrance. Without the
approval of holders of at least a Unit Majority, the Managing General Partner
shall not, on behalf of the Partnership, (i) consent to any amendment to the
Operating Partnership Agreement or, except as expressly permitted by Section
7.9(d), take any
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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.
(c) At all times while serving as the general partner of the
Partnership, the Managing General Partner shall not make any dividend or
distribution on, or repurchase any shares of, its stock or take any other action
within its control if the effect of such action would cause its net worth,
independent of its interest in the Partnership Group, to be less than $[15.0]
million.
7.4 Reimbursement of the General Partners
(a) Except as provided in this Section 7.4 and elsewhere in this
Agreement or in the Operating Partnership Agreement, the General Partners shall
not be compensated for their services as general partners of any Group Member.
(b) The General Partners shall be reimbursed on a monthly basis, or such
other basis as the Managing General Partner may determine in its sole
discretion, 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 including Affiliates to
perform services for the Partnership or for the General Partners in the
discharge of their duties to the Partnership), and (ii) all other necessary or
appropriate expenses allocable to the Partnership or otherwise reasonably
incurred by the Managing General Partner in connection with operating the
Partnership's business (including expenses allocated to the General Partners by
their Affiliates). The Managing General Partner shall determine the expenses
that are allocable to the Partnership in any reasonable manner determined by the
Managing General Partner in its sole discretion. Reimbursements pursuant to this
Section 7.4 shall be in addition to any reimbursement to the General Partners as
a result of indemnification pursuant to Section 7.7.
(c) Subject to Section 5.7, the Managing General Partner, in its sole
discretion and 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
options to purchase Units), or cause the Partnership to issue Partnership
Securities in connection with or pursuant to any employee benefit plan, employee
program or employee practice maintained or sponsored by the Managing General
Partner or any of its Affiliates, in each case for the benefit of employees of
the Managing 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 Managing
General Partner or any of its Affiliates any Units or other Partnership
Securities that the Managing General Partner or such Affiliate is obligated to
provide to any employees pursuant to any such employee benefit plans, employee
programs or employee practices. Expenses incurred by the Managing General
Partner in connection with any such plans, programs and practices (including the
net cost to the
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Managing General Partner or such Affiliate of Units or other Partnership
Securities purchased by the Managing General Partner or such Affiliate from the
Partnership to fulfill options or awards under such plans, programs and
practices) shall be reimbursed in accordance with Section 7.4(b). Any and all
obligations of the Managing General Partner under any employee benefit plans,
employee programs or employee practices adopted by the Managing General Partner
as permitted by this Section 7.4(c) shall constitute obligations of the Managing
General Partner hereunder and shall be assumed by any successor Managing General
Partner approved pursuant to Section 11.1 or 11.2 or the transferee of or
successor to all of the Managing General Partner's Unsubordinated General
Partnership Interest Interests as a general partner in the Partnership pursuant
to Section 4.6 or 4.7.
7.5 Outside Activities
(a) Subject to Section 7.5(g), after the Closing Date, each of the
General Partners, for so long as it is the general partner of the Partnership,
shall not engage in any business or activity or incur any debts or liabilities
(other than tax liabilities) except in connection with or incidental to (i) its
performance as general partner of one or more Group Members or as described in
or contemplated by the Registration Statement , (ii) the acquiring, owning or
disposing of debt or equity securities in any Group Member, (iii) holding and
making investments in [Subsidiaries] and pledging its interest in such
[Subsidiaries] to secure indebtedness of such [Subsidiaries], (iv) the
acquisition of businesses or assets to be used by a Group Member and (v)
permitting its employees to perform services for its Affiliates, including
Affiliates engaging in an activity permitted by Section 7.5(b).
(b) The Affiliates of the General Partners may engage in any activity
other than a Restricted Activity.
(c) Except as restricted by Sections 7.5(a) or (b), each of the General
Partners and their Affiliates 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, whether in businesses engaged in or anticipated to be engaged in by
any Group Member, independently or with others, including business interests and
activities in direct competition with the business and activities of any Group
Member, and none of the same shall constitute a breach of this Agreement or any
duty express or implied by law to any Group Member or any Partner or Assignee.
Neither any Group Member, 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.
(d) Notwithstanding anything to the contrary in this Agreement, (i) the
engaging in competitive activities by any Indemnitees other than a General
Partner in accordance with the provisions of this Section 7.5 is hereby approved
by the Partnership and all Partners and (ii) it shall be deemed not to be a
breach of the General Partners' fiduciary duty or any other
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obligation of any type whatsoever of the General Partners for any Affiliate of a
General Partner to engage in such business interests and activities in
preference to or to the exclusion of the Partnership (including, without
limitation, the General Partners and their Affiliates shall have no obligation
to present business opportunities to the Partnership).
(e) The General Partners and any of their Affiliates may acquire Units
or other Partnership Securities in addition to those acquired on the Closing
Date and, except as otherwise provided in this Agreement, shall be entitled to
exercise all rights of an Assignee or Limited Partner, as applicable, relating
to such Units or Partnership Securities.
(f) The term "Affiliates" when used in Section 7.5(b) and (c) with
respect to the General Partners shall not include any Group Member or any
Subsidiary of the any Group Member.
(g) To the extent the Managing General Partner is merged or liquidated,
pursuant to Section 4.7, into Triarc, the restrictions contained in Section
7.5(a) shall no longer apply to the Managing General Partner and the Managing
General Partner may engage in any activity other than a Restricted Activity. The
restrictions contained in Section 7.5(a), even after a merger or liquidation of
the Managing General Partner, shall continue to apply to the Special General
Partner.
7.6 Loans from the General Partners; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the
General Partners
(a) The General Partners or any of their Affiliates thereof may lend to
any Group Member, and any Group Member may borrow from the General Partners or
any of its Affiliates, funds needed or desired by the Group Member for such
periods of time and in such amounts as the Managing 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 to 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 7.6(a) and Section 7.6(b), the term
"Group Member" shall include any Affiliate of a Group Member that is controlled
by the Group Member.
(b) The Partnership may lend or contribute to any Group Member, the
General Partners or any of their Affiliates, and any Group Member, the General
Partners
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or their Affiliates may borrow, funds on terms and conditions established in the
sole discretion of the Managing General Partner; provided, however, that the
Partnership may not charge the Group Member, the General Partner or its
Affiliates interest at a rate less than the rate that would be charged to the
Group Member, the General Partners or their Affiliates, by unrelated lenders on
comparable loans, provided, however, that notwithstanding anything else herein
contained, the Partnership is permitted to make the Triarc Loan substantially on
the terms described in the Registration Statement. The foregoing authority shall
be exercised by the Managing General Partner in its sole discretion and shall
not create any right or benefit in favor of any Group Member or any other
Person.
(c) The Managing General Partner may itself, or may enter into an
agreement with any of its Affiliates to, render services (other than services it
renders in its capacity as General Partner) to the Partnership or to the
Managing General Partner in the discharge of its duties as general partner of
the Partnership. Any services rendered to the Partnership by the Managing
General Partner (other than services it renders in its capacity as 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
7.6(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 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), is
equitable to the Partnership. The provisions of Section 7.4 shall apply to the
rendering of services described in this Section 7.6(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 Partners nor any of their Affiliates shall sell,
transfer or convey any property to, or purchase any property from, or pursuant
to Section 7.6(a) or 7.6(b) make any loans to or borrow funds, 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 7.6(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to the Conveyance and Contribution Agreement and
any other transactions (including the Triarc Loan) described in or contemplated
by the Registration 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
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contribution of assets to the Partnership in exchange for Units, the Audit
Committee, in determining whether the appropriate number of Units are being
issued, may 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 Partners and their Affiliates will have no obligation to
permit any Group Member to use any facilities or assets of the General Partners
and their 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 Partners or their Affiliates to enter into
such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.
7.7 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), 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, no indemnification
pursuant to this Section 7.7 shall be available to the General Partners with
respect to their obligations incurred pursuant to the Underwriting Agreement or
the Conveyance and Contribution Agreement (other than obligations incurred by
the Managing 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
7.7 shall be made only out of the assets of the Partnership, it being agreed
that the General Partners 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) incurred by an Indemnitee who is indemnified pursuant to
Section 7.7(a) in defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Partnership
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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 that the Indemnitee is
not entitled to be indemnified as authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 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 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 Managing
General Partner or its Affiliates for the cost of) insurance, on behalf of the
General Partner Partners, their Affiliates and such other Persons as the
Managing General Partner 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 or their activities on behalf of the
Partnership, 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 7.7, 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 7.7(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 7.7 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 7.7 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 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or
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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 7.7 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.
7.8 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 any act or omission if such Indemnitee acted in good faith.
(b) Subject to its obligations and duties as Managing General Partner
set forth in Section 7.1(a), the Managing General Partner 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 its agents, and the General
Partners shall not be responsible for any misconduct or negligence on the part
of any such agent appointed by the Managing General Partner in good faith.
(c) Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership, the Limited Partners, the
General Partners, and the Partnership's and each of the General Partners'
directors, officers and employees under this Section 7.8 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.
7.9 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 one of the General Partner or any of their Affiliates,
on the one hand, and the Partnership, the Operating Partnership, any Partner or
any Assignee, on the other, any resolution or course of action by the General
Partners or their Affiliates 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 Managing
General Partner shall be authorized but not required in connection with the
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, (ii) on terms no less favorable to the Partnership
than those generally being provided to or available from
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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 Managing General Partner may also adopt a resolution or course
of action that has not received Special Approval. The Managing General Partner
(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 Managing General Partner (including the Audit Committee)
determines in its sole 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 Managing General Partner
(including the Audit Committee) to consider the interests of any Person other
than the Partnership. In the absence of bad faith by the Managing General
Partner, the resolution, action or terms so made, taken or provided by the
Managing General Partner 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 Managing General Partner or any of its Affiliates 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
Managing General Partner or such Affiliate 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, the Operating Partnership, any Limited Partner or any Assignee,
(ii) it may 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 (iii) in "good faith" or under another
express standard, the Managing General Partner or such Affiliate 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 Managing General
Partner or such Affiliate 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 Managing General Partner to the
Partnership or the Limited Partners. The Managing General Partner 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 Managing General Partner shall be deemed to constitute a breach of any duty
of the Managing General Partner 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 the General Partners or their
Affiliates to exceed 2% of the total amount distributed to all partners
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or (B) hasten the expiration of the Subordination Period or the conversion of
any Subordinated Units into Common Units.
(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 Unitholders hereby authorize the Managing General Partner, on
behalf of the Partnership as a partner of a Group Member, to approve of actions
by the general partner of such Group Member similar to those actions permitted
to be taken by the Managing General Partner pursuant to this Section 7.9.
7.10 Other Matters Concerning the Managing General Partner
(a) The Managing General Partner 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 Managing General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, 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 Managing General Partner 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 Managing 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) 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 extent permitted by law, as required to permit the Managing
General Partner 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 Managing
General Partner to be in, or not inconsistent with, the best interests of the
Partnership.
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7.11 Intentionally Deleted
7.12 Purchase or Sale of Units
The Managing General Partner may cause the Partnership to purchase or
otherwise acquire Units; provided that, except as permitted pursuant to Section
4.11, the Managing General Partner may not cause the Partnership to 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 Managing General Partner or
any Affiliate of the Managing 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.
7.13 Registration Rights of the Managing General Partner and its Affiliates
(a) If (i) the Managing General Partner or any Affiliate of the Managing
General Partner (including for purposes of this Section 7.13, any Person that is
an Affiliate of the Managing General Partner at the date hereof notwithstanding
that it may later cease to be an Affiliate of the Managing General Partner)
holds Units or other Partnership Securities that it desires to sell and (ii)
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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 Managing 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
7.13(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 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 solely as a result of such registration, 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
7.12(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
7.13(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 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 7.13(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.
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(c) If underwriters are engaged in connection with any registration
referred to in this Section 7.13, 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
7.7, 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' fees and disbursements), resulting to, imposed upon, or incurred by
the Indemnified Persons, directly or indirectly, under the Securities Act or
otherwise (hereinafter referred to in this Section 7.13(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 7.13(a) and 7.13(b) shall continue to be
applicable with respect to the Managing General Partner (and any of the Managing
General Partner's 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 Partnership Securities with respect to which it has
requested during such two-year period inclusion in registration statement
otherwise filed 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 7.13(c) shall continue in effect
thereafter.
(e) Any request to register Partnership Securities pursuant to this
Section 7.13 shall (i) specify the Partnership Securities intended to be offered
and sold by the Person making the request, (ii) express such 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.
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7.14 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 Managing
General Partner and any officer of the Partnership authorized by the Managing
General Partner to act on behalf of or in the name of the Partnership 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 Managing General
Partner or any such officer as if it were the Partnership's sole party in
interest, both legally and beneficially. Each Limited Partner hereby waives any
and all defenses or other remedies that may be available against such Person to
contest, negate or disaffirm any action of the Managing General Partner or any
such officer in connection with any such dealing. In no event shall any Person
dealing with the Managing General Partner or any such officer 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 Managing General
Partner or any such officer . Each and every certificate, document or other
instrument executed on behalf of the Partnership by the Managing General Partner
or any such officer 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
Unitholders 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.
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8.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
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 Managing General Partner
shall cause to be mailed or furnished to each Record Holder of a Unit as of a
date selected by the Managing General Partner 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, Partnership equity and cash flows, such
statements to be audited by a firm of independent public accountants selected by
the Managing General Partner.
(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 Managing General
Partner shall cause to be mailed or furnished to each Record Holder of a Unit,
as of a date selected by the Managing General Partner 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 Managing General Partner 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 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 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 Managing
General Partner's determination that such revocation is in the best interests of
the Unitholders. Notwithstanding any other provision herein contained, for the
purposes of computing the adjustments under Section 743(b) of the Code, the
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Managing General Partner 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 elect 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 Managing General Partner
shall determine whether the Partnership should make any other elections
permitted by the Code.
9.3 Tax Controversies
Subject to the provisions hereof, the Managing General Partner is
designated as the Tax Matters Partner (as defined in 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 Managing General Partner
and to do or refrain from doing any or all things reasonably required by the
Managing General Partner to conduct such proceedings.
9.4 Withholding
Notwithstanding any other provision of this Agreement, the Managing General
Partner 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 Partners
Upon the issuance by the Partnership of Common Units to the Underwriters as
described in Section 5.3 in connection with the Initial Offering and the
execution by each Underwriter of a
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Transfer Application, the Managing General Partner shall admit the Underwriters
to the Partnership as Initial Limited Partners in respect of the Common Units
purchased by them.
10.2 Admission of Substituted Unitholder
By transfer of a Unit by a Unitholder in accordance with Article IV, the
transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Unitholder subject to the conditions of, and in the
manner permitted under, this Agreement. A transferor of a Certificate 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 Unitholder to such
purchaser or other transferee in respect of the transferred Units. Each
transferee of a Unit (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 Partner Unitholder with
respect to the Units so transferred to such Person. Such Assignee shall become a
Substituted Unitholder (x) at such time as the Managing General Partner consents
thereto, which consent may be given or withheld in the Managing General
Partner's sole 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 Unitholder 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
Managing General Partner shall be deemed to be the Unitholder 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 Unitholder.
10.3 Admission of Successor or Transferee General Partners
A successor General Partner approved pursuant to Section 11.1 or 11.2 or
the transferee of or successor to all of a General Partner's Unsubordinated
General Partner Interests pursuant to Section 4.6 or 4.7, who is proposed to be
admitted as a successor or transferee General Partner shall be admitted to the
Partnership as a 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 a General Partner's Unsubordinated General Partner Interests as a
general partner in the Partnership pursuant to Section 4.6 or 4.7; provided,
however, that no such successor or transferee shall be admitted to the
Partnership until compliance with the terms of Section 4.6 or 4.7 has occurred
and such successor or transferee has executed and delivered such other documents
or instruments as may
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be required to effect such admission. Any such successor or transferee shall,
subject to the terms hereof, carry on the business of the Partnership and the
Operating Partnership without dissolution.
10.4 Admission of Additional Limited Partners
(a) A Person (other than an Initial Limited Partner or a Substituted
Limited Partner) who makes a Capital Contribution to the Partnership in
accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the Managing General Partner
(i) evidence of acceptance in form satisfactory to the Managing General Partner
of all of the terms and conditions of this Agreement, including the power of
attorney granted in Section 2.6, and (ii) such other documents or instruments as
may be required in the sole discretion of the Managing General Partner to effect
such Person's admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 10.4, other
than pursuant to Section 10.4(c), no Person shall be admitted as an Additional
Limited Partner without the consent of the Managing General Partner, which
consent may be given or withheld in the Managing General Partner's sole
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
Managing General Partner to such admission.
(c) Upon (i) conversion of general partner interests into limited
partner interests pursuant to Sections 4.12, 5.8(g), 5.8(h), 11.1(d), 11.3(b) or
13.1(l), the holder of such Partnership Interests shall be deemed to have been
admitted to the Partnership as a Limited Partner in respect of such Partnership
Interests.
10.5 Admission of Substituted Holder of Incentive Distribution Rights
By transfer of an Incentive Distribution Right by a Holder of Incentive
Distribution Rights in accordance with Article IV, the transferor shall be
deemed to have given the transferee the right to seek admission as a Substituted
Holder of Incentive Distribution Rights subject to the conditions of, and in the
manner permitted under, this Agreement. A transferor of a Certificate for an
Incentive Distribution Right 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 Holder of Incentive Distribution Rights to such purchaser or other
transferee in respect of the transferred Incentive Distribution Rights. Each
transferee of an Incentive Distribution Right (including any nominee holder or
an agent acquiring such Incentive Distribution
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Right 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 Holder of Incentive
Distribution Rights with respect to the Incentive Distribution Right so
transferred to such Person. Such Assignee shall become a Substituted Holder of
Incentive Distribution Rights (x) at such time as the Managing General Partner
consents thereto, which consent may be given or withheld in the Managing General
Partner's sole 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 Holder of Incentive Distribution Rights with respect to
allocations and distributions, including liquidating distributions, of the
Partnership. With respect to voting rights attributable to an Incentive
Distribution Right that are held by Assignees, the Managing General Partner
shall be deemed to be the Holder of Incentive Distribution Rights with respect
thereto and shall, in exercising the voting rights in respect of such Incentive
Distribution Rights on any matter, vote such Incentive Distribution Rights at
the written direction of the Assignee who is the Record Holder of such Incentive
Distribution Rights. If no such written direction is received, such Incentive
Distribution Rights will not be voted. An Assignee shall have no other rights of
a Holder of Incentive Distribution Rights.
10.6 Amendment of Agreement and Certificate of Limited Partnership
To effect the admission to the Partnership of any Partner, the Managing
General Partner 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 Managing General Partner shall prepare
and file an amendment to the Certificate of Limited Partnership, and the
Managing General Partner 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 Partners
(a) The Managing 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 Managing General Partner voluntarily withdraws from the
Partnership (by giving written notice to the other Partners) (and it shall
be deemed that the Managing General Partner has withdrawn pursuant to this
Section 11.1(a)(i) if the Managing General Partner voluntarily withdraws as
general partner of the Operating Partnership);
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(ii) the Managing General Partner transfers all of its rights as
Managing General Partner pursuant to Section 4.6;
(iii) the Managing General Partner is removed pursuant to Section
11.2;
(iv) the Managing 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 the material allegations of
a petition filed against the Managing 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 Managing General
Partner or of all or any substantial part of its properties; provided
however that none of the events listed in (A)-(E) hereof shall be an Event
of Default if (x) such event takes place after the Triarc Merger, (y)
the Managing General Partner is Triarc or its Affiliates, and (z) the
Special General Partner is a non-bankrupt General Partner of the
Partnership and the Operating Partnership at the time of the events
described in this Section 11.1(a)(iv) occur;
(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 Managing General Partner;
(vi) in the event the Managing General Partner is a corporation, a
certificate of dissolution or its equivalent is filed for the Managing
General Partner, or 90 days expire after the date of notice to the Managing
General Partner of revocation of its charter without a reinstatement of its
charter, under the laws of its state of incorporation; or
(vii) (A) in the event the Managing General Partner is a partnership,
the dissolution and commencement of winding up of the Managing General
Partner; (B) in the event the Managing General Partner is acting in such
capacity by virtue of being a trustee of a trust, the termination of the
trust; (C) in the event the Managing General Partner is a natural person,
his death or adjudication of incompetency; and (D) otherwise in the event
of the termination of the Managing General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv), (v), (vi) or
(vii)(A), (B) or (D) occurs, the withdrawing Managing 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 Managing General Partner from
the Partnership.
(b) Withdrawal of the Managing General Partner from the Partnership upon
the occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the
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following circumstances: (i) at any time during the period beginning on the
Closing Date and ending at 12:00 midnight, Eastern Standard Time, on June 30,
2006, the Managing General Partner voluntarily withdraws; provided that prior to
the effective date of such withdrawal, the withdrawal is approved by Unitholders
holding at least a Unit Majority and the Managing General Partner delivers to
the Partnership an Opinion of Counsel ("Withdrawal Opinion of Counsel") that
such withdrawal (following the selection of the successor Managing 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 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 previously
treated as such); (ii) at any time after 12:00 midnight, Eastern Standard Time,
on June 30, 2006, the Managing General Partner voluntarily withdraws by giving
at least 90 days' advance notice to the Unitholders, such withdrawal to take
effect on the date specified in such notice; (iii) at any time that the Managing
General Partner ceases to be the Managing 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 Managing General Partner
voluntarily withdraws by giving at least 90 days' advance notice of its
intention to withdraw to the Unitholders, 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 Partners and their Affiliates) own
beneficially or of record or control at least 50% of the Outstanding Common
Units. The withdrawal of the Managing General Partner from the Partnership upon
the occurrence of an Event of Withdrawal shall also constitute the withdrawal of
the Managing General Partner as general partner of the other Group Members. If
the Managing General Partner gives a notice of withdrawal pursuant to Section
11.1(a)(i), the holders of a Unit Majority, may, prior to the effective date of
such withdrawal, elect a successor Managing General Partner. The Person so
elected as successor Managing General Partner shall automatically become the
successor general partner of the other Group Members. If, prior to the effective
date of the Managing General Partner's withdrawal, a successor is not selected
by the Unitholders 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 Managing General Partner elected in accordance
with the terms of this Section 11.1 shall be subject to the provisions of
Section 10.3.
(c) An Event of Withdrawal of the Managing General Partner shall also be
an Event of Withdrawal of the Special General Partner from the Partnership and
as general partner of other Group Members at the same time and same conditions
as set forth in Section 11.1(b) with respect to the Managing General Partner.
(d) The occurrence after the Triarc Merger of an event otherwise
described in Section 11.1(a)(iv)(A), (B), (C), (D) and (E) that is not an Event
of Withdrawal pursuant to Section 11.1(a)(iv) shall result in (i) the conversion
of the Managing General Partner's 1% Unsubordinated General Partner Interests
into a limited partner interest having the same rights to distributions of cash
and allocations of income, gain, loss or deduction as the 1% Unsubordinated
General Partner Interests were entitled but having no rights to participate in
the
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management of the Partnership, (ii) the Partnership shall continue without the
approval of the Unitholders and (iii) the Special General Partner shall become
the Managing General Partner of the Partnership and shall have all the rights,
authority and powers given to the Managing General Partner pursuant to this
Agreement.
11.2 Removal of the Managing General Partner
The Managing General Partner may be removed if such removal is approved by
the Unitholders holding 662/3% of the Outstanding Units (including Units held by
the General Partners and their Affiliates). 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 Unitholders holding a Unit Majority (including Units held
by the General Partners and their Affiliates). Such removal shall be effective
immediately following the admission of a successor Managing General Partner
pursuant to Section 10.3. The removal of the Managing 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 Managing
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 Units to remove the Managing General Partner shall not exist or
be exercised unless the Partnership has received an opinion opining as to the
matters covered by a Withdrawal Opinion of Counsel. Any successor Managing
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
(a) In the event of (i) withdrawal of the Managing General Partner under
circumstances where such withdrawal does not violate this Agreement or (ii)
removal of the Managing General Partner by the holders of Outstanding Units
under circumstances where Cause does not exist, if a successor Managing 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
the Unsubordinated General Partner Interests of all the Departing Partners and
the partnership interests of all the Departing Partners as the general partners
in the other Group Members and its 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 Managing General Partner is
removed by the Unitholders under circumstances where Cause exists or if the
Managing 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 all the Departing Partners, to purchase the
Combined Interest of all of the Departing Partners for such fair market value of
such Combined Interest. In either event, all of the Departing Partners
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shall be entitled to receive all reimbursements due such Departing Partner
pursuant to Section 7.4, including any employee-related liabilities (including
severance liabilities), incurred in connection with the termination of any
employees employed by the Managing 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 Partners' Combined Interest shall be determined by agreement
between the Departing Partners and their successor or, failing agreement within
30 days after the effective date of such Departing Partners' departure, by an
independent investment banking firm or other independent expert selected by the
Departing Partners and their 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 Partners shall designate an independent investment
banking firm or other independent expert, the Departing Partners' 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 may consider the
then current trading price of Units, on any National Securities Exchange on
which Units are then listed, the value of the Partnerships assets, the rights
and obligations of the General Partners 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 Partners will have the right to convert the
Combined Interest into Common Unit representing limited partner interests or to
receive cash from the Partnership in exchange for such Combined Interest. The
Departing Partners' 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 Partners become Limited Partners or has
their Combined Interests purchased pursuant is this Agreement. For purposes of
this Agreement, conversion of the General Partners' Combined Interest to Common
Units will be characterized as if the General Partners contributed their
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 on such date. In such event, such successor General Partner
shall, subject to the
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following sentence, be entitled to half of such Percentage Interest of all
Partnership allocations and distributions and any other allocations and
distributions to which the Departing Partners as holders of the 2%
Unsubordinated General Partner Interests were 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 Units shall be
99%.
11.4 Termination of Subordination Period, Conversion of Subordinated
Units and Extinguishment of Cumulative Common Unit Arrearages
Notwithstanding any provision of this Agreement, if the Managing General
Partner is removed as general partner of the Partnership under circumstances
where Cause does not exist and Units held by the General Partners and their
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 and (ii) all Cumulative Common Unit
Arrearages on the Common Units will be extinguished.
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 Units or
Incentive Distribution Rights becomes a Record Holder of the Units or Incentive
Distribution Rights so transferred, such transferring Limited Partner shall
cease to be a Limited Partner with respect to the Units or Incentive
Distribution Rights so transferred.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
12.1 Dissolution
(a) 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 Managing General Partner, if a successor
General Partner is elected pursuant to Section 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:
(a) the expiration of its term as provided in Section 2.7;
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(b) an Event of Withdrawal of the Managing General Partner as provided
in Section 11.1(a) (other than Section 11.1(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 Managing General
Partner that is approved by the holders of a Unit Majority;
(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 Managing 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) ,
(vi) or (vii), then, to the maximum extent permitted by law, within 180 days
thereafter, the holders of a Unit Majority 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. Unless such an election is
made within the applicable time period as set forth above, the Partnership shall
conduct only 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 Managing
General Partner, then the interest of the former General Partner shall be
treated in the manner provided in Section 11.3; 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 may for this purpose exercise the powers
of attorney granted the Managing General Partner pursuant to Section 2.6;
provided, that the right of the holders of a Unit Majority 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
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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 the Operating
Partnership 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 Managing General Partner 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 Units. 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 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
Managing General Partner 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 7.3(b)) 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
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contemporaneously therewith, appropriate cash distributions must be made to the
other Partners. The Liquidator may, in its absolute discretion, defer
liquidation of the Partnership's assets for a reasonable time if it determines
that an immediate sale of part or all the Partnership's assets would be
impractical or would cause undue loss to the partners. The Liquidator may, in
its absolute discretion, distribute the Partnership's assets in kind if it
determines that a sale would be impractical or would cause undue loss to the
partners.
(b) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed to Partners otherwise 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 Contributions
The General Partners 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 holders
of any Partnership Interest, or any portion thereof, it being expressly
understood that any such return shall be made solely from Partnership assets.
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12.7 Waiver of Partition
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
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 Managing
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 Managing General Partner
Each Partner agrees that the Managing General Partner, without the approval
of any Partner or Assignee, may amend any provision of this Agreement, 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 sole discretion of the Managing General
Partner, 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
the Partnership and 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 (except approval of holders of a Unit Majority will be
required if such amendment would result in a delisting or suspension of trading
of the Common Units);
(d) a change that, in the sole discretion of the Managing General
Partner, (i) does not adversely affect the Unitholders in any material respect,
(ii) is necessary or advisable to (A) satisfy any requirements, conditions or
guidelines contained in any opinion, directive, order, ruling
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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 any class or classes 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 Managing
General Partner determines in its discretion to be in the best interests of the
Partnership and the Unitholders, (iii) is necessary or advisable in connection
with action taken by the Managing General Partner pursuant to Section 5.10, or
(iv) is required to effect the intent expressed in the Registration 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 Managing General Partner, are
necessary or advisable as a result of a change in the fiscal year or taxable
year of the Partnership including, if the Managing General Partner 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 General Partners or their 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 General Partner, is necessary or advisable in connection with
the authorization of issuance of any class or series of Partnership Securities
pursuant to Section 5.6;
(h) any amendment expressly permitted in this Agreement to be made by
the Managing General Partner 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 Managing General
Partner, 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) Intentionally Deleted
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(l) an amendment, that effectuates the conversion of some or all of the
Units or Incentive Distribution Rights held by the Managing General Partner or
any of its Affiliates from being general partner interests into being limited
partner interests at the election of either of the General Partners or any of
their Affiliates holding such Partnership Interests.
(m) 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
Managing General Partner which consent may be given or withheld in its sole
discretion. A proposed amendment shall be effective upon its approval by the
holders of at least a majority of the Outstanding 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
Managing General Partner shall seek the written approval of the requisite
percentage of Outstanding Units or call a meeting of the Unitholders to consider
and vote on such proposed amendment. The Managing General Partner 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
provision of this Agreement that establishes a percentage of Outstanding 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 Units whose aggregate Outstanding
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
Partners or any of their Affiliates without its consent, which may be given or
withheld in its sole
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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 Managing General Partner'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 6.3 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 the effect that such amendment will not affect the limited liability
of any Limited Partner under applicable law.
(e) Except as provided in Section 13.1, this Section 13.3 shall only be
amended with the approval of the holders of at least 90% of the Outstanding
Units.
13.4 Special Meetings
All acts of Unitholders to be taken pursuant to this Agreement shall be
taken in the manner provided in this Article XIII. Special meetings of the
Unitholders may be called by the Managing General Partner or by Unitholders
owning 20% or more of the Outstanding Units of the class or classes for which a
meeting is proposed. Unitholders shall call a special meeting by delivering to
the Managing General Partner one or more requests in writing stating that the
signing Unitholders 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 Unitholders 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 Managing
General Partner shall send a notice of the meeting to the Unitholders either
directly or indirectly through the Transfer Agent. A meeting shall be held at a
time and place determined by the Managing General Partner on a date not less
than 10 days nor more than 60 days after the mailing of notice of the meeting.
Unitholders 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 Unitholders' limited
liability under the Delaware Act or the law of any other state in which the
Partnership is qualified to do business.
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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 Unitholders 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 Managing General Partner 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 Unitholders are requested in
writing by the Managing General Partner to give such approvals.
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 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 Unitholders, 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, Unitholders 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 Unitholder at a meeting shall constitute a waiver of notice of the meeting,
except when the Unitholder 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.
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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 Unitholders of such class or classes unless
any such action by the Unitholders requires approval by holders of a greater
percentage of such Units, in which case the quorum shall be such greater
percentage. At any meeting of the Unitholders duly called and held in
accordance with this Agreement at which a quorum is present, the act of
Unitholders 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 Unitholders, 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 Unitholders
holding Outstanding Units that in the aggregate represent at least such greater
or different percentage shall be required. The Unitholders 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 Unitholders
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 Unitholders 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 Managing General Partner shall have full power and authority concerning
the manner of conducting any meeting of the Unitholders 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 Managing General Partner 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 Managing General Partner.
The Managing General Partner 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 Unitholders 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 Managing General Partner, any action that may be taken
at a meeting of the Unitholders may be taken without a meeting if an approval in
writing setting forth the action so taken is signed by Unitholders owning not
less than the minimum percentage of the Outstanding
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Units that would be necessary to authorize or take such action at a meeting at
which all the Unitholders were present and voted (unless such provision
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).
Prompt notice of the taking of action without a meeting shall be given to the
Unitholders who have not approved in writing. The Managing General Partner may
specify that any written ballot submitted to Unitholders 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 Managing
General Partner. If a ballot returned to the Partnership does not vote all of
the Units held by the Unitholders 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 Unitholders is solicited by any Person other than by or on
behalf of the Managing General Partner, the written approvals shall have no
force and effect unless and until (a) they are deposited with the Partnership in
care of the Managing General Partner, (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 Managing General Partner 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.
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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, 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 Managing General Partner. If the Managing
General Partner shall determine, in the exercise of its discretion, to consent
to the merger or consolidation, the Managing General Partner shall approve the
Merger Agreement, which shall set forth:
(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;
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(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 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 fixed 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 Managing General
Partner.
14.3 Approval by Unitholders of Merger or Consolidation
(a) The Managing General Partner, upon its approval of the Merger
Agreement, shall direct that the Merger Agreement be submitted to a vote of
Unitholders, 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 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 Units or of any
class of Unitholders, 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 Unitholders, 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 Managing General Partner and the
Unitholders 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.
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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 Partnership Interests of any class then
Outstanding are held by Persons other than the General Partners and their
Affiliates, the Managing 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 Managing General Partner, exercisable in its sole discretion,
to purchase all, but not less than all, of the Partnership Interests of such
class then Outstanding held by Persons other than the General Partners and their
Affiliates, at the greater of (x) the Current Market Price as of the date three
business 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 Partners or any of their
Affiliates for any such Partnership Interest 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 Partnership Interests listed or admitted to trading
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on any National Securities Exchange means the average of the daily Closing
Prices (as hereinafter defined) per Limited Partner Interest 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
Partnership Interests of such class are listed or admitted to trading or, if the
Partnership Interests 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
Partnership Interests 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 Partnership Interests of such
class selected by the Managing General Partner, or if on any such day no market
maker is making a market in the Partnership Interests of such class, the fair
value of such Partnership Interests on such day as determined reasonably and in
good faith by the General Partner; and (iii) "Trading Day" means a day on which
the principal National Securities Exchange on which the Partnership Interests of
any class are listed or admitted to trading is open for the transaction of
business or, if Partnership Interests 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.
(b) If the Managing General Partner, any Affiliate of the Managing
General Partner or the Partnership elects to exercise the right to purchase
Partnership Interests granted pursuant to Section 15.1(a), the Managing 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
Partnership Interests (as of a Record Date selected by the Managing 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 Partnership Interests will be purchased and state that the Managing
General Partner, its Affiliate or the Partnership, as the case may be, elects to
purchase such Partnership Interests, upon surrender of Certificates representing
such Partnership Interests 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 Partnership Interests are listed
or admitted to trading. Any such Notice of Election to Purchase mailed to a
Record Holder of Partnership Interests 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 Managing General Partner, its Affiliate or the Partnership,
as the case may be, shall deposit with the Transfer Agent
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cash in an amount sufficient to pay the aggregate purchase price of all of the
Partnership Interests 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 Partnership Interests 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 Partnership Interests (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 Partnership
Interests therefor, without interest, upon surrender to the Transfer Agent of
the Certificates representing such Partnership Interests, and such Partnership
Interests shall thereupon be deemed to be transferred to the Managing 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 Managing General Partner, or the Partnership, as the case may
be, shall be deemed to be the owner of all such Partnership Interests from and
after the Purchase Date and shall have all rights as the owner of such
Partnership Interests (including all rights as owner of such Partnership
Interests pursuant to Articles IV, V, VI and XII).
(c) At any time from and after the Purchase Date, a holder of an
Outstanding Partnership Interest subject to purchase as provided in this Section
15.1 may surrender his Certificate evidencing such Partnership Interest 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 ,
Incentive Distribution Right or the Unsubordinated General Partner 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 General Partner, the Transfer
Agent or the mailing organization shall be prima facie evidence of the giving or
making of such notice, payment
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or report. If 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 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 Managing General Partner at the principal office of the
Partnership designated pursuant to Section 2.3. The Managing General Partner 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.
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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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
MANAGING GENERAL PARTNER:
NATIONAL PROPANE CORPORATION
By: _______________________________
Name:
Title:
SPECIAL GENERAL PARTNER
NATIONAL PROPANE SGP, INC.
By: _______________________________
Name:
Title:
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ORGANIZATIONAL LIMITED PARTNER:
NATIONAL PROPANE SGP, INC.
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
General Partner.
By: _______________________________
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Exhibit A to the Amended and
Restated Agreement of Limited Partnership of
National Propane Partners, L.P.
Certificate Evidencing Common Units
Representing Limited Partner Interests
National Propane Partners, L.P.
No. Common Units
In accordance with Section 4.1 of the Amended and Restated Agreement of
Limited Partnership of National Propane Partners, L.P., as amended, supplemented
or restated from time to time (the "Partnership Agreement"), National 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 [1101 2nd
Avenue S.E., P.O. Box 2067, Cedar Rapids, Iowa 52406-2067.] 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.
A-107
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<PAGE>
Dated: ____________________________ NATIONAL PROPANE PARTNERS, L.P.
Countersigned and Registered by: By: ______________________________
___________________________________ President
as Transfer Agent and Registrar
By: _______________________________ By: ______________________________
Authorized Signature Secretary
A-108
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<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:
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 under Uniform Gifts to Minors
tenants in common Act___________________________________
State
Additional abbreviations, though not in the above list, may also beused.
ASSIGNMENT OF COMMON UNITS
IN
NATIONAL PROPANE PARTNERS, L.P.
IMPORTANT NOTICE REGARDING INVESTOR RESPONSIBILITIES DUE TO
TAX SHELTER STATUS OF NATIONAL PROPANE PARTNERS, L.P.
You have acquired an interest in National Propane Partners, L.P., [1101 2nd
Avenue S.E., P.O. Box 2067, Cedar Rapids, Iowa 52406-2067,] whose taxpayer
identification number is_________. The Internal Revenue Service has issued
National 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 NATIONAL PROPANE PARTNERS, L.P.
You must report the registration number as well as the name and taxpayer
identification number of NATIONAL 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
NATIONAL PROPANE PARTNERS, L.P.
A-109
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<PAGE>
If you transfer your interest in National 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 National Propane Partners, L.P. 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.
FOR VALUE RECEIVED,______________________________ hereby assigns, conveys,
sells and transfers unto ______________________________
__________________________________ __________________________________________
(Please print or typewrite name (Please insert Social Security or other
and address of Assignee) identifying number of Assignee)
________________________________________ 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 National Propane Partners, L.P.
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 alternation, enlargement
or change.
SIGNATURE(S) MUST BE GUARANTEED ____________________________________________
BY A MEMBER FIRM OF THE (Signature)
NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. OR BY A ____________________________________________
COMMERCIAL BANK OR TRUST (Signature)
COMPANY
SIGNATURE(S) GUARANTEED
A-110
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<PAGE>
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.
________________________________
A-111
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<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 National 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 General Partner 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.
Date: ______________________________
______________________________________________ _______________________________
Social Security or other identifying number of Signature of Assignee
Assignee
______________________________________________ _______________________________
Purchase Price including commissions, if any Name and Address of Assignee
Type of Entity (check one):
[ ] Individual [ ] Partnership [ ] Corporation
[ ] Trust [ ] Other (specify) ____________________
Nationality (check one)
[ ] U.S. Citizen, Resident or Domestic Entity
[ ] Foreign Corporation [ ] Non-resident Alien
If the U.S. Citizen, Resident or Domestic Entity box is checked, the
following certification must be completed.
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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).
A-113
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<PAGE>
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)
A-114
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<PAGE>
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 signee will hold the Common Units
shall be made to the best of the Assignee's knowledge.
A-115
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<PAGE>
APPENDIX B
FORM OF APPLICATION FOR TRANSFER OF COMMON UNITS
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.
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 National 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 General Partner 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 Ageement, (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.
Date: ________________________________
<TABLE>
<S> <C>
- --------------------------------------------------------- ------------------------------------------------------
Social Security or other identifying number of Assignee Signature of Assignee
- --------------------------------------------------------- ------------------------------------------------------
Purchase Price including commissions, if any Name and Address of Assignee
</TABLE>
Type of Entity (check one):
[ ] Individual [ ] Partnership [ ] Corporation
[ ] Trust [ ] Other (specify) _________________________
Nationality (check one)
[ ] U.S. Citizen, Resident or Domestic Entity
[ ] Foreign Corporation [ ] Non-resident Alien
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If the U.S. Citizen, Resident or Domestic Entity box is checked, the
following certification must be completed.
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.
B-2
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APPENDIX C
GLOSSARY OF CERTAIN TERMS
Acquisition: Any transaction in which any member of the Partnership Group
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
or revenues of the Partnership Group above the operating capacity or revenues of
the Partnership Group existing immediately prior to such transaction.
Adjusted Operating Surplus: 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 and (ii) any net reduction in cash reserves for Operating Expenditures
that otherwise increased the Operating Surplus generated during such period, 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 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.
Affiliate: With respect to any Person, another Person that controls, is
controlled by or is under common control with (either directly or indirectly),
such Person (including, with respect to the General Partners, without
limitation, Triarc, DWG Acquisition Group, L.P., Nelson Peltz, Peter W. May or
any of their respective Affiliates). For purposes of this definition 'control'
of a Person means the ability to direct or cause the direction of the management
and policies of such Person whether through the ownership of voting securities,
by contract or otherwise.
Audit Committee: A committee of the board of directors of the Managing
General Partner or the Special General Partner composed entirely of two or more
directors who are neither officers nor employees of such General Partner nor
officers, directors or employees of any Affiliate of such General Partner
(except that such directors may be directors of both General Partners).
Available Cash: With respect to any fiscal quarter of the Partnership,
prior to liquidation of the Partnership:
(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 made 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 Managing General Partner to (i) provide
for the proper conduct of the business of the Partnership Group, (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 is a party or by which it is bound or its
assets are subject, or (iii) provide funds for distributions to Unitholders
and the General Partners in respect of any one or more of the next four
quarters; provided, however, disbursements made or cash reserves
established, increased or reduced after the end of any quarter but on or
before the date on which the Partnership makes its distribution of
Available Cash in respect of such quarter shall be deemed to have been
made, established, increased or reduced for purposes of determining
Available Cash within such quarter if the Managing General Partner so
determines. Notwithstanding the foregoing, 'Available Cash' after the
liquidation of the Partnership occurs shall equal zero.
Bank Credit Facility: The $40 million acquisition facility (the
'Acquisition Facility') and the $15 million working capital facility (the
'Working Capital Facility'), both entered into by the Operating Partnership.
BTU: British thermal unit. The quantity of heat required to raise the
temperature of one pound of water by one degree Fahrenheit.
Capital Account: The capital account maintained for a Partner pursuant to
the Partnership Agreement. The Capital Account of a partner in respect of a
General Partner Interest, a Common Unit, a Subordinated Unit, an Incentive
Distribution Right or any other Partnership Interest shall be the
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<PAGE>
amount which such Capital Account would be if such general partner interest,
Common Unit, Subordinated Unit, 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, Common Unit,
Subordinated Unit, Incentive Distribution Right or other Partnership Interest
was first issued.
Capital Improvements: Additions or improvements to the capital assets owned
by any member of the Partnership Group or the acquisition of existing or the
construction of new capital assets (including, without limitation, retail
distribution outlets, propane tanks, pipeline systems, storage facilities,
appliance showrooms, training facilities and related assets), made to increase
the operating capacity of the Partnership Group over the operating capacity of
the Partnership Group existing immediately prior to such addition, improvement,
acquisition or construction.
Capital Surplus: All Available Cash distributed by the Partnership from any
source will be treated as being distributed from Operating Surplus until the sum
of all Available Cash distributed since the commencement of the Partnership
equals the Operating Surplus as of the end of the quarter prior to such
distribution. Any excess Available Cash will be deemed to be from Capital
Surplus.
Cause: Means (A) 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 a general partner
of the Partnership or (B) the Special General Partner, prior to the Triarc
Merger does not have the same directors on its Board of Directors as the
Managing General Partner.
Closing Date: The first date on which Common Units are sold by the
Partnership to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
Common Unit Arrearage: The amount by which the Minimum Quarterly
Distribution in respect of a quarter during the Subordination Period exceeds the
distribution of Available Cash from Operating Surplus actually made for such
quarter on a Common Unit, cumulative for such quarter and all prior quarters
during the Subordination Period.
Common Units: A Unit representing a fractional part of the Partnership
Interests of all partners of the Partnership and assignees of any such limited
partner's interest and having the rights and obligations specified with respect
to Common Units in the Partnership Agreement.
Conveyance, Contribution and Assumption Agreement: The Conveyance,
Contribution and Assumption Agreement to be dated the Closing Date among the
Operating Partnership, the General Partners, the Partnership and certain other
parties which provides for, among other things, the principal transaction
pursuant to which substantially all of the assets of the Managing General
Partner will be transferred and substantially all of its liabilities will be
assumed by the Operating Partnership.
Current Market Price: With respect to any class of Units as of any date,
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. '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 on the principal national securities
exchange 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, 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 National Association of Securities Dealers,
Inc. Automated Quotation System 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 Managing General Partner, 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 Managing General Partner.
'Trading Day' means a day on which the principal national securities exchange on
which Units of any class are listed or admitted to trading is open for the
transaction of business or, if the 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.
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Degree Day: Degree Days measure the amount by which the average of the high
and low temperature on a given day is below 65 degrees Fahrenheit. For example,
if the high temperature is 60 degrees and the low temperature is 40 degrees for
a National Oceanic and Atmospheric Administration measurement location, the
average temperature is 50 degrees and the number of Degree Days for that day is
15.
Delaware Act: The Delaware Revised Uniform Limited Partnership Act, 6 Del
C. SS17-101, et seq., as amended, supplemented or restated from time to time,
and any successor to such statute.
Departing Partner: A former General Partner from and after the effective
date of any withdrawal or removal of such former General Partner pursuant to the
provisions of the Partnership Agreement.
EBITDA: Operating income (loss) plus depreciation and amortization
(excluding amortization of deferred financing cost). As used in this Prospectus,
EBITDA is not intended to be construed 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).
General Partners: The Managing General Partner and the Special General
Partner and their successors or permitted assigns as general partners of the
Partnership and the Operating Partnership.
Incentive Distributions: The distributions of Available Cash from Operating
Surplus initially made to the Managing General Partner that are in excess of the
General Partners' aggregate General Partner Interests and are not related to the
Managing General Partner's ownership of Subordinated Units or Common Units. The
Managing General Partner may transfer its right to receive such distributions to
one or more Persons.
Initial Common Units: The Common Units sold in the Offering.
Initial Unit Price: An amount per Unit equal to the initial public offering
price of the Initial Common Units as set forth on the outside front cover page
of this Prospectus.
Interim Capital Transactions: (a) Borrowings, refinancings and 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 member of the Partnership Group, (b) sales of equity
interests by any member of the Partnership Group, and (c) sales or other
voluntary or involuntary dispositions of any assets of any member of the
Partnership Group (other than (i) sales or other dispositions of inventory in
the ordinary course of business, (ii) sales or other dispositions of other
current assets, including, without limitation, receivables and accounts, in the
ordinary course of business, (iii) sales or other dispositions of assets as a
part of normal retirements or replacements) or (iv) like kind exchanges of
operating assets to the extent that the operating assets received are of equal
or greater value, in each case prior to the commencement of the dissolution and
liquidation of the Partnership.
Limited Partner: Unless the context otherwise requires, any Person holding
a limited partner interest in the Partnership and having the rights and
obligations specified with respect to a Limited Partner (as such term is defined
in the Partnership Agreement).
Managing General Partner: National Propane Corporation and its successors
and permitted assigns, as managing general partner of the Partnership.
Minimum Quarterly Distribution: $0.525 per Common Unit with respect to each
quarter or $2.10 per Common Unit on an annualized basis, subject to adjustment
as described in 'Cash Distribution Policy -- Distributions from Capital Surplus'
and ' -- Adjustment of Minimum Quarterly Distribution and Target Distribution
Levels.'
Operating Expenditures: All Partnership Group expenditures, including
taxes, reimbursements of the General Partners, 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 Managing General Partner, 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
and premium on such Indebtedness.
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(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)
distributions to partners. Where capital expenditures are made in part for
Acquisitions or Capital Improvements and in part for other purposes, the
Managing General Partner's good faith allocation between the amounts paid
for each shall be conclusive.
Operating Partnership: National Propane, L.P., a Delaware limited
partnership, the Partnership's subsidiary operating partnership, and any
successors thereto and any other subsidiary operating partnerships and
corporations.
Operating Partnership Agreement: The Amended and Restated Agreement of
Limited Partnership of the Operating Partnership (the form of which will be
filed as an exhibit to the Registration Statement of which this Prospectus is a
part), as it may be amended, supplemented or restated from time to time.
Operating Surplus: At the close of any fiscal quarter of the Partnership
prior to liquidation, on a cumulative basis and without duplication:
(a) the sum of (i) $16,300,000, plus all cash and cash equivalents of
the Partnership Group as of the close of business on the Closing Date, and
(ii) all cash receipts of the Partnership Group for the period beginning on
the Closing Date and ending with the last day of such period, other than
cash receipts from Interim Capital Transactions, less
(b) the sum of (i) Operating Expenditures for the period beginning on
the 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 Managing General Partner to provide funds for future
Operating Expenditures; provided however, disbursements made (including
contributions to a member of the Partnership Group or disbursements on
behalf of a member of the Partnership Group) or cash reserves established,
increased or reduced after the end of any quarter but on or before the date
on which the Partnership makes its distribution of Available Cash in
respect of such quarter shall be deemed to have been made, established,
increased or reduced for purposes of determining Operating Surplus, within
such quarter if the Managing General Partner so determines. Operating
Surplus after the liquidation of the Partnership occurs shall equal zero.
Opinion of Counsel: A written opinion of counsel (who may be regular
counsel to Triarc, the Partnership or the General Partners or any of their
Affiliates) acceptable to the Managing General Partner in its reasonable
discretion to the effect that the taking of a particular action will not result
in the loss of the limited liability of the limited partners of the Partnership
under the Delaware Act or cause the Partnership to be treated as an association
taxable as a corporation or otherwise taxed as an entity for federal income tax
purposes.
Partnership: National Propane Partners, L.P., a Delaware limited
partnership, and any successor thereto.
Partnership Agreement: The Amended and Restated Agreement of Limited
Partnership of the Partnership (the form of which is included in this Prospectus
as Appendix A), as it may be amended, supplemented or restated from time to
time. Unless the context requires otherwise, references to the Partnership
Agreement constitute references to the Partnership Agreement of the Partnership
and the Operating Partnership Agreement, collectively.
Partnership Group: The Partnership, the Operating Partnership and any
subsidiary of either such entity, treated as a single consolidated partnership.
Partnership Interest: An interest in the Partnership, which shall include
General Partner Interests, Common Units, Subordinated Units, rights to receive
Incentive Distributions or any other equity securities of the Partnership, or a
combination thereof or interest therein as the case may be.
Partnership Loan: The $40.7 million loan from the Operating Partnership to
Triarc made on the Closing Date.
Partnership Security: Means any class or series of Units, 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.
Person: An individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, government
agency or political subdivision thereof or other entity.
Special General Partner: National Propane SGP, Inc. and its successors and
permitted assigns, as non-managing general partner of the Partnership.
C-4
<PAGE>
<PAGE>
Subordination Period: The Subordination Period will generally extend from
the closing of this Offering until the first day of any quarter beginning after
June 30, 2001 in respect of which (i) distributions of Available Cash from
Operating Surplus on the Common Units and the Subordinated Units with respect to
each of the three consecutive 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 during such periods, (ii)
the Adjusted Operating Surplus generated during each of the three consecutive
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 and the related distribution on the General Partner Interests
in the Partnership during such periods, and (iii) there are no outstanding
Common Unit Arrearages. A portion of the Subordinated Units will convert into
Common Units on the first day after the record date established for the
distribution in respect of any quarter ending on or after (a) June 30, 1999
(with respect to 1,320,872 Subordinated Units, plus 25% of all Subordinated
Units issued upon conversion of all or a portion of the Special General
Partner's General Partner Interest) and (b) June 30, 2000 (with respect to
1,320,872 Subordinated Units, plus 25% of all Subordinated Units issued upon
conversion of all or a portion of the Special General Partner's General Partner
Interest), in respect of which (i) distributions of Available Cash from
Operating Surplus on the Common Units and the Subordinated Units with respect to
each of the three consecutive 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 during such periods, (ii)
the Adjusted Operating Surplus generated during each of the two consecutive
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 and the related distribution on the General Partner Interest
in the Partnership during such periods, and (iii) there are no outstanding
Common Unit Arrearages; provided, however, that the early conversion of the
second tranche of Subordinated Units may not occur until at least one year
following the early conversion of the first tranche of Subordinated Units. In
addition, if the Managing General Partner is removed as general partner of the
Partnership other than for Cause (i) the Subordination Period will end and all
outstanding Subordinated Units will immediately convert into Common Units on a
one-for-one basis, (ii) any existing Common Unit Arrearages will be extinguished
and (iii) the General Partners will have the right to convert their general
partner interests (and the right to receive Incentive Distributions) into Common
Units or to receive cash in exchange for such interests.
Subordinated Unit: A Unit representing a fractional part of the Partnership
Interests of all partners of the Partnership and assignees of any such partner's
interest and having the rights and obligations specified with respect to
Subordinated Units in the Partnership Agreement.
Target Distribution Levels: See 'Cash Distribution Policy -- Incentive
Distributions -- Hypothetical Annualized Yield.'
Transfer Application: An application for transfer of Units in the form set
forth on the back of a certificate, substantially in the form included in this
Prospectus as Appendix B or in a form substantially to the same effect in a
separate instrument.
Unitholders: Holders of the Common Units and the Subordinated Units.
Unit Majority: 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 voting as a class.
Units: The Common Units and the Subordinated Units, collectively, but shall
not include rights to receive Incentive Distributions.
Unrecovered Capital: At any time, with respect to a Unit, the Initial Unit
Price, less the sum of all distributions theretofore made in respect of an
Initial Common Unit constituting Capital Surplus 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
such Unit, adjusted as the Managing General Partner determines to be appropriate
to give effect to any distribution, subdivision or combination of such Units.
C-5
<PAGE>
<PAGE>
____________________________________ ___________________________________
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE PARTNERSHIP OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON UNITS IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE PARTNERSHIP SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Prospectus Summary................................................................................................... 6
Risk Factors......................................................................................................... 33
The Transactions..................................................................................................... 47
Use of Proceeds...................................................................................................... 48
Capitalization....................................................................................................... 49
Dilution............................................................................................................. 50
Cash Distribution Policy............................................................................................. 51
Selected Historical and Pro Forma Consolidated Financial and Operating Data.......................................... 66
Management's Discussion and Analysis of Financial Condition and Results of Operations................................ 68
Business and Properties.............................................................................................. 78
Management........................................................................................................... 91
Security Ownership of Certain Beneficial Owners and Management....................................................... 99
Certain Relationships and Related Transactions....................................................................... 100
Conflicts of Interest and Fiduciary Responsibility................................................................... 101
Description of the Common Units...................................................................................... 106
The Partnership Agreement............................................................................................ 109
Units Eligible for Future Sale....................................................................................... 120
Tax Considerations................................................................................................... 121
Investment in the Partnership by Employee Benefit Plans.............................................................. 138
Underwriting......................................................................................................... 139
Legal Matters........................................................................................................ 140
Experts.............................................................................................................. 140
Additional Information............................................................................................... 140
Index to Financial Statements........................................................................................ F-1
Form of Amended and Restated Agreement of Limited Partnership of National Propane Partners, L.P. .................... Appendix A
Form of Application for Transfer of Common Units..................................................................... Appendix B
Glossary of Certain Terms............................................................................................ Appendix C
</TABLE>
UNTIL , 1996 ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON
UNITS, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
6,190,476 COMMON UNITS
NATIONAL PROPANE
PARTNERS, L.P.
REPRESENTING
LIMITED PARTNER INTERESTS
------------------------------
PROSPECTUS
------------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
, 1996
____________________________________ ___________________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below are the expenses (other than underwriting discounts and
commissions) expected to be incurred in connection with the issuance and
distribution of the securities registered hereby. With the exception of the
Securities and Exchange Commission registration fee, the NASD filing fee and the
NYSE filing fee, the amounts set forth below are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................. $ 52,780
NASD filing fee................................................................. 15,806
NYSE filing fee................................................................. 88,100
Printing and engraving expenses................................................. *
Legal fees and expenses......................................................... 1,200,000
Accounting fees and expenses.................................................... 350,000
Blue Sky fees and expenses...................................................... 15,000
Transfer agent fees and expenses................................................ *
Miscellaneous expenses.......................................................... 250,000
----------
Total...................................................................... $ *
----------
----------
</TABLE>
- ------------
* To be furnished by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Section of the Prospectus entitled 'The Partnership
Agreement -- Indemnification' is incorporated herein by this reference.
Reference is made to Section of the Underwriting Agreement filed as
Exhibit 1.1 to this Registration Statement.
Subject to any terms, conditions or restrictions set forth in the
Partnership Agreements, Section 17-108 of the Delaware Revised Limited
Partnership Act empowers a Delaware limited partnership to indemnify and hold
harmless any partner or other person from and against all claims and demands
whatsoever.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
There has been no sale of securities of the Partnership within the past
three years.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a. Exhibits:
<TABLE>
<C> <S>
1.1 -- Form of Underwriting Agreement
*3.1 -- Form of Amended and Restated Agreement of Limited Partnership of National Propane Partners, L.P.
(included as Appendix A to the Prospectus)
3.2 -- Form of Amended and Restated Agreement of Limited Partnership of National Propane, L.P.
5.1 -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to the legality of the securities being registered
8.1 -- Opinion of Andrews and Kurth L.L.P. relating to tax matters
10.1 -- Form of Credit Agreement among National Propane, L.P. and certain banks
10.2 -- Form of Note Purchase Agreement among and National Propane Partners, L.P.
10.3 -- Form of Conveyance, Contribution and Assumption Agreement, among National Propane, L.P., National Propane
Partners, L.P., National Propane Corporation, National Propane SGP, Inc. and National Sales and Service,
Inc.
10.4 -- Form of Note, in the principal amount of $40.7 million, issued by Triarc to National Propane, L.P.
</TABLE>
II-1
<PAGE>
<PAGE>
<TABLE>
<C> <S>
10.5 -- Form of 1996 National Propane Unit Option Plan
`D'10.6 -- Employment Agreement, dated as of April 24, 1993, between National Propane Corporation and Ronald D.
Paliughi (including Amendment No. 1, dated as of December 7, 1994 and Amendment No. 2, dated as of March
27, 1995)
`D'10.7 -- Severance Agreement, dated as of December 1, 1995, between National Propane Corporation and Ronald R.
Rominiecki
`D'10.8 -- Severance Agreement, dated as of March 27, 1995, between National Propane Corporation and Laurie B.
Crawford
10.9 -- Triarc's 1993 Equity Participation Plan
10.10 -- Form of Non-Incentive Stock Option Agreement under Triarc's 1993 Equity Participation Plan
21.1 -- List of Subsidiaries
*23.1 -- Consent of Deloitte & Touche LLP
*23.2 -- Consent of Arthur Andersen LLP
23.3 -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in Exhibit 5.1)
23.4 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit 8.1)
`D'24.1 -- Powers of Attorney (included on signature page)
*27. -- Financial Data Schedule
</TABLE>
- ------------
* Filed herewith
`D' Previously filed
b. Financial Statement Schedules --
All financial statement schedules are omitted because the information is
not required, is not material or is otherwise included in the financial
statements or related notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the 'Securities Act'), may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefor, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York, State of New York, on May 10, 1996.
NATIONAL PROPANE PARTNERS, L.P.
By: NATIONAL PROPANE CORPORATION
AS GENERAL PARTNER
By: *
...................
Name: Ronald D. Paliughi
Title: President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS PRE-EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED
BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED AS OF MAY 10, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ NELSON PELTZ Director of National Propane May 10, 1996
......................................... Corporation
(NELSON PELTZ)
* Director of National Propane May 10, 1996
......................................... Corporation
(PETER W. MAY)
* President, Chief Executive Officer and May 10, 1996
......................................... Director of National Propane
(RONALD D. PALIUGHI) Corporation (Principal Executive Officer)
* Senior Vice President and Chief May 10, 1996
......................................... Financial Officer of National Propane
(RONALD R. ROMINIECKI) Corporation (Principal Financial and
Accounting Officer)
*By: /S/ NELSON PELTZ May 10, 1996
.........................................
NELSON PELTZ
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
- ----------- ---------------------------------------------------------------------------------------------- --------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement.............................................................
*3.1 -- Form of Amended and Restated Agreement of Limited Partnership of National Propane Partners,
L.P. (included as Appendix A to the Prospectus).............................................
3.2 -- Form of Amended and Restated Agreement of Limited Partnership of National Propane, L.P.....
5.1 -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to the legality of the securities
being registered............................................................................
8.1 -- Opinion of Andrews and Kurth L.L.P. relating to tax matters................................
10.1 -- Form of Credit Agreement among National Propane, L.P. and certain banks....................
10.2 -- Form of Note Purchase Agreement among and National Propane Partners, L.P....
10.3 -- Form of Conveyance, Contribution and Assumption Agreement, among National Propane, L.P.,
National Propane Partners, L.P., National Propane Corporation, National Propane SGP, Inc.
and National Sales and Service, Inc.........................................................
10.4 -- Form of Note, in the principal amount of $40.7 million, issued by Triarc to National
Propane, L.P................................................................................
10.5 -- Form of 1996 National Propane Unit Option Plan.............................................
`D'10.6 -- Employment Agreement, dated as of April 24, 1993, between National Propane Corporation and
Ronald D. Paliughi (including Amendment No. 1, dated as of December 7, 1994 and Amendment
No. 2, dated as of March 27, 1995)..........................................................
`D'10.7 -- Severance Agreement, dated as of December 1, 1995, between National Propane Corporation and
Ronald R. Rominiecki........................................................................
`D'10.8 -- Severance Agreement, dated as of March 27, 1995, between National Propane Corporation and
Laurie B. Crawford..........................................................................
10.9 -- Triarc's 1993 Equity Participation Plan....................................................
10.10 -- Form of Non-Incentive Stock Option Agreement under Triarc's 1993 Equity Participation
Plan........................................................................................
21.1 -- List of Subsidiaries.......................................................................
*23.1 -- Consent of Deloitte & Touche LLP...........................................................
*23.2 -- Consent of Arthur Andersen LLP.............................................................
23.3 -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in Exhibit 5.1)..............
23.4 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit 8.1)................................
`D'24.1 -- Powers of Attorney (included on signature page)............................................
*27 -- Financial Data Schedule....................................................................
</TABLE>
- ------------
* Filed herewith
`D' Previously filed
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-2768 of National Propane Partners, L.P. of our reports relating to the
financial statements of National Propane Corporation and subsidiaries and of
National Propane Partners, L.P. dated March 13, 1996 appearing in the
Prospectus, which is part of such Registration Statement, and to the reference
to us under the headings 'Selected Historical and Pro Forma Consolidated
Financial and Operating Data' and 'Experts' in such Prospectus.
DELOITTE & TOUCHE LLP
Cedar Rapids, Iowa
May 9, 1996
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use
of our report on the financial statements (not included herein) of Public Gas
Company for the ten months ended December 31, 1993 and to all references to our
Firm included in this registration statement of National Propane Partners, L.P.
on Form S-1.
ARTHUR ANDERSEN LLP
Miami, Florida,
May 9, 1996.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,825
<SECURITIES> 0
<RECEIVABLES> 17,371
<ALLOWANCES> (980)
<INVENTORY> 10,543
<CURRENT-ASSETS> 34,099
<PP&E> 165,216
<DEPRECIATION> (82,002)
<TOTAL-ASSETS> 139,112
<CURRENT-LIABILITIES> 38,456
<BONDS> 124,266
<COMMON> 1
0
0
<OTHER-SE> (48,601)
<TOTAL-LIABILITY-AND-EQUITY> 139,112
<SALES> 148,983
<TOTAL-REVENUES> 148,983
<CGS> 109,059
<TOTAL-COSTS> 109,059
<OTHER-EXPENSES> 25,423
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,719
<INCOME-PRETAX> 3,686
<INCOME-TAX> 4,291
<INCOME-CONTINUING> (605)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (605)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<PAGE>
