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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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NATIONAL PROPANE PARTNERS, L.P.
(NAME OF SUBJECT COMPANY)
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NATIONAL PROPANE PARTNERS, L.P.
(NAME OF PERSON FILING STATEMENT)
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COMMON UNITS REPRESENTING LIMITED PARTNER INTERESTS
(TITLE OF CLASS OF SECURITIES)
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637250 10 1
(CUSIP NUMBER OF CLASS OF SECURITIES)
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RONALD R. ROMINIECKI
PRESIDENT AND CHIEF OPERATING OFFICER
NATIONAL PROPANE PARTNERS, L.P.
SUITE 1700, IES TOWER
200 FIRST STREET SE
CEDAR RAPIDS, IOWA 52401
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person Filing Statement)
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WITH A COPY TO:
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MICHAEL ROSENWASSER, ESQ. FREDERICK W. KANNER, ESQ.
ANDREWS & KURTH L.L.P. DEWEY BALLANTINE LLP
805 THIRD AVENUE 1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10019
(212) 850-2800 (212) 259-8000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is National Propane Partners, L.P., a
Delaware limited partnership (the 'National MLP'), and the address of the
principal executive offices of the National MLP is Suite 1700, IES Tower, 200
First Street SE, Cedar Rapids, Iowa 52401. The title of the class of equity
securities to which this statement relates is the common units representing
limited partner interests of the National MLP (the 'National Common Units').
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the cash tender offer (the 'Offer') disclosed in
the Tender Offer Statement on Schedule 14D-1, dated April 9, 1999 (the 'Schedule
14D-1'), the Offer to Purchase filed as Exhibit (a)(1) thereto (the 'Offer to
Purchase') and the related letter of transmittal filed as Exhibit (a)(2)
thereto, filed by Columbia Propane, L.P., a Delaware limited partnership (the
'Purchaser'), CP Holdings, Inc., a Delaware corporation and the managing general
partner of the Purchaser (the 'Purchaser General Partner'), Columbia Propane
Corporation, a Delaware corporation and parent company of Purchaser General
Partner ('Purchaser Holdings') and Columbia Energy Group, the parent company of
Purchaser Holdings. The Offer relates to the purchase by the Purchaser of all of
the outstanding National Common Units at a price of $12.00 per National Common
Unit, net to the seller in cash without interest thereon (the 'Offer
Consideration'), upon the terms and conditions set forth therein. The Offer is
being made by the Purchaser pursuant to the purchase agreement dated as of April
5, 1999 (the 'Purchase Agreement') by and among the Purchaser, Purchaser General
Partner, Purchaser Holdings, the National MLP, National Propane Corporation, the
managing general partner of the National MLP (the 'National MGP'), National
Propane SGP, Inc., the special general partner of the National MLP (the
'National SGP' and, together with the National MGP, the 'General Partners'), and
Triarc Companies, Inc. ('Triarc'), a copy of which is filed as Exhibit 1 hereto
and incorporated herein by reference.
The Offer is the first step of a two-step cash transaction. In the second
step, subject to the terms and conditions of the Purchase Agreement, Purchaser
Holdings would indirectly acquire the general partner interests and subordinated
unit interests of the National MLP from subsidiaries of Triarc and the National
MLP would merge (the 'Merger') into the Purchaser.
As part of the second step, any remaining holders of National Common Units
would receive, in cash, the same per unit price as that paid to holders who
tender their National Common Units pursuant to the Offer. Triarc would receive
$17.9 million for its acquired interests in the National MLP,
composed of $2.1 million in cash and $15.8 million payable in the
form of the forgiveness of indebtedness owed by Triarc to National Propane,
L.P., a Delaware limited partnership (the 'National OLP'), all of the limited
partner interests of which are owned by the National MLP. Simultaneously, and as
a condition of the closing, Triarc will prepay $14.9 million of
such indebtedness. Following the closing, Triarc, through the National MGP,
would retain a 1.0% limited partner interest in the Purchaser.
The Schedule 14D-1 states that the address of the principal executive
offices of the Purchaser, Purchaser General Partner and Purchaser Holdings is
9200 Arboretum Parkway, Suite 140, Richmond, Virginia 23235, and that the
address of the principal executive offices of Columbia Energy Group is 13880
Dulles Corner Lane, Herndon, Virginia 20171. A copy of the joint press release
issued by Purchaser Holdings and the National MLP on April 5, 1999 is filed as
Exhibit 2 hereto and incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the National MLP, which is the entity
filing this statement, are set forth in Item 1 above.
(b) Except as described or referred to below, there exists on the date
hereof no material contract, agreement, arrangement or understanding and no
actual or potential conflict of interest between the National MLP or its
affiliates and (i) the National MLP, its affiliates or the executive officers or
directors
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of the National MGP, or (ii) Purchaser, Purchaser General Partner, Purchaser
Holdings and Columbia Energy Group or any of their executive officers, directors
or affiliates.
The Purchase Agreement. The following is a summary of the Purchase Agreement,
which summary is qualified in its entirety by reference to the Purchase
Agreement, a copy of which is filed as Exhibit 1 hereto and incorporated herein
by reference.
Agreements to Purchase Acquired Interests; The Merger. On the terms and
subject to the conditions of the Purchase Agreement, the Purchaser, in addition
to making the Offer, has agreed to acquire, directly or indirectly as more fully
described below, (i) 100% of the outstanding subordinated units representing
subordinated general partner interests in the National MLP (the 'National
Subordinated Units'), (ii) 100% of the unsubordinated general partner interests
in the National MLP and 100% of the incentive distribution rights representing
general partner interests in the National MLP, (iii) 100% of the unsubordinated
general partner interests in the National OLP, and (iv) substantially all of the
limited partner interests (all of which are referred to herein as the 'National
OLP Interests') in the National OLP (collectively, the items in clauses (i)
through (iv) above and the National Common Units are referred to as the
'Acquired Interests'). The Purchase Agreement further provides that following
the satisfaction or waiver of the conditions described below under 'Conditions
to the Merger,' the National MLP will be merged with and into the Purchaser, and
each then outstanding National Common Unit (other than National Common Units
owned by the Purchaser or any affiliate of the Purchaser), will be converted
into the right to receive an amount in cash equal to the Offer Consideration.
The Purchase Agreement provides that, if the Offer is consummated, Triarc
will unconditionally and irrevocably pay $14,883,720 to the National OLP under
the promissory note in the original principal amount of $40.7 million with a
remaining outstanding balance (immediately prior to the payment referred to in
this sentence) of $30.7 million issued by Triarc to the National OLP (the
'Triarc Note'), together with interest, calculated based on a rate per annum of
9.44%, for the period from the date of acceptance of National Common Units in
the Offer to the closing of the Merger, on a principal amount equal to (x) $2.40
multiplied by (y) the number of National Common Units accepted and paid for in
the Offer. Triarc will make such payment immediately prior to the direct or
indirect acquisition of the Acquired Interests and closing of the Merger as
described below. Thereafter, the National MGP will cause (i) the National MLP to
redeem (A) all 1% of the unsubordinated general partner interests in the
National MLP owned by the National SGP in exchange for the simultaneous
distribution to the National SGP of a 0.9798% limited partner interest in the
National OLP, (B) all 4,533,638 National Subordinated Units and all incentive
distribution rights owned by the National MGP in exchange for the simultaneous
distribution to the National MGP of a 22.6351% limited partner interest in the
National OLP, and (C) all 1% of the unsubordinated general partner interest in
the National MLP owned by the National MGP (other than a general partner
interest valued at $1,000) in exchange for the simultaneous distribution to the
National MGP of a 0.9798% limited partner interest in the National OLP, and
immediately thereafter, (ii) the National OLP to redeem all of the National OLP
Interests owned by the National MGP, other than a 1.0% National OLP Interest
(inclusive of the interest in (C) above) (which, for purposes of determining the
aggregate consideration to be paid to the National General Partners under the
Purchase Agreement, shall be initially valued at $700,000), in exchange for the
simultaneous assignment and distribution to the National MGP of the Triarc Note,
the principal amount of which (at the time of the assignment and distribution
referred to in this clause (ii)) will be $15,816,280.
In addition, the Purchase Agreement provides that, following the foregoing
reorganization, at the closing of the Merger, (x) the Purchaser will purchase
all of the National OLP Interests owned by the National SGP for an aggregate
consideration of $686,000, and (y) Purchaser General Partner will purchase (i)
all of the National OLP general partner interests owned by the National SGP for
an aggregate consideration of $707,000, and (ii) all of the National OLP general
partner interests owned by the National MGP (other than a National OLP general
partner interest valued at $1,000) for an aggregate consideration of $706,000.
The Purchase Agreement further provides that, at the date and time of
filing of a certificate of merger with the Delaware Secretary of State with
respect to the Merger (the 'Effective Time'), by
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virtue of the Merger and without any action on the part of the Purchaser, the
National MLP or any holder of National Common Units, (i) each of the National
Common Units not owned by the Purchaser or an affiliate thereof will be
converted into the right to receive an amount in cash equal to the highest
amount per National Common Unit paid to holders of National Common Units in the
Offer, (ii) the general partner interest in the National MLP owned by the
National MGP will be converted into the right to receive $1,000 in cash, and
(iii) each partnership interest of the Purchaser outstanding immediately prior
to the Effective Time will be converted into one partnership interest of the
Purchaser as the surviving entity in the Merger, with the same rights, powers
and privileges as the interest so converted and will constitute the only
outstanding partnership interests of the Purchaser as the surviving entity.
Purchaser General Partner has agreed that, immediately following the
closing of the Merger, it will purchase the general partner interest valued at
$1,000 in the National OLP held by the National MGP for $1,000 and, as successor
general partner of the National OLP, it will cause the National OLP to convert
the 1.0% limited partner interest held by the National MGP in the National OLP
into a 1.0% special limited partner interest in the National OLP (the 'Special
OLP Interest'). The Special OLP Interest to be held by the National MGP will
have limited voting rights and will be nontransferable (except to an affiliate
of the National MGP) other than as described in the next paragraph.
The Purchase Agreement provides that the National MGP may require, at any
time upon prior written notice and subject among other things to the condition
that good title be transferred, that the Purchaser OLP (which, as used herein,
refers to the National OLP following the Merger) purchase all (but not less than
all) of the Special OLP Interest for cash in an amount equal to the fair market
value of the Special OLP Interest as of the date of such notice, as determined
by a nationally recognized independent appraiser or investment banking firm
selected by Purchaser General Partner. The Purchase Agreement further provides
that Purchaser General Partner may require, at any time upon written notice to
the National MGP, that the National MGP sell to the Purchaser OLP all (but not
less than all) of the Special OLP Interest and deliver good title thereto in
consideration of (i) the payment of the cash price as provided in the
immediately preceding sentence, and (ii) an additional amount in cash, if such
sale is consummated within ten years after the Effective Time, equal to (A) any
incremental gain realized by the National MGP resulting from a decrease in its
share of Indemnified Debt (as hereinafter defined), multiplied by (B) a
fraction, the numerator of which is the Effective Tax Rate (as defined in the
Purchase Agreement) and the denominator of which is one minus the Effective Tax
Rate.
Vote Required to Approve Merger. The Merger will require the approval of
the holders of a majority of the outstanding National Common Units, including
the National Common Units owned by the Purchaser, and a majority of the
outstanding National Subordinated Units, all of which National Subordinated
Units are held by the National MGP. If the Offer is consummated and the
condition that at least the number of National Common Units that constitutes a
majority of the then outstanding National Common Units on a fully diluted basis
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer (the 'Minimum Condition') is satisfied, upon admission to the National
MLP as a limited partner, the Purchaser will be able to approve the Merger
without the vote of any other holder of National Common Units.
Under the Purchase Agreement, the Purchaser has agreed to execute a
consent, as the holder of greater than a majority of the National Common Units
following consummation of the Offer, and the National MGP has agreed to execute
a consent, as holder of all the National Subordinated Units, to approve the
Merger and all other transactions contemplated by the Purchase Agreement.
If the Merger is consummated, holders of National Common Units who elected
not to tender their National Common Units in the Offer will have their interests
in the National Common Units converted into the right to receive the same amount
of cash consideration in exchange for each National Common Unit as they would
have received in the Offer.
Conditions to the Offer. The Purchase Agreement provides that,
notwithstanding any other provision of the Offer, the Purchaser will not be
required to accept for payment or pay for any National Common Units tendered
pursuant to the Offer, and may terminate, extend or amend the Offer and may
postpone the acceptance for payment of and payment for National Common Units
tendered, if (i) the Minimum Condition has not been satisfied, (ii) any
applicable waiting period under the Hart-Scott-
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Rodino Antitrust Improvements Act of 1976, as amended (the 'HSR Act'), has not
expired or been terminated prior to the expiration of the Offer, or (iii) at any
time on or after the date of the Purchase Agreement, and prior to the acceptance
for payment of National Common Units, any of the conditions described below
shall exist:
(a) there shall be instituted or pending any action or proceeding, or
there shall have been issued and remain in effect any temporary restraining
order, preliminary or final injunction, order or decree by any court or
governmental, administrative or regulatory authority or agency, domestic or
foreign, resulting from any action or proceeding brought by any person
which does or could reasonably be expected to (i) restrain or prohibit the
making of the Offer or the consummation of any of the other transactions
contemplated by the Purchase Agreement (the 'Transactions'), (ii) prohibit
or limit ownership or operation by the National MLP, Purchaser General
Partner or the Purchaser of all or any material portion of the business or
assets of the National MLP and its subsidiaries, taken as a whole, or
Purchaser General Partner or any of its subsidiaries, or compel the
National MLP, Purchaser General Partner or any of their subsidiaries to
dispose of or hold separate all or any material portion of the business or
assets of the National MLP, Purchaser General Partner, the Purchaser or any
of their subsidiaries or impose any material limitation on the ability of
Purchaser General Partner or the Purchaser to conduct such business or own
such assets, in each case as a result of the Transactions; (iii) impose
material limitations on the ability of Purchaser Holdings, Purchaser
General Partner or the Purchaser (A) to exercise effectively full rights of
ownership of any National Common Units or any of the other Acquired
Interests, including, without limitation, the right to vote any National
Common Units acquired by the Purchaser pursuant to the Offer, or otherwise
on all matters properly presented to the National MLP's unitholders,
including, without limitation, the approval and adoption of the Purchase
Agreement and the Transactions or (B) to effectively control through the
general partner interests included in the Acquired Interests the business
and operations of the National MLP, National OLP or National Sales and
Service Inc. ('NSSI'); or (iv) require divestiture by Purchaser General
Partner, the Purchaser or any of their affiliates of any significant (in
terms of value or control rights) partnership interest in the National MLP
or the National OLP;
(b) there shall have been any action taken, or any statute, rule,
regulation, order or injunction enacted, entered, enforced, promulgated,
amended, issued or deemed applicable to (i) Purchaser General Partner, the
National MLP or any subsidiary or affiliate of Purchaser General Partner or
the National MLP or (ii) any Transaction, by any legislative body, court,
government or governmental, administrative or regulatory authority or
agency, domestic or foreign, in the case of both (i) and (ii) other than
the routine application of the waiting period provisions of the HSR Act to
the Offer, or the Merger, in each case which results or could reasonably be
expected to result in any of the consequences referred to in clauses (i)
through (iv) of paragraph (a) above;
(c) prior to the expiration of the Offer, all material filings or
notifications required to be made prior to the acceptance for payment of
any National Common Units with any governmental entity shall not have been
made, and all material consents, approvals, authorizations or permits
required to be obtained prior to the acceptance for payment of any National
Common Units from all governmental entities in connection with the
consummation of the transactions contemplated by the Purchase Agreement
shall not have been obtained or shall not be in form and substance
reasonably satisfactory to the Purchaser;
(d) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange or in the over-the-counter market, (ii) a declaration of a banking
moratorium or any substantial limitation or suspension of, payments in
respect of banks in the United States, (iii) any material limitation
(whether or not mandatory) by any United States federal or state government
or governmental, administrative or regulatory authority or agency on the
extension of credit by banks or other lending institutions, (iv) a
commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United States
having a significant adverse effect on the functioning of the financial
markets in the United States, or (v) in the case of any of the foregoing
existing on April 5, 1999, a material acceleration or worsening thereof;
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(e) (i) the Board of Directors of the National MGP (the 'National
Board') or the special committee of the National Board (the 'Special
Committee') shall have withdrawn, modified, qualified or changed in a
manner adverse to Purchaser General Partner or the Purchaser the approval
or recommendation of the Offer, the Transactions, the Merger or the
Purchase Agreement or approved or recommended any National Possible
Alternative (as defined below) or any other acquisition of National Common
Units other than the Offer, the Transactions and the Merger or (ii) the
National Board or the Special Committee shall have resolved to do any of
the foregoing;
(f) any representation and warranty of the National MLP, the National
General Partners and Triarc (collectively with NSSI, the 'National
Parties') in the Purchase Agreement shall not be true and correct as of the
date of the Purchase Agreement and as of the scheduled or extended
expiration of the Offer as though such representation and warranty were
made at and as of such time, except for any representation and warranty
which is expressly made as of a specified date, in which case such
representation and warranty shall be true and correct as of such specified
date, except in all cases where the failure or failures of such
representations and warranties to be so true and correct (without giving
effect to any materiality or Material Adverse Effect (as defined in the
Purchase Agreement) qualification set forth therein) would not have or
would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect;
(g) the National Parties shall have failed to perform in any material
respect any material obligation or to comply in any material respect with
any material agreement or covenant of the National Parties to be performed
or complied with by them under the Purchase Agreement;
(h) the Purchase Agreement shall have been terminated in accordance
with its terms;
(i) any person, entity or 'group' other than Purchaser Holdings or any
of its affiliates shall have become the beneficial owner (as that term is
used in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the 'Exchange Act') of 33% or more of the outstanding National Common
Units;
(j) the Purchaser and the National MGP shall have agreed that the
Purchaser shall terminate the Offer or postpone the acceptance for payment
of or payment for National Common Units thereunder;
(k) Since September 30, 1998, and except as publicly disclosed prior
to the date of this Agreement by the National MLP, there shall have
occurred any Material Adverse Effect or any event or circumstance that
(singly or together with any other such events or circumstances) could
reasonably be expected to have a Material Adverse Effect;
(l) The Note Agreements (including Amendment No. 2 thereto which, like
the Note Agreements, is defined below) shall not be in full force and
effect or there shall exist and be continuing any Event of Default (as
defined therein) thereunder or any condition or event that, with the giving
of notice or the lapse of time or both, would constitute an Event of
Default thereunder; or
(m) There shall exist and be continuing under the credit agreement
dated June 26, 1996, as amended, by and among the National OLP, BankBoston,
N.A., and the bank lenders thereto (the 'Credit Agreement'), any Event of
Default (as defined therein) or any condition or event that, with the
giving of notice or passage of time or both, would constitute an Event of
Default thereunder (other than any such Event of Default that shall have
been waived pursuant to a waiver which is in full force and effect).
Conditions to the Purchase of Acquired Interests. The Purchase Agreement
provides that the obligations of the Purchaser and Purchaser General Partner to
purchase the Acquired Interests owned by the National Parties are subject to the
satisfaction or waiver of certain conditions, including the following: (i) the
reorganization of the National MLP as described above in the second paragraph
under 'Agreements to Purchase Acquired Interests; The Merger' having been
completed; (ii) the Purchase Agreement, the Merger and the other transactions
contemplated under the Purchase Agreement having been approved and adopted by
the affirmative vote of at least a majority of the outstanding National Common
Units voting as a class and at least a majority of the outstanding National
Subordinated Units
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voting as a class, to the extent required; (iii) no statute, rule, decision,
regulation, executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other governmental entity preventing the acquisition of the
Acquired Interests being in effect and no action or proceeding being pending
which could reasonably be expected to result in such an order or injunction;
(iv) the representations and warranties of the National Parties in the Purchase
Agreement regarding corporate and partnership authority, enforceability of the
Purchase Agreement and good and valid title to the Acquired Interests being true
and correct as of the date of closing of the Merger as though made as of such
date; (v) the Purchaser having previously accepted for payment and paid for all
validly tendered National Common Units pursuant to the Offer; and (vi) the
National OLP having prepaid all of its $125 million 8.54% First Mortgage Notes
due June 30, 2010 (the 'First Mortgage Notes') and approximately $13 million
under its acquisition line under the Credit Agreement.
Conditions to the Merger. The Purchase Agreement provides that the
obligations of the parties to effect the Merger are subject to the satisfaction
or waiver of certain conditions, including the following: (i) good and valid
title to the Acquired Interests owned by the National Parties having been
conveyed to the Purchaser and Purchaser General Partner pursuant to the Purchase
Agreement, free and clear of any liens, claims or encumbrances; (ii) the
Purchase Agreement, the Merger and the other transactions contemplated under the
Purchase Agreement having been approved and adopted by the affirmative vote of
at least a majority of the outstanding National Common Units voting as a class
and at least a majority of the outstanding National Subordinated Units voting as
a class, to the extent required; (iii) no statute, rule, decision, regulation,
executive order, decree, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
governmental entity preventing the consummation of the Merger being in effect
and no action or proceeding being pending which could reasonably be expected to
result in such an order or injunction; (iv) the representations and warranties
of the National Parties in the Purchase Agreement regarding corporate and
partnership authority and enforceability of the Purchase Agreement being true
and correct as of the date of closing of the Merger as though made as of such
date; provided, that this clause (iv) is only a condition to the obligations of
the Purchaser, Purchaser General Partner and Purchaser Holdings (the 'Purchaser
Parties'); and (v) the Purchaser having previously accepted for payment and paid
for all validly tendered National Common Units pursuant to the Offer.
No Solicitation. The Purchase Agreement provides that each of the National
Parties (on behalf of itself and its affiliates, including the National MLP and
the National OLP) will terminate all discussions and negotiations with others
regarding a sale or other transaction involving (a) the Acquired Interests, (b)
all or substantially all of the assets, business or securities of the National
MLP or the National OLP, or (c) any other transaction similar to the
transactions contemplated by the Purchase Agreement (collectively, the 'National
Possible Alternatives'), and will not, directly or indirectly, nor shall they
authorize or permit any of their officers, directors or employees to, or any
investment banker, financial advisor, attorney, accountant or other
representative retained by them to, so long as the Purchase Agreement remains in
effect, (i) solicit, initiate, encourage (including by way of furnishing
information or assistance), conduct discussions with or engage in negotiations
with any person or entity regarding or take any other action to facilitate any
inquiries or the making of any proposal which constitutes or may reasonably be
expected to lead to a National Possible Alternative, (ii) enter into an
agreement with any person or entity, other than the Purchaser or its affiliates,
providing for a National Possible Alternative, (iii) make or authorize any
statement, recommendation or solicitation in support of or approve any National
Possible Alternative by any person or entity, other than by the Purchaser or its
affiliates, or (iv) withdraw, modify, qualify or change the recommendation of
the transactions contemplated by the Purchase Agreement by the Special Committee
or the National Board.
Notwithstanding the foregoing provisions, prior to the consummation of the
Offer, Triarc, the National MLP, the National SGP, the National MGP and the
National OLP will be entitled to take any action otherwise prohibited by the
provisions of the Purchase Agreement described in the previous paragraph in
response to any third party inquiry, contact or proposal received by any or all
of them (including furnishing information to any such third party, but only
pursuant to a written confidentiality agreement) if (a) the initial inquiry,
contact or proposal from any third party was not received in violation of the
provisions described in the previous paragraph, (b) the Special Committee shall
have
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determined, in its good faith judgment, that any such otherwise prohibited
action could reasonably be expected to lead to the negotiation and consummation
of a National Possible Alternative that in the opinion of the Special Committee
could reasonably be expected to be more beneficial than the transactions
contemplated by the Purchase Agreement, taken as a whole, to the holders of
National Common Units other than the National MGP and its affiliates (a
'National Superior Transaction') and (c) the Special Committee shall have
determined, after consultation with and based on the advice of its outside legal
counsel, that the failure to take such action would be inconsistent with the
National MGP's or the National Board's fiduciary duties to holders of National
Common Units under applicable law; provided, that none of the National MGP, the
National SGP, the National MLP or the National OLP may execute a binding
agreement to effect a National Superior Transaction unless the Purchase
Agreement has first been terminated in accordance with the applicable terms
thereof. The Purchase Agreement further provides that Triarc, the National MGP
(on behalf of itself, the National MLP, the National OLP and the National SGP)
and the National MLP agree that each of them will notify Purchaser General
Partner immediately if any inquiry, contact or proposal is received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, it or any of its representatives,
indicating, in connection with such notice, the name of such person or entity
and the material terms and conditions of any inquiry, contact or proposal and
thereafter will keep Purchaser General Partner informed, on a current basis, of
the status and terms of any such inquiry, contact or proposal and the status of
any such negotiations or discussions.
Termination of Purchase Agreement. The Purchase Agreement may be terminated
at any time prior to the date on which the Purchaser accepts for payment, and
pays for, the National Common Units under the Offer (the 'Acceptance Date') (a)
by Purchaser General Partner and the National MGP upon their mutual written
agreement; (b) by (i) the Purchaser, if the Offer expires or is terminated or
withdrawn in accordance with its terms without any National Common Units being
purchased thereunder or as a result of the occurrence or existence of any
condition set forth in Annex A of the Purchase Agreement (see 'Conditions to the
Offer' above) but subject to the terms of the Offer; or (ii) the National MGP,
if the Offer is terminated, or has not been commenced in accordance with the
terms of the Purchase Agreement within five business days of the date of the
Purchase Agreement, or if the Purchaser has not purchased National Common Units
validly tendered and not withdrawn pursuant to the Offer in accordance with the
terms of the Purchase Agreement within 90 days after commencement of the Offer;
or (iii) the Purchaser if, as a result of the occurrence or existence of any
condition set forth in Annex A to the Purchase Agreement (see 'Conditions to the
Offer' above), the Offer has not been commenced in accordance with the terms of
the Purchase Agreement within 60 days of the date of the Purchase Agreement;
provided, however, that the party seeking to terminate the Purchase Agreement
pursuant to this clause (b) and its affiliated parties are not in material
breach of any of its representations, warranties or covenants contained in the
Purchase Agreement; (c) by the National MGP acting through the Special Committee
or by Purchaser General Partner, if the Special Committee determines that a
National Possible Alternative would constitute a National Superior Transaction
and the National Board or the Special Committee, consistent with the provisions
of the Purchase Agreement described in the second paragraph of 'No Solicitation'
above, withdraws, modifies, qualifies or changes in a manner adverse to the
Purchaser its recommendation that the holders of National Common Units tender
their National Common Units in the Offer; and (d) by the National MGP, if the
Purchaser has provided a notice to the National MGP that a change in applicable
tax laws has occurred and the National MGP notifies the Purchaser in writing
that the relevant tax law change would adversely affect the tax deferral for the
benefit of the National MGP sought to be achieved by the provisions described
below under 'Agreement with Respect to Tax Matters.'
The Purchase Agreement may also be terminated at any time prior to the
closing of the Merger by either Purchaser Holdings or the National MGP if the
closing of the Merger has not occurred by the date that is 210 days after
purchase of the National Common Units pursuant to the Offer; provided, however,
that no party whose breach of the Purchase Agreement has caused the failure to
so close will have the right to so terminate the Purchase Agreement.
Termination and Outside Date Breakage Fees; Fees and Expenses. If the
Purchase Agreement is terminated in accordance with the provisions described
under clause (c) of the first paragraph of 'Termination of Purchase Agreement'
above, the National MLP will have the obligation to pay or
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cause to be paid promptly (but in no event more than three days after the
Purchase Agreement is so terminated) to the Purchaser a fee of $3.0 million in
cash.
In the event that (i) the Purchase Agreement is terminated in accordance
with the provisions described under clause (c) of the first paragraph of
'Termination of Purchase Agreement' above, and (ii) within the twelve months
following such termination a National Possible Alternative is consummated which
is more beneficial than the transactions contemplated by the Purchase Agreement,
taken as a whole, to the holders of National Common Units other than the
National MGP and its affiliates, then the National MLP shall pay to the
Purchaser, within three days of such consummation, a topping fee equal to $6.0
million (inclusive of any amounts previously paid by the National MLP pursuant
to the immediately preceding paragraph). If any such transaction does not
involve the acquisition of substantially all of the interests in or assets of
the National MLP or the National OLP, then the calculation of the amount to be
paid in excess of amounts paid pursuant to the immediately preceding paragraph
will be adjusted on a pro rata basis.
In the event that the Purchase Agreement is terminated pursuant to the
provision discussed in the last paragraph under 'Termination of Purchase
Agreement' above or is terminated upon mutual agreement of the parties, on the
date of such termination Triarc has agreed to unconditionally and irrevocably
pay to the Purchaser, as an inducement for the Purchaser Parties to enter into
the Purchase Agreement and as a breakage payment for such termination, the sum
of (i) $2.40 multiplied by the number of National Common Units accepted and paid
for in the Offer, and (ii) interest on such amount, calculated based on a rate
per annum of 9.44%, for the period from the date the National Common Units are
accepted and paid for in the Offer to such date of termination.
The Purchase Agreement further provides that the National MLP and the
National OLP will pay all fees and expenses relating to (i) the National MLP's
filings with the Commission, (ii) obtaining the consent of the holders of
National OLP's First Mortgage Notes (except as provided in Amendment No. 2 dated
as of April 5, 1999 ('Amendment No. 2') to each of the separate Note Agreements
dated as of June 26, 1996 (as amended, the 'Note Agreements')) and (iii) up to
an aggregate of $1.5 million of the fees and expenses of the Special Committee
and its advisors and of certain appraisal and asset valuation services with
respect to the assets of the National OLP.
Conduct of Business by the National MLP and the National MGP Pending the
Merger. The National MLP has agreed that during the period from the date of the
Purchase Agreement to the Effective Time, it will (and the National MGP has
agreed to cause the National MLP, the National OLP and NSSI to), among other
things: (i) maintain its assets and properties in good working order and
condition and operate its business in the ordinary course as was being conducted
prior to the execution of the Purchase Agreement; (ii) use its commercially
reasonable efforts to maintain and preserve in all material respects its
business organization intact and maintain in all material respects its
relationships with suppliers, customers, lessors and others having business
relations with it; (iii) file on a timely basis all notices, reports or other
filings required to be filed with or reported to any governmental agency; (iv)
file on a timely basis all applications or other documents necessary to
maintain, renew or extend any material permit, license, variance or any other
approval required by any governmental authority necessary or required for the
continuing operation of its business, whether or not such approval would expire
before or after the Effective Time; and (v) (A) file or cause to be filed,
within the times and in the manner prescribed by law, all tax returns and tax
reports that are required to be filed by such person determined consistent with
prior practices; (B) pay or cause to be paid, within the time and in the manner
prescribed by law, all material taxes (including any estimated taxes) imposed on
such party that are currently due and payable; and (C) establish and maintain
reserves adequate to pay all material taxes not yet due or payable as of the
closing of the Merger.
The Purchase Agreement further provides that, from the date of the Purchase
Agreement until the Effective Time, the National MLP will not (except as
otherwise contemplated by the Purchase Agreement) (and the National MGP will
cause the National MLP, the National OLP and NSSI not to), without first
obtaining the written consent of Purchaser General Partner, which consent will
not be unreasonably withheld or delayed: (i) make any material change in the
conduct of its business and operations or its financial reporting and accounting
methods; (ii) other than in the ordinary course of business consistent with past
practice, enter into any material contract or agreement or terminate or
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amend in any material respect any material contract or agreement to which it is
a party, waive any material rights under any material contract or agreement to
which it is a party, or be in default in any material respect thereunder; (iii)
declare, set aside or pay any distributions to its partners or split, combine or
reclassify any of its equity securities or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any of its
equity securities, or purchase, redeem or otherwise acquire, directly or
indirectly, any such securities; (iv) merge into or with or consolidate with any
other corporation, partnership, person or other entity or acquire all or
substantially all of the business or assets of any corporation, partnership,
person or other entity or form, acquire any interest in or contribute any assets
to any partnership or joint venture or enter into any similar arrangement; (v)
make any change in its agreement of limited partnership; (vi) (A) make any
purchase of any securities of any corporation, partnership, person or entity, or
(B) make any investment in any corporation, partnership, joint venture or other
business enterprise (other than ordinary-course overnight investments consistent
with cash management practices of the National MLP and the National OLP); (vii)
incur any indebtedness for borrowed money (except for borrowings under existing
working capital facilities up to an aggregate of $l.0 million) or guarantee any
such indebtedness or issue, sell or guarantee any debt securities or any rights
or warrants to acquire any debt securities; (viii) sell, lease, pledge, encumber
or otherwise dispose of any portion of its assets other than in the ordinary
course of business consistent with past practice; (ix) issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, any of its equity
securities or securities convertible into its equity securities, or
subscriptions, rights, warrants or options to acquire or other agreements or
commitments of any character obligating it to issue any such securities; (x)
settle in excess of $l.0 million (individually or in the aggregate) any claim,
demand, lawsuit or state or federal regulatory proceeding not covered by
insurance; (xi) except as required on an emergency basis, purchase, lease or
otherwise acquire any property of any kind whatsoever other than in the ordinary
course of business or make any capital expenditures in excess of $1.0 million in
the aggregate; (xii) allow or permit the expiration, termination or cancellation
at any time of any material insurance policy applicable to its business or
operations, unless such policy is replaced, with no loss of coverage, by a
comparable insurance policy (to the extent available on commercially reasonable
terms); (xiii) (A) make or rescind any material express or deemed election
relating to taxes, (B) make a request for a tax ruling or enter into a tax
closing agreement, (C) settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit, or controversy
relating to taxes other than as otherwise set forth in the Purchase Agreement,
or (D) change any of its methods of reporting material income or deductions for
federal income tax purposes from those employed in the preparation of its
federal income tax return for the taxable year ending December 31, 1997, except
as may be required by a change in applicable law; or (xiv) commit to do any of
the foregoing.
In the Purchase Agreement, the National MGP covenants that from the date of
the Purchase Agreement until the Effective Time, (i) it will use its
commercially reasonable efforts to retain its employees related to the operation
of the National MLP and the National OLP, (ii) it will not hire any employee
except in the ordinary course of business consistent with past practice, (iii)
it will not hire any management personnel with an annual salary in excess of
$65,000 without first giving Purchaser General Partner a reasonable opportunity
to consult with the National MGP regarding such prospective hire, (iv) it will
not adopt any material new employee benefit plan, arrangement, practice or
policy, or material employment, severance, consulting or other compensation
arrangement, with or for the benefit of new or existing employees, or, except as
otherwise set forth in the Purchase Agreement, amend any existing employee
benefit plan, arrangement, practice or policy, or existing employment,
severance, consulting or other compensation arrangement in any material respect,
without prior written consent of the Purchaser, which consent shall not be
unreasonably withheld, (v) it will not materially increase the compensation or
level of benefits applicable to its employees, except for normal increases
consistent with past practice, (vi) it will not materially change the nature of
the National MLP's at cost reimbursement obligation for employee services, and
(vii) it will not permit NSSI to do any of the foregoing.
The National Parties further agreed in the Purchase Agreement that they
will, and will cause the National OLP to: (a) keep Amendment No. 2 to the Note
Agreements in effect, and not amend or modify Amendment No. 2, the Note
Agreements or the First Mortgage Notes without the prior written
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consent of the Purchaser which shall not be unreasonably withheld; (b) comply
with their respective obligations under Amendment No. 2; and (c) not give the
preliminary or the final notice of optional prepayment under the Note Agreements
without the prior written consent of the Purchaser which shall not be
unreasonably withheld. In Amendment No. 2 to the Note Agreements, the
noteholders agreed to a prepayment option wherein the National OLP may prepay
the First Mortgage Notes on the date of the Merger. Prepayment of the First
Mortgage Notes and the amounts under the acquisition line is a condition to the
obligations of the Purchaser and Purchaser General Partner to purchase the
Acquired Interests.
Employees and Employee Benefits. Under the Purchase Agreement, the parties
agreed that all employees of the National MGP in connection with the business of
the National MLP and the National OLP will be offered employment by the
Purchaser Parties. The parties further agreed that the Purchaser will assume all
costs of severance relating to such employees under the National MGP employee
retention program, under certain employment and severance agreements and will
assume any amounts related to payments under certain stock, phantom stock, unit
or phantom unit plans maintained by the National MGP. The Purchaser agreed to
assume all liabilities of the National Parties to, or with respect to, such
employees (or their dependents or beneficiaries) related to or based upon their
employment with the National Parties. The Purchaser also agreed to assume any
and all of the National MGP's and the National Parties' obligations under
certain collective bargaining agreements existing at the Effective Time with
respect to such employees.
In connection with any withdrawal liability under Section 4201(a) of the
Employee Retirement Income Security Act of 1974, as amended ('ERISA') by reason
of the consummation of the transactions under the Purchase Agreement, the
parties have agreed that the Purchaser has the option in its sole discretion to
either (i) enter into an agreement with the National Parties under Section 4204
of ERISA pursuant to which it will contribute to the multiemployer plans to
which the National Parties had an obligation to contribute with respect to such
employees of the National MGP immediately prior to the Effective Time, for
substantially the same number of contribution base units for which the National
Parties had an obligation to contribute for each of such multiemployer plans or
(ii) pay directly the amount of any withdrawal liability incurred in connection
with such multiemployer plans by reason of the consummation of the transactions
under the Purchase Agreement where no agreement referred to in clause (i) above
was effected, except if such liability is caused by the failure of any one of
the National Parties to satisfy the requirements of Section 4204 of ERISA.
If the Purchaser completely or partially withdraws from any such
multiemployer plan during the first five plan years beginning after the
Effective Time, the National Parties agreed in the Purchase Agreement to be
secondarily liable for any withdrawal liability that the National Parties would
have incurred at the Effective Time were it not for the application of Section
4204 of ERISA. The National MGP also agreed in the Purchase Agreement to take no
action that would reasonably be expected to result in increased severance cost
obligations to the Purchaser or its affiliates without the prior written consent
of Purchaser General Partner, which shall not be unreasonably withheld, except
as permitted as described under 'Conduct of Business by the National MLP and
National MGP Pending the Merger' above.
Under the Purchase Agreement, the Purchaser and the Purchaser OLP agreed to
fully indemnify, defend, and hold harmless the National Parties from and against
any liability, loss, damage or expense the National Parties may incur as a
result of any claim made with respect to any obligation of, or liability assumed
by, the Purchaser and Purchaser OLP pursuant to the foregoing employee-related
provisions of the Purchase Agreement.
Agreements with Respect to Indemnification of National General Partners,
Triarc and Directors and Officers. Pursuant to the Purchase Agreement, the
Purchaser, Purchaser Holdings and Purchaser General Partner have agreed that,
from and after the closing of the Merger, they will (and will cause the
Purchaser OLP to) jointly and severally indemnify and hold harmless the National
General Partners, Triarc and their respective stockholders, officers, directors,
affiliates, successors and assigns (including any person who has acted in any
such capacity at any time prior to the Effective Time), in the manner set forth
in Section 7.7 of the National MLP's Amended and Restated Agreement of Limited
Partnership (the 'National MLP Partnership Agreement') and Section 7.7 of the
National OLP's
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Amended and Restated Agreement of Limited Partnership (the 'National OLP
Partnership Agreement'), from and against all losses, costs, damages, expenses
(including reasonable attorneys fees), liabilities and claims (collectively,
'Losses') arising or resulting from or relating to the National MLP, the
National OLP, the National General Partners or NSSI, from which such persons, or
any of them, would have been entitled to be indemnified pursuant to such
sections in such partnership agreements, except in each case for Losses for
which the National MGP is indemnifying the Purchaser and its affiliates under
the Purchase Agreement; provided, that such indemnification will not be limited
to payments out of the assets of the National MLP or the Purchaser OLP.
The Purchaser, Purchaser Holdings and Purchaser General Partner have also
agreed that, from and after the closing of the Merger, they will (and will cause
the Purchaser OLP to) jointly and severally indemnify and hold harmless, to the
fullest extent permitted by law, the National General Partners, Triarc and their
respective stockholders, officers, directors, affiliates, successors and assigns
from and against any and all Losses arising or resulting from, or relating to
(a) certain expenses of or relating to the National MLP's and the National OLP's
operations incurred by the National MGP for which the National MLP has a
reimbursement obligation to the National MGP under the National MLP Agreement;
(b) any material breach of the representations or warranties of the Purchaser
Parties in the Purchase Agreement; (c) the conduct of the business or operations
of the Purchaser, the Purchaser OLP, the National MLP, the National OLP or NSSI
following the Effective Time; (d) certain litigation matters described in the
Purchase Agreement; and (e) certain real property located in Marshfield,
Wisconsin, except in each case of clauses (a) through (c) for Losses for which
the National MGP is indemnifying the Purchaser and its affiliates as described
below.
Agreements with Respect to Indemnification of the Purchaser Parties and
Directors and Officers. Under the Purchase Agreement, the National MGP has
agreed that, from and after the closing of the Merger, it will indemnify and
hold harmless Purchaser Holdings and its affiliates, any successors thereto, or
any of the preceding persons who subsequent to the date of the closing of the
Merger guarantees or otherwise incurs any liability with respect to the
Indemnified Debt (as defined below), from and against any and all Losses arising
or resulting from, or relating to any payments that Purchaser Holdings and its
affiliates or any successors thereto are required to make (and make) from their
own funds (after prior recourse is had to the assets of the Purchaser OLP) with
respect to the National OLP debt at the closing of the Merger (consisting of
approximately $140 million principal amount of indebtedness) and any
refinancing, refunding or replacement thereof ('Indemnified Debt'), due to the
inability of the Purchaser OLP to pay or refinance any such Indemnified Debt
from the assets of the Purchaser OLP (such indemnity, the 'Debt Indemnity'). The
National MGP and Triarc have further agreed in the Purchase Agreement that, from
and after the consummation of the Offer, they will jointly and severally
indemnify and hold harmless Purchaser Holdings, the Purchaser, Purchaser General
Partner and their respective stockholders, officers, directors, affiliates,
successors and assigns from and against any and all Losses arising or resulting
from, or relating to (i) any material breach of the representations or
warranties of the National Parties in the Purchase Agreement relating to
organization, existence, powers and qualification, partnership or corporate
authority to enter into the Purchase Agreement and ownership of the Acquired
Interests, or (ii) any claim made by any holder of indebtedness of the National
OLP, to the extent relating to any act or omission of the National MGP, Triarc
or their affiliates prior to closing of the Merger, if such claim has been
asserted in writing prior to the consummation of the Offer and does not arise
from or relate to the transactions contemplated by the Purchase Agreement or any
action or omission otherwise requested by the Purchaser.
Agreements with Respect to Tax Matters. Under the Purchase Agreement, from
the date of closing of the Merger until the expiration of the Debt Indemnity,
the Purchaser agreed that it will not, and Purchaser Holdings agreed that it
will cause the Purchaser, Purchaser General Partner and Purchaser OLP not to,
without the prior written consent of the National MGP, (i) except as required by
applicable law (as defined therein), implement or adopt any material change in
the Purchaser OLP's current federal income tax methods, principles or elections
to be specifically identified by the National Parties, (ii) sell or otherwise
dispose of any assets of the Purchaser OLP (except as otherwise agreed) if such
sale or disposition would result in greater than $5,000,000 of gain per year on
a cumulative basis permitting carry-forwards, to be allocable to the National
MGP pursuant to Section 704(c) of the Code; or (iii) increase as of any date
following the date of closing of the Merger the Section 704 carrying value
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of the assets contributed to the National OLP by the National MGP and the
National SGP, as provided therein. In the event that either the Purchaser or the
Purchaser OLP breaches covenant (i), (ii) or (iii) of this paragraph, subject to
certain limits contained in the Purchase Agreement, Purchaser Holdings,
Purchaser General Partner and the Purchaser OLP agreed to indemnify the National
MGP, in an amount equal to the sum of (x) (A) the incremental gain recognized as
a result of such breach, as calculated therein, multiplied by (B) a fraction,
the numerator of which is the maximum net marginal statutory federal and state
income tax rates (expressed as a decimal) in the jurisdictions applicable to the
National MGP for the year in which such gain is recognized (taking into account
the deductibility of state income tax in determining the liability for federal
income tax) (the 'Effective Tax Rate') and the denominator of which is one minus
the Effective Tax Rate and (y) any other losses, costs, damages, expenses (other
than taxes but including attorneys fees and interest, penalties and additions to
tax imposed on the National Parties by any taxing authority) as a result of such
breach but only to the extent such damages result in a cash expenditure by one
of the National Parties.
Purchaser Holdings and Purchaser General Partner further agreed, following
the Effective Time and until the termination of the Debt Indemnity, to cause the
Purchaser OLP not to (a) prepay, defease, purchase or otherwise retire any of
the Indemnified Debt, except as provided therein, (b) modify any of the
Indemnified Debt so as to eliminate or limit the recourse liability of the
National MGP with respect thereto, (c) merge or consolidate with or otherwise
become a corporation for federal income tax purposes, (d) cause or permit any
other corporation, partnership, person or entity (other than Purchaser Holdings
and its affiliates, or any successor thereto, or any successor to the Purchaser
OLP) to assume, guarantee, indemnify against or otherwise incur any liability
with respect to any Indemnified Debt, or (e) except as required by applicable
law (as defined therein), take or fail to take any other action that would
result in the share of the Indemnified Debt which is allocated to the National
MGP for purposes of Section 752 of the Internal Revenue Code of 1986, as
amended, (the 'Code') and Treasury Regulations promulgated thereunder pursuant
to the Debt Indemnity to be reduced by an amount in excess of the National MGP's
adjusted tax basis in its interest in the Purchaser OLP, as adjusted following
the Effective Time and as so identified by the National MGP (the 'MGP's Basis');
provided, however, that such covenants will only apply to the extent any actions
described in (a), (b), (c), (d) or (e) above would result in the share of the
Indemnified Debt which is allocated to the National MGP for purposes of Section
752 of the Code to be reduced by an amount in excess of the MGP's Basis at all
times until termination of the Debt Indemnity. In addition, Purchaser Holdings
and Purchaser General Partner have agreed to cause the Purchaser OLP to
refinance scheduled principal payments on the Indemnified Debt with sufficient
recourse debt so that at all times until the termination of the Debt Indemnity,
the amount of Indemnified Debt which is allocable to the National MGP for
purposes of Section 752 of the Code will not be reduced by an amount exceeding
the National MGP's Basis. The Purchase Agreement provides that following the
Effective Time and until the termination of the Debt Indemnity, (i) Purchaser
Holdings and Purchaser General Partner will cause the Purchaser OLP to use all
commercially reasonable efforts to not take or omit to take any action, if such
action or omission would constitute a breach of, or give rise to a default or
event of default under, any Indemnified Debt, and (ii) the National MGP will
have the right, but not the obligation, to arrange for the refinancing described
above if and only if the Purchaser OLP is unable to do so in accordance with
this paragraph. The Purchase Agreement further provides that, in the event that
before termination of the Debt Indemnity, the National MGP's share of the
Indemnified Debt for purposes of Section 752 of the Code is reduced by an amount
in excess of the National MGP's Basis as a result of a breach by Purchaser
Holdings or Purchaser General Partner or any affiliate or any successor thereto
of any provision in the Purchase Agreement, subject to certain limits contained
in the Purchase Agreement, Purchaser Holdings, Purchaser General Partner and the
Purchaser OLP agreed to indemnify the National MGP in an amount equal to the sum
of (x) (A) the gain recognized by the National MGP resulting from a decrease in
the National MGP's share of the Indemnified Debt (plus any penalties or
additions to tax imposed on the National Parties by any taxing authority as a
result of such breach), multiplied by (B) a fraction, the numerator of which is
the Effective Tax Rate and the denominator of which is one minus the Effective
Tax Rate and (y) any other losses, costs, damages, expenses (other than taxes
but including attorneys fees and interest, penalties and additions to tax
imposed on the National Parties by
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any taxing authority) as a result of such breach but only to the extent such
damages result in a cash expenditure by one of the National Parties.
Notwithstanding the foregoing, the Purchase Agreement provides that no
indemnity will be provided by any Purchaser Party to the National MGP with
respect to any Losses arising under the foregoing tax indemnity provisions to
the extent that any such Losses or any portion thereof are attributable to (i)
the Internal Revenue Service determining the National MGP is not a partner with
respect to the Purchaser OLP or the Debt Indemnity is not recognized as an
obligation by the National MGP to make payments with respect to the Indemnified
Debt or reimburse a third party with respect to the Indemnified Debt resulting
in the Indemnified Debt not being allocated to the National MGP under Code
Section 752 or (ii) any merger of the National MGP with or into Triarc or an
affiliate of Triarc, or any transfer of the Acquired Interests prior to the
closing of the Merger permitted by the Purchase Agreement, results in the
recognition by the National MGP, National SGP or any transferee thereof or any
successor thereto of any income or gain for federal income tax purposes, except
in each case to the extent such determination results from the breach by
Purchaser or Purchaser Holdings of any provision of the Purchase Agreement.
Upon the terms and subject to the limits of a guaranty agreement, Columbia
Energy Group has agreed to guarantee the Purchaser Parties' indemnification
obligations for any breaches of the tax-related provisions described in the
first and second paragraphs under 'Agreements with Respect to Tax Matters'
above.
The National MGP and the Purchaser agreed in the Purchase Agreement that,
at any time until the expiration of the Debt Indemnity, the fair market value of
the assets of National OLP will be determined in accordance with an appraisal
conducted by a valuation firm (the 'Original Appraiser') prior to closing of the
Merger, performed in a manner consistent with the assumptions and methodologies
used by such firm in its appraisal of the assets upon formation of National OLP;
provided that, if such appraisal places the value of the depreciable and
amortizable assets at less than $117 million, the Purchaser may cause an
appraisal of such assets to be performed by an independent, nationally
recognized appraiser selected by it. If the second appraisal places the value of
such assets at $130 million or less, the National MGP and the Purchaser will,
for all tax and Code Section 704 book purposes, utilize such value. If the
second appraisal places the value of such assets at more than $130 million, the
value placed on such assets by the first appraisal shall be utilized for all tax
and Code Section 704 book purposes. The preliminary appraisal conducted by the
Original Appraiser resulted in a value for such assets at the low end of the
$117-$130 million range, which if confirmed in the final report, would eliminate
the need for a second appraisal.
Consents, Approvals and Filings. The Purchase Agreement provides that each
of the parties thereto will use its commercially reasonable efforts to take, or
cause to be taken, all appropriate action, and to do or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Purchase
Agreement, including but not limited to making all required regulatory filings
and applications and obtaining all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental entities or
authorities and parties to contracts as are necessary for the consummation of
the Merger and other transactions contemplated by the Purchase Agreement and to
otherwise fulfill the conditions to the consummation of the Purchase Agreement.
The Purchase Agreement further provides that, during the period from the
date of the Purchase Agreement to the Effective Time, the parties will use
commercially reasonable efforts to obtain any consents necessary to transfer
title to, and shall use their respective commercially reasonable efforts to
transfer title to, any assets used primarily in the business of the National MLP
or the National OLP (whether owned by the National MLP or the National MGP, but
excluding the capital stock of any subsidiaries of the National MGP) including,
but not limited to, any tradenames, intellectual property rights, real property
rights or personal property rights, from the National MGP, the National SGP and
the National MLP to the National OLP. If any such consents are not obtained, the
National MGP will use its commercially reasonable efforts to take such other
action as may be necessary to provide the Purchaser OLP (as defined in the
Purchase Agreement) with rights to such assets substantially equivalent to those
held by the National MGP, the National SGP and the National MLP.
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The National MGP and Purchaser General Partner also agreed to cooperate in
(a) causing the National MGP, the National MLP and the National OLP to take all
actions necessary to comply with applicable requirements of environmental and
health and safety laws concerning the transfer of property, assets, stock or a
business, (b) effectuating the issuance, assignment or transfer, as promptly as
is reasonably possible on or after the Effective Time, of all licenses or
permits required as of the Effective Time, and (c) identifying, preparing and
filing any notices or reports required from Purchaser General Partner in
connection with the transfer or issuance of the required permits.
Representations and Warranties. The Purchase Agreement contains various
customary representations and warranties of the parties thereto. These include
representations and warranties of the National MLP, the National General
Partners and Triarc with respect to, among other things, the following matters:
(i) organization, existence, powers and qualification, (ii) partnership or
corporate authority to enter into the Purchase Agreement, (iii) the filings of
the National MLP made with the Commission, (iv) the financial statements of the
National MLP, (v) the documents relating to the Offer, (vi) the absence of
certain material adverse changes, (vii) ownership of the Acquired Interests,
(viii) non-contravention of the Purchase Agreement with certain laws, agreements
or orders, (ix) absence of defaults under certain agreements or orders, (x)
completeness of documents provided, (xi) brokerage arrangements, (xii)
undisclosed liabilities, (xiii) absence of certain litigation, (xiv) compliance
with laws, and (xv) certain environmental, labor, insurance, intellectual
property, employee benefits and tax matters.
The Purchaser, Purchaser General Partner and Purchaser Holdings have also
made certain representations and warranties with respect to, among other things,
the following matters: (i) organization, existence, powers and qualification,
(ii) partnership or corporate authority to enter into the Purchase Agreement,
(iii) non-contravention of the Purchase Agreement with certain laws, agreements
or orders, (iv) absence of defaults under certain agreements, (v) the documents
relating to the Offer, (vi) the sufficiency of funds to acquire the Acquired
Interests, and (vii) brokerage arrangements.
Termination of Indemnities and Survival Periods. All obligations of the
National MGP (other than obligations with respect to payments that may become
due as a result of any claims made by any holder of Indemnified Debt prior to
the date of termination) with respect to the Debt Indemnity shall terminate upon
the sale of the Special OLP Interest pursuant to the Put Notice or Call Notice
(both as defined in the Purchase Agreement). None of the representations and
warranties in the Purchase Agreement survive the Acceptance Date, other than
certain representations and warranties concerning (i) organization, existence,
powers, qualification and partnership or corporate authority to enter into the
Purchase Agreement (Sections 3.1 and 3.2 of the Purchase Agreement), which will
survive until April 5, 2000, and (ii) ownership of and title to the Acquired
Interests (Section 3.7 of the Purchase Agreement), which do not terminate. All
covenants, agreements and indemnities contained in the Purchase Agreement which
by their terms are to be performed after the closing of the Merger and the other
transactions shall survive the closing of the Merger.
Access to Information. Under the Purchase Agreement, from the date of the
Purchase Agreement to the Effective Time or until the Purchase Agreement is
terminated as provided therein, each of the National MGP and the National MLP
will provide, and the National MGP will cause the National OLP to provide, to
each of the Purchaser Parties reasonable and prompt access to all of its books,
records (including making copies as reasonably requested), assets, properties,
employees, agents and representatives, and will furnish or cause to be
furnished, as applicable, to each of the Purchaser Parties such information as
any such party may reasonably request, upon prior notice and during normal
business hours, unless that access and disclosure would violate the terms of any
Agreement to which any of the National Parties or the National OLP is bound or
any applicable law or regulation. Each of the Purchaser Parties has agreed,
until the closing of the Merger, to maintain the confidentiality of any data or
information so acquired in accordance with the terms of an existing
confidentiality agreement between Purchaser Holdings and Triarc.
Information Statement; Agreement to Execute Written Consents. The Purchase
Agreement provides that as soon as practicable following the purchase of all
National Common Units validly tendered and not withdrawn pursuant to the Offer,
if required by applicable law, the National MGP will file an
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information statement (the 'Information Statement') with the Securities and
Exchange Commission (the 'SEC') under the Exchange Act, and will use its
commercially reasonable efforts to have the Information Statement cleared by the
SEC. Purchaser General Partner and the National MGP further agreed to cooperate
with each other in the preparation of any Information Statement, and the
National MGP agreed to notify Purchaser General Partner of the receipt of any
comments of the SEC with respect to any Information Statement and of any
requests by the SEC for any amendment or supplement thereto or for additional
information and agreed to provide to Purchaser General Partner promptly copies
of all correspondence between the National MGP or any representative of the
National MGP and the SEC.
Under the Purchase Agreement, the Purchaser has agreed to execute a
consent, on the first business day following expiration of twenty calendar days
from the date of mailing of the Information Statement, as the holder of the
majority of the National Common Units, and the National MGP has agreed to so
execute a consent, as the holder of all of the National Subordinated Units, to
approve all of the transactions contemplated by the Purchase Agreement.
Amendment; Binding Effect and Assignment. The Purchase Agreement provides
that no supplement, modification or waiver of the Purchase Agreement will be
binding unless executed in writing by the party to be bound thereby. The parties
agreed that the Purchase Agreement will be binding upon and inure to the benefit
of the parties thereto and their respective successors and permitted assigns;
but neither the Purchase Agreement nor any of the rights, benefits or
obligations thereunder may be assigned, by operation of law or otherwise, by any
party thereto without the prior written consent of either Purchaser General
Partner or the National MGP, as applicable, other than as set forth therein.
Nothing in the Purchase Agreement, express or implied, is intended to confer
upon any person or entity other than the parties thereto and their respective
successors and permitted assigns any rights, benefits or obligations thereunder.
The Payment Guaranty Agreement. Upon the terms and subject to the limits of a
guaranty agreement. Columbia Energy Group has agreed to guarantee the Purchaser
Parties' indemnification obligations for any breaches of the tax-related
provisions described in the first and second paragraphs under 'Agreements with
Respect to Tax Matters' above, for a specified maximum amount, which maximum
amount declines according to a schedule over the 15 year term of such guaranty.
Indemnification Matters. Certain officers and directors of the National MGP have
indemnification rights under the charter and bylaws of the National MGP and
National SGP, as well as in the National MLP Partnership Agreement and the
National OLP Partnership Agreement. In addition, each of the National MGP's
directors have entered into Indemnification Agreements with the National MGP,
copies of which are filed as Exhibits 7, 8, 9, 10 and 11 hereto and incorporated
herein by reference. The performance by the National MGP of its obligations
under each of the Indemnification Agreements has been, in each case, guaranteed
by Triarc pursuant to Guaranty Agreements, copies of which are filed as
Exhibits 12, 13, 14, 15 and 16 hereto and are incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation. The National Board, acting on the recommendation of the
Special Committee, has unanimously approved and adopted the Purchase Agreement,
the Offer and the Merger and has determined that the Offer and the Merger are
fair to and in the best interests of the holders of National Common Units. For
the reasons set forth under (b) below, the National Board unanimously recommends
that the holders of National Common Units accept the Offer and tender their
National Common Units.
Any determination of fairness involves many different issues and
considerations, and is inherently subjective. Further, conflicts of interest
were present in negotiating and structuring the transaction and in determining
the allocation of the consideration to be received by the holders of National
Common Units, on the one hand, and the General Partners, on the other hand.
Triarc, the parent of the National MGP, has differing interests in the
National MLP from you. Eachmember of the National Board is or was either
an officer or director of Triarcor a subsidiary of Triarc, or has had business
relationships with Triarc, asubsidiary of Triarc, or members of Triarc's Board
of Directors. We thereforeencourage you not to rely solely on the Board of
Directors' recommendation in
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determining whether to accept the offer and tender your common units, but rather
to independently consider the information included herein as well as other
available information about the National MLP.
In addition, the process by which the Special Committee considered the
fairness of the Transactions was not the equivalent of an arms' length
negotiation with the National MGP and Triarc. In this regard, (i) the director
who served on the Special Committee was also a director of the National MGP,
with social and professional ties to the other directors of the National MGP,
and with statutory fiduciary duties to the shareholders of the National MGP and
(ii) the Special Committee did not have available to it, as a practical matter,
the management resources that would have been available to an independent
company negotiating with Triarc. The Special Committee and its financial and
legal advisors, however, had access to all available information that was
provided to potential purchasers of the National MLP. It should also be noted
that the Special Committee did not have any direct discussions or contacts with
any potential purchaser of the National MLP (although it did have a number of
meetings with the National MGP and with Triarc).
Mr. Ryckman, the sole member of the Special Committee, currently serves as
a member of the National Board and serves as chairman and/or director of a
number of other companies. From 1986-1988, Mr. Ryckman served on the Board of
Directors of Triangle Industries, Inc., a public company then controlled by Mr.
Nelson Peltz and Mr. Peter May. Messrs. Peltz and May are directors of the
National MGP and serve, respectively, as Chairman and Chief Executive Officer
and President and Chief Operating Officer, as well as directors of Triarc.
Messrs. Peltz and May have each invested in private investment funds managed by
Mr. Ryckman and each currently owns investments with a cost basis of
approximately $100,000 in such a fund. For his service on the Special Committee,
Mr. Ryckman will be paid a fee of $50,000 plus $750 per meeting of the Special
Committee and will be reimbursed for his out-of-pocket expenses related to his
service on the Special Committee. He will also be entitled to, as are all
members of the National Board, certain rights of indemnification by the National
MGP that have been guaranteed by Triarc.
(b) Background; Reasons for the Recommendation.
Ownership of the National MLP and the Decision to Sell. Beginning in April
1993 (the date that a change of control of Triarc occurred), Triarc's business
strategy included focusing its business resources on its then four core
businesses: beverages, restaurants, textiles and specialty chemicals and
liquefied petroleum gas. Beginning in 1995, Triarc began the process of
expanding its beverage business by acquiring Mistic Brands, Inc. At
approximately the same time, Triarc retained investment banking firms to review
strategic alternatives to maximize the value of its textiles and specialty
chemicals and liquefied petroleum gas businesses. In April 1996, Triarc
completed the sale of its textile business and in July 1996 Triarc completed the
National MLP's IPO which resulted in the sale to the public by Triarc of
approximately 57% of the National MLP. Following the National MLP's IPO, Triarc
continued to expand its beverage business, acquiring Snapple Beverage Corp. and
Cable Car Beverage Corporation. In December 1997, Triarc completed the sale of
its specialty chemical business and effective as of the close of business on
December 28, 1997, Triarc began to account for its interest in the National MLP
utilizing the equity method of accounting. Thus, by the end of 1997, Triarc had
become a consumer products company, focusing on its beverage and restaurant
franchising business.
In the spring of 1996 and following the National MLP's IPO, Triarc had
discussions with numerous potential purchasers (including publicly traded
propane retailers, other entities in the propane distribution business and
financial buyers), regarding a potential transaction involving the National MLP.
Through 1998, more than ten parties executed confidentiality agreements with
Triarc and received confidential information regarding the National MLP. In
several instances beginning in late 1997 and through 1998, discussions with
third parties advanced to a stage where outside advisors of Triarc and of
potential purchasers discussed, over a course of months, possible transactions.
None of these discussions, however, led to an agreement.
Because the National MLP's operating results were below budget during the
1997-1998 winter season, the National OLP was unable to comply with certain
covenants under the Credit Agreement and bank lenders (the 'Banks') thereunder.
As a result, in March 1998, the National MLP was required to negotiate certain
amendments to the Credit Agreement. Effective as of December 31, 1997, these
amendments modified certain covenants, reduced the amount of the acquisition
facility from $40.0
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million to $20.0 million, and extended the conversion date of the acquisition
facility from June 30, 1998 to June 30, 1999 (at which time the acquisition
facility begins scheduled amortization). At the time of such amendments, the
National MGP agreed to forego any additional distributions on its National
Subordinated Units in order to facilitate compliance with covenant restrictions
in the Credit Agreement. Accordingly, no distributions were declared or paid on
the National Subordinated Units with respect to the National MLP's 1998 fiscal
year. By June 30, 1998, however, the National MLP was again not in compliance
with certain covenants of the Credit Agreement and further amendments to the
debt agreements were negotiated. As a result of these amendments, which were
effective as of June 30, 1998, (i) the working capital facility was reduced from
$15.0 million to $10.0 million; (ii) the Banks' commitment under the acquisition
facility was permanently reduced from $20.0 million to the outstanding
borrowings at June 30, 1998 of approximately $13.0 million; (iii) Triarc was
permitted (but not obligated) to prepay through February 14, 1999 up to $10.0
million principal amount of indebtedness owed the National OLP under the $40.7
million Triarc Note; and (iv) to the extent amounts received from such
prepayments were not used to make distributions to common unitholders, such
amounts could be included in the National MLP's determination of consolidated
cash flow for purposes of compliance with certain leverage and interest coverage
ratios requirements. During August and September 1998, Triarc prepaid an
aggregate of $10.0 million of principal (plus accrued interest), the maximum
amount permitted to be prepaid under the amendments. A portion of the Triarc
Note prepayments were used to pay distributions to Common Unitholders for the
quarter ended June 30, 1998. The National MLP paid approximately $1.2 million in
fees and expenses relating to the various amendments to its debt agreements in
1998. In addition, subsequent to such amendments, Fitch IBCA ('Fitch'), a
nationally recognized rating agency, conducted its first credit analysis review
of the National MLP since the issuance of the National OLP's First Mortgage
Notes in July 1996. Following this review, the National MLP was notified by
Fitch that it had downgraded its rating on the First Mortgage Notes from 'BBB'
to 'BB'. As a result of the downgrade, the First Mortgage Notes were no longer
considered investment grade securities and the interest rate payable under the
Credit Agreement increased.
As financial results continued to be negatively impacted by
warmer-than-usual weather conditions, as well as a loss of customers, the
National MLP announced on October 21, 1998 that it had reduced by half the
quarterly distribution payable on the National Common Units for the third
quarter of 1998.
The Bid Process. By December 1998, three parties had indicated to Triarc
significant interest in purchasing the National MLP. Two of the parties ('Bidder
A' and 'Bidder B,' respectively) are publicly traded limited partnerships
engaged in the retail marketing of propane, each of which had previously
received material non-public information when each entered into a
confidentiality agreement with Triarc. The third party, the Purchaser (together
with Purchaser Holdings and the Purchaser General Partner, referred to herein as
'Columbia Propane'), is a subsidiary of Purchaser Holdings, a wholly-owned
subsidiary of Columbia Energy Group, an integrated energy company based in
Herndon, Virginia. On November 30, 1998, Columbia Propane had its first meeting
with Triarc regarding a potential acquisition of the National MLP. Following
this meeting, the parties executed a confidentiality agreement and Columbia
Propane was provided with certain non-public financial operating information
concerning the National MLP.
Between December 17, 1998 and December 23, 1998, Andrews & Kurth L.L.P.
('A&K'), counsel to Triarc, forwarded to each of the three potential purchasers
a bid package containing an invitation for each purchaser to submit a firm
written offer and guidelines for the offer, and a form of purchase agreement
which each purchaser was invited to mark with proposed alterations. Offers were
required to be received by Triarc and A&K by 12:00 noon on Wednesday, January 6,
1999 and kept open until the close of business Friday, February 26, 1999. In
addition, each bidder was encouraged to consult with A&K regarding the form of
purchase agreement and was made aware that a final purchase agreement would have
to be approved by a Special Committee of the National Board, and by the holders
of First Mortgage Notes. The form of purchase agreement originally sent to each
of Bidder A and Bidder B contemplated a unit-for-unit merger. The form of
purchase agreement sent to Columbia Propane (which does not have publicly traded
limited partnership interests) contemplated a cash tender offer for National
Common Units followed by a purchase, in a merger, of the remaining National
Common Units, and a purchase of the National Subordinated Units, the general
partner interests in the National
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MLP, the unsubordinated general partner interests in the National OLP and the
limited partner interests in the National OLP held by the National MLP's general
partners (the 'General Partner Interests'). Eventually, all three potential
purchasers received and reviewed a form of the purchase agreement contemplating
the cash tender offer.
While the transaction structure under the unit-for-unit purchase agreement
and the cash tender offer purchase agreement differed, both were similar in many
respects, including the following key goals:
(i) Consideration to the public holders for their National Common
Units had to be cash or a marketable security;
(ii) Consideration to Triarc and the General Partners of the National
MLP for the transfer of general and subordinated limited partnership
interests would consist of effective forgiveness of the remaining $30.7
million principal balance of the Triarc Note, together with some additional
cash consideration; and
(iii) Deferral of recognition of a tax gain which would otherwise be
recognized upon a sale of all of the National MGP's interest in the
National OLP.
Between January 6, 1999 and January 12, 1999, Triarc and A&K received an
offer letter and a marked copy of the form of purchase agreement from each of
Bidder A, Bidder B and Columbia Propane.
Triarc and A&K analyzed the bids and the contracts proposed by the three
bidders following receipt of these materials. The following is a summary of the
salient points of the three bids:
<TABLE>
<S> <C>
Bidder A: (i) A unit-for-unit merger based on a fixed exchange ratio effectively offering
(as of January 6, 1999, the date of receipt of the offer) $8.39 in market value in
Bidder A's common units per National Common Unit, (ii) forgiveness of the Triarc
Note and a cash payment of $7.5 million for substantially all of the General
Partner Interests, (iii) limited protection for Triarc's anticipated tax deferral,
(iv) a $10.0 million working capital requirement at closing; (v) significant
additional representations and warranties and post-closing indemnification
liabilities for breach, and (vi) an array of transactional costs (including those
relating to the advisors to the Special Committee, discussed below) to be borne by
Triarc. In addition, Bidder A's offer required the consent of its lenders, as well
as those of the National OLP. Bidder A's offer expired at 5:00 p.m. on January 20,
1999 unless Bidder A was to be invited to negotiate on an exclusive basis.
Bidder B: (i) A unit-for-unit merger based on a fixed dollar amount of $8.00 in market value
of Bidder B's common units per National Common Unit, (ii) forgiveness of the Triarc
Note and a cash payment of $5.0 million for substantially all of the General
Partner Interests, (iii) a condition to the merger that the unit price of Bidder B
and of the National MLP not fluctuate outside of a 15% band, and (iv) an employee
retention program granting Bidder B broad discretion over the number of employees
to be retained, and the number to be terminated, following an acquisition. In
addition, Bidder B's offer required the consent of its lenders, as well as those
of the National OLP.
Columbia Propane: (i) A cash tender offer based on $8.00 per National Common Unit, (ii) forgiveness
of the Triarc Note and a cash payment of $5.0 million for substantially all of the
General Partner Interests, (iii) limited protection for Triarc's anticipated tax
deferral, (iv) significant additional representations and warranties and
post-closing indemnification liabilities for breach, and (v) an array of
transactional costs (including those relating to the advisors to the Special
Committee) to be borne by Triarc.
</TABLE>
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On January 8, the National Board met and was updated on the status of the
efforts to sell the National MLP. At the meeting, the Chairman of the National
Board stated that he deemed it advisable and in the best interest of the
National MLP's Common Unitholders to designate a special committee (the 'Special
Committee') of the Board of Directors to review and evaluate any agreement that
may be reached regarding a potential transaction and to make a recommendation on
behalf of the holders of the National Common Units with respect to any such
agreement. Thereafter, the National Board appointed Willis G. Ryckman, III, as
the sole member of the Special Committee, to review and evaluate a proposed
transaction and to make a recommendation to the National Board with respect to
such transaction on behalf of holders of the National Common Units. Mr. Ryckman
was authorized to employ legal and financial advisors to assist him. By
establishing the Special Committee and providing for the employment of legal and
financial advisors for the Special Committee, Triarc and the National MGP did
not directly or indirectly agree to assume any additional duties or
responsibility to you with respect to a possible transaction.
Mr. Ryckman, the sole member of the Special Committee, currently serves as
a member of the National Board and serves as chairman and/or director of a
number of other companies. From 1986-1988, Mr. Ryckman served on the Board of
Directors of Triangle Industries, Inc., a public company then controlled by Mr.
Nelson Peltz and Mr. Peter May. Messrs. Peltz and May are directors of the
National MGP and serve, respectively, as Chairman and Chief Executive Officer
and President and Chief Operating Officer, as well as directors of Triarc.
Messrs. Peltz and May have each invested in private investment funds managed by
Mr. Ryckman and each currently owns investments with a cost basis of
approximately $100,000 in such a fund. For his service on the Special Committee,
Mr. Ryckman will be paid a fee of $50,000 plus $750 per meeting of the Special
Committee and will be reimbursed for his out-of-pocket expenses related to his
service on the Special Committee. He will also be entitled to, as are all
members of the National Board, certain rights of indemnification by the National
MGP that have been guaranteed by Triarc.
Between January 8, 1999 and January 19, 1999, the Special Committee
interviewed five law firms and on January 19 engaged Dewey Ballantine LLP
('Dewey Ballantine') as its legal advisor. In addition, after interviewing four
investment banks, the Special Committee selected Lehman Brothers Inc. ('Lehman
Brothers') on January 20 as its financial advisor. Shortly after their
engagement, Lehman Brothers and Dewey Ballantine participated in a presentation
prepared by senior management of the National MGP, and Lehman Brothers and Dewey
Ballantine reviewed documents set up in a data room (discussed below) and began
their due diligence review.
The Special Committee had its first meeting with its financial and legal
advisors on February 5. Dewey Ballantine advised the Special Committee at that
time of the role of the Special Committee and its duties in evaluating any
transaction involving a sale of the National Common Units. Following this
meeting, the Special Committee held 13 additional meetings with representatives
from Dewey Ballantine and/or Lehman Brothers through April 1, 1999. At these
meetings, discussions were held on numerous issues, including the progress of
the due diligence activities undertaken by Dewey Ballantine and Lehman Brothers,
respectively, the progress of Lehman Brothers' financial analysis of the
proposed transaction, and the progress of the negotiations with each of the
bidders regarding the terms of the proposed transaction and the Purchase
Agreement.
During the week of January 11, Triarc and A&K worked with the National
MLP's senior management to assemble a data room containing publicly available
and non-publicly available information on the National MLP. In addition, during
that week, Eric D. Kogan, Executive Vice President -- Corporate Development of
Triarc, was in contact with representatives of each of the three bidders
regarding the terms of their respective offers and scheduled for each bidder a
management presentation and an opportunity to review the information in the data
room and ask questions of the senior management of the National MGP.
Between Wednesday, January 20, 1999 and Tuesday, January 26, 1999, each of
Bidder A, Bidder B and Columbia Propane was invited, together with legal and
financial advisors, to spend two days in the data room, and receive a management
presentation. Subsequent to its visit, each bidder received additional
information in response to its inquiries.
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On Thursday, January 28, having provided each bidder with access to the
data room and with a management presentation, Mr. Kogan invited each of the
bidders in writing to resubmit a firm written offer, together with a revised
mark-up of the form of purchase agreement, by Wednesday, February 3, and
requested that such offers remain open through Friday, March 5.
On Friday, January 29, the National MLP publicly announced that, based on
preliminary indications, it expected to report EBITDA for the 12 months ended
December 31, 1998, to be significantly lower than the $22.1 million of EBITDA in
1997, and a net loss was expected for 1998 compared to net income of $3.8
million in 1997. In addition, the National MLP also announced that the National
Board had eliminated the National MLP's quarterly distribution to holders of
National Common Units with respect to the quarter ended December 31, 1998. The
National Board noted that eliminating the distribution was necessary to maintain
financial flexibility in future quarters, and that, based on preliminary
operating results for the 1998 fourth quarter, it was likely that the National
MLP would not meet certain financial covenant tests contained in its debt
agreements for the period ended December 31, 1998. Finally, the National MLP
also announced that the National MGP was continuing to consider various
strategic alternatives to maximize the value of the National MLP, and that the
National MGP was involved in active discussions with several third parties
concerning a sale or merger of the National MLP.
On February 3 and 4, Triarc and A&K received a revised offer and a marked
form of purchase agreement from each of Bidder A, Bidder B and Columbia. The
following is a summary of the salient changes from their prior bids:
<TABLE>
<S> <C>
Bidder A: (i) an increase, to $10.00 in market value of Bidder A's common units, in the
unit-for-unit consideration payable for each National Common Unit, (ii) a
decrease, to $5.0 million, in the cash payment for the General Partner Interests,
(iii) increased assurance that Triarc would achieve its anticipated tax deferral,
and (iv) assumption by the purchaser of many of the transaction expenses of the
General Partners. In addition, Bidder A advised Triarc that its offer would remain
open through 12:00 noon on Monday, February 15 unless Bidder A was invited to
negotiate on an exclusive basis. As earlier, this bid remained dependent on
receipt of consents of lenders to both the National OLP and lenders to the bidder.
Bidder B: (i) a decrease, to $7.25, in the consideration for each National Common Unit, to
be offered in a cash tender offer, (ii) an increase, to $7.0 million, in the cash
payment for the General Partner Interests, (iii) new provisions regarding cash and
working capital requirements at closing, and (iv) a sharing of many of the
transaction expenses of the General Partners. As earlier, this bid remained
dependent on receipt of consents of lenders to the National OLP and lenders to the
bidder.
Columbia Propane: (i) an increase, to $9.00, in the consideration payable for each National Common
Unit, (ii) significant additional conditions to purchase of National Common Units
in a tender offer, (iii) increased assurance that Triarc would achieve its
anticipated tax deferral, and (iv) assumption by the purchaser of many of the
transaction expenses of the General Partners and certain severance costs.
</TABLE>
On Thursday, February 4, in response to an inquiry from (and following
execution of a confidentiality letter by) a propane distribution subsidiary of a
large, publicly-traded energy concern, representatives of Triarc met with a new
potential bidder and its counsel, and presented an overview of the National
MLP's business and the sale process. This bidder and its counsel spent two days
reviewing materials in the data room before notifying Triarc that it would not
pursue a transaction involving the National MLP.
Also on Thursday, February 4, Mr. Kogan received an inquiry from another
publicly traded limited partnership engaged in the retail distribution of
propane, regarding an interest in acquiring the National MLP. Following the
execution of a confirmation letter regarding an existing confidentiality
agreement, a
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form of purchase agreement and procedures letter were sent to this party, who
met with representatives of Triarc on Sunday, February 7, to receive an overview
of the National MLP's business and the sale process. This party spent one day
reviewing materials in the data room, declined Triarc's invitation to return for
a second day of review and subsequently notified Triarc that it had decided not
to pursue a purchase of the National MLP.
On Monday, February 8, Triarc and its representatives had an extended
conference call with the Special Committee's advisors, regarding a preliminary
analysis by the Special Committee of the bids, and Triarc's responses to the
bidders. The group focused on, among other things, the need for each of the
bidders to increase its bid price and demonstrate certainty of financing. Later
that afternoon, Mr. Kogan spoke with representatives of each of the bidders
about the concerns of Triarc and the Special Committee with their respective
bids.
On Tuesday, February 9, Mr. Kogan continued his discussions with
representatives of each of the bidders. That afternoon, Mr. Kogan heard from a
representative of Bidder B that Bidder B was willing to (i) consider raising its
offer price for the National Common Units from $7.25 to $8.50 per unit in a cash
tender offer, and (ii) assume up to $1.0 million of expenses of the Special
Committee, but that it was unwilling to take further action beyond its previous
filing of a shelf registration statement, whether through a bridge financing or
otherwise, to alleviate the uncertainties associated with financing of its bid.
On Wednesday, February 10, Triarc and its representatives had a meeting
with the Special Committee and its advisors, to update the Special Committee as
to the status of Triarc's negotiations with the three bidders, and to hear the
Special Committee's views on the negotiation process to date.
On Friday, February 12, representatives of Triarc engaged in an extended
conference call with Bidder A and its advisors regarding open issues. Near the
end of the meeting, Triarc believed that it had made significant progress on a
number of substantive issues. At this point, Bidder A requested that Triarc
agree to negotiate exclusively with it. Triarc responded by requesting that the
parties meet to review and agree on language in the purchase agreement embodying
the resolution of the issues discussed that day, and that Bidder A file a shelf
registration statement to enhance its ability to finance an offer. As the
meeting ended, Triarc invited Bidder A and its representatives to meet
face-to-face at any time over the next three days, but the offer was declined.
Also on February 12, Columbia Propane sent a letter to Triarc clarifying
some of the positions stated in its February 3 submission. Among other things,
Columbia Propane noted that its additional due diligence would be confirmatory
in nature, and requested a meeting with the Special Committee and with holders
of the First Mortgage Notes. Due to the status of the sale process, Triarc
indicated that a meeting with the Special Committee would be premature.
By Saturday morning, February 13, A&K distributed revised purchase
agreements to the three bidders, which incorporated a number of the comments
received from the bidders. Over the course of the weekend, Mr. Kogan spoke with
each of the bidders regarding the status of their offer. In addition, in light
of the expiration of Bidder A's offer on Monday, February 15 (as noted in
Bidder A's revised offer received on February 3), Mr. Kogan informed Bidder B
and Columbia Propane that Triarc requested that responses to the most recently
distributed contract be submitted by Monday, February 15.
On Monday, February 15, the financial advisor for Bidder B submitted a
letter summarizing proposed changes to Bidder B's offer. Separately that day,
during a conference call between A&K and representatives of Columbia Propane,
Columbia Propane agreed to increase its offer for each National Common Unit in a
tender offer to $9.50. In addition, Bidder A agreed verbally to extend the time
through which Triarc could accept its offer to noon on February 18.
On Tuesday, February 16, Triarc received from Columbia Propane a revised
draft of the Purchase Agreement and discussed the proposed changes with A&K and
representatives of Columbia Propane. Over the next 48 hours, Triarc and A&K
analyzed the revised offers and continued to have discussions
21
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<TABLE>
<S> <C>
with all bidders. The following summarizes the salient changes from their prior
bids, and certain of the perceptions of Triarc to the bids as changed:
</TABLE>
<TABLE>
<S> <C>
Bidder A: (i) an increase, to $10.25 in market value of Bidder A's common units, in the
unit-for-unit consideration payable for each National Common Unit; (ii) a
decrease, to $1.0 million in the cash payment for the General Partner Interests;
and (iii) a written confirmation that its deadline had been extended to February
18 at 12:00 noon. While Triarc considered the $10.25 offer for each National
Common Unit to be attractive, it considered Bidder A's proposal generally to be
less likely to be consummated than Columbia Propane's, in view of, among other
things, Bidder A's size relative to the other bidders, its need for financing
(particularly without a shelf registration statement on file with the SEC) and the
need for consent of its lenders.
Bidder B: An increase, to $9.00, in the cash consideration payable for each National Common
Unit. Triarc considered Bidder B's offer to be less likely to be consummated than
Columbia Propane's, in view of, among other things, market uncertainties
associated with Bidder B's financing, and the need for consent of Bidder B's
lenders.
Columbia Propane: An increase, to $9.50, in the consideration payable for each National Common Unit.
Triarc believed that, in view of the lack of a financing contingency, and no need
for consent of its lenders, Columbia Propane's bid had a considerably higher
likelihood of consummation than did that of Bidder A or Bidder B.
</TABLE>
On Wednesday, February 17, representatives of Triarc had meetings with the
Special Committee to discuss the status of negotiations with the three bidders
and to analyze the financeability of each proposal.
On Thursday, February 18, A&K distributed the revised Columbia Propane
purchase agreement. Meanwhile, Bidder A's offer expired. A&K had a conference
call with Columbia Propane for the purpose of setting up a meeting to review the
latest version of the Purchase Agreement.
On Friday, February 19, representatives of A&K asked counsel for Bidder A
whether Bidder A was prepared to continue negotiations with Triarc in view of
the expiration of Bidder A's offer. Counsel for Bidder A informed A&K that
Bidder A was not prepared to continue negotiations.
Also on February 19, Triarc and A&K had an extended meeting with
representatives of Columbia Propane to further discuss the purchase agreement as
distributed on February 18, to discuss a number of open issues, including
certain tax issues and conditions to an offer. Following that meeting, A&K
distributed to Columbia Propane and to LeBoeuf, Lamb, Greene & MacRae L.L.P.
('LeBoeuf Lamb'), its outside counsel, and PaineWebber Incorporated
('PaineWebber'), its financial advisor, a revised form of purchase agreement
embodying the changes discussed the prior evening. On Monday, February 22,
representatives of Triarc, A&K and LeBoeuf Lamb met to discuss the draft
purchase agreement.
In January 1999 the Banks waived any default under the Credit Agreement
with respect to the National OLP's failure to deliver an Officer's Certificate
with respect to the twelve months ended December 31, 1998 on or prior to
January 20, 1999 and permitted such certificate to be delivered on or before
February 20, 1999. On February 20, 1999, pursuant to the January waiver, the
National OLP furnished the Officer's Certificates to BankBoston, N.A. (the
'Administrative Agent') and the Banks with respect to the year ended December
31, 1998 as well as the certificate for the twelve months ended January 31,
1999. Pursuant to such Officer's Certificates, the National OLP notified the
Administrative Agent and the Banks that the National OLP's ratio of total funded
debt to consolidated cash flow as of December 31, 1998, was in excess of the
maximum permitted ratio pursuant to the Credit Agreement (the 'Leverage Ratio
Default'). The Leverage Ratio Default under the Credit Agreement was waived
pursuant to a letter agreement (the 'February Waiver Letter') that, in addition
to waiving the year-end non-compliance, also waived subsequent defaults relating
to the leverage ratio for any period ending on
22
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or prior to August 31, 1999, subject to satisfaction of certain conditions. The
conditions to such future waivers included, among others, that the National OLP
deliver a purchase and sale agreement from a creditworthy buyer on or before
April 30, 1999 providing for full repayment of loan obligations under, and
termination of, the Credit Agreement, that the National OLP deliver monthly
certificates to the Banks' satisfaction regarding the status of the sale
process, indicating that such sale would be consummated on or before September
30, 1999 and that the National MLP not make distributions to holders of National
Common Units until all bank indebtedness was repaid in full. In addition, the
February Waiver Letter prohibited any additional borrowings under the Credit
Agreement without the consent of each Bank.
On Tuesday, February 23, representatives of Triarc, A&K, Columbia Propane,
LeBoeuf Lamb and PaineWebber met regarding open issues in the draft purchase
agreement, and regarding an exclusivity agreement and a payment guaranty
agreement for the tax indemnification. At this time, Columbia Propane and Triarc
agreed to enter into an exclusivity agreement. The exclusivity agreement
provided for (among other things) an exclusivity period ending March 23, during
which time (i) Triarc would not solicit any other bids, (ii) Columbia Propane
would have the ability to conduct confirmatory due diligence, and (iii) efforts
would be made to obtain consents of the holders of the First Mortgage Notes to
the proposed transaction.
Following the execution of the exclusivity agreement with Columbia Propane,
(i) Mr. Kogan informed representatives of Bidder A and Bidder B that during the
exclusivity period, Triarc was no longer able to discuss with them their
respective bids, and (ii) Triarc and Columbia Propane outlined arrangements for
Columbia Propane's confirmatory due diligence. Starting on Thursday, February
25, representatives of Columbia Propane, LeBoeuf Lamb and Columbia Propane's
third-party consultants visited the data room to continue its confirmatory due
diligence review of the National MLP.
On Sunday, February 28, Mr. Kogan and the National MLP's senior management
met with representatives of Columbia Propane at the National MLP's headquarters
in Cedar Rapids, Iowa, to continue the diligence effort. Later that week,
Columbia Propane representatives, including personnel from its third-party
consultants, began a series of on-site visits to National MLP facilities. A
representative of the National MLP accompanied the Columbia Propane team at each
site. In all, the Columbia Propane team visited over 80 sites during the
exclusivity period.
On Friday, March 5, representatives of Triarc and A&K conferred by
telephone with the Special Committee's legal and financial advisors, Dewey
Ballantine and Lehman Brothers. During the call, Mr. Kogan updated the Special
Committee's advisors about two additional, informal, expressions of interest
from third parties regarding a purchase of the National MLP, and about the
status of the Columbia Propane bid. After an extended discussion of a number of
aspects of the Columbia Propane bid and the exclusivity letter, counsel for the
Special Committee indicated that:
(i) The Special Committee requested an exception to the exclusivity
letter to enable it to conduct independent discussions with other potential
bidders (Triarc declined this request);
(ii) The Columbia Propane offer of $9.50 per National Common Unit
should be increased and did not otherwise provide a sufficient basis from
which to conduct negotiations; and
(iii) Triarc should consider reallocating Columbia Propane's proposed
consideration as between Triarc and the General Partners, on the one hand,
and the holders of National Common Units, on the other, to provide greater
consideration to holders of National Common Units.
On Thursday, March 18, the National Board met and discussed, among other
things, recent operating results and the status of the potential transaction.
Mr. Kogan updated the National Board of events since the last meeting, and
outlined a preliminary view as to each Bidder's proposal, from the point of view
of (i) pricing, (ii) certainty of consummation, and (iii) strength of contract.
Mr. Brian L. Schorr, Executive Vice President and General Counsel of Triarc,
discussed the terms of the proposed transaction with Columbia Propane as set
forth in the Purchase Agreement. In addition, Mr. John L. Barnes, Jr., Executive
Vice President and Chief Financial Officer of Triarc, notified the National
Board of negotiations with lenders under the Credit Agreement and the February
Waiver Letter.
Also on March 18, the National MLP engaged Donaldson, Lufkin & Jenrette
Securities Corporation ('DLJ') as its financial advisor in connection with
soliciting consents from holders of the
23
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<PAGE>
First Mortgage Notes. Promptly thereafter, DLJ began discussions with holders of
the First Mortgage Notes regarding noteholder consent to the transactions
contemplated by the Purchase Agreement.
On Friday, March 19, the Special Committee received a letter from Columbia
Propane confirming its offer of $9.50 per National Common Unit, and further
discussing its bid. Later that day, representatives of Triarc and A&K conferred
by telephone with the Special Committee's legal and financial advisors. During
the call, Mr. Kogan updated the Special Committee's advisors about the status of
Columbia Propane's confirmatory due diligence and about DLJ's negotiations with
holders of the First Mortgage Notes.
On Monday, March 22, Mr. Kogan spoke with Michael J. Cannon, Senior Vice
President of Lehman Brothers, in an effort to obtain guidance from the Special
Committee's financial advisor as to what price per National Common Unit the
Special Committee would deem to be fair to holders of National Common Units. Mr.
Cannon declined to specify what price would be acceptable to the Special
Committee, but stated the $9.50 offer price per National Common Unit should be
increased, and that Triarc should consider reallocating Columbia Propane's
proposed consideration as between Triarc and the General Partners, on the one
hand, and the holders of National Common Units, on the other, to provide greater
consideration to holders of National Common Units.
On Tuesday, March 23, in separate calls, Mr. Kogan and Mr. Peter May, a
director of the National MGP, spoke with Mr. Ryckman, again seeking guidance
from the Special Committee as to what price per National Common Unit the Special
Committee would deem to be fair to holders of National Common Units. Mr. Ryckman
declined to cite a particular price or range of prices that would be acceptable
to the Special Committee, and instead urged Triarc to obtain for the holders of
National Common Units the best price available, and then report back to the
Special Committee.
On Friday, March 26, representatives of Triarc and Columbia met at Triarc's
offices to receive from Mr. Kogan an update of Triarc's discussions with the
Special Committee and with holders of the First Mortgage Notes. In addition, the
parties discussed a number of unresolved issues, including those relating to a
proposed limitation by Triarc on its indemnification for environmental
liabilities. During those discussions, Columbia indicated a willingness to raise
its offer by $0.10 to $9.60 per National Common Unit.
Later in the afternoon of March 26, representatives of Triarc, including
Mr. May, Mr. Kogan and Mr. Schorr, and A&K met with the Special Committee and
its financial and legal advisors. Mr. Kogan told the Special Committee that,
earlier in the day, he had told Columbia Propane that its bid price needed to be
increased, and he reported Columbia Propane's willingness, as described above,
to increase its bid price. The Special Committee met with its advisors, then
returned to report to Triarc that Columbia Propane's offer price for each
National Common Unit still needed to be increased. Triarc then met with counsel
and returned to report to the Special Committee that it was willing to receive
less consideration for its interest so that the aggregate consideration being
received by the holders of National Common Units would be $10.00 per National
Common Unit. In agreeing to the foregoing, Mr. May emphasized to the Special
Committee that Triarc and the National General Partner were bearing a
disproportionate burden of expenses, closing costs, and post-closing
responsibilities, as compared to the holders of National Common Units; in this
light, Mr. May said, Triarc was not prepared to forego forgiveness of any part
of the Triarc Note.
On March 26, after the meeting described above, the Special Committee
conferred with its financial and legal advisors regarding the proposal from
Triarc. Thereafter, the financial and legal advisors to the Special Committee
met with Mr. Kogan and with Mr. Schorr to advise them of the Special Committee's
view that while the total enterprise value being offered by Columbia Propane was
adequate, the allocation of Columbia Propane's proposed consideration as between
Triarc and the General Partners, on the one hand, and the holders of National
Common Units, on the other, was not sufficiently in favor of the holders of
National Common Units. The Special Committee's advisors indicated the Special
Committee would be in a position to recommend a proposal that would supplement
the proposed price of $10.00 per National Common Unit with the payment by Triarc
of $25 million under the Triarc Note, with all such payment being distributed
pro rata to the holders of the National Common Units (i.e., increasing the total
consideration to be received by holders of National Common Units by
approximately an additional $3.73 per National Common Unit).
24
<PAGE>
<PAGE>
On Tuesday, March 30, the National Board met. In addition to National Board
members, the Special Committee's legal and financial advisors were in
attendance, along with Mr. Schorr of Triarc and a representative of A&K.
Following a long discussion, in response to the Special Committee's proposal on
March 26, 1999, Triarc offered to reallocate Columbia's proposed consideration
as between Triarc and the General Partners, on the one hand, and the holders of
the National Common Units, on the other hand. Accordingly, Triarc proposed that,
in consideration for the National MGP's general and subordinated partner
interests, it would (i) forego all cash previously offered by Columbia Propane,
and (ii) pay to the National OLP an amount under the Triarc Note aggregating the
equivalent of $1.90 per National Common Unit, provided that Columbia Propane
increased its bid from $9.60 per National Common Unit to $11.50 per National
Common Unit. The Special Committee and its advisors conferred separately, and
advised Triarc that additional consideration to the holders of National Common
Units would be required, so that the holders of National Common Units would
receive, at a minimum, aggregate consideration of $12.60 per National Common
Unit. After meeting again with its advisors, Triarc offered to further
reallocate the proposed consideration being offered. Accordingly, Triarc
proposed that, in consideration for the National MGP's general and subordinated
partner interests, it would agree to pay to the National OLP an amount under the
Triarc Note aggregating the equivalent of $2.40 per National Common Unit,
provided that Columbia Propane increase its bid from $9.60 per National Common
Unit to $12.00 per National Common Unit. In response, the Special Committee
indicated that, subject to receipt of a satisfactory fairness opinion from
Lehman Brothers, it would recommend approval of the proposal to the National
Board if Triarc agreed to share on a 50%/50% basis any additional consideration
for the interests in the National MLP it was able to obtain from Columbia
Propane in excess of Columbia Propane's current proposal of $9.60 per National
Common Unit. The parties finally agreed to a proposal by which the holders of
National Common Units would receive $12.00 cash per National Common Unit plus
50% of any additional consideration for interests in the National MLP that
Triarc succeeded in obtaining from Columbia Propane in excess of $9.60 per
National Common Unit, to the extent such consideration exceeded an amount equal
to $0.50 per National Common Unit (the first $0.50 of such additional
consideration would be credited against Triarc's obligation to repay the Triarc
Note), subject to receipt of a satisfactory fairness opinion from Lehman
Brothers.
On Thursday, April 1, the National Board met. In addition to the National
Board members, the Special Committee's legal advisors were in attendance, as
were Mr. Kogan and Mr. Schorr. At this meeting, the Special Committee presented
a history of the transaction and the negotiations with the various bidders, and
the status of discussions regarding price.
Later in the day on April 1, the National Board met again with the Special
Committee, with its legal and financial advisors also present. During the
meeting, Mr. Kogan presented an update on the status of discussions with holders
of the First Mortgage Notes, and pointed out that, based on his discussions with
Columbia Propane, Columbia Propane had agreed to pay a premium of 2 5/8% to the
holders of the First Mortgage Notes in connection with the early pre-payment of
such First Mortgage Notes, but that Columbia Propane would not pay any
additional consideration (per Common Unit). Lehman Brothers then discussed its
financial analysis with the National Board, and opined orally (which opinion was
subsequently confirmed in writing) that the offered price of $12.00 for each
National Common Unit was fair, from a financial point of view, to the holders of
National Common Units. Thereafter, the Special Committee recommended to the
National Board that it approve the transactions pursuant to which, among other
things, Columbia Propane would commence a tender offer for all National Common
Units, offering $12.00 in cash for each National Common Unit, and pursuant to
which Triarc would pay to the National OLP immediately prior to the closing of
the Merger a net of approximately $12.8 million under the Triarc Note, with the
remainder of the Triarc Note to be forgiven. The recommendation was unanimously
approved by the National Board.
On Saturday and Sunday, April 3 and April 4, the parties held a series of
telephone conference calls regarding open issues relating to the terms of the
Purchase Agreement.
On Monday April 5, following the receipt of the consents of holders of the
First Mortgage Notes, the parties finalized and executed the Purchase Agreement.
25
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<PAGE>
REASONS FOR THE RECOMMENDATION
The Special Committee engaged Lehman Brothers to act as its financial
advisor in connection with the Offer and the Merger and instructed Lehman
Brothers to evaluate, from a financial perspective, the fairness of the
consideration to be received by the holders of National Common Units in the
Offer and the Merger. On April 1, 1999, Lehman Brothers delivered its opinion to
the Special Committee, to the effect that as of such date and based upon and
subject to certain matters stated therein, from a financial point of view, the
cash consideration of $12.00 per unit to be received by the holders of National
Common Units in the Offer and the Merger was fair to the holders of National
Common Units.
THE FULL TEXT OF THE WRITTEN OPINION OF LEHMAN BROTHERS IS INCLUDED AS
APPENDIX I TO THIS DOCUMENT, AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF
NATIONAL COMMON UNITS MAY READ SUCH OPINION FOR A DISCUSSION OF THE ASSUMPTIONS
MADE, FACTORS CONSIDERED AND LIMITATIONS UPON THE REVIEW UNDERTAKEN BY LEHMAN
BROTHERS IN RENDERING ITS OPINION. THE FOLLOWING IS A SUMMARY OF LEHMAN
BROTHERS' OPINION AND THE METHODOLOGY LEHMAN BROTHERS USED TO RENDER ITS
FAIRNESS OPINION.
No limitations were imposed by the Special Committee on the scope of Lehman
Brothers' investigation or the procedures to be followed by Lehman Brothers in
rendering its opinion. In arriving at its opinion, Lehman Brothers did not
ascribe a specific range of values to the National Common Units but made its
determination as to the fairness of the consideration to be received by the
holders of National Common Units in the Offer and the Merger on the basis of the
financial and comparative analyses described below. Lehman Brothers' advisory
services and opinion were provided for the information and assistance of the
Special Committee, in connection with its consideration of the Offer and Merger.
Lehman Brothers was not requested to opine as to, and its opinion does not
address, the National MGP's underlying business decision to proceed with or
effect the Offer and Merger.
In arriving at its opinion, Lehman Brothers reviewed and analyzed:
(1) a draft of the Purchase Agreement dated March 26, 1999 and the
specific terms of the Offer and Merger;
(2) publicly available information concerning Columbia Energy Group
and the National MLP that Lehman Brothers believed to be relevant to its
analysis, including, without limitation, each of the periodic reports filed
by the National MLP since the IPO on June 26, 1996, including the audited
and unaudited financial statements included in such reports and statements;
(3) financial and operating information with respect to the corporate
structure, businesses, operations and prospects of the National MLP as
furnished to Lehman Brothers by the National MGP, including financial
projections based on the business plan of the National MLP and, in
particular:
(a) certain estimates of propane sales volumes;
(b) the budget for the fiscal year 1999;
(c) projected operating cash flow ('EBITDA') for 1999-2003;
(d) the sensitivity of retail gallons sold to changes in weather;
(4) a trading history of National Common Units from June 26, 1996 to
March 30, 1999, and a comparison of that trading history with those of
other companies that Lehman Brothers deemed relevant;
(5) a comparison of the historical operating and financial results and
present financial condition of the National MLP with those of other
companies that Lehman Brothers deemed relevant; and
(6) a comparison of the financial terms of the Offer and Merger with
the financial terms of certain other transactions that Lehman Brothers
deemed relevant.
In addition, Lehman Brothers:
(a) had numerous discussions with the management of both the National
MGP and Triarc concerning the National MLP's corporate structure, business,
operations, financial condition, assets and growth opportunities; and
26
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(b) undertook such other studies, analyses and investigations as
Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information that was used
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of the management of the
National MLP that it was not aware of any facts or circumstances that would lead
them to believe that such information, taken as a whole, was inaccurate or
misleading in any material respect. With respect to the National MLP's budget
for 1999 that was prepared in November 1998, Lehman Brothers was advised by the
National MGP that such budget, at the time it was prepared, was prepared in good
faith based on assumptions that, taken as a whole, were within the range of
reasonableness. However, for purposes of its analysis, Lehman Brothers also
considered certain assumptions and estimates with respect to the future
financial performance of the National MLP from 1999 through 2003 and developed
certain adjustments to the projections of the National MLP for 1999 and
projections for the future financial performance of the National MLP over such
period. Lehman Brothers discussed these adjusted projections with management of
the National MLP and management agreed that the adjustments, taken as a whole,
and adjusted projections were within a range of reasonableness. In arriving at
its opinion, Lehman Brothers did not conduct a physical inspection of the
properties and facilities of the National MLP and did not make or obtain any
evaluations or appraisals of the assets or liabilities of the National MLP. In
addition, Lehman Brothers was not authorized to solicit, and it did not solicit,
any indications of interest from any third party with respect to the purchase of
all or a part of the National MLP's business. Lehman Brothers' opinion
necessarily is based upon market, economic and other conditions as they existed
on, and could be evaluated as of, the date of its opinion letter.
In rendering its opinion, Lehman Brothers considered the process and
negotiations as more fully described in Item 4. Lehman Brothers also considered
the current distribution policy of the National MLP and the National Common Unit
arrearages that had been accrued to the date of its opinion.
In connection with rendering its opinion, Lehman Brothers performed certain
financial, comparative and other analyses as described below. The preparation of
a fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial and comparative analysis and the application
of those methods to the particular circumstances, and, therefore, such an
opinion is not readily susceptible to summary description. Furthermore, in
arriving at its fairness opinion, Lehman Brothers did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Lehman Brothers believes that its analyses must be
considered as a whole and that considering any portion of such analyses and of
the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying the opinion. In
its analyses, Lehman Brothers made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many of
which are beyond the control of the National MLP or the National MGP. Any
estimates contained in the analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses relating
to the value of businesses do not purport to be appraisals or to reflect the
prices at which businesses actually may be sold.
VALUATION ANALYSIS OF THE NATIONAL MLP
In conjunction with rendering its opinion, Lehman Brothers prepared a
valuation of the National MLP. In determining the valuation of the propane
business of the National MLP, Lehman Brothers used the following methodologies:
discounted cash flow analysis, comparable company trading analysis and a
comparable acquisition analysis. Lehman Brothers also determined the fair market
value of the Triarc Note using comparable yields of fixed income instruments
with similar credit characteristics. The aforementioned methodologies used to
determine the value of the propane business were combined with the determination
of the fair market value of the Triarc Note to generate a reference enterprise
value range for the National MLP. The enterprise value range was adjusted for
appropriate on and off balance sheet assets and liabilities to arrive at an
equity value range (in aggregate dollars).
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The various valuation methodologies noted above and the implied equity
values derived therefrom are included in the following table. This table should
be read together with the more detailed descriptions set forth below. The table
alone does not constitute a complete description of the financial and
comparative analyses. In particular, in applying the various valuation
methodologies to the particular businesses, operations and growth opportunities
of the National MLP, and the particular circumstances of the Offer and Merger,
Lehman Brothers made qualitative judgments as to the significance and relevance
of each analysis. In addition, Lehman Brothers made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of the National MLP or the
National MGP. Accordingly, the methodologies and the equity values derived
therefrom as set forth in the table must be considered as a whole and in the
context of the narrative description of the financial analyses, including the
assumptions underlying these analyses. Considering the implied equity values
without considering the narrative description of the financial analyses,
including the assumptions underlying these analyses, could create a misleading
or incomplete view of the process underlying, and conclusions represented by,
Lehman Brothers' opinion.
<TABLE>
<CAPTION>
IMPLIED
EQUITY VALUE
VALUATION METHODOLOGY SUMMARY DESCRIPTION OF VALUATION METHODOLOGY ($MM)
- ------------------------------------------------- ------------------------------------------------- -------------
<S> <C> <C>
Discounted Cash Flow Analysis.................... Net present value of projected free cash flows as $63 -- $138
accepted by management of the National MGP as
within the range of reasonableness using various
growth rates, discount rates and terminal values
Comparable Company Trading Analysis.............. Market valuation benchmark based on the $38 -- $113
partnership equity trading multiples and
enterprise value trading multiples of selected
comparable propane companies for selected
financial and asset-based measures
Comparable Acquisitions Analysis................. Market valuation benchmark based on the $23 -- $63
consideration paid in selected comparable propane
transactions
Total Consideration for National MLP Equity......................................................... $94 -- $99
</TABLE>
The range of the total consideration for National MLP Equity as indicated
in the table above reflects the difference in the estimated fair market value of
the Triarc Note of $25.5 million, as determined by Lehman Brothers, and the face
amount of the Triarc Note of $30.7 million.
Discounted Cash Flow Analysis. Lehman Brothers estimated the net present
value of the future cash flows expected to be generated by the National MLP as
of January 1, 1999 based on an EBITDA growth rate of 1.5% per annum and a range
of discount rates. These projections were prepared by Lehman Brothers based on
information provided by the National MGP's management and on various industry
benchmarks and assumptions provided by and discussed with the National MGP's
management and agreed to by the National MGP as being within the range of
reasonableness. The two cases of projections are referred to as Case A and Case
B.
Case A is based on the 1999 fiscal year budget prepared by the National MGP
which has budgeted EBITDA of $25.4 million. This budget is based on the National
MGP's view of 'normalized' weather, volumes and margins. Lehman Brothers used an
EBITDA growth rate of 1.5% per annum for the 2000-2003 period. Interest income
and expense and other income were based on the National MGP Five-Year Plan dated
September 9, 1998 (the 'Plan'). Capital expenditures were based on the Plan and
adjusted for incremental lease expense that was not included in EBITDA.
Case B projections are based on Lehman Brothers' subjective assessment of
'normalized' EBITDA for the Partnership. In deriving these projections, Lehman
Brothers reviewed the following: the National MLP's historical and projected
financial performance; Wall Street research for comparable propane partnerships;
and the correlation between degree days and retail volume. This review resulted
in Lehman Brothers' subjective assessment of 'normalized' 1999 EBITDA for the
National MLP in the range of $22.0 to $23.0 million. Lehman Brothers used the
same 1.5% per annum annual EBITDA
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growth rate for Case B for the 2000-2003 period as was used in
Case A. Interest income and expense and other income were based on the Plan.
Capital expenditures were based on the Plan and adjusted for incremental lease
expense that was not included in EBITDA.
Lehman Brothers used discount rates ranging from 8% to 12% and terminal
value EBITDA multiples of 9.0x to 11.0x. The discount rates were based on Lehman
Brothers' view of the weighted average cost of capital for similar companies in
the propane industry. The terminal value multiples were selected based on the
current trading multiples of similar publicly traded companies and from the
multiples in selected acquisitions of similar companies. The discounted cash
flow analysis resulted in implied equity values ranging from $63 million to
$138 million.
Comparable Company Trading Analysis. Lehman Brothers reviewed the public
stock market trading multiples for selected propane master limited partnerships
including AmeriGas Partners, L.P.; Cornerstone Propane Partners, L.P.;
Ferrellgas Partners, L.P.; Heritage Propane Partners, L.P.; Star Gas Partners,
L.P. and Suburban Propane Partners, L.P. Using publicly available information,
Lehman Brothers calculated and analyzed the market capitalization multiples and
'adjusted' market capitalization multiples of certain historical and projected
financial and operating criteria such as EBITDA, distributable cash flow, cash
flow from operations and retail gallons sold. The market capitalization of each
company was obtained by adding its long-term debt to the market value of all the
partnership units, assuming all classes of equity are valued on a per unit
equivalent to the publicly traded common units, and subtracting the cash
balance. The 'adjusted' market capitalization is similar with the only exception
being that the subordinated units were valued at 75% of the per unit equivalent
value of the publicly traded common units ('adjusted equity value'). The
appropriate market capitalization to latest twelve months ('LTM') EBITDA,
projected 1999 EBITDA and LTM retail gallons sold multiple ranges were
determined to be 10.0x to 11.0x, 9.5x to 10.0x and $1.15 to $1.75, respectively.
The appropriate equity value to LTM distributable cash flow and LTM cash flow
from operations multiples were determined to be 10.0x to 12.0x and 8.5x to
10.0x, respectively. The appropriate adjusted market capitalization to LTM
EBITDA, projected EBITDA and LTM retail gallons sold multiples were determined
to be 9.0x to 10.0x, 8.5x to 9.5x and $1.11 to $1.65, respectively. The
appropriate adjusted equity value to LTM distributable cash flow and LTM cash
flow from operations multiples were determined to be 8.5x to 10.5x and 7.5x to
9.0x, respectively.
The comparable company trading analysis methodology yielded valuations for
the National MLP that imply an equity value range of $63 million to $113 million
based on market capitalization multiples and $38 million to $88 million based on
'adjusted' market capitalization multiples. However, because of the inherent
differences between the businesses, operations and prospects of the National MLP
and the businesses, operations and prospects of the companies included in the
comparable company group, Lehman Brothers believed that it was inappropriate to,
and therefore did not, rely solely on the quantitative results of the analysis
and, accordingly, also made qualitative judgments concerning differences between
the characteristics of these companies and the National MLP that would affect
the public trading values of the National MLP and such comparable companies.
Comparable Acquisitions Analysis. Lehman Brothers reviewed certain publicly
available information on selected propane transactions which were announced or
consummated from August 1989 to March 1999 including, but not limited to,
Cornerstone / Propane Continental, Star Gas / Pearl Gas, Ferrellgas / Skelgas,
Northwestern Growth (Empire Energy) / Synergy (Retail Outlets), Northwestern
Growth / Synergy, Petroleum Heat & Power / Star Gas, Ferrellgas / Star Gas
(Southeast), Ferrellgas / Vision Energy, Thermogas (MAPCO) / Emro Propane,
Empire Gas / PSNC Propane, Empire Energy Management / Empire Energy, UGI
(AmeriGas) / AP Propane, and QFB Partners (Quantum) / Petrolane. For each
transaction, relevant transaction multiples were analyzed including the total
purchase price (equity purchase price plus assumed obligations) divided by:
(1) LTM EBITDA; and
(2) retail gallons on a dollar per gallon basis, where available.
The appropriate LTM EBITDA multiple ranges were determined to be 6.0x to
8.5x. The appropriate retail gallon multiple ranges were determined to be $1.25
to $1.50 per gallon, respectively.
The comparable acquisitions analysis methodology yielded valuations for the
National MLP that imply equity values ranging from $23 million to $63 million.
However, because the market conditions,
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rationale and circumstances surrounding each of the transactions analyzed were
specific to each transaction and because of the inherent differences between
the businesses, operations and prospects of the National MLP and the acquired
businesses analyzed, Lehman Brothers believed that it was inappropriate to,
and therefore did not, rely solely on the quantitative results of the analysis
and, accordingly, also made qualitative judgments concerning differences
between the characteristics of these transactions and the Offer and Merger
that would affect the acquisition values of the National MLP and such acquired
companies.
COMMON UNIT VALUATION ANALYSIS
As a result of the National MLP's multiple classes of equity, Lehman
Brothers' analysis of the fairness from a financial point of view, of the
consideration to be received by the holders of National Common Units in the
Offer included considering the allocation of the total equity value of the
National MLP among the unsubordinated general partner interest, the subordinated
general partner interest and the limited partner interest (i.e., the interest
attributable to the holders of National Common Units). Regarding the allocation
of the equity value to the National Common Units, Lehman Brothers considered the
following: (i) discounted cash flows to the National Common Units under two
cases of projections ('Discounted Equity Cash Flow Analysis'); (ii) two recent
comparable transactions involving the purchase of non-public subordinated units
from the general partner ('Comparable Subordinated Unit Transactions') as
applied to the total equity consideration offered by Columbia; and (iii) the
value that would be attributable to the National Common Units in a liquidation
scenario (pursuant to Article 6.1(c)(ii) of the National MLP Partnership
Agreement) ('Liquidation Analysis') based on the total equity consideration
offered by Columbia Propane. Lehman Brothers also performed a historical trading
analysis and a merger premium analysis to determine the fairness of the
consideration to be received by the holders of National Common Units. Except for
the Liquidation Analysis, the implied per unit equity values derived using the
various valuation methodologies described above all supported the conclusion
that the consideration to be received by the holders of National Common Units in
the Offer and Merger is fair to the holders of National Common Units from a
financial point of view.
The various allocation methodologies noted above and the implied per unit
equity values derived therefrom are included in the following table. This table
should be read together with the more detailed descriptions set forth below. The
table alone does not constitute a complete description of the financial and
comparative analyses. In particular, in applying the various valuation
methodologies to the particular businesses, operations and growth opportunities
of the National MLP, and the particular circumstances of the Offer and Merger,
Lehman Brothers made qualitative judgments as to the significance and relevance
of each analysis. In addition, Lehman Brothers made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of the National MLP or the
National MGP. Accordingly, the methodologies and the per unit equity values
derived therefrom as set forth in the table below must be considered as a whole
and in the context of the narrative description of the financial analyses,
including the assumptions underlying these analyses. Considering the implied per
unit equity values without considering the narrative description of the
financial analyses, including the assumptions underlying these analyses, could
create a misleading or incomplete view of the process underlying, and
conclusions represented by, Lehman Brothers' opinion.
<TABLE>
<CAPTION>
ALLOCATION METHODOLOGY IMPLIED EQUITY VALUE PER UNIT
- ----------------------------------------------------------------------------------- ------------------------------
<S> <C>
Discounted Equity Cash Flows
Case A........................................................................ $10.69 -- $12.54
Case B........................................................................ $8.03 -- $9.43
Comparable Subordinated Unit Transactions.......................................... $9.93 -- $11.72
Liquidation Analysis............................................................... $13.40 -- $14.14
Consideration to be received by the holders of National Common Units in the Offer
and Merger....................................................................... $12.00
</TABLE>
Discounted Equity Cash Flow Analysis. Lehman Brothers used the
aforementioned Case A and Case B projections to determine the cash flows that
would inure under each case to the various equity
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classes. Lehman Brothers used equity discount rates ranging from 14% to 16%
and similar capitalization rates based on equity cash flows in year five. The
discount rates were based on Lehman Brothers' assessment of the cost of equity
capital for the Partnership and similar companies in the propane industry.
The Lehman Brothers equity cash flow analysis indicated a range of $10.69
to $12.54 per National Common Unit and $8.03 to $9.43 per National Common Unit
for the Case A and Case B projections, respectively.
Comparable Subordinated Unit Transactions. Lehman Brothers reviewed two
recently announced/completed transactions whereby subordinated units were
purchased in a transaction from the partnerships' respective general partners.
These two transactions were the July 17, 1998 indirect acquisition of
subordinated units by the Ferrellgas Companies, Inc. Employee Stock Ownership
Trust from trusts affiliated with James E. Ferrell and the November 30, 1998
announced restructuring of Suburban Propane Partners, L.P. whereby subordinated
units owned by Suburban's general partner will be purchased by the partnership
as part of a recapitalization. In these two transactions, the value received for
the subordinated/general partner interests was calculated as between 37% and 53%
of the per unit equivalent of the common unit value on the day prior to the
announcement of the transaction. However, because the market conditions,
rationale and circumstances surrounding both of these transactions were specific
to each transaction and because of the inherent differences between the
businesses, operations and prospects of the Partnership and the partnerships
involved in the transactions analyzed, Lehman Brothers believed that it was
inappropriate to, and therefore did not, rely solely on the quantitative results
of the analysis and, accordingly, also made qualitative judgments concerning
differences between the characteristics of these transactions and the Offer and
Merger that would affect the acquisition values of the Partnership's equity and
such acquired equity.
In allocating the total consideration offered by Columbia Propane for the
equity value of the National MLP between the various classes, Lehman Brothers
used a range of 35% to 55% of the equivalent per common unit value for purposes
of determining the value of the subordinated/general partner interests. Using
the comparable subordinated unit transaction allocation methodology and the
total equity consideration offered by Columbia Propane of $99 million, the
implied per National Common Unit equity values ranged from $10.48 to $11.72.
Using the comparable subordinated unit transaction allocation methodology and
the total equity consideration offered by Columbia Propane of $94 million (this
reduced amount reflecting the estimated fair market value of the Triarc Note of
$25.5 million rather than the face amount of $30.7 million), the implied per
National Common Unit equity values ranged from $9.93 to $11.10.
Liquidation Analysis. Lehman Brothers reviewed Article 6.1(c)(ii) of the
National MLP Partnership Agreement which relates to the distribution of proceeds
in the event of a liquidation. While the Offer and Merger is not a liquidation
as defined in the National MLP Partnership Agreement, and the holders of
National Common Units do not have the right to initiate a liquidation, the
liquidation provisions of the Partnership Agreement are the only provisions that
directly address the allocation of consideration between the various equity
classes.
Using the liquidation analysis allocation methodology and the total equity
consideration offered by Columbia Propane of $99 million, the implied per
National Common Unit equity value is $14.14. Using the liquidation analysis
allocation methodology and the total equity consideration offered by Columbia
Propane of $94 million (this reduced amount reflecting the estimated fair market
value of the Triarc Note of $25.5 million rather than the face amount of $30.7
million), the implied per National Common Unit equity value is $13.40.
Historical Trading Analysis. Lehman Brothers reviewed the daily historical
closing prices of the National Common Units for the period from June 26, 1996 to
March 30, 1999. Lehman Brothers calculated the closing National Common Unit
prices based on 5, 10, 20, 30, 60, 120 and 260 trading day
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<PAGE>
averages, respectively, as of March 30, 1999. The following table summarizes the
historical trading analysis for such period.
<TABLE>
<CAPTION>
AS OF MARCH 30, 1999
----------------------------------------
PREMIUM BASED ON $12.00
PER UNIT PRICE IN THE OFFER
UNIT PRICE AND MERGER
---------- ---------------------------
<S> <C> <C>
Closing Price.................................................... $ 7.00 71.4%
10-Day Average................................................... $ 5.92 102.7%
20-Day Average................................................... $ 5.60 114.3%
30-Day Average................................................... $ 5.47 119.4%
60-Day Average................................................... $ 5.84 105.5%
120-Day Average.................................................. $ 6.63 81.1%
260-Day Average.................................................. $11.61 3.4%
Since 10/21/98(a)................................................ $ 6.45 86.1%
Since 1/29/99(b)................................................. $ 5.49 118.6%
</TABLE>
- ------------
(a) Represents the average closing price per National Common Unit since the
announcement that the National Common Unit distribution would be reduced
from $0.525 per unit to $0.2625 per unit with respect to the third quarter
of 1998.
(b) Represents the average closing price per National Common Unit since the
announcement that all National Common Unit distributions would be
eliminated with respect to the fourth quarter of 1998 and that the National
MGP was continuing to examine strategic alternatives with respect to the
National MLP.
Premiums Analysis. Lehman Brothers reviewed certain publicly available
information on selected cash transactions between $7 and $15 per share, selected
natural resources transactions and selected MLP transactions. The following
table summarizes the premiums paid in those selected transactions.
<TABLE>
<CAPTION>
PREMIUM PAID
VERSUS PRIOR PRICE
--------------------------
1 DAY 1 WEEK 1 MONTH
----- ------ -------
<S> <C> <C> <C>
SELECTED CASH TRANSACTIONS(a)
Mean............................................................................ 28.9% 34.5% 40.1%
Median.......................................................................... 21.6% 29.0% 30.4%
NATURAL RESOURCE TRANSACTIONS
Mean............................................................................ 36.2% 41.5% 37.8%
Median.......................................................................... 29.4% 31.8% 26.1%
MLP TRANSACTIONS
Mean............................................................................ 32.2% 34.5% 38.4%
Median.......................................................................... 32.1% 34.4% 38.0%
NATIONAL COMMON UNIT CONSIDERATION ($12.00 PER UNIT)................................. 71.4% 125.9% 143.0%
PARTNERSHIP DATA..................................................................... $7.00 $5.31 $4.94
</TABLE>
- ------------
(a) Selected cash transactions between $7 and $15 per share from January 1, 1997
to February 15, 1999.
Lehman Brothers is an internationally recognized investment banking firm
engaged in, among other things, the valuation of businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive bids, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. The Special
Committee of the Board of Directors of National MGP selected Lehman Brothers
because of its expertise, reputation and familiarity with the National MLP, the
propane industry and master limited partnerships and because its investment
banking professionals have substantial experience in transactions comparable to
the Offer and Merger.
Pursuant to the terms of an engagement letter agreement, dated January 20,
1999, between Lehman Brothers and the Special Committee, the National OLP will
pay Lehman Brothers a fee of $1,000,000. In addition, the Special Committee, on
behalf of the National MGP (in its capacity as managing general partner of the
National MLP), has agreed to reimburse Lehman Brothers for its
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reasonable expenses (including, without limitation, professional and legal fees
and disbursements) incurred in connection with its engagement, and to indemnify
Lehman Brothers and certain related persons against certain liabilities in
connection with its engagement, including certain liabilities which may arise
under federal securities laws.
In the ordinary course of its business, Lehman Brothers actively trades in
the equity securities of the National MLP and Triarc for its own account and for
the accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities.
National Propane Corporation Special Committee. On April 1, 1999, the
Special Committee determined that the Transaction was in the best interests of
the holders of the National Common Units (other than the National MGP) and
recommended the approval of the Offer and the Merger by the National Board. In
reaching this conclusion, the Special Committee considered the benefits offered
by the Offer and the Merger and weighed them against the risks associated with
the Offer and the Merger. While the Special Committee did not consider the risks
associated with the Offer and the Merger to be insubstantial, it ultimately
concluded that these risks were outweighed by the potential benefits of the
Offer and the Merger to the holders of National Common Units. In reaching this
determination, the Special Committee relied, among other things, on the accuracy
of the representations and warranties of Columbia Propane, the National MLP, the
National MGP and Triarc to be made in the Purchase Agreement, the opinions and
views of officers of the National MGP and the advice of the Special Committee's
financial and legal advisors.
The factors considered by the Special Committee in reaching its decision
included, among others, the following: (a) the historical financial performance
of the National MLP, (b) the financial prospects of continuing to operate the
National MLP as an independent company, (c) projections of cash available for
distribution to the holders of the National Common Units, (d) the historical
trading prices on the New York Stock Exchange of the National Common Units and
the amount of the premium being offered to the holders of the National Common
Units in the Offer and the Merger, (e) possible alternative acquirers for the
National MLP, (f) the terms of the National MLP Partnership Agreement, and (g)
the valuation analyses performed by Lehman Brothers.
As a result of the foregoing considerations, the Special Committee's
discussions with the management of the National MGP, the Special Committee's
other inquiries and the advice of its legal and financial advisors, the Special
Committee identified the following factors, among others, in support of its
recommendation to approve the Offer and the Merger: (a) the National MLP is not
a core part of Triarc's business, (b) the National MLP has been known for some
time within its industry to be available for acquisition and no proposal has
been made to acquire the National MLP on terms that are more favorable to the
holders of the National Common Units than those contained in the Offer and the
Merger, (c) the consideration being paid to the General Partners for the General
Partner Interests is reasonable considering the rights and privileges associated
with the General Partner Interests under the terms of the National MLP
Partnership Agreement, (d) Lehman Brothers, financial advisor to the Special
Committee, has opined that, as of April 1, 1999, the consideration being offered
to the National Common Unit holders is fair to them from a financial point of
view, (e) the National MLP's recent operating results, (f) the National MLP's
forecasted non-compliance with covenants under the Credit Agreement, and (g) the
Purchase Agreement allows the National MGP to entertain other unsolicited
acquisition proposals received prior to the date of acceptance of the tender
offer and to terminate the Purchase Agreement upon payment of a termination fee
of $3.0 million if the Special Committee determines that a possible alternative
transaction is more beneficial to the holders of the National Common Units than
the Offer and the Merger and the payment of a topping fee equal to $6.0 million
(inclusive of the termination fee) if within 12 months following termination of
the Purchase Agreement an alternative transaction is consummated which is more
beneficial to the holders of the National Common Units than the Offer and the
Merger.
In making its recommendation, the National Board considered the
recommendations of the Special Committee and the opinion of Lehman Brothers, as
well as each of the factors described above. In view of the wide variety of
factors that they considered, the Special Committee and the National Board did
not consider it practical to, nor did they attempt to, quantify or otherwise
assign relative weights to the specific factors they considered in reaching
their decisions.
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UNCERTAINTIES ASSOCIATED WITH PROJECTIONS
Management of the National MLP advised Lehman Brothers that the National
MLP has consistently experienced difficulties in attaining projected financial
results. In addition, management advised Lehman Brothers that any projected
results may differ substantially from actual results because of a number of
risks and uncertainties including, but not limited to, the following: changes in
wholesale propane prices; regional weather conditions; the ability to attract
and retain customers; general economic conditions; competition from other energy
sources and within the propane industry; success of operating initiatives;
development and operating costs; advertising and promotional efforts; the
existence or absence of adverse publicity; change in business strategy or
development plans; quality of management; availability, terms and deployment of
capital; business ability and judgment of personnel; availability of qualified
personnel; labor and employee benefit costs; the success of the National MLP in
identifying systems and programs that are not yet Year 2000 compliant;
unexpected costs associated with Year 2000 compliance or the business risk
associated with Year 2000 non-compliance by customers and/or suppliers; changes
in, or failure to comply with, governmental regulations (including accounting
standards, environmental laws and taxation requirements); and the costs,
uncertainties and other effects of legal and administrative proceedings and
other risks and uncertainties.
THE SPECIAL COMMITTEE, CONFLICTS OF INTEREST AND FIDUCIARY DUTY
The National Board believes that the Offer and the Merger are fair to and
in the best interests of holders of National Common Units. However, conflicts of
interest were present in negotiating and structuring the transaction and in
determining the allocation of the consideration to be received by the holders
of National Common Units, on the one hand, and the General Partners, on the
other hand. Triarc,the parent of National MGP, has differing interests in the
National MLP from you. Triarc's interests in the National MLP consist of
unsubordinated general partner interests and subordinated units representing
subordinated general partner interests, which are different interests than
those owned by the holders of National Common Units. It is in Triarc's interest
to maximize the consideration it receives for its interests. In general, since
the amount to be paid by the Purchaser in the Transactions will not change,
any consideration to be received by Triarc reduces the consideration to be
received by holders of National Common Units. Each member of the Board of
Directors is or was either an officer or director of Triarc or a subsidiary of
Triarc, or has had business relationships with Triarc, a subsidiary of Triarc,
or members of Triarc's Board of Directors.
The National Board utilized the Special Committee and its legal and
financial advisors on behalf of the holders of National Common Units primarily
(i) to mitigate the conflict of interest between the National MGP and the
holders of the National Common Units in determining the appropriate amount of
consideration each would receive in the transactions contemplated by the
Purchase Agreement, and (ii) to assist the National Board in determining whether
to recommend approval of the Offer and the Merger to holders of National Common
Units. Mr. Ryckman, the sole member of the Special Committee, currently serves
as a member of the National Board and serves as chairman and/or director of a
number of other companies. From 1986-1988, Mr. Ryckman served on the Board of
Directors of Triangle Industries, Inc., a public company then controlled by Mr.
Nelson Peltz and Mr. Peter May. Messrs. Peltz and May are directors of the
National MGP and serve, respectively, as Chairman and Chief Executive Officer
and President and Chief Operating Officer, as well as directors of Triarc.
Messrs. Peltz and May have each invested in private investment funds managed by
Mr. Ryckman and each currently owns investments with a cost basis of
approximately $100,000 in such a fund. For his service on the Special Committee,
Mr. Ryckman will be paid a fee of $50,000 plus $750 per meeting of the Special
Committee and will be reimbursed for his out-of-pocket expenses related to his
service on the Special Committee. He will also be entitled to, as are all
members of the National Board, certain rights of indemnification by the National
MGP that have been guaranteed by Triarc.
In appointing the Special Committee and its advisors in connection with the
transactions contemplated by the Purchase Agreement, the National MGP did not
intend to undertake, and the disclosures in this Schedule should not be read to
create, a duty to ensure on behalf of the holders of National Common Units that
the terms of the Offer and the Merger are fair to holders of National
Common Units. The Delaware Chancery Court, in dismissing a recent action against
Plum Creek Timber Company, L.P., another publicly traded Delaware limited
partnership, and its general partner, held that a partnership agreement can
limit the nature, scope and applicability of fiduciary duties that
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<PAGE>
would otherwise apply. The Delaware Chancery Court held that the partnership
agreement in the Plum Creek case did have such an effect. In particular, that
agreement, like the National MLP Partnership Agreement, gave the general partner
the unilateral right to submit the proposed transaction to holders of common
units in its sole discretion. In this case, however, the Offer is conditioned on
the valid tender of at least a majority of the outstanding National Common
Units.
Federal securities rules require full and accurate disclosure of the Offer,
the Merger, and the other transactions contemplated by the Purchase Agreement,
including disclosure regarding the basis for a belief as to the fairness of the
Offer and the Merger. The National MLP, the National MGP and their respective
officers and directors do not disclaim any duties imposed upon them under the
Federal securities laws.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
On January 20, 1999, the Special Committee of the National Board engaged
Lehman Brothers as its exclusive financial advisor for the purpose of providing
financial advisory services to the Special Committee in connection with a
potential sale of the National MLP. In consideration of such services, the
Special Committee, on behalf of the National MGP (in its capacity as managing
general partner of the National MLP) agreed to pay Lehman Brothers (i) a
retainer of $400,000 payable on execution of the engagement letter and (ii) an
additional fee of $600,000 payable upon delivery of a written opinion to the
Special Committee with respect to the fairness, from a financial point of view,
to the holders of National Common Units of the National MLP that are
unaffiliated with the National MGP of the consideration to be received in a
potential transaction by such unitholders. The Special Committee in such
capacity has agreed to pay Lehman Brothers' reasonable expenses incurred in
connection with its engagement; provided that expenses in excess of $50,000
shall require the consent of the Special Committee. In addition, the Special
Committee in such capacity has agreed to customary indemnification provisions
arising out of certain liabilities that may be incurred by Lehman Brothers.
On March 18, 1999, the National OLP retained DLJ to render financial
advisory services in connection with the solicitation of consents, waivers or
authorizations from holders of the First Mortgage Notes relating to the
prepayment provisions of the First Mortgage Notes. The National OLP agreed to
pay DLJ a cash fee equal to (i) 0.50% of the principal amount of the First
Mortgage Notes plus (ii) an additional cash compensation equal to 25% of the
difference between 105% of the principal amount of the First Mortgage Notes less
the actual prepayment price. These fees amount to $625,000 and $742,188,
respectively, for an aggregate of $1,367,188, and are payable upon execution and
delivery by all of the holders of First Mortgage Notes (or such lesser amount
acceptable to the National OLP) of a consent, waiver or authorization and the
prepayment of the First Mortgage Notes pursuant to such consent. The National
OLP has agreed to pay all reasonable out-of-pocket expenses incurred by DLJ,
including all reasonable fees and expenses of counsel to DLJ in connection with
its retention (provided that such fees and expenses will not exceed $40,000
without prior approval of the National OLP). In addition, the National OLP
agreed to customary indemnification provisions arising out of certain
liabilities that may be incurred by DLJ.
Neither the National MLP nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer or the
Merger. Mr. Ryckman will receive a fee of $50,000 plus a fee of $750 per meeting
of the Special Committee for his service on the Special Committee. In addition,
he will be reimbursed for his out-of-pocket expenses related to such service and
is entitled to, as are all members of the National Board, certain rights of
indemnification by the National MGP that have been guaranteed by Triarc.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past sixty days, no transactions in the National Common
Units have been effected by the National MLP or, to the best of the National
MLP's knowledge, by any affiliate or subsidiary of the National MLP or any
executive officer or director of the National MGP.
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(b) To the best of the National MLP's knowledge, all of its affiliates or
subsidiaries and all of the executive officers and directors of the National MGP
currently intend to tender all National Common Units which are held of record or
beneficially owned by such persons pursuant to the Offer, other than National
Common Units, if any, held by such persons which, if tendered, could cause such
person to incur liability under the provisions of Section 16(b) of the
Securities Exchange Act of 1934, as amended.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Negotiations.
Except as set forth in this Schedule, no negotiation is being undertaken or
is underway by the National MLP, the National MGP or Triarc in response to the
Offer which relates to or would result in: (i) an extraordinary transaction,
such as a merger or reorganization, involving the National MLP or any subsidiary
thereof; (ii) a purchase, sale or transfer of a material amount of assets by the
National MLP or any subsidiary thereof; (iii) a tender offer for or other
acquisition of securities by or of the National MLP; or (iv) any material change
in the present capitalization or dividend policy of the National MLP.
(b) Transactions and Other Matters.
Except as set forth in this Schedule, there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
In connection with Columbia Propane's confirmatory due diligence, Triarc
provided Columbia Propane with the budget of the National MLP for the 1999
fiscal year. The budget was prepared by the National MLP's management in the
ordinary course of its annual budgeting processes. The budget has not been
revised or updated since the date it was provided to Columbia Propane. A summary
of selected information from the budget has been filed as part of Exhibit 5 to
this Schedule 14D-9.
In addition, Triarc provided Columbia Propane with the National MGP's
Consolidated Five-Year Plan (the 'Plan') for the years ended December 31, 1999
through 2003. The Plan was prepared in September 1998, prior to the November
1998 preparation of the 1999 budget. The Plan was prepared on
a consolidated basis (i.e., each individual operating unit was not specifically
forecasted). In addition, the Plan was prepared assuming normal weather patterns
in the areas of the National MLP's operations and annual growth rates of
approximately 2% to 4%. A summary of selected information from the Plan has
been filed as part of Exhibit 5 to this Schedule 14D-9.
Neither the budget nor the Plan is publicly available and both were
prepared for internal purposes only. They were not prepared with a view to
public disclosure or compliance with published guidelines of the SEC or the
guidelines established by the American Institute of Certified Public Accountants
regarding projections and such information has been filed only because it was
provided to Columbia Propane. The budget and the Plan are based upon a variety
of estimates and assumptions relating to the business of the Partnership,
general business and economic conditions and other matters, many of which are
inherently uncertain or beyond the National MLP's control, and does not take
into account any change in ownership of the National MLP or any changes to the
National MLP's operations or capital structure which may result therefrom. Among
the assumptions reflected in the budget and the Plan are: (i) the passing on to
the consumers of changes in the cost of propane in order to maintain certain
average margins and (ii) that normal degree-day weather patterns will prevail.
It is not possible to predict whether the assumptions made in preparing the
budget and the Plan will be valid. Realization of the budget and the Plan is
subject to significant financial, market, economic and competitive uncertainties
and contingencies, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the National MLP.
Accordingly, there can be no assurance that the budget or the Plan will be
realized, or that the actual results will not vary materially from those of the
budget. The inclusion of the budget should not be regarded as a representation
by the National MLP Partnership or any of its affiliates or representatives
that the budget or the Plan or any aspect thereof will be achieved.
36
<PAGE>
<PAGE>
It should be noted that the projected results of the Plan and the 1999
Budget are not historical facts and constitute 'forward-looking statements'
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
'Reform Act'). The safe harbor for forward looking statements provided in the
Reform Act is not available to statements made in connection with a tender
offer. However, holders of National Common Units should be aware that any
forward-looking statements involve risks, uncertainties and other factors which
may cause actual results, performance or achievements of the National MLP to be
materially different from any future results, performance or achievements
expressed or implied by the projections. Such factors, many of which are beyond
the control of the National MLP, include, but are not limited to, the following:
changes in wholesale propane prices; regional weather conditions; the ability to
attract and retain customers; general economic conditions where the National MLP
operates; competition from other energy sources and within the propane industry;
success of operating initiatives; development and operating costs; advertising
and promotional efforts; the existence or absence of adverse publicity; change
in business strategy or development plans; quality of management; availability,
terms and deployment of capital; business ability and judgment of personnel;
availability of qualified personnel; labor and employee benefit costs; the
success of the National MLP in identifying systems and programs that are not yet
Year 2000 compliant; unexpected costs associated with Year 2000 compliance or
the business risk associated with Year 2000 non-compliance by customers and/or
suppliers; changes in, or failure to comply with, government regulations
(including accounting standards, environmental laws and taxation requirements);
the costs, uncertainties and other effects of legal and administrative
proceedings and other risks and uncertainties referred to in the National MLP's
Form 10-K and other current and periodic filings by the National MLP.
On April 15, 1999, the National MLP filed its Annual Report on Form 10-K
for the fiscal year ended December 31, 1998. The independent auditors report
with respect to the National MLP's financial statements for the year ended
December 31, 1998 contained an explanatory paragraph concerning substantial
doubt as to the Partnership's ability to continue as a going concern. In
addition, the notes to such financial statements state that:
'The [National MLP's] continuation as a going concern is dependent
upon its ability to generate sufficient cash flow to meet its obligations
on a timely basis, to comply with the terms and covenants of its debt
agreements, to obtain additional financing or refinancing as may be
required, and ultimately to attain successful operations. To successfully
achieve these objectives, the [National MLP] believes the [National MLP
sale] is the most viable alternative. If the [National MLP sale] is not
consummated and the Lenders are unwilling to extend or modify the February
Waiver, the [National MLP] could seek to otherwise refinance its
indebtedness, (ii) the [National MGP] might consider buying the banks'
loans to the [National OLP] ($15,997,000 principal amount outstanding at
December 31, 1998, (iii) the [National MLP] could pursue other potential
purchasers of the [National MLP] or (iv) the [National MLP] could be forced
to seek protection under Federal bankruptcy laws.'
The National MLP is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is obligated to file reports and
other information with the SEC relating to its business, financial condition and
other matters. Information, as of particular dates, concerning the National
MGP's directors and officers, their remuneration, options granted to them and
the principal holders of the National Common Units, is filed with the SEC. Such
reports and other information should be available for inspection at the SEC, and
copies thereof should be obtainable from the SEC. Such material should also be
available for inspection at the offices of the NYSE, 20 Broad Street, New York,
New York 10005.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
(1) Purchase Agreement, dated as of April 5, 1999, by and among the
Purchaser, Purchaser General Partner, Purchaser Holdings, the National MLP, the
National MGP, the National SGP and Triarc.*
(2) Joint Press Release issued by Columbia Propane Corporation and National
Propane Partners, L.P. on April 5, 1999.**
(3) Letter to holders of National Common Units of the National MLP dated
April 15, 1999.'D'
37
<PAGE>
<PAGE>
(4) Payment Guaranty dated April 5, 1999 of Columbia Energy Group in favor
of the National MGP.*
(5) Summary of One-Year and Five-Year Financial Projections of the National
MLP.
(6) Opinion of Lehman Brothers dated April 1, 1999.'D'
(7) Indemnification Agreement, made effective as of September 25, 1996,
between National Propane Corporation and Frederick W. McCarthy.*
(8) Indemnification Agreement, made effective as of September 25, 1996,
between National Propane Corporation and Willis G. Ryckman.*
(9) Indemnification Agreement, made effective as of April 24, 1993, between
National Propane Corporation and Nelson Peltz.*
(10) Indemnification Agreement, made effective as of April 24, 1993,
between National Propane Corporation and Peter W. May.*
(11) Indemnification Agreement, made effective as of April 24, 1993 between
National Propane Corporation and Ronald D. Paliughi.*
(12) Guaranty Agreement dated as of March 23, 1999 between Triarc
Companies, Inc. and Nelson Peltz.
(13) Guaranty Agreement dated as of March 23, 1999 between Triarc
Companies, Inc. and Peter May.
(14) Guaranty Agreement dated as of March 10, 1999 between Triarc
Companies, Inc. and Frederick W. McCarthy.
(15) Guaranty Agreement dated as of March 10, 1999 between Triarc
Companies, Inc. and Willis G. Ryckman.
(16) Guaranty Agreement dated as of March 10, 1999 between Triarc
Companies, Inc. and Ronald D. Paliughi.
- ------------
* Filed with the National MLP's Current Report on Form 8-K dated April 14,
1999 and incorporated herein by reference.
** Filed with the National MLP's Current Report on Form 8-K dated April 6, 1999
and incorporated herein by reference.
'D' Included in copies mailed to holders of National Common Units.
38
<PAGE>
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: April 15, 1999
NATIONAL PROPANE PARTNERS, L.P.
By: National Propane Corporation, its
Managing General Partner
By: /s/ RONALD R. ROMINIECKI
.................................
NAME: RONALD R. ROMINIECKI
TITLE: PRESIDENT AND CHIEF
OPERATING OFFICER
39
<PAGE>
<PAGE>
[Logo]
NATIONAL PROPANE CORPORATION
SUITE 1700, IES TOWER
200 FIRST STREET SE
CEDAR RAPIDS, IOWA 52401
April 15, 1999
Dear Unitholder:
I am pleased to inform you that on April 5, 1999, National Propane
Partners, L.P. entered into a purchase agreement with Columbia Propane
Corporation that provides for the acquisition of the Partnership by Columbia
Propane. Under the terms of the purchase agreement, a subsidiary of Columbia
Propane has commenced a tender offer for all outstanding common units of the
Partnership at $12.00 per common unit. The tender offer is the first step of a
two-step cash transaction. In the second step, subject to the terms and
conditions of the purchase agreement, Columbia Propane would indirectly purchase
any remaining common units at a price of $12.00 per common unit, and would
indirectly acquire the general partner interests and subordinated unit interests
of the Partnership from subsidiaries of Triarc Companies, Inc. As part of the
second step, the Partnership would merge into a subsidiary partnership of
Columbia Propane.
THE BOARD OF DIRECTORS OF NATIONAL PROPANE CORPORATION, THE MANAGING
GENERAL PARTNER OF THE PARTNERSHIP, ACTING ON THE RECOMMENDATION OF THE SPECIAL
COMMITTEE OF THE BOARD, HAS UNANIMOUSLY APPROVED THE PURCHASE AGREEMENT, THE
OFFER AND THE MERGER, AND HAS DETERMINED THAT THE OFFER AND THE MERGER ARE
FAIR TO AND IN THE BEST INTERESTS OF THE HOLDERS OF COMMON UNITS AND RECOMMENDS
THAT THE HOLDERS OF COMMON UNITS ACCEPT THE OFFER AND TENDER THEIR COMMON UNITS.
In arriving at its recommendations, the Board of Directors gave careful
consideration to a number of factors. These factors included, among other
things, the recommendation of the Special Committee of the Board, and the
opinion dated April 1, 1999 of Lehman Brothers Inc., financial advisor to the
Special Committee, that, as of such date, from a financial point of view, the
consideration to be received by holders of common units pursuant to the offer
and the merger was fair to the Partnership's common unitholders.
Any determination of fairness involves many different issues and
considerations, and is inherently subjective. Further, conflicts of interest
were present in negotiating and structuring the transaction and in determining
the allocation of the consideration to be received by the common unitholders,
on the one hand, and the General Partners, on the other hand. Triarc, the parent
of National Propane Corporation, has differing interests in the Partnership
from you. Each member of the Board of Directors is or was either an officer or
director of Triarc or a subsidiary of Triarc, or has had business relationships
with Triarc, a subsidiary of Triarc, or members of Triarc's Board of Directors.
We therefore encourage you not to rely solely on the Board of Directors'
recommendation in determining whether to accept the offer and tender your common
units, but rather to independently consider the information included herein as
well as other available information about the Partnership.
Attached to this letter is a copy of the Partnership's
Solicitation/Recommendation Statement on Schedule 14D-9 and a copy of the Lehman
Brothers opinion. Columbia Propane has sent to you under separate cover Columbia
Propane's Offer to Purchase, together with related materials. These documents
set forth the terms and conditions of the offer and other important information.
We encourage you to read Columbia Propane's mailing and the enclosed materials
carefully.
Sincerely,
RONALD R. ROMINIECKI
President and Chief Executive Officer
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION
1998 Five-Year Business Plan
Condensed Statement of Operations
Schedule IS - I
National Propane
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $166,694 $174,529 $178,551 $182,122 $185,764
Franchise/Other revenue -- -- -- -- --
--------- --------- --------- --------- ---------
Total revenues 166,694 174,529 178,551 182,122 185,764
--------- --------- --------- --------- ---------
Expenses:
Cost of sales 123,102 126,412 129,095 131,047 133,336
Selling and distribution 4,005 4,144 4,227 4,343 4,471
General and administrative 21,972 22,546 22,707 22,984 23,482
Reduction in carrying value of assets (a) -- -- -- -- --
Facilities relocation and restructuring (a) -- -- -- -- --
Acquisition related costs -- -- -- -- --
Corporate expense 100 -- -- -- --
--------- --------- --------- --------- ---------
Total expenses 149,179 153,102 156,029 158,374 161,289
--------- --------- --------- --------- ---------
Operating Profit / EBIT (A) 17,515 21,427 22,522 23,748 24,475
Facilities relocation and restructuring -- -- -- -- --
Acquisition related costs -- -- -- -- --
Reduction in carrying value of assets (sch. IS - II) -- -- -- -- --
Depreciation of properties (sch. IS - II) 10,143 9,980 9,980 9,980 9,980
Amortization of goodwill (sch. IS - II) 1,026 1,026 1,026 1,026 1,026
Amortization of trademarks (sch. IS - II) -- -- -- -- --
Amortization of stock compensation (sch. IS - II) 391 291 141 40 --
Amortization - other (sch. IS - II) 702 577 475 275 175
--------- --------- --------- --------- ---------
Total depreciation & amortization (sch. IS - II) 12,262 11,874 11,622 11,321 11,181
--------- --------- --------- --------- ---------
EBITDA 29,777 33,301 34,144 35,069 35,656
Other income (expense):
Interest (expense) (sch. IS - III) (12,437) (12,639) (13,157) (12,825) (12,735)
Investment income (sch. IS - IV) -- -- -- -- --
Other income (sch. IS - V) 400 400 400 400 400
Gain on sale of businesses -- -- -- -- --
Equity in earnings of NPLP -- -- -- -- --
Intercompany interest (sch. IS - V) 8,194 8,217 8,194 8,194 8,107
Other expense (sch. IS - V) -- -- -- -- --
--------- --------- --------- --------- ---------
Total Other(B) (3,843) (4,022) (4,563) (4,231) (4,228)
--------- --------- --------- --------- ---------
Income (loss) before taxes (A+B) 13,672 17,405 17,959 19,517 20,247
Provision for taxes (3,264) (3,903) (3,997) (4,264) (4,388)
--------- --------- --------- --------- ---------
Income (loss) before minority interests 10,408 13,502 13,962 15,253 15,859
Minority interests (5,510) (7,648) (7,966) (8,858) (9,276)
--------- --------- --------- --------- ---------
Income (loss) from continuing operations 4,898 5,854 5,996 6,395 6,583
Discontinued operations -- -- -- -- --
--------- --------- --------- --------- ---------
Income before extraordinary items 4,898 5,854 5,996 6,395 6,583
Extraordinary items -- -- -- -- --
--------- --------- --------- --------- ---------
Net income $4,898 $5,854 $5,996 $6,395 $6,583
========= ========= ========= ========= =========
</TABLE>
(a) It is anticipated that these amounts will be zero.
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION
1998 Five-Year Business Plan
Balance Sheet
Schedule BS - I
National Propane
<TABLE>
<CAPTION>
12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
Plan Plan Plan Plan Plan
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $602 $500 $3,500 $500 $2,125
Restricted cash and cash equivalents -- -- -- -- --
Marketable securities and other investments -- -- -- -- --
Receivables 14547 13878 13065 12215 12426
Inventories 8841 8265 7815 7521 7671
Deferred income taxes -- -- -- -- --
Prepaid and other current assets 1465 1490 1520 1550 1581
-------- -------- -------- -------- --------
Total current assets 25455 24133 25900 21786 23803
-------- -------- -------- -------- --------
Properties, net 70115 65309 60829 56349 51869
Goodwill 15595 14569 13543 12517 11491
Trademarks -- -- -- -- --
Investments -- -- -- -- --
Other assets:
Pension and other post retirement benefits -- -- -- -- --
Deferred costs 5751 4448 3247 2246 1345
Investments in consolidated subsidiaries -- -- -- -- --
Notes and contracts receivable - non current 140 120 100 80 60
Other investments -- -- -- -- --
Other assets 200 200 200 200 200
-------- -------- -------- -------- --------
Total other assets 6091 4768 3547 2526 1605
-------- -------- -------- -------- --------
Total Assets 117,256 108,779 103,819 93,178 88,768
======== ======== ======== ======== ========
Current Liabilities:
Current portion of long-term debt (sch. BS - III) 4,478 4,583 8,167 6,000 6,000
Accounts payable 6539 7170 7313 7675 7829
Accrued expenses and other current liabilities 13697 14049 14199 14842 15155
Net current liabilities of discontinued operations -- -- -- -- --
-------- -------- -------- -------- --------
Total current liabilities 24714 25802 29679 28517 28984
-------- -------- -------- -------- --------
Intercompany payable/(receivable) (sch. BS - II) (60700) (60700) (60700) (60700) (56862)
Long-term debt (sch. BS - III) 131750 133167 135000 135000 135000
Insurance loss reservese -- -- -- -- --
Deferred income taxes 12608 12608 12608 12608 12608
Deposits and other long-term liabilities 2304 2104 1904 1704 1704
Minority interest (10403) (16661) (22687) (27877) (32674)
-------- -------- -------- -------- --------
Total noncurrent liabilities 75559 70518 66125 60735 59776
-------- -------- -------- -------- --------
Stockholders' equity
Common stock 1 1 1 1 1
Additional paid-in capital 138166 138166 138166 138166 138166
Retained earnings (120986) (125633) (130137) (134241) (138159)
Currency translation adjustment -- -- -- -- --
Unearned compensation (198) (75) (15) -- --
Net unrealized gains (loss) on marketable securities -- -- -- -- --
Treasury shares at cost -- -- -- -- --
-------- -------- -------- -------- --------
Total stockholders' equity 16983 12459 8015 3926 8
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Liabilities and Equity $117,256 $108,779 $103,819 $93,178 $88,768
======== ======== ======== ======== ========
</TABLE>
<PAGE>
<PAGE>
NATIONAL PROPANE CORPORATION
1998 Five-Year Business Plan
Statement of Cash Flows
Schedule CF - I
National Propane
<TABLE>
<CAPTION>
12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
Plan Plan Plan Plan Plan
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Income (sch. IS - I) 2,496 5,853 5,996 6,396 6,582
Depreciation and amortization (sch. IS - I and IS - II) 3,058 11,874 11,622 11,321 11,181
Proceeds from sale of businesses -- -- -- -- --
Amortization of orginal debt discount and deferred debt costs 182 726 726 726 726
Equity in earnings of NPLP -- -- -- -- --
Dividends from NPLP (146) (10,500) (10,500) (10,500) (10,500)
Add back interest expense, accrual basis -- -- -- -- --
Add back intercompany interest, accrual basis -- -- -- -- --
Subtract cash interest paid -- -- -- -- --
Income tax provision (benefit) -- -- -- -- --
Income tax payments -- -- -- -- --
Capital expenditures - general (1,375) (5,174) (5,500) (5,500) (5,500)
Capital expenditures- aircraft leases -- -- -- -- --
Management fees -- -- -- -- --
Intercompany principal repaid (sch. CF - II) -- -- -- -- 3,838
Intercompany interest paid (sch. CF - II) -- -- -- -- --
Other intercompany (sch. CF - II) -- -- -- -- --
Repurchase of common stock -- -- -- -- --
Proceeds from stock option exercises -- -- -- -- --
Payment of deferred financing costs -- -- -- -- --
Reclassification of debt from long-term liability -- -- -- -- --
Debt repayments (1,268) 1,522 (4,583) (2,167) --
Debt borrowings -- -- 10,000 -- --
-------- -------- -------- -------- --------
Subtotal 2,947 4,301 7,761 276 6,327
Change in working capital
(Increase) decrease in receivables (7,887) 669 813 850 (211)
(Increase) decrease in inventories (1,100) 576 450 294 (150)
(Increase) decrease in prepaid and
other current assets -- (25) (30) (30) (31)
Increase (decrease) in accounts
payable and accrued expenses 5,445 983 293 1,005 467
-------- -------- -------- -------- --------
(3,542) 2,203 1,526 2,119 75
-------- -------- -------- -------- --------
Subtotal (595) 6,504 9,287 2,395 6,402
* Other, net (please provide detail of significant amounts) 655 (6,606) (6,287) (5,395) (4,777)
-------- -------- -------- -------- --------
Change in cash and short term investments 60 (102) 3,000 (3,000) 1,625
Beginning cash and short term investments (sch. BS - I) 542 602 500 3,500 500
-------- -------- -------- -------- --------
Ending cash and short term investments (sch. BS - I) 602 500 3,500 500 2,125
======== ======== ======== ======== ========
Beginning long-term debt (sch. BS - I and BS III) 137,496 136,228 137,750 133,167 131,000
Beginning cash and short term investments (sch. BS - I) (542) (602) (500) (3,500) (500)
-------- -------- -------- -------- --------
Beginning net debt 136,954 135,626 137,250 129,667 130,500
======== ======== ======== ======== ========
Change in long-term debt (1,268) 1,522 (4,583) (2,167) --
Change in cash and short term investments (60) 102 (3,000) 3,000 (1,625)
-------- -------- -------- -------- --------
Change in net debt (1,328) 1,624 (7,583) 833 (1,625)
======== ======== ======== ======== ========
Ending long-term debt (sch. BS - I and BS III) 136,228 137,750 133,167 131,000 131,000
Ending cash and short term investments (sch. BS - I) (602) (500) (3,500) (500) (2,125)
-------- -------- -------- -------- --------
Ending net debt 135,626 137,250 129,667 130,500 128,875
======== ======== ======== ======== ========
* Distributions to Common Unitholders (3518) (14073) (14073) (14073) (14073)
Minority Interest 4218 7647 7966 8858 9276
Proceeds from sale of property -- -- -- -- --
Gain on sale of assets -- -- -- -- --
Increase(decrease) in other LT Liabs (50) (200) (200) (200) --
(Increase)decrease in other LT Assets 5 20 20 20 20
-------- -------- -------- -------- --------
655 (6,606) (6,287) (5,395) (4,777)
</TABLE>
<PAGE>
<PAGE>
National Propane Partners L.P.
1999 Budget
(000)
<TABLE>
<CAPTION>
1/99 2/99 3/99 4/99 5/99 6/99 7/99 8/99
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gallons Sold 20,032 16,565 15,154 11,145 8,553 8,257 9,034 9,494
Propane Revenues 17,979 14,799 13,192 9,882 7,560 7,009 7,291 8,411
Appliance Revenues 247 242 232 230 270 252 246 259
Other Revenues 593 523 562 526 693 657 602 547
-------- -------- -------- -------- -------- -------- -------- --------
Total Revenues 18,819 15,564 13,986 10,637 8,523 7,919 8,139 9,218
Cost of Propane Sales 8,355 6,684 5,730 4,240 3,165 2,914 3,028 4,066
Cost of Appliance Sales 185 182 172 172 193 185 183 194
Total Cost of Sales 8,539 6,866 5,902 4,412 3,358 3,099 3,211 4,260
Propane Gross Profit 9,624 8,115 7,462 5,641 4,394 4,095 4,263 4,346
Appliance Gross Profit 63 59 60 58 77 67 63 65
Other Gross Profit 593 523 562 526 693 657 602 547
-------- -------- -------- -------- -------- -------- -------- --------
Total Gross Profit 10,280 8,698 8,084 6,225 5,164 4,819 4,928 4,958
Operating Expenses 5,069 4,831 5,089 4,843 4,661 4,774 4,919 4,903
EBITDA 5,210 3,866 2,995 1,382 504 45 9 54
Depreciation & Amortization 1,018 1,018 1,018 1,017 1,017 1,018 1,016 1,016
-------- -------- -------- -------- -------- -------- -------- --------
Operating Income 4,193 2,849 1,977 365 (514) (972) (1,007) (962)
Other Income (Expenses) 16 16 16 16 16 16 16 16
-------- -------- -------- -------- -------- -------- -------- --------
EBIT 4,209 2,864 1,993 381 (498) (957) (991) (946)
Interest (Income) from Parent (318) (352) (352) (341) (352) (341) (352) (352)
Interest Expense 1,049 1,048 1,056 1,048 1,034 1,043 1,034 1,037
-------- -------- -------- -------- -------- -------- -------- --------
Net Interest Expense (Income) 731 696 704 708 682 703 682 685
-------- -------- -------- -------- -------- -------- -------- --------
Income Before Taxes 3,477 2,168 1,289 (327) (1,180) (1,659) (1,673) (1,631)
Income Taxes 17 17 17 17 17 17 17 17
-------- -------- -------- -------- -------- -------- -------- --------
Net Income (Loss) 3,460 2,151 1,272 (344) (1,197) (1,676) (1,690) (1,648)
======== ======== ======== ======== ======== ======== ======== ========
Selling Price 0.8975 0.8934 0.8705 0.8866 0.8839 0.8488 0.8071 0.8859
Cost 0.4171 0.4035 0.3781 0.3805 0.3701 0.3529 0.3352 0.4282
-------- -------- -------- -------- -------- -------- -------- --------
Margin 0.4804 0.4899 0.4924 0.5061 0.5138 0.4959 0.4719 0.4577
======== ======== ======== ======== ======== ======== ======== ========
<CAPTION>
9/99 10/99 11/99 12/99 1,999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Gallons Sold 12,026 14,607 16,753 19,806 161,427
Propane Revenues 10,531 12,863 15,224 18,235 142,976
Appliance Revenues 296 321 336 316 3,248
Other Revenues 750 764 714 686 7,617
-------- -------- -------- -------- --------
Total Revenues 11,576 13,949 16,274 19,237 153,841
Cost of Propane Sales 5,280 6,609 7,735 8,753 66,559
Cost of Appliance Sales 216 237 247 234 2,400
--------
Total Cost of Sales 5,496 6,846 7,982 8,987 68,960
Propane Gross Profit 5,251 6,255 7,489 9,483 76,417
Appliance Gross Profit 80 84 89 82 847
Other Gross Profit 750 764 714 686 7,617
-------- -------- -------- -------- --------
Total Gross Profit 6,080 7,103 8,292 10,251 84,881
Operating Expenses 4,879 4,914 5,110 5,410 59,402
EBITDA 1,201 2,189 3,182 4,841 25,479
Depreciation & Amortization 1,012 1,010 1,010 1,011 12,181
-------- -------- -------- -------- --------
Operating Income 189 1,179 2,171 3,830 13,298
Other Income (Expenses) 16 16 16 16 190
-------- -------- -------- -------- --------
EBIT 205 1,195 2,187 3,846 13,488
Interest (Income) from Parent (341) (352) (341) (352) (4,145)
Interest Expense 1,046 1,032 1,052 1,071 12,550
-------- -------- -------- -------- --------
Net Interest Expense (Income) 705 680 711 719 8,406
-------- -------- -------- -------- --------
Income Before Taxes (501) 515 1,476 3,127 5,082
Income Taxes 17 17 17 17 204
-------- -------- -------- -------- --------
Net Income (Loss) (518) 498 1,459 3,110 4,878
======== ======== ======== ======== ========
Selling Price 0.8757 0.8806 0.9087 0.9207 0.8857
Cost 0.4390 0.4524 0.4617 0.4419 0.4123
-------- -------- -------- -------- --------
Margin 0.4366 0.4282 0.4470 0.4788 0.4734
======== ======== ======== ======== ========
</TABLE>
<PAGE>
<PAGE>
LEHMAN BROTHERS
April 1, 1999
Special Committee of the Board of Directors
National Propane Corporation
Suite 1700, 200 1st Street, S.E.
Cedar Rapids, IA 52401-1409
Dear Sirs:
We understand that National Propane Corporation (the "Company" or the
"Managing General Partner"), acting in its capacity as Managing General Partner
of National Propane Partners, L.P. ("National" or the "Partnership"), is
considering entering into a transaction (the "Proposed Transaction") pursuant to
which (i) the Partnership will be acquired by Columbia Propane, L.P. and certain
affiliates ("Columbia") and (ii) each of the units representing limited
partnership interests in the Partnership (the "Common Units") that are held by
common unitholders (the "Common Unitholders") will be converted into the right
to receive $12.00 per unit in cash. The terms and conditions of the Proposed
Transaction are set forth in more detail in the draft Purchase Agreement dated
March 26, 1999 between National and Columbia and certain of their affiliates
(the "Agreement").
We have been requested by the Special Committee of the Board of Directors
of the Company, acting in its capacity as Managing General Partner of National,
to render our opinion with respect to the fairness, from a financial point of
view, to the Common Unitholders of the consideration to be received by the
Common Unitholders in the Proposed Transaction. We have not been requested to
opine as to, and our opinion does not in any manner address, the Company's
underlying business decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction; (2) such publicly available
information concerning Columbia and National that we believed to be relevant to
our analysis, including, without limitation, each of the periodic reports filed
by National since its initial public offering on June 26, 1996, including the
audited and unaudited financial statements included in such reports and
statements; (3) financial and operating information with respect to the
corporate structure, businesses, operations and prospects of National as
furnished to us by the Company, including financial projections based on the
business plan of the Partnership and, in particular; (a) certain estimates of
propane sales volumes; (b) the budget for the fiscal year 1999; (c) projected
operating cash flow for 1999-2003; and (d) the sensitivity of retail gallons
sold to changes in weather; (4) a trading history of National's Common Units
from June 26, 1996 to March 30, 1999 and a comparison of that trading history
with those of other companies that we deemed relevant; (5) a
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comparison of the historical operating and financial results and present
financial condition of National with those of other companies that we deemed
relevant; and (6) a comparison of the financial terms of the Proposed
Transaction with the financial terms of certain other transactions that we
deemed relevant.
In addition, we (a) had numerous discussions with the management of both
the Company and Triarc concerning National's corporate structure, business,
operations, financial condition, assets and growth opportunities; and (b) have
undertaken such other studies, analyses and investigations as we deemed
appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information that was used by us
without assuming any responsibility for independent verification of such
information and have further relied upon the assurances of the management of the
Partnership that it was not aware of any facts or circumstances that would lead
them to believe that such information, taken as a whole, was inaccurate or
misleading in any material respect. With respect to National's budget for 1999
that was prepared in November 1998, we have been advised by the Partnership that
such budget, at the time it was prepared, was prepared in good faith based on
assumptions that, taken as a whole, were within the range of reasonableness.
However, for purposes of our analysis, we also have considered certain
assumptions and estimates with respect to the future financial performance of
the Partnership from 1999 through 2003 and developed certain adjustments to the
projections of the Partnership for 1999 and to the projections for the future
financial performance of the Partnership over such period. We have discussed
these adjusted projections with the management of the Partnership and they have
agreed that the adjustments, taken as a whole, and adjusted projections are
within a range of reasonableness. In arriving at our opinion, we have not
conducted a physical inspection of the properties and facilities of the
Partnership and have not made or obtained any evaluations or appraisals of the
assets or liabilities of the Partnership. In addition, you have not authorized
us to solicit, and we have not solicited, any indications of interest from any
third party with respect to the purchase of all or a part of the Partnership's
business. Our opinion necessarily is based upon market, economic and other
conditions as they existed on, and can be evaluated as of, the date of this
letter.
In arriving at our opinion, we also considered the process and negotiations
undertaken by the Managing General Partner in connection with the potential sale
of National and the process and negotiations undertaken by the Managing General
Partner, Triarc Companies, Inc. and the Special Committee of the Board of
Directors in connection with the Proposed Transaction. We also considered the
current distribution policy of the Partnership and the Common Unit arrearages
that had been accrued to the date hereof.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
received by the Common Unitholders in the Proposed Transaction is fair to the
Common Unitholders.
We have acted as financial advisor to the Special Committee of the Board of
Directors of the Company in connection with the Proposed Transaction and will
receive a fee for our services. In addition, the Company has agreed to indemnify
us for certain liabilities that may arise out of the rendering of this opinion.
In the ordinary course of our business, we actively trade in the equity
securities of the Partnership for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
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This opinion is solely for the use and benefit of the Special Committee of
the Board of Directors of the Company, acting in its capacity as Managing
General Partner of National, and is rendered to the Special Committee in
connection with its consideration of the Proposed Transaction. This opinion is
not intended to be and does not constitute a recommendation to any Common
Unitholder as to whether or not such Unitholder should tender his units in any
tender offer with respect to the Proposed Transaction.
Very truly yours,
LEHMAN BROTHERS
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GUARANTY AGREEMENT
This GUARANTY AGREEMENT is made and entered into as of the 23rd day of
March, 1999 (this "Agreement") between Triarc Companies, Inc. ("Triarc") and
Nelson Peltz (the "Director").
WHEREAS, National Propane Corporation ("NPC"), a subsidiary of Triarc,
and the Director have entered into an Indemnification Agreement effective April
24, 1993 (the "Indemnification Agreement") which provides for indemnification of
the Director and Triarc wishes to guarantee NPC's obligation to the Director
under the Indemnification Agreement;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
do hereby agree as follows:
1. Guaranty. Triarc hereby irrevocably and unconditionally guarantees
to the Director timely and complete performance by NPC of all of NPC's
undertakings, covenants, obligations and indemnities (collectively,
"Obligations") provided for in the Indemnification Agreement. This guaranty is a
guaranty of payment and of performance.
2. Subrogation. Upon making any payment hereunder, Triarc shall be
subrogated to the rights of the Director against NPC with respect to any such
payment, provided that Triarc shall not enforce a right or receive any payment
by way of subrogation until all of NPC's Obligations shall have been paid in
full and the Director agrees to take at Triarc's expense such steps as Triarc
may reasonably request to implement such subrogation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRIARC COMPANIES, INC.
By: /s/ Brian L. Schorr
Name: Brian L. Schorr
Title: Executive Vice President
and General Counsel
/s/ Nelson Peltz
Nelson Peltz
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GUARANTY AGREEMENT
This GUARANTY AGREEMENT is made and entered into as of the 23rd day of
March, 1999 (this "Agreement") between Triarc Companies, Inc. ("Triarc") and
Peter W. May (the "Director").
WHEREAS, National Propane Corporation ("NPC"), a subsidiary of Triarc,
and the Director have entered into an Indemnification Agreement effective April
24, 1993 (the "Indemnification Agreement") which provides for indemnification of
the Director and Triarc wishes to guarantee NPC's obligation to the Director
under the Indemnification Agreement;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
do hereby agree as follows:
1. Guaranty. Triarc hereby irrevocably and unconditionally guarantees
to the Director timely and complete performance by NPC of all of NPC's
undertakings, covenants, obligations and indemnities (collectively,
"Obligations") provided for in the Indemnification Agreement. This guaranty is a
guaranty of payment and of performance.
2. Subrogation. Upon making any payment hereunder, Triarc shall be
subrogated to the rights of the Director against NPC with respect to any such
payment, provided that Triarc shall not enforce a right or receive any payment
by way of subrogation until all of NPC's Obligations shall have been paid in
full and the Director agrees to take at Triarc's expense such steps as Triarc
may reasonably request to implement such subrogation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRIARC COMPANIES, INC.
By: /s/ Brian L. Schorr
Name: Brian L. Schorr
Title: Executive Vice President
and General Counsel
/s/ Peter W. May
Peter W. May
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GUARANTY AGREEMENT
This GUARANTY AGREEMENT is made and entered into as of the 10th day of
March, 1999 (this "Agreement") between Triarc Companies, Inc. ("Triarc") and
Frederick W. McCarthy (the "Director").
WHEREAS, NPC and the Director have entered into an Indemnification
Agreement effective September 25, 1996 (the "Indemnification Agreement") which
provides for indemnification of the Director and Triarc wishes to guarantee the
obligations of National Propane Corporation ("NPC"), a subsidiary of Triarc, to
the Director under the Indemnification Agreement;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
do hereby agree as follows:
1. Guaranty. Triarc hereby irrevocably and unconditionally guarantees
to the Director timely and complete performance by NPC of all of NPC's
undertakings, covenants, obligations and indemnities (collectively
"Obligations") provided for in the Indemnification Agreement. This guaranty is a
guaranty of payment and of performance.
2. Subrogation. Upon making any payment hereunder, Triarc shall be
subrogated to the rights of the Director against NPC with respect to any such
payment, provided that Triarc shall not enforce a right or receive any payment
by way of subrogation until all of NPC's Obligations shall have been paid in
full and the Director agrees to take at Triarc's expense such steps as Triarc
may reasonably request to implement such subrogation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRIARC COMPANIES, INC.
By: /s/ Brian L. Schorr
Name: Brian L. Schorr
Title: Executive Vice President
and General Counsel
/s/ Frederick W. McCarthy
Frederick W. McCarthy
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GUARANTY AGREEMENT
This GUARANTY AGREEMENT is made and entered into as of the 10th day of
March, 1999 (this "Agreement") between Triarc Companies, Inc. ("Triarc") and
Willis G. Ryckman (the "Director").
WHEREAS, the Board of Directors (the "Board of Directors") of National
Propane Corporation ("NPC"), a subsidiary of Triarc, at a meeting held on
January 8, 1999, appointed the Director as the sole member of a Special
Committee of the Board of Directors (the "Special Committee") for the purpose of
(i) reviewing and evaluating a purchase agreement effecting the sale of all or
substantially all of the partnership interests of National Propane, L.P. (the
"Partnership") and National Propane, L.P. and (ii) making a recommendation to
the Board of Directors with respect to such proposal on behalf of the
Partnership's Common Unitholders;
WHEREAS, NPC and the Director have entered into an Indemnification
Agreement effective September 25, 1996 (the "Indemnification Agreement") which
provides for indemnification of the Director and Triarc wishes to guarantee
NPC's obligations to the Director under the Indemnification Agreement;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
do hereby agree as follows:
1. Guaranty. Triarc hereby irrevocably and unconditionally guarantees
to the Director timely and complete performance by NPC of all of NPC's
undertakings, covenants, obligations and indemnities (collectively,
"Obligations") provided for in the Indemnification Agreement. This guaranty is a
guaranty of payment and of performance.
2. Subrogation. Upon making any payment hereunder, Triarc shall be
subrogated to the rights of the Director against NPC with respect to any such
payment, provided that Triarc shall not enforce a right or receive any payment
by way of subrogation until all of NPC's Obligations shall have been paid in
full and the Director agrees to take at Triarc's expense such steps as Triarc
may reasonably request to implement such subrogation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRIARC COMPANIES, INC.
By: /s/ Brian L. Schorr
Name: Brian L. Schorr
Title: Executive Vice President and
General Counsel
/s/ Willis G. Ryckman
Willis G. Ryckman
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GUARANTY AGREEMENT
This GUARANTY AGREEMENT is made and entered into as of the 10th day of
March, 1999 (this "Agreement") between Triarc Companies, Inc. ("Triarc") and
Ronald D. Paliughi (the "Director").
WHEREAS, NPC and the Director have entered into an Indemnification
Agreement effective April 24, 1993 (the "Indemnification Agreement") which
provides for indemnification of the Director and Triarc wishes to guarantee the
obligations of National Propane Corporation ("NPC"), a subsidiary of Triarc, to
the Director under the Indemnification Agreement;
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
do hereby agree as follows:
1. Guaranty. Triarc hereby irrevocably and unconditionally guarantees
to the Director timely and complete performance by NPC of all of NPC's
undertakings, covenants, obligations and indemnities (collectively
"Obligations") provided for in the Indemnification Agreement. This guaranty is a
guaranty of payment and of performance.
2. Subrogation. Upon making any payment hereunder, Triarc shall be
subrogated to the rights of the Director against NPC with respect to any such
payment, provided that Triarc shall not enforce a right or receive any payment
by way of subrogation until all of NPC's Obligations shall have been paid in
full and the Director agrees to take at Triarc's expense such steps as Triarc
may reasonably request to implement such subrogation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRIARC COMPANIES, INC.
By: /s/ Brian L. Schorr
Name: Brian L. Schorr
Title: Executive Vice President and
General Counsel
/s/ Ronald D. Paliughi
Ronald D. Paliughi
