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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report January 12, 1998
Date of earliest event reported January 8, 1998
CORNERSTONE PROPANE PARTNERS, L.P.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-12499 77-0439862
(State or other jurisdiction Commission File Number (IRS Employer
of incorporation) Identification No.)
432 Westridge Drive
Watsonville, CA 95076
(Address of principal executive offices) (Zip Code)
(408) 724-1921
(Registrant's telephone number, including area code)
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Item 5. Other Events.
On January 8, 1998, Cornerstone Propane Partners, L.P., a Delaware
limited partnership (the "registrant" or the "Partnership") agreed to sell
1,750,000 common units representing limited partner interests in the
Partnership (the "Common Units"), pursuant to an Underwriting Agreement dated
January 8, 1998, among the Partnership, Cornerstone Propane, L.P.,
Cornerstone Propane GP, Inc. and the underwriters listed on Schedule I
thereto (the "Underwriting Agreement"). The Common Units are registered
under the Securities Act of 1933, as amended (Registration Statement No.
333-34581).
The Underwriting Agreement is filed herewith as an Exhibit and is
hereby incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
The following exhibits are filed herewith:
Exhibit
Number Description
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1.1 Underwriting Agreement, dated January 8, 1998, among Cornerstone
Propane Partners, L.P., Cornerstone Propane, L.P., Cornerstone Propane
GP, Inc. and the underwriters listed on Schedule I thereto.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CORNERSTONE PROPANE PARTNERS, L.P.
(Registrant)
By: Cornerstone Propane GP, Inc.,
Managing General Partner
By: /s/ Ronald J. Goedde
--------------------------------
Name: Ronald J. Goedde
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
Date: January 12, 1998
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EXHIBIT INDEX
Exhibit
Number Description
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1.1 Underwriting Agreement, dated January 8, 1998, among Cornerstone
Propane Partners, L.P., Cornerstone Propane, L.P., Cornerstone Propane
GP, Inc. and the underwriters listed on Schedule I thereto.
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CORNERSTONE PROPANE PARTNERS, L.P.
1,725,000 COMMON UNITS REPRESENTING LIMITED PARTNER INTERESTS
UNDERWRITING AGREEMENT
January 8, 1998
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Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Cornerstone Propane Partners, L.P., a Delaware limited partnership (the
"Partnership"), proposes to issue and sell to the several Underwriters named in
Schedule I hereto (the "Underwriters") 1,750,000 common units representing
limited partner interests in the Partnership (the "Firm Units"). The Partnership
also proposes to issue and sell to the several Underwriters not more than an
additional 262,500 common units representing limited partner interests in the
Partnership (the "Additional Units") if and to the extent that you, as Managers
of the offering, shall have determined to exercise, on behalf of the
Underwriters, the right to purchase such Additional Units granted to the
Underwriters in Section 2 hereof. The Firm Units and the Additional Units are
hereinafter collectively referred to as the "Units." The common units
representing limited partner interests in the Partnership to be outstanding
after giving effect to the sales contemplated hereby are hereinafter referred to
as the "Common Units."
The Partnership has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Units. The registration statement as amended by Post-Effective Amendment No.2 on
Form S-3 at the time it becomes effective, including the information (if any)
deemed to be part of the registration statement at the time of effectiveness
pursuant to Rule 430A under the Securities Act of 1933, as amended (the
"Securities Act"), is hereinafter referred to as the "Registration Statement";
the prospectus in the form first used to confirm sales of Units is hereinafter
referred to as the "Prospectus"; each of the preliminary prospectus dated
January2, 1998 filed as part of the registration statement and each preliminary
prospectus filed as a part of any subsequent amendment thereto, or filed
pursuant to Rule 424 under the Securities Act prior to the Prospectus, is
hereinafter referred to as a "Preliminary Prospectus." If the Partnership has
filed an abbreviated registration statement to register additional Common Units
pursuant to Rule 462(b) under the Securities Act (the "Rule 462 Registration
Statement"), then any reference herein to the term "Registration Statement"
shall be deemed to include such Rule 462 Registration Statement. Terms not
defined herein have the meaning set forth in the Prospectus.
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Cornerstone Propane GP, Inc., a California corporation is the general
partner (the "Managing General Partner") of both the Partnership and Cornerstone
Propane, L.P., a Delaware limited partnership (the "Operating Partnership").
SYN Inc., a Delaware corporation is the special general partner (the "Special
General Partner") of the Partnership and the Operating Partnership. The
Partnership, the Operating Partnership and Cornerstone Sales & Service
Corporation, a Delaware corporation and a wholly owned subsidiary of the
Operating Partnership (the "Corporate Sub"), are collectively referred to herein
as the "Partnership Entities."
1. REPRESENTATIONS AND WARRANTIES. Each of the Partnership, the
Operating Partnership and the Managing General Partner represents and warrants
to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or, to the knowledge of
the Partnership, the Operating Partnership, or the Managing General Partner,
threatened by the Commission.
(b) (i) The Registration Statement, when it became effective,
did not contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (ii) the Registration Statement, any Preliminary Prospectus and the
Prospectus comply and, as amended or supplemented, if applicable, will comply in
all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) any Preliminary Prospectus
and the Prospectus do not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph l(b) do not apply to
statements or omissions in the Registration Statement, any Preliminary
Prospectus or the Prospectus, as amended or supplemented, if applicable, based
upon information relating to any Underwriter furnished to the Partnership in
writing by such Underwriter through you expressly for use therein.
(c) None of the Partnership Entities, the Managing General
Partner or the Special General Partner has taken, and none of them will take,
directly or indirectly, any action designed to or that could reasonably be
expected to cause or result in the stabilization or manipulation of the price of
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the Common Units, and the Partnership has not distributed and, prior to the
later to occur of (i) the Closing Date (as defined in Section 4 hereof) and (ii)
completion of the distribution of the Units, will not distribute, any prospectus
(as defined under the Securities Act) in connection with the offering and sale
of the Units other than the Registration Statement, any Preliminary Prospectus,
the Prospectus or other materials, if any, permitted by the Securities Act,
including Rule 134 of the general rules and regulations thereunder.
(d) Each of the Partnership and the Operating Partnership is a
limited partnership duly formed, validly existing and in good standing under the
Delaware Revised Uniform Limited Partnership Act (the "Delaware Act") with full
partnership power and authority to own or lease its properties and to conduct
its business in all material respects as described in the Registration Statement
and the Prospectus, and each of the Partnership and the Operating Partnership is
duly registered or qualified as a foreign limited partnership to conduct its
business and in good standing in each jurisdiction or place where the nature or
location of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify (i) would not have a material adverse effect on the Partnership Entities
taken as a whole, and (ii) would not subject the limited partners of the
Partnership to any material liability.
(e) The Managing General Partner is a corporation duly
organized and validly existing in good standing under the laws of the State of
California, with full corporate power and authority to own or lease its
properties and to conduct its business and to act as managing general partner of
the Partnership and of the Operating Partnership, in each case in all material
respects as described in the Registration Statement and the Prospectus, and the
Managing General Partner is duly registered or qualified as a foreign
corporation to conduct its business and in good standing in each jurisdiction or
place where the nature or location of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify (i) would not have a material adverse effect on the
Partnership Entities taken as a whole, and (ii) would not subject the limited
partners of the Partnership to any material liability.
(f) Each subsidiary of the Operating Partnership is a
corporation duly organized and validly existing in good standing under the laws
of the state of its incorporation, with full corporate power and authority to
own or lease its properties and to conduct its business, in each case in all
material respects as described in the Registration Statement and the Prospectus,
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and each subsidiary of the Operating Partnership is duly registered or qualified
as a foreign corporation to conduct its business and in good standing in each
jurisdiction or place where the nature or location of its properties or the
conduct of its business requires such registration or qualification, except
where the failure so to register or qualify (i) would not have a material
adverse effect on the Partnership Entities taken as a whole, and (ii) would not
subject the limited partners of the Partnership to any material liability; all
of the issued shares of capital stock of each subsidiary of the Operating
Partnership have been duly and validly authorized and issued, are fully paid and
non-assessable and are owned directly by the Operating Partnership, free and
clear of all liens, encumbrances, equities or claims.
(g) The authorized interests in the Partnership outstanding
prior to the issuance of the Units have been duly authorized and are validly
issued, fully paid and non-assessable, except as described in the Prospectus.
(h) The Units have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, except as described in the Prospectus and
except as described in the Prospectus, there are no preemptive rights or other
rights to subscribe for or to purchase, nor any restriction upon the voting or
transfer of, any limited partner interests in the Partnership or the Operating
Partnership pursuant to the Partnership Agreement, the Operating Partnership
Agreement or any agreement or other instrument to which the Partnership or the
Operating Partnership is a party or by which either of them may be bound. Except
as described in the Prospectus, there are no outstanding options or warrants to
purchase any Common Units or Subordinated Units. The Units, when issued and
delivered against payment therefor as provided herein, will conform in all
material respects to the descriptions thereof contained in the Prospectus. The
Partnership has all requisite power and authority to issue, sell and deliver the
Units, in accordance with and upon the terms and conditions set forth in this
Agreement and in the Prospectus. At the Closing Date and the Option Closing
Date (as defined in Section 4 hereof), all corporate and partnership action, as
the case may be, required to be taken by any of the Partnership Entities, the
Managing General Partner, the Special General Partner or any of their
shareholders or partners for the authorization, issuance, sale and delivery of
the Units contemplated by this Agreement shall have been validly taken.
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(i) This Agreement has been duly authorized, executed and
delivered by each of the Partnership, the Operating Partnership and the Managing
General Partner.
(j) The Partnership Agreement is a valid and legally binding
agreement of the Managing General Partner and the Special General Partner
enforceable against the Managing General Partner and the Special General Partner
in accordance with its terms.
(k) None of the offering, issuance and sale by the Partnership
of the Units, the execution, delivery and performance of this Agreement nor the
consummation of the transactions contemplated hereby (i) will conflict with or
will constitute a violation of the agreement of limited partnership, certificate
or articles of incorporation or bylaws or other organizational documents of any
of the Partnership Entities, the Managing General Partner or the Special General
Partner, (ii) will conflict with or will constitute a breach or violation of, or
a default (or an event which, with notice or lapse of time or both, would
constitute such an event) under any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which any of the
Partnership Entities, the Managing General Partner, or the Special General
Partner is a party or by which any of them or any of their respective properties
may be bound, (iii) violates or will violate any order, judgment, decree or
injunction of any court or governmental agency or body directed to any of the
Partnership Entities, the Managing General Partner or the Special General
Partner or any of their properties in a proceeding to which any of them or their
property is a party, (iv) violates or will violate any statute, law or
regulation applicable to any of the Partnership Entities, the Managing General
Partner or the Special General Partner or any of their respective properties, or
(v) will result in the creation or imposition of any lien, charge or encumbrance
(except as contemplated by the Note Agreement and the Bank Credit Agreement)
upon any property or assets of any of the Partnership Entities, the Managing
General Partner or the Special General Partner, or in the case of clause (ii),
(iii), (iv) or (v) which conflicts, breaches, violations or defaults would have
a material adverse effect upon the Partnership Entities taken as a whole.
(l) No permit, consent, approval, authorization or order of any
court, governmental agency or body or financial institution is required in
connection with the execution and delivery of, or the consummation of the
transactions contemplated by, this Agreement except (i) for such permits,
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consents, approvals and similar authorizations required under the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the securities or "Blue Sky" laws of certain jurisdictions, (ii) for such
permits, consents, approvals and similar authorizations which have been, or on
or prior to the Closing Date will be, obtained, (iii) for such permits,
consents, approvals and similar authorizations which, if not obtained, would
not, individually or in the aggregate, have a material adverse effect upon the
Partnership Entities taken as a whole and (iv) as set forth or contemplated in
the Prospectus.
(m) Arthur Andersen LLP, who have expressed their opinions on
the audited consolidated financial statements of the Partnership and SYN Inc.
included in the Registration Statement and the Prospectus, are independent
public accountants as required by the Securities Act and the rules and
regulations thereunder.
(n) Baird, Kurtz & Dobson, who have expressed their opinions on
the audited consolidated financial statements of Empire Energy Corporation and
Synergy Group, Incorporated included in the Registration Statement and the
Prospectus, are independent public accountants as required by the Securities Act
and the rules and regulations thereunder.
(o) Price Waterhouse LLP, who have expressed their opinion on
the audited consolidated financial statements of CGI Holdings, Inc. included in
the Registration Statement and the Prospectus, are independent public
accountants as required by the Securities Act and the rules and regulations
thereunder.
(p) At September 30, 1997, the Partnership had the
capitalization set forth in the Prospectus. The financial statements (including
the related notes and supporting schedules) included in the Registration
Statement and the Prospectus present fairly in all material respects the
financial position, results of operations and cash flows of the entities
purported to be shown thereby on the basis stated therein at the respective
dates or for the respective periods to which they apply and have been prepared
in accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except to the extent disclosed therein. The
information set forth in the Registration Statement and the Prospectus under the
captions "Selected Pro Forma Financial and Operating Data" and "Selected
Historical Financial and Operating Data" is accurately presented in all material
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respects and has been prepared on a basis consistent with the audited and
unaudited historical consolidated financial statements included in the
Registration Statement and the Prospectus.
(q) The Units have been approved for listing on the New York
Stock Exchange, subject only to official notice of issuance.
(r) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the Partnership
Entities taken as a whole from that set forth in the Prospectus (exclusive of
any amendments or supplements thereto subsequent to the date of this Agreement).
(s) There are no legal or governmental proceedings pending or
threatened to which any of the Partnership Entities is a party or to which any
of the properties of the Partnership Entities is subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described or any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement that are not described or
filed as required.
(t) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment thereto,
or filed pursuant to Rule 424 under the Securities Act, complied when so filed
in all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(u) None of the Partnership Entities or the Managing General
Partner is now, or after the sale of the Units to be sold by the Partnership
hereunder and the application of the net proceeds from such sale as described in
the Prospectus under the caption "Use of Proceeds" none of them will be, an
"investment company" as such term is defined in the Investment Company Act of
1940, as amended.
(v) After sale of the Units to be sold by the Partnership
hereunder and application of the net proceeds from such sale as described in the
Prospectus under the caption "Use of Proceeds," the Operating Partnership will
not be a "gas utility company" and none of the Partnership Entities, the
Managing General Partner or the Special General Partner will be a "holding
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company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or subject to regulation thereunder.
(w) All of the Partnership Entities (i) are in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect upon the Partnership Entities taken as a whole.
(x) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties) which
would, singly or in the aggregate, have a material adverse effect on the
Partnership Entities, taken as a whole.
(y) There are no contracts, agreements or understandings between
the Partnership Entities, the Managing General Partner or the Special General
Partner and any person granting such person the right to require the Partnership
to file a registration statement under the Securities Act with respect to any
securities of the Partnership or to require the Partnership to include such
securities with the Units registered pursuant to the Registration Statement
(z) Each of the Partnership Entities maintains insurance against
such losses and risks and in such amounts as is reasonably adequate to protect
the Partnership Entities, the Managing General Partner, the Special General
Partner and their businesses; none of the Partnership Entities (or their
predecessors) has within the last two years been refused any insurance coverage
sought or applied for; and none of the Partnership Entities has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
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and adversely affect the condition (financial or otherwise), business or
operations of the Partnership Entities taken as a whole, except as described in
or contemplated by the Prospectus.
(aa) Each of the Partnership Entities maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (1)
transactions are executed in accordance with management's general or specific
authorizations; (2) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (3) access to assets is
permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(bb) Each of the Partnership Entities, the Managing General
Partner and the Special General Partner has complied with all provisions of
Section 517.075, Florida Statutes relating to issuers doing business with the
Government of Cuba or with any person or affiliate located in Cuba.
2. AGREEMENTS TO SELL AND PURCHASE. The Partnership hereby agrees
to sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Partnership the respective number of Firm Units set forth in Schedule I hereto
opposite its name, at $20.905 a Unit (the "Purchase Price").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Partnership agrees to
sell to the Underwriters the Additional Units, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to 262,500 Additional
Units at the Purchase Price. If you, on behalf of the Underwriters, elect to
exercise such option, you shall so notify the Partnership in writing not later
than 30 days after the date of this Agreement, which notice shall specify the
number of Additional Units to be purchased by the Underwriters and the date on
which such Units are to be purchased. Such date may be the same as the Closing
Date (as defined below) but not earlier than the Closing Date nor later than ten
business days after the date of such notice. Additional Units may be purchased
as provided in Section 2 hereof solely for the purpose of covering
overallotments made in connection with the offering of the Firm Units. If any
Additional Units are to be purchased, each Underwriter agrees, severally and not
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jointly, to purchase the number of Additional Units (subject to such adjustments
to eliminate fractional shares as you may determine) that bears the same
proportion to the total number of Additional Units to be purchased as the number
of Firm Units set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Units.
Each of the Partnership, the Managing General Partner and the Special
General Partner hereby agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period ending 120 days after the date of the Prospectus, (i) offer, issue,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any Common
Units, Subordinated Units or any securities convertible into or exercisable or
exchangeable for Common Units or Subordinated Units or (ii) enter into any swap
or other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Units or such other securities,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Units or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (A) the Units to be sold
hereunder, (B) issuances of Common Units pursuant to employee benefit plans
described in the Prospectus or (C) the issuance of Common Units in connection
with Acquisitions or Capital Improvements (each as defined in the Partnership
Agreement); provided that the Subordinated Units may be transferred without such
consent to an affiliate of the Managing General Partner who agrees to be bound
by the transfer restrictions contained in this paragraph.
3. TERMS OF PUBLIC OFFERING. The Partnership is advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Units as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Partnership is further
advised by you that the Units are to be offered to the public initially at
$22.125 a Unit (the "Public Offering Price") and to certain dealers selected by
you at a price that represents a concession not in excess of $.75 a Unit under
the Public Offering Price, and that any Underwriter may allow, and such dealers
may reallow, a concession, not in excess of $.10 a Unit, to any Underwriter or
to certain other dealers.
4. PAYMENT AND DELIVERY. Payment for the Firm Units shall be made
to the Partnership in federal or other funds immediately available in New York
City against delivery of such Firm Units for the respective accounts of the
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several Underwriters at 9:00 A.M., New York City time, on January 14, 1998, or
at such other time on the same or such other date, not later than January 20,
1998, as shall be designated in writing by you. The time and date of such
payment are hereinafter referred to as the "Closing Date."
Payment for any Additional Units shall be made to the Partnership in
federal or other funds immediately available in New York City against delivery
of such Additional Units for the respective accounts of the several Underwriters
at 9:00 A.M., New York City time, on the date specified in the notice described
in Section 2 or at such other time on the same or on such other date, in any
event not later than February 20, 1998, as shall be designated in writing by
you. The time and date of such payment are hereinafter referred to as the
"Option Closing Date."
Certificates for the Firm Units and the Additional Units shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Units and the Additional Units shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Units to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of
the Partnership to sell the Units to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Units on the Closing
Date are subject to the condition that the Registration Statement shall have
become effective not later than 5:30 P.M., New York City time, on the date
hereof.
The several obligations of the Underwriters to purchase and pay for
the Units on the Closing Date are subject to the following further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any notice
have been given of any intended or potential downgrading or of any
review for a possible change that does not indicate the direction of
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the possible change, in the rating accorded any of the securities of
the Partnership Entities by any "nationally recognized statistical
rating organization," as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any development involving
a prospective change, in the condition, financial or otherwise, or in
the earnings, business or operations of the Partnership Entities taken
as a whole from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement) that, in your judgment, is material and adverse and that
makes it, in your judgment, impracticable to market the Units on the
terms and in the manner contemplated in the Prospectus.
(b) The representations and warranties of the Partnership, the
Operating Partnership and the Managing General Partner contained in this
Agreement shall be true and correct as of the Closing Date and the Partnership,
the Operating Partnership and the Managing General Partner shall have complied
in all material respects with all of the agreements and satisfied in all
material respects all of the conditions on their part to be performed or
satisfied hereunder on or before the Closing Date.
(c) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of the
Managing General Partner to the effect set forth in clause (b) above.
(d) The Underwriters shall have received on the Closing Date, an
opinion of Schiff Hardin & Waite, outside counsel for the Partnership, the
Operating Partnership, the Managing General Partner and the Special General
Partner, dated the Closing Date, to the effect that:
(i) Each of the Partnership and the Operating
Partnership has been duly formed and is validly existing in good
standing as a limited partnership under the Delaware Act with all
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necessary partnership power and authority to own or lease its
properties, and to conduct its business, in each case in all material
respects as described in the Prospectus.
(ii) The Units to be issued and sold to the
Underwriters by the Partnership pursuant to this Agreement and the
limited partner interests represented thereby are duly authorized
under the Partnership Agreement and, when issued and delivered against
payment therefor as provided in this Agreement, will be validly
issued, fully paid (to the extent required under the Partnership
Agreement) and nonassessable (except as such nonassessability may be
affected by matters described in the Prospectus under the caption "The
Partnership Agreement-Limited Liability").
(iii) The Partnership Agreement constitutes a valid
and legally binding agreement of the Managing General Partner and the
Special General Partner, enforceable against the Managing General
Partner and the Special General Partner in accordance with its terms,
except as the enforceability thereof may be limited by (A) bankruptcy,
insolvency, fraudulent transfer, reorganization, receivership,
moratorium and similar laws of general application relating to or
affecting creditors' rights generally and to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and (B) public policy, applicable law
relating to fiduciary duties and an implied covenant of good faith and
fair dealing.
(iv) The Operating Partnership Agreement constitutes a
valid and legally binding agreement of the Managing General Partner,
the Special General Partner and the Partnership, enforceable against
the Managing General Partner, the Special General Partner and the
Partnership in accordance with its terms, except as the enforceability
thereof may be limited by (A) bankruptcy, fraudulent transfer,
reorganization, receivership, moratorium and similar laws of general
application relating to or affecting creditors' rights generally and
to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and
(B) public policy, applicable law relating to fiduciary duties and an
implied covenant of good faith and fair dealing.
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(v) The opinion of Schiff Hardin & Waite that is
filed as Exhibit 8.1 to the Registration Statement is confirmed and
the Underwriters may rely upon such opinion as if it were addressed to
them.
(vi) The Registration Statement was declared
effective under the Securities Act on January 5, 1998; to the
knowledge of such counsel, no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for
that purpose have been instituted or threatened by the Commission; and
any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by such Rule.
(vii) Upon delivery to the Underwriters of
certificates evidencing the Units issued in the name of the
Underwriters and payment by the Underwriters of the purchase price for
the Units, the Underwriters will acquire the Units free of any adverse
claim (as such term is defined in Section 8-302 of the New York
Uniform Commercial Code), assuming that the Underwriters are acting in
good faith and without notice of any adverse claim.
(viii) The Partnership has all requisite power and
authority under the Delaware Act and the Partnership Agreement to
issue, sell and deliver the Units, in accordance with and upon the
terms and conditions set forth in this Agreement and in the
Registration Statement and Prospectus.
(ix) The Managing General Partner is a corporation
duly organized and validly existing in good standing under the laws of
the State of California, with full corporate power and authority to
own or lease its properties and to conduct its business and to act as
managing general partner of the Partnership and of the Operating
Partnership, in each case in all material respects as described in the
Registration Statement and the Prospectus.
(x) The Special General Partner is a corporation duly
organized and validly existing in good standing under the laws of the
State of Delaware, with full corporate power and authority to own or
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lease its properties and to conduct its business and to act as special
general partner of the Partnership and the Operating Partnership, in
each case in all material respects as described in the Registration
Statement and the Prospectus.
(xi) Corporate Sub is a corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware, with full corporate power and authority to own or lease its
properties and to conduct its business as contemplated by the
Registration Statement and the Prospectus.
(xii) Each of the Partnership and the Operating
Partnership is duly qualified or registered as a foreign limited
partnership for the transaction of business under the laws of the
states listed on Schedule I to such opinion; and to the knowledge of
such counsel, such jurisdictions are the only jurisdictions in which
the character of the business conducted by the Partnership and the
Operating Partnership or the location of the properties owned or
leased either of them makes such qualification or registration
necessary (except where the failure to so qualify or so register would
not (A) have a material adverse effect on the Partnership Entities
taken as a whole or (B) subject the limited partners of the
Partnership to any material liability).
(xiii) Each of the Managing General Partner and the
Special General Partner is duly qualified or registered as a foreign
corporation for the transaction of business under the laws of the
states listed on Schedule II to such opinion; and to the knowledge of
such counsel, such jurisdictions are the only jurisdictions in which
the character of the business conducted by the Managing General
Partner and the Special General Partner or the location of the
properties owned or leased by either of them makes such qualification
or registration necessary (except where the failure to so qualify or
so register would not (A) have a material adverse effect on the
Partnership Entities taken as a whole or (B) subject the limited
partners of the Partnership to any material liability).
(xiv) Corporate Sub is duly qualified or registered as
a foreign corporation for the transaction of business under the laws
of the states listed on Schedule III to such opinion; and to the
knowledge of such counsel, such jurisdictions are the only
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jurisdictions in which the character of the business conducted by
Corporate Sub or the location of the properties owned or leased by it
makes such qualification or registration necessary (except where the
failure to so qualify or so register would not (A) have a material
adverse effect on the Partnership Entities taken as a whole or (B)
subject the limited partners of the Partnership to any material
liability).
(xv) All of the issued and outstanding shares of
capital stock of Corporate Sub have been duly authorized and validly
issued and are fully paid and nonassessable; and all of such shares
are owned of record by the Operating Partnership free and clear of all
liens, encumbrances, security interests, charges or claims known to
such counsel, without independent investigation, other than those
created by or arising under the Delaware General Corporation Law.
(xvi) This Agreement has been duly authorized,
executed and delivered by each of the Partnership, the Operating
Partnership and the Managing General Partner.
(xvii) The statements in the Registration Statement
and the Prospectus under the captions "Management's Discussion and
Analysis of Financial Condition and Results of Operations - The
Partnership - Liquidity and Capital Resources - Financing and Sources
of Liquidity," and "Description of Common Units" insofar as they
constitute descriptions of the operative agreements or refer to
statements of law or legal conclusions, are accurate and complete in
all material respects.
(xviii) After due inquiry, such counsel does not know
of any legal or governmental proceedings pending or threatened to
which any of the Partnership Entities is a party or to which any of
the properties of any of the Partnership Entities is subject that are
required to be described in the Registration Statement or the
Prospectus and are not so described or of any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as
required.
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(xix) To the knowledge of such counsel, other than as
described or contemplated in the Prospectus, there is no litigation,
proceeding or governmental investigation pending or threatened against
any of the Partnership Entities, the Managing General Partner or the
Special General Partner which, if adversely determined, (x) would have
a material adverse effect on the Partnership Entities taken as a whole
or (y) would impair or call into question the validity of this
Agreement or the performance by any of the Partnership Entities or the
Managing General Partner of their obligations under this Agreement.
(xx) None of the Partnership Entities or the Managing
General Partner is now, or after sale of the Units to be sold by the
Partnership hereunder and application of the net proceeds from such
sale as described in the Prospectus under the caption "Use of
Proceeds" none of them will be, an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended.
(xxi) After sale of the Units to be sold by the
Partnership hereunder and application of the net proceeds from such
sale as described in the Prospectus under the caption "Use of
Proceeds," the Operating Partnership will not be a "gas utility
company" and none of the Partnership Entities, the Managing General
Partner or the Special General Partner will be a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or subject to regulation thereunder.
(xxii) Neither the offering, issuance and sale by the
Partnership of the Units, nor the execution, delivery and performance
of this Agreement by any of the Partnership, the Operating Partnership
or the Managing General Partner, nor the consummation of the
transactions contemplated hereby (A) will constitute a violation of
the certificate or articles of incorporation or bylaws or other
organizational documents of the Partnership Entities, the Managing
General Partner or the Special General Partner, (B) will constitute a
breach or violation of, or a default under (or an event which, with
notice or lapse of time or both, would constitute such an event), any
indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument (other than the Partnership Agreements) known
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to such counsel to which any of the Partnership Entities, the Managing
General Partner or the Special General Partner is a party or by which
any of them or any of their respective properties may be bound, (C)
will violate any order, judgment, decree or injunction of any court or
governmental agency or body known to such counsel directed to any of
the Partnership Entities, the Managing General Partner or the Special
General Partner, or any of their properties in a proceeding to which
any of the Partnership Entities, the Managing General Partner or the
Special General Partner or any of their property is a party, (D)
violates or will violate any federal statute, law or regulation
applicable to any of the Partnership Entities, the Managing General
Partner or the Special General Partner or any of their respective
properties, or (E) will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of any of the
Partnership Entities except as contemplated by the Note Agreement and
the Bank Credit Agreement.
(xxiii) No permit, consent, approval, authorization or
order of any federal court, governmental agency or body or any
financial institution is required in connection with the execution and
delivery of, or the consummation of the transactions contemplated by,
this Agreement except (A) as may be required under state securities or
"Blue Sky" laws, as to which such counsel need not express any
opinion, and (B) for such permits, consents, approvals and similar
authorizations which have been obtained.
(xxiv) Except as described in the Prospectus, there
are no preemptive rights or other rights to subscribe for or to
purchase, nor any restriction upon the voting or transfer of, any
limited partner interests in the Partnership or the Operating
Partnership or shares of capital stock of the Managing General Partner
or the Special General Partner pursuant to the certificate of
incorporation or bylaws of the Managing General Partner or the Special
General Partner or, to the knowledge of such counsel, pursuant to any
agreement or instrument to which any Partnership Entity, the Managing
General Partner or the Special General Partner is a party or by which
any of them may be bound. To such counsel's knowledge, neither the
filing of the Registration Statement nor the offering or sale of the
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Units as contemplated hereby gives rise to any rights for or relating
to the registration of any Units or other securities of the
Partnership. To such counsel's knowledge, except as disclosed in the
Prospectus, there are no outstanding options or warrants to purchase
any Units or Subordinated Units or other partnership interests in the
Partnership or the Operating Partnership. All corporate and
partnership action required to be taken by the Partnership Entities,
the Managing General Partner, the Special General Partner and their
shareholders or partners for the authorization, issuance, sale and
delivery of the Units has been validly taken.
(xxv) Such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial statements
and schedules and other historical, pro forma and projected financial
and statistical data included therein as to which such counsel need
not express any opinion) comply as to form in all material respects
with the Securities Act and the applicable rules and regulations of
the Commission thereunder, (B) has no reason to believe that (except
for financial statements and schedules and other historical, pro forma
and projected financial and statistical data as to which such counsel
need not express any belief) the Registration Statement and the
prospectus included therein at the time the Registration Statement
became effective contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (C) has no
reason to believe that (except for financial statements and schedules
and other historical, pro forma and projected financial and
statistical data as to which such counsel need not express any belief)
the Prospectus contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(e) The Underwriters shall have received on the Closing Date an
opinion of Skadden, Arps, Slate, Meagher & Flom L.L.P., counsel for the
Underwriters, dated the Closing Date, with respect to such matters as you may
reasonably request.
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(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters, from
each of Arthur Andersen LLP, Baird, Kurtz & Dobson and Price Waterhouse LLP,
independent public accountants, containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus; provided that the letters
delivered on the Closing Date shall use a "cut-off date" not earlier than the
date hereof.
(g) The Units shall have been approved for listing on the New
York Stock Exchange.
The several obligations of the Underwriters to purchase Additional
Units hereunder are subject to the delivery to you on the Option Closing Date of
such documents as you may reasonably request with respect to the good standing
of the Partnership, the due authorization and issuance of the Additional Units
and other matters related to the issuance of the Additional Units and the
satisfaction of the foregoing conditions to the several obligations of the
Underwriters to purchase and pay for the Units on the Closing Date (other than
paragraph (f)), except that all references to the Firm Units and the Closing
Date shall be deemed to refer to the Additional Units and the Option Closing
Date, respectively.
6. COVENANTS OF THE PARTNERSHIP. In further consideration of the
agreements of the Underwriters herein contained, each of the Partnership, the
Operating Partnership and the Managing General Partner covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, three signed copies of
the Registration Statement (including exhibits thereto) and for delivery to each
other Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and to furnish to you in New York City, without charge, prior
to 5:00 P.M., New York City time, on the business day next succeeding the date
of this Agreement and during the period mentioned in paragraph (c) below, as
many copies of the Prospectus and any supplements and amendments thereto or to
the Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration Statement
or the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to which
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you reasonably object, and to file with the Commission within the applicable
period specified in Rule 424(b) under the Securities Act any prospectus required
to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Units as in the opinion of counsel for the Underwriters the
Prospectus is required by law to be delivered in connection with sales by an
Underwriter or dealer, any event shall occur or condition exist as a result of
which it is necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if, in the opinion of counsel for
the Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the Commission and
furnish, at its own expense, to the Underwriters and to the dealers (whose names
and addresses you will furnish to the Partnership) to which Units may have been
sold by you on behalf of the Underwriters and to any other dealers upon request,
either amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Units for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall reasonably
request; PROVIDED, HOWEVER, that neither the Partnership, the Managing General
Partner nor the Special General Partner shall be required to qualify to do
business or to file a general consent to service of process in any such
jurisdictions.
(e) To make generally available to the Partnership's security
holders and to you as soon as practicable an earnings statement covering the
twelve-month period ending January 31, 1999 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or cause to be
paid all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Partnership's counsel and the Partnership's accountants in connection with the
registration and delivery of the Units under the Securities Act and all other
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fees or expenses in connection with the preparation and filing of the
Registration Statement, any Preliminary Prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities hereinabove specified, (ii) all
costs and expenses related to the transfer and delivery of the Units to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or Legal Investment memorandum in
connection with the offer and sale of the Units under state securities laws and
all expenses in connection with the qualification of the Units for offer and
sale under state securities laws as provided in Section 6(d) hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with the Blue Sky or Legal Investment memorandum,
(iv) all filing fees and disbursements of counsel to the Underwriters incurred
in connection with the review and qualification of the offering of the Units by
the National Association of Securities Dealers, Inc., (v) all costs and expenses
incident to listing the Units on the New York Stock Exchange, (vi) the cost of
printing certificates representing the Units, (vii) the costs and charges of any
transfer agent, registrar or depositary, (viii) the costs and expenses of the
Partnership relating to investor presentations on any "road show" undertaken in
connection with the marketing of the Offering of the Units, including, without
limitation expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Partnership, travel and
lodging expenses of the representatives and officers of the Partnership and any
such consultants, and the cost of any aircraft chartered in connection with the
road show, and (ix) other costs and expenses incident to the performance of the
obligations of the Partnership hereunder for which provision is not otherwise
made in this Section. It is understood, however, that except as provided in this
Section, Section 7 entitled "Indemnity and Contribution," and the last paragraph
of Section 9 below, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel, stock transfer taxes payable
on resale of any of the Units by them and any advertising expenses connected
with any offers they may make. Notwithstanding anything to the contrary provided
in the foregoing, each of the parties to this Agreement shall bear its own
expenses in connection with road show presentations.
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(g) The Partnership Entities will use the net proceeds received
by them from the sale of the Units in the manner specified in the Prospectus
under "Use of Proceeds."
7. INDEMNITY AND CONTRIBUTION.
(a) Each of the Partnership, the Operating Partnership and the
Managing General Partner, jointly and severally, agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Partnership shall have furnished any amendments or supplements thereto), or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements t:herein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Underwriter furnished to the
Partnership in writing by such Underwriter through you expressly for use
therein; PROVIDED, HOWEVER, that the foregoing indemnity agreement with respect
to any preliminary prospectus shall not inure to the benefit of any Underwriter
from whom the person asserting any such losses, claims, damages or liabilities
purchased Units, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Partnership shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of such Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the Units to
such person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such losses, claims, damages or liabilities,
unless such failure is the result of noncompliance by the Partnership with
Section 6(a) hereof.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Partnership, the Operating Partnership and the
Managing General Partner, their respective directors and officers who sign the
Registration Statement and each person, if any, who controls the Partnership
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within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the
Partnership, the Operating Partnership and the Managing General Partner to such
Underwriter, but only with reference to information relating to such Underwriter
furnished to the Partnership in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to paragraph (a) or (b) of this Section 7, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to paragraph (a) of this Section 7, and by the
Managing General Partner, in the case of parties indemnified pursuant to
paragraph (b) of this Section 7. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment. No indemnifying
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party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in paragraph
(a) or (b) of this Section 7 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Partnership, the Operating Partnership and the
Managing General Partner on the one hand and the Underwriters on the other hand
from the offering of the Units or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Partnership, the Operating Partnership and the
Managing General Partner on the one hand and of the Underwriters on the other
hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Partnership, the Operating
Partnership and the Managing General Partner on the one hand and the
Underwriters on the other hand in connection with the offering of the Units
shall be deemed to be in the same respective proportions as the net proceeds
from the offering of the Units (before deducting expenses) received by the
Partnership and the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate Public Offering Price of the Units. The
relative fault of the Partnership, the Operating Partnership and the Managing
General Partner on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Partnership, the
Operating Partnership and the Managing General Partner or by the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the respective number of Units they have purchased hereunder, and
not joint.
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(e) The Partnership, the Operating Partnership and the Managing
General Partner and the Underwriters agree that it would not be just or
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (d) of this Section 7. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Units underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 7 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Partnership, the Operating Partnership and the Managing General Partner
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Underwriter or any person controlling any Underwriter or
by or on behalf of the Partnership, the Operating Partnership and the Managing
General Partner, or the respective officers or directors or any person
controlling the Partnership and (iii) acceptance of and payment for any of the
Units.
8. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Partnership, if (a) after the execution and delivery
of this Agreement and prior to the Closing Date, (i) trading generally shall
have been suspended or materially limited on or by, as the case may be, any of
the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., the Chicago Board Options Exchange, the
Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
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securities of the Partnership shall have been suspended on any exchange or in
any over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(i) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Units on the terms and in the manner contemplated in the Prospectus.
9. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Units
that it has or they have agreed to purchase hereunder on such date, and the
aggregate number of Units which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Units to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Units set forth opposite their respective names in Schedule I bears to the
aggregate number of Firm Units set forth opposite the names of all such
nondefaulting Underwriters, or in such other proportions as you may specify, to
purchase the Units which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; provided that in no event shall the
number of Units that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 9 by an amount in excess of one
ninth of such number of Units without the written consent of such Underwriter.
If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Firm Units and the aggregate number of Firm Units with respect to which
such default occurs is more than one-tenth of the aggregate number of Firm Units
to be purchased, and arrangements satisfactory to you and the Partnership for
the purchase of such Firm Units are not made within 48 hours after such default,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Partnership. In any such case either you or
the Partnership shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if any, in
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<PAGE>
the Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Additional Units and the aggregate
number of Additional Units with respect to which such default occurs is more
than one-tenth of the aggregate number of Additional Units to be purchased, the
nondefaulting Underwriters shall have the option to (i) terminate their
obligation hereunder to purchase Additional Units or (ii) purchase not less than
the number of Additional Units that such nondefaulting Underwriters would have
been obligated to purchase in the absence of such default. Any action taken
under this paragraph shall not relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Partnership, the
Operating Partnership or the Managing General Partner to comply with the terms
or to fulfill any of the conditions of this Agreement, or if for any reason the
Partnership, the Operating Partnership or the Managing General Partner shall be
unable to perform their obligations under this Agreement, the Partnership, the
Operating Partnership and the Managing General Partner will reimburse the
Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and disbursements of their counsel) reasonably incurred by such
Underwriters in connection with this Agreement or the offering contemplated
hereunder.
10. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
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<PAGE>
12. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Very truly yours,
CORNERSTONE PROPANE PARTNERS, L.P.
By: Cornerstone Propane GP, Inc.,
its Managing General Partner
By: /s/ Keith G. Baxter
-------------------------------
Keith G. Baxter
President and Chief Executive
Officer
CORNERSTONE PROPANE, L.P.
By: Cornerstone Propane GP, Inc.,
its Managing General Partner
By: /s/ Keith G. Baxter
-------------------------------
Keith G. Baxter
President and Chief Executive
Officer
CORNERSTONE PROPANE GP, INC.
By: /s/ Keith G. Baxter
-------------------------------
Keith G. Baxter
President and Chief Executive
Officer
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Acting severally on behalf
of themselves and the several
Underwriters named herein.
By Morgan Stanley & Co. Incorporated
By: /s/ Jeffrey R. Holzschuh
--------------------------------
Name: Jeffrey R. Holzschuh
Title: Managing Director
<PAGE>
SCHEDULE I
Number of
Firm Units
Underwriter To Be Purchased
------------ ----------------
Morgan Stanley & Co. Incorporated 725,000
PaineWebber Incorporated 725,000
A.G. Edwards & Sons, Inc. 100,000
CIBC Oppenheimer Corp. 100,000
Prudential Securities Incorporated 100,000
Total............................... 1,750,000
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