SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 2-88526
PETROLEUM HEAT AND POWER CO., INC.
----------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 06-1183025
---------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
2187 Atlantic Street, Stamford, Connecticut 06902
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(Address of principal executive office) (Zip Code)
Registrant's telephone number,
including area code: (203) 325-5400
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports)
and (2) had been subject to such filing requirements for the past 90
days.
Yes X No
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This Report contains a total of 16 pages.
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Petroleum Heat and Power Co., Inc.
Index to Form 10-Q
Page
------
Part 1 - Financial Information:
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993 3
Consolidated Statements of Operations for the
Second Quarters Ended
June 30, 1994 and June 30, 1993
and the Six Months Ended
June 30, 1994 and June 30, 1993 4
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1994 and
June 30, 1993 5-6
Notes to Condensed Consolidated Financial Statements 7-8
Item 2 - Management's Discussion and Analysis of
Financial Conditions and Results
of Operations 9-14
Part 2 - Other Information:
Item 6 - Exhibits and Reports on Form 8-K 15
Signature 16
<PAGE>
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<TABLE><CAPTION>
Petroleum Heat and Power Co., Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
Assets
------
June 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Current assets:
Cash $ 29,124,164 $ 4,613,546
U.S. Treasury Notes held in a Cash Collateral Account - 20,000,000
Accounts receivable (net of allowance of $1,917,316
and $1,026,202) 56,146,485 74,818,503
Inventories 11,863,454 13,992,928
Prepaid expenses 5,058,384 5,230,865
Notes receivable and other current assets 1,473,608 1,715,329
------------ ------------
Total current assets 103,666,095 120,371,171
------------ ------------
Property, plant and equipment 66,513,153 62,643,562
Less: accumulated depreciation and amortization 32,833,625 31,103,032
------------ ------------
33,679,528 31,540,530
------------ ------------
Intangible assets (net of accumulated amortization
of $229,927,532 and $217,190,143)
Customer lists 73,838,487 73,177,198
Deferred charges 20,132,454 13,717,281
Deferred pension costs 1,332,616 1,332,616
------------ ------------
95,303,557 88,227,095
------------ ------------
Investment in Star Gas Corporation 16,668,000 16,000,000
------------ ------------
Restricted cash 1,663,000 -
------------ ------------
Other assets 430,000 450,000
------------ ------------
$251,410,180 $256,588,796
============ ============
<CAPTION>
Liabilities and Stockholders' Equity
------------------------------------
<S> <C> <C>
Current liabilities:
Working capital borrowings $ - $ 28,000,000
Current maturities of long-term debt 33,345 33,345
Current maturities of cumulative redeemable exchangeable
preferred stock 4,166,667 4,166,667
Accounts payable 5,847,600 16,664,026
Customer credit balances 9,342,347 22,324,023
Unearned service contract revenue 11,957,093 13,018,983
Accrued expenses 20,797,200 19,469,875
------------ ------------
Total current liabilities 52,144,252 103,676,919
------------ ------------
Long-term notes payable 42,631,832 50,000,000
------------ ------------
Other long-term debt 1,660,386 47,059
------------ ------------
Supplemental benefits payable 1,642,050 1,652,314
------------ ------------
Pension plan obligation acquired 7,066,318 7,079,494
------------ ------------
Subordinated notes payable 167,631,831 135,263,663
------------ ------------
Cumulative redeemable exchangeable preferred stock, par value
$.10 per share; 409,722 shares authorized, 250,000 shares
outstanding of which 41,667 are reflected as current 20,833,333 20,833,333
------------ ------------
Stockholders' equity (deficiency):
Preferred stock - par value $.10 per share; 5,000,000 shares
authorized, none outstanding
Class A common stock - par value $.10 per share; 40,000,000
shares authorized, 18,992,579 shares outstanding 1,899,258 1,899,258
Class B common stock - par value $.10 per share; 6,500,000
shares authorized, 216,901 shares outstanding 21,690 21,690
Class C common stock - par value $.10 per share; 5,000,000
shares authorized, 2,545,139 shares outstanding 254,514 254,514
Additional paid-in capital 54,416,259 54,416,259
Deficit (92,977,508) (112,741,672)
Minimum pension liability adjustment (4,534,035) (4,534,035)
------------ ------------
(40,919,822) (60,683,986)
Note receivable from stockholder (1,280,000) (1,280,000)
------------ ------------
Total stockholders' equity (deficiency) (42,199,822) (61,963,986)
------------ ------------
$251,410,180 $256,588,796
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
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<TABLE><CAPTION>
Petroleum Heat and Power Co., Inc.
and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- --------------------------
1994 1993 1994 1993
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 69,267,229 $ 71,978,298 $336,060,150 $323,249,450
Cost of sales 51,650,838 56,160,963 214,913,644 217,836,985
------------ ------------ ------------ ------------
Gross profit 17,616,391 15,817,335 121,146,506 105,412,465
------------ ------------ ------------ ------------
Selling, general and
administrative expenses 21,711,612 22,343,354 46,638,134 46,221,168
Direct delivery expense 5,094,524 4,969,452 19,809,103 17,287,430
Amortization of customer lists 4,808,732 6,365,890 9,684,783 12,763,078
Depreciation and amortization
of plant and equipment 1,402,794 1,487,197 2,767,984 2,926,760
Amortization of deferred charges 1,556,790 1,423,615 3,052,606 2,761,431
Provision for supplemental benefits 69,867 79,597 139,734 122,658
------------ ------------ ------------ ------------
Operating income (loss) (17,027,928) (20,851,770) 39,054,162 23,329,940
Other income (expense):
Interest expense (5,864,305) (5,718,487) (11,864,294) (10,966,048)
Interest income 623,176 576,140 938,031 952,370
Gain (loss) on sales of fixed assets 51,878 22,110 72,195 (19,534)
------------ ------------ ------------ ------------
Income (loss) before income
taxes, equity interest
and extraordinary item (22,217,179) (25,972,007) 28,200,094 13,296,728
Income taxes (benefit) (51,000) (30,000) 550,000 301,000
------------ ------------ ------------ ------------
Income (loss) before equity
interest and extraordinary item (22,166,179) (25,942,007) 27,650,094 12,995,728
Equity in earnings (losses) of Star
Gas Corporation (1,595,000) - 668,000 -
------------ ------------ ------------ ------------
Income (loss) before
extraordinary item (23,761,179) (25,942,007) 28,318,094 12,995,728
------------ ------------ ------------ ------------
Extraordinary item - loss on early
extinguishment of debt - (867,110) (654,500) (867,110)
------------ ------------ ------------ ------------
Net income (loss) $(23,761,179) $(26,809,117) $ 27,663,594 $ 12,128,618
============ ============ ============ ============
Net income (loss) applicable to
common stock $(23,761,179) $(26,809,117) $ 25,864,898 $ 10,303,372
Income (loss) before extraordinary
item per common share
Class A Common Stock $(1.11) $(1.21) $1.22 $ .51
Class B Common Stock .41 .47 .82 .94
Class C Common Stock (1.11) (1.21) 1.22 .51
Extraordinary loss per common share
Class A Common Stock - $ (.04) $(.03) $(.04)
Class B Common Stock - - - -
Class C Common Stock - (.04) (.03) (.04)
Net income (loss) per common share
Class A Common Stock $(1.11) $(1.25) $1.19 $ .47
Class B Common Stock .41 .47 .82 .94
Class C Common Stock (1.11) (1.25) 1.19 .47
Cash dividends declared per
common stock
Class A Common Stock $ .14 $ .14 $ .28 $ .25
Class B Common Stock .41 .47 .82 .94
Class C Common Stock .14 .14 .28 .25
Weighted average number of
common stock outstanding
Class A Common Stock 18,992,579 18,992,579 18,992,579 18,992,579
Class B Common Stock 216,901 216,901 216,901 216,901
Class C Common Stock 2,545,139 2,545,139 2,545,139 2,545,139
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
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<TABLE><CAPTION>
Petroleum Heat and Power Co., Inc.
and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended June 30,
----------------------------
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 27,663,594 $ 12,128,618
Adjustments to reconcile net income to
net cash provided by operating
activities:
Amortization of customer lists 9,684,783 12,763,078
Depreciation and amortization of
plant and equipment 2,767,984 2,926,760
Amortization of deferred charges
and debt discount 3,052,606 2,773,041
Equity in earnings of Star Gas
Corporation (668,000) -
Provision for losses on accounts
receivable 976,245 1,082,946
Provision for supplemental benefit 139,734 122,658
Loss on bond redemption 654,500 867,110
(Gain) loss on sales of fixed assets (72,195) 19,534
Amortization of acquired pension
plan obligation (13,176) (13,231)
Decrease in accounts receivable 17,695,773 22,250,726
Decrease in inventory 2,129,474 3,258,009
Decrease in prepaid expenses,
notes receivable and other current
assets 414,202 179,505
Decrease in other assets 20,000 10,000
Decrease in accounts payable (10,816,426) (8,440,134)
Decrease in customer credit balances (12,981,676) (9,680,606)
Decrease in unearned service
contract revenue (1,061,890) (1,378,963)
Increase (decrease) in accrued expenses 1,340,339 (2,985,591)
------------ ------------
Net cash provided by
operating activities 40,925,871 35,883,460
------------ ------------
Cash flows from (used for) investing
activities:
Acquisition of customer lists (8,846,072) (7,782,976)
Capital expenditures (5,031,330) (2,829,070)
Increase in deferred charges (5,425,279) (2,346,516)
Proceeds from sales of fixed assets 196,543 89,583
------------ ------------
Net cash used for investing
activities (19,106,138) (12,868,979)
------------ ------------
</TABLE>
<PAGE>
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<TABLE><CAPTION>
Petroleum Heat and Power Co., Inc.
and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended June 30,
-----------------------------
1994 1993
------------ ------------
<S> <C> <C>
Cash flows from (used for) financing
activities:
Net reductions under a financing
arrangement $ (28,000,000) $ (32,000,000)
Net proceeds from issuance of
subordinated notes 71,087,500 48,067,642
Repayment of notes payable (50,654,500) -
Repurchase of subordinated notes - (25,368,574)
Decrease (increase) in U.S.
Treasury Notes 20,000,000 (5,000,000)
Restricted cash held as collateral for
payment of a long-term note payable (1,663,000) -
Decrease in other debt and
supplemental benefits (166,671) (166,672)
Principal payments under capital
lease obligation - (103,595)
Cash dividends paid (7,912,444) (6,911,774)
------------ -------------
Net cash provided by (used for)
financing activities 2,690,885 (21,482,973)
------------ -------------
Net increase in cash 24,510,618 1,531,508
Cash at beginning of year 4,613,546 3,859,557
------------ -------------
Cash at the end of period $ 29,124,164 $ 5,391,065
============ =============
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 10,129,688 $ 10,581,257
Income taxes 163,319 224,223
Non-cash investing activity:
Acquisition of customer lists and
deferred charges (1,630,000) -
Non-cash financing activity:
Issuance of note payable 1,630,000 -
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
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Petroleum Heat and Power Co., Inc.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1- Basis of Presentation
---------------------
The financial information included herein is unaudited; however,
such information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for the fair statement of results for the interim periods.
The results of operations for the six months ended June 30, 1994
are not necessarily indicative of the results to be expected for the
full year.
2- Per Share Data
--------------
Earnings per common shares are computed utilizing the three class
method based upon the weighted average number of shares of Class A
Common Stock, Class B Common Stock and Class C Common Stock
outstanding after adjusting net income (loss) for preferred dividends
declared and preferred stock accretion of $1,799,000 and $1,825,000
for the six months ended June 30, 1994 and 1993, respectively. Fully
diluted earnings per common shares are not presented because the
effect is not material.
3- Acquisitions
------------
During the six month period ending June 30, 1994, the Company
acquired the customer lists and equipment of three unaffiliated fuel
oil dealers. The aggregate consideration for these acquisitions,
accounted for by the purchase method, was approximately $17.3 million.
Sales and net income of the acquired companies is included in the
consolidated statement of income from the respective dates of
acquisition.
Had these acquisitions occurred at the beginning of the period,
the pro forma unaudited results of operations for the six months ended
June 30, 1994, would have been as follows:
(Thousands, Except Per Share)
-----------------------------
Net Sales $348,822
Net Income $ 28,526
Earnings Per Share:
Class A Common Stock $1.23
Class B Common Stock $ .82
Class C Common Stock $1.23
During July 1994, the Company acquired the customer list and equipment
of two unaffiliated fuel oil dealers. The aggregate consideration for
these acquisitions, accounted for by the purchase method, was approximately
$7.4 million.
<PAGE>
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4- Termination of Special Dividends on Class B Common Stock
--------------------------------------------------------
During July 1994, the Company exercised its right to terminate the
Special Dividends on the Class B Common Stock, effective August 31,
1994, "the expiration date". The Company's restated and amended
articles of incorporation provides that when the Company terminates
the Special Dividends, the holders of Class B Common Stock have the
right to require the Company to purchase their shares at $17.50 per
share plus all accrued and unpaid Special Dividends through the
expiration date ($0.2763 per share).
After the expiration date, the Class B Common Stock will not be
paid any dividends until the aggregate amount of dividends paid on all
other classes of stock exceeds the Common Stock Allocation (defined as
the Company's cash flow for each fiscal year after December 31, 1985,
on a cumulative basis, minus all Special Dividends paid or accrued).
At December 31, 1993 the Common Stock Allocation amounted to $100.2
million. After the Common Stock Allocation has been satisfied each
share of Class B Common Stock will participate equally with each share
of Class A Common Stock and Class C Common Stock with respect to all
dividends.
The maximum amount of funds needed by the Company to purchase all
of the outstanding shares of Class B Common Stock (including the
payment of all accrued and unpaid Special Dividends) and to pay
related fees and expenses will be approximately $3,911,000.
5 - Changes in Credit Agreement
---------------------------
On August 1, 1994, the Company amended its credit agreement to
include a $50 million two-year revolving credit acquisition facility,
convertible into a three-year self amortizing term loan. Assuming the
refinancing of certain of the Company's debt due in 1998, repayments
and/or sinking fund deposits equal to 1/3 of the outstanding balance
of the facility on June 30, 1996 would be payable annually with the
final payment due May 30, 1999. If the refinancing has not occurred on
or prior to June 30, 1998, the final payment due on May 30, 1999 would
be accelerated to June 30, 1998. The Company has agreed to pledge its
accounts receivable and inventory as security under the revised and
amended credit agreement.
<PAGE>
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Petroleum Heat and Power Co., Inc.
and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
-------------------------
Six Months Ended June 30, 1994
Compared to Six Months Ended June 30, 1993
------------------------------------------
For the six months ended June 30, 1994, the Company's strong
first quarter results coupled with improvements in the second quarter
over the prior year's comparable period led to record levels of home
heating oil volume, EBITDA* and net income. The Company sold 293.1
million gallons of home heating oil and propane, 7.2% more than the
six months ended June 30, 1993, EBITDA increased 30.5% to $54.7
million, and net income increased to $27.7 million, more than doubling
that for the six months ended June 30, 1993. Included in net income
for the six months ended June 30, 1994 was the Company's $0.7 million
share in the net earnings of Star Gas. However, as the Company's
investment in Star is accounted for under the equity method of
accounting, Star's volume, sales and operating income are not
reflected in the Company's financial statements.
Net sales increased 4.0% to $336.1 million for the first six
months of 1994 from $323.2 million during the first six months of
1993. This $12.8 million increase was attributable to volume growth
associated with colder weather, $25.3 million, and to acquisitions,
$12.5 million, offset by attrition in the Company's customer base and
lower selling prices, reflecting a lower wholesale cost of product.
Home heating oil volume, including propane delivered by the
Company's branches, increased 7.2% to 293.1 million gallons during the
first six months of 1994. This increase of 19.6 million gallons was
due to colder temperatures for the first half of 1994 of approximately
9.1%, experienced primarily during the first quarter of 1994, and the
impact of the nine acquisitions completed in 1993 whose entire six
month volume is first reflected in 1994. The acquisition volume
growth was not significantly impacted by the three 1994 acquisitions,
the largest of which was completed on June 30, 1994. The acquisition
related volume growth and the impact of the colder temperatures, was
partially offset by attrition in the Company's customer base,
including lower volumes associated with the non-automatic delivery and
bid segments of the Company's business.
Gross profit increased 14.9% or $15.7 million to $121.1 million
(41.3 cents per gallon) for the first half of 1994 from $105.4 million
(38.5 cents per gallon) for the six months ended June 30, 1993. This
$15.7 million increase in gross profit was attributable to the volume
increase and improved home heating oil margins which was partially
offset by the higher cost of providing heating equipment repair and
maintenance services to customers in response to the severe Northeast
winter weather experienced during the first quarter of 1994.
*EBITDA is defined as operating income before depreciation and
amortization and non-cash expenses associated with key employees'
Deferred Compensation Plan.
<PAGE>
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Direct delivery expense increased $2.5 million from $17.3
million, (6.3 cents per gallon), to $19.8 million (6.8 cents per gallon)
for the first half of 1994, an increase of 6.9% per gallon. This per
gallon increase was greater than expected due primarily to the
additional costs associated with temporary delivery inefficiencies
experienced during the first quarter of 1994 created by the severe
winter weather conditions which produced numerous winter snow and ice
storms in the Company's delivery area.
Selling, general and administrative expenses increased $0.4
million, (0.9%) from $46.2 million for the first six months of 1993 to
$46.6 million for the first half of 1994. This increase was primarily
attributable to higher vehicle maintenance and repair costs arising
from the severity of the winter weather conditions. On a per gallon
basis, these expenses declined from 16.9 cents to 15.9 cents due to the
economies of scale associated with the acquisitions, the weather
related volume increase and a reduction in marketing expenses.
Depreciation of fixed assets and amortization of customer lists
and deferred charges decreased $2.9 million, (16.0%) to $15.5 million
for the first half of 1994. These non-cash expenses declined as
certain customer lists and deferred charges have become fully
amortized.
Operating income increased $15.7 million, (67.4%) to $39.1
million for the first six months of 1994 from $23.3 million for the
first half of 1993. This significant improvement was due to improved
home heating oil margins and the volume growth which was somewhat
offset by weather related increases in service, delivery and operating
expenses experienced during the first quarter of 1994. Also,
contributing to the increase in operating income was the reduction in
depreciation and amortization expense.
Net interest expense increased $0.9 million, (9.1%) to $10.9
million. A reduction in the average long-term borrowing rate was
offset by a $34.3 million increase in long-term borrowings from $172.4
million, at an average interest rate of 11.6%, to $206.7 million, at
an average interest rate of 10.9%. This increase in long-term
borrowings was due to the conversion in March 1993 of $12.8 million of
Redeemable Preferred Stock into Subordinated Notes due in 2000, the
issuance in April 1993 of $50.0 million of 10 1/8% public notes due in
2003 and the issuance in February 1994 of $75.0 million of 9 3/8%
public debentures due 2006. The proceeds of these public issues were
used to repay $75.0 million in debt maturing in 1993, 1994 and 1995
and to finance the Company's ongoing acquisition program. While
short-term interest rates were approximately the same in both periods,
average short-term borrowings were reduced from $17.8 million for the
first six months of 1993 to $7.3 million for the first six months of
1994 as part of the proceeds of the $75.0 million Subordinated
Debentures, pending use of these funds for the acquisition program,
were used to repay working capital borrowings.
Income before income taxes, extraordinary item and equity in
earnings of Star Gas Corporation increased to $28.2 million for the
first half of 1994, $14.9 million greater (112.1%) than in 1993 due to
the increase in operating income offset by the $0.9 million increase
in net interest expense.
<PAGE>
-11-
Income taxes were approximately $0.6 million for the six months
ended June 30, 1994 compared to $0.3 million for the first half of
1993 representing certain state income taxes. The Company has not
provided for any Federal income taxes for the six months ended June
30, 1994 due to the availability and expected utilization of Federal
income tax net operating loss carryforwards.
Equity income represents the Company's share of Star Gas
Corporation's net income for the six months ended June 30, 1994. In
December 1993, the Company invested $16.0 million in Star, the
nation's tenth largest retail distributor of propane gas and acquired
an approximate 30% equity interest. With this investment the Company
assumed operating management of Star's business and obtained the
option, exercisable beginning late in 1994, to acquire the remaining
Star equity. To concentrate on its core businesses, Star sold its
Texas propane operations in December 1993 and sold a non-propane
related business on August 1, 1994. The results for Star, exclusive
of these operations for the six months ended June 30, 1994, have
exceeded expectations with retail propane volume of 52.3 million
gallons, EBITDA of $12.3 million, depreciation and amortization of
$5.9 million and net income of $2.3 million. Based on Petro's equity
percentage, $0.7 million was recorded as equity in earnings of Star.
The extraordinary item of $0.7 million for the six months ended
June 30, 1994 includes the cash premium paid in connection with
refinancing in February 1994 of $50.0 million in long-term notes
maturing in June 1994 with the proceeds of the $75 million 9 3/8%
Subordinated Debenture issue. In a similar transaction for the six
months ended June 30, 1993, the Company recorded an extraordinary
charge of $0.9 million representing a cash premium of $0.4 million and
the write off of $0.5 million in debt discount and related deferred
charges when $25.0 million of subordinated debt maturing in 1993 and
1995 was refinanced.
Net income for the first half of 1994 increased by $15.5 million,
128.1%, due to the $15.7 million increase in operating income, $0.7
million of equity income from Star Gas, offset by the $0.9 million
increase in net interest expense.
EBITDA increased 30.5% to $54.7 million in 1994 from $41.9
million for 1993. This significant improvement was due to an increase
in home heating oil gross profit partially offset by weather related
increases in service and operating expenses.
<PAGE>
-12-
Three Months Ended June 30, 1994
Compared to Three Months Ended June 30, 1993
--------------------------------------------
During the second quarter of 1994, the Company's results
continued to improve compared to the prior year. While the Company
sold approximately the same volume in both periods, 52 million
gallons, the EBITDA loss for this non-heating period was reduced by
20.1% to $9.2 million, a $2.3 million improvement, and the net loss
was reduced by $3.0 million (11.4%) compared to the second quarter of
1993 to $23.8 million.
Net sales declined 3.8% from $72.0 million in the second quarter
of 1993 to $69.3 million in the second quarter of 1994. This decrease
was attributable primarily to lower selling prices, reflecting a lower
wholesale cost of product, and to a reduction in the low margin bid
segment of the Company's business which was offset by volume growth
associated with ten acquisitions made since the beginning of the
second quarter of 1993.
Home heating oil volume increased 1.1% to 52 million gallons
during the second quarter of 1994. The increase in home heating oil
volume was due to the 1993 and 1994 acquisitions offset by lower
volumes associated with the bid segment of the Company's business.
During the first half of 1994 the Company completed three acquisitions
with annual volume aggregating 24.7 million gallons. These
acquisitions did not materially impact the second quarter of 1994
primarily because the largest acquisition (19.4 million gallons) was
completed on June 30, 1994. While temperatures were approximately the
same in both periods and did not impact the quarter to quarter
comparison, they were approximately 15.6% warmer than normal.
Gross profit increased 11.4% from $15.8 million (30.7 cents per
gallon) in the second quarter of 1993 to $17.6 million (33.9 cents per
gallon) in the second quarter of 1994 primarily due to an increase in
home heating oil gross profit margins and to a lesser extent, the
slight increase in home heating oil volume. Historically, the
expansion in home heating oil gross profit and margins have been
reduced by an increase in the cost of providing heating equipment
repair and maintenance service to the Company's customer base.
However, during the second quarter of 1994, the Company did not
experience this normal increase as the Company continues its ongoing
effort to contain costs while providing improved customer service.
Direct delivery expense increased slightly to $5.1 million for
the second quarter of 1994, approximately equal to the increase in
home heating oil volume.
Operating expenses declined $0.6 million, (2.8%) from $22.3
million in the second quarter of 1993 to $21.7 for the second quarter
of 1994. This decline was due to the Company's ongoing commitment to
monitor and control its operating expenses despite inflationary
pressures and by implementing a more disciplined and cost effective
marketing program.
<PAGE>
-13-
Depreciation of fixed assets and amortization of customer lists
and deferred charges decreased $1.5 million, (16.3%) to $7.8 million.
These non-cash expenses declined as certain customer lists and
deferred charges have become fully amortized.
The operating loss for the second quarter of 1994 was $17.0
million, $3.8 million (18.3%) less than the $20.9 million loss
realized in the second quarter of 1993. This improvement was due to
the increase in home heating oil margins, cost controls which reduced
service and operating expenses and the reduction in depreciation and
amortization expense.
Net interest expense increased $0.1 million, (1.9%) to $5.2
million. A reduction in the average long-term borrowing rate was
offset by a $19.5 million increase in long-term borrowings from $192.8
million, at an average interest rate of 11.4%, to $212.3 million, at
an average interest rate of 10.8%. In addition, the Company reduced
bank fees and generated interest income on higher cash balances in the
second quarter of 1994 compared to the second quarter of 1993.
The loss before income taxes, extraordinary item and equity in
earnings of Star Gas Corporation was reduced by $3.8 million to $22.2
million for the second quarter of 1994, due to improved home heating
oil margins, the reduction in operating expenses and a reduction in
depreciation and amortization expenses.
Included in equity income (loss) for the three months ended June
30, 1994 is the Company's share of Star's seasonal net loss. While
Star's propane business is less seasonal than the home heating oil
business, operating and net losses are expected for the second
calendar quarter. Despite warmer temperatures in the regions in which
it operates, the results for Star for the three months ended June 30,
1994 have approximated expectations with retail propane volume of 12.9
million gallons, a seasonal EBITDA loss of $0.5 million, depreciation
and amortization of $2.8 million and a net loss of $5.1 million.
Based on Petro's equity percentage, the Company recorded a $1.6
million loss as equity in earnings (loss) of Star.
Income taxes were a benefit of $51,000 for the three months ended
June 30, 1994, as the Company expects its effective annual Federal
income tax rate to be zero, as it was in 1993 due to the utilization
of net operating loss carryforwards.
The net loss for the period was $23.8 million, $3.0 million less
than the second quarter of 1993 due to the improvements noted in
operating income and a reduction in the extraordinary refinancing
charge recorded in the second quarter of 1993 offset by the expected
equity loss recorded for Star Gas Corporation.
The seasonally related EBITDA loss was reduced from $11.5 million
for the second quarter of 1993 to $9.2 million for the second quarter
of 1994, an improvement of $2.3 million or 20.1%. This improvement
was due to an increase in gross profit and a reduction in operating
expenses.
<PAGE>
-14-
Liquidity and Financial Condition
---------------------------------
In February 1994, the Company completed a public offering of
$75.0 million of 9 3/8% Subordinated Debentures due 2006. The proceeds
from the sale of the debentures were used to repay $50.0 million of
the Company's 9% Notes due June 1, 1994, pay expenses in connection
with the offering of $3.9 million and pay a premium of $0.7 million
for the early retirement of the Notes. The remaining $20.4 million of
the proceeds will finance the Company's ongoing acquisition program.
As a result of the repayment of the Notes, the $20.0 million cash
collateral account securing these notes was released to the Company,
increasing the amount available for acquisitions to $40.4 million.
Net cash provided by operating activities, $40.9 million, along
with the $40.4 million of net proceeds from the issuance and
refinancing of debt in February 1994 as mentioned above, amounted to
$81.3 million for the six months ended June 30, 1994. These funds
were utilized in investing activities for acquisitions and the
purchase of fixed assets ($19.1 million) and in financing activities
to repay $28.0 million of working capital borrowings, to pay dividends
of $7.9 million and to make principal payments on other long-term
obligations of $0.2 million. In addition, the Company financed an
additional acquisition with a note payable of $1.7 million and secured
the note by depositing $1.7 million into a restricted cash account.
As a result of the above activity, the Company's cash balance
increased by $24.5 million.
A consortium of banks has historically provided the Company with
credit facilities pursuant to an amended and restated credit
agreement. As of June 30, 1994, there were no borrowings outstanding
under the credit agreement, primarily due to the application of the
proceeds from the February 1994 offering and due to the cash provided
from operations in the first half of 1994. At June 30, 1994, the
Company had $51.5 million of net working capital.
For the remainder of 1994, the Company's financing obligations
include the mandatorily required redemption of $4.2 million of
Redeemable Preferred Stock, the offer to purchase Class B Common Stock
and payment of related expenses in the maximum amount of $3.9 million,
Redeemable Preferred Stock Dividends of approximately $1.5 million,
principal payments on other long-term obligations of $0.2 million and
paying Common Stock dividends, anticipated to be approximately $6.1
million. Based on the Company's current cash position, bank credit
availability and expected net cash to be provided by operations during
1994, the Company expects to be able to meet all of the above-
mentioned obligations in 1994, as well as meet all of its other
current obligations as they become due.
Supplemental Financial Information
----------------------------------
During the first half of 1994, the company generated $40.9
million in NIDA* compared to $28.9 million for the first half of 1993.
This $12.0 million increase (41.4%) was primarily due to the 7.2%
volume increase and improved home heating oil gross profit margins
offset by weather related operating expenses and additional interest
expense.
*NIDA is defined as the sum of consolidated net income (loss), plus
depreciation and amortization of plant and equipment and amortization
of customer lists and deferred charges, plus non-cash expenses
associated with key employees' deferred compensation plan, less
dividends accrued on preferred stock, excluding net income (loss)
derived from investments accounted for by the equity method, except to
the extent of any cash dividends received by the Company.
<PAGE>
-15-
PART II OTHER INFORMATION
-------------------------
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits Included Within:
------------------------
(1) Third amended and restated credit agreement dated as of
August 1, 1994.
(27) Financial Data Schedule Six Months Ended June 30, 1994.
(b) Reports on Form 8-K
-------------------
A report on Form 8-K under item 2, "Acquisition of Assets" was
filed on July 13, 1994, reporting the Company's acquisition of
the home heating business operations and assets of DeBlois Oil
Company based in Rhode Island. Financial statements shall be
provided as soon as they become available, in any event no later
than sixty days from the date of the 8-K filing.
<PAGE>
-16-
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized:
Signature Title Date
--------- ----- ----
Irik P. Sevin President, Chairman of the August 10, 1994
--------------------
Irik P. Sevin Board, Chief Executive Officer,
and Chief Financial and Accounting
Officer and Director
<PAGE>
INDEX OF EXHIBITS
(1) Third amended and restated credit agreement dated as of
August 1, 1994.
27 Financial Data Schedule Six Months Ended June 30, 1994
================================================================================
PETROLEUM HEAT AND POWER CO., INC.
------------------------------------
THIRD
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of August 1, 1994
-------------------------------------
CHEMICAL BANK,
as Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . 22
SECTION 2. AMOUNT AND TERMS OF WORKING CAPITAL
LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.1 Working Capital Loan Commitments . . . . . . . . . . . . . . . . 22
2.2 Working Capital Notes . . . . . . . . . . . . . . . . . . . . . . 23
2.3 Procedure for Borrowing Working Capital Loans . . . . . . . . . . 23
2.4 Use of Proceeds of Working Capital Loans . . . . . . . . . . . . 24
SECTION 3. TERMS OF INVENTORY LETTERS OF CREDIT
SUB-FACILITY . . . . . . . . . . . . . . . . . . . . . . 24
3.1 Inventory L/C Commitment . . . . . . . . . . . . . . . . . . . . 24
3.2 Procedure for Issuance of Inventory Letters of Credit . . . . . . 25
3.3 Fees, Commissions and Other Charges . . . . . . . . . . . . . . . 25
3.4 Inventory L/C Participations . . . . . . . . . . . . . . . . . . 26
3.5 Inventory Reimbursement Obligation of the Company . . . . . . . . 27
3.6 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . 27
3.7 Inventory Letter of Credit Payments . . . . . . . . . . . . . . . 28
3.8 Application . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4. AMOUNT AND TERMS OF ACCEPTANCE
SUB-FACILITY . . . . . . . . . . . . . . . . . . . . . . 28
4.1 Acceptance Commitments . . . . . . . . . . . . . . . . . . . . . 28
4.2 Creation of Acceptances . . . . . . . . . . . . . . . . . . . . . 28
4.3 Discount of Acceptances . . . . . . . . . . . . . . . . . . . . . 29
4.4 Acceptance Reimbursement Obligations . . . . . . . . . . . . . . 30
4.5 Mandatory Prepayment . . . . . . . . . . . . . . . . . . . . . . 30
4.6 Supply of Drafts . . . . . . . . . . . . . . . . . . . . . . . . 31
4.7 Delivery of Certain Documentation . . . . . . . . . . . . . . . . 31
4.8 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.9 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5. AMOUNT AND TERMS OF ACQUISITION R/C LOANS . . . . . . . . . . . 32
5.1 Acquisition Loan Commitments . . . . . . . . . . . . . . . . . . 32
5.2 Acquisition Notes . . . . . . . . . . . . . . . . . . . . . . . . 32
5.3 Procedure for Borrowing Acquisition R/C Loans . . . . . . . . . . 32
5.4 Use of Proceeds of Acquisition R/C Loans . . . . . . . . . . . . 33
<PAGE>
Page
----
SECTION 6. TERMS OF ACQUISITION LETTER OF CREDIT
FACILITY . . . . . . . . . . . . . . . . . . . . . . . . 33
6.1 Acquisition L/C Commitment . . . . . . . . . . . . . . . . . . . 33
6.2 Procedure for Issuance of Acquisition Letters of Credit . . . . . 34
6.3 Fees, Commissions and Other Charges . . . . . . . . . . . . . . . 34
6.4 Acquisition L/C Participations . . . . . . . . . . . . . . . . . 35
6.5 Acquisition L/C Reimbursement Obligation of the Company . . . . . 36
6.6 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . 36
6.7 Acquisition Letter of Credit Payments . . . . . . . . . . . . . . 37
6.8 Application . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.9 Certain Existing Letters of Credit . . . . . . . . . . . . . . . 37
SECTION 7. AMOUNT AND TERMS OF ACQUISITION TERM LOANS . . . . . . . . . . 37
7.1 Acquisition Term Loan . . . . . . . . . . . . . . . . . . . . . . 37
7.2 Acquisition Notes . . . . . . . . . . . . . . . . . . . . . . . . 38
7.3 Procedure for Borrowing Acquisition Term Loans . . . . . . . . . 38
7.4 Repayment of Acquisition Term Loans and Cash Collateralization of
Acquisition Letters of Credit . . . . . . . . . . . . . . . . . 38
7.5 Use of Proceeds of Acquisition Term Loans . . . . . . . . . . . . 39
SECTION 8. PROVISIONS RELATING TO CERTAIN EXTENSIONS
OF CREDIT; FEES AND PAYMENTS . . . . . . . . . . . . . . 39
8.1 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.2 Termination or Reduction of Commitments . . . . . . . . . . . . . 39
8.3 Payments and Voluntary Prepayments . . . . . . . . . . . . . . . 39
8.4 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . 40
8.5 Annual Clean-Up . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.6 Interest Rates and Payment Dates . . . . . . . . . . . . . . . . 41
8.7 Computation of Interest and Fees; Payments . . . . . . . . . . . 42
8.8 Conversion and Continuation Options . . . . . . . . . . . . . . . 42
8.9 Minimum Amounts of Tranches . . . . . . . . . . . . . . . . . . . 43
8.10 Inability to Determine Eurodollar Rate . . . . . . . . . . . . . 43
8.11 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.12 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . 44
8.13 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.14 Balance Deficiency Fees . . . . . . . . . . . . . . . . . . . . . 45
8.15 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . . . 46
8.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 9. CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT AND TO INITIAL
EXTENSIONS OF CREDIT . . . . . . . . . . . . . . . . . . . . . 48
9.1 Conditions to Effectiveness of Initial Extensions of Credit
hereunder . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(a) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . 48
(b) Corporate Proceedings . . . . . . . . . . . . . . . . . . . 48
(c) Corporate Documents . . . . . . . . . . . . . . . . . . . . 48
- ii -
<PAGE>
Page
----
(d) Incumbency Certificates . . . . . . . . . . . . . . . . . . 48
(e) Receipt of Certain Documents . . . . . . . . . . . . . . . 48
(f) Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(g) Borrowing Base Certificate . . . . . . . . . . . . . . . . 49
(h) Lien Searches . . . . . . . . . . . . . . . . . . . . . . . 49
(i) Legal Matters . . . . . . . . . . . . . . . . . . . . . . . 49
9.2 Conditions of All Extensions of Credit . . . . . . . . . . . . . 50
(a) Representations and Warranties; No Default . . . . . . . . 50
(b) Legal Matters . . . . . . . . . . . . . . . . . . . . . . . 50
9.3 Additional Conditions of Acquisition R/C Loans . . . . . . . . . 50
(a) Covenant Compliance . . . . . . . . . . . . . . . . . . . . 50
(b) Notice of Acquisition . . . . . . . . . . . . . . . . . . . 50
SECTION 10. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 51
10.1 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . 51
10.2 Corporate Power and Authorization; Enforceable Obligations . . . 51
10.3 No Legal Bar to Loans . . . . . . . . . . . . . . . . . . . . . 51
10.4 No Material Litigation . . . . . . . . . . . . . . . . . . . . . 52
10.5 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.6 Ownership of Properties; Liens . . . . . . . . . . . . . . . . . 52
10.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.8 Financial Condition . . . . . . . . . . . . . . . . . . . . . . 52
10.9 Filing of Statements and Reports . . . . . . . . . . . . . . . . 53
10.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.11 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.12 Investment Company Act; Other Regulations . . . . . . . . . . . 54
10.13 Federal Regulations . . . . . . . . . . . . . . . . . . . . . . 54
10.14 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 55
11.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 55
11.2 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . 57
11.3 Maintenance of Properties; Insurance . . . . . . . . . . . . . . 57
11.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.5 Conduct of Business and Maintenance of Existence . . . . . . . . 58
11.6 Inspection of Property, Books and Records . . . . . . . . . . . 58
11.7 ERISA Reports . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.8 Execution of Guaranties and Security Agreements by Additional
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.9 Maintenance of Collateral . . . . . . . . . . . . . . . . . . . 59
11.10 Update of Customer Lists . . . . . . . . . . . . . . . . . . . . 60
11.11 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 12. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 61
12.1 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . 61
- iii -
<PAGE>
Page
----
12.2 Limitations on Liens . . . . . . . . . . . . . . . . . . . . . . 61
12.3 Limitation on Contingent Obligations . . . . . . . . . . . . . . 62
12.4 Prohibition of Fundamental Changes . . . . . . . . . . . . . . . 62
12.5 Limitation on Investments, Loans and Advances . . . . . . . . . 63
12.6 Prohibition of Certain Prepayments and Dividends . . . . . . . . 63
12.7 Limitation on Leases . . . . . . . . . . . . . . . . . . . . . . 64
12.8 Consolidated Cash Flow . . . . . . . . . . . . . . . . . . . . . 64
12.9 Consolidated Capital Funds . . . . . . . . . . . . . . . . . . . 64
12.10 Limitation on Funded Debt . . . . . . . . . . . . . . . . . . . 64
12.11 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . 65
12.12 Adjusted Consolidated Cash Flow. . . . . . . . . . . . . . . . . 65
12.13 Limitation on Negative Pledge Clauses . . . . . . . . . . . . . 65
SECTION 13. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 14. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . 69
14.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . 69
14.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . 69
14.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . 69
14.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . 70
14.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . 70
14.6 Non-Reliance on Agent and Other Banks . . . . . . . . . . . . . 70
14.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 71
14.8 Agent in Its Individual Capacity . . . . . . . . . . . . . . . . 71
14.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 15. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 72
15.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 72
15.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
15.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . 73
15.4 Survival of Representations and Warranties . . . . . . . . . . . 73
15.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . 73
15.6 Successors and Assigns; Participations; Purchasing Banks . . . . 74
15.7 Adjustments; Set-off . . . . . . . . . . . . . . . . . . . . . . 77
15.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 77
15.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 78
15.10 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . 78
SCHEDULES
- - ---------
Schedule I Commitments; Commitment Percentages; Addresses for Notices
ySchedule II Subsidiaries
Schedule III Subordinated and Other Indebtedness
- iv -
<PAGE>
Schedule IV Acquisitions Since March 31, 1994
Schedule V Existing Acquisition Letters of Credit
EXHIBITS
- - --------
Exhibit A Form of Working Capital Note
Exhibit B Form of Acquisition Note
Exhibit C Form of Third Amended and Restated Company Security Agreement
Exhibit D Form of Cash Collateral Agreement
Exhibit E Form of Third Amended and Restated Subsidiary Guarantee
Exhibit F Form of Third Amended and Restated Subsidiary Security Agreement
Exhibit G Form of Request for Acceptances
Exhibit H Form of Draft
Exhibit I Form of Borrowing Base Certificate
Exhibit J Form of Assignment and Acceptance
Exhibit K Form of Line Letter
- v -
<PAGE>
THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 1,
1994, among:
(a) PETROLEUM HEAT AND POWER CO., INC., a Minnesota corporation (the
"Company");
-------
(b) the banks and other financial institutions from time to time parties
hereto (collectively, the "Banks"); and
-----
(c) CHEMICAL BANK, a New York banking corporation, as agent for such Banks
(in such capacity, the "Agent").
-----
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and Manufacturers Hanover Trust Company were
parties to a Credit Agreement, dated as of December 31, 1986 (as amended,
supplemented or otherwise modified from time to time, the "Original Agreement");
------------------
WHEREAS, the Original Agreement was amended and restated pursuant to
the Amended and Restated Credit Agreement, dated as of May 1, 1989 (as amended,
supplemented or otherwise modified from time to time prior to the date hereof,
the "A&R Agreement"), among the Company, Maxwhale Corp., the banks parties
-------------
thereto and Manufacturers Hanover Trust Company, as agent for such banks;
WHEREAS, the A&R Agreement was amended and restated pursuant to the
Second Amended and Restated Credit Agreement, dated as of December 31, 1992 (as
amended, supplemented or otherwise modified from time to time prior to the date
hereof, the "Existing Agreement"), among the Company, Maxwhale Corp., the banks
------------------
parties thereto and Chemical Bank (as successor by merger to Manufacturers
Hanover Trust Company), as agent for such banks;
WHEREAS, the Company has requested that the Existing Agreement be
amended to contain, inter alia, (a) a revolving credit and letter of credit
----- ----
facility to provide financing for the Company's ongoing acquisition program and
(b) certain other provisions upon the terms and subject to the conditions herein
contained; and
WHEREAS, each of the parties to the Existing Agreement (after giving
effect to the assignment effected hereby of Fleet Bank's interest to NationsBank
of North Carolina, N.A.) is agreeable to the requested amendments, but only upon
the terms and subject to the conditions set forth herein, and each of the
parties to the Existing Agreement, for convenience of reference, has agreed to
restate the Existing Agreement as so amended;
WHEREAS, each of the Banks and the other parties hereto are agreeable
to the terms and provisions of the Existing Agreement as amended and restated
hereby;
<PAGE>
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties to the Existing Agreement agree that the Existing
Agreement shall be and hereby is amended and restated in its entirety and the
parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
-------------
shall have the following meanings, unless the context otherwise requires:
"Acceptance Rate" shall mean the rate for any Acceptance financing
---------------
equal to 1 and 1/2% per annum above the discount rate, as determined from
time to time by each Bank in its sole and absolute discretion, as generally
available to other customers of such Bank for bankers' acceptances, for up
to and including 180-day tenor.
"Acceptance Reimbursement Obligation" shall have the meaning set forth
-----------------------------------
in subsection 4.4(a) hereof.
"Acceptances" shall have the meaning set forth in subsection 4.1
-----------
hereof.
"Accumulated Funding Deficiency" shall have the meaning set forth in
------------------------------
Section 302 of ERISA.
"Acquisition Commitment" shall mean, as to any Bank, its obligation to
----------------------
make Acquisition R/C Loans to the Company and issue or participate in
Acquisition Letters of Credit on behalf of the Company pursuant hereto in
an aggregate principal and/or face amount not to exceed at any one time
outstanding the amount set forth opposite such Bank's name in Schedule I,
as such amount may be reduced from time to time as provided herein
(collectively, as to all of the Banks, the "Acquisition Commitments").
-----------------------
"Acquisition Commitment Period" shall mean the period from and
-----------------------------
including the date hereof to but not including the Commitment Termination
Date or such earlier date on which the Acquisition Commitments shall
terminate as provided herein.
"Acquisition L/C Obligations" shall mean, at any time, an amount equal
---------------------------
to the sum of (a) the aggregate then undrawn and unexpired amount of the
then outstanding Acquisition Letters of Credit and (b) the aggregate amount
of drawings under Acquisition Letters of Credit which have not then been
reimbursed pursuant to subsection 6.5.
"Acquisition L/C Reimbursement Obligations" shall mean the obligation
-----------------------------------------
of the Company to reimburse the Issuing Bank pursuant to subsection 6.5 for
amounts drawn under Acquisition Letters of Credit.
"Acquisition Letters of Credit" shall have the meaning set forth in
-----------------------------
subsection 6.1(a).
<PAGE>
3
"Acquisition Loan" shall mean an Acquisition R/C Loan or an
----------------
Acquisition Term Loan, as the context shall require.
"Acquisition Note" shall have the meaning set forth in subsection 5.2.
----------------
"Acquisition R/C Loans" shall have the meaning set forth in subsection
---------------------
5.1.
"Acquisition Term Loan" shall have the meaning set forth in subsection
---------------------
7.1.
"Acquisition Term Loan Commitment" shall mean, as to any Bank, its
--------------------------------
obligation to make Acquisition Term Loans to the Company on the Commitment
Termination Date in an aggregate principal amount at any one time
outstanding not to exceed such Bank's Commitment Percentage of the
Acquisition R/C Loans outstanding on the Commitment Termination Date
(collectively, as to all of the Banks, the "Aggregate Acquisition Term Loan
-------------------------------
Commitment").
----------
"Adjusted Net Income" shall mean, for any fiscal year of the Company,
-------------------
Consolidated Net Income for such fiscal year plus, to the extent that any
of the following were deducted in calculating such Consolidated Net Income,
depreciation of capital assets, amortization of Customer Lists and deferred
charges, Consolidated Net Lease Obligations and non-cash expenses
associated with certain key employees' deferred compensation plans to the
extent incurred prior to January 1, 1994; provided that, to the extent the
--------
liability recorded on the books of the Company relating to any such expense
is reduced in such fiscal year, Adjusted Net Income for such fiscal year
shall be reduced by an amount equal to such reduction.
"Agent" shall have the meaning set forth in the preamble hereto.
-----
"Aggregate Outstanding Acquisition Extensions of Credit" shall mean,
------------------------------------------------------
as to any Bank at any time, an amount equal to the sum of (a) the aggregate
unpaid principal amount at such time of all Acquisition R/C Loans of such
Bank then outstanding and (b) such Bank's Commitment Percentage of the
Acquisition L/C Obligations then outstanding.
"Aggregate Outstanding Working Capital Extensions of Credit" shall
----------------------------------------------------------
mean, as to any Bank at any time, an amount equal to the sum of (a) the
aggregate unpaid principal amount at such time of all Working Capital Loans
of such Bank then outstanding, (b) the aggregate amount of all Acceptances
(including, without limitation, Existing Acceptances) made by such Bank
hereunder (or pursuant to the terms of the Existing Agreement, as the case
may be) then outstanding and (c) such Bank's Commitment Percentage of the
Inventory L/C Obligations then outstanding.
"Agreement" shall mean this Third Amended and Restated Credit
---------
Agreement, as amended, supplemented or otherwise modified from time to
time.
"Alternate Base Rate" shall mean, for any day, a rate per annum
-------------------
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greatest of (a) the Prime
<PAGE>
4
Rate in effect on such day, (b) the Base CD Rate in effect on such day plus
1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. If for any reason the Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable
to ascertain the Base CD Rate or the Federal Funds Effective Rate, or both,
for any reason, including the inability or failure of the Agent to obtain
sufficient quotations in accordance with the terms thereof, the Alternate
Base Rate shall be determined without regard to clause (b) or (c), or both,
of the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in
the Alternate Base Rate due to a change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate shall be effective on
the effective day of such change in the Prime Rate, the Three-Month
Secondary CD Rate or the Federal Funds Effective Rate, respectively.
"Alternate Base Rate Loans" shall mean Loans the rate of interest
-------------------------
applicable to which is based upon the Alternate Base Rate.
"Applicable Margin" shall mean, for any day, for each Type of Working
-----------------
Capital Loan or Acquisition Loan, as the case may be, the rate per annum
set forth for such Loan below opposite the Interest Coverage Ratio in
effect on such day:
Working Capital Acquisition
--------------- -----------
Loans Loans
----- -----
Interest Base Eurodol Base Eurodol
Coverage Ratio Rate lar Rate lar
--------------
Loans Loans Loans Loans
----- ----- ----- -----
Interest .00% 1.25% .25% 1.75%
Coverage Ratio
A
Interest .25% 1.50% .50% 2.00%
Coverage Ratio
B
Interest .50% 1.75% .75% 2.25%
Coverage Ratio
C
For purposes of this definition, the Interest Coverage Ratio shall be
determined as of the last day of each fiscal quarter of the Company for the
period of the four fiscal quarters of the Company ending on the last day of
such fiscal quarter. The Interest Coverage Ratio as so determined shall be
deemed to be in effect from the fifth Business Day following the date of
the receipt by the Banks of the financial statements covering such fiscal
quarter (or fiscal year, in the case of the last fiscal quarter of each
fiscal year) pursuant to subsections 11.1(a) or 11.1(b), as the case may
be, until (but not including) the fifth Business Day following the delivery
to the Banks of the financial statements covering the next succeeding
fiscal quarter pursuant to subsection 11.1(a) or 11.1(b), as the case may
be.
"Application" shall mean an application, in such form as the Issuing
-----------
Bank may specify from time to time, requesting the Issuing Bank to open an
Inventory Letter of Credit or an Acquisition Letter of Credit, as specified
therein.
<PAGE>
5
"Asset Disposition" shall mean any sale, lease, transfer or other
-----------------
disposition (or series of related sales, leases, transfers or dispositions)
of shares of Capital Stock of a Subsidiary (other than directors'
qualifying shares), property or other assets (each referred to for the
purposes of this definition as a "disposition") by the Company or any of
-----------
its Subsidiaries (including any disposition by means of merger,
consolidation or similar transaction) other than (i) a disposition by a
Subsidiary to the Company or by the Company or a Subsidiary to a wholly-
owned Subsidiary, (ii) a disposition of property or assets at fair market
value in the ordinary course of business or (iii) a disposition of obsolete
assets in the ordinary course of business.
"Available Acquisition Commitment" shall mean, as to any Bank at any
--------------------------------
date, an amount equal to the excess, if any of (a) such Bank's Acquisition
Commitment at such date over (b) the sum of such Bank's Aggregate
Outstanding Acquisition Extensions of Credit at such date and (except for
purposes of determining the commitment fee payable pursuant to subsection
8.1) such Bank's Commitment Percentage of any Indebtedness incurred
pursuant to subsection 12.1(g) hereof to the extent that such Indebtedness
is not secured by an Acquisition Letter of Credit.
"Available Working Capital Commitment" shall mean, as to any Bank at
------------------------------------
any date, an amount equal to the excess, if any of (a) such Bank's Working
Capital Commitment at such date over (b) the sum of such Bank's Aggregate
Outstanding Working Capital Extensions of Credit at such date.
"balance deficiency percentage" shall have the meaning set forth in
-----------------------------
subsection 8.14(c).
"Base CD Rate" shall mean the sum of (a) the product of (i) the Three-
------------
Month Secondary CD Rate and (ii) a fraction, the numerator of which is one
and the denominator of which is one minus the C/D Reserve Percentage and
(b) the C/D Assessment Rate.
"benefitted Bank" shall have the meaning set forth in subsection 15.7
---------------
hereof.
"Borrowing Base" shall mean, on any date of determination thereof, the
--------------
amount equal to (a) the sum of (i) 90% of the aggregate amount of Eligible
Accounts of the Company and its Subsidiaries and (ii) 80% of the aggregate
amount of Eligible Inventory and Eligible Inventory Under Contract of the
Company and its Subsidiaries minus (b) the Borrowing Base Adjustment. The
Borrowing Base (including without limitation, the amount of Eligible
Accounts, Eligible Inventory and the Borrowing Base Adjustment) on any date
shall be determined by the Agent in accordance with the provisions of
subsection 2.1(b) by reference to the most recent Borrowing Base
Certificate delivered hereunder.
"Borrowing Base Adjustment" shall mean, as of any date of
-------------------------
determination, the sum of (i) the aggregate amount of outstanding accounts
payable for petroleum and/or propane purchases of the Company and its
Subsidiaries as of such date and (ii) the aggregate amount of outstanding
Working
<PAGE>
6
Capital Borrowings (other than Working Capital Loans) on such date. The
Borrowing Base Adjustment shall be determined by the Agent from time to time in
accordance with the provisions of subsection 2.1(b) by reference to the most
recent Borrowing Base Certificate delivered hereunder.
"Borrowing Base Certificate" shall mean the certificate, substantially
--------------------------
in the form of Exhibit I, to be provided by the Company pursuant to
subsection 11.1(g).
"Borrowing Date" shall mean any Business Day specified in a notice
--------------
pursuant to subsection 2.3, 5.3 or 7.3 as a date on which the Company
requests the Banks to make Loans hereunder.
"Business" shall have the meaning set forth in subsection 10.14(b).
--------
"Business Day" shall mean a day other than a Saturday, Sunday or other
------------
day on which commercial banks in the City of New York are authorized or
required by law to close.
"Capital Stock" of any person shall mean any and all shares,
-------------
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of such person,
including any Preferred Stock, but excluding any debt securities
convertible into or exchangeable for such equity.
"Cash Collateral Account" shall mean that certain bank account within
-----------------------
the exclusive dominion and control of Chemical, as Depositary, opened for
the benefit of the Agent and the Banks pursuant to the Cash Collateral
Agreement.
"Cash Collateral Agreement" shall mean the Cash Collateral Agreement,
-------------------------
dated as of the date hereof, among the Company, the Agent and Chemical, as
Depositary, in substantially the form of Exhibit D hereto.
"Cash Flow Covenant Amount" shall mean, at any date, the sum of (a)
-------------------------
the amount equal to 20% of each extension of credit made under the
Acquisition Commitment (other than (i) Acquisition Term Loans and (ii)
other extensions of credit under the Acquisition Commitments which
refinance extensions of credit under the Acquisition Commitments which
previously have been prepaid) more than 12 months prior to such date plus
(b) the amount set forth below opposite the period during which such date
occurs:
Period Amount
------ ------
Prior to 12/31/94 $25,000,000
12/31/94 - 03/30/95 27,500,000
03/31/95 - 03/30/96 30,000,000
03/31/96 - 03/30/97 35,000,000
03/31/97 - thereafter 40,000,000
"C/D Assessment Rate": for any day as applied to any Alternate Base
-------------------
Rate Loan, the net annual assessment rate (rounded upward to the nearest
1/100th of 1%) determined by Chemical to be payable on such day to the
Federal Deposit Insurance
<PAGE>
7
Corporation or any successor ("FDIC") for FDIC's insuring time deposits
----
made in Dollars at offices of Chemical in the United States.
"C/D Reserve Percentage": for any day as applied to any Alternate
----------------------
Base Rate Loan, that percentage (as expressed as a decimal) which is in
effect on such day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) (the "Board"), for determining the
-----
maximum reserve requirement for a Depository Institution (as defined in
Regulation D of the Board) in respect of new non-personal time deposits in
Dollars having a maturity of 30 days or more.
"Chemical" shall mean Chemical Bank.
--------
"Closing Date" shall mean the date upon which this Agreement is
------------
executed and delivered by each of the initial parties hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time.
"Commercial Inventory Letter of Credit" shall have the meaning set
-------------------------------------
forth in subsection 3.1.
"Commitment Percentage" shall mean, as to any Bank, the percentage set
---------------------
forth opposite such Bank's name on Schedule I hereto, as the same may be
adjusted from time to time in accordance herewith.
"Commitment Period" shall mean the Acquisition Commitment Period or
-----------------
the Working Capital Commitment Period, as the context shall require.
"Commitment Termination Date" shall mean June 30, 1996.
---------------------------
"Commonly Controlled Entity" shall mean an entity, whether or not
--------------------------
incorporated, which is under common control with the Company within the
meaning of Section 4001 of ERISA, as amended from time to time, or is part
of a group which includes the Company and which is treated as a single
employer under Section 414 of the Code.
"Company" shall have the meaning set forth in the preamble hereto.
-------
"Consolidated Cash Flow" shall mean, for any period, the aggregate sum
----------------------
of: (i) Consolidated Net Income for such period; provided that all amounts
--------
used in this calculation shall be determined in accordance with GAAP and
that this calculation shall be made using "first-in/first-out" inventory
valuation basis; (ii) the amount of depreciation of the capital assets of
the Company and its Subsidiaries for such period to the extent that such
amount was deducted from the computation of Consolidated Net Income for
such period; (iii) the amount of amortization of the Customer Lists and
deferred charges of the Company and its Subsidiaries for such period to the
extent that such amount was deducted from the computation of Consolidated
Net Income for such
<PAGE>
8
period; and (iv) the amount of non-cash expenses associated with certain
key employees' deferred compensation plans for such period to the extent
that such amount was deducted from the computation of Consolidated Net
Income for such period and solely to the extent such expenses were incurred
prior to January 1, 1994; provided that, to the extent the liability
--------
recorded on the books of the Company relating to any such expense is
reduced during such period, Consolidated Cash Flow for such period shall be
reduced by an amount equal to such reduction.
"Consolidated Cash Uses" shall mean, for any period (to the extent any
----------------------
such uses referred to below were paid for in cash by the Company or any of
its Subsidiaries to a Person other than the Company or any of its
Subsidiaries), the aggregate sum of (i) capital expenditures made by the
Company and its Subsidiaries during such period; provided that, in the
--------
event that the Company or any of its Subsidiaries shall sell a capital
asset owned by it during such period and shall, within six months of such
sale, make a capital expenditure to acquire a substantially similar capital
asset as a replacement for such sold capital asset, then for purposes of
this definition, only that portion of the capital expenditure incurred by
the Company or such Subsidiary, as the case may be, for such replacement
capital asset in excess of the sale price of the sold similar capital asset
shall be calculated for purposes of determining Consolidated Cash Uses for
such period, (ii) dividends paid by the Company and its Subsidiaries during
such period, (iii) payments made during such period with respect to
Consolidated Funded Debt, (iv) payments made to, or amounts set aside for,
any sinking or analogous fund during such period (net of any such amounts
which have been returned to the Company and its Subsidiaries during such
period), (v) payments made by the Company and its Subsidiaries during such
period for the purpose of redeeming any capital stock of the Company or any
of its Subsidiaries, as the case may be, during such period, (vi) payments
made by the Company or any of its Subsidiaries during such period with
respect to Financing Leases, (vii) payments made by the Company and its
Subsidiaries during such period with respect to acquisition costs
(including, without limitation, the aggregate unpaid principal amount at
such time of all Acquisition Loans then outstanding, but net of any Net
Cash Proceeds received by the Company and its Subsidiaries during such
period from the extraordinary disposition of assets), and (viii) amounts
deposited into the Cash Collateral Account during such period (net of
amounts withdrawn from the Cash Collateral Account during such period).
"Consolidated EBITDA Coverage Ratio" as of any date of determination
----------------------------------
shall mean the ratio of (i) the aggregate amount of EBITDA for the period
of the most recent four consecutive fiscal quarters ending at least 45 days
prior to the date of such determination to (ii) Consolidated Interest
Expense for such period of four consecutive fiscal quarters; provided,
--------
however, that:
-------
(1) if the Company or any Subsidiary has incurred any
indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate
the Consolidated EBITDA Coverage Ratio is an incurrence of
Indebtedness, or both, EBITDA and Consolidated Interest Expense for
such period will be calculated after giving effect on a pro forma
<PAGE>
9
basis to (A) such Indebtedness as if such Indebtedness had been
incurred on the first day of such period, (B) the discharge of any
other indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, and (C) the
interest income realized by the Company and its Subsidiaries on the
proceeds of such indebtedness, to the extent not yet applied at the
date of determination, assuming such proceeds earned interest at the
Treasury Rate from the date such proceeds were received through such
date of determination;
(2) if since the beginning of such period the Company or any
Subsidiary will have made any Asset Disposition, EBITDA for such
period will be reduced by an amount equal to EBITDA (if positive)
directly attributable to the assets which are the subject of such
Asset Disposition for such period, or increased by an amount equal to
EBITDA (if negative), directly attributable thereto for such period
and Consolidated Interest Expense for such period will be reduced by
an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Subsidiary
repaid, repurchased, defeased or otherwise discharged with respect to
the Company and its continuing Subsidiaries in connection with such
Asset Dispositions for such period (or, if the Capital Stock of any
Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Subsidiary to the
extent the Company and its continuing Subsidiaries are no longer
liable for such Indebtedness after such sale); and
(3) if since the beginning of such period the Company or any
Subsidiary (by merger or otherwise) will have made an Investment in
any Subsidiary (or any person which becomes a Subsidiary) or an
acquisition of assets, including any acquisition of assets occurring
in connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all of the assets of
an operating unit of a business, EBITDA and Consolidated Interest
Expense for such period will be calculated after giving pro forma,
effect thereto (including the incurrence of any indebtedness) as if
such Investment or acquisition occurred on the first day of such
period.
For purposes of this definition, whenever pro forma effect is to be given
to an acquisition of assets, the amount of income or earnings relating
thereto, and the amount of Consolidated Interest Expense associated with
any Indebtedness incurred in connection therewith the pro forma
calculations will be determined in good faith by a Responsible Officer of
the Company; provided, however, that such Responsible Officer shall assume
-------- -------
(i) the historical sales and gross profit margins associated with such
assets for any consecutive 12-month period ended prior to the date of
purchase (provided that the first month of such period will be no more than
--------
18 months prior to such date of purchase), less estimated post-acquisition
loss of customers (not to be less than 3%) and (ii) other expenses as if
such assets had been owned by the Company since the first day of such
period. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest on such indebtedness will be
<PAGE>
10
calculated as if the rate in effect on the date of determination had been
the applicable rate for the entire period.
"Consolidated Funded Debt" shall mean, as of any date of determination
------------------------
thereof, all Indebtedness (the "Original Indebtedness") of the Company and
---------------------
its Subsidiaries (a) having a stated maturity of more than one year from
the date of its incurrence, (b) which is extendible or renewable at the
option of the Company or any of its Subsidiaries to a date which is more
than one year from the date of its incurrence or (c) which, by its terms or
pursuant to the agreement under which such Original Indebtedness is issued,
may be paid with proceeds of other Indebtedness which (i) is issued under
the same instrument or agreement as the Original Indebtedness, (ii) has
similar terms to the Original Indebtedness and (iii) has a stated maturity
which is more than one year from the date of incurrence of the Original
Indebtedness. For purposes of this definition, (x) the term "Indebtedness"
shall also include (without duplication) all guarantees by the Company or
any of its Subsidiaries of any Indebtedness which would constitute
Consolidated Funded Debt of a Person (other than the Company and its
Subsidiaries) and all Acquisition R/C Loans and (y) Working Capital
Borrowings and Indebtedness relating to any Letter of Credit referred to in
subsection 12.3(f) shall not be deemed Consolidated Funded Debt.
Notwithstanding anything to the contrary contained herein, Acquisition
Letters of Credit (and the obligations secured thereby) shall be included
in the calculation of Consolidated Funded Debt only to the extent that the
face amount thereof is in excess of the amount then on deposit in the Cash
Collateral Account.
"Consolidated Interest Expense" shall mean, for any period, the total
-----------------------------
interest expense of the Company and its Subsidiaries, determined on a
consolidated basis, including (i) interest expense attributable to
Financing Leases, (ii) amortization of debt discount, (iii) capitalized
interest, (iv) non-cash interest expense, (v) commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, (vi) interest actually paid by the Company or any
such Subsidiary under any guarantee of indebtedness or other obligation of
any other Person, (vii) net costs associated with Hedging Obligations
(including amortization of fees), (viii) Preferred Stock dividends in
respect of all Preferred Stock of Subsidiaries held by persons other than
the Company or a wholly-owned Subsidiary, (ix) the cash contributions to
any employee stock ownership plan or similar trust to the extent such
contributions are used by such plan to pay interest or fees to any person
(other than the Company) in connection with loans incurred by such plan or
trust to purchase newly issued or treasury shares of the Company (but
excluding interest expense associated with the accretion of principal on a
non-interest bearing or other discount security) and (x) to the extent not
already included in Consolidated Interest Expense, the interest expense
attributable to Indebtedness of another person that is guaranteed by the
Company or any of its Subsidiaries, less interest income (exclusive of
deferred financing fees) of the Company and its Subsidiaries determined on
a consolidated basis in accordance with GAAP.
"Consolidated Net Income" shall mean for any period the aggregate of
-----------------------
the net income of the Company and its Subsidiaries for such period as
reported on the income
<PAGE>
11
statement of the Company for such period, after eliminating all offsetting
debits and credits between the Company and its Subsidiaries, computed in
accordance with GAAP and with such calculation being made using a "first-
in/first-out" inventory valuation basis; provided that during such time as
--------
Star Gas Corporation is not a Subsidiary of the Company (and regardless of
whether such treatment complies with GAAP) there shall not be included in
Consolidated Net Income of the Company and its Subsidiaries (a) any amounts
actually distributed as dividends to the Company or its Subsidiaries by
Star Gas Corporation and its subsidiaries for such period and (b) any
portion of the consolidated net income of Star Gas Corporation and its
subsidiaries for such period.
"Consolidated Net Lease Obligations" shall mean, for any fiscal year
----------------------------------
of the Company, the aggregate gross lease expense of the Company and its
Subsidiaries for real or personal property due in that year, minus (i)
income received during such fiscal year derived from the sublease of any
such property, and (ii) amounts received during such fiscal year as
reimbursement for expenses attributable to such property and (iii)
expenditures made during such fiscal year which should be capitalized on
the consolidated balance sheet of the Company and its Subsidiaries in
accordance with GAAP for lease obligations.
"Consolidated Operating Profit" shall mean, for any period of the
-----------------------------
Company, Consolidated Net Income for such period plus, to the extent that
any of the following were deducted in calculating such Consolidated Net
Income, Consolidated Interest Expense, taxes, amortization of Customer
Lists and deferred charges, depreciation and non-cash expenses associated
with certain key employees' deferred compensation plans to the extent
incurred prior to January 1, 1994; provided that, to the extent the
--------
liability recorded on the books of the Company relating to any such expense
is reduced in such period, Consolidated Operating Profit for such fiscal
year shall be reduced by an amount equal to such reduction.
"contingent obligations" shall have the meaning set forth in
----------------------
subsection 12.3.
"Contractual Obligation" shall mean, as to any Person, any provision
----------------------
of any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Customer List" shall mean, at any time, the names and addresses of
-------------
all customers of the Company and its Subsidiaries at such time, together
with all trade names and trademarks and all supporting documents, including
but not limited to computer discs, programs, tapes, trial balances and
carrying media.
"Default" shall mean any of the events specified in Section 13 hereof,
-------
whether or not any requirement for the giving of notice or the lapse of
time or both or any other condition has been satisfied.
"Designated Debt" shall be the collective reference to the 11.85%,
---------------
12.17% and 12.18% Senior and Subordinated Notes of the Company, due October
1, 1998.
<PAGE>
12
"Customer List Disposition" shall have the meaning set forth in
-------------------------
subsection 8.4(d).
"Dollars" and "$" shall mean dollars in lawful currency of the United
-------
States of America.
"Draft" shall mean a draft substantially in the form of Exhibit H
-----
hereto or in such other form as the relevant Bank shall reasonably request.
"EBITDA" for any period shall mean the Consolidated Net Income for
------
such period (but without giving effect to adjustments, accruals, deductions
of entries resulting from purchases accounting, extraordinary losses or
gains and any gains or losses from any Asset Dispositions), plus the
following to the extent deducted in calculating such Consolidated Net
Income: (i) income tax expense, (ii) Consolidated Interest Expense, (iii)
depreciation expense, (iv) amortization expense and (v) all other non-cash
expenses.
"Eligible Accounts" shall mean, as to any Person at a particular date,
-----------------
the total outstanding balance of Accounts (as defined in the Uniform
Commercial Code in effect in the State of New York) of such Person recorded
on the books of such Person in accordance with GAAP after giving effect to
all normal reserves (including, without limitation, bad debt reserves) in
connection therewith (a) which are bona fide, valid and legally enforceable
obligations of the account debtor in respect thereof and arise from the
actual sale and delivery of goods or rendition and acceptance of services
in the ordinary course of business to such account debtor, (b) which are
not owed by an obligor which is an affiliate or Subsidiary of such Person,
(c) which are not owed by an obligor which has taken any of the actions or
suffered any of the events of the kind described in paragraph (g) of
Section 13, and (d) which are owned solely by such Person free and clear of
all liens or other rights or claims of any other Person (except in favor of
the Agent for the ratable benefit of the Banks).
"Eligible Inventory" shall mean as to any Person at a particular date,
------------------
the aggregate amount of Inventory (as defined in the Uniform Commercial
Code in effect in the State of New York) constituting petroleum or propane
products then carried on the books of such Person in accordance with GAAP
after giving effect to all normal reserves in connection therewith which is
owned solely by such Person free and clear of all liens or other rights or
claims of any other Person (except carriers' or warehousemen's or other
like liens arising in the ordinary course of business or except in favor of
the Agent for the ratable benefit of the Banks).
"Eligible Inventory Under Contract" shall mean, as to any Person, at
---------------------------------
any given time, the aggregate purchase price of petroleum and propane
products (in an amount not to exceed $15,000,000) which any other Person is
obligated under contract to supply to such Person valued on a "first-
in/first-out" basis at the contract price as if such products were
inventory of such Person, and which such products (i) have not, as of such
time, been delivered to such Person and (ii) have not, in the case of the
Company and its Subsidiaries, been included as Eligible Inventory in the
then effective
<PAGE>
13
Borrowing Base Certificate delivered pursuant to subsection 11.1(g) and,
with respect to which, such Person's obligation to pay the purchase price
of such products is supported by a letter of credit or such Person has
prepaid such purchase price; provided that in the case of such prepayments
--------
delivery of any products related thereto must occur within seven days.
"Environmental Laws" shall mean any and all foreign, Federal, state,
------------------
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of the environment, as now or
may at any time hereafter be in effect.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
"Eurocurrency Reserve Requirements" shall mean, for any day as applied
---------------------------------
to a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of such Board) maintained by a member bank of such System.
"Eurodollar Base Rate" shall mean, with respect to each day during
--------------------
each Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate at which Chemical is offered Dollar deposits at or about
12:00 Noon, New York City time, two Working Days prior to the beginning of
such Interest Period in the interbank eurodollar market where the
eurodollar and foreign currency and exchange operations in respect of its
Eurodollar Loans are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein and in an
amount comparable to the amount of its Eurodollar Loan to be outstanding
during such Interest Period.
"Eurodollar Loans" shall mean Loans the rate of interest applicable to
----------------
which is based upon the Eurodollar Rate.
"Eurodollar Rate" shall mean, with respect to each day during each
---------------
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula (rounded
upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
-----------------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche" shall mean the collective reference to Eurodollar
------------------
Loans the Interest Periods with respect to all of which begin on the same
date and end on the
<PAGE>
14
same later date (whether or not such Eurodollar Loans shall originally have
been made on the same day).
"Event of Default" shall mean any of the events specified in Section
----------------
13 hereof, provided that any requirement for the giving of notice or the
lapse of time or both has been satisfied.
"Existing Acceptances" shall mean such bankers' acceptances created by
--------------------
the lenders parties to the Existing Agreement for the account of the
Company pursuant thereto as are outstanding and unreimbursed on the Closing
Date.
"Existing Agreement" shall have the meaning assigned to such term in
------------------
the recitals hereto.
"Existing Line Letters" shall mean the collective reference to all
---------------------
lines of credit made by the Banks in favor of the Company which were
outstanding immediately prior to the Closing Date.
"Federal Funds Effective Rate" shall mean, for any day, the weighted
----------------------------
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it.
"Financing Lease" shall mean (a) any lease of property, real or
---------------
personal, if the then present value of the minimum rental commitment
thereunder should, in accordance with GAAP applied on a basis consistent
with that of the preceding year, be capitalized on a balance sheet of the
lessee, and (b) any other such lease the obligations under which are
capitalized on a consolidated balance sheet of the Company and its
Subsidiaries.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America in effect from time to time.
"Governmental Authority" shall mean any nation or government, any
----------------------
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Guarantees" shall mean the collective reference to (a) the
----------
Subsidiaries Guarantee and (b) each other guarantee from time to time
provided to the Agent in connection herewith, as each of the same may be
amended, supplemented or otherwise modified from time to time; each, a
"Guarantee".
---------
"Hedging Obligations" of any person shall mean the obligations of such
-------------------
person pursuant to any interest rate swap agreement, foreign currency
exchange agreement,
<PAGE>
15
interest rate collar agreement, option or futures contract or other similar
agreement or arrangement designed to protect such person against changes in
interest rates or foreign exchange rates.
"Indebtedness" shall mean, at a particular date, the sum (without
------------
duplication) at such date for a Person of (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services, (b) the capitalized portion of all obligations of such Person
under Financing Leases and (c) all obligations of such Person in respect of
letters of credit, acceptances, or similar obligations issued or created
for the account of such Person.
"indemnified liabilities" shall have the meaning set forth in
-----------------------
subsection 15.5 hereof.
"Insolvency" shall mean, with respect to any Multiemployer Plan, the
----------
condition that such Plan is insolvent within the meaning of such term as
used in Section 4245 of ERISA.
"Insolvent" shall mean pertaining to a condition of insolvency.
---------
"Interest Coverage Ratio" shall mean, for any period the ratio of (x)
-----------------------
Consolidated Operating Profit for such period, to (y) Consolidated Interest
Expense for such period.
"Interest Coverage Ratio A" shall mean, that for any period of
-------------------------
determination, the Interest Coverage Ratio is greater than or equal to 2.75
to 1.00.
"Interest Coverage Ratio B" shall mean, that for any period of
-------------------------
determination, the Interest Coverage Ratio is equal to or greater than 2.00
to 1.00 but less than 2.75 to 1.00.
"Interest Coverage Ratio C" shall mean that for any period of
-------------------------
determination, the Interest Coverage Ratio is less than 2.00 to 1.00.
"Interest Payment Date" shall mean, (a) as to any Alternate Base Rate
---------------------
Loan, the last day of each calendar month to occur while such Loan is
outstanding and (b) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period and (c) as to
any Eurodollar Loan having an Interest Period longer than three months,
each day which is three months or a whole multiple thereof after the first
day of such Interest Period and the last day of such Interest Period.
"Interest Period" shall mean, with respect to any Eurodollar Loan,
---------------
initially, the period commencing on the date of borrowing or conversion, as
the case may be, with respect to such Eurodollar Loan and ending one, two,
three or six months thereafter, as selected by the Company in its notice of
borrowing as provided in subsection 2.3, 5.3 or 7.3 or its notice of
conversion as provided in subsection 8.8, as the case may be, and
thereafter, each period commencing on the last day of the next preceding
Interest
<PAGE>
16
Period applicable to such Eurodollar Loan and ending one, two, three or six
months thereafter, as selected by the Company, by irrevocable notice to the
Agent not less than two (2) Working Days prior to the last day of the then
current Interest Period with respect to such Eurodollar Loan, provided
--------
that, all of the foregoing provisions relating to the Interest Period are
----
subject to the following: (a) if any Interest Period pertaining to a
Eurodollar Loan would otherwise end on a day which is not a Working Day,
that Interest Period shall be extended to the next succeeding Working Day
unless the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period shall end
on the immediately preceding Working Day and, notwithstanding the
provisions of subsection 8.7 hereof, if such Interest Period is so
extended, then such Loan shall bear interest during the period from the
last day of such Interest Period to such succeeding Working Day as if it
were a Alternate Base Rate Loan; (b) any Interest Period pertaining to a
Eurodollar Loan that begins on the last Working Day of a calendar month (or
on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Working Day of a calendar month; (c) if any Interest Period includes a day
on which an installment of principal on a Eurodollar Loan is due and
payable but does not begin or end on such date, then the portion of the
Eurodollar Loan then maturing shall have an Interest Period ending on such
payment date; and (d) any Interest Period that would otherwise extend
beyond the Commitment Termination Date (in the case of Working Capital
Loans) or the date final payment is due on the Acquisition Term Loans (in
the case of Acquisition Loans) shall end on the Commitment Termination Date
or such date of final payment, as the case may be.
"Inventory L/C Commitment" shall mean $15,000,000.
------------------------
"Inventory L/C Obligations" shall mean, at any time, an amount equal
-------------------------
to the sum of (a) the aggregate then undrawn and unexpired amount of the
then outstanding Inventory Letters of Credit and (b) the aggregate amount
of drawings under Inventory Letters of Credit which have not then been
reimbursed pursuant to subsection 3.5.
"Inventory Letters of Credit" shall have the meaning set forth in
---------------------------
subsection 3.1(a).
"Inventory Reimbursement Obligation" shall mean the obligation of the
----------------------------------
Company to reimburse the Issuing Bank pursuant to subsection 3.5 for
amounts drawn under Inventory Letters of Credit.
"Investment" in any Person shall mean any loan or advance to, any
----------
guarantee of, any acquisition of any Capital Stock, equity interest,
obligation or other security of, or capital contribution or other
investment in, such Person; provided however, that advances to customers
--------
and suppliers in the ordinary course of business shall be deemed not to be
"Investments".
"Issuing Bank" shall mean Chemical, in its capacity as issuer of any
------------
Inventory Letter of Credit and/or Acquisition Letter of Credit, as the
context may require.
<PAGE>
17
"L/C Fee Payment Date" shall mean the last day of each March, June,
--------------------
September and December.
"L/C Obligation" shall mean an Inventory L/C Obligation or an
--------------
Acquisition L/C Obligation, as the context shall require; collectively, the
"L/C Obligations".
---------------
"L/C Participants" shall mean, with respect to any Inventory Letter of
----------------
Credit or Acquisition Letter of Credit, the collective reference to all the
Banks other than the Issuing Bank with respect thereto.
"L/C Reimbursement Obligations" shall be the collective reference to
-----------------------------
the Inventory Reimbursement Obligations and the Acquisition L/C
Reimbursement Obligations.
"Letters of Credit" shall mean the collective reference to the
-----------------
Inventory Letters of Credit, the Acquisition Letters of Credit and all
letters of credit issued by any Bank for the account of the Company which
are permitted by subsection 12.3(f) hereof.
"Line Letter" shall mean that certain letter in the form of Exhibit K
-----------
hereto, dated as of the date hereof, executed by each of the Banks and the
Company and establishing a $15,000,000 line of credit in favor of the
Company to be used exclusively to open standby Letters of Credit to support
insurance requirements of the Company and its Subsidiaries, as amended,
supplemented, superseded or otherwise modified from time to time.
"Loan" shall mean a Working Capital Loan and/or an Acquisition Loan,
----
as the context may require (collectively, the "Loans").
-----
"Loan Documents" shall mean the collective reference to this
--------------
Agreement, the Notes, the Security Documents, the Drafts and the
Applications.
"Material Adverse Effect" shall mean, a material adverse effect on (a)
-----------------------
the business, operations, property, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole, (b) the
ability of the Company to perform its obligations under this Agreement of
any of the Notes or any of the other Loan Documents or (c) the validity or
enforceability of this Agreement or any of the Notes or any of the other
Loan Documents or the rights or remedies of the Agent or the Banks
hereunder or thereunder.
"Materials of Environmental Concern" shall mean any gasoline or
----------------------------------
petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, material or wastes, defined
or regulated as such in or under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde
insulation.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
------------------
as defined in Section 4001(a)(3) of ERISA.
<PAGE>
18
"Net Cash Proceeds" shall mean, with respect to any issuance or
-----------------
creation of any Indebtedness or any other financing or any sale, lease or
other disposition of assets or issuance of capital stock (other than
pursuant to the exercise of employee or director stock options), (a) the
cash proceeds (including, without limitation, all cash proceeds received by
way of deferred payment of principal pursuant to a note or installment
receivable or otherwise, but only as and when received) received by the
Company or any Subsidiary of the Company, minus, (b) brokerage commissions
and other fees and expenses (including fees and expenses of counsel and
investment bankers) related to such financing, sale, lease or other
disposition or issuance, and minus (c) in the case of any such issuance or
creation of any Indebtedness or financing, sale, lease or other disposition
of assets, (i) provisions for all taxes payable as a result thereof and in
connection therewith, (ii) payments made to retire Indebtedness secured by
or otherwise relating directly to such assets being sold or otherwise
disposed of or the assets which are securing such issuance, creation or
financing where payment of such Indebtedness is required in connection
therewith and (iii) appropriate amounts to be provided by the Company or
any Subsidiary of the Company, as the case may be, as a reserve, in
accordance with GAAP consistently applied with those applied in the
preparation of the financial statements referred to in subsection 10.8,
against any liabilities associated with such assets being sold or otherwise
disposed of and retained by the Company or any Subsidiary of the Company,
as the case may be, after such sale, lease or other disposition of such
assets.
"Notes" shall mean the collective reference to the Working Capital
-----
Notes and the Acquisition Notes.
"Original Agreement" shall have the meaning assigned to such term in
------------------
the recitals hereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA.
"Participant" shall have the meaning set forth in subsection 15.6(b).
-----------
"Person" shall mean any individual, partnership, corporation, business
------
trust, joint stock company, trust, unincorporated association, joint
venture, government authority or other entity of whatever nature.
"Plan" shall mean any "pension plan" (as defined in Section 3(2) of
----
ERISA) and in respect of which the Company or a Commonly Controlled Entity
is an "employer" as defined in Section 3(5) of ERISA.
"Preferred Stock" as applied to the Capital Stock of any corporation,
---------------
shall mean Capital Stock of any class or classes (however designated) which
is preferred as to the payment of dividends, or as to the distribution of
assets upon any voluntary liquidation or dissolution of such corporation,
over shares of Capital Stock of any other class of such corporation;
provided, however, that Preferred Stock will not include the Company's
-------- -------
Class B Common Stock.
<PAGE>
19
"Prime Rate" shall mean the rate of interest per annum publicly
----------
announced from time to time by the Agent as its prime rate in effect at its
principal office in New York City (each change in the Prime Rate to be
effective on the date such change is publicly announced).
"Prohibited Transaction" shall have the meaning set forth in Section
----------------------
406 of ERISA or Section 4975 of the Code.
"Properties" shall have the meaning set forth in subsection 10.14(a).
----------
"Purchasing Banks" shall have the meaning set forth in subsection
----------------
15.6(c).
"Register" shall have the meaning set forth in subsection 15.6(d).
--------
"Reorganization" shall mean, with respect to any Multiemployer Plan,
--------------
the condition that such Plan is in reorganization within the meaning of
such term as used in Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
----------------
4043(b) of ERISA or the regulations thereunder.
"Request for Acceptances" shall mean the form of Request for
-----------------------
Acceptances, substantially in the form of Exhibit G hereto, with
appropriate insertions, or in such other form as the relevant Bank shall
reasonably request, duly executed by the Company.
"Required Banks" shall mean, at a particular time, Banks whose
--------------
Commitment Percentages (or, during such time as no Commitments are then in
effect, Loans) aggregate at least 71%.
"Requirement of Law" shall mean, as to any Person, the Certificate of
------------------
Incorporation and By-Laws or other organizational or governing documents of
such Person and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Reserve Determination" shall have the meaning set forth in subsection
---------------------
4.5(a) hereof.
"Security Agreements" shall mean the collective reference to each of
-------------------
the Third Amended and Restated Company Security Agreement, substantially in
the form of Exhibit C hereto and the Third Amended and Restated Subsidiary
Security Agreement, substantially in the form of Exhibit F hereto, each as
the same may be amended, supplemented or otherwise modified from time to
time; each, a "Security Agreement".
------------------
<PAGE>
20
"Security Documents" shall mean the Security Agreements, the Cash
------------------
Collateral Agreement and the Guarantees.
"Single Employer Plan" shall mean any Plan which is not a
--------------------
Multiemployer Plan.
"Standby Inventory Letter of Credit" shall have the meaning set forth
----------------------------------
in subsection 3.1.
"Subordinated Debt" shall mean (i) all Indebtedness of the Company
-----------------
existing on the date hereof which is set forth on Schedule III hereto, (ii)
all Indebtedness of the Company containing subordination provisions
substantially similar to those set forth in the Note Agreement, dated as of
September 1, 1988, relating to $60,000,000 aggregate principal amount of
subordinated notes of the Company, due October 1, 1998 (the "Subordinated
------------
Notes") and (iii) all other Indebtedness of the Company which shall
-----
otherwise be subordinated in right of payment, in a manner satisfactory to
the Required Banks.
"Subsidiaries Guarantee" shall mean the Third Amended and Restated
----------------------
Subsidiary Guarantee, substantially in the form of Exhibit E hereto, as the
same may be amended, supplemented or otherwise modified from time to time.
"Subsidiary" shall mean any corporation more than 50% of whose issued
----------
and outstanding voting stock (except directors' qualifying shares, if
required by law) at the time is owned by the Company, directly or through
one or more Subsidiaries, including, without limitation, each of the
Subsidiaries listed on Schedule II attached hereto. Notwithstanding the
foregoing, Star Gas Corporation and its Subsidiaries shall be deemed not to
constitute "Subsidiaries" of the Company during the period (a) from and
after the date upon which the Agent receives an officers' certificate of
the Company (in form and substance satisfactory to the Agent) setting forth
a written resolution of the board of directors of the Company specifying
that Star Gas Corporation and its subsidiaries shall be deemed not to be
"Subsidiaries" of the Company for purposes of this Agreement (including,
without limitation, for purposes of determining compliance with the
provisions of Section 12) to (b) the date upon which the Agent receives an
officers' certificate of the Company (in form and substance satisfactory to
the Agent) rescinding such written resolution described above; provided
--------
that Star Gas Corporation shall not be designated as a "Subsidiary" of the
Company unless immediately prior to and after giving effect to such
designation (i) no Default or Event of Default has occurred and is
continuing and (ii) immediately after giving effect to such designation,
the Company would be permitted to incur at least one Dollar of Consolidated
Funded Debt under the provisions of subsection 12.10 of this Agreement.
"Taxes" shall have the meaning set forth in subsection 8.16(a).
-----
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
-----------------------------
market rate for three-month certificates of deposit reported as being in
effect on such
<PAGE>
21
day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board of Governors of the Federal Reserve System
through the public information telephone line of the Federal Reserve Bank
of New York (which rate will, under the current practices of such Board, be
published in Federal Reserve Statistical Release H.15(519) during the week
following such day), or, if such rate shall not be so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 A.M., New York City
time, on such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it.
"Transferee" shall have the meaning set forth in subsection 15.6(f).
----------
"Treasury Rate" as of any date of determination shall mean the yield
-------------
to maturity at the time of computation of United States Treasury securities
with a constant maturity (as compiled and published in the most recent
Federal Reserve Statistical Release H.15(519) which has become publicly
available at least two business days prior to such date of determination
(or, if such Statistical Release is no longer published, any publicly
available source of similar market data)) of one year.
"Type" shall mean, as to any Loan, its nature as an Alternate Base
----
Rate Loan or a Eurodollar Loan.
"Uniform Customs" shall mean the Uniform Customs and Practice for
---------------
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
"Working Capital Borrowings" shall mean, on the date of determination,
--------------------------
all Indebtedness of the Company and its Subsidiaries, on a consolidated
basis, incurred to finance current assets; provided that, in any event, the
--------
excess of current liabilities over current assets (determined in accordance
with GAAP) shall not be deemed Working Capital Borrowings.
"Working Capital Commitment" shall mean, as to any Bank, its
--------------------------
obligation to make Working Capital Loans to the Company, issue Acceptances
on behalf of the Company and issue or participate in Inventory Letters of
Credit on behalf of the Company pursuant hereto in an aggregate principal
and/or face amount not to exceed at any one time outstanding the amount set
forth opposite such Bank's name in Schedule I, as such amount may be
reduced from time to time as provided herein (collectively, as to all of
the Banks, the "Working Capital Commitments").
---------------------------
"Working Capital Commitment Period" shall mean the period from and
---------------------------------
including the date hereof to but not including the Commitment Termination
Date or such earlier date on which the Working Capital Commitments shall
terminate as provided herein.
<PAGE>
22
"Working Capital Loans" shall have the meaning set forth in subsection
---------------------
2.1.
"Working Capital Note" shall have the meaning set forth in subsection
--------------------
2.2.
"Working Day" shall mean any day on which dealings in foreign
-----------
currencies and exchange between banks may be carried on in London and in
New York.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
-----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Company and its Subsidiaries not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF WORKING CAPITAL
LOANS
2.1 Working Capital Loan Commitments. (a) Subject to the terms and
--------------------------------
conditions of this Agreement, each Bank severally agrees to make loans (the
"Working Capital Loans") to the Company at any time and from time to time during
---------------------
the Working Capital Commitment Period, in an aggregate principal amount at any
one time outstanding not to exceed such Bank's Working Capital Commitment;
provided that no Bank shall have an obligation to make any Working Capital Loan
- - --------
if, after giving effect to the making (and the use of proceeds) thereof, (x) the
Available Working Capital Commitment of such Bank would be less than zero or (y)
the Aggregate Outstanding Working Capital Extensions of Credit would exceed such
Bank's Commitment Percentage of the Borrowing Base. The Working Capital Loans
may from time to time be either (a) Alternate Base Rate Loans, (b) Eurodollar
Loans or (c) a combination thereof, as determined by the Company and notified to
the Agent in accordance with subsection 2.3 and 8.8 hereof; provided that no
--------
Working Capital Loan shall be made as a Eurodollar Loan after the day that is
one month prior to the Commitment Termination Date. The Company may use the
Working Capital Commitment by borrowing, prepaying the Working Capital Loans in
whole or in part, and reborrowing, all in accordance with the terms and
conditions of this Agreement.
(b) The Company shall deliver a Borrowing Base Certificate to the
Agent sufficiently in advance of the Closing Date to permit the Agent to
determine the Borrowing
<PAGE>
23
Base to be in effect on the Closing Date and, thereafter, shall deliver
Borrowing Base Certificates and such other materials to the Agent in accordance
with the provisions of subsection 11.1(g). Each such Borrowing Base Certificate
shall certify the Borrowing Base and the Borrowing Base Adjustment in effect on
the last day of the applicable reporting period. Promptly following its receipt
of each Borrowing Base Certificate, the Agent shall determine the then current
Borrowing Base using the information contained in such Borrowing Base
Certificate and shall notify the Company and each Bank of the Borrowing Base and
Borrowing Base Adjustment so determined. Each determination of the Borrowing
Base and the Borrowing Base Adjustment by the Agent shall remain in effect until
notice of a redetermined Borrowing Base and Borrowing Base Adjustment shall have
been given by the Agent in accordance with the provisions of this subsection
2.1(b).
2.2 Working Capital Notes. (a) The Working Capital Loans made by
---------------------
each Bank shall be evidenced by a promissory note of the Company, substantially
in the form of Exhibit A, with appropriate insertions as to payee, date and
principal amount (a "Working Capital Note"), payable to the order of such Bank
--------------------
and in a principal amount equal to the lesser of (a) the amount of the initial
Working Capital Commitment of such Bank and (b) the aggregate unpaid principal
amount of all Working Capital Loans made by such Bank. Each Bank is hereby
authorized to record the date, Type and amount of each Working Capital Loan made
by such Bank, each continuation thereof, each conversion of all or a portion
thereof to another Type, the date and amount of each payment or prepayment of
principal thereof and, in the case of Eurodollar Loans, the length of each
Interest Period with respect thereto, on the schedule annexed to and
constituting a part of its Working Capital Note, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded.
----- -----
Each Working Capital Note shall (x) be dated the Closing Date, (y) be stated to
mature on the Commitment Termination Date and (z) provide for the payment of
interest in accordance with subsection 8.6.
(b) Each Bank, which is a party to the Existing Agreement, shall, on
or before the Closing Date, deliver to the Agent the notes held by such Bank
pursuant to the Existing Agreement and the Existing Line Letters, and, on the
Closing Date, the Agent shall mark each such note so delivered to it
"superseded" and turn over all such notes to the Company. Amounts outstanding
pursuant to the terms of the Existing Agreement shall on the Closing Date be
deemed to be Working Capital Loans, Inventory Letters of Credit or Acceptances
(as appropriate) hereunder and reduce the Available Working Capital Commitment
accordingly. The Working Capital Notes delivered pursuant to the terms hereof
shall be delivered in substitution and replacement for, but not in payment of,
such superseded notes referred to in the immediately preceding sentence.
Amounts outstanding under the Existing Line Letters (including, without
limitation, any undrawn letters of credit issued pursuant thereto) shall on the
Closing Date be deemed to be outstanding under the Line Letters and the Company
hereby acknowledges and agrees that as of the Closing Date the Existing Line
Letters shall be terminated and have no further force and effect.
2.3 Procedure for Borrowing Working Capital Loans. The Company may
---------------------------------------------
borrow under the Working Capital Commitments on any Working Day, if all or any
part of the requested Working Capital Loans are to be initially Eurodollar
Loans, or on any Business Day, otherwise, provided that the Company shall give
--------
the Agent irrevocable notice (which
<PAGE>
24
notice must be received by the Agent prior to 11:00 A.M., New York City time,
(a) two Working Days prior to the requested Borrowing Date, if all or any part
of the requested Working Capital Loans are to be initially Eurodollar Loans and
(b) on the same Business Day as the requested Borrowing Date, otherwise),
specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date,
(iii) whether the borrowing is to be of Eurodollar Loans, Alternate Base Rate
Loans or a combination thereof and (iv) if the borrowing is to be entirely or
partly of Eurodollar Loans, the respective amounts of each such Type of Loan and
the respective lengths of the initial Interest Periods therefor. Each borrowing
pursuant to the Working Capital Commitments shall be in an aggregate principal
amount of the lesser of (a) $500,000 or any whole multiple of $100,000 in excess
thereof, in the case of Alternate Base Rate Loans or $1,000,000 or any whole
multiple of $100,000 in excess thereof, in the case of Eurodollar Loans or (b)
the then Available Working Capital Commitment. Upon receipt of any such notice
from the Company, the Agent shall promptly notify each Bank thereof. Each Bank
will make the amount of its pro rata share of each borrowing available to the
Agent for the account of the Company at the office of the Agent specified in
subsection 15.2 prior to 3:00 P.M., New York City time, on the Borrowing Date
requested by the Company in funds immediately available to the Agent. Such
borrowing will then be made available to the Company by the Agent crediting the
account of the Company on the books of such office with the aggregate of the
amounts made available to the Agent by the Bank and in like funds as received by
the Agent.
2.4 Use of Proceeds of Working Capital Loans. The proceeds of
----------------------------------------
Working Capital Loans shall be used to finance working capital requirements of
the Company and its Subsidiaries in accordance with the terms of this Agreement;
provided however that in no event shall such proceeds be used to acquire any
- - --------
interest in Star Gas Corporation or any of its subsidiaries.
SECTION 3. TERMS OF INVENTORY LETTERS OF CREDIT
SUB-FACILITY
3.1 Inventory L/C Commitment. (a) Subject to the terms and
------------------------
conditions hereof, the Issuing Bank, in reliance on the agreements of the other
Banks set forth in subsection 3.4(a), agrees to issue letters of credit
("Inventory Letters of Credit") for the account of the Company on any Business
---------------------------
Day during the Working Capital Commitment Period in such form as may be approved
from time to time by the Issuing Bank; provided that the Issuing Bank shall have
--------
no obligation to issue any Inventory Letter of Credit if, after giving effect to
such issuance:
(i) the sum of (A) the Inventory L/C Obligations and (B) the
Acceptance Reimbursement Obligations would exceed the Inventory L/C
Commitment;
(ii) the Available Working Capital Commitment of such Bank would be
less than zero; or
(iii) the Aggregate Outstanding Working Capital Extensions of Credit
of such Bank would exceed such Bank's Commitment Percentage of the
Borrowing Base.
<PAGE>
25
Each Inventory Letter of Credit shall (i) (A) in the case of a Standby Inventory
Letter of Credit (as defined below), have an expiry date no later than 360 days
from the date of issuance thereof or, if earlier, the Commitment Termination
Date, and (B) in the case of a Commercial Inventory Letter of Credit, have an
expiry date no later than 180 days from the date of issuance thereof, or if
earlier, the Commitment Termination Date, (ii) be denominated in Dollars, (iii)
be in a minimum face amount of $100,000 and (iv) be either a standby letter of
credit issued to support obligations of the Company with respect to inventory
purchases (a "Standby Inventory Letter of Credit") or (y) a documentary letter
----------------------------------
of credit in respect of the purchase of inventory by the Company (a "Commercial
----------
Inventory Letter of Credit").
- - --------------------------
(b) Each Inventory Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(c) The Issuing Bank shall not at any time be obligated to issue any
Inventory Letter of Credit hereunder if such issuance would conflict with, or
cause the Issuing Bank or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
3.2 Procedure for Issuance of Inventory Letters of Credit. The
-----------------------------------------------------
Company may from time to time request that the Issuing Bank issue an Inventory
Letter of Credit by delivering to the Issuing Bank at its address for notices
specified herein an Application therefor, completed to the satisfaction of the
Issuing Bank, and such other certificates, documents and other papers and
information as the Issuing Bank may request. Upon receipt of any Application,
the Issuing Bank will process such Application and the certificates, documents
and other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly issue the Inventory
Letter of Credit requested thereby (but in no event shall the Issuing Bank be
required to issue any Inventory Letter of Credit earlier than three Business
Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Inventory Letter of Credit to the beneficiary
thereof or as otherwise may be agreed by the Issuing Bank and the Company. The
Issuing Bank shall furnish a copy of such Inventory Letter of Credit to the
Company promptly following the issuance thereof.
3.3 Fees, Commissions and Other Charges.
-----------------------------------
(a) The Company shall pay to the Agent, for the account of the
Issuing Bank and the L/C Participants, a letter of credit commission with
respect to the undrawn face amount of each Standby Inventory Letter of Credit,
computed for the period from the date of such payment to the date upon which the
next such payment is due hereunder, in an amount equal to the Applicable Margin
then in effect for Working Capital Loans which bear interest at a rate based
upon the Eurodollar Rate. Such commissions shall be payable in advance on the
date of issuance of each Standby Inventory Letter of Credit and on each L/C Fee
Payment Date to occur thereafter and shall be non refundable.
(b) The Company shall pay to the Agent, for the account of the
Issuing Bank and the L/C Participants, a fronting fee with respect to each
Commercial Inventory Letter of Credit in an amount equal to 1/4 of 1% of the
face amount of such Commercial Inventory
<PAGE>
26
Letter of Credit. Such fronting fee shall be payable in advance on the date of
issuance of such Commercial Inventory Letter of Credit and shall be
nonrefundable.
(c) In addition to the foregoing fees and commissions, the Company
shall pay or reimburse the Issuing Bank for such normal and customary costs and
expenses as are incurred or charged by the Issuing Bank in issuing, effecting
payment under, amending or otherwise administering any Inventory Letter of
Credit.
(d) The Agent shall, promptly following its receipt thereof,
distribute to the Issuing Bank and the L/C Participants all fees and commissions
received by the Agent for their respective accounts pursuant to this subsection.
3.4 Inventory L/C Participations. (a) The Issuing Bank irrevocably
----------------------------
agrees to grant and hereby grants to each L/C Participant, and, to induce the
Issuing Bank to issue Inventory Letters of Credit hereunder, each L/C
Participant irrevocably agrees to accept and purchase and hereby accepts and
purchases from the Issuing Bank, on the terms and conditions hereinafter stated,
for such L/C Participant's own account and risk an undivided interest equal to
such L/C Participant's Commitment Percentage in the Issuing Bank's obligations
and rights under each Inventory Letter of Credit issued hereunder and the amount
of each draft paid by the Issuing Bank thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Bank that, if a draft is
paid under any Inventory Letter of Credit for which the Issuing Bank is not
reimbursed in full by the Company in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Bank upon demand at the
Issuing Bank's address for notices specified herein an amount equal to such L/C
Participant's Commitment Percentage of the amount of such draft, or any part
thereof, which is not so reimbursed. The Agent agrees to provide to each L/C
Participant a copy of each Inventory Letter of Credit issued pursuant to the
terms hereof and a copy of any draft paid under any such Inventory Letter of
Credit.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to subsection 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Inventory Letter of
Credit is paid to the Issuing Bank within three Business Days after the date
such payment is due, such L/C Participant shall pay to the Issuing Bank on
demand an amount equal to the product of (i) such amount, times (ii) the daily
average Federal Funds Effective Rate during the period from and including the
date such payment is required to the date on which such payment is immediately
available to the Issuing Bank, times (iii) a fraction the numerator of which is
the number of days that elapse during such period and the denominator of which
is 360. If any such amount required to be paid by any L/C Participant pursuant
to subsection 3.4(a) is not in fact made available to the Issuing Bank by such
L/C Participant within three Business Days after the date such payment is due,
the Issuing Bank shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum equal to the rate then payable on Working Capital Loans which
bear interest at a rate based upon the Alternate Base Rate. A certificate of
the Issuing Bank submitted to any L/C Participant with respect to any amounts
owing under this subsection shall be conclusive in the absence of manifest
error.
<PAGE>
27
(c) Whenever, at any time after the Issuing Bank has made payment
under any Inventory Letter of Credit and has received from any L/C Participant
its pro rata share of such payment in accordance with subsection 3.4(a), the
--- ----
Issuing Bank receives any payment related to such Inventory Letter of Credit
(whether directly from the Company or otherwise, including proceeds of
collateral applied thereto by the Issuing Bank), or any payment of interest on
account thereof, the Issuing Bank will distribute to such L/C Participant its
pro rata share thereof; provided, however, that in the event that any such
- - --- ---- -------- -------
payment received by the Issuing Bank shall be required to be returned by the
Issuing Bank, such L/C Participant shall return to the Issuing Bank the portion
thereof previously distributed by the Issuing Bank to it.
3.5 Inventory Reimbursement Obligation of the Company. The Company
-------------------------------------------------
agrees to reimburse the Issuing Bank on each date on which the Issuing Bank
notifies the Company of the date and amount of a draft presented under any
Inventory Letter of Credit and paid by the Issuing Bank for the amount of (a)
such draft so paid and (b) any taxes, fees, charges or other costs or expenses
incurred by the Issuing Bank in connection with such payment. Each such payment
shall be made to the Issuing Bank at its address for notices specified herein in
lawful money of the United States of America and in immediately available funds.
Interest shall be payable on any and all amounts remaining unpaid by the Company
under this subsection from the date such amounts become payable (whether at
stated maturity, by acceleration or otherwise) until payment in full at the rate
which would be payable on any overdue Working Capital Loans which bear interest
at a rate based upon the Alternate Base Rate. Each drawing under any Inventory
Letter of Credit shall constitute a request by the Company to the Agent for a
borrowing pursuant to subsection 2.1 of Alternate Base Rate Loans in the amount
of such drawing. The Borrowing Date with respect to such borrowing shall be the
date of such drawing.
3.6 Obligations Absolute. The Company's obligations under this
--------------------
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment which the
Company may have or have had against the Issuing Bank or any beneficiary of an
Inventory Letter of Credit. The Company also agrees with the Issuing Bank that
the Issuing Bank shall not be responsible for, and the Company's Inventory
Reimbursement Obligations under subsection 3.5 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the Company and any
beneficiary of any Inventory Letter of Credit or any other party to which such
Inventory Letter of Credit may be transferred or any claims whatsoever of the
Company against any beneficiary of such Inventory Letter of Credit or any such
transferee. The Issuing Bank shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Inventory Letter of Credit,
except for errors or omissions caused by the Issuing Bank's gross negligence or
willful misconduct. The Company agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Inventory Letter of Credit or the
related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards or care specified in the
Uniform Commercial Code of the State of New York, shall be binding on the
Company and shall not result in any liability of the Issuing Bank to the
Company.
<PAGE>
28
3.7 Inventory Letter of Credit Payments. If any draft shall be
-----------------------------------
presented for payment under any Inventory Letter of Credit, the Issuing Bank
shall promptly notify the Company of the date and amount thereof. The
responsibility of the Issuing Bank to the Company in connection with any draft
presented for payment under any Inventory Letter of Credit shall, in addition to
any payment obligation expressly provided for in such Inventory Letter of
Credit, be limited to determining that the documents (including each draft)
delivered under such Inventory Letter of Credit in connection with such
presentment are in conformity with such Inventory Letter of Credit.
3.8 Application. To the extent that any provision of any Application
-----------
related to any Inventory Letter of Credit is inconsistent with the provisions of
this Section 3, the provisions of this Section 3 shall apply.
SECTION 4. AMOUNT AND TERMS OF ACCEPTANCE
SUB-FACILITY
4.1 Acceptance Commitments. Subject to the terms and conditions
----------------------
hereof, each Bank severally, and not jointly, agrees to create acceptances (the
"Acceptances"), in respect of Drafts drawn on such Bank by the Company and
-----------
discounted by such Bank for the account of the Company from time to time during
the Working Capital Commitment Period; provided that concurrently therewith, the
--------
Company requests that such Bank discount such Draft pursuant to subsection 4.3;
and provided, further such Bank shall have no obligation to create any
-------- -------
acceptance if, after giving effect to such creation (and the use of the proceeds
thereof):
(i) the sum of (A) the Acceptance Reimbursement Obligations and (B)
the Inventory L/C Obligations would exceed the Inventory L/C Commitment;
(ii) the Available Working Capital Commitment of such Bank would be
less than zero; or
(iii) the Aggregate Outstanding Working Capital Extensions of Credit
of such Bank would exceed such Bank's Commitment Percentage of the
Borrowing Base.
The Company may utilize the Working Capital Commitments in this manner by
drawing Drafts on each of the Banks and presenting such Drafts for acceptance
pursuant to subsection 4.3, paying its obligations with respect thereto pursuant
to subsection 4.4, and again drawing Drafts on each of the Banks and presenting
them for acceptance, all in accordance with the terms and conditions of this
Section 4.
4.2 Creation of Acceptances. (a) The Company may request the
-----------------------
creation of Acceptances hereunder by submitting to each Bank at its office
specified in Schedule I hereto at least two Business Days prior to the requested
date of acceptance, (i) a Request for Acceptances, with a copy to the Agent,
completed in a manner in form and substance satisfactory to such Bank and
specifying, among other things, the date (which must be a Business Day),
maturity and amount of the Draft to be accepted, (ii) to the extent not
<PAGE>
29
previously supplied to such Bank in accordance with subsection 4.6, a Draft to
be drawn on such Bank, appropriately completed in accordance with this
subsection 4.2 and (iii) such other certificates, documents and other papers and
information as such Bank may reasonably request. Notwithstanding the foregoing,
the Company shall not make a Request for Acceptances or submit any Drafts for
payment to any Bank hereunder unless (y) the Company shall have simultaneously
provided to each other Bank a Request for Acceptances or a Draft, as the case
may be, which has a maturity date identical to that provided to each other Bank
and an undiscounted face amount equal to such Bank's Commitment Percentage of
all Acceptances requested or drawn upon at such time and (z) the undiscounted
face amount of all Acceptances requested or drawn upon at such time is the
lesser of (i) $250,000 or any greater amount which is a whole multiple of
$100,000 in excess thereof or (ii) the then Available Working Capital
Commitment.
(b) Each Draft submitted by the Company for acceptance hereunder
shall be denominated in Dollars, shall be dated the date specified in the
Request for Acceptances with respect thereto and shall be stated to mature on a
Business Day which is 30, 60, 90 or 180 days after the date thereof and, in any
event, not more than 180 days after the anticipated date of shipment specified
in the relevant Request for Acceptances. No Acceptance created hereunder shall
(i) mature after the date which is 30 days prior to the Commitment Termination
Date, (ii) be created more than 30 days after the date of any shipments of goods
to which such Acceptance relates, (iii) have a tenor in excess of the period of
time which is usual and reasonably necessary to finance transactions of a
similar character, (iv) be in a undiscounted face amount of less than $200,000
or (v) be in a face amount which, when taken together with all other Acceptances
and other financings relating to the shipment of goods to which such Acceptance
relates, exceeds the fair market value of such shipment.
(c) Subject to subsection 4.2(d), not later than the close of
business at its office specified in Schedule I hereto on the Business Day
specified in a Request for Acceptances, and upon fulfillment of the applicable
conditions set forth in Section 9, each Bank will, in accordance with such
Request for Acceptances, (i) complete the date, amount and maturity of each
Draft presented for acceptance (to the extent not completed by the Company),
(ii) accept such Drafts and (iii) upon such acceptance, discount such
Acceptances in accordance with subsection 4.3.
(d) The acceptance and discounting of Drafts by any Bank hereunder
shall at all times be in the sole and absolute discretion of such Bank and no
Bank shall be obligated to accept or discount a Draft unless all Banks have
agreed to accept and discount their corresponding Drafts in accordance herewith.
4.3 Discount of Acceptances. Each of the Banks severally agrees, on
-----------------------
the terms and conditions of this Agreement, that on any date on which it creates
an Acceptance hereunder, such Bank will discount such Acceptance at the
Acceptance Rate, by making available to the Company an amount in immediately
available funds equal to the face amount of each Acceptance created by such Bank
on such date less such discount and notify the Agent that such Draft has been
accepted and discounted by such Bank. Each Bank will then make the discounted
amount of such Acceptance available to the Agent for the account of the Company
at the office of the Agent specified in subsection 15.2 prior to 2:00 P.M., New
<PAGE>
30
York City time, on the Business Day specified in the relevant Request for
Acceptances in funds immediately available to the Agent. Such proceeds will
then be made available to the Company by the Agent crediting the account of the
Company on the books of such office with the aggregate of the amounts made
available to the Agent by the Bank and in like funds as received by the Agent.
4.4 Acceptance Reimbursement Obligations. (a) The Company shall be
------------------------------------
obligated, and hereby unconditionally agrees to pay to each Bank, the face
amount of each Acceptance created by such Bank hereunder on the maturity
thereof, or such earlier date on which the obligations of the Company under this
Agreement shall become or shall have been declared due and payable pursuant to
the terms and conditions of this Agreement (the obligation of the Company under
this subsection 4.4 with respect to an Acceptance being an "Acceptance
----------
Reimbursement Obligation"). Interest shall accrue on any amount of an
- - ------------------------
Acceptance Reimbursement Obligation not paid when due (whether by scheduled
maturity, mandatory prepayment, acceleration or otherwise) from the date such
amount becomes due until paid in full at the rate applicable to overdue Working
Capital Loans bearing interest at a rate based upon the Alternate Base Rate
(before as well as after judgment). Such interest shall be payable by the
Company on demand by the Agent.
(b) The Company shall be obligated, and hereby unconditionally
agrees, to pay to each of the Banks, for its own account, the face amount of
each Existing Acceptance on the maturity date thereof, or such earlier date on
which the obligations of the Company under this Agreement shall become or shall
have been declared due and payable. For purposes hereof, the obligation of the
Company to make such payments shall be deemed an Acceptance Reimbursement
Obligation.
4.5 Mandatory Prepayment. (a) In the event that (i) there is a
--------------------
determination made by any regulatory body or instrumentality thereof (including,
without limitation, any Federal Reserve Bank or any bank examiner), or there is
a change in, or change in interpretation of, any applicable law, rule or
regulation (such determination or such change, a "Reserve Determination"), in
---------------------
either case to the effect that any bankers' acceptance created hereunder or in
connection with a substantially similar facility (whether or not the Company or
any Bank is directly involved as parties) will be ineligible for reserve-free
treatment (or if already discounted, should have been ineligible for reserve-
free treatment) under Federal Reserve rules or regulations, and as a result any
Bank is required to maintain, or determines as a matter of prudent banking
practice that it is appropriate for it to maintain, additional reserves, or (ii)
any restriction is imposed on any Bank (including, without limitation, any
change in acceptance limits imposed on any Bank) which would prevent such Bank
from creating bankers' acceptances or otherwise performing its obligations in
respect of the Acceptances, then, with the consent of the Banks, the Agent may,
or upon the direction of the Banks, the Agent shall, by notice to the Company in
accordance with subsection 15.2, demand prepayment of all outstanding
Acceptances, and the Banks shall have no further obligation to accept or
discount Drafts hereunder. The Company agrees that it shall, within two
Business Days of its receipt of a notice of mandatory prepayment of the
Acceptances, prepay all Acceptance Reimbursement Obligations in accordance with
the provisions of subsection 4.5(c) hereof.
<PAGE>
31
(b) The Company agrees to prepay the amount of each Acceptance
Reimbursement Obligation prior to its stated maturity from the proceeds received
by it upon completion of the underlying transaction covered by the Acceptance or
Acceptances giving rise to such Acceptance Reimbursement Obligation to the
extent from time to time required by the Board of Governors of the Federal
Reserve System.
(c) Any prepayment of any Acceptance Reimbursement Obligation made
pursuant hereto shall be made to the Bank which created the underlying
Acceptance and shall be in an amount equal to the face amount of such Acceptance
minus a prepayment discount calculated by such Bank in accordance with its
customary practice for similar Acceptances and communicated to the Company;
provided that, in the event that the Company fails to make such prepayment as
- - --------
provided in this subsection 4.5(c), the Acceptance Reimbursement Obligation with
respect to each Acceptance then outstanding shall be prepaid by a Working
Capital Loan under the Working Capital Loan Commitment made without further
request by the Company and pursuant to this subsection on the Business Day on
which such prepayment was due in a principal amount equal to the face amount of
such Acceptance and subject to the terms and conditions hereof applicable to
Working Capital Loans.
(d) The Company shall prepay all Acceptance Reimbursement Obligations
in accordance with subsection 4.5(c) to the extent necessary to satisfy
subsection 8.5 hereof.
(e) Notwithstanding the foregoing, any Acceptance Reimbursement
Obligation which is prepaid pursuant to this subsection 4.5 shall be deemed to
be outstanding, and shall be deemed to reduce the Available Working Capital
Commitment of each Bank so prepaid, until such time as the corresponding
Acceptance Reimbursement Obligations of each other Bank have been paid in the
same amount.
4.6 Supply of Drafts. To enable the Banks to create Acceptances in
----------------
the manner specified in this Section 4, the Company shall provide to each of the
Banks, on the Closing Date and thereafter from time to time upon request of the
Agent or the Banks, such number of blank Drafts conforming to the requirements
hereof as the Agent or such Banks may reasonably request, each duly executed on
behalf of the Company, and the Banks shall hold such documents in safekeeping.
The Company and the Banks hereby agree that in the event that any authorized
signatory of the Company whose signature shall appear on any Draft shall cease
to have such authority at the time that an Acceptance is to be created with
respect thereto, such signature shall nevertheless be valid and sufficient for
all purposes as if such authority had remained in full force and effect at the
time of such creation.
4.7 Delivery of Certain Documentation. Upon request by the Agent or
---------------------------------
any Bank creating an Acceptance, the Company shall furnish to the Agent or such
Bank (a) a copy of the contract of sale or any bill of lading, warehouse
receipt, policy or certificate of insurance or other document covering or
otherwise relating to each shipment of goods specified in the Request for
Acceptances relating to such Acceptance and (b) such other documents or
information as such Bank or the Agent shall reasonably request with respect to
the creation of such Acceptance.
<PAGE>
32
4.8 Notice. The Agent shall notify the Federal Reserve Bank of New
------
York of the terms under which Acceptances may be made if requested or required
to do so by such institution.
4.9 Use of Proceeds. The proceeds of the Acceptances shall be used
---------------
solely to finance the purchase and/or sale of inventory of the Company in
transactions which fulfill the requirements of regulations of the Board of
Governors of the Federal Reserve System of the United States governing the
creation and discounting of, and the maintenance of reserves with respect to,
bankers' acceptances.
SECTION 5. AMOUNT AND TERMS OF ACQUISITION R/C LOANS
5.1 Acquisition Loan Commitments. (a) Subject to the terms and
----------------------------
conditions of this Agreement, each Bank severally agrees to make loans (the
"Acquisition R/C Loans") to the Company at any time and from time to time from
---------------------
the date hereof to and including the last day of the Acquisition Commitment
Period, in an aggregate principal amount at any one time outstanding which, when
added to such Bank's Commitment Percentage of the then outstanding Acquisition
L/C Obligations would not exceed such Bank's Acquisition Commitment; provided
--------
that no Bank shall have an obligation to make any Acquisition R/C Loan if, after
giving effect to the making (and the use of proceeds) thereof, the Available
Acquisition Commitment of such Bank would be less than zero. The Acquisition
R/C Loans may from time to time be either (i) Alternate Base Rate Loans, (ii)
Eurodollar Loans or (iii) a combination thereof, as determined by the Company
and notified to the Agent in accordance with subsection 5.3 and 8.8 hereof. The
Company may use the Acquisition Commitment by borrowing, prepaying the
Acquisition R/C Loans in whole or in part, and reborrowing, all in accordance
with the terms and conditions of this Agreement.
5.2 Acquisition Notes. (a) The Acquisition R/C Loans made by each
-----------------
Bank shall be evidenced by a promissory note of the Company, substantially in
the form of Exhibit B, with appropriate insertions as to payee, date and
principal amount (an "Acquisition Note"), payable to the order of such Bank and
----------------
in a principal amount equal to the lesser of (i) the amount of the initial
Acquisition Commitment of such Bank and (ii) the aggregate unpaid principal
amount of all Acquisition R/C Loans made by such Bank. Each Bank is hereby
authorized to record the date, Type and amount of each Acquisition R/C Loan made
by such Bank, each continuation thereof, each conversion of all or a portion
thereof to another Type, the date and amount of each payment or prepayment of
principal thereof and, in the case of Eurodollar Loans, the length of each
Interest Period with respect thereto, on the schedule annexed to and
constituting a part of its Acquisition Note, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded.
----- -----
Each Acquisition Note shall (x) be dated the Closing Date, (y) be stated to
mature on the Commitment Termination Date and (z) provide for the payment of
interest in accordance with subsection 8.6.
5.3 Procedure for Borrowing Acquisition R/C Loans. The Company may
---------------------------------------------
borrow under the Acquisition Commitments on any Working Day, if all or any part
of the requested Acquisition R/C Loans are to be initially Eurodollar Loans, or
on any Business
<PAGE>
33
Day, otherwise, provided that the Company shall give the Agent irrevocable
--------
notice (which notice must be received by the Agent prior to 11:00 A.M., New York
City time, (a) two Working Days prior to the requested Borrowing Date, if all or
any part of the requested Acquisition R/C Loans are to be initially Eurodollar
Loans and (b) on the same Business Day as the requested Borrowing Date,
otherwise), specifying (i) the amount to be borrowed, (ii) the requested
Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans,
Alternate Base Rate Loans or a combination thereof and (iv) if the borrowing is
to be entirely or partly of Eurodollar Loans, the respective amounts of each
such Type of Loan and the respective lengths of the initial Interest Periods
therefor. Each borrowing pursuant to the Acquisition Commitments shall be in an
aggregate principal amount of the lesser of (a) $500,000 or any whole multiple
of $100,000 in excess thereof, in the case of Alternate Base Rate Loans or
$1,000,000 or any whole multiple of $100,000 in excess thereof, in the case of
Eurodollar Loans or (b) the then Available Acquisition Commitment. Upon receipt
of any such notice from the Company, the Agent shall promptly notify each Bank
thereof. Each Bank will make the amount of its pro rata share of each borrowing
available to the Agent for the account of the Company at the office of the Agent
specified in subsection 15.2 prior to 3:00 P.M., New York City time, on the
Borrowing Date requested by the Company in funds immediately available to the
Agent. Such borrowing will then be made available to the Company by the Agent
crediting the account of the Company on the books of such office with the
aggregate of the amounts made available to the Agent by the Bank and in like
funds as received by the Agent.
5.4 Use of Proceeds of Acquisition R/C Loans. The proceeds of
----------------------------------------
Acquisition R/C Loans shall be used (a) to finance the purchase price paid by
the Company and its Subsidiaries for the acquisition of companies engaged in
fuel oil or propane distribution business or (b) to refinance the consideration
paid by the Company and its Subsidiaries within the immediately preceding twelve
calendar months (but, except in the case of the refinancing of Letters of Credit
described on Schedule V, in no event before June 1, 1994) for the acquisition
thereof; provided however that in no event shall such proceeds be used to
--------
acquire any interest in Star Gas Corporation or any of its subsidiaries.
SECTION 6. TERMS OF ACQUISITION LETTER OF CREDIT
FACILITY
6.1 Acquisition L/C Commitment. (a) Subject to the terms and
--------------------------
conditions hereof, the Issuing Bank, in reliance on the agreements of the other
Banks set forth in subsection 6.4(a), agrees to issue letters of credit
("Acquisition Letters of Credit") for the account of the Company on any Business
-----------------------------
Day during the Acquisition Commitment Period in such form as may be approved
from time to time by the Issuing Bank; provided that the Issuing Bank shall have
--------
no obligation to issue any Acquisition Letter of Credit if, after giving effect
to such issuance, the Available Acquisition Commitment of any Bank would be less
than zero. No Acquisition Letter of Credit shall have an expiry date which is
later than five years from the date of issuance thereof. Each Acquisition
Letter of Credit shall (i) be denominated in Dollars, (ii) be in a minimum face
amount of $1,000,000 and (iii) be a standby letter of credit issued to support
obligations for which the Acquisition R/C Loans would have been available
pursuant to this Agreement.
<PAGE>
34
(b) Each Acquisition Letter of Credit shall be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
(c) The Issuing Bank shall not at any time be obligated to issue any
Acquisition Letter of Credit hereunder if such issuance would conflict with, or
cause the Issuing Bank or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
6.2 Procedure for Issuance of Acquisition Letters of Credit. The
-------------------------------------------------------
Company may from time to time request that the Issuing Bank issue an Acquisition
Letter of Credit by delivering to the Issuing Bank, at its address for notices
specified herein, an Application therefor, completed to the satisfaction of the
Issuing Bank, and such other certificates, documents and other papers and
information as the Issuing Bank may request. Upon receipt of any Application,
the Issuing Bank will process such Application and the certificates, documents
and other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall promptly issue the
Acquisition Letter of Credit requested thereby (but in no event shall the
Issuing Bank be required to issue any Acquisition Letter of Credit earlier than
three Business Days after its receipt of the Application therefor and all such
other certificates, documents and other papers and information relating thereto)
by issuing the original of such Acquisition Letter of Credit to the beneficiary
thereof or as otherwise may be agreed by the Issuing Bank and the Company. The
Issuing Bank shall furnish a copy of such Acquisition Letter of Credit to the
Company promptly following the issuance thereof.
6.3 Fees, Commissions and Other Charges.
-----------------------------------
(a) The Company shall pay to the Agent, for the account of the
Issuing Bank and the L/C Participants, a letter of credit commission with
respect to the undrawn face amount of each Acquisition Letter of Credit,
computed for the period from the date of such payment to the date upon which the
next such payment is due hereunder in an amount equal to the Applicable Margin
then in effect for Acquisition Loans which bear interest at a rate based upon
the Eurodollar Rate, provided that to the extent that such Acquisition Letter of
--------
Credit is cash collateralized pursuant to the Cash Collateral Agreement (or
otherwise in a manner acceptable to the Agent), such commission shall instead be
in an amount equal to 1/4 of 1% of the undrawn face amount of such Acquisition
Letter of Credit. Such commission shall be payable in advance on the date of
issuance of such Acquisition Letter of Credit and on each L/C Fee Payment Date
to occur thereafter and shall be non-refundable.
(b) The Company shall pay to the Agent, for the account of the
Issuing Bank, a letter of credit fronting fee in the amount equal to 1/8 of 1%
of the portion of each Acquisition Letter of Credit which is not cash
collateralized pursuant to the Cash Collateral Agreement. Such fee shall
payable, in advance, for the period from the date of such payment to the date
upon which the next such payment is due hereunder and shall be paid on the date
of issuance of such Acquisition Letter of Credit and on each L/C Fee Payment
Date to occur thereafter and shall be non-refundable.
<PAGE>
35
(c) In addition to the foregoing fees and commissions, the Company
shall pay or reimburse the Issuing Bank for such normal and customary costs and
expenses as are incurred or charged by the Issuing Bank in issuing, effecting
payment under, amending or otherwise administering any Acquisition Letter of
Credit.
(d) The Agent shall, promptly following its receipt thereof,
distribute to the Issuing Bank and the L/C Participants all fees and commissions
received by the Agent for their respective accounts pursuant to this subsection
6.3.
6.4 Acquisition L/C Participations. (a) The Issuing Bank
------------------------------
irrevocably agrees to grant and hereby grants to each L/C Participant, and, to
induce the Issuing Bank to issue Acquisition Letters of Credit hereunder, each
L/C Participant irrevocably agrees to accept and purchase and hereby accepts and
purchases from the Issuing Bank, on the terms and conditions hereinafter stated,
for such L/C Participant's own account and risk an undivided interest equal to
such L/C Participant's Commitment Percentage in the Issuing Bank's obligations
and rights under each Acquisition Letter of Credit issued hereunder and the
amount of each draft paid by the Issuing Bank thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Bank that, if a draft is
paid under any Acquisition Letter of Credit for which the Issuing Bank is not
reimbursed in full by the Company in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Bank upon demand at the
Issuing Bank's address for notices specified herein an amount equal to such L/C
Participant's Commitment Percentage of the amount of such draft, or any part
thereof, which is not so reimbursed. The Agent agrees to provide to each L/C
Participant a copy of each Acquisition Letter of Credit issued pursuant to the
terms hereof and a copy of any draft paid under any such Acquisition Letter of
Credit.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to subsection 6.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Acquisition Letter of
Credit is paid to the Issuing Bank within three Business Days after the date
such payment is due, such L/C Participant shall pay to the Issuing Bank on
demand an amount equal to the product of (i) such amount, times (ii) the daily
average Federal Funds Effective Rate during the period from and including the
date such payment is required to the date on which such payment is immediately
available to the Issuing Bank, times (iii) a fraction the numerator of which is
the number of days that elapse during such period and the denominator of which
is 360. If any such amount required to be paid by any L/C Participant pursuant
to subsection 6.4(a) is not in fact made available to the Issuing Bank by such
L/C Participant within three Business Days after the date such payment is due,
the Issuing Bank shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum applicable to Acquisition Loans which are Alternate Base Rate
Loans hereunder. A certificate of the Issuing Bank submitted to any L/C
Participant with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has made payment
under any Acquisition Letter of Credit and has received from any L/C Participant
its pro rata share of such payment in accordance with subsection 6.4(a), the
--- ----
Issuing Bank receives any payment related to such Acquisition Letter of Credit
(whether directly from the Company or otherwise,
<PAGE>
36
including proceeds of collateral applied thereto by the Issuing Bank), or any
payment of interest on account thereof, the Issuing Bank will distribute to such
L/C Participant its pro rata share thereof; provided, however, that in the event
--- ---- -------- -------
that any such payment received by the Issuing Bank shall be required to be
returned by the Issuing Bank, such L/C Participant shall return to the Issuing
Bank the portion thereof previously distributed by the Issuing Bank to it.
6.5 Acquisition L/C Reimbursement Obligation of the Company. (a)
-------------------------------------------------------
The Company agrees to reimburse the Issuing Bank on each date on which the
Issuing Bank notifies the Company of the date and amount of a draft presented
under any Acquisition Letter of Credit and paid by the Issuing Bank for the
amount of (a) such draft so paid and (b) any taxes, fees, charges or other costs
or expenses incurred by the Issuing Bank in connection with such payment. Each
such payment shall be made to the Issuing Bank at its address for notices
specified herein in lawful money of the United States of America and in
immediately available funds. Interest shall be payable on any and all amounts
remaining unpaid by the Company under this subsection 6.5 from the date such
amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate which would be payable on overdue
Acquisition Loans which are Alternate Base Rate Loans. Each drawing under any
Acquisition Letter of Credit shall, during the Acquisition Commitment Period,
constitute a request by the Company to the Agent for a borrowing pursuant to
subsection 5.1 of Alternate Base Rate Loans in the amount of such drawing. The
Borrowing Date with respect to such borrowing shall be the date of such drawing.
(b) Notwithstanding anything to the contrary, in the event of any
failure by the Company to reimburse the Issuing Bank in accordance with the
provisions of subsection 6.5(a), the Reimbursement Obligations which have not
been so reimbursed shall be deemed to be bifurcated into (i) the portion of such
Reimbursement Obligations which, in the aggregate, are equal to the amount then
on deposit in the Cash Collateral Account and (ii) the portion such
Reimbursement Obligations (if any) which is in excess thereof. Each of the
Agent, the Issuing Bank and each L/C Participant hereby agrees that it shall
have no recourse to the Company with respect to the portion of such
Reimbursement Obligations which are described in clause (i) above, but rather
that its sole recourse with respect to such Reimbursement Obligations shall be
to the amounts on deposit in the Cash Collateral Account; provided that the
--------
Company shall remain liable for, and the Agent, the Issuing Bank and the L/C
Participants shall have full recourse to the Company in respect of, the portion
of such Reimbursement Obligations which is described in clause (ii) above.
6.6 Obligations Absolute. Subject to the provisions of subsection
--------------------
6.5(b), the Company's obligations under this Section 6 shall be absolute and
unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which the Company may have or have had
against the Issuing Bank or any beneficiary of an Acquisition Letter of Credit.
The Company also agrees with the Issuing Bank that the Issuing Bank shall not be
responsible for, and the Company's Acquisition L/C Reimbursement Obligations
under subsection 6.5 shall not be affected by, among other things, the validity
or genuineness of documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or forged, or any
dispute between or among the Company and any beneficiary of any Acquisition
Letter of Credit or any other party to which such Acquisition Letter of Credit
may be transferred or any claims whatsoever of the
<PAGE>
37
Company against any beneficiary of such Acquisition Letter of Credit or any such
transferee. The Issuing Bank shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Acquisition Letter of
Credit, except for errors or omissions caused by the Issuing Bank's gross
negligence or willful misconduct. The Company agrees that any action taken or
omitted by the Issuing Bank under or in connection with any Acquisition Letter
of Credit or the related drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance with the standards or care
specified in the Uniform Commercial Code of the State of New York, shall be
binding on the Company and shall not result in any liability of the Issuing Bank
to the Company.
6.7 Acquisition Letter of Credit Payments. If any draft shall be
-------------------------------------
presented for payment under any Acquisition Letter of Credit, the Issuing Bank
shall promptly notify the Company of the date and amount thereof. The
responsibility of the Issuing Bank to the Company in connection with any draft
presented for payment under any Acquisition Letter of Credit shall, in addition
to any payment obligation expressly provided for in such Acquisition Letter of
Credit, be limited to determining that the documents (including each draft)
delivered under such Acquisition Letter of Credit in connection with such
presentment are in conformity with such Acquisition Letter of Credit.
6.8 Application. To the extent that any provision of any Application
-----------
related to any Acquisition Letter of Credit is inconsistent with the provisions
of this Section 6, the provisions of this Section 6 shall apply.
6.9 Certain Existing Letters of Credit. Each Bank hereby agrees that
----------------------------------
each letter of credit which is listed on Schedule V and is outstanding on the
Closing Date shall, from and after the Closing Date, be deemed for all purposes
hereof and of the other Loan Documents (including, without limitation, the
provisions of subsections 6.4 and 6.5) to be an Acquisition Letter of Credit.
From and after the Closing Date, commissions and other fees with respect to such
letters of credit shall accrue in the amount and manner specified in subsection
6.3 with respect to each such letter of credit and shall be payable to the
Agent, for the account of the Banks (with respect to amounts accruing after the
Closing Date and for the account of the relevant issuing bank with respect to
amounts accruing prior thereto), on each L/C Fee Payment Date.
SECTION 7. AMOUNT AND TERMS OF ACQUISITION TERM LOANS
7.1 Acquisition Term Loan. (a) Subject to the terms and conditions
---------------------
of this Agreement, each Bank severally agrees to make an acquisition term loan
(the "Acquisition Term Loan") to the Company on the Commitment Termination Date
---------------------
in an amount not to exceed the Acquisition Term Loan Commitment of such Bank.
The Acquisition Term Loans may from time to time be (a) Alternate Base Rate
Loans, (b) Eurodollar Loans or (c) a combination thereof, as determined by the
Company and notified to the Agent in accordance with subsection 7.3 and 8.8
hereof.
<PAGE>
38
7.2 Acquisition Notes. The Acquisition Term Loans made by each Bank
-----------------
shall be evidenced by an Acquisition Note. Each Bank is hereby authorized to
record the date and amount of each payment or prepayment of principal of its
Acquisition Term Loan, each continuation thereof, each conversion of all or a
portion thereof to another Type, the date and amount of each payment or
prepayment of principal thereof and, in the case of Eurodollar Loans, the length
of each Interest Period with respect thereto, on the schedule annexed to and
constituting a part of its Acquisition Note, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded.
----- -----
7.3 Procedure for Borrowing Acquisition Term Loans. The Company
----------------------------------------------
shall give the Agent irrevocable notice (which notice must be received by the
Agent prior to 11:00 A.M., New York City time, (a) two Working Days prior to the
Commitment Termination Date, if all or any part of the Acquisition Term Loans
are to be initially Eurodollar Loans and (b) on the same Business Day as the
Commitment Termination Date, otherwise) requesting that the Banks make the
Acquisition Term Loans on the Commitment Termination Date and specifying (i) the
amount to be borrowed, (ii) whether the borrowing is to be of Eurodollar Loans,
Alternate Base Rate Loans or a combination thereof and (iii) if the borrowing is
to be entirely or partly of Eurodollar Loans, the respective amounts of each
such Type of Loan and the respective lengths of the initial Interest Periods
therefor; provided that the Acquisition Term Loans to be borrowed on the
--------
Commitment Termination Date may be Eurodollar Loans only if such date is a
Working Day. Upon receipt of any such notice from the Company, the Agent shall
promptly notify each Bank thereof. If the aggregate principal amount of the
Acquisition Term Loans is to be equal to or less than the aggregate principal
amount of the Acquisition R/C Loans then outstanding, the Acquisition Term Loans
shall be made without any payments being made by the Banks, and the Company
shall pay any difference to the Agent on behalf of the Banks on the Commitment
Termination Date.
7.4 Repayment of Acquisition Term Loans and Cash Collateralization of
-----------------------------------------------------------------
Acquisition Letters of Credit. The Acquisition Term Loans shall be payable and
- - -----------------------------
any then outstanding Acquisition L/C Obligations shall be cash collateralized in
consecutive annual installments on the dates set forth below, with each such
installment being in the amount equal to the percentage of the Acquisition Term
Loans made on the Commitment Termination Date or the percentage of the
Acquisition L/C Obligations outstanding on the Commitment Termination Date, as
the case may be, which is set forth below opposite the date when due:
Date Percentage
---- ----------
June 30, 1997 33.33%
June 30, 1998 66.67%
Notwithstanding the foregoing, if each issue of Designated Debt of the Company
is refinanced on or prior to June 30, 1998 upon terms and subject to conditions
substantially similar to the terms of such issue prior to such refinancing, then
(x) 33.33% of the Acquisition Term Loans outstanding on the Commitment
Termination Date shall be due, and 33.33% of the Acquisition L/C Obligations
outstanding on the Commitment Termination Date shall be cash collateralized, on
June 30, 1998 (rather than 66.67% as set forth above) and (y) the remaining
33.33% of such Acquisition Term Loans and Acquisition L/C Obligations shall be
due and payable or cash collateralized, as the case may be, on May 30, 1999.
<PAGE>
39
7.5 Use of Proceeds of Acquisition Term Loans. The proceeds of the
-----------------------------------------
Acquisition Term Loans shall be used by the Company for the same purposes as
Acquisition R/C Loans pursuant to subsection 5.4.
SECTION 8. PROVISIONS RELATING TO CERTAIN EXTENSIONS
OF CREDIT; FEES AND PAYMENTS
8.1 Commitment Fee. The Company agrees to pay to the Agent, for the
--------------
account of each Bank, a commitment fee for the period from and including the
Closing Date to and including the Commitment Termination Date, computed at the
rate of 3/8 of 1% per annum on the average daily amount of the sum of (a)
Available Working Capital Commitment and (b) Available Acquisition Commitment of
such Bank during the period for which payment is made. Such commitment fee
shall be payable on the last day of each month (commencing on August 31, 1994)
and on the Commitment Termination Date. If all or a portion of any commitment
fee shall not be paid when due, any such unpaid amount shall bear interest at a
rate per annum determined pursuant to subsection 8.6(e) until paid in full and
such interest shall be payable upon demand.
8.2 Termination or Reduction of Commitments. The Company shall have
---------------------------------------
the right, upon not less than three Business Days' notice to the Agent, to
terminate the Working Capital Commitments and/or the Acquisition Commitments or,
from time to time, to reduce the amount of either or both thereof. Any such
reduction shall be in an amount equal to $1,000,000 or a whole multiple of
$100,000 in excess thereof and shall reduce permanently the Working Capital
Commitments and/or Acquisition Commitments, as the case may be, then in effect.
Termination of the Acquisition Commitments shall also terminate the obligation
of the Banks to make the Acquisition Term Loans. Notwithstanding anything to
the contrary contained herein, no voluntary termination or reduction of the
Working Capital Commitments shall be permitted if after giving effect to such
termination or reduction the Inventory L/C Obligations shall exceed the amount
of the Working Capital Commitments.
8.3 Payments and Voluntary Prepayments. (a) Any prepayment or
----------------------------------
reduction of the Working Capital Notes or the Acquisition Notes shall be in the
aggregate principal amount of $1,000,000 or a whole multiple thereof or, if
less, the aggregate principal amount thereof which is then outstanding.
(b) The Company may at its option prepay the Working Capital Notes
and the Acquisition Notes in whole at any time or in part from time to time
without premium or penalty.
(c) The Company shall give to the Agent prior irrevocable written,
telegraphic or tested telex notice of any repayment or prepayment (which notice
must be received by the Agent prior to 11:00 A.M., New York City time, two
Working Days prior to any such repayment or prepayment if all or any part of the
Loans to be repaid or prepaid are Eurodollar Loans or on the same Business Day
as such prepayment or repayment, otherwise), specifying (i) the date and amount
of prepayment, (ii) whether the prepayment or repayment is of Working Capital
Loans, Acquisition R/C Loans, Acquisition Term Loans or a
<PAGE>
40
combination thereof, and if a combination thereof, the amount allocable to each
and (iii) whether the prepayment is of Eurodollar Loans, Alternate Base Rate
Loans or a combination thereof, and if a combination thereof, the amount
allocable to each. Upon receipt of such notice, the Agent shall promptly notify
each Bank thereof. If any such notice is given, the amount specified in such
notice shall be due and payable on the date specified therein, together with the
other amounts required pursuant to the terms of this Agreement.
(d) The Company may pay any Eurodollar Loan without premium or
penalty in whole or in part on the last day of any Interest Period applicable
thereto and, subject to the provisions of subsection 8.13 hereof, may prepay a
Eurodollar Loan on any other date.
(e) Partial prepayments of Acquisition Term Loans owing under any
Acquisition Note shall be in the principal amounts set forth in clause (a),
together with payment of accrued interest thereon to the date of the prepayment
together with any amounts owing pursuant to subsection 8.13 and shall be applied
on account of the installments of principal in the inverse order of the maturity
thereof. Amounts prepaid on account of Acquisition Term Loans owing under the
Acquisition Note may not be reborrowed.
8.4 Mandatory Prepayments. (a) If the Aggregate Outstanding Working
---------------------
Capital Extensions of Credit of all of the Banks at any time exceed the Working
Capital Commitments then in effect, the Company shall immediately prepay such
Aggregate Outstanding Working Capital Extensions of Credit (and, to the extent
necessary, cash collateralize the Inventory L/C Obligations) in an aggregate
principal amount equal to such excess, together with commitment fees accrued to
the date of such payment. Any such prepayment shall be applied, first, to the
-----
Working Capital Loans, second, to the Acceptance Reimbursement Obligations and,
------
third, to cash collateralize, in a manner acceptable to the Agent and the
- - -----
Banks, the then outstanding Inventory L/C Obligations.
(b) If, at any time during the Acquisition Commitment Period, the
Aggregate Outstanding Acquisition Extensions of Credit of all of the Banks
exceed the Acquisition Commitments then in effect, the Company shall immediately
prepay such Aggregate Outstanding Acquisition Extensions of Credit (and, to the
extent necessary, cash collateralize the Acquisition L/C Obligations) in an
aggregate principal amount equal to such excess, together with commitment fees
accrued to the date of such payment. Any such prepayment shall be applied,
first, to the Acquisition R/C Loans and, second, to cash collateralize, in a
- - ----- ------
manner acceptable to the Agent and the Banks, the then outstanding Acquisition
L/C Obligations.
(c) If at any time during the Working Capital Commitment Period, the
Aggregate Outstanding Working Capital Extensions of Credit of all of the Banks
exceed the Borrowing Base then in effect, the Company shall, on the fourth
Business Day after a request therefor is made by the Agent or any Bank, prepay
such Aggregate Outstanding Working Capital Extensions of Credit (or, to the
extent necessary, cash collateralize the Inventory L/C Obligations) in an
aggregate principal amount equal to such excess, together with commitment fees
accrued to the date of such payment. Any such prepayment shall be applied,
first, to the Working Capital Loans, second, to the Acceptance Reimbursement
- - ----- ------
Obligations and, third, to cash collateralize, in a manner acceptable to the
-----
<PAGE>
41
Agent and the Banks, the then outstanding Inventory L/C Obligations. Amounts
prepaid pursuant to this subsection may be reborrowed.
(d) In the event that the Company or any of its Subsidiaries sells,
assigns, transfers, leases or otherwise disposes of any of the Customer Lists,
then on the first Business Day after any such sale, assignment, transfer, lease
or other disposition (any of the foregoing, a "Customer List Disposition"), the
-------------------------
Company shall or shall cause any of its Subsidiaries to apply the Net Cash
Proceeds to prepay the Loans as follows:
(i) 100% of such Net Cash Proceeds shall be applied to prepay any
remaining installments of the Acquisition Term Loans, in the inverse order
of their scheduled maturities until the Acquisition Term Loans have been
satisfied in full;
(ii) from any amounts remaining after giving effect to the
application described in clause (i) above, the Acquisition Commitment (or,
to the extent that no Acquisition Commitment is then outstanding, the
Working Capital Commitment) shall be reduced by the amount equal to (A) to
the extent that the Net Cash Proceeds of such Customer List Disposition,
together with the Net Cash Proceeds from all other Customer List
Dispositions of the Customer Lists occurring prior to the date of such
Customer List Disposition but after the date hereof, is less than
$10,000,000, 20% of such remaining Net Cash Proceeds and (B) otherwise,
100% of such remaining Net Cash Proceeds.
Notwithstanding anything to the contrary contained herein, any sale, assignment,
transfer, lease or other disposition of any of the Customer Lists which occurs
within 90 days after the Company or any of its Subsidiaries, as the case may be,
acquired such Customer Lists shall be deemed to be a Customer List Disposition
for purposes hereof only to the extent of the aggregate principal amount of
extensions of credit made hereunder to finance the acquisition of such Customer
Lists.
(e) Each prepayment of the Loans pursuant to this subsection 8.4
shall be accompanied by payment in full of all accrued interest thereon to and
including the date of such prepayment, together with any additional amounts
owing pursuant to subsection 8.13.
(f) Notwithstanding anything to the contrary contained herein or in
the Cash Collateral Agreement, the Company shall not have any right to request
the withdrawal from the Cash Collateral Account of any amount deposited therein
pursuant to the terms of this subsection 8.4.
8.5 Annual Clean-Up. The Company and its Subsidiaries shall repay
---------------
the Working Capital Loans, all Working Capital Borrowings of the type described
in subsection 12.1(g) and all outstanding Acceptances to the extent necessary to
cause there to be no amounts outstanding under the Working Capital Commitments
(other than with respect to L/C Obligations) and no other Working Capital
Borrowings outstanding for a period of at least forty-five consecutive days
during the period from April 1 through September 30 of each calendar year.
8.6 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
--------------------------------
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum
<PAGE>
42
equal to the Eurodollar Rate determined for such day plus the Applicable Margin
then in effect for Working Capital Loans or Acquisition Loans, as the case may
be.
(b) Each Alternate Base Rate Loan shall bear interest for each day at
a rate per annum equal to the Alternate Base Rate plus the Applicable Margin
then in effect for Working Capital Loans or Acquisition Loans, as the case may
be.
(c) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any commitment fee, facility fee, agency
fee or other amount payable hereunder shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum which is (x) in the case of overdue principal, the
rate that would otherwise be applicable thereto pursuant to the foregoing
provisions of this subsection plus 2% or (y) in the case of overdue interest,
commitment fee, facility fee, agency fee or other amounts, the rate described in
paragraph (b) of this subsection plus 2%, in each case from the date of such
non-payment until such amount is paid in full (as well after as before
judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this
--------
subsection shall be payable from time to time on demand.
8.7 Computation of Interest and Fees; Payments. The commitment fee
------------------------------------------
and other fees payable pursuant to the terms hereof and interest shall be
calculated on the basis of a 360 day year for the actual days elapsed. Any
change in the interest rate on any Note resulting from a change in the Alternate
Base Rate or the Eurocurrency Reserve Requirements shall become effective as of
the opening of business on the day on which such change in the Alternate Base
Rate is announced, or such change in the Eurocurrency Reserve Requirements shall
become effective, as the case may be. The Agent shall as soon as practicable
notify the Company and the Banks of each determination of a Eurodollar Rate.
All payments (including prepayments) by the Company on account of principal and
interest on any Note and the commitment fee, facility fees and agency fees
hereunder shall be made to the Agent at its office specified in subsection 15.2
in lawful money of the United States of America in immediately available funds.
If any payment on any Note becomes due and payable on a Saturday, Sunday or
legal holiday under the laws of the State of New York, the maturity thereof
shall be extended to the next succeeding Business Day, and, with respect to
payments of principal, and interest thereon shall be payable at the then
applicable rate during such extension. Each determination of an interest rate
by the Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Company and the Banks in the absence of manifest error. The
Agent shall, at the request of the Company, deliver to the Company a statement
showing the quotations used by the Agent in determining any interest rate
pursuant to subsection 8.6(a), 8.6(b) or 8.6(c).
8.8 Conversion and Continuation Options. (a) The Company may elect
-----------------------------------
from time to time to convert Eurodollar Loans to Alternate Base Rate Loans by
giving the Agent at least one Business Day's prior irrevocable notice of such
election, provided that any such conversion of Eurodollar Loans may only be made
--------
on the last day of an Interest Period with respect thereto. The Company may
elect from time to time to convert Alternate Base Rate
<PAGE>
43
Loans to Eurodollar Loans by giving the Agent at least two Working Days' prior
irrevocable notice of such election. Any such notice of conversion to
Eurodollar Loans shall specify the length of the initial Interest Period or
Interest Periods therefor. Upon receipt of any such notice the Agent shall
promptly notify each Bank thereof. All or any part of outstanding Eurodollar
Loans and Alternate Base Rate Loans may be converted as provided herein,
provided that (i) no Loan may be converted into a Eurodollar Loan when any Event
- - --------
of Default has occurred and is continuing and the Agent has or the Required
Banks have determined that such a conversion is not appropriate, (ii) any such
conversion may only be made if, after giving effect thereto, subsection 8.9
shall not have been contravened and (iii) no Loan may be converted into a
Eurodollar Loan after the date that is one month prior to the Commitment
Termination Date (with respect to conversions of Working Capital Loans) or the
date of the final installment of principal of the Acquisition Term Loans (with
respect to conversions of Acquisition Loans).
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Company giving
notice to the Agent, in accordance with the applicable provisions of the term
"Interest Period" set forth in subsection 1.1, of the length of the next
Interest Period to be applicable to such Loans, provided that no Eurodollar Loan
--------
may be continued as such (i) when any Event of Default has occurred and is
continuing and the Agent has or the Required Banks have determined that such a
continuation is not appropriate, (ii) if, after giving effect thereto,
subsection 8.9 would be contravened or (iii) after (A) the date that is one
month prior to the Commitment Termination Date (with respect to continuations of
Working Capital Loans), (B) the date that is one month prior to the date of the
final installment of principal of the Acquisition Term Loans (with respect to
continuations of Acquisition Loans) and provided, further, that if the Company
-------- -------
shall fail to give any required notice as described above in this paragraph or
if such continuation is not permitted pursuant to the preceding proviso such
Loans shall be automatically converted to Alternate Base Rate Loans on the last
day of such then expiring Interest Period.
8.9 Minimum Amounts of Tranches. All borrowings, conversions and
---------------------------
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, (a) the aggregate principal amount of the
Loans comprising each Eurodollar Tranche shall be equal to $1,000,000 or a whole
multiple of $500,000 in excess thereof and (b) there shall be no more than ten
Eurodollar Tranches at any one time outstanding.
8.10 Inability to Determine Eurodollar Rate. If the Agent determines
--------------------------------------
that extraordinary circumstances affecting the interbank eurodollar market make
it impracticable to ascertain the interest rate applicable for any Interest
Period or impossible to lend at the Eurodollar Rate, the Agent shall promptly
notify the Company of such determination and no additional Eurodollar Loans
shall be made nor any Alternate Base Rate Loans converted to Eurodollar Loans
until such notice is withdrawn. If any Eurodollar Loan is outstanding on the
date of such notice and such notice has not been withdrawn on the last day of
the then current Interest Period applicable thereto, the Company may on the last
day of such Interest Period either convert such Eurodollar Loan to a Alternate
Base Rate Loan or prepay the outstanding principal balance thereof and accrued
interest thereon in full.
<PAGE>
44
8.11 Illegality. Notwithstanding any other provisions herein, if any
----------
law, regulation, treaty or directive or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Bank to
make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the
commitment hereunder to make Eurodollar Loans or convert Alternate Base Rate
Loans to Eurodollar Loans shall forthwith be cancelled and (b) Loans then
outstanding as Eurodollar Loans, if any, shall be converted to Alternate Base
Rate Loans on the last day of the Interest Period applicable thereto or within
such earlier period as required by law. The Company hereby agrees promptly to
pay to any Bank, upon its demand, any additional amounts necessary to compensate
such Bank for any unavoidable costs incurred by such Bank in making any
conversion in accordance with this subsection 8.11, including, but not limited
to, any interest or fees payable by such Bank to lenders of funds obtained by it
or in order to make or maintain its Eurodollar Loans hereunder (such Bank's
notice setting forth calculations of such costs to be conclusive absent manifest
error).
8.12 Requirements of Law. (a) In the event that any law,
-------------------
regulation, treaty or directive or any change therein or in the interpretation
or application thereof or compliance by any Bank with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority:
(i) does or shall subject such Bank to any tax of any kind whatsoever
with respect to this Agreement, any Note, any Acceptance, any Loans, any
Inventory Letter of Credit, any Acquisition Letter of Credit or any
Application, or change the basis of taxation of payments to such Bank of
principal, fees, interest, L/C Reimbursement Obligations, Acceptance
Reimbursement Obligations or any other amount payable hereunder (except for
taxes covered by subsection 8.16 and changes in the rate of any tax
presently imposed on such Bank based upon the overall net income of such
Bank);
(ii) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held
by, or deposits or other liabilities in or for the account of, advances or
loans by, letters of credit issued or participated in by, or other credit
extended by, or any other acquisition of funds by, any office of such Bank
which are not otherwise included in the determination of the Eurodollar
Rate hereunder;
(iii) does or shall impose on any Bank any other condition;
and the result of any of the foregoing is to increase the cost to any Bank of
making, renewing or maintaining advances or extensions of credit to the Company
in the form of Eurodollar Loans, Inventory Letters of Credit, Acquisition
Letters of Credit or Acceptances, or to reduce any amount receivable from the
Company thereunder then, in any such case, the Company shall promptly pay to
such Bank, upon its demand, any additional amounts necessary to compensate such
Bank for such additional cost or reduced amount receivable which such Bank deems
to be material as determined by such Bank with respect to this Agreement, any
Note, any Acceptance, the Loans, any Inventory Letter of Credit or any
Acquisition Letter of Credit. If any Bank becomes entitled to claim any
additional amounts pursuant to this subsection 8.12(a), it shall promptly notify
the Company of the event by reason of which it has become so entitled. A
certificate setting forth calculations as to any additional amounts
<PAGE>
45
payable pursuant to the foregoing sentence submitted by such Bank to the Company
shall be conclusive in the absence of manifest error.
(b) If any Bank shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Bank or any
corporation controlling such Bank with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof does or shall have the effect of
reducing the rate of return on such Bank's or such corporation's capital as a
consequence of its obligations hereunder or under any Inventory Letter of Credit
or any Acquisition Letter of Credit to a level below that which such Bank or
such corporation could have achieved but for such change or compliance (taking
into consideration such Bank's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, after submission by such Bank to the Company (with a copy to the
Agent) of a written request therefore, the Company shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such reduction. A
certificate setting forth calculations as to any additional amounts payable
pursuant to the foregoing sentence submitted by such Bank to the Company shall
be conclusive in the absence of manifest error. So long as no Default or Event
of Default has occurred and is continuing, if the Company is required to make a
payment pursuant to this subsection 8.12(b) as required by the immediately
preceding section, it may, if there are no L/C Obligations outstanding and
subject to the provisions of subsection 8.13 hereof, immediately terminate the
Working Capital Commitment and Acquisition Commitment of such Bank and prepay
such Bank's Loans and Acceptances, together with accrued interest thereon and
all other amounts payable with respect thereto.
(c) This covenant shall survive termination of this Agreement and
payment of the Notes and all other amounts payable hereunder.
8.13 Indemnity. The Company agrees to indemnify each Bank and to
---------
hold such Bank harmless from any loss or expense which such Bank may sustain or
incur as a consequence of (a) default by the Company in payment of the principal
of or interest on the Eurodollar Loans of such Bank, including, but not limited
to, any such loss or expense arising from additional interest or fees payable by
such Bank to lenders of funds obtained by it in order to maintain Eurodollar
Loans hereunder, (b) default by the Company in making a borrowing or conversion
after the Company has given a notice in accordance with subsection 2.3, 5.3, 7.3
or 8.8 hereof, and (c) default by the Company in making any prepayment after the
Company has given a notice in accordance with subsection 8.3 hereof or (d) a
voluntary or involuntary prepayment of a Eurodollar Loan on a day which is not
the last day of an Interest Period with respect thereto, including, but not
limited to, any such loss or expense arising from interest or fees payable by
such Bank to lenders of funds obtained by it in order to maintain Eurodollar
Loans hereunder. This covenant shall survive termination of this Agreement and
payment of the Notes.
8.14 Balance Deficiency Fees. (a) The Company agrees to pay to each
-----------------------
Bank a balance deficiency fee equal to the average daily balance deficiency
percentage (as hereinafter defined) of the amount, if any, by which the average
daily amount of free
<PAGE>
46
available balances in non-interest bearing accounts maintained by the Company
and its Subsidiaries with such Bank is less than 5% of the amount equal to the
sum of the average daily amount of Aggregate Outstanding Working Capital
Extensions of Credit during the period for which payment is to be made. Such
balance deficiency fee shall be net of activity costs and shall be payable
monthly in arrears to the Agent, for the account of the Banks, on the last day
of each month (commencing on August 31, 1994) and on the last day of the
calendar month following the calendar month in which payment or prepayment in
full is made under this Agreement, for the month or portion thereof next
preceding the month in which such payment is due. Each Bank agrees that by
12:00 Noon on the date when payment is due, it will notify the Company and the
Agent of the amount due to such Bank pursuant to this subsection 8.14.
(b) The term "balance deficiency percentage" as used herein shall
mean a fluctuating rate per annum equal to the Alternate Base Rate minus 1%.
(c) It is understood that nothing in this Agreement shall obligate
the Company or any of its Subsidiaries to maintain balances with any Bank.
8.15 Pro Rata Treatment and Payments. (a) Each borrowing by the
-------------------------------
Company from the Banks, each payment by the Company on account of any fee
hereunder and any reduction of the Working Capital Commitments, the Acquisition
Commitments or Term Loan Commitments of the Banks hereunder shall be made pro
---
rata according to the respective Commitment Percentages of the Banks. Each
- - ----
payment (including each prepayment) by the Company on account of principal of
and interest on the Working Capital Loans, the Acquisition R/C Loans or the
Acquisition Term Loans shall be made pro rata according to the respective
--- ----
outstanding principal amounts of the Working Capital Loans, Acquisition R/C
Loans or Acquisition Term Loans, as the case may be, held by each Bank. All
payments on Loans (including prepayments) to be made by the Company on account
of principal, interest and fees shall be made without set-off or counterclaim
and shall be made to the Agent, for the account of the Banks, at the Agent's
office set forth in subsection 15.2, in lawful money of the United States of
America and in immediately available funds. The Agent shall distribute such
payments to the Banks promptly upon receipt in like funds as received. If any
payment hereunder (other than payments on the Eurodollar Loans) becomes due and
payable on a day other than a Business Day, such payment shall be extended to
the next succeeding Business Day, and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension. If any payment on a Eurodollar Loan becomes due and payable on a day
other than a Working Day, the maturity thereof shall be extended to the next
succeeding Working Day unless the result of such extension would be to extend
such payment into another calendar month in which event such payment shall be
made on the immediately preceding Working Day.
(b) Unless the Agent shall have been notified in writing by any Bank
prior to a Borrowing Date that such Bank will not make the amount which would
constitute its Commitment Percentage of the borrowing on such Borrowing Date
available to the Agent, the Agent may assume that such Bank has made such amount
available to the Agent on such Borrowing Date, and the Agent may, in reliance
upon such assumption, make available to the Company a corresponding amount. If
such amount is made available to the Agent on a date
<PAGE>
47
after such Borrowing Date, such Bank shall pay to the Agent on demand an amount
equal to the product of (i) the daily average Federal Funds Effective Rate,
times (ii) the amount of such Bank's Commitment Percentage of such borrowing,
times (iii) a fraction the numerator of which is the number of days that elapse
from and including such Borrowing Date to the date on which such Bank's
Commitment Percentage of such borrowing shall have become immediately available
to the Agent and the denominator of which is 360. A certificate of the Agent
submitted to any Bank with respect to any amounts owing under this subsection
8.15(b) shall be conclusive, absent manifest error. If such Bank's Commitment
Percentage of such borrowing is not in fact made available to the Agent by such
Bank within three Business Days of such Borrowing Date, the Agent shall be
entitled to recover such amount with interest thereon (without duplication) at
the rate per annum applicable to Acquisition Loans which are Alternate Base Rate
Loans hereunder, on demand, from the Company.
8.16 Taxes. (a) All payments made by the Company under this
-----
Agreement and the Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding, in the case of the Agent and each Bank, net
income taxes and franchise taxes (imposed in lieu of net income taxes) imposed
on the Agent or such Bank, as the case may be, as a result of a present or
former connection between the jurisdiction of the government or taxing authority
imposing such tax and the Agent or such Bank (excluding a connection arising
solely from the Agent or such Bank having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or the
Notes) or any political subdivision or taxing authority thereof or therein (all
such non-excluded taxes, levies, imposts, duties, charges, fees, deductions and
withholdings being hereinafter called "Taxes"). If any Taxes are required to be
-----
withheld from any amounts payable to the Agent or any Bank hereunder or under
the Notes, the amounts so payable to the Agent or such Bank shall be increased
to the extent necessary to yield to the Agent or such Bank (after payment of all
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement and the Notes. Whenever any Taxes are
payable by the Company, as promptly as possible thereafter the Company shall
send to the Agent for its own account or for the account of such Bank, as the
case may be, a certified copy of an original official receipt received by the
Company showing payment thereof. If the Company fails to pay any Taxes when due
to the appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Company shall indemnify the
Agent and the Banks for any incremental taxes, interest or penalties that may
become payable by the Agent or any Bank as a result of any such failure. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of the Notes and all other amounts payable hereunder.
(b) Each Bank that is not incorporated under the laws of the United
States of America or a state thereof agrees that it will deliver to the Bank and
the Agent (i) two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 or successor applicable form, as the case may be, and
(ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form.
Each such Bank also agrees to deliver to the Company and the Agent two further
copies of the said Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms or other manner of certification, as the case may be, on or
before the date
<PAGE>
48
that any such form expires or becomes obsolete or after the occurrence of any
event requiring a change in the most recent form previously delivered by it to
the Company, and such extensions or renewals thereof as may reasonably be
requested by the Bank or the Agent, unless in any such case an event (including,
without limitation, any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which renders
all such forms inapplicable or which would prevent such Bank from duly
completing and delivering any such form with respect to it and such Bank so
advises the Company and the Agent. Such Bank shall certify (i) in the case of a
Form 1001 or 4224, that it is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes and
(ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from
United States backup withholding tax.
SECTION 9. CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT AND TO
INITIAL EXTENSIONS OF CREDIT
9.1 Conditions to Effectiveness of Initial Extensions of Credit
-----------------------------------------------------------
hereunder. The effectiveness of this Agreement and the obligation of each Bank
- - ---------
to make its initial extension of credit hereunder on the Closing Date shall be
subject to the fulfillment of the following conditions precedent:
(a) Legal Opinion. There shall have been delivered to the Agent,
-------------
with a copy for each Bank, on the Closing Date an opinion of Phillips,
Nizer, Krim & Ballon, counsel to the Company and its Subsidiaries, in form
and substance satisfactory to the Banks.
(b) Corporate Proceedings. The Company shall have furnished to the
---------------------
Agent, with a copy for each Bank (in form and substance satisfactory to the
Banks) a copy, certified by an appropriate officer on the Closing Date, of
the resolutions of the Board of Directors of (i) the Company, authorizing
all borrowings or other extensions of credit herein provided for and (ii)
the Company and each of its Subsidiaries, authorizing the execution,
delivery and performance of each Loan Document to which the Company or such
Subsidiary, as the case may be, is a party.
(c) Corporate Documents. The Agent shall have received, with a
-------------------
counterpart for each Bank, true and complete copies of the certificate of
incorporation and by-laws of the Company and each of its Subsidiaries in
each case, certified as of the Closing Date as complete and correct copies
thereof by the Secretary or an Assistant Secretary of each such Person.
(d) Incumbency Certificates. The Agent shall have received, with a
-----------------------
counterpart for each Bank, an incumbency certificate with respect to the
relevant officers of each of the Company and its Subsidiaries in form and
substance satisfactory to the Agent.
(e) Receipt of Certain Documents. There shall have been received by
----------------------------
the Agent on the Closing Date, with a copy for each Bank, the following
documents,
<PAGE>
49
which shall have been duly authorized, executed and delivered by the appropriate
party or parties thereto and which shall be satisfactory in form and substance
to the Banks:
(i) counterparts of this Agreement, executed and delivered by a
duly authorized officer of the Company and each Bank;
(ii) a Working Capital Note, payable to each Bank, substantially
in the form of Exhibit A hereto, executed and delivered by a duly
authorized officer of the Company;
(iii) an Acquisition Note, payable to each Bank, substantially
in the form of Exhibit B hereto, executed and delivered by a duly
authorized officer of the Company;
(iv) each Security Agreement, executed and delivered by a duly
authorized officer of the grantor party thereto, together with such
Uniform Commercial Code financing statements and other documents,
instruments and agreements necessary (or otherwise reasonably required
by the Agent) in order to perfect (or continue the perfection of) the
Agent's security interest in the Collateral (as defined therein)
granted thereunder;
(v) the Subsidiaries Guarantee, executed and delivered by a duly
authorized officer of each Subsidiary of the Company;
(vi) the Cash Collateral Agreement, executed and delivered by a
duly authorized officer of the Company;
(vii) the Line Letter, executed by the parties thereto; and
(viii) any and all other documents which are necessary or
desirable, in the opinion of the Agent or the Banks, to effectuate any
of the foregoing.
(f) Fees. The Agent shall have received, for the ratable account of
----
the Banks, a non-refundable facility fee in the aggregate amount equal to
$250,000.
(g) Borrowing Base Certificate. The Agent shall have received, with
--------------------------
a copy for each Bank, a Borrowing Base Certificate, dated the Closing Date,
executed by the chief financial officer or a senior vice president of the
Company.
(h) Lien Searches. The Agent and the Banks shall have received a
-------------
copy, in form and substance satisfactory to them, of any lien and judgment
searches which the Agent may require.
(i) Legal Matters. All other instruments and legal and corporate
-------------
proceedings in connection with the transactions contemplated by this
Agreement and the other Loan Documents shall be satisfactory in form and
substance to the Banks, and each
<PAGE>
50
Bank shall have received copies of all documents which it may have
reasonably requested in connection therewith.
9.2 Conditions of All Extensions of Credit. The obligation of each
--------------------------------------
Bank to make any Loans (including the Acquisition Term Loans), or create any
Acceptances to be made by it hereunder or to issue or participate in any Letters
of Credit pursuant to the terms hereof (including, without limitation, the
initial extensions of credit hereunder) shall be subject to the following
conditions precedent:
(a) Representations and Warranties; No Default. The representations
------------------------------------------
and warranties contained in Section 10 hereof shall be true and correct on
the date of the making of such Loan, creation of such Acceptance or the
issuance or participation in such Letter of Credit, and no Default or Event
of Default shall have occurred and be continuing on such date. Each
borrowing, request for the creation of an Acceptance or request for the
issuance of an Inventory Letter of Credit or an Acquisition Letter of
Credit by the Company hereunder shall constitute a representation by the
Company as of the date of each such borrowing, creation or issuance that
the conditions contained in the foregoing sentence have been satisfied.
(b) Legal Matters. All other instruments and legal and corporate
-------------
proceedings in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to the Agent and its
counsel, and counsel to the Agent shall have received copies of all
documents which it may have reasonably requested in connection therewith.
9.3 Additional Conditions of Acquisition R/C Loans. The obligations
----------------------------------------------
of each Bank to make any Acquisition R/C Loan or to issue or participate in any
Acquisition Letters of Credit pursuant to the terms hereof shall (in addition to
the conditions set forth in Sections 9.1 and 9.2 above) be subject to the
following conditions precedent:
(a) Covenant Compliance. The Company shall be in compliance with the
-------------------
covenant set forth in Section 12.10 after giving effect to the making of
any Acquisition R/C Loan or issuance of any Acquisition Letter of Credit.
(b) Notice of Acquisition. The Company shall have given the Agent
---------------------
notice, at least five Business Days prior to the Borrowing Date (in the
case of Acquisition R/C Loans) or the issuance date (in the case of
Acquisition Letters of Credit), describing in reasonable detail the use of
the proceeds of such Acquisition R/C Loan or Acquisition Letter of Credit,
as the case may be. Such notice shall include, without limitation, the
name of the company being acquired (or previously acquired), the
consideration being paid (or previously paid) for such acquisition and a
description of the assets of such company being acquired (or previously
acquired); provided, however, that the provisions of this subsection 9.3(b)
-------- -------
shall not apply with respect to Acquisition R/C Loans and Acquisition
Letters of Credit which are being used to refinance Acquisition R/C Loans
which previously have been prepaid.
Each Borrowing of Acquisition R/C Loans and each issuance of an Acquisition
Letter of Credit shall be deemed to be a representation and warranty by the
Company that the proceeds thereof are being used by the Company either (x) to
finance the purchase price paid by the Company and its
Subsidiaries for the acquisition of companies engaged in fuel oil or propane
distribution business or (y) to refinance the purchase price paid by the Company
<PAGE>
51
and its Subsidiaries for any acquisition which was consummated within the
immediately preceding twelve calendar months.
SECTION 10. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to enter into this Agreement and to make
the Loans and other extensions of credit herein provided for, the Company hereby
represents and warrants to each Bank that:
10.1 Corporate Existence. The Company and each of its Subsidiaries
-------------------
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power to own its assets and
to transact the business in which it is presently engaged, and is duly qualified
as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to so qualify
will not materially and adversely affect the conduct of business taken as a
whole as it is currently conducted by the Company and its Subsidiaries.
10.2 Corporate Power and Authorization; Enforceable Obligations. The
----------------------------------------------------------
Company and each of its Subsidiaries has the corporate power, authority and
legal right to make, deliver and perform this Agreement, the Notes, the Security
Documents, the Applications and the other Loan Documents to which it is a party
and, in the case of the Company, to borrow hereunder. The Company has taken all
necessary corporate action to authorize the borrowings and/or issuance of the
Letters of Credit on the terms and conditions of this Agreement, the Notes, the
Security Documents, the Applications and the other Loan Documents to which it is
a party. Each Subsidiary has taken all necessary corporate action to authorize
the execution, delivery and performance by it of the Security Documents and the
other Loan Documents to which it is a party. No consent of any other party,
including stockholders of the Company or any Subsidiary, is required and no
consent, license, approval or authorization of, or registration or declaration
with, any Governmental Authority is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement, the Notes,
the Security Documents, the Applications or any of the other Loan Documents.
This Agreement and each other Loan Document to be entered into on the Closing
Date by the Company and/or any of its Subsidiaries has been duly executed and
delivered on behalf of the Company and such Subsidiary. This Agreement and each
such other Loan Document constitutes a legal, valid and binding obligation of
the Company and/or such Subsidiary, as the case may be, enforceable against the
Company or such Subsidiary in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
10.3 No Legal Bar to Loans. The execution, delivery and performance
---------------------
of this Agreement, the Notes, the Security Documents, the Applications and the
other Loan Documents will not violate any provision of any existing law or
regulation or of any order or decree of any court or governmental
instrumentality, or of the Certificate of Incorporation or
<PAGE>
52
By-Laws of the Company or any Subsidiary, or of any mortgage, indenture,
contract or other agreement to which the Company or any Subsidiary is a party or
by which the Company or any Subsidiary and any of its property or assets may be
bound, and will not result in the creation or imposition of any lien, charge or
encumbrance on, or security interest in, any of its properties pursuant to the
provisions of such mortgage, indenture, contract or other agreement.
10.4 No Material Litigation. No litigation or administrative
----------------------
proceedings of or before any court, tribunal or governmental body is presently
pending, or, to the knowledge of the Company, threatened against the Company or
any Subsidiary or any of its or their properties or with respect to this
Agreement, any Note, any Security Document, any Application or any other Loan
Document, which, if adversely determined, would, in the opinion of the Company,
have a Material Adverse Effect.
10.5 No Default. Neither the Company nor any of its Subsidiaries is
----------
in default in any material manner in the payment or performance of any of its
obligations or in the performance of any contract, agreement or other instrument
to which it is a party or by which it or any of its assets may be bound or if in
default, such default will not materially affect the conduct of the business of
the Company and its Subsidiaries taken as a whole, and no Default or Event of
Default hereunder has occurred and is continuing.
10.6 Ownership of Properties; Liens. The Company and each Subsidiary
------------------------------
have good and marketable title to all of their properties and assets, real and
personal, and none of such properties and assets are subject to any mortgage,
lien, pledge, charge, encumbrance, security interest or title retention or other
security agreement or arrangement of any nature whatsoever except as permitted
in subsection 12.2 hereof.
10.7 Taxes. The Company and each Subsidiary have filed or caused to
-----
be filed all tax returns which to the knowledge of the Company are required to
be filed, and have paid all taxes shown to be due and payable on said returns or
on any assessments made against them (other than those being contested in good
faith by appropriate proceedings for which adequate reserves have been provided
on the books of the Company or such Subsidiary, as the case may be), and no
material tax liens have been filed and, to the best of the knowledge of the
Company, no material claims are being asserted with respect to any taxes.
10.8 Financial Condition. The consolidated balance sheet of the
-------------------
Company and its consolidated Subsidiaries as at December 31, 1993 and the
related consolidated statements of income and of cash flows for the fiscal year
ended on such date, reported on by KPMG Peat Marwick, copies of which have
heretofore been furnished to each Bank, are complete and correct and present
<PAGE>
53
fairly the consolidated financial condition of the Company and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the fiscal year then ended. The unaudited
consolidated balance sheet of the Company and its consolidated Subsidiaries as
at March 31, 1994 and the related unaudited consolidated statements of income
and of cash flows for the three-month period ended on such date, certified by
the chief financial officer of the Company, copies of which have heretofore been
furnished to each Bank, are complete and correct and present fairly the
consolidated financial condition of the Company and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the three-month period then ended (subject
to normal year-end audit adjustments). All such financial statements, including
the related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved by
such accountants or chief financial officer, as the case may be, and as
disclosed therein). Neither the Company nor any of its consolidated
Subsidiaries had, at the date of the most recent balance sheet referred to
above, any material guarantee obligation, contingent liability or liability for
taxes, or any long-term lease or unusual forward or long-term commitment,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction, which is not reflected in the foregoing statements or in
the notes thereto. During the period from March 31, 1994 to and including the
date hereof there has been no sale, transfer or other disposition by the Company
or any of its consolidated Subsidiaries of any material part of its business or
property and (except as set forth on Schedule IV) no purchase or other
acquisition of any business or property (including any capital stock of any
other Person) material in relation to the consolidated financial condition of
the Company and its consolidated Subsidiaries at March 31, 1994. Since March
31, 1994, there has been no material adverse change in the condition, financial
or otherwise, of the Company and such Subsidiaries.
10.9 Filing of Statements and Reports. The Company and each
--------------------------------
Subsidiary have filed copies of all statements and reports which, to the
knowledge of the Company, are required to be filed with any governmental
authority, agency, commission, board or bureau.
10.10 ERISA. Neither a Reportable Event nor an Accumulated Funding
-----
Deficiency has occurred during the five-year period prior to the date on which
this representation is made or deemed made with respect to any Plan, and each
Plan has complied in all material respects with the applicable provisions of
ERISA and the Code. No termination of a Single Employer Plan has occurred, and
no lien in favor of the PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits in an amount in excess of $7,000,000. Neither the Company nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan, and neither the Company nor any Commonly Controlled Entity
would become subject to any liability under ERISA if the Company or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent. The present value (determined using actuarial and
other assumptions which are reasonable in respect of the benefits provided and
the employees participating) of the liability of the Company and each Commonly
Controlled Entity for post retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all
such Plans allocable to such benefits by an amount in excess of $1,000,000.
<PAGE>
54
10.11 Subsidiaries. The corporations listed on Schedule II attached
------------
hereto are wholly-owned Subsidiaries of the Company, and the Company owns no
common stock of any other corporation except for Subsidiaries which have no
material assets.
10.12 Investment Company Act; Other Regulations. The Company is not
-----------------------------------------
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended. The
Company is not subject to regulation under any Federal or State statute or
regulation which limits its ability to incur Indebtedness.
10.13 Federal Regulations. No part of the proceeds of any Loans will
-------------------
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of any regulations of
such Board of Governors. If requested by any Bank or the Agent, the Company
will furnish to the Agent and each Bank a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said Regulation
U.
10.14 Environmental Matters.
---------------------
(a) To the best knowledge of the Company, the facilities and
properties owned, leased or operated by the Company or any of its Subsidiaries
(the "Properties") do not contain, and have not previously contained, any
----------
Materials of Environmental Concern in amounts or concentrations which (i)
constitute or constituted a violation of, or (ii) could reasonably be expected
to give rise to liability under, any Environmental Law in effect at the time
this representation is made or deemed to be made except in either case insofar
as such violation or liability, or any aggregation thereof, is not reasonably
likely to have a Material Adverse Effect.
(b) To the best knowledge of the Company, the Properties and all
operations at the Properties are in compliance, and have in the last five years
been in compliance, in all material respects with all applicable Environmental
Laws, and there is no contamination at, under or about the Properties or
violation of any Environmental Law with respect to the Properties or the
business operated by the Company or any of its Subsidiaries (the "Business")
--------
which could materially interfere with the continued operation of the Properties
or which could have a Material Adverse Effect.
(c) Neither the Company nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with Environmental Laws
with regard to any of the Properties or the Business, nor does the Company have
knowledge that any such notice will be received or is being threatened except
insofar as such notice or threatened notice, or any aggregation thereof, does
not involve a matter or matters that is or are reasonably likely to have a
Material Adverse Effect.
(d) To the best knowledge of the Company, Materials of Environmental
Concern have not been transported or disposed of from the Properties in
violation of, or in a
<PAGE>
55
manner or to a location which could reasonably be expected to give rise to
liability under, any Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, stored or disposed of at, on or under any of
the Properties in violation of, or in a manner that could reasonably be expected
to give rise to liability under, any applicable Environmental Law except insofar
as any such violation or liability referred to in this paragraph, or any
aggregation thereof, is not reasonably likely to have a Material Adverse Effect.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the Company, threatened, under any
Environmental Law to which the Company or any Subsidiary is or will be named as
a party with respect to the Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business except insofar
as such proceeding, action, decree, order or other requirement, or any
aggregation thereof, is not reasonably likely to have a Material Adverse Effect.
(f) To the best knowledge of the Company, there has been no release
of Materials of Environmental Concern at or from the Properties, or arising from
or related to the operations of the Company or any Subsidiary in connection with
the Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could reasonably give rise to liability under
Environmental Laws except insofar as any such violation or liability referred to
in this paragraph, or any aggregation thereof, is not reasonably likely to have
a Material Adverse Effect.
SECTION 11. AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees that so long as any Note
remains outstanding and unpaid or so long as any Commitment remains unterminated
or any amount remains outstanding or unpaid hereunder or so long as any Letter
of Credit or L/C Obligations remain outstanding:
11.1 Financial Statements. The Company shall furnish to each Bank:
--------------------
(a) as soon as available, but in any event not later than 105 days
after the close of each fiscal year of the Company, a copy of the annual
audit report for such year for the Company and its Subsidiaries, including
therein a consolidated balance sheet of the Company and its Subsidiaries as
at the end of such fiscal year, and a related consolidated statement of
income and retained earnings of the Company and its Subsidiaries for such
fiscal year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal period, and if such
statements are prepared on a last-in/first-out basis, the Company will
submit in the footnotes to such statements income and balance sheet
statements prepared on a first-in/first-out valuation, all in reasonable
detail, prepared in accordance with GAAP applied on a basis consistently
maintained throughout the period involved and with prior periods,
<PAGE>
56
such financial statements being certified by independent certified public
accountants of recognized standing selected by the Company and acceptable
to the Required Banks;
(b) as soon as available, but in any event not later than 60 days
after the end of each of the first three quarterly periods of each fiscal
year of the Company, an unaudited consolidated balance sheet of the Company
and its Subsidiaries, as at the end of such fiscal quarter, and an
unaudited consolidated statement of income and retained earnings of the
Company and its Subsidiaries for the period from the beginning of such
fiscal year to the end of such fiscal quarter, setting forth in comparative
form the figures for the corresponding fiscal period of the previous year,
all in reasonable detail, prepared in accordance with GAAP applied on a
basis consistently maintained throughout the period involved and with prior
periods and certified by the chief financial officer of the Company
(subject to normal year-end audit adjustment);
(c) During such time as the Company and its Subsidiaries own more
than 50% of the issued and outstanding voting stock (except directors'
qualifying shares, if required by law) of Star Gas Corporation, but Star
Gas Corporation is not considered a Subsidiary for purposes of this
Agreement, then as soon as available, but in any event not later than 105
days after the close of each fiscal year of the Company, a copy of the
annual audit report for such year for the Company and its Subsidiaries
(including Star Gas Corporation as if it were a Subsidiary for purposes of
this Agreement), including therein a consolidated balance sheet of the
Company and its Subsidiaries (including Star Gas Corporation as if it were
a Subsidiary for purposes of this Agreement) as at the end of such fiscal
year, and a related consolidated statement of income and retained earnings
of the Company and its Subsidiaries (including Star Gas Corporation as if
it were a Subsidiary for purposes of this Agreement) for such fiscal year,
setting forth in each case in comparative form the corresponding figures
for the preceding fiscal period, and if such statements are prepared on a
last-in/first-out basis, the Company will submit in the footnotes to such
statements income and balance sheet statements prepared on a
first-in/first-out valuation, all in reasonable detail, prepared in
accordance with GAAP applied on a basis consistently maintained throughout
the period involved and with prior periods, such financial statements being
certified by independent certified public accountants of recognized
standing selected by the Company and acceptable to the Required Banks;
(d) During such time as the Company and its Subsidiaries own more
than 50% of the issued and outstanding voting stock (except directors'
qualifying shares, if required by law) of Star Gas Corporation, but Star
Gas Corporation is not considered a Subsidiary for purposes of this
Agreement, then as soon as available, but in any event not later than 60
days after the end of each of the first three quarterly periods of each
fiscal year of the Company, an unaudited consolidated balance sheet of the
Company and its Subsidiaries (including Star Gas Corporation as if it were
a Subsidiary for purposes of this Agreement), as at the end of such fiscal
quarter, and an unaudited consolidated statement of income and retained
earnings of the Company and its Subsidiaries (including Star Gas
Corporation as if it were a Subsidiary for purposes of this Agreement) for
the period from the beginning of such fiscal year to the end of
<PAGE>
57
such fiscal quarter, setting forth in comparative form the figures for the
corresponding fiscal period of the previous year, all in reasonable detail,
prepared in accordance with GAAP applied on a basis consistently maintained
throughout the period involved and with prior periods and certified by the
chief financial officer of the Company (subject to normal year-end audit
adjustment);
(e) concurrently with the delivery of the financial statements
referred to in clause (a) above, a certificate of such independent
certified public accountants stating that in making the examination
necessary for certifying such financial statements no knowledge was
obtained of any Events of Default or Defaults hereunder, except as
specifically indicated;
(f) concurrently with the delivery of the financial statements
referred to in clauses (a) and (b) above, a certificate of the chief
financial officer of the Company (i) stating that, to the best of his
knowledge, the Company during the relevant period has kept, observed,
performed and fulfilled each and every covenant and condition contained in
this Agreement, the Notes and the other Loan Documents and that he has
obtained no knowledge of any Events of Default or Defaults hereunder except
as specifically indicated and (ii) setting forth, in reasonable detail, the
calculations supporting such statements in respect of subsections 12.7,
12.8, 12.9, 12.10 and 12.12;
(g) promptly after the same are sent, copies of all financial
statements and reports which the Company sends to its stockholders, and
promptly after the same are filed, copies of all financial statements and
reports which the Company may make to, or file with, any governmental
authority, agency, commission, board or bureau as may be reasonably
requested by the Agent or any Bank;
(h) promptly, such additional financial and other information as the
Agent or any Bank may from time to time reasonably request, including
unaudited consolidating balance sheets and statements of income and
retained earnings of the Company and its Subsidiaries on an annual or
quarterly basis; and
(i) within twenty days following the end of each calendar month, a
Borrowing Base Certificate showing the Borrowing Base as of the last day of
such calendar month and such other information necessary for the Agent to
determine the Borrowing Base Adjustment in effect at such day, in each case
certified as complete and correct by the chief financial officer or a
senior vice president, as the case may be, of the Company together with
supporting documents reasonably acceptable to the Agent.
11.2 Payment of Obligations. The Company shall, and shall cause its
----------------------
Subsidiaries to, pay and discharge, at or before maturity, all of their
respective obligations and liabilities, including without limitation tax
liabilities, except where the same may be contested in good faith, and will
maintain, and cause its Subsidiaries to maintain, in accordance with GAAP,
appropriate reserves for the accrual of any of the same.
11.3 Maintenance of Properties; Insurance. The Company shall, and
------------------------------------
shall cause its Subsidiaries to, keep all properties useful and necessary in the
business of the
<PAGE>
58
Company and its Subsidiaries in normal working order and condition; maintain,
and cause its Subsidiaries to maintain, with financially sound and reputable
insurance companies, insurance on all their properties in such amounts as the
Company deems proper in accordance with sound business practices against such
risks as are usually insured against in the same general area and by companies
engaged in the same or a similar business; and furnish to the Agent and the
Banks, upon written request, full information as to the insurance carried.
11.4 Notices. The Company shall promptly give notice in writing to
-------
the Agent and each Bank of:
(a) the occurrence of any Default under this Agreement or of any
default under any material instrument or other agreement of the Company or
any Subsidiary;
(b) any litigation, proceeding, investigation or dispute which may
exist at any time between the Company or any Subsidiary and any
governmental regulatory body which might substantially interfere with the
normal business operations of the Company or any Subsidiary;
(c) all litigation and proceedings against the Company or any
Subsidiary in which the amount involved is $100,000 or more and not covered
by insurance or in which injunctive or similar relief is sought; and
(d) each acquisition made by the Company or any of its Subsidiaries
which is of the type for which Acquisition Loans would be available,
including, without limitation, the material terms of all preferred and
common stock of the Company or any of its Subsidiaries to be issued in
connection with such acquisition, the other consideration with respect
thereto, the assets being acquired, the identity of the seller thereof and
such other information as any Bank may reasonably request with respect to
such investment.
11.5 Conduct of Business and Maintenance of Existence. The Company
------------------------------------------------
shall, and shall cause its Subsidiaries to, continue to engage in business of
the same general type as now conducted by the Company and its Subsidiaries, and
preserve, renew and keep in full force and effect their corporate existence and
take all reasonable action to maintain their rights, privileges and franchises
necessary or desirable in the normal conduct of business, provided that nothing
--------
herein contained shall prevent the Company or any Subsidiary from (a)
discontinuing a part of its business, if such discontinuance is in the opinion
of the Board of Directors of the Company in the interest of the Company and not
disadvantageous to the Banks, or (b) engaging in such activities as permitted
pursuant to subsections 11.9 and 12.4 hereof.
11.6 Inspection of Property, Books and Records. The Company shall,
-----------------------------------------
and shall cause its Subsidiaries to, permit any representatives of the Agent or
of any Bank to visit and inspect any of their respective properties and examine
and make abstracts from any of the books and records of the Company and any
Subsidiary at any reasonable time and as often as may reasonably be desired.
<PAGE>
59
11.7 ERISA Reports. The Company shall furnish to the Agent and each
-------------
Bank (a) as soon as possible, and in any event within 30 days after any
executive officer of the Company knows or has reason to know of the following
events: (i) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan or any withdrawal from, or the termination, Reorganization
or Insolvency of, any Multiemployer Plan, or (ii) the institution of proceedings
or the taking of any other action by the PBGC, the Company or any Commonly
Controlled Entity, or any Multiemployer Plan with respect to the withdrawal
from, or the termination, Reorganization or Insolvency of, any Plan, a statement
of the chief financial officer of the Company setting forth details thereof and
the action which the Company or the Commonly Controlled Entity proposes to take
with respect thereto, together with a copy of the notice of any Reportable Event
given to the PBGC, (b) at the request of the Agent or any Bank, promptly after
the filing thereof with the United States Secretary of Labor or the PBGC, copies
of each annual and other report with respect to each Plan, and (c) promptly
after receipt thereof, a copy of any notice the Company or any Commonly
Controlled Entity may receive from the PBGC relating to the intention of the
PBGC to terminate any Plan or to appoint a trustee to administer any Plan.
11.8 Execution of Guaranties and Security Agreements by Additional
-------------------------------------------------------------
Subsidiaries. At any time when either (x) the Agent requests that the Company
- - ------------
do so or (x) such Subsidiary has assets with a fair market value in excess of
$100,000, the Company shall cause each of its Subsidiaries which is not then
party to a Guarantee and a Security Agreement to execute and deliver to the
Agent:
(a) a Security Agreement, substantially in the form of Exhibit F
hereto, accompanied by such documents, instruments, agreements and legal
opinions as the Agent reasonably may request in order to perfect (or
evidence the perfection of) the security interests granted by such
Subsidiary thereunder; and
(b) a Guarantee, substantially in the form of Exhibit E hereto.
Each Security Agreement and Guarantee which is delivered pursuant to this
subsection 11.8 shall be accompanied by such resolutions, incumbency
certificates and legal opinions as are reasonably requested by the Agent and as
otherwise may be necessary to cause such Security Agreement and Guarantee to
constitute a legal, valid and binding obligation of such Subsidiary, as the case
may be, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
11.9 Maintenance of Collateral. The Company shall, and shall cause
-------------------------
its Subsidiaries to, keep their Customer Lists and all Inventory and Accounts
(as each such term is defined in the relevant Security Agreement) free and clear
of any and all liens, encumbrances, pledges or other security interests, except
(a) the security interests made in favor of the Agent, for the ratable benefit
of the Banks, and (b) so long as no Default or Event of Default has occurred and
is continuing, the Company and its Subsidiaries may sell, assign, transfer,
lease or otherwise dispose of all or any part of their Customer Lists, provided
--------
<PAGE>
60
the Net Cash Proceeds from any such sale, assignment, transfer, lease or other
disposition are applied in accordance with the terms of subsection 8.4(b).
11.10 Update of Customer Lists. The Company shall, and shall cause
------------------------
its Subsidiaries to, provide to the Agent within ten days following the last day
of each fiscal year of the Company and on such other dates as the Agent
reasonably may request (which request shall be made by the Agent not more than
four times in any calendar year) one or more computer tapes (or such other
medium as may be acceptable to the Agent) containing each Customer List owned by
the Company or any of its Subsidiaries as of the last day of the relevant fiscal
year of the Company (or such other date, as the case may be) and the Company and
the Agent agree that each Bank shall be permitted to review such tapes (or other
medium) during the reasonable business hours of the Agent.
11.11 Environmental Laws. The Company shall, and shall cause its
------------------
Subsidiaries to:
(a) comply with, and use commercially reasonable efforts to ensure
material compliance by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply in all material respects with and
maintain, and ensure that all tenants and subtenants obtain and comply in all
material respects with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws except to the extent that failure to do so could not be reasonably expected
to have a Material Adverse Effect;
(b) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and comply with reasonable promptness in all material
respects with all lawful orders of all Governmental Authorities regarding
Environmental Laws except to the extent that the same are being contested in
good faith by appropriate proceedings and the pendency of such proceedings could
not be reasonably expected to have a Material Adverse Effect; and
(c) defend, indemnify and hold harmless the Agent and the Banks, and
their respective employees, agents, officers and directors, from and against any
and all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the Company, any of its Subsidiaries or the Properties, or any
orders, or lawful requirements of Governmental Authorities related thereto,
including, without limitation, attorney's and consultant's fees, investigation
and laboratory fees, response costs, court costs and litigation expenses, except
to the extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor. The
agreements in this paragraph shall survive repayment of the Notes and all other
amounts payable hereunder.
<PAGE>
61
SECTION 12. NEGATIVE COVENANTS
The Company hereby covenants and agrees that so long as any Note
remains outstanding and unpaid or so long as any Commitment remains unterminated
or any amount remains outstanding or unpaid hereunder or so long as any Letter
of Credit or L/C Obligations remain outstanding, the Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly:
12.1 Limitation on Indebtedness. Create, incur, assume or suffer to
--------------------------
exist, any Indebtedness, except (a) Indebtedness in respect of the Loans, the
Notes, the Acceptances, the Letters of Credit and the other obligations of the
Company hereunder; (b) accounts payable (other than for borrowed money) incurred
in the ordinary course of business as presently conducted, provided that the
same shall not be overdue or, if overdue, are being contested in good faith and
by appropriate proceedings; (c) Indebtedness between Subsidiaries and between
any Subsidiaries and the Company; (d) other Indebtedness owing by the Company or
any Subsidiary on the date of this Agreement and which was reflected in the
balance sheet of the Company delivered to the Banks most recently prior to the
date hereof and referred to in subsection 10.8 hereof; (e) Subordinated Debt;
(f) Indebtedness of hereafter-acquired companies in the fuel oil or propane
distribution business not exceeding in the aggregate a principal amount of
$1,000,000 outstanding at any one time; (g) purchase money Indebtedness created
as a result of the acquisition of companies in the fuel oil or propane
distribution business, provided that any such Indebtedness shall be included in
--------
the calculations contained in subsection 12.10; (h) Indebtedness for funding of
capital expenditures not to exceed $3,000,000 outstanding at any one time; and
(i) Indebtedness in respect of Letters of Credit issued by any Bank and
permitted pursuant to subsection 12.3(f) hereof.
12.2 Limitations on Liens. Create, incur, assume or suffer to exist,
--------------------
any mortgage, pledge, lien, charge, security interest or encumbrance of any kind
upon any of its property or assets, income or profits, whether now owned or
hereafter acquired, except (a) the liens and security interests existing as of
the date of this Agreement referred to in the financial statements referred to
in subsection 10.8 hereof, provided, however, that such liens and security
-------- -------
interests are not spread to cover other or additional indebtedness or property
of the Company or any of its Subsidiaries; (b) liens for taxes not yet due or
which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the
Company or such Subsidiary, as the case may be, in accordance with GAAP; (c)
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like
liens arising in the ordinary course of business for sums which are not overdue
for a period of more than 30 days or which are being contested in good faith and
by appropriate proceedings; (d) pledges or deposits in connection with worker's
compensation, unemployment insurance and other social security legislation;
(e) deposits to secure the performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (f) easements, rights-of-way, restrictions and
other similar encumbrances incurred in the ordinary course of business which, in
the aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of the Company or its Subsidiaries;
(g) security interests and liens covering real
<PAGE>
62
or personal property in existence at the time of acquisition thereof by the
Company or any Subsidiary, and purchase money mortgages and purchase money
security interests (including the lien or retained security title of a
conditional vendor) covering real or personal property hereafter acquired by the
Company and its Subsidiaries, provided that no such lien is spread to cover any
--------
additional property (except for additional property in the nature of
improvements to property already subject to any such lien or additions to
accounts receivable or inventory, as the case may be, already subject to such
lien); (h) liens, mortgages and security interests in favor of the Agent, for
the ratable benefit of the Banks, under the Security Documents or otherwise in
connection herewith (including, without limitation, those arising pursuant to
the Cash Collateral Agreement); (i) liens arising out of judgments of awards not
exceeding the aggregate principal amount of $500,000 outstanding at any time;
(j) purchase money liens and security interests arising out of the funding of
capital expenditures to the extent not otherwise prohibited hereunder; and
(k) liens created to secure borrowings permitted under subsections 12.1(f) and
12.1(h) hereof and limited to the amount borrowed under each such subsection.
Notwithstanding the foregoing, in no event shall the Company or any of its
Subsidiaries create, incur, assume or suffer to exist, any mortgage, pledge,
lien, charge, security interest or encumbrance of any kind upon the capital
stock of Star Gas Corporation, other than pursuant to agreements which provide
such a mortgage, pledge, lien, charge, security interest or encumbrance on the
date hereof (as such agreements may be amended, supplemented, restated,
refinanced or otherwise modified from time to time).
12.3 Limitation on Contingent Obligations. Assume, guarantee,
------------------------------------
indorse or otherwise in any way be or become responsible or liable for the
obligations of any person, firm, corporation or other entity (all such
transactions being herein called "contingent obligations"), whether by agreement
----------------------
to purchase or repurchase obligations, or by agreement to supply funds for the
purpose of paying, or enabling such entity to pay, any obligations (whether
through purchasing stock, making a loan, advance or capital contribution or by
means of agreeing to maintain or cause such entity to maintain, a minimum
working capital or net worth of any such entity, or otherwise), except
(a) contingent obligations by indorsement of instruments for deposit or
collection in the ordinary course of business; (b) contingent obligations of the
Company in respect of indebtedness of Subsidiaries or of any Subsidiary in
respect of indebtedness of the Company, provided that, in either such case, the
--------
indebtedness in respect of which such contingent obligations are given is
permitted by subsection 12.1 hereof; (c) contingent obligations by the Company
or any Subsidiary of any purchase money obligations for the purchase of (i) any
oil delivery vehicle entered into by any operator of an oil delivery vehicle
which vehicle has been or will be used on behalf of the Company or such
Subsidiary or (ii) any fuel distribution company acquired by the Company or any
Subsidiary, provided that the amount of any such purchase money obligations
--------
guaranteed by the Company or its Subsidiaries shall be included in any
calculation of Consolidated Funded Debt pursuant to subsection 12.10;
(d) contingent obligations assumed by the Company or any of its Subsidiaries as
a part of any acquisition of stock or assets of companies in the fuel oil
distribution business permitted in accordance with the terms hereof; (e)
contingent obligations in respect of any leases of real property by the Company
or any Subsidiary; and (f) contingent obligations relating to letters of credit
(including letters of credit issued under the Line Letter, but not including the
Inventory Letters of Credit and the Acquisition Letters of Credit) in an
aggregate amount not to exceed $15,000,000 at any one time outstanding.
12.4 Prohibition of Fundamental Changes. Enter into any transaction
----------------------------------
of merger or consolidation or liquidate or dissolve itself (or suffer any
liquidation or dissolution)
<PAGE>
63
or convey, sell, lease, transfer or otherwise dispose of, in one transaction or
a series of related transactions, all or a substantial part of its property,
business, or assets, including its accounts receivable or stock or securities
convertible into stock of any Subsidiary or group of Subsidiaries which consist
of all or a substantial part of the Company's property, business or assets, or
make any material change in the present method of conducting business, except
that: (a) any Subsidiary may be voluntarily liquidated or dissolved, or may be
merged into, or consolidated with, the Company (provided that the Company shall
--------
be the continuing or surviving corporation) or with any one or more
Subsidiaries; (b) any Subsidiary may sell, lease, transfer or otherwise dispose
of any of its assets to the Company or another Subsidiary; (c) the Company or
any Subsidiary may sell their respective Customer Lists provided such sale does
not violate the provisions of subsection 12.9; and (d) any Subsidiary may sell
any or all of its assets (other than its Inventory and Accounts, as each such
term is defined in the relevant Security Agreement), or discontinue to do
business, if such sale or discontinuance is in the opinion of the Board of
Directors of the Company in the interest of the Company and not disadvantageous
to the Banks and such sale does not violate the provisions of subsection 11.9.
12.5 Limitation on Investments, Loans and Advances. Make or suffer
---------------------------------------------
to exist any advances or loans to, or investments (by way of transfers of
property, contributions to capital, acquisitions of stock, or securities or
evidences of indebtedness, acquisitions of businesses or acquisitions of assets
other than in the ordinary course of business, or otherwise) in, any person,
firm, corporation or other business entity, except (a) investments in
certificates of deposit issued by any domestic commercial bank with a capital
and surplus of at least $100,000,000, provided, however, that such certificates
-------- -------
of deposit shall have a maturity of one year or less from the date of purchase;
(b) investments in direct obligations of the United States of America or any
agency thereof, or marketable obligations directly and fully guaranteed by the
United States of America or any money market funds, or commercial paper,
provided, however, that any such obligations or commercial paper shall have a
- - -------- -------
maturity of one year or less from the date of purchase and any such commercial
paper either is issued by any of the Banks or is rated "A-1" by Standard &
Poor's Corporation (or has a similar rating by any similar organization which
rates commercial paper); (c) stock or obligations issued in settlement of claims
against any other person by reason of an event of bankruptcy or composition or
readjustment of debt or reorganization of any debtor of the Company or any
Subsidiary; (d) loans to Subsidiaries; (e) during such time as no Default or
Event of Default has occurred and is continuing, non-hostile acquisitions of
stock or assets of companies in the oil or propane distribution business; (f)
loans or advances to officers, directors and employees; (g) loans in the
ordinary course of business to oil delivery vehicle operators for the purpose of
purchasing oil or propane delivery vehicles; (h) advances, loans and investments
existing on the date hereof which are specified in the financial statements
referred to in subsection 10.8 hereof; and (i) advances of oil to other
companies in the oil business by way of "through-puts" in accordance with
industry practice.
12.6 Prohibition of Certain Prepayments and Dividends. (a) Make any
------------------------------------------------
payment of principal of any debt, with a maturity of more than one year, for
borrowed money (except with respect to Indebtedness evidenced by the Notes) or
for the deferred purchase price of property or services, except at the stated
maturity of such debt or as required by mandatory prepayment provisions relating
thereto as in effect on the date hereof; provided that:
--------
<PAGE>
64
(i) any such debt (other than Subordinated Debt) may be prepaid at
any time if no Default or Event of Default has occurred and is continuing
or would result therefrom; and
(ii) any Subordinated Debt may be prepaid at any time when no Default
or Event of Default has occurred and is continuing or would result
therefrom (x) following the termination of the Acquisition Commitments or
(y) prior to such termination, with the proceeds of new Subordinated Debt
or equity sales.
(b) Pay any dividend (other than dividends payable solely in common
stock of the Borrower) on, or make any payment on account of, or set apart
assets for a sinking or other analogous fund for, the purchase, redemption,
defeasance, retirement or other acquisition of, any shares of any class of
Capital Stock of the Borrower or any Subsidiary or any warrants or options to
purchase any such Stock or make any other distribution in respect thereof,
either directly or indirectly (such payments, "Restricted Payments"); provided
------------------- --------
that the provisions of this subsection 12.6(b) shall not apply to (a) Restricted
Payments made by any Subsidiary of the Borrower to any wholly-owned Subsidiary
of the Borrower or to the Borrower and (b) other Restricted Payments made when
no Default or Event of Default has occurred and is continuing or would result
therefrom.
12.7 Limitation on Leases. Permit the ratio of Adjusted Net Income
--------------------
for any fiscal year of the Company to Consolidated Net Lease Obligations for
such fiscal year to be less than 4 to 1.
12.8 Consolidated Cash Flow. Permit Consolidated Cash Flow for any
----------------------
period of four consecutive fiscal quarters of the Company to be less than the
Cash Flow Covenant Amount then applicable.
12.9 Consolidated Capital Funds. Permit the amount equal to (a)
--------------------------
Consolidated Operating Profit for any fiscal year of the Company times 6 minus
(b) Consolidated Funded Debt (other than Subordinated Debt) as at the end of
such fiscal year to be less than $125,000,000.
12.10 Limitation on Funded Debt. Incur, create, assume, guarantee or
-------------------------
otherwise become liable ("Incur") for any additional Funded Debt (including,
-----
without limitation, any Acquisition R/C Loans) unless such additional Funded
Debt is permitted pursuant to subsection 12.1 and, after giving effect thereto,
the Consolidated EBITDA Coverage Ratio as of the date of the most recent
financial statements delivered pursuant to subsection 11.1(a) or (b) on or prior
to the date on which such Funded Debt is to be Incurred exceeds the ratio set
forth opposite such period during which such date occurs:
Period Ratio
------ -----
Prior to 12/31/95 2.0 to 1.0
1/1/96 - 12/31/96 2.1 to 1.0
1/1/97 - 12/31/97 2.2 to 1.0
1/1/98 - 12/31/98 2.3 to 1.0
1/1/99 - 12/31/99 2.4 to 1.0
1/1/2000 and thereafter 2.5 to 1.0
Notwithstanding the foregoing provisions of this subsection 12.10, the Company
may incur, create, assume, guarantee or otherwise become liable for additional
Funded Debt to the extent that such additional Funded Debt is Incurred to
refund, extend or renew up to an equal
<PAGE>
65
amount of outstanding Funded Debt; provided that if any Funded Debt is Incurred
--------
for the purpose of refunding, extending or renewing any Indebtedness which is:
(i) subordinate to the obligations hereunder, then such new Funded
Debt must also be subordinated to the obligations hereunder to at least the
same extent as was the Indebtedness which is being refunded, extended or
renewed, as the case may be, thereby; or
(ii) of equal rank with the obligations hereunder, then such Funded
Debt may not be senior to the obligations hereunder.
12.11 Covenant Not to Compete. Upon the sale of any Customer List by
-----------------------
the Company, any of its Subsidiaries, the Agent or any Bank to any Person
following the occurrence of any Event of Default, sell or distribute any product
of the type sold or distributed by the Company or any of its Subsidiaries to any
Person listed on such Customer List who purchased such products from the Company
or any of its Subsidiaries at any time during the one year period prior to the
date of sale of such Customer List, or otherwise utilize the information
contained in such Customer List as of the date of such sale, directly or
indirectly, for the foregoing purposes; provided, however, that such covenant
-------- -------
shall terminate upon the date which is five years following the date of sale of
such Customer List. Notwithstanding anything to the contrary contained in this
Agreement, the terms and provisions of this subsection 12.11 and the protection
afforded by this subsection 12.11, shall be for the benefit only of the Agent,
the Banks and any Person who purchases Customer Lists from any of the foregoing
or from the Company or any of its Subsidiaries following the occurrence and
during the continuance of any Event of Default.
12.12 Adjusted Consolidated Cash Flow. Permit at any time
-------------------------------
Consolidated Cash Uses for the period from March 31, 1992 to such time (the
"Relevant Period") to exceed an amount equal to the sum of (a) the Net Cash
---------------
Proceeds resulting from (i) the issuance of capital stock by the Company or any
of its Subsidiaries during the Relevant Period to Persons other than the Company
or any of its Subsidiaries and (ii) the issuance or creation of any Funded Debt
by the Company or any of its Subsidiaries during the Relevant Period to Persons
other than the Company or any of its Subsidiaries and (b) the positive or
negative amount, as the case may be, of Consolidated Cash Flow for each twelve
month period ended March 31 subsequent to March 31, 1992 which ends during the
Relevant Period plus $37,439,000. Solely for purposes of this subsection,
"Funded Debt" shall mean Consolidated Funded Debt of the Company and its
Subsidiaries (other than any guarantees by the Company and its Subsidiaries).
12.13 Limitation on Negative Pledge Clauses. Enter into with any
-------------------------------------
Person any agreement which prohibits or limits the ability of the Borrower or
any of its Subsidiaries to create, incur, assume or suffer to exist any Lien
upon any of the capital stock of Star Gas Corporation from time to time owned,
beneficially or of record, by it; provided that the provisions of this
--------
subsection 12.13 shall not apply to this Agreement or any other agreements of
the Company or its Subsidiaries which contain a provision to such effect on the
date hereof (as such other agreements may be amended, supplemented, restated,
refinanced or otherwise modified from time to time).
<PAGE>
66
SECTION 13. EVENTS OF DEFAULT
Upon the occurrence of any of the following:
(a) failure by the Company to pay (A) the principal of or any
installment of the principal of any Note when due, including, without
limitation, pursuant to the terms of subsection 8.4 and 8.5, or (B) any
Acceptance Reimbursement Obligation or any L/C Obligation when due, or (C)
any interest on any Note or any fee (including, without limitation, any
commitment fee) within five days after any such interest or fee becomes
due;
(b) if any representation or warranty made by the Company or any of
its Subsidiaries in this Agreement or any other Loan Document or in any
certificate, financial or other statement furnished at any time under or in
connection with this Agreement or such Loan Document shall prove to have
been untrue or misleading in any material respect when made or deemed made;
(c) default by the Company or any other Subsidiary of the Company, as
the case may be, in the observance or performance of any of the covenants
or agreements contained in the Loan Documents (other than this Agreement
and the Guarantees) or in subsections 12.4 and 12.6 through and including
12.13 of this Agreement;
(d) default by the Company in the observance or performance of any
covenant or agreement contained in subsections 11.1(g), 12.1, 12.2, 12.3
and 12.5, and the continuance of same for 5 days after notice of such
default is given the Company by the Agent or any Bank;
(e) default by the Company in the observance or performance of any
other covenant or agreement contained in this Agreement, and the
continuance of the same for 15 days after notice of such default is given
the Company, by the Agent or any Bank;
(f) if the Company, any Subsidiary or any guarantor of any Note, any
Acceptance Reimbursement Obligation, any Inventory Reimbursement Obligation
or any Acquisition L/C Reimbursement Obligation (if other than a
Subsidiary) shall (i) default in the payment of principal or interest on
any obligation for borrowed money (other than any Note), or for the
deferred purchase price of property, beyond the period of grace, if any,
provided with respect thereto or (ii) default in the performance or
observance of any other term, condition or agreement contained in any such
obligation or in any agreement relating thereto if the effect thereof is to
cause, or permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to cause, such obligation to become due
prior to its stated maturity;
(g) (i) the Company, any of its Subsidiaries or any guarantor of any
Note, any Acceptance Reimbursement Obligation, any Inventory Reimbursement
Obligation or Acquisition L/C Reimbursement Obligation (if other than a
Subsidiary) shall
<PAGE>
67
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or
any substantial part of its property, or the Company, any of its
Subsidiaries or any such guarantor shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against the
Company, any of its Subsidiaries or any such guarantor any case, proceeding
or other action of a nature referred to in clause (i) above or seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its property, which case,
proceeding or other action (x) results in the entry of an order for relief
or (y) remains undismissed, undischarged or unbonded for a period of 60
days; or (iii) the Company, any of its Subsidiaries or any such guarantor
shall take any action indicating its consent to, approval of, or
acquiescence in, or in furtherance of, any of the acts set forth in clauses
(i) or (ii) above; or (iv) the Company, any of its Subsidiaries or any such
guarantor shall generally not, or shall be unable to, pay its debts as they
become due or shall admit in writing its inability to pay its debts;
(h) (i) any Person shall engage in any Prohibited Transaction
involving any Plan, (ii) any Accumulated Funding Deficiency, whether or not
waived, shall exist with respect to any Plan, (iii) a Reportable Event
shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement
of proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Banks, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Company or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Banks is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist, with
respect to a Plan or any employee benefit plan which is covered by ERISA;
and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any, could
subject the Company or any of its Subsidiaries to any tax, penalty or other
liabilities in the aggregate material in relation to the business,
operations, property or financial or other condition of the Company and its
Subsidiaries taken as a whole;
(i) default by any guarantor (including, without limitation, the
Company or any of its Subsidiaries) in the observance of any covenant or
agreement contained in its Guarantee or any other guarantee of any of the
obligations of the Company hereunder, any such Guarantee or other guarantee
shall cease to be in full force and effect or shall be declared to be null
and void, or the validity or enforceability thereof shall be contested by
any such guarantor, or such party shall deny that it has any further
liability to the Banks with respect thereto;
<PAGE>
68
(j) failure by any guarantor to perform any agreements contained in
any agreement executed by a guarantor for the benefit of the Agent and/or
the Banks;
(k) (i) any of the Security Documents (other than the Guarantees)
shall cease, for any reason, to be in full force and effect, or the Company
shall so assert or (ii) the security interests created by the Security
Documents shall cease, for any reason other than a release by the Agent, to
be enforceable and of the same effect and priority purported to be created
thereby; or
(l) final judgment for the payment of money in excess of $500,000
shall be rendered against the Company, any Subsidiary or any guarantor of
any Note, any Acceptance Reimbursement Obligation, any Inventory
Reimbursement Obligation or Acquisition L/C Reimbursement Obligation (if
other than a Subsidiary), and the same shall remain undischarged, unbonded
or not insured, for a period of 30 days during which execution of such
judgment shall not be effectively stayed;
then (i) if such event is an event specified in paragraph (g) above, then the
Working Capital Commitments, the Acquisition Commitments and the Acquisition
Term Loan Commitments shall immediately terminate and the Loans hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement and
the Notes (including, without limitation, all L/C Obligations whether or not the
beneficiaries thereof shall have presented the documents required thereunder and
all amounts of Acceptance Reimbursement Obligations whether or not matured)
shall be immediately due and payable without notice or demand and (ii) if such
event is any other Event of Default, either or both of the following actions may
be taken: (A) with the consent of the Required Banks, the Agent may, or upon
the direction of the Required Banks, the Agent shall, by notice to the Company
declare the Working Capital Commitments, the Acquisition Commitments and the
Acquisition Term Loan Commitments to be terminated forthwith, whereupon the
Working Capital Commitments, the Acquisition Commitments and the Acquisition
Term Loan Commitments shall immediately terminate; and (B) with the consent of
the Required Banks, the Agent may, or upon the direction of the Required Banks,
the Agent shall, by notice of default to the Company, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all L/C Obligations whether or not the
beneficiaries thereof shall have presented the documents required thereunder and
all amounts of Acceptance Reimbursement Obligations whether or not matured) and
the Notes to be due and payable forthwith, whereupon the same shall immediately
become due and payable without presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived, anything contained herein or
in any Note or in any Acceptance or any Application or other letter of credit
application to the contrary notwithstanding; and (iii) with the consent of the
Required Banks, the Agent may, and upon the direction of the Required Banks, the
Agent shall, exercise any and all remedies and other rights provided pursuant to
this Agreement and/or the other Loan Documents. With respect to all Acceptances
and Letters of Credit (including, without limitation, Letters of Credit issued
pursuant to the terms of the Line Letters) that shall not have been paid or with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to this paragraph, the Company shall at such time deposit
in the Cash Collateral Account (or such other cash collateral account as the
Agent shall specify) an amount equal to the aggregate then undrawn and unexpired
amount of
<PAGE>
69
such Letters of Credit plus the aggregate outstanding amount of Acceptance
Reimbursement Obligations. Such monies shall be applied to payments of drafts
drawn under Letters of Credit and to payment of Acceptances at maturity, and the
unused portion thereof after such application, if any, shall be applied to repay
other obligations of the Company hereunder or under the Notes, and after all
Letters of Credit have expired, all Drafts and Acceptances have matured and been
repaid and all other obligations of the Company hereunder are paid in full, the
balance, if any, shall be returned to the Company. Except as expressly provided
above in this Section 13, presentment, demand, protest and all other notices of
any kind are hereby expressly waived.
SECTION 14. THE AGENT
14.1 Appointment. Each Bank hereby irrevocably designates and
-----------
appoints Chemical as the Agent of such Bank under this Agreement, and each such
Bank irrevocably authorizes Chemical, as the Agent for such Bank, to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Agreement and such other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement or
such other Loan Documents, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or the other Loan Documents or otherwise exist against the Agent.
14.2 Delegation of Duties. The Agent may execute any of its duties
--------------------
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
14.3 Exculpatory Provisions. Neither the Agent nor any of its
----------------------
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or the other Loan Documents
(except for its or such Person's own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Banks for any recitals, statements,
representations or warranties made by the Company or any Subsidiary or any
officer thereof contained in this Agreement or the other Loan Documents or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this Agreement or the
other Loan Documents or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or the other Loan Documents or
for any failure of the Company or any of its Subsidiaries to perform its
obligations hereunder or thereunder. The Agent shall not be under any
obligation to any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of the Company.
<PAGE>
70
14.4 Reliance by Agent. The Agent shall be entitled to rely, and
-----------------
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Company), independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of the Required Banks as it deems appropriate
or it shall first be indemnified to its satisfaction by the Banks against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement, the
Notes and the other Loan Documents in accordance with a request of the Required
Banks, and such request and any action taken or failure to act pursuant thereto
shall be binding upon all the Banks and all future holders of the Notes.
14.5 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Bank or the Company
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give notice thereof to the Banks and to
the Company; provided, however, that the failure of the Agent to give such
-------- -------
notice to the Company shall not affect the rights of the Agent and the Banks
hereunder or under the Security Documents. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Required Banks; provided that unless and until the Agent shall have
--------
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the Banks.
14.6 Non-Reliance on Agent and Other Banks. Each Bank expressly
-------------------------------------
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Company, shall be deemed to constitute any
representation or warranty by the Agent to any Bank. Each Bank represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Company and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Bank also represents that it will, independently and
without reliance upon the Agent or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries. Except for notices, reports and other
<PAGE>
71
documents expressly required to be furnished to the Banks by the Agent hereunder
or by the other Loan Documents, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
14.7 Indemnification. The Banks agree to indemnify the Agent in its
---------------
capacity as such (to the extent not reimbursed by the Company and without
limiting the obligation of the Company to do so), ratably according to the
respective amounts of their Working Capital Commitments at the time that the
event giving rise to the indemnity obligation occurred, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including without limitation at any time following the payment of the
Notes) be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of this Agreement, the other Loan Documents, or any
documents contemplated by or referred to herein or therein (including, without
limitation, the Line Letter) or the transactions contemplated hereby or thereby
or any action taken or omitted by the Agent under or in connection with any of
the foregoing; provided that no Bank shall be liable for the payment of any
--------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
Agent's gross negligence or willful misconduct. The agreements in this
subsection shall survive the payment of the Notes and all other amounts payable
hereunder.
14.8 Agent in Its Individual Capacity. The Agent and its affiliates
--------------------------------
may make loans to, accept deposits from and generally engage in any kind of
business with the Company and its Subsidiaries as though the Agent were not the
Agent hereunder. With respect to its Loans made or renewed by it and any Note
issued to it and with respect to any Letter of Credit issued or participated in
by it, the Agent shall have the same rights, powers, obligations and limitations
under this Agreement and the other Loan Documents as any Bank and is subject to
the same as though it were not the Agent, and the terms "Bank" and "Banks" shall
include the Agent in its individual capacity.
14.9 Successor Agent. The Agent may resign as Agent upon 10 days'
---------------
notice to the Banks. If the Agent shall resign as Agent under this Agreement,
then the Required Banks shall appoint from among the Banks a successor agent for
the Banks, subject to prior approval by the Company (which approval shall not be
unreasonably withheld), whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term "Agent" shall mean such
successor agent effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent or any of the parties to this Agreement
or any holders of the Notes. After any retiring Agent's resignation hereunder
as Agent, the provisions of this subsection 14.9 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under this
Agreement.
<PAGE>
72
SECTION 15. MISCELLANEOUS
15.1 Amendments and Waivers. Neither this Agreement, any Note or any
----------------------
other Loan Document, nor any terms hereof of thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection 15.1. With the written consent of the Required Banks, the Agent and
the Company may, from time to time, enter into written amendments, supplements
or modifications hereto for the purpose of adding any provisions to this
Agreement, the Notes, or the other Loan Documents to which the Company is a
party or changing in any manner the rights of the Banks or of the Company
hereunder or thereunder or waiving, on such terms and conditions as the Agent
may specify in such instrument, any of the requirements of this Agreement or the
Notes or the other Loan Documents to which the Company is a party or any Default
or Event of Default and its consequences; provided, however, that no such waiver
-------- -------
and no such amendment, supplement or modification shall:
(i) without the written consent of each Bank, extend any scheduled
installment or the final scheduled maturity of any of the Loans or the
Notes, or reduce the rate or extend the time of payment of interest
thereon, or reduce the principal amount thereof, or change the amount or
payment terms (including, without limitation, fees and commissions) of any
Working Capital Commitment, Acquisition Commitment or Acquisition Term Loan
Commitment, or consent to the assignment or transfer by the Company of any
of its rights and obligations under this Agreement, or reduce the
respective percentages specified in the definitions of "Required Banks" in
subsection 1.1, or amend the definition of Borrowing Base in any respect
which would increase the amount available to the Company hereunder, or
amend, modify or waive any provision of this subsection 15.1;
(ii) without the written consent of all Banks, release any of the
collateral provided for in any Security Document, except as set forth
therein or increase the amount of Indebtedness permitted pursuant to
subsection 12.1(g);
(iii) without the written consent of the Issuing Bank, amend,
supplement or otherwise modify any provisions of or directly applicable to
any Letter of Credit;
(iv) without the written consent of the then Agent, amend, modify or
waive any provision of Section 14.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Banks and shall be binding upon the Company, the Banks,
the Agent and all future holders of the Notes. In the case of any waiver, the
Company, the Banks and the Agent shall be restored to their former position and
rights hereunder and under the outstanding Notes, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
15.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing (including by
telegraph or telex), and, unless
<PAGE>
73
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or 5 days after being deposited in the mail,
postage prepaid, or, in the case of telegraphic notice, when delivered to the
telegraph company, or, in the case of telex notice, when sent, answerback
received, addressed as follows in the case of the Company and the Agent, and as
set forth in Schedule I in the case of the other parties hereto, or to such
other address as may be hereafter notified by the respective parties hereto and
any future holders of the Notes:
The Company: Petroleum Heat and Power Co., Inc.
Clearwater House
2187 Atlantic Street
Stamford, Connecticut 06902
Attention: President
Telecopier: (203) 328-7422
The Agent: Chemical Bank
7600 Jericho Turnpike
Woodbury, New York 11797
Attention: John T. Mast, Vice President
Telecopier: (516) 364-3307
provided that any notice, request or demand to or upon the Agent or the Banks
- - --------
pursuant to subsections 2.3, 5.3, 7.3, 8.2, 8.3 and 8.8 shall not be effective
until received.
15.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder or under any other Loan Document, shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided or provided in the
Loan Documents are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
15.4 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement, the Letters of
Credit and the Notes.
15.5 Payment of Expenses and Taxes. The Company agrees (a) to pay or
-----------------------------
reimburse the Agent for all its out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement, the Notes and the
other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including, without
<PAGE>
74
limitation, the fees and disbursements of counsel to the Agent, (b) to pay or
reimburse each Bank and the Agent for all their costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the Notes and any such other documents, including, without
limitation, fees and disbursements of counsel to the Agent and to the several
Banks, (c) to pay, indemnify, and hold each Bank, the Agent and the officers,
directors, employees, agents, attorneys-in-fact or affiliates of each such Bank
and the Agent ( each an "Indemnified Party") harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent under or in
respect of, this Agreement, the Notes and any such other documents, and (d) to
pay, indemnify, and hold each Indemnified Party harmless from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the Notes and any such other documents (all
the foregoing, collectively, the "indemnified liabilities"), provided, that the
----------------------- --------
Company shall have no obligation hereunder to the Indemnified Parties with
respect to indemnified liabilities arising from (i) the gross negligence or
willful misconduct of any such Indemnified Party, (ii) legal proceedings
commenced against the Indemnified Party by any security holder or creditor
thereof arising out of and based upon rights afforded any such security holder
or creditor solely in its capacity as such, or (iii) legal proceedings commenced
against the Indemnified Party by any other Bank or by any transferee of any part
of such Bank's commitment hereunder. The agreements in this subsection shall
survive repayment of the Notes and all other amounts payable hereunder.
15.6 Successors and Assigns; Participations; Purchasing Banks. (a)
--------------------------------------------------------
This Agreement shall be binding upon and inure to the benefit of the Company,
the Banks, the Agent, all future holders of the Notes and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of each Bank.
(b) Any Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
------------
owing to such Bank, any Note held by such Bank, any Working Capital Commitment,
Acquisition Commitment or Acquisition Term Loan Commitment of such Bank or any
other interest of such Bank hereunder and under the other Loan Documents. In
the event of any such sale by a Bank of a participating interest to a
Participant, such Bank's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Bank shall remain solely
responsible for the performance thereof, such Bank shall remain the holder of
any such Note for all purposes under this Agreement and the other Loan
Documents, and the Company and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement and the other Loan Documents. The Company agrees that if
amounts outstanding under this Agreement and the Notes are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this Agreement
or any Note, provided that, in purchasing such participating interest, such
--------
<PAGE>
75
Participant shall be deemed to have agreed to share with the Banks the proceeds
thereof as provided in subsection 15.7(a) as fully as if it were a Bank
hereunder. The Company also agrees that each Participant shall be entitled to
the benefits of subsections 8.12, 8.13 and 8.16 with respect to its
participation in the Working Capital Commitments, Acquisition Commitments,
Acquisition Term Loan Commitments and the Loans outstanding from time to time;
provided, that no Participant shall be entitled to receive any greater amount
- - --------
pursuant to such subsections than the transferor Bank would have been entitled
to receive in respect of the amount of the participation transferred by such
transferor Bank to such Participant had no such transfer occurred.
(c) Any Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to any Bank or
any affiliate thereof and, with the consent of the Company and the Agent (which
in each case shall not be unreasonably withheld), to one or more additional
banks or financial institutions ("Purchasing Banks") all or any part of its
----------------
rights and obligations under this Agreement and the Notes pursuant to an
Assignment and Acceptance, substantially in the form of Exhibit J, executed by
such Purchasing Bank, such transferor Bank (and, in the case of a Purchasing
Bank that is not then a Bank or an affiliate thereof, by the Company and the
Agent) and delivered to the Agent for its acceptance and recording in the
Register. Upon such execution, delivery, acceptance and recording, from and
after the Effective Date determined pursuant to such Assignment and Acceptance,
(x) the Purchasing Bank thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and obligations of a
Bank hereunder with a Working Capital Commitment, Acquisition Commitment and
Acquisition Term Loan Commitment, and (y) the transferor Bank thereunder shall,
to the extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of a transferor Bank's rights
and obligations under this Agreement, such transferor Bank shall cease to be a
party hereto). Such Assignment and Acceptance shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Bank and the resulting adjustment of Commitment
Percentages arising from the purchase by such Purchasing Bank of all or a
portion of the rights and obligations of such transferor Bank under this
Agreement and the Notes. On or prior to the Effective Date determined pursuant
to such Assignment and Acceptance, the Company, at its own expense, shall
execute and deliver to the Agent in exchange for the Working Capital Note and/or
Acquisition Note, as the case may be, of the transferor Bank a new Working
Capital Note and/or Acquisition Note to the order of such Purchasing Bank in an
amount equal to the Working Capital Commitment, Acquisition Commitment or
Acquisition Term Loan Commitment, as the case may be, assumed by it pursuant to
such Assignment and Acceptance and, if the transferor Bank has retained a
Working Capital Commitment, Acquisition Commitment or Acquisition Term Loan
Commitment hereunder, a new Working Capital Note or Acquisition Note (if the
Commitment Termination Date has occurred prior to the date of the Assignment and
Acceptance) to the order of the transferor Bank in an amount equal to the
Working Capital Commitment, Acquisition Commitment or Acquisition Term Loan
Commitment, as the case may be, retained by it hereunder. Such new Notes shall
be dated the Closing Date or the Commitment Termination Date, as the case may
be, and shall otherwise be in the form of the Note replaced thereby. The
Note(s) surrendered by the transferor Bank shall be returned by the Agent to the
Company marked "cancelled".
<PAGE>
76
Notwithstanding anything to the contrary contained herein or in any other Loan
Document, no Bank shall assign any portion of any of its Commitments hereunder
(or the extensions of credit outstanding thereunder) pursuant to an Assignment
and Acceptance without simultaneously assigning to the same Purchasing Bank a
ratable share of each other Commitment hereunder (or the extensions of credit
outstanding thereunder) and such Purchasing Bank becoming a party to the Line
Letter for its ratable share thereof.
(d) The Agent shall maintain at its address referred to in subsection
15.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and addresses of the Banks and
--------
the Working Capital Commitment, Acquisition Commitment and Acquisition Term Loan
Commitment of, and principal amount of the Loans owing to, each Bank from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Company, the Agent and the Banks may treat each Person
whose name is recorded in the Register as the owner of the Loan recorded therein
for all purposes of this Agreement. The Register shall be available for
inspection by the Company or any Bank at any reasonable time and from time to
time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by a
transferor Bank and Purchasing Bank (and, in the case of a Purchasing Bank that
is not then a Bank or an affiliate thereof, by the Company and the Agent)
together with payment to the Agent of a registration and processing fee of
$2000, the Agent shall (i) promptly accept such Assignment and Acceptance and
(ii) on the Effective Date determined pursuant thereto record the information
contained therein in the Register and give notice of such acceptance and
recordation to the Banks and the Company.
(f) The Company authorizes each Bank to disclose to any Participant
or Purchasing Bank (each, a "Transferee") and any prospective Transferee any and
----------
all financial information in such Bank's possession concerning the Company and
its affiliates which has been delivered to such Bank by or on behalf of the
Company pursuant to this Agreement or which has been delivered to such Bank by
or on behalf of the Company in connection with such Bank's credit evaluation of
the Company and its affiliates prior to becoming a party to this Agreement.
(g) If, pursuant to this subsection, any interest in this Agreement
or any Note is transferred to any Transferee which is organized under the laws
of any jurisdiction other than the United States or any state thereof, the
transferor Bank shall cause such Transferee, concurrently with the effectiveness
of such transfer, (i) to represent to the transferor Bank (for the benefit of
the transferor Bank, the Agent and the Company) that under applicable law and
treaties no taxes will be required to be withheld by the Agent, the Company or
the transferor Bank with respect to any payments to be made to such Transferee
in respect of the Loans, (ii) to furnish to the transferor Bank (and, in the
case of any Purchasing Bank registered in the
<PAGE>
77
Register, the Agent and the Company) either U.S. Internal Revenue Service Form
4224 or U.S. Internal Revenue Service Form 1001 (wherein such Transferee claims
entitlement to complete exemption from U.S. federal withholding tax on all
interest payments hereunder) and (iii) to agree (for the benefit of the
transferor Bank, the Agent and the Company) to provide the transferor Bank (and,
in the case of any Purchasing Bank registered in the Register, the Agent and the
Company) a new Form 4224 or Form 1001 upon the expiration or obsolescence of any
previously delivered form and comparable statements in accordance with
applicable U.S. laws and regulations and amendments duly executed and completed
by such Transferee, and to comply from time to time with all applicable U.S.
laws and regulations with regard to such withholding tax exemption.
(h) Nothing herein shall prohibit any Bank from pledging or assigning
any Note to any Federal Reserve Bank in accordance with applicable law.
15.7 Adjustments; Set-off. (a) If any Bank (a "benefitted Bank")
-------------------- ---------------
shall at any time receive any payment of all or part of its Loans, Inventory
Reimbursement Obligations, Acquisition L/C Reimbursement Obligations or
Acceptance Reimbursement Obligations or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in clause (g) of
Section 13, or otherwise) in a greater proportion than any such payment to and
collateral received by any other Bank, if any, in respect of such other Bank's
Loans, Inventory Reimbursement Obligations, Acquisition L/C Reimbursement
Obligations or Acceptance Reimbursement Obligations or interest thereon, such
benefitted Bank shall purchase for cash from the other Banks such portion of
each such other Bank's Loans, Inventory Reimbursement Obligations, Acquisition
L/C Reimbursement Obligations or Acceptance Reimbursement Obligations, or shall
provide such other Banks with the benefits of any such collateral, or the
proceeds thereof, as shall be necessary to cause such benefitted Bank to share
the excess payment or benefits of such collateral or proceeds ratably with each
of the Banks; provided, however, that if all or any portion of such excess
-------- -------
payment or benefits is thereafter recovered from such benefitted Bank, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest. The Company agrees that each
Bank so purchasing a portion of another Bank's Loans, Inventory Reimbursement
Obligations, Acquisition L/C Reimbursement Obligations or Acceptance
Reimbursement Obligations may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Bank were the direct holder of such portion.
(b) In addition to any rights and remedies of the Banks provided by
law, each Bank shall have the right, without prior notice to the Company, any
such notice being expressly waived by the Company to the extent permitted by
applicable law, upon any amount becoming due and payable by the Company
hereunder or under the Notes (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Bank to or for the credit or the account of the Company.
Each Bank agrees promptly to notify the Company and the Agent after any such
set-off and application made by such Bank, provided that the failure to give
--------
such notice shall not affect the validity of such set-off and application.
15.8 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts and all of
said counterparts
<PAGE>
78
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be lodged with
the Company and the Agent.
15.9 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
15.10 Submission To Jurisdiction; Waivers. (a) The Company hereby
-----------------------------------
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Loan Document to which
it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Company at its address set forth in subsection 15.2 or at such other
address of which the Agent shall have been notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
(b) The Company, the Agent and each Bank hereby irrevocably and
unconditionally waive trial by jury and the Company hereby waives its right of
set-off and its right to interpose counterclaims in any legal action or
proceeding relating to this Agreement and for any counterclaim therein.
<PAGE>
79
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
PETROLEUM HEAT AND POWER CO., INC.
By:/s/ George Leibowitz
--------------------------------
Title: Senior Vice President
CHEMICAL BANK, as Agent and as a Bank
By:/s/ John T. Mast
--------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By:/s/ H. Louis Bailey
--------------------------------
Title: Managing Director
NATIONSBANK OF NORTH CAROLINA, N.A.
By:/s/ Moses James Sawney
--------------------------------
Title: Vice President
NATIONAL WESTMINSTER BANK USA
By:/s/ Susan M. O'Connor
--------------------------------
Title: Senior Vice President
UNION TRUST COMPANY
By:/s/ Matthew O. Riley
--------------------------------
Title: Assistant Vice President
<PAGE>
Schedule I
Commitments; Commitment Percentages;
Addresses for Notices
-----------------------------------
Working Capital Acquisition Commitment
Address for Notices Commitment Commitment Percentage
- - ------------------- ---------- ---------- ----------
Chemical Bank $26,250,000 $17,500,000 35%
7600 Jericho Turnpike
Woodbury, NY 11797
Attn: John Mast
The First National Bank $15,000,000 $10,000,000 20%
of Boston
100 Federal Street, #010802
Boston, MA 02110
Attn: H. Louis Bailey
NationsBank of North $15,000,000 $10,000,000 20%
Carolina, N.A.
767 Fifth Avenue
New York, NY 10152
Attn: Chris Lawler
National Westminster $11,250,000 $7,500,000 15%
Bank USA
244 Westchester Avenue
White Plains, NY 11797
Attn: Susan O'Connor
Union Trust Company $7,500,000 $5,000,000 10%
41 Jerome Avenue
Bloomfield, CT 06002
Attn: Matt Riley
TOTAL $75,000,000 $50,000,000 100%
=========== ========== ====
<PAGE>
SCHEDULE II
to Credit Agreement
-------------------
<TABLE><CAPTION>
Jurisdiction
Name of Corporation of Incorporation
------------------- ----------------
<S> <C> <C>
1. Ortep of New Jersey, Inc. NJ
2. Ortep of Staten Island, Inc. NY
3. Ortep of Pennsylvania, Inc. PA
4. Ortep of Connecticut, Inc. CT
5. Petro/Crystal Corp. NY
6. Reliance Utilities Corp. NY
7. Public Fuel Services, Co., Inc. NY
8. Petro, Inc. DE (Qualified in: NY, CT)
9. CBW Realty Corp. of New York NY
10. CBW Realty Corp. of Connecticut CT
11. CBW Realty Corp. of Pennsylvania PA
12. CBW Realty Corp. MA
13. Miller Fuel Oil Co. PA
14. D. J. W. Gasoline Co. PA
15. Marex Corporation MD
16. Maxwhale Corp. MN (Qualified in: CT,
NY,ME,NH,MA,NJ)
17. Ocennet Fuel Oil Corp. CT
18. A. P. Woodson Company, Inc. DC (Qualified in: MD)
19. Ortep Fuel Oil, Rhode Island Inc. RI (Qualified in: MA)
</TABLE>
<PAGE>
SCHEDULE III
to Credit Agreement
-------------------
<TABLE><CAPTION>
PETROLEUM HEAT AND POWER CO., INC.
Indebtedness Outstanding
as of March 31, 1994
--------------------
<S> <C>
Subordinated Indebtedness
-------------------------
9.375% Subordinated Debenture Due February 1, 2006 $ 75,000,000
10 1/8% Subordinated Notes Due April 1, 2003 50,000,000
11.85, 12.17% and 12.18% Subordinated Notes
Due October 1, 1998 30,000,000
Subordinated Notes Due March 1, 2000 6,381,831
14.10% Subordinated Notes due January 15, 2001 6,250,000
---------
$167,631,831
------------
Other Long-Term Debt
--------------------
11.85%, 12.17% and 17.18% Senior Notes
Due October 1, 1998 $ 30,000,000
Senior Notes Due March 1, 2000 6,381,832
14.10% Senior Note Due January 15, 2001 6,250,000
8.0% Acquisition Note Payable 1,630,000
Other Long Term Debt 38,723
------------
$ 44,300,555
------------
</TABLE>
<PAGE>
SCHEDULE IV
to Credit Agreement
-------------------
<TABLE><CAPTION>
PETROLEUM HEAT AND POWER CO., INC.
Material Acquisition since March 31, 1994
-----------------------------------------
Date Name Amount Paid
---- ---- -----------
<S> <C> <C>
June 30, 1994 DeBlois Oil Company $15,225,000
July 26, 1994 Herbert Fuel $ 5,068,000
July 28, 1994 TRICO Fuel $ 3,069,000
</TABLE>
Material Dispositions since March 31, 1994
------------------------------------------
None
<PAGE>
SCHEDULE V
TO CREDIT AGREEMENT
-------------------
<TABLE><CAPTION>
PETRO LETTERS OF CREDIT
-----------------------
Dollar Issue Due
Petro Amount L/C# Date Date Beneficiary
----- ------ ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
Shared 9,015,000 G188368 4/10/90 2/1/95 U.S. Fire Insurance &
North River Insurance Co.
& Westchester Fire
Insurance Co.
Chemical 1,663,000 T225200 3/7/94 4/8/99 Rettig
Chemical 766,875 T233131 7/27/94 8/31/99 Trico Fuel Corp. &
Vito Dellino
Chemical 2,300,625 T233132 7/27/94 8/31/99 Trico Fuel Corp. &
Leonard Scarola
Maxwhale
--------
None
</TABLE>
<PAGE>
EXHIBIT A to
Credit Agreement
----------------
FORM OF
WORKING CAPITAL NOTE
$__________ New York, New York
August 1, 1994
FOR VALUE RECEIVED, the undersigned, PETROLEUM HEAT AND POWER CO.,
INC, a Minnesota corporation (the "Company"), hereby unconditionally promises to
-------
pay on the Commitment Termination Date to the order of _____________ (the
"Bank") at the office of Chemical Bank, located at 7600 Jericho Turnpike,
----
Woodbury, New York 11797, in lawful money of the United States of America and in
immediately available funds, the principal amount of the lesser of
(a)_________________ DOLLARS ($____________) and (b) the aggregate unpaid
principal amount of all Working Capital Loans made by the Bank to the
undersigned pursuant to subsection 2.1 of the Third Amended and Restated Credit
Agreement (as defined below). The undersigned further agrees to pay interest in
like money at such office on the unpaid principal amount hereof from time to
time from the date hereof at the rates per annum set forth in subsections 8.6(a)
and 8.6(b) of the Third Amended and Restated Credit Agreement referred to below
until any such amount shall become due and payable (whether at the stated
maturity, by acceleration or otherwise), and thereafter on any such overdue
amount at the rate per annum set forth in subsection 8.6(c) of the Third Amended
and Restated Credit Agreement until paid in full (both before and after
judgment). Interest shall be payable in arrears on each Interest Payment Date,
commencing on the first such date to occur after the date hereof and terminating
upon payment (including prepayment) in full of the unpaid principal amount
hereof; provided that interest accruing on any overdue amount shall be payable
--------
on demand.
The holder of this Working Capital Note is authorized to, and so long
as it holds this Working Capital Note shall, record the date, Type and amount of
each Working Capital Loan made by the Bank pursuant to subsection 2.1 of the
Third Amended and Restated Credit Agreement, each continuation thereof, each
conversion of all or a portion thereof to another Type pursuant to subsection
8.8 of the Third Amended and Restated Credit Agreement, the date and amount of
each payment or prepayment of principal thereof and, in the case of Eurodollar
Loans, the length of each Interest Period and the Eurodollar Rate with respect
thereto, on the schedules annexed hereto and constituting a part hereof, or on a
continuation thereof which shall be annexed hereto and constitute a part hereof,
and any such recordation shall constitute prima facie evidence of the accuracy
----- -----
of the information so recorded, provided that failure of the Bank to make any
--------
such recordation (or any error in such recordation) shall not affect the
obligations of the Company under this Working Capital Note or under the Third
Amended and Restated Credit Agreement.
This Working Capital Note is one of the Working Capital Notes
referred to in the Third Amended and Restated Credit Agreement, dated as of the
date hereof, among the Company, the Bank and the other Banks parties thereto and
Chemical Bank, a New York
<PAGE>
2
banking corporation, as Agent (as amended, supplemented or otherwise modified
from time to time, the "Third Amended and Restated Credit Agreement"), is
-------------------------------------------
entitled to the benefits thereof and is subject to optional and mandatory
prepayment in whole or in part as provided therein. Terms used herein which are
defined in the Third Amended and Restated Credit Agreement shall have such
defined meanings unless otherwise defined herein or unless the context otherwise
requires.
This Working Capital Note is secured as provided in the Security
Documents. Reference is hereby made to the Security Documents for a description
of the properties and assets in which a security interest has been granted, the
nature and extent of the security, the terms and conditions upon which the
security interest was granted and the rights of the holder of this Working
Capital Note in respect thereof. Payment and performance of this Working
Capital Note are guaranteed as set forth in the Guarantees. The undersigned
agrees to pay all costs and expenses incurred by the Bank in connection with the
enforcement of its rights and remedies under the Third Amended and Restated
Credit Agreement, this Working Capital Note and the other Loan Documents.
Upon the occurrence of any one or more of the Events of Default
specified in the Third Amended and Restated Credit Agreement, all amounts then
remaining unpaid on this Working Capital Note shall become, or may be declared
to be, immediately due and payable, all as provided therein. All parties now
and hereafter liable with respect to this Working Capital Note, whether maker,
principal, surety, guarantor, endorser or otherwise, hereby waive presentment,
demand, protest and all other notices of any kind.
THIS WORKING CAPITAL NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
PETROLEUM HEAT AND
POWER CO., INC.
By:________________________
Title:
<PAGE>
SCHEDULE A to
Working Capital Note
--------------------
LOANS, CONVERSIONS AND PAYMENTS
OF ALTERNATE BASE RATE LOANS
----------------------------
Amount of Amount of
Eurodollar Alternate Unpaid
Loans Base Rate Principal
Converted Loans Balance
Amount of into Converted of
Alternate Alternate into Amount of Alternate
Base Rate Base Rate Eurodollar Principal Base Rate Notatation
Date Loan Loans Loans Repaid Loans Made by
- - ---- -------- --------- --------- ------- ------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
- - --- ---------- ---------- --------- -------- --------- -------
- - ---- ---------- ---------- --------- -------- --------- -------
<PAGE>
SCHEDULE B to
Working Capital Note
--------------------
LOANS, CONVERSIONS AND PAYMENTS
OF EURODOLLAR LOANS
-------------------------------
Amount Amount of
of Eurodollar
Euro- Amount of Loans
dollar Alternate Interest Converted
Loan Base Rate Period and into Unpaid
(and Loans Eurodollar Alternate Amount Principal
Contin- Converted Rate with Base of Prin- Balance of Nota-
uations into Euro- Respect Rate cipal Eurodollar tion
Date Thereof) dollar Loans Thereto Loans Repaid Loans made by
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
- - ---- -------- ------------ ---------- --------- ------- ---------- ---------
<PAGE>
EXHIBIT B to
Credit Agreement
----------------
ACQUISITION NOTE
$__________ New York, New York
August 1, 1994
FOR VALUE RECEIVED, PETROLEUM HEAT AND POWER CO., INC., a Minnesota
corporation (the "Company"), promises to pay no later than May 30, 1999 to the
-------
order of _____________ (the "Bank"), at the office of Chemical Bank located at
----
7600 Jericho Turnpike, Woodbury, New York 11797, in lawful money of the United
States of America and in immediately available funds, the principal amount of
the lesser of (a) ___________________________ ($__________) and (b) the
aggregate unpaid principal amount of all Acquisition Loans made by the Bank to
the undersigned pursuant to the Third Amended and Restated Credit Agreement,
dated as of the date hereof, among the Company, the Bank and the other Banks
parties thereto and Chemical Bank, a New York banking corporation, as Agent (as
the same may from time to time be amended, supplemented or otherwise modified,
the "Credit Agreement"; terms used herein without definition having the meaning
----------------
assigned thereto therein). The Company further agrees to pay interest in like
money at such office on the unpaid principal amount hereof from time to time
from the date hereof at the rates and on the dates specified in subsection 8.6
of the Credit Agreement until paid in full (both before and after judgment).
This Acquisition Note shall evidence the obligation of the Company to
repay both the Acquisition Term Loans and the Acquisition R/C Loans in
accordance with the terms of the Credit Agreement. Pursuant to subsections 5.2
and 7.2 of the Credit Agreement, the holder of this Acquisition Note is
authorized to record (a) the date, Type and amount of each Acquisition R/C Loan
made by the Bank, (b) the date, Type and amount of the Acquisition Term Loan
made by the Bank, (c) each continuation of each such Acquisition Loan, (d) each
conversion of all or a portion thereof to another Type, (e) the date and amount
of each payment or prepayment of principal hereof and (f) in the case of
Eurodollar Loans, the length of each Interest Period with respect thereto, on
the schedules annexed hereto and made a part hereof and any such recordation
shall constitute prima facie evidence of the accuracy of the information so
----- -----
recorded, absent manifest error, provided that the failure of the holder of this
--------
Acquisition Note to make such recordation (or any error in such recordation)
shall not affect the obligations of the Company hereunder or under the Credit
Agreement.
The Company further agrees to make repayments pursuant to subsection
7.4 of the Credit Agreement and prepayments of the principal amount outstanding
hereunder in accordance with the provisions of the Credit Agreement.
If any payment on this Acquisition Note in connection with an
Alternate Base Rate Loan becomes due and payable on a day other than a Business
Day, the maturity thereof shall be extended to the next succeeding Business Day,
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension. If any payment on this
Acquisition Note in connection with a Eurodollar Loan becomes due
<PAGE>
2
and payable on a day other than a Working Day, the maturity thereof shall be
extended to the next succeeding Working Day (unless the result of such extension
would be to carry the related Interest Period into another calendar month, in
which event the maturity thereof shall occur on the immediately preceding
Working Day), and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This promissory note is the "Acquisition Note" referred to in the
Credit Agreement, and is entitled to the benefits thereof and is subject to
optional prepayment and mandatory prepayment in whole or in part as provided
therein. Capitalized terms used herein without definition shall have the
respective meanings assigned to such terms in the Credit Agreement.
This Acquisition Note is secured as provided in the Security
Documents. Reference is hereby made to the Security Documents for a description
of the properties and assets in which a security interest has been granted, the
nature and extent of the security, the terms and conditions upon which the
security interest was granted and the rights of the holder of this Acquisition
Note in respect thereof. The undersigned agrees to pay all costs and expenses
incurred by the Bank in connection with the enforcement of its rights and
remedies under the Credit Agreement, this Acquisition Note and the other Loan
Documents.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts remaining unpaid on this
Acquisition Note, including, without limitation the principal amount of the
Acquisition Note and interest thereon, shall become, or may be declared to be,
immediately due and payable all as provided therein.
The Company hereby waives the requirements of demand, presentment,
protest and notice of dishonor and all other demands or notices of any kind in
connection with the delivery, acceptance, performance, default, dishonor or
enforcement of this Acquisition Note.
THIS ACQUISITION NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
PETROLEUM HEAT AND POWER CO., INC.,
a Minnesota corporation
By:___________________________
Name:
Title:
<PAGE>
SCHEDULE A to
Acquisition Note
----------------
ALTERNATE BASE RATE LOANS
AND REPAYMENTS OF ALTERNATE BASE RATE LOANS
-------------------------------------------
Amount Unpaid
Converted Amount Principal
Amount of to Converted Balance of
Alternate Alternate Amount of to Alternate Nota-
Base Rate Base Rate Principal Eurodollar Base Rate tion
Date Loans Loans Repaid Loans Loans Made By
- - ---- ----- ----- ------ ----- ----- -------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
- - ---- --------- --------- --------- ---------- --------- --------
<PAGE>
SCHEDULE B to
Acquisition Note
----------------
EURODOLLAR LOANS AND REPAYMENTS OF EURODOLLAR LOANS
---------------------------------------------------
Interest
Period Unpaid
Amount and Euro- Amount Principal
Amount Converted dollar Amount Converted Balance
of Euro- to Euro- Rate with of to Alter- of Euro-
dollar dollar Respect Principal nate Base dollar Notation
Date Loans Loans Thereto Repaid Rate Loans Loans Made By
- - ---- ----- ----- ------- ------ ---------- ----- -------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
- - ---- -------- --------- --------- --------- ---------- -------- --------
<PAGE>
EXHIBIT C to
Credit Agreement
----------------
FORM OF
THIRD AMENDED AND RESTATED
COMPANY SECURITY AGREEMENT
THIRD AMENDED AND RESTATED COMPANY SECURITY AGREEMENT, dated as of
August 1, 1994, between PETROLEUM HEAT AND POWER CO., INC., a Minnesota
corporation (the "Company"), and CHEMICAL BANK (as successor by merger to
-------
Manufacturers Hanover Trust Company), as agent (in such capacity, the "Agent")
-----
for the banks and other financial institutions (the "Banks") from time to time
-----
parties to the Third Amended and Restated Credit Agreement, dated as of August
1, 1994 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Company, the Banks and the Agent.
----------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company and Manufacturers Hanover Trust Company were
parties to a Credit Agreement, dated as of December 31, 1986 (the "Original
--------
Agreement");
- - ---------
WHEREAS, in connection with the Original Agreement, the Company made a
Security Agreement, dated as of December 31, 1986, in favor of Manufacturers
Hanover Trust Company (the "Original Security Agreement");
---------------------------
WHEREAS, the Original Agreement was amended and restated pursuant to
the Amended and Restated Credit Agreement, dated as of May 1, 1989 (as amended,
supplemented or otherwise modified prior to the date hereof, the "First Amended
-------------
and Restated Credit Agreement"), among the Company, Maxwhale Corp., the banks
- - -----------------------------
party thereto and Manufacturers Hanover Trust Company, as agent for such banks;
WHEREAS, the First Amended and Restated Credit Agreement was amended
and restated pursuant to the Second Amended and Restated Credit Agreement dated
as of December 31, 1992 (the "Existing Credit Agreement") among the Company, the
-------------------------
banks parties thereto and Chemical Bank, as agent for such banks;
WHEREAS, in connection with the First Amended and Restated Credit
Agreement, the Original Security Agreement was amended and restated pursuant to
the Amended and Restated Company Security Agreement, dated as of May 1, 1989,
made
<PAGE>
2
by the Company in favor of Manufacturers Hanover Trust Company, as agent (the
"First Amended and Restated Security Agreement");
---------------------------------------------
WHEREAS, in connection with the Existing Credit Agreement, the First
Amended and Restated Security Agreement was amended and restated pursuant to the
Second Amended and Restated Company Security Agreement, dated as of December 31,
1992, made by the Company in favor of Chemical Bank, as agent (as amended,
supplemented or otherwise modified prior to the date hereof, the "Existing
--------
Security Agreement");
- - ------------------
WHEREAS, the Company has requested that the Existing Credit Agreement
be amended to contain, inter alia, (i) a revolving credit and letter of credit
----- ----
facility to provide financing for the Company's ongoing acquisition program (ii)
provisions for the issuance of Inventory Letters of Credit (as defined in the
Credit Agreement) and (iii) certain other provisions upon the terms and subject
to the conditions therein contained; and
WHEREAS, in connection with the execution of the Credit Agreement, the
Company, the Agent and the Banks wish to amend the Existing Security Agreement
on the terms and conditions set forth herein and, for convenience of reference,
to restate the Existing Security Agreement as so amended;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and to induce the Agent and the Banks to enter into the Credit
Agreement and to induce the Banks to make their respective loans and other
extensions of credit to the Company under the Credit Agreement, the Company
hereby agrees with the Agent, for the ratable benefit of the Banks, that the
Existing Security Agreement shall be and hereby is amended and restated in its
entirety as follows:
1. Defined Terms. Unless otherwise defined herein:
-------------
(a) terms which are defined in the Credit Agreement and used herein are so used
as so defined;
(b) the following terms which are defined in the UCC are used herein as so
defined: Accounts, Chattel Paper, Instruments, Inventory and Proceeds; and
(c) the following terms shall have the following meanings:
"Collateral" shall have the meaning set forth in Section 2 of this
----------
Security Agreement.
"Customer Lists" shall mean, at any time, the names and addresses of
--------------
all customers of the Company at such time, together with all trade names
and trademarks and all supporting documents, including but not limited to
computer discs, programs, tapes, aged trial balances and carrying media.
"Obligations" shall mean the unpaid principal amount of, and interest
-----------
on (including without limitation, interest accruing after the maturity of
the Loans and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding) the Notes, the
Acceptance Reimbursement Obligations, the Inventory L/C Reimbursement
Obligations, the Acquisition L/C Reimbursement Obligations,
<PAGE>
3
reimbursement obligations for Letters of Credit issued by any Bank in
connection with any Line Letter and which are permitted by subsection
12.3(f) of the Credit Agreement, amounts owing to any Bank in connection
with Working Capital Borrowings or Acquisition Loans permitted pursuant to
subsection 2.1 or subsection 5.1, respectively, of the Credit Agreement and
all other obligations and liabilities of the Company or any Subsidiary to
the Agent or to the Banks, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement,
any Note, any Acceptance, any Draft, any Application, any Letter of Credit,
any other Loan Document (including, without limitation, the Guarantee) and
any other document (including, without limitation, any Line Letter)
executed and delivered in connection therewith or herewith, whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including, without limitation, all fees and
disbursements of counsel to the Agent or to the Banks that are required to
be paid by the Company pursuant to the terms of the Credit Agreement) or
otherwise.
"Security Agreement" shall mean this Third Amended and Restated
------------------
Company Security Agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
"Trademarks" means (a) all trademarks, trade names, corporate names,
----------
company names, business names, fictitious business names, trade styles,
service marks, logos and other source of business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country, or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in
Schedule I hereto, and (b) all renewals thereof.
"Trademark License" means any agreement, written or oral, naming the
-----------------
Company as licensor or licensee, granting any right under any Trademark and
the goodwill associated therewith.
"UCC" shall mean the Uniform Commercial Code as from time to time in
---
effect in the State of New York.
2. Confirmation and Grant of Security Interest. (a) The Company
-------------------------------------------
hereby confirms and acknowledges that pursuant to the Existing Security
Agreement and certain other Loan Documents the Agent had been duly assigned,
pledged and granted, for the ratable benefit of the Banks, a continuing security
interest in and to certain of the Collateral (as defined in the Existing
Security Agreement). The Company hereby ratifies and restates such pledge,
assignment and grant as to all of such Collateral and confirms that such pledge,
assignment and grant shall continue to be made for the ratable benefit of the
Banks in favor of the Agent.
<PAGE>
4
(b) As collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations, the Company hereby grants to the Agent, for the
ratable benefit of the Banks, a security interest in all of the following
property now owned or at any time hereafter acquired by the Company or in which
the Company now has or at any time in the future may acquire any right, title or
interest (collectively, the "Collateral"):
----------
(i) all Customer Lists;
(ii) all Accounts;
(iii) all Inventory;
(iv) all Trademarks;
(v) all Trademark Licenses;
(vi) all books and records pertaining to the Collateral; and
(vii) to the extent not otherwise included, all Proceeds and products of
any and all of the foregoing.
3. Representations and Warranties. The Company hereby represents and
------------------------------
warrants that:
(a) Title; No Other Liens. Except for the lien granted to the Agent
---------------------
for the benefit of the Banks pursuant to this Security Agreement and the
other liens permitted to exist on the Collateral pursuant to the Credit
Agreement, the Company owns each item of the Collateral free and clear of
any and all liens or claims of others. No security agreement, financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except such as may
have been filed in favor of the Agent, for the benefit of the Banks,
pursuant to this Security Agreement or as may be permitted pursuant to the
Credit Agreement.
(b) Perfected First Priority Liens. The liens granted pursuant to
------------------------------
this Security Agreement constitute perfected liens on the Collateral in
favor of the Agent, for the ratable benefit of the Banks, which are prior
to all other liens on the Collateral created by the Company and in
existence on the date hereof and which are enforceable as such against all
creditors of and purchasers from the Company.
(c) Location of Inventory. The Inventory is kept at the locations
---------------------
listed on Schedule II hereto.
(d) Power and Authority; Authorization. The Company has the
----------------------------------
corporate power and authority and the legal right to execute and deliver,
to perform its obligations under, and to grant the lien on the Collateral
pursuant to, this Security
<PAGE>
5
Agreement and has taken all necessary corporate action to authorize its
execution, delivery and performance of, and grant of the lien on the
Collateral pursuant to, this Security Agreement.
(e) Enforceability. This Security Agreement constitutes a legal,
--------------
valid and binding obligation of the Company enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
(f) No Conflict. The execution, delivery and performance of this
-----------
Security Agreement will not violate any provision of any Requirement of Law
or Contractual Obligation of the Company and will not result in the
creation or imposition of any lien on any of the properties or revenues of
the Company pursuant to any Requirement of Law or Contractual Obligation of
the Company, except as contemplated hereby.
(g) No Consents, etc. No consent or authorization of, filing with,
-----------------
or other act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without limitation, any
stockholder or creditor of the Company), is required in connection with the
execution, delivery, performance, validity or enforceability of this
Security Agreement.
(h) No Litigation. No litigation, investigation or proceeding of or
-------------
before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Company, threatened by or against the Company or against
any of its properties or revenues with respect to this Security Agreement,
the Collateral or any of the transactions contemplated hereby.
(i) Chief Executive Office. The Company's chief executive office and
----------------------
chief place of business is located at Clearwater House, 2187 Atlantic
Street, Stamford, Connecticut 06902.
4. Covenants. The Company covenants and agrees with the Agent and
---------
the Banks that, from and after the date of this Security Agreement until the
Obligations are paid in full and the Acquisition Commitments, Acquisition Term
Loan Commitments, Working Capital Commitments, all Letters of Credit and all
Acceptances are terminated:
(a) Further Documentation; Pledge of Instruments. At any time and
--------------------------------------------
from time to time, upon the written request of the Agent, and at the sole
expense of the Company, the Company will promptly and duly execute and
deliver such further instruments and documents and take such further action
as the Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Security Agreement and of the rights
and powers herein granted, including, without limitation, filings with
appropriate Governmental Authorities needed to perfect the security
interest granted hereunder in trademarks and tradenames and the filing of
any financing or continuation statements under the Uniform Commercial Code
in effect in any jurisdiction with respect to the liens created hereby.
The Company also hereby
<PAGE>
6
authorizes the Agent to file any such financing or continuation statement
without the signature of the Company to the extent permitted by applicable
law. A carbon, photographic or other reproduction of this Security
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
(b) Indemnification. The Company agrees to pay, and to save the
---------------
Agent and the Banks harmless from, any and all liabilities, costs and
expenses (including, without limitation, legal fees and expenses) (i) with
respect to, or resulting from, any delay in paying, any and all excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral, (ii) with respect to, or resulting from,
any delay by any Person (other than the Agent or any Bank) in complying
with any Requirement of Law applicable to any of the Collateral or (iii) in
connection with any of the transactions contemplated by this Security
Agreement.
(c) Maintenance of Records. The Company will keep and maintain at
----------------------
its own cost and expense satisfactory and complete records of the
Collateral. The Company will mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the security interests
granted hereby. For the further security of the Agent and the Banks, the
Agent, for the ratable benefit of the Banks, shall have a security interest
in all of the Company's books and records pertaining to the Collateral, and
the Company shall turn over for inspection any such books and records to
the Agent or to its representatives during normal business hours at the
request of the Agent.
(d) Right of Inspection. The Agent and the Banks shall at all times
-------------------
have full and free access during normal business hours to all the books,
correspondence and records of the Company, and the Agent and the Banks and
their respective representatives may examine the same, take extracts
therefrom and make photocopies thereof, and the Company agrees to render to
the Agent and the Banks, at the Company's cost and expense, such clerical
and other assistance as may be reasonably requested with regard thereto.
(e) Compliance with Laws, etc. The Company will comply in all
--------------------------
material respects with all Requirements of Law applicable to the Collateral
or any part thereof or to the operation of the Company's business;
provided, however, that the Company may contest any Requirement of Law in
-------- -------
any reasonable manner which shall not, in the sole opinion of the Agent,
adversely affect the Agent's or the Banks' rights or the priority of their
liens on the Collateral.
(f) Payment of Obligations. The Company will pay promptly when due
----------------------
all taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor,
materials and supplies) against or with respect to the Collateral, except
that no such charge need be paid if (i) the validity thereof is being
contested in good faith by appropriate proceedings, (ii) such proceedings
do not involve any material danger of the sale, forfeiture or loss of any
of
<PAGE>
7
the Collateral or any interest therein and (iii) such charge is adequately
reserved against on the Company's books in accordance with GAAP.
(g) Limitation on Liens on Collateral. The Company will not create,
---------------------------------
incur or permit to exist, will defend the Collateral against, and will take
such other action as is necessary to remove, any lien or claim on or to the
Collateral, other than the liens created hereby and other than as permitted
pursuant to the Credit Agreement, and will defend the right, title and
interest of the Agent and the Banks in and to any of the Collateral against
the claims and demands of all Persons whomsoever.
(h) Limitations on Dispositions of Collateral. The Company will not
-----------------------------------------
sell, transfer, lease or otherwise dispose of any of the Collateral, or
attempt, offer or contract to do so except as permitted in the Credit
Agreement.
(i) Further Identification of Collateral. The Company will furnish
------------------------------------
to the Agent and the Banks from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Agent may reasonably request, all in
reasonable detail.
(j) Notices. The Company will advise the Agent and the Banks
-------
promptly, in reasonable detail, at their respective addresses set forth in
subsection 15.2 of the Credit Agreement, (i) of any lien (other than liens
created hereby or permitted under the Credit Agreement) on, or claim
asserted against, any of the Collateral and (ii) of the occurrence of any
other event which could reasonably be expected to have a material adverse
effect on the aggregate value of the Collateral or on the liens created
hereunder.
(k) Changes in Locations, Name, etc. The Company will not (i) permit
--------------------------------
any Inventory having a market value of over $100,000 to be kept at a
location at which the Agent does not have a perfected security interest; or
(ii) change its name, identity or corporate structure to such an extent
that any financing statement (after giving effect to any amendments
thereto) filed by the Agent in connection with this Security Agreement
would become seriously misleading.
5. Trademarks.
----------
5.1 Representations and Warranties Concerning the Trademarks.
--------------------------------------------------------
Schedule I hereto includes all registered Trademarks owned by the Company in its
own name as of the date hereof. To the best of the Company's knowledge, each
Trademark is valid, subsisting, unexpired, enforceable and has not been
abandoned. Except for except as set forth in Schedule I, none of such
Trademarks is the subject of any licensing or franchise agreement. No holding,
decision or judgment has been rendered by any United States Governmental
Authority which would be reasonably likely to limit, cancel or question the
validity of any Trademark. No action or proceeding is pending (i) seeking to
limit, cancel or question the validity of any Trademark, or (ii) which, if
adversely determined, would be reasonably likely to have a material adverse
effect on the value of any Trademark.
<PAGE>
8
5.2 Covenants. (a) The Company (either itself or through licensees)
---------
will, except with respect to any Trademark that the Company shall reasonably
determine is of negligible economic value to it, (i) continue to use each
Trademark in a manner which maintains such Trademark in full force free from any
claim of abandonment for non-use, (ii) maintain as in the past the quality of
products and services offered under such Trademark, (iii) not adopt or use any
mark which is confusingly similar or a colorable imitation of such Trademark
unless the Company shall grant to the Agent, for the ratable benefit of the
Banks, a perfected security interest in such mark pursuant to this Security
Agreement, and (iv) not (and not permit any licensee or sublicensee thereof to)
do any act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(b) The Company will notify the Agent and the Banks immediately
if it knows, or has reason to know, that any application or registration
relating to any Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office or any court or tribunal in any country) regarding
the Company's ownership of any Trademark or its right to register the same or to
keep and maintain the same.
(c) Whenever the Company either itself or through any agent,
employee, licensee or designee, shall file an application for registration of
any Trademark with the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof, the
Company shall report such filing to the Agent and the Banks within five Business
Days after the last day of the fiscal quarter in which such filing occurs. Upon
request of the Agent, the Company shall execute and deliver any and all
additional agreements, instruments, documents, and papers as the Agent may
request to evidence the Agent's and the Banks' security interest in any
Trademark and the goodwill and general intangibles of the Company relating
thereto or represented thereby, and the Company hereby constitutes the Agent its
attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power being coupled with an interest is irrevocable until the Obligations shall
have been fully paid and the Working Capital Commitments, the Acquisition
Commitments, the Acquisition Term Laon Commitments, all Acceptances and all
Letters of Credit shall have been terminated.
(d) The Company will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, or any similar office or agency in any other country or
any political subdivision thereof, to maintain and pursue each application (and
to obtain the relevant registration) and to maintain each registration of the
Trademarks, including, without limitation, filing of applications for renewal,
affidavits of use and affidavits of incontestability.
(e) In the event that any Trademark included in the Collateral is
infringed, misappropriated or unlawfully diluted by a third party, the Company
shall promptly notify the Agent and the Bank after it learns thereof and shall,
unless the Company shall reasonably determine that such Trademark is of
negligible economic value to the Company which determination the Company shall
promptly report to the Agent and the Banks, promptly sue
<PAGE>
9
for infringement, misappropriation or dilution, to seek injunctive relief where
appropriate and to recover any and all damages for such infringement,
misappropriation or dilution, or take such other actions as the Company shall
reasonably deem appropriate under the circumstances to protect such Trademark.
6. Provisions Relating to Accounts.
-------------------------------
6.1 Company Remains Liable under Accounts. Anything herein to the
-------------------------------------
contrary notwithstanding, the Company shall remain liable under each of the
Accounts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. Neither the Agent nor any Bank
shall have any obligation or liability under any Account (or any agreement
giving rise thereto) by reason of or arising out of this Agreement or the
receipt by the Agent or any Bank of any payment relating to such Account
pursuant hereto, nor shall the Agent or any Bank be obligated in any manner to
perform any of the obligations of the Company under or pursuant to any Account
(or any agreement giving rise thereto), to make any payment, to make any inquiry
as to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Account (or any agreement
giving rise thereto), to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times.
6.2 Analysis of Accounts. The Agent shall have the right to make
--------------------
test verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and the Company shall furnish all such
assistance and information as the Agent may require in connection with such test
verifications. At any time and from time to time, upon the Agent's reasonable
request and at the expense of the Company, the Company shall cause independent
public accountants or others satisfactory to the Agent to furnish to the Agent
reports showing reconciliations, aging and test verifications of, and trial
balances for, the Accounts. The Agent in its own name or in the name of others
may communicate with account debtors on the Accounts to verify with them to the
Agent's satisfaction the existence, amount and terms of any Accounts.
6.3 Collections on Accounts. (a) The Agent hereby authorizes the
-----------------------
Company to collect the Accounts, subject to the Agent's direction and control,
and the Agent may curtail or terminate said authority at any time after the
occurrence and during the continuance of an Event of Default. If required by
the Agent at any time after the occurrence and during the continuance of an
Event of Default, any payments of Accounts, when collected by the Company, (i)
shall be forthwith (and, in any event, within two Business Days) deposited by
the Company in the exact form received, duly indorsed by the Company to the
Agent if required, in a Collateral Account maintained under the sole dominion
and control of the Agent, subject to withdrawal by the Agent for the account of
the Banks only as provided in Section 9, and (ii) until so turned over, shall be
held by the Company in trust for the Agent and the Banks, segregated from other
funds of the Company.
<PAGE>
10
(b) Each such deposit of Proceeds of Accounts shall be accompanied by
a report identifying in reasonable detail the nature and source of the payments
included in the deposit.
(c) At the Agent's request at any time when any Event of Default
shall have occurred and be continuing, the Company shall deliver to the Agent
all original and other documents evidencing, and relating to, the agreements and
transactions which gave rise to the Accounts, including, without limitation, all
original orders, invoices and shipping receipts.
6.4 Representations and Warranties. (a) No amount payable to the
------------------------------
Company under or in connection with any Account is evidenced by any Instrument
or Chattel Paper which has not been delivered to the Agent.
(b) The place where the Company keeps its records concerning the
Accounts is Clearwater House, 2187 Atlantic Street, Stamford, Connecticut 06902.
(c) None of the obligors on any Accounts (other than obligors with
respect to Accounts which, in the aggregate, are not material in relation to all
Accounts of the Company and its Subsidiaries taken as a whole) is a Governmental
Authority.
6.5 Covenants. (a) The amount represented by the Company to the
---------
Banks from time to time as owing by each account debtor or by all account
debtors in respect of the Accounts will at such time be the correct amount
actually owing by such account debtor or debtors thereunder.
(b) The Company will not amend, modify, terminate or waive (other
than in the ordinary course of business in accordance with past practice) any
agreement giving rise to an Account in any manner which could reasonably be
expected to materially adversely affect the value of such Account as Collateral.
(c) The Company will not fail to exercise promptly and diligently
each and every material right which it may have under each agreement giving rise
to an Account (other than any right of termination and except with respect to
Accounts which, in the aggregate, are not material in relation to all Accounts
of the Company and its Subsidiaries taken as a whole).
(d) The Company will not fail to deliver to the Agent a copy of each
material demand, notice or document received by it relating in any way to any
agreement giving rise to an Account (except with respect to Accounts which, in
the aggregate, are not material in relation to all Accounts of the Company and
its Subsidiaries taken as a whole).
(e) Other than in the ordinary course of business as generally
conducted by the Company over a period of time, the Company will not grant any
extension of the time of payment of any of the Accounts, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partially, any Person liable for the payment thereof, or allow any credit or
discount whatsoever thereon.
<PAGE>
11
(f) The Company will not remove its books and records from the
location specified in Section 5.4(b).
(g) In any suit, proceeding or action brought by the Agent or any
Bank under any Account for any sum owing thereunder, the Company will save,
indemnify and keep the Agent and such Bank harmless from and against all
expense, loss or damage suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction or liability whatsoever of the account debtor
thereunder, arising out of a breach by the Company of any obligation thereunder
or arising out of any other agreement, indebtedness or liability at any time
owing to or in favor of such account debtor or its successors from the Company.
7. Agent's Appointment as Attorney-in-Fact.
---------------------------------------
(a) Powers. The Company hereby irrevocably constitutes and appoints
------
the Agent and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Company and in the name of the Company or in its
own name, from time to time in the Agent's discretion, for the purpose of
carrying out the terms of this Security Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Security
Agreement, and, without limiting the generality of the foregoing, the Company
hereby gives the Agent the power and right, on behalf of the Company, without
notice to or assent by the Company, to do the following:
(i) at any time when any Event of Default shall have occurred and
be continuing, in the name of the Company or its own name, or otherwise, to
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under, or
with respect to, any Collateral and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Agent for the purpose of collecting any and all such
moneys due or with respect to such Collateral whenever payable;
(ii) to pay or discharge taxes and liens levied or placed on or
threatened against the Collateral, and
(iii) at any time when any Event of Default shall have occurred and
be continuing, (A) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Agent or as the Agent shall direct; (B) to ask
or demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) to sign and indorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices and
other documents in connection with any of the Collateral; (D) to commence
and prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any thereof
and to enforce any other right in respect of any
<PAGE>
12
Collateral; (E) to defend any suit, action or proceeding brought against
the Company with respect to any Collateral; (F) to settle, compromise or
adjust any suit, action or proceeding described in the preceding clause
and, in connection therewith, to give such discharges or releases as the
Agent may deem appropriate; (G) to assign any Trademark (along with
goodwill of the business to which such Trademark pertains), throughout the
world for such term or terms, on such conditions, and in such manner, as
the Agent shall in its sole discretion determine; and (H) generally, to
sell, transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the Agent
were the absolute owner thereof for all purposes, and to do, at the Agent's
option and the Company's expense, at any time, or from time to time, all
acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the liens of the Agent and the Banks
thereon and to effect the intent of this Security Agreement, all as fully
and effectively as the Company might do.
The Company hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Other Powers. The Company also authorizes the Agent, at any time
------------
and from time to time, to execute, in connection with the sale provided for in
Section 8 hereof, any indorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) No Duty on the Part of Agent or Banks. The powers conferred on
-------------------------------------
the Agent and the Banks hereunder are solely to protect the interests of the
Agent and the Banks in the Collateral and shall not impose any duty upon the
Agent or any Bank to exercise any such powers. The Agent and the Banks shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to the Company for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
8. Performance by Agent of Company's Obligations. If the Company
---------------------------------------------
fails to perform or comply with any of its agreements contained herein and the
Agent, as provided for by the terms of this Security Agreement, itself performs
or complies, or otherwise causes performance or compliance, with such agreement,
the expenses of the Agent incurred in connection with such performance or
compliance, together with interest thereon at a rate per annum 2% above the
Alternate Base Rate, shall be payable by the Company to the Agent on demand and
shall constitute Obligations secured hereby.
9. Proceeds. It is agreed that if an Event of Default shall occur
--------
and be continuing (a) all Proceeds received by the Company consisting of cash,
checks and other near-cash items shall be held by the Company in trust for the
Agent and the Banks, segregated from other funds of the Company, and shall,
forthwith upon receipt by the Company, be turned over to the Agent in the exact
form received by the Company (duly indorsed by the Company to the Agent, if
required), and (b) any and all such Proceeds
<PAGE>
13
received by the Agent (whether from the Company or otherwise) may, in the sole
discretion of the Agent, be held by the Agent for the ratable benefit of the
Banks as collateral security for, and/or then or at any time thereafter may be
applied by the Agent against, the Obligations (whether matured or unmatured),
such application to be in such order as the Agent shall elect. Any balance of
such Proceeds remaining after the Obligations shall have been paid in full and
the Acquisition Commitments, Acquisition Term Loan Commitments, Working Capital
Commitments, all Letters of Credit and all Acceptances shall have been
terminated shall be paid over to the Company or to whomsoever may be lawfully
entitled to receive the same.
10. Remedies. If an Event of Default shall occur and be continuing,
--------
the Agent, on behalf of the Banks may exercise, in addition to all other rights
and remedies granted to them in this Security Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, the Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon the Company or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker's board or office of the Agent or any Bank or elsewhere
upon such terms and conditions as it may deem advisable and at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk. The Agent or any Bank shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in the Company, which right or equity is
hereby waived or released. The Company further agrees, at the Agent's request,
to assemble the Collateral and make it available to the Agent at places which
the Agent shall reasonably select, whether at the Company's premises or
elsewhere. The Agent shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Agent and the Banks hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations, in such order as the Agent may elect,
and only after such application and after the payment by the Agent of any other
amount required by any provision of law, need the Agent account for the surplus,
if any, to the Company. To the extent permitted by applicable law, the Company
waives all claims, damages and demands it may acquire against the Agent or any
Bank arising out of the exercise by them of any rights hereunder. If any notice
of a proposed sale or other disposition of Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition. The Company shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Agent or any Bank to collect such deficiency.
<PAGE>
14
11. Amendments, etc, with respect to the Obligations. The Company
------------------------------------------------
shall remain obligated hereunder, and the Collateral shall remain subject to the
lien granted hereby, notwithstanding that, without any reservation of rights
against the Company, and without notice to or further assent by the Company, any
demand for payment of any of the Obligations made by the Agent or any Bank may
be rescinded by the Agent or such Bank, and any of the Obligations continued,
and the Obligations, or the liability of any other Person upon or for any part
thereof, or any collateral security or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be renewed,
extended, amended, modified, accelerated, compromised, waived, surrendered, or
released by the Agent or any Bank, and the Credit Agreement, the Notes, the
Letters of Credit and any other Loan Documents and any other documents executed
and delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or part, as the Banks (or the Required Banks, as the case
may be) may deem advisable from time to time, and any guarantee, right of offset
or other collateral security at any time held by the Agent or any Bank for the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Agent nor any Bank shall have any obligation to protect,
secure, perfect or insure this or any other lien at any time held by it as
security for the Obligations or any property subject thereto. The Company
waives any and all notice of the creation, renewal, extension or accrual of any
of the Obligations and notice of or proof of reliance by the Agent or any Bank
upon this Security Agreement; the Obligations, and any of them, shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Security Agreement; and all dealings between the Company, on the one
hand, and the Agent and the Banks, on the other, shall likewise be conclusively
presumed to have been had or consummated in reliance upon this Security
Agreement.
12. Limitation on Duties Regarding Preservation of Collateral. The
---------------------------------------------------------
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the UCC
or otherwise, shall be to deal with it in the same manner as the Agent deals
with similar property for its own account. Neither the Agent, any Bank, nor any
of their respective directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Company or otherwise.
13. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and constitute
powers coupled with an interest.
14. Severability. Any provision of this Security Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE>
15
15. Paragraph Headings. The paragraph headings used in this Security
------------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. No Waiver; Cumulative Remedies. Neither the Agent nor any Bank
------------------------------
shall by any act (except by a written instrument pursuant to Section 17 hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Agent or any Bank, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Agent or any Bank of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy which
the Agent or such Bank would otherwise have on any future occasion. The rights
and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
17. Waivers and Amendments; Successors and Assigns; Governing Law.
-------------------------------------------------------------
None of the terms or provisions of this Security Agreement may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Company and the Agent, provided that any provision of this
--------
Security Agreement may be waived by the Agent in a written letter or agreement
executed by the Agent or by telex or facsimile transmission from the Agent.
This Security Agreement shall be binding upon the successors and assigns of the
Company and shall inure to the benefit of the Agent and the Banks and their
respective successors and assigns.
18. GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
19. Notices. Notices hereunder may be given by mail, by telex or by
-------
facsimile transmission, addressed or transmitted to the Person to which it is
being given at such Person's address or transmission number set forth in the
Credit Agreement and shall be effective (a) in the case of mail, 2 days after
deposit in the postal system, first class postage pre-paid and (b) in the case
of telex or facsimile notices, when sent. The Company may change its address
and transmission number by written notice to the Agent, and the Agent or any
Bank may change its address and transmission number by written notice to the
Company and, in the case of a Bank, to the Agent.
20. Authority of Agent. The Company acknowledges that the rights and
------------------
responsibilities of the Agent under this Security Agreement with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Security Agreement shall, as between the Agent
and the Banks, be governed by the Credit Agreement and by such other agreements
with respect thereto as may exist from time to time
<PAGE>
16
among them, but, as between the Agent and the Company, the Agent shall be
conclusively presumed to be acting as agent for the Banks with full and valid
authority so to act or refrain from acting, and the Company shall not be under
any obligation, or entitlement, to make any inquiry respecting such authority.
21. Release of Collateral and Termination. (a) The Agent shall
-------------------------------------
(without any requirement of consent of or notice to any Person, including,
without limitation, any Bank) release from the liens created hereby any
Collateral which is sold, transferred or otherwise conveyed in accordance with
the terms of the Credit Agreement.
(b) At such time as the Obligations shall have been paid in full and
the Working Capital Commitments, the Acquisition Commitments, the Acquisition
Term Loan Commitments, all Acceptances and all Letters of Credit shall have been
terminated, the Collateral shall be released from the Liens created hereby, and
this Security Agreement and all obligations of the Agent and the Company
hereunder shall terminate, all without delivery of any instrument or performance
of any act by any party, and all rights to the Collateral shall revert to the
Company. Upon request of the Company following any such termination, the Agent
will deliver (at the sole cost and expense of the Company) to the Company any
Collateral held by the Agent hereunder, and execute and deliver (at the sole
cost and expense of the Company) to the Company such documents as the Company
shall reasonably request to evidence such termination.
22. Counterparts. This Security Agreement may be executed by one or
------------
more of the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, each of the Company and the Agent has caused this
Security Agreement to be duly executed and delivered as of the date first above
written.
PETROLEUM HEAT AND POWER CO., INC.
By
------------------------------------------------
Title:
CHEMICAL BANK, as Agent
By
------------------------------------------------
Title:
<PAGE>
17
SCHEDULE I TO
THIRD AMENDED AND RESTATED
COMPANY SECURITY AGREEMENT
--------------------------
TRADEMARKS
----------
Company Trademark
------- ---------
Petroleum Heat and Power Co., Inc. Petro
Reg. No.: 538,181
Petro Fuel Oil &
Design
Reg. No.: 937,913
Maxwhale Corp. Whale Design
Reg. No.: 1,293,778
<PAGE>
18
SCHEDULE II TO
THIRD AMENDED AND RESTATED
COMPANY SECURITY AGREEMENT
--------------------------
INVENTORY
---------
Company States Where Inventory
------- ----------------------
is Located
----------
Petroleum Heat and Power Co., Connecticut
Inc. Maryland
Massachusetts
New Hampshire
New Jersey
New York
Pennsylvania
Rhode Island
Virginia
Marex Corporation Maryland
Maxwhale Corp. Massachusetts
New Jersey
New York
Miller Fuel Oil Co. Pennsylvania
Occennet Fuel Oil Corp. Connecticut
Ortep of Connecticut, Inc. Connecticut
Ortep of New Jersey, Inc. New Jersey
Ortep of Pennsylvania, Inc. Pennsylvania
Ortep Fuel Oil of Rhode Rhode Island
Island, Inc.
Petro, Inc. Connecticut
New York
Public Fuel Service Co., Inc. New York
Reliance Utilities Corp. New York
A.P. Woodson Company, Inc. Maryland
<PAGE>
EXHIBIT D to
Credit Agreement
----------------
COMPANY CASH COLLATERAL AGREEMENT
CASH COLLATERAL AGREEMENT, dated as of August 1, 1994, among:
(a) PETROLEUM HEAT AND POWER CO., INC., a Minnesota corporation (the
"Company");
-------
(b) CHEMICAL BANK, a New York banking corporation, acting in its capacity as
agent (in such capacity, the "Agent") for the banks and other financial
-----
institutions (the "Banks") from time to time parties to the Third Amended
-----
and Restated Credit Agreement, dated as of August 1, 1994, (as amended,
supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Company, the Banks and the Agent; and
---------
(c) CHEMICAL BANK, acting in its capacity as depositary (in such capacity, the
"Depositary").
----------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company, the Banks and the Agent are parties to the
Credit Agreement;
WHEREAS, pursuant to the Credit Agreement, the Second Amended and
Restated Credit Agreement, dated as of December 31, 1992 among the Company,
Maxwhale Corp., the Banks and the Agent is being amended to contain, inter alia,
(a) a revolving credit and letter of credit facility to provide financing for
the Company's ongoing acquisition program and (b) certain other provisions upon
the terms and subject to the conditions therein contained;
WHEREAS, the Company will derive substantial benefit from the Credit
Agreement, and, in connection with the execution thereof, the Company, the Banks
and the Agent wish to amend the Cash Collateral Agreement dated as of October
21, 1993 among the Company, the Agent and the Depositary (the "Existing Cash
Collateral Agreement") on the terms and conditions set forth herein and for
convenience of reference, to restate the Existing Cash Collateral Agreement as
so amended;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and to induce the Agent and the Banks to enter into
the Credit Agreement and to induce the Banks to make and/or continue their
respective loans and other extensions of Credit (including, without limitation,
the Inventory Letters of Credit and the Acquisition Letters of Credit), the
parties hereto agree that the Existing Cash Collateral Agreement shall be and
hereby is amended and restated in its entirety as follows:
<PAGE>
2
1. All terms defined in the Credit Agreement and used herein shall
have the meanings given to them therein except where specifically defined herein
or where the context otherwise requires. The Depositary, however, shall have no
duty to inquire into the terms of the Credit Agreement. Additionally, for
purposes hereof, the term "Obligations" shall mean the unpaid principal amount
of, and interest on (including without limitation, interest accruing after the
maturity of the Loans and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the Notes, the Acceptance
Reimbursement Obligations, the Inventory L/C Reimbursement Obligations, the
Acquisition L/C Reimbursement Obligations, reimbursement obligations for Letters
of Credit issued by any Bank in connection with any Line Letter and which are
permitted by subsection 12.3(f) of the Credit Agreement, amounts owing to any
Bank in connection with Working Capital Borrowings or Acquisition Loans
permitted pursuant to subsection 2.1 or subsection 5.1, respectively, of the
Credit Agreement and all other obligations and liabilities of the Company or any
Subsidiary to the Agent or to the Banks, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Credit Agreement, any Note,
any Acceptance, any Draft, any Application, any Letter of Credit, this Cash
Collateral Agreement, any other Loan Document (including, without limitation,
the Guarantee) and any other document (including, without limitation, any Line
Letter) executed and delivered in connection therewith or herewith, whether on
account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses (including, without limitation, all fees and disbursements of
counsel to the Agent or to the Banks that are required to be paid by the Company
pursuant to the terms of the Credit Agreement) or otherwise.
2. (a) Concurrently with the execution and delivery of this Cash
Collateral Agreement, there shall be established and thereafter maintained by
the Depositary an account entitled "Chemical Bank as Agent - Petroleum Heat and
Power Co., Inc. Cash Collateral Account" (herein referred to as the "Cash
----
Collateral Account"). All moneys and securities therein shall at all times be
- - ------------------
subject to the exclusive dominion and control of the Depositary, provided that
--------
the Depositary shall act with respect to the Cash Collateral Account in
accordance with the terms of this Cash Collateral Agreement.
(b) The Company agrees that it shall deposit in the Cash Collateral
Account in immediately available funds all amounts required to be deposited
therein pursuant to the Credit Agreement (including, without limitation,
subsection 7.4 thereof). The Company shall notify the Depositary and the Agent
of each such deposit. All amounts deposited shall be retained in the Cash
Collateral Account and shall be withdrawn only as follows:
(i) upon written instructions of the Agent from time to time,
specifying the amount to be withdrawn, and stating that the Company has
failed to pay any of the Obligations when due and that the withdrawal is in
accordance with Section 5(a) hereof, the Depositary shall promptly withdraw
the amount specified in such notice and pay the same to the Agent for
application by the Agent to payment of such unpaid Obligations;
<PAGE>
3
(ii) upon written request of the Company to the Agent at any time and
from time to time when the amount on deposit in the Cash Collateral Account
is in excess of the amount required pursuant to the Credit Agreement and no
Default or Event of Default has occurred and is continuing, the Agent will
request that the Depositary withdraw from the Cash Collateral Account the
amount specified in such notice from the Company (not to exceed the amount
of such excess), and the Depositary shall promptly withdraw the amount
specified in such request and pay the same to the Company or its order; and
(iii) upon termination of this Cash Collateral Agreement pursuant to
Section 6 hereof, the Depositary shall promptly withdraw all amounts in the
Cash Collateral Account and pay the same to the Company or its order (or
otherwise as directed by a court of competent jurisdiction).
3. (a) If an Event of Default shall have occurred and be continuing,
the Pledged Funds (as defined below) and any investment earnings thereon shall
be available to the Agent for withdrawal and distribution as provided in Section
2(b)(i) hereof.
4. The Company hereby pledges, assigns and transfers to the Agent,
and grants to the Agent, for the ratable benefit of the Banks, a first lien on
and security interest in all cash and securities at any time and from time to
time deposited or held in the Cash Collateral Account or held by the Depositary
hereunder (the "Pledged Funds" or "Collateral") as collateral security for the
------------- ----------
performance and payment in full of the Obligations. The Company agrees that it
shall have no dominion or control over or of the Pledged Funds.
5. (a) The Agent shall apply all funds withdrawn from the Cash
Collateral Account pursuant to clause (i) of Section 2(b) hereof in the manner
provided in clause (b) of this Section 5. The Depositary shall have no
responsibility for such application.
(b) In the event that any portion of the outstanding principal of the
Obligations has been declared or has become due and payable whether or not prior
to its stated maturity, the Agent, without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon the Company or any other
Person (all and each of which demands, advertisements and/or notices are hereby
expressly waived to the maximum extent permitted by applicable law), may
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give option or options to
purchase, contract to sell or otherwise dispose of and deliver said Collateral,
or any part thereof, in one or more parcels at public or private sale or sales,
at any exchange, broker's board or at any of the Agent's or any Bank's offices
or elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk, with the right to the Agent and any Bank upon any
such sale or sales, public or private, to purchase the whole or any part of said
collateral so sold, free of any right or equity of redemption in the Company,
which right or equity is hereby expressly waived or released, to the extent
permitted by law. The Agent shall pay over the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
<PAGE>
4
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care, safekeeping or otherwise of any and all of the
Collateral or in any way relating to the rights of the Agent and any Bank
hereunder, including reasonable attorneys' fees and legal expenses, to itself
for application to the payment in whole or in part, of the Obligations in such
order as the Agent may elect, the Company remaining liable for any deficiency in
the Obligations remaining unpaid after such application, and only after so
paying over such net proceeds and after the payment by the Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Uniform Commercial Code, need the Agent account for the
surplus, if any, to the Company. The Company agrees that the Agent need not
give more than ten days' notice of the time and place of any public sale or of
the time after which a private sale or other intended disposition is to take
place and that such notice is reasonable notification of such matters. No
notification need be given to the Company if it has signed after default a
statement renouncing or modifying any right to notification of sale or other
intended disposition. In addition to the rights and remedies granted to it in
this Cash Collateral Agreement and in any other instrument or agreement
securing, evidencing or relating to any of the obligations, the Agent and each
Bank shall have all the rights and remedies of a secured party under the Uniform
Commercial Code of the State of New York.
6. This Cash Collateral Agreement shall terminate on the date upon
which the Acquisition L/C Commitment has terminated and no Acquisition L/C
Obligations remain outstanding; provided that if any Default or Event of Default
--------
shall have occurred and then be continuing, this Cash Collateral Agreement shall
not terminate and, instead, all amounts on deposit in the Cash Collateral
Account shall be held as collateral security for the Obligations.
7. (a) Cash held by the Depositary in the Cash Collateral Account
shall be invested and reinvested in accordance with subparagraph (b) below. So
long as a Default or Event of Default shall have occurred and be continuing, if
the net proceeds of a sale of any Permitted Investment pursuant to Section 7(b)
does not equal the face value at maturity of such Permitted Investment, the
Depositary shall give written notice to the Company of such deficiency and the
Company shall promptly deposit into the Cash Collateral Account additional cash
or Permitted Investments (as hereinafter defined) with a face value at maturity
equal to or in excess of such deficiency.
(b) If the Depositary is so directed by the Company by the delivery
of an oral request confirmed in writing, any cash held in the Cash Collateral
Account shall (unless the Agent shall have notified the Depositary that there is
an existing Event of Default) be invested or reinvested by the Depositary in
accordance with the instructions of the Company in Permitted Investments. The
Depositary shall sell all or any designated part of such investments if so
directed by the Company by the delivery of a written request subject to the
provisions of the second sentence of paragraph 7(a). All such investments, the
interest thereon and the net proceeds of the sale or payment thereof (plus any
deficiency paid by the Company) shall be held by the Depositary in the Cash
Collateral Account, subject to withdrawal as provided in Section 2(b) hereof,
for the same purposes as the cash used to purchase such investments.
Notwithstanding the foregoing, if the Agent has notified the Depositary that
there is an existing Event of Default under the Credit Agreement, any cash
<PAGE>
5
held in the Cash Collateral Account shall be invested or reinvested by the
Depositary in accordance with the instructions of the Agent. Such instructions
shall be given in the same manner as required of the Company pursuant to this
Section.
(c) The Depositary is hereby authorized and directed, without
instructions or further act by the Company or the Agent, to sell for cash, as
soon as practicable, any or all Permitted Investments held in a Cash Collateral
Account in order to effect a withdrawal therefrom pursuant to Section 2(b)
hereof, without responsibility to account for, or any liability for loss of,
interest or increased fees (including, without limitation, fees payable on the
undrawn amount of each Acquisition Letter of Credit) as a result of such sale.
If an Event of Default shall have occurred and be continuing and such sale (or
any payment at maturity) produces a net sum less than the cost (including
accrued interest) of the investments so sold or paid, the Company shall be
required to pay the deficiency to the Depositary upon receipt by the Company of
notice of such deficiency, for deposit in the Cash Collateral Account and
application to payment of the Obligations as permitted hereunder.
(d) As used herein, "Permitted Investments" shall mean (i) securities
---------------------
issued or directly and fully guaranteed by the United States Government or (ii)
certificates of deposit of any domestic commercial bank (including, without
limitation, the Agent) having capital and surplus in excess of $500,000,000, in
each case maturing no later than the earlier of (x) one year from the date of
acquisition and (y) five years following the last day of the Acquisition L/C
Commitment Period.
8. (a) The Company agrees to pay the reasonable fees and expenses
(including disbursements, advances and reasonable counsel fees) of the
Depositary incurred in connection with its execution and delivery of this Cash
Collateral Agreement and the performance of its duties hereunder. The duties of
the Depositary are only such as are specifically provided herein, including,
without limitation, as provided by any written instructions signed by the party
hereto who is authorized hereunder to deliver such instructions to the
Depositary. The duties of the Depositary are purely ministerial in nature, and
the Depositary shall incur no liability whatsoever, except for willful
misconduct or gross negligence.
(b) Beyond the safe custody of moneys and securities held in the Cash
Collateral Account, the Depositary shall be under no responsibility in respect
to any of the items deposited with it other than to comply with the specific
duties and responsibilities herein set forth or set forth in any written
instructions herein provided for and, without limiting the generality of the
foregoing, the Depositary shall have no obligation or responsibility to solicit
any items for deposit in the Cash Collateral Account or to determine (i) the
correctness of any statement or calculation made by the Agent, any Bank or the
Company in any written instructions, (ii) whether any deposit in the Cash
Collateral Account is proper or (iii) whether the existence of an Event of
Default shall restrict or require any action of the Depositary hereunder other
than as may be specified in any written instructions of the Agent delivered
pursuant hereto. The Depositary may consult with counsel and shall be fully
protected in any action taken in accordance with such advice. The Depositary
shall be fully indemnified by the Company against any liability, except for
liability resulting from
<PAGE>
6
its own willful misconduct or gross negligence, and against the cost and expense
of defending any legal proceedings which may be instituted against it in respect
of the subject matter of this Cash Collateral Agreement (including counsel
fees), but the Depositary shall not be required to institute legal proceedings
of any kind. The Depositary shall have no responsibility for the genuineness or
validity of any document or other item deposited with it and shall be fully
protected in acting in accordance with any written instructions given it
hereunder and believed by it to have been signed by the proper party or parties.
9. (a) The Depositary may resign at any time by giving 60 days'
prior written notice to the Agent and the Company.
(b) So long as no Default or Event of Default has occurred and is
continuing, and no fees or other amounts are owing by the Company to the
Depositary hereunder, the Company may select a successor Depositary with the
consent of the Agent, which consent shall not be unreasonably withheld, provided
--------
that such successor Depositary shall execute a counterpart of this Cash
Collateral Agreement.
(c) Upon appointment and acceptance as Depositary, each successor
Depositary shall forthwith, without further act or deed, succeed to all the
rights and duties of its predecessor under this Cash Collateral Agreement. Such
predecessor shall promptly deliver to such successor Depositary all sums and
securities held hereunder, together with all records and other documents
necessary or appropriate in connection with the performance of the duties of the
successor Depositary under this Cash Collateral Agreement. Upon the written
request of the successor Depositary, the Agent or the Company, and upon payment
of all amounts due to such predecessor under this Cash Collateral Agreement,
such predecessor shall transfer, assign and confirm to the successor Depositary
all its rights under this Cash Collateral Agreement by executing and delivering
from time to time to the successor Depositary such further instruments and by
taking such other action as may reasonably be deemed by such successor
Depositary, the Agent or the Company to be necessary or appropriate in
connection therewith.
10. The Company represents and warrants that:
(a) The Company has the power, authority and legal right to execute,
deliver and perform this Cash Collateral Agreement, to grant the lien on the
Collateral pursuant to this Cash Collateral Agreement, and that this Cash
Collateral Agreement constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law);
(b) This Cash Collateral Agreement is effective to create a valid
lien on and security interest of the first priority in the Pledged Funds on
deposit in the Cash Collateral Account, and the Company has taken no action
which would subject the Pledged Funds to any prior lien or security interest or
to any agreement purporting to grant to any third party a
<PAGE>
7
lien or security interest on the property or assets of the Company which would
include the Pledged Funds. Upon the making of deposits in the Cash Collateral
Account, all action necessary or desirable to protect and perfect such lien and
security interest will have been duly taken;
(c) No security agreements have been executed and delivered by the
Company, and no financing statements have been filed by the Company in any
jurisdiction, granting or purporting to grant a lien on or security interest in
the funds constituting or to constitute the Pledged Funds to any secured party
except in connection with this Cash Collateral Agreement and the other Loan
Documents;
(d) No consent or authorization of, filing with or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any other
Person is required in connection with the execution, delivery, performance,
validity or enforceability of this Cash Collateral Agreement; and
(e) The Company will promptly notify the Agent of any lien, charge,
encumbrance, security interest or claim made or asserted against the Cash
Collateral Account or any portion thereof and shall defend the Cash Collateral
Account against any such lien, charge, encumbrance, security interest or claim.
11. The Company agrees at any time or from time to time, upon the
request of the Agent or any Bank, to execute and deliver to the Agent or such
Bank such further documents and to do such further acts and things as the Agent
or such Bank may reasonably request in order fully to effect the purposes of
this Cash Collateral Agreement.
12. Any notice or demand upon any party to this Cash Collateral
Agreement shall be deemed to have been effectively given or made when delivered
by hand or, in the case of telegraphic notice, when delivered to the telegraph
company or, in the case of telex and/or telecopy notice, when sent (such
telegram or telex and/or telecopy to be confirmed in writing addressed to the
address set forth below) to such address or number set forth below (until
another address or number shall have been designated in writing by the
respective party to which such address or number relates):
The Company: Petroleum Heat and Power Co., Inc.
Clearwater House
2187 Atlantic Street - 5th Floor
Stamford, Connecticut 06902
Telecopier: (203) 328-7422
Attention: Irik P. Sevin, President
The Agent: Chemical Bank
7600 Jericho Turnpike
Woodbury, NY 11797
Attention: John T. Mast
Telecopier: (516) 364-3307
<PAGE>
8
Depositary: Chemical Bank
600 Fifth Avenue - 10th Floor
New York, New York 10020
Telecopier: (516) 364-3307
Attention: Escrow Administration
13. This Cash Collateral Agreement is being delivered in the State of
New York, and the rights, obligations and liabilities of the parties hereunder
shall be governed by, and construed and interpreted in accordance with, the laws
of the State of New York.
14. Any provision of this Cash Collateral Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. None of the terms or provisions of this Cash Collateral Agreement
may be waived, altered or amended except by an instrument in writing, duly
executed by the parties hereto.
16. This Cash Collateral Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, and
all of such counterparts taken together shall be deemed to constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Cash
Collateral Agreement to be duly executed and delivered by their proper and duly
authorized officers as of the day and year first above written.
PETROLEUM HEAT AND POWER CO., INC.
By
---------------------------------
Title:
CHEMICAL BANK, as Agent
By
---------------------------------
Title:
CHEMICAL BANK, as Depositary
By
---------------------------------
Title:
<PAGE>
EXHIBIT E to
Credit Agreement
----------------
FORM OF THIRD AMENDED AND RESTATED
SUBSIDIARY GUARANTEE
THIRD AMENDED AND RESTATED SUBSIDIARY GUARANTEE, dated as of August 1,
1994, between each Subsidiary listed on Schedule I hereto (collectively, the
"Guarantors") and CHEMICAL BANK (as successor by merger to Manufacturers Hanover
----------
Trust Company), as agent (in such capacity, the "Agent") for the banks and other
-----
financial institutions (the "Banks") from time to time parties to the Third
-----
Amended and Restated Credit Agreement, dated as of August 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
----------------
among Petroleum Heat and Power Co., Inc., a Minnesota corporation (the
"Company"), the Banks and the Agent.
-------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company and Manufacturers Hanover Trust Company were
parties to a Credit Agreement, dated as of December 31, 1986 (the "Original
--------
Agreement");
- - ---------
WHEREAS, in connection with the Original Agreement, the Guarantors
made a Guarantee, dated as of December 31, 1986, in favor of Manufacturers
Hanover Trust Company (the "Original Guarantee");
------------------
WHEREAS, the Original Agreement was amended and restated pursuant to
the Amended and Restated Credit Agreement, dated as of May 1, 1989 (the "First
-----
Amended and Restated Credit Agreement"), among the Company, the banks party
- - -------------------------------------
thereto and Manufacturers Hanover Trust Company, as agent for such banks;
WHEREAS; the First Amended and Restated Credit Agreement was amended
and restated pursuant to the Second Amended and Restated Credit Agreement dated
as of December 31, 1992 (the "Existing Credit Agreement"), among the Company,
the banks party thereto and Chemical Bank, as agent for such banks;
WHEREAS, in connection with the First Amended and Restated Credit
Agreement, the Original Guarantee was amended and restated pursuant to the
Amended and Restated Subsidiary Guarantee, dated as of May 1, 1989 (the "First
-----
Amended and Restated Guarantee");
- - ------------------------------
WHEREAS, in connection with the Existing Credit Agreement, the First
Amended and Restated Guarantee was amended and restated pursuant to the Second
Amended and Restated Subsidiary Guarantee dated as of December 31, 1992 (as
amended, supplemented or otherwise modified prior to the date hereof, the
"Existing Guarantee");
WHEREAS, the Company has requested that the Existing Credit Agreement
be amended to contain, inter alia, (i) a revolving credit and letter of credit
----- ----
facility to provide
<PAGE>
2
financing for the Company's ongoing acquisition program, (ii) provisions for the
issuance of Inventory Letters of Credit (as defined in the Credit Agreement) and
(iii) certain other provisions upon the terms and subject to the conditions
therein contained;
WHEREAS, the Company and the Guarantors are engaged in related
businesses, and each Guarantor will derive substantial benefits from the making
of the extensions of credit under the Credit Agreement and the Line Letter; and
WHEREAS, in connection with the execution of the Credit Agreement, the
Guarantors, the Banks and the Agent wish to amend the Existing Guarantee on the
terms and conditions set forth herein and, for convenience of reference, to
restate the Existing Guarantee as so amended;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and to induce the Agent and the Banks to enter into the Credit
Agreement and to induce the Banks to make their respective extensions of credit
to the Company under the Credit Agreement and the Line Letter, the Guarantors
hereby agree with the Agent, for the ratable benefit of the Banks, that the
Existing Guarantee shall be and hereby is amended and restated in its entirety
as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in
-------------
the Credit Agreement shall herein have the respective meanings assigned to them
therein. The following terms shall have the following meanings:
"Credit Documents" shall mean the Credit Agreement, each Note, each
----------------
Letter of Credit, each Acceptance, each Draft, each Line Letter, each
Application, each Security Document and any other Loan Document.
"Letters of Credit" shall mean all letters of credit issued by any
-----------------
Bank as permitted pursuant to subsections 3.1 and 6.1 of the Credit
Agreement.
"Obligations" shall mean the unpaid principal amount of, and interest
-----------
on (including without limitation, interest accruing after the maturity of
the Loans and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for post-filing
or post-petition interest is allowed in such proceeding) the Notes, the
Acceptance Reimbursement Obligations, the Inventory L/C Reimbursement
Obligations, the Acquisition L/C Reimbursement Obligations, reimbursement
obligations for Letters of Credit issued by any Bank in connection with any
Line Letter and which are permitted by subsection 12.3(f) of the Credit
Agreement, amounts owing to any Bank in connection with Working Capital
Borrowings or Acquisition Loans permitted pursuant to subsection 2.1 or
subsection 5.1, respectively, of the Credit Agreement and all other
obligations and liabilities of the Company or any Subsidiary to the Agent
or to the Banks, whether direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter
<PAGE>
3
incurred, which may arise under, out of, or in connection with, the Credit
Agreement, any Note, any Acceptance, any Draft, any Application, any Letter
of Credit, any other Loan Document (including, without limitation, the
Guarantee) and any other document (including, without limitation, any Line
Letter) executed and delivered in connection therewith or herewith, whether
on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including, without limitation, all fees and
disbursements of counsel to the Agent or to the Banks that are required to
be paid by the Company pursuant to the terms of the Credit Agreement) or
otherwise.
2. Guarantee. (a) Each Guarantor hereby, jointly and severally,
---------
unconditionally and irrevocably guarantees to the Agent and the Banks and their
respective successors, indorsees, transferees and assignees, the prompt and
complete payment and performance by the Company when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations. Each Guarantor
further agrees to pay any and all expenses (including, without limitation, all
fees and disbursements of counsel) which may be paid or incurred by the Agent or
by the Banks in enforcing, or obtaining advice of counsel in respect of, any of
their rights under this Guarantee. This Guarantee shall remain in full force
and effect until the Obligations are paid in full and the Acquisition
Commitments, Acquisition Term Loan Commitments, Working Capital Commitments, all
Letters of Credit and the Line Letters are terminated, notwithstanding that from
time to time prior thereto the Company may be free from any Obligations.
(b) Each Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Agent or any Bank on account of its
liability hereunder, it will notify the Agent and such Bank in writing that such
payment is made under this Guarantee for such purpose.
(c) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors.
(d) Each Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of such Guarantor hereunder
without impairing this Guarantee or affecting the rights and remedies of the
Agent or any Bank hereunder.
(e) No payment or payments made by the Company, any Guarantor, any
other guarantor or any other Person or received or collected by the Agent or any
Bank from the Company, any Guarantor, any other guarantor or any other Person by
virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Obligations shall be deemed to modify, reduce, release or otherwise affect
the liability of any Guarantor hereunder which shall, notwithstanding any such
payment or payments other than payments made by such Guarantor in respect of the
Obligations or payments received or collected from such Guarantor in respect of
the Obligations, remain liable for the Obligations up to up to the maximum
liability of such
<PAGE>
4
Guarantor hereunder until the Obligations are paid in full and the Acquisition
Commitments, Acquisition Term Loan Commitments, the Working Capital Commitments,
all Letters of Credit and all Line Letters are terminated.
3. Right of Set-off. The Agent and each Bank are hereby irrevocably
----------------
authorized by each Guarantor at any time and from time to time without notice to
such Guarantor, any such notice being hereby waived by each Guarantor, to set
off and appropriate and apply any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Agent or such Bank to or for the credit or the account of the
Guarantor, or any part thereof in such amounts as the Agent or such Bank may
elect, on account of the liabilities of such Guarantor hereunder and claims of
every nature and description of the Agent or such Bank against such Guarantor,
in any currency, whether arising hereunder, under the Credit Agreement, any
Note, any Inventory L/C Reimbursement Obligation, any Acceptance Reimbursement
Obligation, any Draft, any Letter of Credit, any Application, any Line Letter,
any other Security Document or otherwise, as the Agent or such Bank may elect,
whether or not the Agent or such Bank has made any demand for payment and
although such liabilities and claims may be contingent or unmatured. The Agent
and each Bank shall notify such Guarantor promptly of any such set-off made by
it and the application made by it of the proceeds thereof, provided that the
--------
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Agent and each Bank under this paragraph are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Agent or such Bank may have.
4. No Subrogation. Notwithstanding any payment or payments made by
--------------
any Guarantor hereunder, or any set-off or application of funds of such
Guarantor by the Agent or any Bank, such Guarantor shall not be entitled to be
subrogated to any of the rights of the Agent or any Bank against the Company,
or, any other Guarantor or any other Person or against any collateral security
or guarantee or right of offset held by the Agent or any Bank for the payment of
the Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from the Company, any other Guarantor or any other
Person in respect of payments made by such Guarantor hereunder, until all
amounts owing to the Agent and the Banks by the Company on account of the
Obligations are paid in full and the Acquisition Commitments, Acquisition Term
Loan Commitments, the Working Capital Commitments, all Letters of Credit and all
Line Letters are terminated. If any amount shall be paid to any Guarantor on
account of such subrogation rights at any time when all of the Obligations shall
not have been paid in full, such amount shall be held by such Guarantor in trust
for the Agent and the Banks, segregated from other funds of such Guarantor, and
shall, forthwith upon receipt by such Guarantor, be turned over to the Agent in
the exact form received by such Guarantor (duly indorsed by such Guarantor to
the Agent, if required), to be applied against the Obligations, whether matured
or unmatured, in such order as the Agent may determine.
<PAGE>
5
5. Amendments, etc. with respect to the Obligations. Each Guarantor
------------------------------------------------
shall remain obligated hereunder notwithstanding that, without any reservation
of rights against such Guarantor or any other Guarantor, and without notice to
or further assent by such Guarantor or any other Guarantor, any demand for
payment of any of the Obligations made by the Agent or any Bank may be rescinded
by the Agent or such Bank, and any of the Obligations continued, and the
Obligations, or the liability of any other party upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by
the Agent or any Bank, and the Credit Agreement, any Note, any Letter of Credit,
any Line Letter, any Acceptance, any Draft, the Security Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or in part, as the Banks (or the
Required Banks, as the case may be) may deem advisable from time to time, and
any collateral security, guarantee or right of offset at any time held by the
Agent or any Bank for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. Neither the Agent nor any Bank shall have any
obligation to protect, secure, perfect or insure any lien at any time held by it
as security for the Obligations or for this Guarantee or any property subject
thereto. When making any demand hereunder against any of the Guarantors, the
Agent or any Bank may, but shall be under no obligation to, make a similar
demand on the Company or any other Guarantor or guarantor, and any failure by
the Agent or any Bank to make any such demand or to collect any payments from
the Company or any such other Guarantor or guarantor or any release of the
Company or such other Guarantor or guarantor shall not relieve any of the
Guarantors in respect of which a demand or collection is not made or any of the
Guarantors not so released of their several obligations or liabilities
hereunder, and shall not impair or affect the rights and remedies, express or
implied, or as a matter of law, of the Agent or any Bank against any of the
Guarantors. For the purposes hereof "demand" shall include the commencement and
continuance of any legal proceedings.
6. Guarantee Absolute and Unconditional. Each Guarantor waives any
------------------------------------
and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Agent or any Bank upon
this Guarantee or acceptance of this Guarantee; the Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred
in reliance upon this Guarantee; and all dealings between the Company or any
Guarantor, on the one hand, and the Agent and the Banks, on the other, shall
likewise be conclusively presumed to have been had or consummated in reliance
upon this Guarantee. Each Guarantor waives diligence, presentment, protest,
demand for payment and notice of default or nonpayment to or upon the Company or
any Guarantor with respect to the Obligations. This Guarantee shall be
construed as a continuing, absolute and unconditional guarantee of payment
without regard to (a) the validity or enforceability of the Credit Agreement,
any Note, any Letter of Credit, any Application, any Acceptance, any Draft, any
Line Letter, any other Security Document, any of the Obligations or any
collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Agent or any Bank, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by
<PAGE>
6
the Company against the Agent or any Bank, or (c) any other circumstance
whatsoever (with or without notice to or knowledge of the Company or any
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of the Company for the Obligations, or of any Guarantor under
this Guarantee, in bankruptcy or in any other instance. When the Agent is
pursuing its rights and remedies hereunder against any Guarantor, the Agent or
any Bank may, but shall be under no obligation to, pursue such rights and
remedies as it may have against the Company, any other Guarantor or any other
Person or against any collateral security or guarantee for the Obligations or
any right of offset with respect thereto, and any failure by the Agent or any
Bank to pursue such other rights or remedies or to collect any payments from the
Company, any other Guarantor or any such other Person or to realize upon any
such collateral security or guarantee or to exercise any such right of offset,
or any release of the Company, any other Guarantor or any such other Person or
of any such collateral security, guarantee or right of offset, shall not relieve
any Guarantor of any liability hereunder, and shall not impair or affect the
rights and remedies, whether express, implied or available as a matter of law,
of the Agent and the Banks against such Guarantor.
7. Reinstatement. This Guarantee shall continue to be effective, or
-------------
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any of the Obligations is rescinded or must otherwise be restored or returned
by the Agent or any Bank upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company, or any Guarantor or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Company or any substantial part of its
property, or otherwise, all as though such payments had not been made.
8. Payments. Each Guarantor hereby agrees that the Obligations will
--------
be paid to the Agent without set-off or counterclaim in U.S. Dollars at the
office of the Agent located at 7600 Jericho Turnpike, Woodbury, New York 11797.
9. Representations and Warranties. Each Guarantor represents and
------------------------------
warrants to the Agent and the Banks that:
(a) such Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority and the legal right
to own and operate its property, to lease the property it operates and to
conduct the business in which it is currently engaged;
(b) such Guarantor has the corporate power and authority and the
legal right to execute and deliver, and to perform its obligations under,
this Guarantee, and has taken all necessary corporate action to authorize
its execution, delivery and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding obligation
of such Guarantor enforceable in accordance with its terms, except as
enforceability may be
<PAGE>
7
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally;
(d) the execution, delivery and performance of this Guarantee will
not violate any provision of any Requirement of Law or Contractual
Obligation of such Guarantor and will not result in or require the creation
or imposition of any lien on any of the properties or revenues of such
Guarantor pursuant to any Requirement of Law or Contractual Obligation of
such Guarantor;
(e) no consent or authorization of, filing with, or other act by or
in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or
creditor of such Guarantor) is required in connection with the execution,
delivery, performance, validity or enforceability of this Guarantee;
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
such Guarantor, threatened by or against such Guarantor or against any of
its properties or revenues (i) with respect to this Guarantee or any of the
transactions contemplated hereby or (ii) which, if adversely determined,
would have a material adverse effect on the business, operations, property
or financial or other condition of such Guarantor;
(g) such Guarantor has good record and marketable title in fee simple
to or valid leasehold interests in all its real property, and good title to
all its other property, and none of such property is subject to any lien of
any nature whatsoever except as permitted by subsection 12.2 of the Credit
Agreement; and
(h) such Guarantor has filed or caused to be filed all tax returns
required to be filed by it, and has paid all taxes due on said returns or
on any assessments made against it (other than those being contested in
good faith by appropriate proceedings for which adequate reserves have been
provided on its books in accordance with GAAP).
Each Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by such Guarantor on the date of
each borrowing, issuance of a Letter of Credit or creation of an Acceptance
under the Credit Agreement on and as of such date of borrowing, issuance or
creation, as the case may be, as though made hereunder on and as of such date.
11. Severability. Any provision of this Guarantee which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE>
8
12 Paragraph Headings. The paragraph headings used in this Guarantee
------------------
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
13. No Waiver; Cumulative Remedies. Neither the Agent nor any Bank
------------------------------
shall by any act (except by a written instrument pursuant to paragraph 14
hereof), delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Default or Event of
Default or in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Agent or any Bank,
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Agent or any Bank of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Agent or such Bank would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
14. Waivers and Amendments; Successors and Assigns; Governing Law.
-------------------------------------------------------------
None of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
such Guarantor and the Agent, provided that any provision of this Guarantee may
--------
be waived by the Agent in a letter or agreement executed by the Agent or by
telex or facsimile transmission from the Agent. This Guarantee shall be binding
upon the successors and assigns of each Guarantor and shall inure to the benefit
of the Agent and the Banks and their respective successors and assigns. This
Guarantee shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York.
15. Notices. Notices by the Agent to each Guarantor may be given by
-------
mail, by telex or by facsimile transmission, addressed to each Guarantor at its
address or transmission number set forth on Schedule I hereto and shall be
effective (a) in the case of mail, 2 days after deposit in the postal system,
first class postage pre-paid and (b) in the case of telex or facsimile
transmissions, when sent. Each Guarantor may change its address and
transmission numbers by written notice to the Agent.
16. Authority of Agent. Each Guarantor acknowledges that the rights
------------------
and responsibilities of the Agent under this Guarantee with respect to any
action taken by the Agent or the exercise or non-exercise by the Agent of any
option, right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Guarantee shall, as between the Agent and the
Banks, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Agent and each Guarantor, the Agent shall be conclusively presumed to be acting
as agent for the Banks with full and valid authority so to act or refrain from
acting, and the Guarantor shall not be under any obligation, or entitlement, to
make any inquiry respecting such authority.
<PAGE>
9
17. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
18. Submission to Jurisdiction; Waivers. (a) Each Grantor hereby
-----------------------------------
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding commenced by any party hereto relating to this Guarantee or any
other Loan Document to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the courts of the State of New York, the courts of
the United States of America for the Southern District of New York, and
appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Guarantor at its address set forth on Schedule I hereto or at such other
address of which the Agent shall have been notified with copies addressed
as set forth in Section 15; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
(b) EACH GUARANTOR, EACH BANK AND THE AGENT KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING REFERRED TO IN PARAGRAPH (a) ABOVE, AND EACH GUARANTOR HEREBY WAIVES
ITS RIGHT OF SET-OFF AND ITS RIGHT TO INTERPOSE COUNTERCLAIMS IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM
THEREIN.
<PAGE>
10
19. Counterparts This Guarantee may be executed by one or more of
------------
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, each of the Guarantors and the Agent has caused
this Guarantee to be duly executed and delivered by their duly authorized
officers as of the date first above written.
ORTEP FUEL OIL OF RHODE ISLAND, INC.
ORTEP OF CONNECTICUT, INC.
PETRO, INC.
PETRO/CRYSTAL CORP.
ORTEP OF STATEN ISLAND, INC.
CBW REALTY CORP. OF NEW YORK
CBW REALTY CORP. OF CONNECTICUT
CBW REALTY CORP. OF PENNSYLVANIA
CBW REALTY CORP.
OCENNET FUEL OIL CORP.
ORTEP OF NEW JERSEY, INC.
MAXWHALE CORP.
PUBLIC FUEL SERVICES CO., INC.
MILLER FUEL OIL CO.
D.J.W. GASOLINE CO.
ORTEP OF PENNSYLVANIA, INC.
MAREX CORPORATION
A.P. WOODSON CO.
RELIANCE UTILITIES CORP.
By__________________________________
Title:
CHEMICAL BANK, as Agent
By__________________________________
Title:
<PAGE>
11
SCHEDULE I to
Third Amended and Restated
Subsidiary Guarantee
---------------------
NAMES AND ADDRESSES OF GUARANTORS
---------------------------------
ORTEP FUEL OIL OF RHODE ISLAND, INC.
ORTEP OF CONNECTICUT, INC.
PETRO, INC.
PETRO/CRYSTAL CORP.
ORTEP OF STATEN ISLAND, INC.
CBW REALTY CORP. OF NEW YORK
CBW REALTY CORP. OF CONNECTICUT
CBW REALTY CORP. OF PENNSYLVANIA
CBW REALTY CORP.
OCENNET FUEL OIL CORP.
Clearwater House
2187 Atlantic Street - 5th Floor
Stamford, Connecticut 06902
Telecopier: (203) 328-7422
Attention: Joseph P. Cavanaugh
ORTEP OF NEW JERSEY, INC.
1245 Westfield Avenue
Clark, New Jersey 07066
Telecopier: (908) 574-8888
Attention: Joseph P. Cavanaugh
MAXWHALE CORP.
1 Coffey Street
Brooklyn, New York 11231
Telecopier: (718) 624-5459
Attention: Joseph P. Cavanaugh
PUBLIC FUEL SERVICES CO., INC .
740 Jamaica Avenue
Brooklyn, New York 11208
Telecopier: (718) 827-1105
Attention: Joseph P. Cavanaugh
<PAGE>
12
D.J.W. GASOLINE CO.
MILLER FUEL OIL CO.
ORTEP OF PENNSYLVANIA, INC.
4025 Pottsville Pike
Reading, Pennsylvania 19605
Telecopier: (215) 929-0397
Attention: Joseph P. Cavanaugh
MAREX CORPORATION
8900 Citation Road
Baltimore, Maryland 21221
Telecopier: (410) 574-7027
Attention: Joseph P. Cavanaugh
A.P. WOODSON CO.
8101 Parston Drive
Forrestville, MD 20747
Telecopier: (301) 735-8243
Attention: Joseph P. Cavanaugh
RELIANCE UTILITIES CORP .
522 Grand Blvd.
Westbury, New York 115901
Telecopier: (516) 338-0065
Attention: Joseph P. Cavanaugh
<PAGE>
EXHIBIT F to
Credit Agreement
----------------
FORM OF
THIRD AMENDED AND RESTATED
SUBSIDIARY SECURITY AGREEMENT
THIRD AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT, dated as of
August 1, 1994, between each Subsidiary signatory hereto (each, a "Grantor"),
-------
and CHEMICAL BANK (as successor by merger to Manufacturers Hanover Trust
Company), as agent (in such capacity, the "Agent") for the banks and other
-----
financial institutions (the "Banks") from time to time parties to the Third
-----
Amended and Restated Credit Agreement, dated as of August 1, 1994 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
----------------
among Petroleum Heat and Power Co., Inc. (the "Company"), the Banks and the
-------
Agent.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company and Manufacturers Hanover Trust Company were
parties to a Credit Agreement, dated as of December 31, 1986 (the "Original
--------
Agreement");
- - ---------
WHEREAS, in connection with the Original Agreement, the Grantors made
a Security Agreement, dated as of December 31, 1986, in favor of Manufacturers
Hanover Trust Company (the "Original Security Agreement");
---------------------------
WHEREAS, the Original Agreement was amended and restated pursuant to
the Amended and Restated Credit Agreement, dated as of May 1, 1989 (as amended,
supplemented or otherwise modified prior to the date hereof, the "First Amended
-------------
and Restated Credit Agreement"), among the Company, Maxwhale Corp., the banks
- - -----------------------------
party thereto and Manufacturers Hanover Trust Company, as agent for such banks;
WHEREAS, the First Amended and Restated Credit Agreement was amended
and restated pursuant to the Second Amended and Restated Credit Agreement dated
as of December 31, 1992 (the "Existing Credit Agreement") among the Company, the
-------------------------
banks parties thereto and Chemical Bank, as agent for such banks;
WHEREAS, in connection with the First Amended and Restated Credit
Agreement, the Original Security Agreement was amended and restated pursuant to
the Amended and Restated Subsidiary Security Agreement, dated as of May 1, 1989,
made by the Grantors in favor of Manufacturers Hanover Trust Company, as agent
(the "First Amended and Restated Security Agreement");
---------------------------------------------
WHEREAS, in connection with the Existing Credit Agreement, the First
Amended and Restated Security Agreement was amended and restated pursuant to the
Second Amended and Restated Subsidiary Security Agreement, dated as of December
31, 1992, made
<PAGE>
2
by the Grantors in favor of Chemical Bank, as agent (as amended, supplemented or
otherwise modified prior to the date hereof, the "Existing Security Agreement");
---------------------------
WHEREAS, the Company has requested that the Existing Credit Agreement
be amended to contain, inter alia, (i) a revolving credit and letter of credit
----- ----
facility to provide financing for the Company's ongoing acquisition program (ii)
provisions for the issuance of Inventory Letters of Credit (as defined in the
Credit Agreement) and (iii) certain other provisions upon the terms and subject
to the conditions therein contained;
WHEREAS, the Company and the Grantors are engaged in related
businesses, and each Grantor will derive substantial benefit from the making of
the extensions of credit under the Credit Agreement; and
WHEREAS, in connection with the execution of the Credit Agreement, the
Grantors, the Agent and the Banks wish to amend the Existing Security Agreement
on the terms and conditions set forth herein and, for convenience of reference,
to restate the Existing Security Agreement as so amended;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and to induce the Agent and the Banks to enter into the Credit
Agreement and to induce the Banks to make their respective loans and other
extensions of credit to the Company under the Credit Agreement, the Grantors
hereby agree with the Agent, for the ratable benefit of the Banks, that the
Existing Security Agreement shall be and hereby is amended and restated in its
entirety as follows:
1. Defined Terms. Unless otherwise defined herein:
-------------
(a) terms which are defined in the Credit Agreement and used herein are so used
as so defined;
(b) the following terms which are defined in the UCC are used herein as so
defined: Accounts, Chattel Paper, Instruments, Inventory and Proceeds; and
(c) the following terms shall have the following meanings:
"Collateral" shall have the meaning set forth in Section 2 of this
----------
Security Agreement.
"Customer Lists" shall mean, at any time, the names and addresses of
--------------
all customers of each Grantor at such time, together with all trade names
and trademarks and all supporting documents, including but not limited to
computer discs, programs, tapes, aged trial balances and carrying media.
"Guarantee" shall mean the Third Amended and Restated Subsidiary
---------
Guarantee, dated as of the date hereof, made by each Grantor in favor of
the Agent, for the
<PAGE>
3
benefit of the Banks, as amended, supplemented or otherwise modified from
time to time.
"Obligations" shall mean the obligations of each Grantor (including,
-----------
without limitation, the "Obligations" referred to therein) under the
Guarantee to which it is a party.
"Security Agreement" shall mean this Third Amended and Restated
------------------
Subsidiary Security Agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
"Trademarks" means (a) all trademarks, trade names, corporate names,
----------
company names, business names, fictitious business names, trade styles,
service marks, logos and other source of business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country, or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in
Schedule I hereto, and (b) all renewals thereof.
"Trademark License" means any agreement, written or oral, naming a
-----------------
Grantor as licensor or licensee, granting any right under any Trademark and
the goodwill associated therewith.
"UCC" shall mean the Uniform Commercial Code as from time to time in
---
effect in the State of New York.
2. Confirmation and Grant of Security Interest. (a) Each Grantor
-------------------------------------------
hereby confirms and acknowledges that pursuant to the Existing Security
Agreement and certain other Loan Documents the Agent had been duly assigned,
pledged and granted, for the ratable benefit of the Banks, a continuing security
interest in and to certain of the Collateral (as defined in the Existing
Security Agreement). Each Grantor hereby ratifies and restates such pledge,
assignment and grant as to all of such Collateral and confirms that such pledge,
assignment and grant shall continue to be made for the ratable benefit of the
Banks in favor of the Agent.
(b) As collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations, each Grantor hereby grants to the Agent, for the
ratable benefit of the Banks, a security interest in all of the following
property now owned or at any time hereafter acquired by such Grantor or in which
such Grantor now has or at any time in the future may acquire any right, title
or interest (collectively, the "Collateral"):
----------
(i) all Customer Lists;
<PAGE>
4
(ii) all Accounts;
(iii) all Inventory;
(iv) all Trademarks;
(v) all Trademark Licenses;
(vi) all books and records pertaining to the Collateral; and
(vii) to the extent not otherwise included, all Proceeds and products of
any and all of the foregoing.
3. Representations and Warranties. Each Grantor hereby represents
------------------------------
and warrants that:
(a) Title; No Other Liens. Except for the lien granted to the Agent
---------------------
for the benefit of the Banks pursuant to this Security Agreement and the
other liens permitted to exist on the Collateral pursuant to the Credit
Agreement, such Grantor owns each item of the Collateral free and clear of
any and all liens or claims of others. No security agreement, financing
statement or other public notice with respect to all or any part of the
Collateral granted by such Grantor is on file or of record in any public
office, except such as may have been filed in favor of the Agent, for the
benefit of the Banks, pursuant to this Security Agreement or as may be
permitted pursuant to the Credit Agreement.
(b) Perfected First Priority Liens. The liens granted by such
------------------------------
Grantor pursuant to this Security Agreement constitute perfected liens on
the Collateral in favor of the Agent, for the ratable benefit of the Banks,
which are prior to all other liens on the Collateral created by such
Grantor and in existence on the date hereof and which are enforceable as
such against all creditors of and purchasers from such Grantor.
(c) Location of Inventory. The Inventory of such Grantor is kept at
---------------------
the locations listed with respect to such Grantor on Schedule II hereto.
(d) Power and Authority; Authorization. Such Grantor has the
----------------------------------
corporate power and authority and the legal right to execute and deliver,
to perform its obligations under, and to grant the lien on the Collateral
granted by such Grantor pursuant to, this Security Agreement and has taken
all necessary corporate action to authorize its execution, delivery and
performance of, and grant of the lien on the Collateral granted by such
Grantor pursuant to, this Security Agreement.
(e) Enforceability. This Security Agreement constitutes a legal,
--------------
valid and binding obligation of such Grantor, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.
<PAGE>
5
(f) No Conflict. The execution, delivery and performance of this
-----------
Security Agreement will not violate any provision of any Requirement of Law
or Contractual Obligation of such Grantor and will not result in the
creation or imposition of any lien on any of the properties or revenues of
such Grantor pursuant to any Requirement of Law or Contractual Obligation
of such Grantor, except as contemplated hereby.
(g) No Consents, etc. No consent or authorization of, filing with,
-----------------
or other act by or in respect of, any arbitrator or Governmental Authority
and no consent of any other Person (including, without limitation, any
stockholder or creditor of such Grantor), is required in connection with
the execution, delivery, performance, validity or enforceability of this
Security Agreement.
(h) No Litigation. No litigation, investigation or proceeding of or
-------------
before any arbitrator or Governmental Authority is pending or, to the
knowledge of such Grantor, threatened by or against such Grantor or against
any of its properties or revenues with respect to this Security Agreement,
the Collateral or any of the transactions contemplated hereby.
(i) Chief Executive Office. Such Grantor's chief executive office
----------------------
and chief place of business is located at the location listed with respect
to such Grantor on Schedule III hereto.
4. Covenants. Such Grantor covenants and agrees with the Agent and
---------
the Banks that, from and after the date of this Security Agreement until the
Obligations are paid in full and the Acquisition Commitments, Acquisition Term
Loan Commitments, Working Capital Commitments, all Letters of Credit and all
Acceptances are terminated:
(a) Further Documentation; Pledge of Instruments. At any time and
--------------------------------------------
from time to time, upon the written request of the Agent, and at the sole
expense of such Grantor, such Grantor will promptly and duly execute and
deliver such further instruments and documents and take such further action
as the Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Security Agreement and of the rights
and powers herein granted, including, without limitation, filings with
appropriate Governmental Authorities needed to perfect the security
interest granted hereunder in trademarks and tradenames and the filing of
any financing or continuation statements under the Uniform Commercial Code
in effect in any jurisdiction with respect to the liens created hereby.
Such Grantor also hereby authorizes the Agent to file any such financing or
continuation statement without the signature of such Grantor to the extent
permitted by applicable law. A carbon, photographic or other reproduction
of this Security Agreement shall be sufficient as a financing statement for
filing in any jurisdiction.
(b) Indemnification. Such Grantor agrees to pay, and to save the
---------------
Agent and the Banks harmless from, any and all liabilities, costs and
expenses (including, without limitation, legal fees and expenses) (i) with
respect to, or resulting from, any delay in paying, any and all excise,
sales or other taxes which may be payable or determined to
<PAGE>
6
be payable with respect to any of the Collateral, (ii) with respect to, or
resulting from, any delay by any Person (other than the Agent or any Bank)
in complying with any Requirement of Law applicable to any of the
Collateral or (iii) in connection with any of the transactions contemplated
by this Security Agreement.
(c) Maintenance of Records. Such Grantor will keep and maintain at
----------------------
its own cost and expense satisfactory and complete records of the
Collateral. Such Grantor will mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the security interests
granted hereby. For the further security of the Agent and the Banks, the
Agent, for the ratable benefit of the Banks, shall have a security interest
in all of such Grantor's books and records pertaining to the Collateral,
and such Grantor shall turn over for inspection any such books and records
to the Agent or to its representatives during normal business hours at the
request of the Agent.
(d) Right of Inspection. The Agent and the Banks shall at all times
-------------------
have full and free access during normal business hours to all the books,
correspondence and records of such Grantor, and the Agent and the Banks and
their respective representatives may examine the same, take extracts
therefrom and make photocopies thereof, and such Grantor agrees to render
to the Agent and the Banks, at such Grantor's cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto.
(e) Compliance with Laws, etc. Such Grantor will comply in all
--------------------------
material respects with all Requirements of Law applicable to the Collateral
or any part thereof or to the operation of such Grantor's business;
provided, however, that such Grantor may contest any Requirement of Law in
-------- -------
any reasonable manner which shall not, in the sole opinion of the Agent,
adversely affect the Agent's or the Banks' rights or the priority of their
liens on the Collateral.
(f) Payment of Obligations. Such Grantor will pay promptly when due
----------------------
all taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor,
materials and supplies) against or with respect to such Grantor, except
that no such charge need be paid if (i) the validity thereof is being
contested in good faith by appropriate proceedings, (ii) such proceedings
do not involve any material danger of the sale, forfeiture or loss of any
of the Collateral or any interest therein and (iii) such charge is
adequately reserved against on such Grantor's books in accordance with
GAAP.
(g) Limitation on Liens on Collateral. Such Grantor will not create,
---------------------------------
incur or permit to exist, will defend the Collateral against, and will take
such other action as is necessary to remove, any lien or claim on or to the
Collateral, other than the liens created hereby and other than as permitted
pursuant to the Credit Agreement, and will defend the right, title and
interest of the Agent and the Banks in and to any of the Collateral against
the claims and demands of all Persons whomsoever.
<PAGE>
7
(h) Limitations on Dispositions of Collateral. Such Grantor will
-----------------------------------------
not sell, transfer, lease or otherwise dispose of any of the Collateral, or
attempt, offer or contract to do so except as permitted in the Credit
Agreement.
(i) Further Identification of Collateral. Such Grantor will furnish
------------------------------------
to the Agent and the Banks from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Agent may reasonably request, all in
reasonable detail.
(j) Notices. Such Grantor will advise the Agent and the Banks
-------
promptly, in reasonable detail, at their respective addresses set forth in
subsection 15.2 of the Credit Agreement, (i) of any lien (other than liens
created hereby or permitted under the Credit Agreement) on, or claim
asserted against, any of the Collateral granted by it and (ii) of the
occurrence of any other event which could reasonably be expected to have a
material adverse effect on the aggregate value of the Collateral or on the
liens created hereunder.
(k) Changes in Locations, Name, etc. Such Grantor will not (i)
--------------------------------
permit any Inventory having a market value in excess of $100,000 to be kept
at a location at which the Agent does not have a perfected security
interest; or (ii) change its name, identity or corporate structure to such
an extent that any financing statement (after giving effect to any
amendments thereto) filed by the Agent in connection with this Security
Agreement would become seriously misleading.
5. Trademarks.
----------
5.1 Representations and Warranties Concerning the Trademarks.
--------------------------------------------------------
Schedule I hereto includes all registered Trademarks owned by each Grantor in
its own name as of the date hereof. To the best of each Grantor's knowledge,
each of its Trademarks is valid, subsisting, unexpired, enforceable and has not
been abandoned. Except as set forth in Schedule I, none of such Trademarks is
the subject of any licensing or franchise agreement. No holding, decision or
judgment has been rendered by any United States Governmental Authority which
would be reasonably likely to limit, cancel or question the validity of any
Trademark. No action or proceeding is pending (i) seeking to limit, cancel or
question the validity of any Trademark, or (ii) which, if adversely determined,
would be reasonably likely to have a material adverse effect on the value of any
Trademark.
5.2 Covenants. (a) Each Grantor (either itself or through
---------
licensees) will, except with respect to any Trademark that such Grantor shall
reasonably determine is of negligible economic value to it, (i) continue to use
each of its Trademarks in a manner which maintains such Trademark in full force
free from any claim of abandonment for non-use, (ii) maintain as in the past the
quality of products and services offered under such Trademark, (iii) not adopt
or use any mark which is confusingly similar or a colorable imitation of such
Trademark unless such Grantor shall grant to the Agent, for the ratable benefit
of the Banks, a perfected security interest in such mark pursuant to this
Security Agreement, and (iv) not
<PAGE>
8
(and not permit any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby any of its Trademarks may become invalidated.
(b) Each Grantor will notify the Agent and the Banks immediately
if it knows, or has reason to know, that any application or registration
relating to any Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office or any court or tribunal in any country) regarding
such Grantor's ownership of any Trademark or its right to register the same or
to keep and maintain the same.
(c) Whenever a Grantor either itself or through any agent, employee,
licensee or designee, shall file an application for registration of any
Trademark with the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof, such
Grantor shall report such filing to the Agent and the Banks within five Business
Days after the last day of the fiscal quarter in which such filing occurs. Upon
request of the Agent, such Grantor shall execute and deliver any and all
additional agreements, instruments, documents, and papers as the Agent may
request to evidence the Agent's and the Banks' security interest in any
Trademark and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby, and such Grantor hereby constitutes the Agent
its attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power being coupled with an interest is irrevocable until the Obligations shall
have been fully paid and the Working Capital Commitments, the Acquisition
Commitments, the Acquisition Term Loan Commitments and all Letters of Credit
shall have been terminated.
(d) Each Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, or any similar office or agency in any other country or
any political subdivision thereof, to maintain and pursue each of its
applications (and to obtain the relevant registration) and to maintain each
registration of its Trademarks, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of incontestability.
(e) In the event that any Trademark included in the Collateral
granted by a Grantor is infringed, misappropriated or unlawfully diluted by a
third party, such Grantor shall promptly notify the Agent and the Bank after it
learns thereof and shall, unless such Grantor shall reasonably determine that
such Trademark is of negligible economic value to such Grantor which
determination such Grantor shall promptly report to the Agent and the Banks,
promptly sue for infringement, misappropriation or dilution, to seek injunctive
relief where appropriate and to recover any and all damages for such
infringement, misappropriation or dilution, or take such other actions as such
Grantor shall reasonably deem appropriate under the circumstances to protect
such Trademark.
<PAGE>
9
6. Provisions Relating to Accounts.
-------------------------------
6.1 Grantor Remains Liable under Accounts. Anything herein to the
-------------------------------------
contrary notwithstanding, each Grantor shall remain liable under each of its
Accounts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account. Neither the Agent nor any Bank
shall have any obligation or liability under any Account (or any agreement
giving rise thereto) by reason of or arising out of this Agreement or the
receipt by the Agent or any Bank of any payment relating to such Account
pursuant hereto, nor shall the Agent or any Bank be obligated in any manner to
perform any of the obligations of a Grantor under or pursuant to any Account (or
any agreement giving rise thereto), to make any payment, to make any inquiry as
to the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Account (or any agreement
giving rise thereto), to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times.
6.2 Analysis of Accounts. The Agent shall have the right to make
--------------------
test verifications of the Accounts in any manner and through any medium that it
reasonably considers advisable, and each Grantor shall furnish all such
assistance and information as the Agent may require in connection with such test
verifications. At any time and from time to time, upon the Agent's reasonable
request and at the expense of the relevant Grantor, such Grantor shall cause
independent public accountants or others satisfactory to the Agent to furnish to
the Agent reports showing reconciliations, aging and test verifications of, and
trial balances for, its Accounts. The Agent in its own name or in the name of
others may communicate with account debtors on the Accounts to verify with them
to the Agent's satisfaction the existence, amount and terms of any Accounts.
6.3 Collections on Accounts. (a) The Agent hereby authorizes each
-----------------------
Grantor to collect its Accounts, subject to the Agent's direction and control,
and the Agent may curtail or terminate said authority at any time after the
occurrence and during the continuance of an Event of Default. If required by
the Agent at any time after the occurrence and during the continuance of an
Event of Default, any payments of Accounts, when collected by a Grantor, (i)
shall be forthwith (and, in any event, within two Business Days) deposited by
such Grantor in the exact form received, duly indorsed by such Grantor to the
Agent if required, in a Collateral Account maintained under the sole dominion
and control of the Agent, subject to withdrawal by the Agent for the account of
the Banks only as provided in Section 9, and (ii) until so turned over, shall be
held by such Grantor in trust for the Agent and the Banks, segregated from other
funds of such Grantor.
(b) Each such deposit of Proceeds of Accounts shall be accompanied by
a report identifying in reasonable detail the nature and source of the payments
included in the deposit.
(c) At the Agent's request at any time when any Event of Default
shall have occurred and be continuing, each Grantor shall deliver to the Agent
all original and other
<PAGE>
10
documents evidencing, and relating to, the agreements and transactions which
gave rise to its Accounts, including, without limitation, all original orders,
invoices and shipping receipts.
6.4 Representations and Warranties. (a) No amount payable to a
------------------------------
Grantor under or in connection with any Account is evidenced by any Instrument
or Chattel Paper which has not been delivered to the Agent.
(b) The place where such Grantor keeps its records concerning the
Accounts is the location listed with respect to such Grantor on Schedule III
hereto.
(c) None of the obligors on any Accounts (other than obligors with
respect to Accounts which, in the aggregate, are not material in relation to all
Accounts of the Company and its Subsidiaries taken as a whole) is a Governmental
Authority.
6.5 Covenants. (a) The amount represented by each Grantor to the
---------
Banks from time to time as owing by each account debtor or by all account
debtors in respect of its Accounts will at such time be the correct amount
actually owing by such account debtor or debtors thereunder.
(b) No Grantor will amend, modify, terminate or waive (other than in
the ordinary course of business in accordance with past practice) any agreement
giving rise to an Account in any manner which could reasonably be expected to
materially adversely affect the value of such Account as Collateral.
(c) No Grantor will fail to exercise promptly and diligently each and
every material right which it may have under each agreement giving rise to an
Account (other than any right of termination and except with respect to Accounts
which, in the aggregate, are not material in relation to all Accounts of the
Company and its Subsidiaries taken as a whole).
(d) No Grantor will fail to deliver to the Agent a copy of each
material demand, notice or document received by it relating in any way to any
agreement giving rise to an Account (except with respect to Accounts which, in
the aggregate, are not material in relation to all Accounts of the Company and
its Subsidiaries taken as a whole).
(e) Other than in the ordinary course of business as generally
conducted by the relevant Grantor over a period of time, such Grantor will not
grant any extension of the time of payment of any of the Accounts, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partially, any Person liable for the payment thereof, or allow any
credit or discount whatsoever thereon.
(f) No Grantor will remove its books and records from the location
specified in Section 5.4(b).
(g) In any suit, proceeding or action brought by the Agent or any
Bank under any Account for any sum owing thereunder, each Grantor will save,
indemnify and keep the Agent and such Bank harmless from and against all
expense, loss or damage suffered by
<PAGE>
11
reason of any defense, setoff, counterclaim, recoupment or reduction or
liability whatsoever of the account debtor thereunder, arising out of a breach
by a Grantor of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such account
debtor or its successors from a Grantor.
7. Agent's Appointment as Attorney-in-Fact.
---------------------------------------
(a) Powers. Each Grantor hereby irrevocably constitutes and appoints
------
the Agent and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of such Grantor and in the name of such Grantor or in its
own name, from time to time in the Agent's discretion, for the purpose of
carrying out the terms of this Security Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Security
Agreement, and, without limiting the generality of the foregoing, each Grantor
hereby gives the Agent the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, to do the following:
(i) at any time when any Event of Default shall have occurred and
be continuing, in the name of such Grantor or its own name, or otherwise,
to take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under, or
with respect to, any Collateral and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Agent for the purpose of collecting any and all such
moneys due or with respect to such Collateral whenever payable;
(ii) to pay or discharge taxes and liens levied or placed on or
threatened against the Collateral, and
(iii) at any time when any Event of Default shall have occurred and
be continuing, (A) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Agent or as the Agent shall direct; (B) to ask
or demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) to sign and indorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices and
other documents in connection with any of the Collateral; (D) to commence
and prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any thereof
and to enforce any other right in respect of any Collateral; (E) to defend
any suit, action or proceeding brought against such Grantor with respect to
any Collateral; (F) to settle, compromise or adjust any suit, action or
proceeding described in the preceding clause and, in connection therewith,
to give such discharges or releases as the Agent may deem appropriate; (G)
to assign any Trademark (along with goodwill of the business to which such
Trademark pertains), throughout the world for such term or terms, on such
conditions, and in such manner,
<PAGE>
12
as the Agent shall in its sole discretion determine; and (H) generally, to
sell, transfer, pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though the Agent
were the absolute owner thereof for all purposes, and to do, at the Agent's
option and such Grantor's expense, at any time, or from time to time, all
acts and things which the Agent deems necessary to protect, preserve or
realize upon the Collateral and the liens of the Agent and the Banks
thereon and to effect the intent of this Security Agreement, all as fully
and effectively as such Grantor might do.
Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Other Powers. Each Grantor also authorizes the Agent, at any
------------
time and from time to time, to execute, in connection with the sale provided for
in Section 8 hereof, any indorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) No Duty on the Part of Agent or Banks. The powers conferred on
-------------------------------------
the Agent and the Banks hereunder are solely to protect the interests of the
Agent and the Banks in the Collateral and shall not impose any duty upon the
Agent or any Bank to exercise any such powers. The Agent and the Banks shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
8. Performance by Agent of Grantor's Obligations. If any Grantor
---------------------------------------------
fails to perform or comply with any of its agreements contained herein and the
Agent, as provided for by the terms of this Security Agreement, itself performs
or complies, or otherwise causes performance or compliance, with such agreement,
the expenses of the Agent incurred in connection with such performance or
compliance, together with interest thereon at a rate per annum 2% above the
Alternate Base Rate, shall be payable by such Grantor to the Agent on demand and
shall constitute Obligations secured hereby.
9. Proceeds. It is agreed that if an Event of Default shall occur
--------
and be continuing (a) all Proceeds received by each Grantor consisting of cash,
checks and other near-cash items shall be held by such Grantor in trust for the
Agent and the Banks, segregated from other funds of such Grantor, and shall,
forthwith upon receipt by such Grantor, be turned over to the Agent in the exact
form received by such Grantor (duly indorsed by such Grantor to the Agent, if
required), and (b) any and all such Proceeds received by the Agent (whether from
such Grantor or otherwise) may, in the sole discretion of the Agent, be held by
the Agent for the ratable benefit of the Banks as collateral security for,
and/or then or at any time thereafter may be applied by the Agent against, the
Obligations (whether matured or unmatured), such application to be in such order
as the Agent shall elect. Any balance of such Proceeds remaining after the
Obligations shall have been paid in full and the Acquisition Commitments,
Acquisition Term Loan Commitments, Working Capital Commitments, all
<PAGE>
13
Letters of Credit and all Acceptances shall have been terminated shall be paid
over to the relevant Grantor or to whomsoever may be lawfully entitled to
receive the same.
10. Remedies. If an Event of Default shall occur and be continuing,
--------
the Agent, on behalf of the Banks may exercise, in addition to all other rights
and remedies granted to them in this Security Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, the Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon any Grantor or any other
Person (all and each of which demands, defenses, advertisements and notices are
hereby waived), may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, lease, assign, give option or options to purchase, or otherwise
dispose of and deliver the Collateral or any part thereof (or contract to do any
of the foregoing), in one or more parcels at public or private sale or sales, at
any exchange, broker's board or office of the Agent or any Bank or elsewhere
upon such terms and conditions as it may deem advisable and at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk. The Agent or any Bank shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in a Grantor, which right or equity is
hereby waived or released. Each Grantor further agrees, at the Agent's request,
to assemble the Collateral and make it available to the Agent at places which
the Agent shall reasonably select, whether at such Grantor's premises or
elsewhere. The Agent shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Agent and the Banks hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations, in such order as the Agent may elect,
and only after such application and after the payment by the Agent of any other
amount required by any provision of law, need the Agent account for the surplus,
if any, to the relevant Grantor. To the extent permitted by applicable law,
each Grantor waives all claims, damages and demands it may acquire against the
Agent or any Bank arising out of the exercise by them of any rights hereunder.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition. Each Grantor shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay the Obligations and the fees and
disbursements of any attorneys employed by the Agent or any Bank to collect such
deficiency.
11. Amendments, etc, with respect to the Obligations. Each Grantor
------------------------------------------------
shall remain obligated hereunder, and the Collateral shall remain subject to the
lien granted hereby, notwithstanding that, without any reservation of rights
against such Grantor, and without notice to or further assent by such Grantor,
any demand for payment of any of the Obligations made by the Agent or any Bank
may be rescinded by the Agent or such Bank, and any of the Obligations
continued, and the Obligations, or the liability of any other Person
<PAGE>
14
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Agent or any Bank, and the Credit Agreement, the
Notes, the Letters of Credit and any other Loan Documents and any other
documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or part, as the Banks (or the
Required Banks, as the case may be) may deem advisable from time to time, and
any guarantee, right of offset or other collateral security at any time held by
the Agent or any Bank for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. Neither the Agent nor any Bank shall have any
obligation to protect, secure, perfect or insure this or any other lien at any
time held by it as security for the Obligations or any property subject thereto.
Each Grantor waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of or proof of reliance by the
Agent or any Bank upon this Security Agreement; the Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred
in reliance upon this Security Agreement; and all dealings between a Grantor, on
the one hand, and the Agent and the Banks, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Security Agreement.
12. Limitation on Duties Regarding Preservation of Collateral. The
---------------------------------------------------------
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the UCC
or otherwise, shall be to deal with it in the same manner as the Agent deals
with similar property for its own account. Neither the Agent, any Bank, nor any
of their respective directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of a Grantor or otherwise.
13. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and constitute
powers coupled with an interest.
14. Severability. Any provision of this Security Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. Paragraph Headings. The paragraph headings used in this Security
------------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. No Waiver; Cumulative Remedies. Neither the Agent nor any Bank
------------------------------
shall by any act (except by a written instrument pursuant to Section 17 hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and
<PAGE>
15
conditions hereof. No failure to exercise, nor any delay in exercising, on the
part of the Agent or any Bank, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Agent or
any Bank of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Agent or such Bank would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
17. Waivers and Amendments; Successors and Assigns; Governing Law.
-------------------------------------------------------------
None of the terms or provisions of this Security Agreement may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Grantor(s) affected thereby and the Agent, provided that any
--------
provision of this Security Agreement may be waived by the Agent in a written
letter or agreement executed by the Agent or by telex or facsimile transmission
from the Agent. This Security Agreement shall be binding upon the successors
and assigns of the Grantors and shall inure to the benefit of the Agent and the
Banks and their respective successors and assigns.
18. GOVERNING LAW. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
19. Notices. Notices hereunder may be given by mail, by telex or by
-------
facsimile transmission, addressed or transmitted to the Person to which it is
being given at such Person's address or transmission number set forth in the
Guarantee and shall be effective (a) in the case of mail, 2 days after deposit
in the postal system, first class postage pre-paid and (b) in the case of telex
or facsimile notices, when sent. A Grantor may change its address and
transmission number by written notice to the Agent, and the Agent may change its
address and transmission number by written notice to the Grantors and, in the
case of a Bank, to the Agent.
20. Authority of Agent. Each Grantor acknowledges that the rights
------------------
and responsibilities of the Agent under this Security Agreement with respect to
any action taken by the Agent or the exercise or non-exercise by the Agent of
any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Security Agreement shall, as between
the Agent and the Banks, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Agent and the Grantors, the Agent shall be conclusively presumed
to be acting as agent for the Banks with full and valid authority so to act or
refrain from acting, and no Grantor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
21. Release of Collateral and Termination. (a) The Agent shall
-------------------------------------
(without any requirement of consent of or notice to any Person, including,
without limitation, any Bank)
<PAGE>
16
release from the liens created hereby any Collateral which is sold, transferred
or otherwise conveyed in accordance with the terms of the Credit Agreement.
(b) At such time as the Obligations shall have been paid in full and
the Working Capital Commitments, the Acquisition Commitments, the Acquisition
Term Loan Commitments, all Letters of Credit and all Acceptances shall have been
terminated, the Collateral shall be released from the Liens created hereby, and
this Security Agreement and all obligations of the Agent and the Grantors
hereunder shall terminate, all without delivery of any instrument or performance
of any act by any party, and all rights to the Collateral shall revert to the
Grantors. Upon request of any Grantor following any such termination, the Agent
will deliver (at the sole cost and expense of such Grantor) to such Grantor any
Collateral held by the Agent hereunder, and execute and deliver (at the sole
cost and expense of such Grantor) to such Grantor such documents as such Grantor
shall reasonably request to evidence such termination.
22. Counterparts. This Security Agreement may be executed by one or
------------
more of the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
<PAGE>
17
IN WITNESS WHEREOF, each of the Grantors and the Agent has caused this
Security Agreement to be duly executed and delivered as of the date first above
written.
ORTEP FUEL OIL OF RHODE ISLAND, INC.
ORTEP OF CONNECTICUT, INC.
PETRO, INC.
PETRO/CRYSTAL CORP.
ORTEP OF STATEN ISLAND, INC.
CBW REALTY CORP. OF NEW YORK
CBW REALTY CORP. OF CONNECTICUT
CBW REALTY CORP. OF PENNSYLVANIA
CBW REALTY CORP.
OCENNET FUEL OIL CORP.
ORTEP OF NEW JERSEY, INC.
MAXWHALE CORP.
PUBLIC FUEL SERVICES CO., INC.
MILLER FUEL OIL CO.
D.J.W. GASOLINE CO.
ORTEP OF PENNSYLVANIA, INC.
MAREX CORPORATION
A.P. WOODSON CO.
RELIANCE UTILITIES CORP.
By
------------------------------------------------
Title:
CHEMICAL BANK, as Agent
By
------------------------------------------------
Title:
<PAGE>
SCHEDULE I TO
THIRD AMENDED AND RESTATED
SUBSIDIARY SECURITY AGREEMENT
-----------------------------
TRADEMARKS
----------
COMPANY TRADEMARK
------- ---------
Maxwhale Corp. Whale Design
Reg. No.: 1,293,778
<PAGE>
SCHEDULE II TO
THIRD AMENDED AND RESTATED
SUBSIDIARY SECURITY AGREEMENT
-----------------------------
INVENTORY
---------
State Where
Subsidiary Inventory
---------- is Located
--------------------
Marex Corporation Maryland
Maxwhale Corp. Massachusetts
New Jersey
New York
Miller Fuel Oil Co. Pennsylvania
Occennet Fuel Oil Corp. Connecticut
Ortep of Connecticut, Inc. Connecticut
Ortep of New Jersey, Inc. New Jersey
Ortep of Pennsylvania, Inc. Pennsylvania
Ortep Fuel Oil of Rhode Island, Inc. Rhode Island
Petro, Inc. Connecticut
New York
Public Fuel Service Co., Inc. New York
Reliance Utilities Corp. New York
A.P. Woodson Company, Inc. Maryland
<PAGE>
20
SCHEDULE III TO
THIRD AMENDED AND RESTATED
SUBSIDIARY SECURITY AGREEMENT
-----------------------------
SUBSIDIARIES
------------
CHIEF EXECUTIVE
OFFICE
--------------------
SUBSIDIARY PLACE OF BUSINESS
---------- ----------------- -
1. Ortep of New Jersey, Inc. 1245 Westfield Avenue 2187 Atlantic Street
Clark, NJ 07066 Stamford, CT 06902
2. Ortep of Staten Island, 2541 Richmond Terrace 2187 Atlantic Street
Inc. Staten Island, NY Stamford, CT 06902
10303
3. Ortep of Pennsylvania, 4025 Pottsville Pike 2187 Atlantic Street
Inc. Reading, PA 19603 Stamford, CT 06902
4. Ortep of Connecticut, Inc. 212 Elm Street 2187 Atlantic Street
North Haven, CT Stamford, CT 06902
06473
5. Petro/Crystal Corp. 2187 Atlantic Street 2187 Atlantic Street
5th Floor Stamford, CT 06902
Stamford, CT 06902
6. Reliance Utilities Corp. 522 Grand Blvd. 2187 Atlantic Street
Westbury, NY 11590 Stamford, CT 06902
7. Public Fuel Service Co., 740 Jamaica Avenue 2187 Atlantic Street
Inc. Brooklyn, NY 11208 Stamford, CT 06902
8. Petro, Inc. 2187 Atlantic Street 2187 Atlantic Street
5th Floor Stamford, CT 06902
Stamford, CT 06902
9. CBW Realty Corp. of New 2187 Atlantic Street 2187 Atlantic Street
York 5th Floor Stamford, CT 06902
Stamford, CT 06902
10. CBW Realty Corp. of 2187 Atlantic Street 2187 Atlantic Street
Connecticut 5th Floor Stamford, CT 06902
Stamford, CT 06902
11. CBW Realty Corp. of 2187 Atlantic Street 2187 Atlantic Street
Pennsylvania 5th Floor Stamford, CT 06902
Stamford, CT 06902
<PAGE>
21
CHIEF EXECUTIVE
OFFICE
--------------------
SUBSIDIARY PLACE OF BUSINESS
---------- ----------------- -
12. CBW Realty Corp. 2187 Atlantic Street 2187 Atlantic Street
5th Floor Stamford, CT 06902
Stamford, CT 06902
13. Miller Fuel Oil Co. 301 No. Forge Road 2187 Atlantic Street
Palmyra, PA 17078 Stamford, CT 06902
14. D.J.W. Gasoline 4025 Pottsville Pike 2187 Atlantic Street
Company, Inc. Reading, PA 19605 Stamford, CT 06902
15. Marex Corporation 8900 Citation Road 2187 Atlantic Street
Baltimore, MD 21221 Stamford, CT 06902
16. Maxwhale Corp. 1 Coffey Street 2187 Atlantic Street
Brooklyn, NY 11231 Stamford, CT 06902
17. Ocennet Fuel Oil 64 Oakland Avenue 2187 Atlantic Street
Corp. East Hartford, CT Stamford, CT 06902
06108
18. A.P. Woodson 8101 Parston Drive 2187 Atlantic Street
Company, Inc. Forestville, MD Stamford, CT 06902
20747
19. Ortep Fuel Oil of Colfax & Concord 2187 Atlantic Street
Rhode Island, Inc. Street Stamford, CT 06902
Pawtucket, RI 02860
<PAGE>
EXHIBIT G to
Credit Agreement
----------------
FORM OF
REQUEST FOR ACCEPTANCES
[LETTERHEAD OF PETROLEUM HEAT AND POWER CO., INC.]
______________ __, 19__
[BANK NAME]
[ADDRESS]
Dear Sirs:
Reference is made to the Third Amended and Restated Credit Agreement,
dated as of August 1, 1994 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Petroleum Heat and Power Co., Inc.,
----------------
the banks and other financial institutions from time to time parties thereto
(the "Banks") and Chemical Bank, as Agent. Unless otherwise defined herein,
-----
capitalized terms which are defined in the Credit Agreement are used herein as
therein defined. We hereby request that you accept and discount the enclosed
Draft[s], payable on ________ __, 19__, for a period of __ days subject to the
terms of the Credit Agreement.
We hereby certify that the proceeds of your discount of the Draft[s]
will be used solely to finance, and will be the sole source of financing for,
the following domestic purchases and shipments of #2 fuel oil:
Draft Date of Dollar
Number Shipment Origin Destination Amount
- - ------ -------- ------ ----------- ------
We further certify to you that each destination written above is either (1) 25
miles from the corresponding place of origin or (2) located in a State different
from that of the corresponding place of origin. Upon request, we will provide
to you the bill of lading or invoice number for each shipment, as well as any
other information which you may request relating to any shipment or the
financing.
We further certify that on the date hereof we are requesting that the
other Banks parties to the Credit Agreement accept and discount Drafts in the
amount required by subsection 4.3 of the Credit Agreement.
PETROLEUM HEAT AND POWER CO., INC.
By:_______________________
Title:
<PAGE>
EXHIBIT H to
Credit Agreement
----------------
FORM OF DRAFT
- - --------------------------------------------------------------------------------
[consecutive numbers]
_________ __, 19__1/
-
At ____2/ days after the date hereof, Pay to the Order of
-
___________________________3/ the sum of ____________________ DOLLARS
-
($___________)4/.
-
[Name of Bank upon
which Draft is Drawn]
[Address of Bank]
PETROLEUM HEAT AND POWER CO., INC.
By:_________________________
Title:
--------------------
1/ Insert date of Acceptance
-
2/ Insert 30, 60, 90 or 180
-
3/ Insert name of Bank upon which Acceptance is drawn
-
4/ Insert amount of Draft
-
<PAGE>
EXHIBIT I to
Credit Agreement
----------------
FORM OF
BORROWING BASE CERTIFICATE
This Certificate is delivered pursuant to subsection 11.1(i) of Third
Amended and Restated Credit Agreement, dated as of August 1, 1994 (as the same
may be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Petroleum Heat and Power Co., Inc., a Minnesota
----------------
corporation (the "Company"), the several banks and other financial institutions
-------
from time to time parties thereto and Chemical Bank, as Agent. Unless otherwise
defined herein or as the context otherwise requires, terms used herein have the
meanings provided in the Credit Agreement.
On behalf of the Company, the undersigned certifies that he is [the
Chief Financial Officer][a Senior Vice President] of the Company, and that, as
such, he is authorized to execute this Borrowing Base Certificate on behalf of
the Company and further certifies that:
For purposes of this Borrowing Base Certificate, the Borrowing Base
and Borrowing Base Adjustment calculation date is ___________ __, 199__ (the
"Calculation Date").
----------------
1. The value of all Eligible Accounts of the Company and its
Subsidiaries as of the Calculation Date is: $_______________. [Schedule I
hereto sets forth certain calculations used to determine such value] .
2. 90% of the amount designated in Item 1 above is:
------
$_______________.
3. The value of all Eligible Inventory of the Company and its
Subsidiaries as of the Calculation Date is: $________________.
4. The aggregate purchase price of all Eligible Inventory Under
Contract of the Company and its Subsidiaries valued on a "first-in/first-
out" basis at the contract price as of the Calculation Date is:
$____________.
5. The sum of the amounts designated in Item 3 and Item 4 above of
------ ------
the Company and its Subsidiaries as of the Calculation Date is:
$________________.
6. 80% of the amount designated in Item 5 above is: $____________.
------
7. The Borrowing Base (the sum of the amounts designated in Item 2
------
and Item 6 above) as of the Calculation Date is: $________________.
------
<PAGE>
8. The aggregate amount of outstanding accounts payable for petroleum
and/or propane purchases of the Company and its Subsidiaries as of the
Calculation Date is: $_____________.
9. The aggregate amount of Working Capital Borrowings (other than
Working Capital Loans) of the Company and its Subsidiaries as of the
Calculation Date is: $________________.
10. The Borrowing Base Adjustment (the sum of the amounts designated
in Item 8 and Item 9 above) as of the Calculation Date is:
------ ------
$_________________.
11. The Borrowing Base (the amount designated in Item 7) minus the
------ -----
Borrowing Base Adjustment (the amount designated in Item 10) as of the
-------
Calculation Date is: $_________________.
12. The information contained in this Borrowing Base Certificate
(including the information upon which the foregoing calculations are based)
is true and complete in all material respects as of the date hereof.
13. Except as disclosed in this Borrowing Base Certificate, there has
been no material adverse change in the collectibility or enforceability of
Accounts of the Company and its Subsidiaries or the market value or
salability of Inventory of the Company and its subsidiaries since
______________ ___, 19__.
14. The Aggregate Outstanding Working Capital Extensions of Credit of
all of the Banks will not exceed the amount designated in Item 11.
-------
15. To the best of my knowledge after due inquiry and in good faith,
the calculations contained herein are determined in accordance with GAAP
and the Borrowing Base calculations are based upon Accounts and Inventory
of the Company and its Subsidiaries which meet the criteria set forth in
the Credit Agreement for Eligible Accounts and Eligible Inventory,
respectively.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this ___
day of_________, 19__ [insert the Closing Date or 20th day and the applicable
month and year, as may be the case].
PETROLEUM HEAT AND POWER CO., INC.
By:___________________________
Name:
Title:
<PAGE>
Schedule I
----------
Accounts Excluded
-----------------
A. Accounts, the balance of which is in excess
of $250,000, that have been excluded which are
owed by an obligor which has taken any of
the actions or suffered any of the events of
the kind described in paragraph (g) of
Section 13 of the Credit Agreement is: $_________
B. Accounts that have been excluded which
are not free and clear of all liens and other
claims of any other Person (except in favor
of the Agent for the ratable benefit of the
Banks) is: $_________
C. Other Accounts that have been excluded in
determining Eligible Accounts is: $_________
<PAGE>
EXHIBIT J to
CREDIT AGREEMENT
----------------
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to:
(a) the Credit Agreement, dated as of August 1, 1994 (as amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among
----------------
Petroleum Heat and Power Co., Inc. (the "Company"), the Banks named therein
-------
and Chemical Bank, as agent for the Banks (in such capacity, the "Agent");
-----
and
(b) the letter agreement, dated as of August 1, 1994 (as amended, supplemented
or otherwise modified from time to time, the "Line Letter"), among the
-----------
Company and the Banks named therein.
Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
(the "Assignor") and (the
-------------------- -------- --------------------
"Assignee") agree as follows:
--------
1. (a) The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), a ___% interest (the "Assigned Interest") in
-----------------
and to the Assignor's rights and obligations under the Credit Agreement and the
Line Letter with respect to those credit facilities contained in the Credit
Agreement and/or the Line Letter as are set forth on SCHEDULE 1 (individually,
an "Assigned Facility"; collectively, the "Assigned Facilities"), in a principal
----------------- -------------------
amount for each Assigned Facility as set forth on SCHEDULE 1.
(b) Notwithstanding anything to the contrary contained in this Assignment
and Acceptance, the sole obligation of an Assignee hereunder with respect to the
Line Letter shall be to take the participating interest specified in SCHEDULE 1
in its ratable share of any letters of credit outstanding under the Line Letter
on the date hereof and otherwise to comply with the terms of the Line Letter.
In no event shall any Assignee, by its execution and delivery of this Assignment
and Acceptance, be deemed to have provided any commitment to take participating
interests in letters of credit issued under the Line Letter after the date
hereof.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the Line Letter, or with
respect to the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Loan Document, the Line
Letter or any other instrument or document furnished pursuant thereto, other
than that the Assignor has not created any adverse claim upon the interest being
assigned by it hereunder and that such interest is free and clear of any such
adverse claim; (b) makes no representation or warranty and assumes no
responsibility with respect to the
<PAGE>
financial condition of the Company, any of its Subsidiaries or any other obligor
or the performance or observance by the Company, any of its Subsidiaries or any
other obligor of any of their respective obligations under the Credit Agreement,
any other Loan Document the Line Letter or any other instrument or document
furnished pursuant hereto or thereto; and (c) attaches any Notes held by it
evidencing the Assigned Facilities and (i) requests that the Agent, upon request
by the Assignee, exchange the attached Notes for a new Note or Notes payable to
the Assignee and (ii) if the Assignor has retained any interest in the Assigned
Facility, requests that the Agent exchange the attached Notes for a new Note or
Notes payable to the Assignor, in each case in amounts which reflect the
assignment being made hereby (and after giving effect to any other assignments
which have become effective on the Effective Date).
3. The Assignee (a) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (b) confirms that it has received
a copy of the Credit Agreement, together with copies of the financial statements
delivered pursuant to subsection 11.1 thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor, the Agent or any other
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (d) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement, the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Agent by the terms thereof, together with such powers as are
incidental thereto; and (e) agrees that it will be bound by the provisions of
the Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to subsection
8.16(b) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be
----------
, 19 (the "Effective Date"). Following the execution of this Assignment and
- - -- -- --------------
Acceptance, it will be delivered to the Agent for acceptance by it and recording
by the Agent pursuant to the Credit Agreement, effective as of the Effective
Date (which shall not, unless otherwise agreed to by the Agent, be earlier than
five Business Days after the date of such acceptance and recording by the
Agent).
5. Upon such acceptance and recording, from and after the Effective Date,
the Agent shall make all payments in respect of the Assigned Interest (including
payments of principal, interest, fees and other amounts) to the Assignee whether
such amounts have accrued prior to the Effective Date or accrue subsequent to
the Effective Date. The Assignor and the Assignee shall make all appropriate
adjustments in payments by the Agent for periods prior to the Effective Date or
with respect to the making of this assignment directly between themselves.
<PAGE>
3
6. From and after the Effective Date, (a) the Assignee shall be a party to
the Credit Agreement and the Line Letter and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a Bank under the
Credit Agreement, the other Loan Documents and the Line Letter, and shall be
bound by the provisions thereof and (b) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement and the Line Letter.
7. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
<PAGE>
SCHEDULE 1
TO ASSIGNMENT AND ACCEPTANCE
RELATING TO THE CREDIT AGREEMENT, DATED AS OF , 199 ,
---------------- --- --
AMONG
,
--------------------------------------
THE BANKS NAMED THEREIN
AND
CHEMICAL BANK, AS AGENT FOR THE BANKS (IN SUCH CAPACITY, THE "AGENT")
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
Credit Principal
Facility Assigned Amount Assigned Commitment Percentage
Assigned1/
-
Working Capital Commitment
Working Capital $ . %
-------------- --- ---------------
Loans
Inventory Letters $ . %
-------------- --- ---------------
of Credit
Acceptances $ . %
-------------- --- ---------------
Acquisition Commitment
Acquisition R/C $ . %
-------------- --- ---------------
Loans
Acquisition $ . %
-------------- --- ---------------
Letters of Credit
Acquisition Term $ . %
-------------- --- ---------------
Loans
Line Letter
Letters of Credit $ . %
-------------- --- ---------------
[NAME OF ASSIGNEE] [NAME OF ASSIGNOR]
By By
Name: Name:
Title: Title:
--------------------
1/
-
Calculate the Commitment Percentage that is assigned to at
least 15 decimal places and show as a percentage of the
aggregate commitments of all Lenders.
<PAGE>
2
Accepted: Consented To:
-------- ------------
CHEMICAL BANK, as Agent PETROLEUM HEAT AND POWER CO.,
INC.
By By
Name: Name:
Title: Title:
<PAGE>
EXHIBIT K TO
CREDIT AGREEMENT
----------------
FORM OF
LINE LETTER
as of August 1, 1994
Petroleum Heat and Power Co., Inc.
Davenport Street
Stamford, Connecticut 06904
Attention: Irik P. Sevin, President
Dear Sirs:
Each financial institution referred to below (each, a "Bank") is
----
pleased to confirm that it is severally (but not jointly with the other Banks
referred to below) holding available for Petroleum Heat and Power Co., Inc., a
Minnesota corporation (the "Company") a line of credit (the "Line of Credit")
------- --------------
from the date hereof through June 30, 1995 in an aggregate amount not to exceed
the percentage specified opposite its signature hereto (such Bank's "Ratable
-------
Share") times $15,000,000 to be used exclusively to issue standby letters of
- - -----
credit to support insurance requirements of the Company and its subsidiaries
(collectively, the "Letters of Credit"). Notwithstanding anything to the
-----------------
contrary contained herein, the availability of the Line of Credit and the
obligation of the Issuing Bank (as hereinafter defined) to issue Letters of
Credit shall be subject to the Banks' continued satisfaction with the financial
condition, business and operations of the Company and its Subsidiaries and
shall, in any event, terminate if all of the facilities provided for in the
Credit Agreement expire or are otherwise terminated. THE WILLINGNESS OF THE
BANKS TO HOLD AVAILABLE FOR THE COMPANY THE LINE OF CREDIT SHALL IN NO EVENT BE
DEEMED TO BE A COMMITMENT OR OBLIGATION OF ANY BANK AND EACH BANK MAY, AT ANY
TIME IN ITS SOLE DISCRETION, REDUCE ITS RATABLE SHARE OF THE LINE OF CREDIT OR
TERMINATE ITS SHARE OF THE LINE OF CREDIT IN ACCORDANCE WITH THE TERMS HEREOF.
Issuance of Letters of Credit
- - -----------------------------
The parties hereto agree that Chemical Bank will act as the issuing
bank (the "Issuing Bank") for each Letter of Credit. The Company may from time
------------
to time request that the Issuing Bank issue a Letter of Credit hereunder by
delivering to the Issuing Bank an application therefor, completed to the
satisfaction of the Issuing Bank, and such other certificates, documents and
other papers and information as the Issuing Bank may request. Upon receipt of
such application, the Issuing Bank will process such application and the
certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures by issuing the
original of such Letter of Credit to the beneficiary thereof or as otherwise may
be agreed by the Issuing Bank and
<PAGE>
2
the Company. The Issuing Bank shall furnish a copy of such Letter of Credit to
the Company promptly following the issuance thereof.
Unless the Issuing Bank shall have been notified in writing to the
contrary by any Bank prior to the date it is to issue any Letter of Credit, the
Issuing Bank may assume that such Bank continues to be satisfied with the
financial condition, business and operations of the Company and may, in reliance
upon such assumption, issue such Letter of Credit.
Provisions Relating to Letters of Credit
- - ----------------------------------------
The Letters of Credit shall have maturities of up to one year;
provided that each such Letter of Credit shall be automatically extended for
- - --------
successive periods of one year (but in no event shall any Letter of Credit be
extended beyond June 30, 1996) unless, at least thirty days prior to the date
such Letter of Credit would otherwise be extended (any such date of extension,
an "Extension Date"; and the date which is thirty days prior thereto, the
--------------
"Refusal Deadline"), the Issuing Bank notifies the Company that it elects not to
----------------
extend such Letter of Credit. The Company agrees to give each Bank at least 45
days prior notice to any Extension Date that it desires to extend the relevant
Letter or Credit. Each Letter of Credit shall (a) be denominated in Dollars,
(b) be in a minimum face amount of $100,000 and (c) be subject to the Uniform
Customs and, to the extent not inconsistent therewith, the laws of the State of
New York.
The Company shall pay to the Issuing Bank, for the account of the
Issuing Bank and the L/C Participants, a letter of credit commission with
respect to the undrawn face amount of each Letter of Credit, computed for the
period from the date of such payment to the date upon which the next such
payment is due hereunder, in an amount equal to 1-3/4% per annum of such undrawn
face amount. Such commissions shall be payable in advance on the date of
issuance of each Letter of Credit and on each L/C Fee Payment Date to occur
thereafter and shall be non refundable. In addition to the foregoing fees and
commissions, the Company shall pay or reimburse the Issuing Bank for such normal
and customary costs and expenses as are incurred or charged by the Issuing Bank
in issuing, effecting payment under, amending or otherwise administering any
Letter of Credit. The Agent shall, promptly following its receipt thereof,
distribute to the Issuing Bank and the L/C Participants all fees and commissions
received by the Agent for their respective accounts pursuant to this subsection.
The Issuing Bank irrevocably agrees to grant and hereby grants to each
other Bank (each such other Bank, a "L/C Participant"), and, to induce the
---------------
Issuing Bank to issue Letters of Credit hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby accepts and purchases from
the Issuing Bank, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Ratable Share of the Issuing Bank's obligations and rights under
each Letter of Credit issued hereunder and the amount of each draft paid by the
Issuing Bank thereunder. Each L/C Participant unconditionally and irrevocably
agrees with the Issuing Bank that, if a draft is paid under any Letter of Credit
for which the Issuing Bank is not
<PAGE>
3
reimbursed in full by the Company in accordance with the terms of this Line
Letter, such L/C Participant shall pay to the Issuing Bank upon demand at the
Issuing Bank's address for notices specified herein an amount equal to such L/C
Participant's Ratable Share of the amount of such draft, or any part thereof,
which is not so reimbursed. The Agent agrees to provide to each L/C Participant
a copy of each Letter of Credit issued pursuant to the terms hereof and a copy
of any draft paid under any such Letter of Credit.
If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to the immediately preceding paragraph in respect of any
unreimbursed portion of any payment made by the Issuing Bank under any Letter of
Credit is paid to the Issuing Bank within three Business Days after the date
such payment is due, such L/C Participant shall pay to the Issuing Bank on
demand an amount equal to the product of (a) such amount, times (b) the daily
average Federal Funds Effective Rate during the period from and including the
date such payment is required to the date on which such payment is immediately
available to the Issuing Bank, times (c) a fraction the numerator of which is
the number of days that elapse during such period and the denominator of which
is 360. If any such amount required to be paid by any L/C Participant pursuant
to the immediately preceding paragraph is not in fact made available to the
Issuing Bank by such L/C Participant within three Business Days after the date
such payment is due, the Issuing Bank shall be entitled to recover from such L/C
Participant, on demand, such amount with interest thereon calculated from such
due date at the rate per annum equal to the rate then payable on Working Capital
Loans under the Credit Agreement which bear interest at a rate based upon the
Alternate Base Rate. A certificate of the Issuing Bank submitted to any L/C
Participant with respect to any amounts owing under this paragraph shall be
conclusive in the absence of manifest error.
Whenever, at any time after the Issuing Bank has made payment under
any Letter of Credit and has received from any L/C Participant its pro rata
--- ----
share of such payment in accordance with this Line Letter, the Issuing Bank
receives any payment related to such Letter of Credit (whether directly from the
Company or otherwise, including proceeds of collateral applied thereto by the
Issuing Bank), or any payment of interest on account thereof, the Issuing Bank
will distribute to such L/C Participant its Ratable Share thereof; provided,
--------
however, that in the event that any such payment received by the Issuing Bank
- - -------
shall be required to be returned by the Issuing Bank, such L/C Participant shall
return to the Issuing Bank the portion thereof previously distributed by the
Issuing Bank to it.
The Company agrees to reimburse the Issuing Bank on each date on which
the Issuing Bank notifies the Company of the date and amount of a draft
presented under any Letter of Credit and paid by the Issuing Bank for the amount
of (a) such draft so paid and (b) any taxes, fees, charges or other costs or
expenses incurred by the Issuing Bank in connection with such payment. Each
such payment shall be made to the Issuing Bank at its address for notices
specified in the Credit Agreement in lawful money of the United States of
America and in immediately available funds. Interest shall be payable on any
and all amounts remaining unpaid by the Company under this subsection from the
date such amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate which would be payable on any
overdue Working Capital Loans under the Credit Agreement which bear interest at
a rate based upon the Alternate Base Rate.
<PAGE>
4
The parties hereto hereby agree that the provisions of subsections
3.6, 3.7 and 3.8 of the Credit Agreement are deemed to be incorporated herein by
reference as if each Letter of Credit was an Inventory Letter of Credit under
the Credit Agreement and as if the Banks party hereto (other than the Issuing
Bank) were Inventory L/C Participants.
Reduction or Termination of Line of Credit
- - ------------------------------------------
Each Bank may, at any time in its sole discretion, elect to reduce or
terminate its Ratable Share by providing five Business Days' prior written
notice to the Issuing Bank and the Company. In the event that any Bank gives
such notice (each such Bank, a "Withdrawing Bank"), such Bank shall have no
----------------
obligation to purchase participating interests in any Letter of Credit which is
to be issued, or with respect to which the Refusal Deadline is to occur, on or
after the sixth Business Day following the date of delivery of such notice (such
sixth Business Day, the "Reduction Date"). Notwithstanding the foregoing, each
--------------
Bank hereby agrees that any reduction or termination of its ratable share of the
Line of Credit shall not affect its obligation to purchase participating
interests in each Letter of Credit which was issued prior to the Reduction Date
and with respect to which no Refusal Deadline has occurred following the
Reduction Date.
In the event that any Bank elects to become a Withdrawing Bank, then,
from and after the Reduction Date, (a) such Withdrawing Bank's Ratable Share of
any Letter of Credit to be issued shall be reduced by the amount specified in
its notice to the Issuing Bank and the Company and (b) the Ratable Share each
remaining Bank shall be increased by the amount equal to:
Commitment Percentage
of Remaining Bank Commitment
x Percentage of
Total Commitment Withdrawing Bank
Percentages of
Remaining Banks
provided, that in no event shall any Bank's Ratable Share of the aggregate
- - --------
amount of Letters of Credit outstanding in respect of which it is obligated to
purchase a participating interest exceed the "Cap Amount" set forth opposite its
signature hereto.
Collateral Security for Line of Credit
- - --------------------------------------
Obligations owing to the Banks in connection with this Line of Credit
(including, without limitation, reimbursement obligations resulting from
drawings under the Letters of Credit) shall be secured equally and ratably with
the obligations of the
Company under the Third Amended and Restated Credit Agreement, dated as of
August 1, 1994 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"; unless otherwise defined herein terms defined in
----------------
the Credit Agreement are used herein as therein defined), among the Company, the
banks and other financial institutions from time to time parties thereto (the
"Banks") and Chemical Bank, a New York banking
-----
<PAGE>
5
corporation, as agent for the Banks (in such capacity, the "Agent"), in
-----
accordance with the terms of the Security Documents.
Without diminishing the effect of the third to last sentence of
Section 13 of the Credit Agreement, the Company agrees that, if any Letter of
Credit is outstanding at a time when the agreement of all Banks to provide this
Line of Credit has been terminated for any reason, the Company shall deposit in
a cash collateral account opened by the Agent and having terms and conditions
acceptable to the Agent and the Banks an amount equal to the then undrawn and
unexpired amount of any such Letter of Credit.
Miscellaneous
- - -------------
The parties hereto agree (i) that if pursuant to the terms of
subsection 15.6(c) of the Credit Agreement any Bank sells all or any part of its
rights under the Credit Agreement or the Notes it shall sell a proportionate
amount of its rights and obligations under the Line of Credit and the Letters of
Credit so that at all times the Commitment Percentage set forth herein for such
Bank shall equal the Commitment Percentage of such Bank in the Credit Agreement
and (ii) to amend this letter agreement to effectuate the foregoing.
With respect to assignments pursuant to subsection 15.6(c) of the
Credit Agreement, unless the transferor Bank and the Purchasing Bank
specifically agree otherwise, the Purchasing Bank shall be responsible for its
Ratable Share of all issued and outstanding Letters of Credit at the time of the
assignment as well as for all Letters of Credit which are subsequently issued.
The Company and each Bank hereby irrevocably and unconditionally
waives trial by jury and the Company hereby waives its right of set-off and its
right to interpose counterclaims in any legal action or proceeding relating to
this Agreement and for any counterclaim therein.
THIS LETTER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Please acknowledge your acceptance of the foregoing by signing where
indicated below and by returning this letter to Chemical Bank.
Very truly yours,
Ratable Share: 35.0% CHEMICAL BANK, as Issuing Bank and as
Cap Amount: $5,250,000 a Bank
By:
-----------------------------------------------
Name:
<PAGE>
6
Ratable Share: 20.0% THE FIRST NATIONAL BANK OF BOSTON
Cap Amount: $3,000,000
By:
-----------------------------------------------
Name:
Ratable Share: 20.0% NATIONSBANK OF NORTH CAROLINA, N.A.
Cap Amount: $3,000,000
By:
-----------------------------------------------
Name:
Ratable Share: 15.0% NATIONAL WESTMINSTER BANK USA
Cap Amount: $2,250,000
By:
-----------------------------------------------
Name:
Ratable Share: 10.0% UNION TRUST COMPANY
Cap Amount: $1,500,000
By:
-----------------------------------------------
Name:
Agreed to and Accepted:
- - ----------------------
PETROLEUM HEAT AND POWER
CO., INC.
By:
------------------------------------------------------
Title: Senior Vice-President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
Petroleum Heat and Power Co., Inc.
and Subsidiaries
----------------
Financial Data Schedule
Six Months Ended June 30, 1994
This schedule contains summary financial information extracted
from Petroleum Heat and Power Co., Inc. and Subsidiaries financial
statements as of June 30, 1994 and is qualified in its entirety by
reference to such financial statements.
<CAPTION>
Item Number Item Description Amount
----------- ---------------------------- ------------
<S> <C> <C>
5.02(1) Cash and cash items $ 29,124,164
5.02(2) Marketable securities none
5.02(3)(a)(1) Notes and accounts receivable-trade 58,063,801
5.02(4) Allowance for doubtful accounts 1,917,316
5.02(6) Inventory 11,863,454
5.02(9) Total current assets 103,666,095
5.02(13) Property, plant and equipment 66,513,153
5.02(14) Accumulated depreciation 32,833,625
5.02(18) Total assets 251,410,180
5.02(21) Total current liabilities 52,144,252
5.02(22) Bonds, mortgages and similar debt 211,924,049
5.02(28) Preferred stock - mandatory redemption 25,000,000
5.02(29) Preferred stock - no mandatory redemption none
5.02(30) Common stock 2,175,462
5.02(31) Other stockholders' equity (44,375,284)
5.02(32) Total liabilities and stockholders' equity 251,410,180
5.03(b)1(a) Net sales of tangible products 317,947,011
5.03(b)1 Total revenues 336,060,150
5.03(b)2(a) Cost of tangible goods sold 177,401,644
5.03(b)2 Total costs and expenses applicable to sales
and revenue 214,913,644
5.03(b)3 Other costs and expenses 81,116,099
5.03(b)5 Provision for doubtful accounts and notes 976,245
5.03(b)(8) Interest and amortization of debt discount 11,864,294
5.03(b)(10) Income before taxes and other items 28,200,094
5.03(b)(11) Income tax expense 550,000
5.03(b)(14) Income/loss continuing operations 28,318,094
5.03(b)(15) Discontinued operations none
5.03(b)(17) Extraordinary items (654,500)
5.03(b)(18) Cumulative effect - change in accounting
principles none
5.03(b)(19) Net income or loss 27,663,594
5.03(b)(20) Earnings per share - primary 1.19
5.03(b)(20) Earnings per share - fully diluted 1.19
</TABLE>
