UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission File No. 2-88526
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1996 OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from_____________________to___________________________
Commission file number__________________________________________________________
PETROLEUM HEAT AND POWER CO., INC.
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(Exact name of registrant as specified in its charter)
Minnesota 06-1183025
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2187 Atlantic Street, Stamford, CT 06902
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(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code: (203) 325-5400
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock
--------------------
(Title of Each Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No__
Indicate by check mark if disclosure of delinquent filer pursuant to Item 405 of
Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of March 4, 1997 was approximately $80,694,531.
As of March 4, 1997 there were 23,149,769 shares of the Registrant's Class A
Common Stock, 11,228 shares of the Registrant's Class B Common Stock and
2,597,519 shares of the Registrant's Class C Common Stock outstanding.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
The documents incorporated by reference into this Form 10-K and the parts
hereof into which such documents are incorporated are listed below:
Document Part
- -------- ------
Those portions of the registrant's proxy III
statement for the registrant's 1997 Annual
Meeting (the "Proxy Statement") that are
specifically identified herein as incorporated
by reference into this Form 10-K
PART I
ITEM 1. BUSINESS
Petroleum Heat and Power Co., Inc. is the largest retail distributor of
home heating oil in the United States, with total sales of $608.2 million for
the year ended December 31, 1996. Petro serves approximately 400,000 customers
in the Northeast and Mid-Atlantic states, including the metropolitan areas of
New York City, Boston, Washington, D.C., Baltimore, Providence and Hartford.
In addition to selling home heating oil, the Company installs and repairs
heating equipment. The Company considers such services, which are typically not
designed to generate profits, to be an integral part of its basic fuel oil
business and generally does not provide service to any person who is not a
heating oil customer. The Company provides home heating equipment repair service
24 hours a day, 365 days a year, generally within four hours of request, and
regularly provides various service incentives to obtain and retain customers. To
a limited extent, the Company also markets other petroleum products, including
diesel fuel and gasoline, to commercial customers.
The Company's volume, cash flow and operating profits before depreciation
and amortization have increased significantly since 1980, primarily because of
its acquisition of other home heating oil businesses. The home heating oil
industry is large, highly fragmented and undergoing consolidation, with
approximately 3,700 independently owned and operated home heating oil
distributors in the Northeast. Petro is the principal consolidator in this
industry and, since 1979, when current management assumed control, has acquired
178 retail heating oil distributors. Petro acquires distributors in both new and
existing markets and integrates them into the Company's existing operations.
Economies of scale are realized from these purchases through the centralization
of accounting, data processing, fuel oil purchasing, credit and marketing
functions. Due to its acquisition history, the Company is well known in the
heating oil industry and is regularly contacted by potential sellers. In
addition, the Company has become more proactive in identifying and contacting
potential acquisition candidates. As a result of its growth strategy, heating
oil volume sold increased from 59.4 million gallons in 1980 to 456.1 million
gallons for the year ended December 31, 1996, a compound annual growth rate of
13.6%. The Company believes that it is uniquely positioned to continue its
strategy given the Company's acquisition expertise, reputation, access to
capital and the absence of competitors with a comparable combination of these
attributes. Despite the Company's size, Petro estimates that its customer base
represents only approximately 5% of the residential home heating oil customers
in the Northeast.
2
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The Company's business, the sale of home heating oil principally to
residential customers, has been relatively stable primarily due to the following
fundamental industry characteristics: (i) residential demand for heating oil has
been relatively unaffected by general economic conditions due to the
non-discretionary nature of heating oil purchases, (ii) homeowners have tended
to remain with their existing distributors of heating oil products and (iii)
loss of customers to other energy sources, primarily natural gas, has been low
due to either the high cost of conversion from home heating oil or lack of
availability of natural gas. While weather can have a material effect on the
Company's sales in any particular year, temperatures over the past 30 years have
been relatively stable, and as a result have not had a significant impact on the
Company's long-term performance.
INVESTMENT IN STAR GAS
In December 1993, the Company purchased a 29.5% equity interest in Star Gas
Corporation ("Star Gas") for $16.0 million and acquired options to purchase the
remaining equity interest. In December 1994, the Company completed the
acquisition of Star Gas for approximately $25.9 million by exercising its right
to purchase the remaining outstanding common equity of Star Gas through the
payment of $3.8 million in cash and the issuance of 2.5 million shares of the
Company's Class A Common Stock. In November 1995, Star Gas Partners, L.P., a
Delaware limited partnership ("Star Gas Partners"), and Star Gas organized Star
Gas Propane, L.P., a Delaware limited partnership (the "Operating Partnership").
Star Gas is the general partner of both Star Gas Partners and the Operating
Partnership. In December 1995, Petro transferred substantially all of its
propane assets and liabilities to Star Gas, which then transferred substantially
all of its assets and liabilities to the Operating Partnership in exchange for
general and limited partner interests. In December 1995, Star Gas Partners
completed its initial public offering of approximately 2.9 million common units
of limited partner interests at a price of $22 per unit and, concurrently, Star
Gas issued approximately $85.0 million in first mortgage notes to certain
institutional investors.
As a result of the foregoing transactions (the "Star Gas Transactions"),
Star Gas received a 46.5% equity interest in Star Gas Partners and Petro
received net proceeds of $134.7 million, of which $72.6 million was used to
repay $67.8 million in principal amount of long-term debt and $6.0 million was
reserved to guarantee Star Gas Partners' minimum quarterly distribution. At
December 31, 1996 $3.0 million remained as a reserve to guarantee Star Gas
Partners' minimum quarterly distributions and $3.0 million had been released as
certain quarterly targets were achieved. Petro also received $4.3 million of
minimum quarterly distributions from Star Gas Partners for the year ended
December 31, 1996, which represented three-fourths of the anticipated annual
distribution.
With the acquisition of Star Gas on December 7, 1994, and its operation as
a wholly-owned subsidiary of the Company until December 19, 1995, the Company's
operations were consolidated and classified into two business segments: Home
Heating Oil and Propane. For financial information regarding the Company's
business segments, see Note 17 to the Company's Consolidated Financial
Statements included elsewhere herein. As a result of the Star Gas Transactions,
the Company currently accounts for its investment in Star Gas Partners following
the equity method of accounting.
3
<PAGE>
In August 1996, Star Gas Partners announced that it had retained Morgan
Stanley & Co. Incorporated to assist it in the development and consideration of
strategic alternatives including the possibility of a sale or merger. In March
1997, Star Gas Partners announced that as a result of this review, as well as
its assessment of its financial results and prospects, it had determined to
discontinue this effort and retain its independence and pursue opportunities for
growth in the coming years.
FUNDAMENTAL CHARACTERISTICS
Unaffected by General Economy
The Company's business is relatively unaffected by business cycles. As home
heating oil for residential use is such a basic necessity, variations in the
amount purchased as a result of general economic conditions have been limited.
Customer Stability
The Company has a relatively stable customer base due to the tendency of
homeowners to remain with their traditional distributors or home buyers to
remain with the previous homeowner's distributor. While the Company loses
approximately 90% of the customers acquired in an acquisition (during the first
six years), approximately 40% of these losses are as a result of customers
moving, and of these losses the Company is able to retain approximately 70% of
the homes underlying the original customer list purchased.
In addition, approximately 90% of the Company's customers receive their
home heating oil pursuant to an automatic delivery system without the customer
having to make an affirmative purchase decision. These deliveries are scheduled
by computer, based upon each customer's historical consumption patterns and
prevailing weather conditions. The Company delivers home heating oil
approximately six times during the year to the average customer. The Company's
practice is to bill customers promptly after delivery. In addition,
approximately 40% of the Company's customers are on the Company's budget payment
plan, whereby their estimated annual oil purchases and service contract are paid
for in a series of equal monthly payments over a twelve month period.
Weather Stability
The Company's business is directly related to the heating needs of its
customers. Accordingly, the weather can have a material effect on the Company's
sales in any particular year, such as in 1990 and 1991, which were the first and
third warmest years in the century. However, the temperatures over the past 30
years have been relatively stable, and as a result have not had a significant
impact on the Company's performance except on a short-term basis.
4
<PAGE>
Insulation from Oil Price Volatility
Although the price of crude oil can be volatile, historically this has not
materially affected the performance of the Company since over the years it has
added an increasing gross margin onto its wholesale costs, designed to offset
the impact of inflation, account attrition and weather. As a result, variability
in supply prices has affected net sales, but generally has not affected gross
profit or net income, and as such, the Company's margins are most meaningfully
measured on a per gallon basis and not as a percentage of sales. While
fluctuations in wholesale prices have not significantly affected demand to date,
it is possible that significant wholesale price increases over an extended
period of time could have the effect of encouraging conservation. If demand were
reduced and the Company was unable to increase its gross profit margin or reduce
its operating expenses, the effect of the decrease in volume would be to reduce
net income.
Approximately 20% of the Company's total sales are made to individual
customers under an agreement pre-establishing the maximum sales price of oil
over a twelve month period. The maximum price at which oil is sold to these
individual customers is renegotiated in April of each year in light of then
current market conditions. The Company currently enters into forward purchase
contracts for a substantial majority of the oil it sells to these capped-price
customers in advance and at a fixed cost. Should events occur after a
capped-sales price is established that increases the cost of oil above the
amount anticipated, margins for the capped-price customers whose oil was not
purchased in advance would be lower than expected, while those customers whose
oil was purchased in advance would be unaffected. Conversely, should events
occur during this period that decrease the cost of oil below the amount
anticipated, margins for the capped-price customers whose oil was purchased in
advance could be lower than expected, while those customers whose oil was not
purchased in advance would be unaffected or higher than expected.
The Company used options to hedge and reduce the risk associated with a
substantial portion of the heating oil forward purchase contracts acquired as of
December 31, 1996. Should the cost of heating oil significantly decline below
the acquisition cost, these options would substantially offset the effects of
such decline.
Conversions to Natural Gas
The rate of conversion from the use of home heating oil to natural gas
is primarily affected by the relative prices of the two products and the cost of
replacing an oil fired heating system with one that uses natural gas. The
Company believes that approximately 1% of its customer base annually converts
from home heating oil to natural gas. Even when natural gas had a significant
price advantage over home heating oil, such as in 1980 and 1981 when there were
government controls on natural gas prices or, for a short time in 1990 and 1991,
during the Persian Gulf crisis, the Company's customers converted to natural gas
at only a 2% annual rate. During the latter part of 1991 and through 1996,
natural gas conversions have returned to their approximate 1% historical annual
rate as the prices for the two products have been at parity.
Business Strategy
Current management assumed control of the Company in 1979 and restructured
the Company's fuel oil operation by consolidating operating branches and
focusing primarily on the retail sale of home heating oil. After this
reorganization, management perceived an opportunity to achieve substantial
growth and increased profitability by acquiring fuel oil distributors in new and
existing markets.
5
<PAGE>
Operating Strategy
In recent years, the Company has increased its focus on its operating
strategy. As a result of a major strategic study aimed at improving
organizational and marketing effectiveness, Petro has recently begun to
implement an operational restructuring program designed to improve the Company's
productivity and responsiveness to customers. Based on its size, the Company is
seeking to redefine its organizational structure and to access developments in
communications and computer technology which are currently in use by other large
distribution businesses, but which are generally not used by retail heating oil
companies. In addition, Petro is seeking to create a premium brand image that
will capitalize on both its size and the lack of consumer brand awareness in the
heating oil industry. These efforts are designed to reduce operating costs,
maximize customer satisfaction, build name recognition and minimize net customer
attrition.
As part of the implementation of this operational restructuring program, in
April 1996, the Company opened its first regional customer service center on
Long Island, New York. This state-of-the-art facility currently conducts all
activities which interface with the Company's approximate 100,000 Long Island
customers, including sales, customer service, credit and accounting. The Company
is also now operating under the single brand name of "Petro" on Long Island,
rather than the 12 brand names previously in use. In connection with the opening
of the customer service center, five full-function branches were consolidated
into three strategically located delivery and service depots to serve the
Company's customers more efficiently. In October 1996, the Company announced the
formation of its Mid-Atlantic operating region. The Company will continue to
test and refine its systems in preparation for implementation of optimal
operating structures throughout the Company. The Company anticipates that the
total cost of this program will be approximately $21.0 million over four years,
of which approximately $6.0 million has been incurred to date.
Acquisition Strategy
The Company's acquisition strategy is to continue to grow its fuel oil
operations through the acquisition and integration of additional distributors in
existing and new markets. The Company's acquisitions typically result in
significant economies of scale through centralization of the accounting, data
processing and fuel oil purchasing functions of the acquired distributor. As the
Company's regionalization program is implemented, the Company believes that it
may realize additional economies in the areas of credit, marketing and customer
service.
Marketing Strategy
The Company's marketing strategy is based on providing service to
quality-minded customers who desire problem-free heating from their heating oil
supplier. As described above, the Company is consolidating its operations under
one brand name, and is building that brand name by employing an upgraded,
professionally trained and managed sales force and using a professionally
developed mass marketing campaign, including radio and print advertising media.
The Company has a nationwide toll free telephone number, 1-800-OIL-HEAT, which
the Company believes helps it to build customer awareness and brand identity.
6
<PAGE>
The Company is employing new means of acquiring customers, including
co-marketing arrangements with realtors, builders, home inspectors and other
affinity groups. In addition, during the first quarter of 1997, the Company
intends to commence a new direct mail marketing initiative targeted at homes in
transition. This program is designed to contact potential customers before they
have moved to their new residences in advance of solicitations from competing
suppliers. The Company is also in the process of refining its product/pricing
strategy to better meet the needs of desired customer segments.
Customers and Sales
The Company currently serves approximately 400,000 customers in the
following 26 markets:
New York Massachusetts New Jersey
Bronx, Queens and Boston (Metropolitan) Camden
Kings Counties Northeastern Massachusetts Neptune
Dutchess County (Centered in Lawrence) Newark(Metropolitan)
Staten Island Worcester North Brunswick
Eastern Long Island Rockaway
Western Long Island Trenton
Connecticut Pennsylvania Rhode Island
Bridgeport--New Haven Allentown Providence
Hartford (Metropolitan) Berks County Newport
Litchfield County (Centered in Reading)
Southern Fairfield Bucks County Maryland/Virginia/D.C.
County (Centered in Southampton) Baltimore (Metropolitan)
Lebanon County Washington, D.C.
(Centered in Palmyra) (Metropolitan)
Approximately 85% of the Company's #2 fuel oil sales are made to
homeowners, with the balance to industrial, commercial and institutional
customers. Historically, the Company has lost a portion of its customer base
each year for various reasons, including customer relocation, price competition
and conversions to natural gas.
SUPPLIERS
The Company obtains its fuel oil in either barge or truckload quantities,
and has contracts with approximately 70 third party storage terminals for the
right to temporarily store its heating oil at their facilities. Purchases are
made pursuant to supply contracts or on the spot market. The Company has market
price based contracts for substantially all its petroleum requirements with 14
different suppliers, the majority of which have significant domestic sources for
their product, and many of which have been suppliers to the Company for over 10
years. The Company's current suppliers are: Amerada Hess Corporation; Bayway
Refining Co.; Citgo Petroleum Corp.; Coastal New England and New York; George E.
Warren Corp.; Global Petroleum Corp.; Koch Refining Company, L.P.; Louis Dreyfus
Energy Corp.; Mieco, Inc.; Mobil Oil Corporation; Northeast Petroleum, a
division of Cargill, Inc.; Northville Industries Corp.; Sprague Energy; and Sun
Oil Company. Typically the Company's supply contracts have terms of 12 months.
All of the supply contracts provide for maximum and in some cases minimum
quantities, and in most cases do not establish in advance the price at which
fuel oil is sold, which, like the Company's price to most of its customers, is
established from time to time.
7
<PAGE>
The Company believes that its policy of contracting for substantially all
its supply needs with diverse and reliable sources will enable it to obtain
sufficient product should unforeseen shortages develop in worldwide supplies.
The Company further believes that relations with its current suppliers are
satisfactory.
COMPETITION
The Company's business is highly competitive. The Company competes with
fuel oil distributors offering a broad range of services and prices, from full
service distributors, like the Company, to those offering delivery only.
Competition with other companies in the fuel oil industry is based primarily on
customer service and price.
Long-standing customer relationships are typical in the retail home heating
oil industry. Many companies in the industry, including Petro, deliver home
heating oil to their customers based upon weather conditions and historical
consumption patterns without the customer making an affirmative purchase
decision each time oil is needed. In addition, most companies, including Petro,
provide home heating equipment repair service on a 24-hour per day basis, which
tends to build customer loyalty.
EMPLOYEES
As of December 31, 1996, the Company had 2,472 employees, of whom 623 were
office, clerical and customer service personnel, 742 were heating equipment
repairmen, 668 were oil truck drivers and mechanics, 238 were management and
staff and 201 were employed in sales. Approximately 400 of those employees are
seasonal and are rehired annually to support the requirements of the heating
season. Approximately 700 employees are represented by 20 different local
chapters of labor unions.
Management believes that its relations with both its union and non-union
employees are satisfactory.
ENVIRONMENTAL MATTERS
The Company has implemented environmental programs and policies designed to
avoid potential liability under applicable environmental laws. The Company has
not incurred any significant environmental compliance costs and compliance with
environmental regulations has not had a material effect on the Company's
operating or financial condition. This is primarily due to the Company's general
policy of not owning or operating fuel oil terminals and of closely monitoring
its compliance with all environmental laws. In light of the Company's general
policy regarding operations and environmental compliance, the Company does not
expect environmental compliance to have a material effect on its operations and
financial condition in the future. The Company's policy for determining the
timing and amount of any environmental cost is to reflect an expense as and when
the cost becomes probable and reasonably capable of estimation.
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PROPANE BUSINESS
In addition to its heating oil business, the Company owns a 46.5% equity
interest in Star Gas Partners, which is primarily engaged in the retail
distribution of propane and related supplies and equipment to residential,
commercial, industrial, agricultural and motor fuel customers. The Company
believes that Star Gas Partners is the ninth largest retail propane distributor
in the United States, serving approximately 153,000 customers from 67 branch
locations and 34 satellite storage facilities in the Midwest and Northeast. Star
Gas Partners also serves approximately 70 wholesale customers from its wholesale
operation in southern Indiana.
Star Gas Partners' strategy is to maximize its cash flow and profitability,
primarily through acquisitions of small- to medium-sized local and regional
independent propane distributors. It focuses on those companies with a
relatively large percentage of residential customers, which generate higher
margins than other types of customers, and those located in the Midwest and
Northeast, where the Company believes that Star Gas Partners can attain higher
margins than in other areas in the United States.
During the fiscal year ended September 30, 1996, approximately 71% of Star
Gas Partners' sales (by volume of gallons sold) were to retail customers (of
which approximately 56%, 22%, 13% and 9% were sales to residential customers,
industrial/commercial customers, agricultural customers and motor fuel
customers, respectively) and approximately 29% were to wholesale customers.
Approximately 70% to 75% of Star Gas Partners' retail propane volume is sold
during the peak heating season from October through March, as many customers use
propane for heating purposes. Consequently, sales, operating profits and cash
flows may vary significantly from quarter to quarter.
Star Gas Partners obtains propane from approximately 30 sources, all of
which are domestic or Canadian companies. Supplies from these sources have
traditionally been readily available, although no assurance can be given that
supplies of propane will be readily available in the future. Substantially all
of Star Gas Partners' propane supply for its Northeast retail operations are
purchased under annual or longer term supply contracts, which generally provide
for pricing in accordance with market prices at the time of delivery. Star Gas
Partners typically supplies its Midwest retail and wholesale operations by a
combination of (i) spot purchases from Mont. Belvieu, Texas, which are
transported by pipeline to Star Gas Partners' 21 million gallon underground
storage facility in Seymour, Indiana, and then delivered to the Midwest branches
and (ii) purchases from a number of Midwest refineries which are transported by
truck to the branches either directly or via the Seymour facility. A portion of
the refinery purchases are purchased under contract.
Star Gas Partners' business is highly competitive. Propane competes
primarily with electricity, natural gas and fuel oil as an energy source on the
basis of price, availability and portability. In addition to competing with
alternative energy sources, Star Gas Partners competes with other companies
engaged in the retail propane distribution business. Competition in the propane
industry is highly fragmented and generally occurs on a local level with other
large full-service multi-state propane marketers, smaller local independent
marketers and farm cooperatives. Based on industry publications, Star Gas
Partners believes that the ten largest multi-state marketers, including Star Gas
Partners, account for less than 35% of the total retail sales of propane in the
United States, and that no single marketer has a greater than 10% share of the
total retail market in the United States. Most of Star Gas Partners' retail
distribution branches compete with five or more marketers or distributors.
9
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ITEM 2. PROPERTIES
The Company provides services to its customers from 26 branches/depots and
18 satellites, 12 of which are owned and 32 of which are leased, in 26 marketing
areas in the Northeast and Mid-Atlantic Regions of the United States.
The Company believes its existing facilities are maintained in good
condition and are suitable and adequate for present needs. In addition, there
are numerous comparable facilities available at similar rentals in each of its
marketing areas should they be required.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceeding which could
have a material adverse effect on the results of operations or the financial
condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Class A Common Stock
The Company's Class A Common Stock is traded on the National Association of
Securities Dealers Inc. National Market under the symbol "HEAT". The high and
low per share price of the Class A Common Stock and dividends declared on the
Class A Common Stock for 1995 and 1996 were as follows:
1995 1996
------------------------------------ --------------------------------
Quarter High Low Dividend High Low Dividend
- ------- ---- --- -------- ---- --- --------
1st $ 9 1/4 $ 6 3/4 $.1500 $ 8 1/4 $ 6 1/2 $.1500
2nd 8 1/4 6 1/2 .1500 7 3/4 6 1/2 .1500
3rd 8 3/4 7 .1500 7 3/4 6 1/4 .1500
4th 8 1/2 6 3/4 .1500 7 3/4 5 5/8 .1500
The last sale price of the Class A Common Stock on March 4, 1997 was $5 3/8
per share. As of March 4, the Company had 241 shareholders of record of its
Class A Common Stock. The Company declared a dividend of $.15 per share of Class
A Common Stock which was paid on January 2, 1997 to holders of record as of
December 16, 1996. The Company has also declared a dividend of $.075 per share
of Class A Common Stock payable on April 1, 1997 to holders of record on March
17, 1997.
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 Company's
Articles of Incorporation provide 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. As a result of terminating the Special Dividends, the Company
has repurchased 206,303 shares of Class B Common Stock for approximately $3.6
million.
As of March 4, 1997 there were 11,228 shares of Class B Common Stock
outstanding which is no longer listed on the American Stock Exchange, nor is
there an established public trading market for it.
Class C Common Stock
There is no established trading market for the Company's Class C Common
Stock, $.10 par value. The number of record holders of the Company's Class C
Common Stock at March 4, 1997 was 24.
The Company declared cash dividends on its Class C Common Stock of $.60 per
share in 1995 and declared cash dividends of $.60 per share in 1996. In
addition, the Company declared a dividend of $.15 per share of Class C Common
Stock which was paid on January 2, 1997 to holders of record as of December 16,
1996. The Company has declared a dividend of $.075 per share of Class C Common
Stock payable on April 1, 1997 to holders of record on March 17, 1997.
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Dividend Policy
The Company is currently paying quarterly dividends on its Class A and
Class C Common Stock at an annual rate of $.30 per share. The Company has
historically paid dividends on January 2, April 1, July 1 and October 1 of each
year.
The Company reviews its dividend policy from time to time in light of the
Company's results of operations, financial condition, capital needs, future
projects and other facts deemed relevant by the Board of Directors. While the
board of Directors may vary the dividend policy to reduce or eliminate
dividends, the approval of the Class C Common Stockholders is required to reduce
dividends lower than the level established by a shareholders' agreement among
the Class C Common Stockholders.
The Company may pay dividends on the Class A Common Stock and Class C
Common Stock only upon paying all current and cumulative dividends on the
Redeemable Preferred Stock and the 12 7/8% Exchangeable Preferred Stock. The
Company has paid all current and cumulative dividends on such stock. The Company
believes that it has sufficient liquidity to meet all dividend requirements on
its preferred stock and to pay cash dividends on the Class A Common Stock and
the Class C Common Stock.
Under the terms of the Company's debt instruments, the Company is
restricted to the amount of dividend distributions it can make on its capital
stock. Under the most restrictive dividend limitations, $8.8 million was
available for the payment of dividends on all classes of Common Stock at
December 31, 1996. The amount available for dividends is increased each quarter
by 50% of the cash flow, as defined, for the previous fiscal quarter, and by the
new issuance of capital stock.
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ITEM 6. SELECTED FINANCIAL AND OTHER DATA
The following table sets forth selected financial and other data of the
Company and should be read in conjunction with the more detailed financial
statements included elsewhere in this Report. The Company typically generates
net income and NIDA in the quarters ending in March and December and experiences
net losses and negative NIDA during the non-heating season quarters ending in
June and September. Although EBITDA and NIDA should not be considered
substitutes for net income (loss) as an indicator of the Company's operating
performance and NIDA is not a measure of the Company's liquidity, they are
included in the following tables as they are the principal bases upon which the
Company assesses its financial performance. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition."
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales $512,430 $538,526 $546,677 $609,507 $608,161
Cost of sales 350,941 366,809 362,981 387,825 427,388
-------- -------- -------- ------- -------
Gross profit 161,489 171,717 183,696 221,682 180,773
Operating expenses 110,165 123,280 128,310 164,929 143,069
Amortization of customer lists 23,496 23,183 19,748 20,527 18,611
Depreciation of plant and equipment 5,534 5,933 6,469 12,374 6,574
Amortization of deferred charges 5,363 5,548 6,177 6,142 4,760
Provision for supplemental benefit 1,974 264 373 1,407 873
-------- -------- -------- -------- --------
Operating income 14,957 13,509 22,619 16,303 6,886
Interest expense-net 18,622 20,508 23,766 38,792 32,412
Other income (expense)-net (324) (165) 109 218 1,842
-------- -------- -------- -------- --------
Loss before income taxes,
equity interest in Star Gas,
and extraordinary item (3,989) (7,164) (1,038) (22,271) (23,684)
Income taxes 400 400 600 500 500
-------- -------- ------- -------- --------
Loss before equity interest in
Star Gas and extraordinary item (4,389) (7,564) (1,638) (22,771) (24,184)
Share of income (loss) of Star Gas - - (1,973) 728 2,283
--------- -------- ------- -------- --------
Loss before extraordinary item (4,389) (7,564) (3,611) (22,043) (21,901)
Extraordinary item-loss on
early extinguishment of debt - (867) (654) (1,436) (6,414)
--------- -------- ------- -------- --------
Net loss $ (4,389) $ (8,431) $(4,265) $(23,479) $(28,315)
========= ========= ======== ========= =========
Net loss applicable to Common Stock $ (8,842) $(11,798) $(7,776) $(26,742) $(30,704)
Net income (loss) per common share:
Class A Common Stock $ (.81) $ (.57) $ (.37) $ (1.06) $ (1.20)
Class B Common Stock 1.14 1.88 1.10 - -
Class C Common Stock (.81) (.57) (.37) (1.06) (1.20)
Cash dividends declared per
common share:
Class A Common Stock $0.18 $0.525 $0.55 $0.60 $ 0.60
Class B Common Stock 1.14 1.88 1.10 - -
Class C Common Stock 0.18 0.525 0.55 0.60 0.60
Weighted average number of
common shares outstanding:
Class A Common Stock 12,854 18,993 19,195 22,711 22,983
Class B Common Stock 2,447 217 152 15 12
Class C Common Stock 2,545 2,545 2,550 2,598 2,598
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash $ 3,860 $ 4,614 $ 15,474 $ 78,285 $ 3,257
Working capital (deficiency) (6,744) 16,694 28,344 65,408 18,093
Total assets 252,783 256,589 397,174 357,241 275,025
Long-term debt 135,058 185,311 309,945 294,429 291,337
Redeemable preferred stock
(long-term portion) 37,718 20,833 36,632 12,500 8,333
Stockholders' deficiency (33,917) (61,964) (66,176) (100,903) (145,733)
Summary Cash Flow Data:
Net Cash provided by (used in)
operating activities $ 26,713 $ 36,637 $ 31,449 $ (1,707) $ (3,852)
Net Cash provided by (used in)
investing activities (49,143) (34,337) (31,672) 16,613 (26,193)
Net Cash provided by (used in)
financing activities 23,381 (1,546) 11,083 47,905 (44,983)
Other Data:
EBITDA(1) $ 51,325 $ 48,437 $ 55,386 $ 56,753 $ 37,704
NIDA(2) $ 27,721 $ 24,043 $ 27,666 $ 14,650 $ 9,354
Gallons of home heating oil
and retail propane sold 423,354 443,487 456,719 503,610 456,141
</TABLE>
- ----------
(1) "EBITDA" (Earnings Before Interest, Taxes, Depreciation and Amortization)
is defined as operating income before depreciation, amortization, non-cash
charges relating to the grant of stock options to executives of the
Company, non-cash charges associated with deferred compensation plans and
other non-cash charges of a similar nature, if any. EBITDA should not be
considered as an alternative to net income (as an indicator of operating
performance) or as an alternative to cash flow (as a measure of liquidity
or availability to service debt obligations), but provides additional
significant information in that EBITDA is a principal basis upon which the
Company assesses its financial performance.
(2) "NIDA" (Net Income (Loss) Before Extraordinary Item, Depreciation and
Amortization)is defined as net income (loss) before extraordinary item,
plus depreciation, amortization, non-cash charges relating to the grant of
stock options to executives of the Company, non-cash charges, associated
with deferred compensation plans and other non-cash charges of a similar
nature, if any, less dividends accrued on preferred stock, excluding net
income (loss) derived from investments accounted for by the equity method,
plus any cash dividends received by the Company from these investments.
NIDA should not be considered as an alternative to net income (as an
indicator of operating performance) or as an alternative to cash flow (as a
measure of liquidity or ability to service debt obligations) but provides
additional information in that NIDA is a principal basis upon which the
Company assesses its financial performance.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Overview
In analyzing the Company's results, investors should consider a variety of
factors unique to the Company and the heating oil industry. These include the
Company's active acquisition program, the rapid rate of amortization of customer
lists purchased in heating oil acquisitions and the Company's recent
transactions involving its propane operations. First, the financial results of a
given year do not reflect the full impact of that year's acquisitions. In
addition, acquisitions made during the spring and summer months generally have a
negative effect on earnings in the calendar year in which they are made. Second,
substantially all purchased intangibles have been comprised of customer lists
and covenants not to compete. Amortization of customer lists is a non-cash
write-off which is accounted for 90% over a six-year period and the balance over
a 25-year period. The covenants not to compete are amortized over the lives of
the covenants, which generally range from five to seven years. Third, as a
result of the conversion of Petro's propane operations, including the operations
of Star Gas Corporation ("Star Gas"), into a Master Limited Partnership in
December 20, 1995 (the "Star Gas Transactions"), Petro's 1996 results account
for Star Gas' performance on an equity basis. In contrast, Petro's 1995 results
account for the Company's propane operations on a consolidated basis through
December 20, 1995, and on an equity basis for the last eleven days of 1995. As a
result and in an effort to make the following discussion more meaningful, the
analysis of results is focused primarily on Petro's home heating oil operations.
1996 Compared to 1995
Volume. Heating oil volume increased 8.8% to 456.1 million gallons for
1996, as compared to 419.6 million gallons for 1995. This increase was largely
due to gallonage from twenty three heating oil acquisitions completed since
January 1, 1995, as well as to colder weather than in the previous year.
Combined total retail gallons of heating oil and propane decreased 9.4% from
1995 to 1996, as retail propane volume, which amounted to 84.0 million gallons
in 1995, was excluded from Petro's 1996 operating results as a result of the
Star Gas Transactions.
Net sales. Net sales for the Company's heating oil business increased 19.5%
to $608.2 million for 1996, as compared to $509.1 million for 1995. This growth
was due both to increased volume and to higher selling prices associated with
the significant increases in wholesale product costs during fiscal 1996.
Combined total sales of heating oil and propane remained relatively unchanged
from 1995 to 1996, as propane sales, which amounted to $100.4 million in 1995,
were excluded from Petro's 1996 financials as a result of the Star Gas
Transactions.
Gross profit. Gross profit for the Company's heating oil business increased
8.0% to $180.8 million for 1996, as compared to $167.4 million for 1995. The
growth in gross profit resulted primarily from the increased volume and was
partially offset by an unusual slight decline in home heating oil margins caused
by significant and rapid increases in supply costs and the effect of record
winter storms in early 1996 on net service expense, which is included in the
Company's calculation of gross profit. Combined total gross profit declined
18.5% from 1995 to 1996, as propane gross profit, which amounted to $54.2 in
1995, was excluded from Petro's 1996 operating results as a result of the Star
Gas Transactions.
15
<PAGE>
Selling, general and administrative expenses. Selling, general and
administrative expenses for the Company's heating oil business increased 8.7% to
$105.6 million for 1996, as compared to $97.2 million for 1995. Despite the
impact of inflation-related cost increases and the impact of certain expenses
related to the operational restructuring, selling, general and administrative
expenses declined slightly on a per gallon basis, reflecting economies resulting
from the increased volume. Combined total selling, general and administrative
expenses decreased 17.7% from 1995 to 1996, as propane expenses, which amounted
to $31.1 million in 1995, were excluded from Petro's 1996 operating results as a
result of the Star Gas Transactions.
Direct delivery expenses. Direct delivery expenses for the Company's
heating oil business increased 15.4% to $33.1 million for 1996, as compared to
$28.7 million for 1995. In addition to the growth in volume delivered, this
increase was also due to inflation-related cost increases and the severe first
quarter snow storms, which impacted delivery productivity and required the
Company to pay unusually high overtime and retain additional temporary
personnel. Combined total direct delivery expenses decreased 9.6% from 1995 to
1996, as propane delivery expenses, which amounted to $7.9 million in 1995, were
excluded from Petro's 1996 operating results as a result of the Star Gas
Transactions.
Restructuring charges. Restructuring charges for 1996 were $1.2 million.
These charges represent costs associated with the Company's regionalization and
consolidation of its five full-function Long Island branches into one regional
customer service center and three strategically located delivery and service
depots. The customer service center began operation during May 1996 and
represents the first stage of implementation of an operational effectiveness
study conducted by a nationally recognized consulting firm and senior management
in 1995.
Corporate identity expenses. Corporate identity expenses for 1996 were $2.7
million. These expenses represent costs associated with the Company's brand
identity program in Long Island, and include the repainting of over 400 delivery
and service vehicles in the region. Through this program, the Company is seeking
to build significant brand equity by marketing its services throughout the
region under the "Petro" brand name, rather than the twelve brands previously in
use.
Pension curtailment costs. Pension curtailment costs for 1996 were $0.6
million. This non-cash charge represents the one-time costs associated with the
"freezing" of one of the Company's two defined benefits plans, which resulted in
the acceleration of previously unrecognized prior service costs.
Amortization of customer lists. Amortization of heating oil customer lists
increased 1.6% to $18.6 million for 1996, as compared to $18.3 million for 1995,
due to the Company's recent acquisitions, which were partially offset by the
impact of certain customer lists becoming fully amortized. Combined total
amortization of customer lists decreased 9.3% from 1995 to 1996, as propane
customer list amortization, which amounted to $2.2 million in 1995, was excluded
in Petro's 1996 operating results as a result of the Star Gas Transactions.
Depreciation of plant and equipment. Depreciation of heating oil plant and
equipment increased 10.7% to $6.6 million for 1996, as compared to $5.9 million
for 1995, as a result of the Company's recent fixed asset additions associated
with acquisitions, which outpaced the impact of certain assets becoming fully
depreciated. Combined total depreciation of plant and equipment decreased 46.9%
from 1995 to 1996, as propane-related depreciation, which amounted to $6.4
million in 1995, was excluded from Petro's 1996 operating results as a result of
the Star Gas Transactions.
16
<PAGE>
Amortization of deferred charges. Amortization of heating oil deferred
charges decreased 8.5% to $4.8 million for 1996, as compared to $5.2 million for
1995, as a result of certain deferred items becoming fully amortized. Combined
total amortization of deferred charges decreased from $6.1 million for 1995 to
$4.8 million for 1996, as the impact of propane-related amortization of deferred
charges, which amounted to $0.9 million in 1995, was excluded in Petro's 1996
operating results as a result of the Star Gas Transactions.
Provision for supplemental benefits. Provision for supplemental benefits
declined to $0.9 million for 1996, as compared to $1.4 million for 1995. These
supplemental benefits reflect the extension of the exercise date of certain
options previously issued. The decrease in the provision for supplemental
benefits is due to a reduction in the required accrual pertaining to those
options.
Operating income. Operating income for the Company's heating oil business
decreased to $6.9 million for 1996, as compared to $10.7 million for 1995.
Excluding restructuring and corporate identity costs associated with the
Company's regionalization program and one-time pension curtailment costs
associated with the termination of one of the Company's two defined benefit
plans, operating income increased 4.9% to $11.3 million. This improvement was
largely a result of higher volume. Combined total operating income decreased
$9.4 million, as the impact of propane-related operating income, which amounted
to $5.6 million in 1995, was excluded from Petro's 1996 operating results as a
result of the Star Gas Transactions.
Net interest expense. Net interest expense declined 16.4% to $32.4 million
for 1996, as compared to $38.8 million for 1995. This decrease was due to the
decline in average borrowings versus the prior period resulting from the
application of proceeds from the Star Gas Transactions to debt repayment.
Other income. Other income was $1.8 million for 1996 and $0.2 million for
1995, reflecting the sale of the Company's underperforming Springfield,
Massachusetts and New Hampshire heating oil operations during the second quarter
of 1996 and the first quarter of 1995, respectively.
Equity in earnings of Star Gas Partnership. The Company's share of earnings
of Star Gas Partners was $2.3 million for 1996. For 1995, Star Gas' results were
consolidated with the Company's through December 20, 1995, and equity in
earnings of Star Gas were $0.7 million for the final eleven days of 1995. In
1996, the Company received $4.3 million in distributions from Star Gas Partners,
reflecting the Company's ownership of partnership interests for the period of
December 20, 1995 to September 30, 1996. Due to the lagged nature of these
distributions, the Company received distributions on its interest from October
1, to December 31, 1996 during the first quarter of fiscal year 1997. Total
distributions received by the Company for its ownership interest in Star Gas
Partners for the full year 1996 were $5.5 million.
Income before extraordinary items. Income before extraordinary items
remained relatively unchanged at a loss of $21.9 million for 1996, as compared
to a loss of $22.0 million for 1995. Excluding the restructuring, corporate
identity and pension curtailment costs, income before extraordinary items
improved to a loss of $17.5 million. This improvement was largely due to the
$6.4 million reduction in interest expense and the $1.6 million increase in
other income. Partially offsetting these gains was the elimination of $5.6
million of Star Gas operating income in 1995 as a result of the Star Gas
Transactions, which was greater than the $1.6 million increase in equity in
earnings of Star Gas for 1996 versus 1995.
17
<PAGE>
Extraordinary item - loss on early extinguishment of debt. In February
1996, the Company recorded an extraordinary charge of $6.4 million in connection
with the retirement of $43.8 million of 12 1/4% Subordinated Debentures due
2005. This amount includes both a prepayment premium of $4.8 million and a
write-off of deferred charges of $1.6 million associated with the issuance of
that debt. In 1995, the Company recorded an extraordinary charge of $1.4 million
related to the repayment of $12.8 million of debt due March 2000.
Net income/(loss). Net loss increased to $28.3 million for 1996, as
compared to a loss of $23.5 million for 1995. This increase was largely due to
the extraordinary item described above.
EBITDA.* EBITDA for the Company's heating oil business decreased 9.3% to
$37.7 million, as compared to $41.6 million for 1995. Excluding one-time
restructuring, corporate identity and pension curtailment expenses, EBITDA
increased to $42.1 million for 1996. This increase of 1.2% was less than the
increase in volume as a result of the unusual decline in gross profit margins.
Combined total EBITDA before these one-time costs and adding distributions of
$4.3 million from Star Gas, representing Petro's ownership interest in Star
through September 30, 1996, decreased 18.3% from 1995 to 1996, as the impact of
propane EBITDA, which amounted to $15.2 million in 1995, was excluded from
Petro's 1996 operating results as a result of the Star Gas Transactions. The
majority of Petro's proceeds from the sale of a 53.5% interest in Star Gas were
applied to the reduction of long-term debt and associated interest expense,
which did not impact EBITDA.
NIDA.** Total NIDA for the Company declined from $14.7 million in 1995 to
$9.4 million in 1996. Excluding restructuring and corporate identity expenses,
NIDA decreased by 10.2% to $13.2 million in 1996, as the loss of propane-related
EBITDA due to the Star Gas Transactions was largely offset by a reduction in
interest expense and the receipt of master limited partnership distributions
from Star Gas.
- ----------
* EBITDA is defined as operating income before depreciation, amortization,
non-cash charges relating to the grant of stock options to executives of
the Company, non-cash charges associated with deferred compensation plans
and other non-cash charges of a similar nature, if any.
** NIDA is defined as net income (loss) before extraordinary items, plus
depreciation, amortization, non-cash charges relating to the grant of stock
options to executives of the Company, non-cash charges associated with
deferred compensation plans and other non-cash charges of a similar nature,
if any, less dividends accrued on preferred stock, excluding net income
(loss) derived from investments accounted for by the equity method, plus
any cash dividends received by the Company from these investments.
18
<PAGE>
1995 Compared with 1994
Volume. Home heating oil and retail propane volume increased 10% to 503.6
million gallons in 1995, as compared to 456.7 million gallons in 1994. This
increase was primarily due to the inclusion of gallonage from 11 home heating
oil and propane acquisitions in 1995, as well as 12 home heating oil and propane
acquisitions in 1994, including Star Gas, whose volume was fully reflected for
the first time in 1995. Excluding the impact of the propane assets transferred
in the Star Gas Transactions to Star Gas Partners (the "Propane Assets") in both
1994 and 1995, volume declined 4.6%, from 439.7 million gallons to 419.6 million
gallons. This decline was largely due to warmer weather in 1995 and a change in
the Company's scheduling of fuel oil deliveries, which, while improving
operating efficiency, negatively impacted the year to year volume comparison.
Heating oil volume was further impacted by the sale of the Company's New
Hampshire operations, as well as by the loss of certain low margin
interruptible, will call and bid customers, and by account attrition, which
together offset the impact of heating oil acquisitions.
Net sales. Net sales increased 11.5% to $609.5 million for 1995, as
compared to $546.7 million in 1994. This increase was due to retail and
wholesale sales associated with the Company's acquisitions. Excluding the impact
of the Propane Assets in both 1994 and 1995, net sales declined 3.5% from $527.7
million to $509.1 million. This decrease was smaller than the decline in volume
as a result of a slight increase in home heating oil selling prices and a 3.2%
rise in service and installation revenues due to the acquisition of branches
with, on average, higher service revenues than at the Company's historic
locations.
Gross profit. Gross profit increased 20.7% to $221.7 million in 1995, as
compared to $183.7 million for 1994. Excluding the impact of the Propane Assets,
gross profit fell 3.6%, from $173.7 million to $167.4 million. This decrease was
also smaller than the decline in volume, largely as a result of increased
heating oil margins and a 10.7% decline in net service loss, caused both by the
growth in service and installation revenues and by the establishment of customer
service departments, which resulted in the reclassification of certain service
costs as general and administrative expenses in 1995 which were treated as
service expenses in 1994.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased 34.6% to $128.3 million in 1995, as compared
to $95.3 million in 1994, due largely to the additional expenses associated with
Star Gas, which accounted for $28.0 million, or 84.9%, of the increase.
Excluding the Propane Assets, as well as the impact of the reclassification of
certain service costs discussed above and one-time expenses related to a
consulting study discussed above, selling, general and administrative expenses
increased only 1.1% in 1995.
Direct delivery expense. Direct delivery expense increased 11.0% to $36.6
million for 1995, as compared to $33.0 million for 1994. Excluding the impact of
the Propane Assets, direct delivery expenses decreased 8.0%, from $31.2 million
to $28.7 million, due both to the Company's ability to reduce direct delivery
expenses in response to the decline in volume and to improved performance
resulting from the change in delivery scheduling. As a result of these efforts,
the Company's per unit delivery cost fell in 1995.
19
<PAGE>
Amortization of customer lists. Amortization of customer lists increased
3.9% to $20.5 million for 1995, as compared to $19.7 million for 1994. This
increase was primarily due to customer list amortization associated with Star
Gas. Excluding the Propane Assets, the Company experienced a decline in customer
list amortization, from $18.9 million to $18.3 million, as a result of certain
customer lists becoming fully amortized.
Depreciation and amortization of plant and equipment. Depreciation and
amortization of plant and equipment increased 91.3% to $12.4 million for 1995,
as compared to $6.5 million for 1994. This increase was largely due to
depreciation associated with Star Gas. Excluding the Propane Assets, the Company
experienced a 13.2% increase in depreciation, from $5.2 million to $5.9 million,
as a result of the Company's increased size and asset base.
Amortization of deferred charges. Amortization of deferred charges remained
virtually unchanged from the prior fiscal year at $6.1 million for 1995, as the
$0.9 million increase in amortization associated with Star Gas was offset by a
like amount of deferred charges associated with prior heating oil acquisitions
which became fully amortized.
Provision for supplemental benefits. Provision for supplemental benefits
increased to $1.4 million for 1995, as compared to $0.4 million for 1994. This
non-cash expense is related to the extension of the exercise date related to
certain options previously issued. This event occurred late in fiscal year 1994;
accordingly, the full impact is first reflected in fiscal year 1995.
Operating income. Operating income declined $6.3 million to $16.3 million
for 1995, as compared to $22.6 million for 1994. Excluding the Propane Assets,
operating income declined from $20.1 million to $10.7 million for 1995,
primarily due to the decline in volume and the one-time cost of the consulting
study discussed above.
Net Interest expense. Net interest expense increased by $15.0 million to
$38.8 million for 1995, as compared to $23.8 million for 1994, due to increased
average borrowings of $136.0 million, a substantial portion of which was used to
finance the purchase of Star Gas. The remaining increase in average debt
outstanding was primarily associated with the funding of the 22 other home
heating oil and propane acquisitions completed in 1994 and 1995, as well as with
increasing Petro's working capital to fund future expansion. While the Company
was successful in refinancing $12.8 million of its debt in April 1995 at a lower
borrowing rate, the average borrowing rate for the Company increased by 0.29%
from 1994 to 1995 as a result of the Company's extension of its average maturity
on its debt outstanding.
Other income. Other income of $0.2 million for 1995 primarily represents
the net gain recorded on the sale of certain customer lists and fixed assets,
including the sale of the New Hampshire operations.
Income taxes. Income taxes were $0.5 million for 1995, as compared to $0.6
million for 1994, and represent certain state taxes. The Company had losses for
Federal Income Tax purposes in both 1994 and 1995. As of December 31, 1995, net
operating loss carryforwards amounted to $76.2 million.
20
<PAGE>
Equity in earnings of Star Gas. For 1994, the Company recorded equity in
losses of Star Gas of $2.0 million. This amount represented the share of Star
Gas' loss associated with the Company's minority interest prior to its purchase
of the remainder of Star Gas on December 7, 1994. From that date until December
19, 1995, the Company owned 100% of Star Gas; accordingly, Star's results were
consolidated into the Company's, and the Company showed no such equity in
losses. Subsequent to the December 19, 1995 conversion of Star Gas into a Master
Limited Partnership, the Company owned 46.5% of Star Gas, and Star Gas' results
were again accounted for under the equity method of accounting, resulting in
equity in earnings of $0.7 million in 1995.
Extraordinary item - loss on early extinguishment of debt. In April 1995,
the Company recorded an extraordinary charge of $1.4 million in connection with
the refinancing of $12.8 million of debt due in March 2000. This refinancing
yielded a reduction in the borrowing rate on that debt of over 3.4% in 1995. In
the comparable period in 1994, the Company also recorded an extraordinary charge
of $0.7 million, when it refinanced $50.0 million in long-term notes that were
scheduled to mature in June 1994.
Net loss. Net loss increased from $4.3 million for 1994 to $23.5 million
for 1995. This was primarily due to the decline in home heating oil volume,
increased interest expense associated with the Company's acquisition of Star
Gas, and an increase in non-cash depreciation and amortization expense at Star
Gas.
EBITDA. EBITDA increased 2.5%, or $1.4 million, to $56.8 million for 1995,
as compared to $55.4 million for 1994, due to an increase in EBITDA of $11.6
million at Star Gas, largely offset by the decline in heating oil volume and
one-time expenses related to the consulting study.
NIDA. NIDA declined from $27.7 million for 1994 to $14.7 million for 1995.
This decline was primarily due to the volume related home heating oil EBITDA
decline and increased interest expense associated with the Company's
acquisitions, primarily Star Gas.
21
<PAGE>
Liquidity and Financial Condition
It has been the Company's strategy to finance its growth through a
combination of internally generated capital, the sale of common stock, and the
issuance of redeemable preferred stock and debt. In the past five years,
acquisitions and other asset requirements have been financed in the following
manner: 31.3% with internally generated cash and funds from common stock
offerings; 33.4% with redeemable preferred stock and long-term debt; and 35.3%
from the net proceeds of the Star Gas Transaction.
In December 1995, the Company received net proceeds from the transfer of
its propane assets to the Star Gas Partnership of $134.7 million, $83.7 million
from Star Gas Corporation's First Mortgage Notes and $51.0 million from the Star
Gas MLP equity offering. Approximately $30.0 million of these funds were used in
1995, $24.0 million to repay long-term debt and $6.0 million reserved to
guarantee the Star Gas Partnership's minimum quarterly distribution. In February
1996, $48.6 million of these funds were used to retire $43.8 million of the
Company's $125.0 million 12 1/4% Subordinated Debentures due 2005 at an eleven
percent premium.
For 1996, the opening cash balance at January 1, 1996 of $78.3 million and
the receipt of Star Gas's minimum quarterly distribution of $4.3 million
(representing three-fourths of the anticipated annual distribution), combined
with the net cash used in operating activities of $3.9 million, amounted to
$78.7 million. These funds were utilized in investing activities for
acquisitions and the purchase of fixed assets of $34.6 million and in financing
activities to pay dividends of $17.7 million, redeem preferred stock of $4.2
million, repay notes payable of $2.1 million, and repurchase subordinated notes
of $48.6 million (as described in the preceding paragraph). These financing
activities were partially offset by cash provided by other financing activities
of $28.1 million (which includes $22.0 million of working capital credit
facility borrowings, $2.1 million of dividend reinvestment proceeds and the
release of $3.0 million from the Star Gas minimum quarterly distribution
guarantee based upon the fulfillment of the guarantee provisions). In addition,
the sale of the Company's Springfield Massachusetts operations generated $4.1
million of proceeds. As a result of the above activities, the Company's cash
balance decreased by $75.0 million to $3.3 million at December 31, 1996.
The Company currently has available a $60 million working capital revolving
credit facility. At December 31, 1996 there were $22 million of borrowings
outstanding under this facility, and the Company had $18.1 million of working
capital.
In February 1997, the Company completed the private placement of $30
million of 12 7/8% exchangeable preferred stock due 2009. Proceeds from this
placement will be used for general corporate purposes, including the Company's
operational restructuring and acquisition programs.
For 1997, the Company anticipates paying dividends on its Common Stock
before dividend reinvestment of approximately $9.6 million, repaying $3.0
million of long-term debt, redeeming $4.2 million of Redeemable Preferred Stock
and paying $4.7 million in preferred dividends. Based on the Company's current
working capital position, funds generated from the February 1997 sale of
preferred stock, bank credit availability and expected net cash provided by
operating activities, the Company expects to be able to meet all of the above
mentioned obligations in 1997.
Currently, the Company has no material commitments for capital
expenditures.
22
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements, Page F-1
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information appearing in the Proxy Statement under the caption ELECTION
OF DIRECTORS and under the caption EXECUTIVE OFFICERS, is incorporated herein by
this reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information appearing in the Proxy Statement under the caption
EXECUTIVE COMPENSATION, is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information appearing in the Proxy Statement under the caption ELECTION
OF DIRECTORS -- Ownership of Equity Securities in the Company, is incorporated
herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information appearing in the Proxy Statement under the caption ELECTION
OF DIRECTORS -- Certain Transactions, is incorporated herein by this reference.
23
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K
(a) The following documents are filed as part of this report:
1. The following consolidated financial statements are included in Part
II, Item 8:
Consolidated Financial Statements of Petroleum Heat and Power Co.,
Inc. and Subsidiaries:
Independent Auditors' Reports
Consolidated Balance Sheets, December 31, 1995 and 1996
Consolidated Statements of Operations, years ended December 31,
1994, 1995 and 1996
Consolidated Statements of Changes in Stockholders' Equity
(Deficiency) years ended December 31, 1994, 1995 and 1996
Consolidated Statements of Cash Flows, years ended December 31,
1994, 1995 and 1996
Notes to Consolidated Financial Statements
2. The following financial schedule is submitted herewith:
Schedule II - Valuation and Qualifying Accounts Years Ended December
31, 1994, 1995 and 1996
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements
or notes thereto.
3. (a) Exhibits
The Exhibits which are listed on the Exhibit Index attached hereto.
4. Reports on Form 8-K
None.
24
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Consolidated Financial Statements of Petroleum Heat and Power Co.,
Inc. and Subsidiaries
Independent Auditors' Report F-2
Consolidated Balance Sheets, December 31, 1995 and 1996 F-3
Consolidated Statements of Operations, Years ended
December 31, 1994, 1995 and 1996 F-4
Consolidated Statements of Changes in Stockholders'
Equity (Deficiency), Years ended December 31, 1994,
1995 and 1996 F-5
Consolidated Statements of Cash Flows, Years ended
December 31, 1994, 1995 and 1996 F-6
Notes to Consolidated Financial Statements F-8
Schedule for the years ended December 31, 1994, 1995 and 1996:
II - Valuation and Qualifying Accounts F-27
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements
or notes thereto.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors of PETROLEUM HEAT AND POWER CO., INC.:
We have audited the accompanying consolidated balance sheets of
Petroleum Heat and Power Co., Inc. and subsidiaries as of December 31, 1995 and
1996, and the related consolidated statements of operations, changes in
stockholders' equity (deficiency) and cash flows for each of the years in the
three-year period ended December 31, 1996. In connection with our audit of the
consolidated financial statements we also have audited the financial statement
schedule as listed in the accompanying index. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Petroleum Heat and Power Co., Inc. and subsidiaries as of December 31, 1995 and
1996, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996 in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Stamford, Connecticut
March 3, 1997
F-2
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 31,
---------------------
Assets 1995 1996
- ------ --------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 78,285 $ 3,257
Restricted cash 6,000 3,000
Accounts receivable (net of allowance of $969 and $1,088) 95,361 93,362
Inventories 20,413 22,084
Prepaid expenses 6,115 7,008
Notes receivable and other current assets 1,617 1,299
--------- ---------
Total current assets 207,791 130,010
--------- ---------
Property, plant and equipment - net 30,263 30,666
Intangible assets (net of accumulated amortization
of $264,456 and $283,486)
Customer lists 76,419 77,778
Deferred charges and pension costs 27,296 25,718
--------- ---------
103,715 103,496
--------- ---------
Investment in and advances to the Star Gas Partnership 14,648 9,943
Other assets 824 910
--------- ---------
$ 357,241 $ 275,025
========= =========
Liabilities and Stockholders' Equity (Deficiency)
Current liabilities:
Working capital borrowings $ -- $ 22,000
Current debt 47,001 3,047
Current maturities of cumulative redeemable
exchangeable preferred stock 4,167 4,167
Accounts payable 22,824 18,988
Customer credit balances 19,610 17,468
Unearned service contract revenue 15,535 15,388
Accrued expenses and other liabilities 33,246 30,859
--------- ---------
Total current liabilities 142,383 111,917
--------- ---------
Supplemental benefits and other liabilities 1,658 1,584
Pension plan obligation 7,174 7,587
Notes payable and other long-term debt 17,779 16,787
Senior notes payable 35,200 34,150
Subordinated notes payable 241,450 240,400
Cumulative redeemable exchangeable preferred stock 12,500 8,333
Common stock redeemable at option of stockholder (161 Class A
and 40 Class C shares and 124 Class A and 31 Class C shares) 1,280 984
Note receivable from stockholder (1,280) (984)
Stockholders' equity (deficiency):
Class A common stock-par value $.10 per share; 40,000 shares
authorized, 22,653 and 22,931 shares outstanding 2,266 2,294
Class B common stock-par value $.10 per share; 6,500 shares
authorized, 14 and 11 shares outstanding 1 1
Class C common stock-par value $.10 per share; 5,000 shares
authorized, 2,558 and 2,567 shares outstanding 256 257
Additional paid-in capital 76,418 78,804
Deficit (174,972) (221,024)
Minimum pension liability adjustment (4,872) (6,065)
--------- ---------
Total stockholders' equity (deficiency) (100,903) (145,733)
--------- ---------
$ 357,241 $ 275,025
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 546,677 $ 609,507 $ 608,161
Cost of sales 362,981 387,825 427,388
--------- --------- ---------
Gross profit 183,696 221,682 180,773
Selling, general and administrative expenses 95,314 128,295 105,601
Direct delivery expense 32,995 36,634 33,102
Restructuring charges -- -- 1,150
Corporate identity expenses -- -- 2,659
Pension curtailment expense -- -- 557
Amortization of customer lists 19,749 20,527 18,611
Depreciation of plant and equipment 6,469 12,374 6,574
Amortization of deferred charges 6,177 6,142 4,760
Provision for supplemental benefits 373 1,407 873
--------- --------- ---------
Operating income 22,619 16,303 6,886
Other income (expense):
Interest expense (25,282) (41,084) (34,669)
Interest income 1,516 2,292 2,257
Other 109 218 1,842
--------- --------- ---------
Loss before income taxes, equity interest
and extraordinary item (1,038) (22,271) (23,684)
Income taxes 600 500 500
--------- --------- ---------
Loss before equity interest
and extraordinary item (1,638) (22,771) (24,184)
--------- --------- ---------
Share of income (loss) of Star Gas Partnership (1,973) 728 2,283
--------- --------- ---------
Loss before extraordinary item (3,611) (22,043) (21,901)
--------- --------- ---------
Extraordinary item-loss on early
extinguishment of debt (654) (1,436) (6,414)
--------- --------- ---------
Net loss $ (4,265) $ (23,479) $ (28,315)
========= ========= =========
Preferred Stock dividends (3,511) (3,263) (2,389)
--------- --------- ---------
Net loss applicable to common stock $ (7,776) $ (26,742) $ (30,704)
========= ========= =========
Income (loss) before extraordinary item per common share:
Class A Common Stock $ (0.34) $ (1.00) $ (0.95)
Class B Common Stock 1.10 -- --
Class C Common Stock (0.34) (1.00) (0.95)
Extraordinary (loss) per common share:
Class A Common Stock $ (0.03) $ (0.06) $ (0.25)
Class B Common Stock -- -- --
Class C Common Stock (0.03) (0.06) (0.25)
Net income (loss) per common share:
Class A Common Stock $ (0.37) $ (1.06) $ (1.20)
Class B Common Stock 1.10 -- --
Class C Common Stock (0.37) (1.06) (1.20)
Weighted average number of common shares outstanding:
Class A Common Stock 19,195 22,711 22,983
Class B Common Stock 152 15 12
Class C Common Stock 2,550 2,598 2,598
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity (Deficiency)
Years Ended December 31, 1994, 1995 and 1996
(In thousands)
<TABLE>
<CAPTION>
Common Stock
---------------------------------------------------
Class A Class B Class C
---------------------------------------------------
No. Of No. Of No. Of
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 18,831 $ 1,883 217 $ 22 2,506 $251
Net loss
Cash dividends declared and paid
(Notes 6 and 7)
Cash dividends payable (Notes 6 and 7)
Repurchase of Class B Common Stock (196) (20)
Repurchase of Class A Common Stock (190) (19)
Class A Common Stock issued 2,489 249
Class A Stock options exercised 210 21
Class C Stock options exercised 52 5
Minimum pension liability adjustment
Other
----------------------------------------------------
Balance at December 31, 1994 21,340 2,134 21 2 2,558 256
Net loss
Cash dividends declared and paid
(Notes 6 and 7)
Cash dividends payable (Notes 6 and 7)
Repurchase of Class A Common Stock (1,521) (152)
Class A Common Stock issued 2,875 288
Class A Common Stock issued under the
Dividend Reinvestment Plan 18 2
Minimum pension liability adjustment
Other (59) (6) (7) (1)
----------------------------------------------------
Balance at December 31, 1995 22,653 2,266 14 1 2,558 256
Net loss
Cash dividends declared and paid
(Notes 6 and 7)
Cash dividends payable (Notes 6 and 7)
Class A Common Stock issued under the
Dividend Reinvestment Plan 302 30
Minimum pension liability adjustment
Other (24) (2) (3) 9 1
----------------------------------------------------
Balance at December 31, 1996 22,931 $ 2,294 11 $ 1 2,567 $257
====================================================
<CAPTION>
Minimum
Additional Pension
Paid-In Liability
Capital Deficit Adjustment Total
------- ------- ---------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ 53,156 $(112,742) $ (4,534) $ (61,964)
Net loss (4,265) (4,265)
Cash dividends declared and paid
(Notes 6 and 7) (12,463) (12,463)
Cash dividends payable (Notes 6 and 7) (3,483) (3,483)
Repurchase of Class B Common Stock (3,414) (3,434)
Repurchase of Class A Common Stock (1,694) (1,713)
Class A Common Stock issued 21,847 22,096
Class A Stock options exercised 838 859
Class C Stock options exercised 210 215
Minimum pension liability adjustment (2,117) (2,117)
Other 93 93
---------------------------------------------
Balance at December 31, 1994 71,036 (132,953) (6,651) (66,176)
Net loss (23,479) (23,479)
Cash dividends declared and paid
(Notes 6 and 7) (14,718) (14,718)
Cash dividends payable (Notes 6 and 7) (3,822) (3,822)
Repurchase of Class A Common Stock (13,439) (13,591)
Class A Common Stock issued 18,229 18,517
Class A Common Stock issued under the
Dividend Reinvestment Plan 137 139
Minimum pension liability adjustment 1,779 1,779
Other 455 448
---------------------------------------------
Balance at December 31, 1995 76,418 (174,972) (4,872) (100,903)
Net loss (28,315) (28,315)
Cash dividends declared and paid
(Notes 6 and 7) (13,880) (13,880)
Cash dividends payable (Notes 6 and 7) (3,857) (3,857)
Class A Common Stock issued under the
Dividend Reinvestment Plan 2,034 2,064
Minimum pension liability adjustment (1,193) (1,193)
Other 352 351
---------------------------------------------
Balance at December 31, 1996 $ 78,804 $(221,024) $ (6,065) $(145,733)
=============================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands) Years Ended December 31,
--------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from (used in) operating activities:
Net loss $ (4,265) $(23,479) $(28,315)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Amortization of customer lists 19,749 20,527 18,611
Depreciation of plant and equipment 6,469 12,374 6,574
Amortization of deferred charges 6,177 6,142 4,760
Share of (income)loss of Star Gas 1,973 (728) (2,283)
Provision for losses on accounts receivable 1,421 1,856 1,882
Provision for supplemental benefits 373 1,407 873
Loss on early extinguishment of debt 654 1,436 6,414
Gain on sale of business -- (788) (1,781)
Other (135) 544 105
Change in Operating Assets and Liabilities, net of
effects of acquisitions and dispositions:
Decrease (increase) in accounts receivable (3,752) (19,285) 117
Increase in inventory (3,498) (3,391) (1,671)
Increase in other current assets (119) (430) (575)
Decrease (increase) in other assets (214) 240 (86)
Increase (decrease) in accounts payable (1,330) 5,872 (3,836)
Increase (decrease) in customer credit balances 2,303 (5,938) (2,142)
Increase (decrease) in unearned service contract revenue 1,315 1,201 (147)
Increase (decrease) in accrued expenses 4,328 733 (2,352)
-------- -------- --------
Net cash provided by (used in) operating activities 31,449 (1,707) (3,852)
-------- -------- --------
Cash flows from (used in) investing activities:
Investment in Star Gas Corporation, net of cash acquired (1,372) -- --
Sale of Star Gas limited partnership interest -- 51,046 --
Minimum quarterly distributions from Star Gas Partnership -- -- 4,313
Acquisitions (26,411) (26,438) (28,493)
Capital expenditures (4,172) (11,174) (6,874)
Proceeds from sale of business -- 1,477 4,073
Net proceeds from sales of fixed assets 283 1,702 788
-------- -------- --------
Net cash provided by (used in) investing activities (31,672) 16,613 (26,193)
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands) Years Ended December 31,
---------------------------------
1994 1995 1996
-------- --------- --------
<S> <C> <C> <C>
Cash flows from (used in) financing activities:
Net proceeds from Star Gas Corporation debt offering -- 83,687 --
Net proceeds from issuance of common stock 1,074 18,656 2,064
Net proceeds from issuance of subordinated notes 71,088 120,350 --
Repayment of notes payable (50,655) (80,206) (1,050)
Redemption of preferred stock (4,167) (24,133) (4,167)
Repurchase of common stock (5,146) (14,150) (39)
Repurchase of subordinated notes -- -- (49,612)
Credit facility borrowings 45,200 20,000 51,000
Credit facility repayments (49,000) (49,100) (29,000)
Decrease (increase) in restricted cash 20,000 (6,000) 3,000
Cash dividends paid (15,526) (18,201) (17,702)
Other (1,785) (2,998) 523
-------- --------- --------
Net cash provided by (used in) financing activities 11,083 47,905 (44,983)
-------- --------- --------
Net increase (decrease) in cash 10,860 62,811 (75,028)
Cash at beginning of year 4,614 15,474 78,285
-------- --------- --------
Cash at end of year $ 15,474 $ 78,285 $ 3,257
======== ========= ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest $ 22,712 $ 35,122 $ 37,007
Income taxes 382 3,255 215
Noncash investing activities:
Acquisitions (9,549) (8,000) --
Noncash financing activities:
Issuance of notes payable 9,549 8,000 --
</TABLE>
See accompanying notes to consolidated financial statements
F-7
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share data)
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Petroleum Heat and
Power Co., Inc. (Petro) and its subsidiaries (the Company), each of which is
wholly owned. The Company currently operates in twenty-six major markets in the
Northeast, including the metropolitan areas of Boston, New York City, Baltimore,
Providence and Washington, DC, serving approximately four hundred thousand
customers in those areas. Credit is granted to substantially all of these
customers with no individual account comprising a concentrated credit risk.
Basis of Presentation
Certain reclassifications have been made to the 1994 and 1995 financial
statements to conform to the 1996 presentation.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Inventories
Inventories are stated at the lower of cost or market using the first-in,
first-out method. The components of inventories were as follows at the dates
indicated:
December 31,
--------------------------
1995 1996
--------- --------
Fuel oil $ 11,764 $ 14,066
Parts, appliances and equipment 8,649 8,018
--------- --------
$ 20,413 $ 22,084
========= ========
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Customer Lists and Deferred Charges
Customer lists are recorded at cost less accumulated amortization. Amortization
for the fuel oil customer lists is computed using the straight-line method with
90% of the cost amortized over six years and 10% of the cost amortized over 25
years. Amortization for propane customer lists was computed using the
straight-line method with cost amortized over fifteen years.
Deferred charges include goodwill, acquisition costs and payments related to
covenants not to compete. The covenants are amortized using the straight-line
method over the terms of the related contracts; acquisition costs are amortized
using the straight-line method over a six-year period; while goodwill is
amortized using the straight-line method over a twenty-five year period. Also
included as deferred charges are the costs associated with the issuance of the
Company's subordinated debt. Such costs are being amortized using the interest
method over the lives of the instruments.
F-8
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except per share data)
(1) Summary of Significant Accounting Policies - (Continued)
Customer Lists and Deferred Charges - (continued)
The Company assesses the recoverability of intangible assets at the end of each
fiscal year and, when appropriate, at the end of each fiscal quarter, by
comparing the carrying values of such intangibles to market values, where a
market exists, supplemented by cash flow analyses to determine that the carrying
values are recoverable over the remaining estimated lives of the intangibles
through undiscounted future operating cash flows. When an intangible asset is
deemed to be impaired, the amount of impairment is measured based on market
values, as available, or by projected operating cash flows, using a discount
rate reflecting the Company's assumed average cost of funds.
Customer Credit Balances
Customer credit balances represent payments received from customers pursuant to
a budget payment plan (whereby customers pay their estimated annual fuel charges
on a fixed monthly basis) in excess of actual deliveries billed.
Revenue Recognition
Sales of fuel oil, propane, heating equipment and propane appliances are
recognized at the time of delivery of the product to the customer or at the time
of sale or installation. Revenue from repairs and maintenance service is
recognized upon completion of the service. Payments received from customers for
heating equipment service contracts are deferred and amortized into income over
the terms of the respective service contracts, on a straight line basis, which
generally do not exceed one year.
Concentration of Revenue with Guaranteed Maximum Price Customers
Approximately 20% of the Company's heating oil volume is sold to individual
customers under an agreement pre-establishing the maximum sales price of oil
over a twelve month period. The maximum price at which oil is sold to these
capped-price customers is renegotiated in the Spring of each year in light of
then current market conditions. The Company currently enters into forward
purchase contracts for a substantial majority of the oil it sells to these
capped-price customers in advance and at a fixed cost. Should events occur after
a capped-sales price is established that increases the cost of oil above the
amount anticipated, margins for the capped-price customers whose oil was not
purchased in advance would be lower than expected, while those customers whose
oil was purchased in advance would be unaffected. Conversely, should events
occur during this period that decrease the cost of oil below the amount
anticipated, margins for the capped-price customers whose oil was purchased in
advance could be lower than expected, while those customers whose oil was not
purchased in advance would be unaffected or higher than expected.
The Company uses put options to hedge the risk associated with a decrease in
heating oil prices in situations where forward purchase contracts have been
entered into to match capped-price customer commitments. Should the market price
of heating oil decline below the forward purchase contract price, these options
would substantially offset the effects of such decline. The cost of acquiring
these options is recognized in cost of goods sold over the life of each option
agreement. The gains received by exercising such options are also recognized in
cost of goods sold when they are realized. Options outstanding at December 31,
1996 hedge the risk associated with approximately 66% of the 32.9 million
gallons of heating oil forward purchase contracts, and expire at various times
with no option expiring later than April 1997. The carrying amount of these
options at December 31, 1996 was $258 and were included in Prepaid Expenses on
the Consolidated Balance Sheet. The risk that counterparties to such instruments
may be unable to perform is minimized by limiting the counterparties to major
oil companies and major financial institutions. The Company does not expect any
losses due to such counterparty default.
F-9
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except per share data)
(1) Summary of Significant Accounting Policies - (Continued)
Environmental Costs
The Company expenses, on a current basis, costs associated with managing
hazardous substances and pollution in ongoing operations. The Company also
accrues for costs associated with the remediation of environmental pollution
when it becomes probable that a liability has been incurred and the amount can
be reasonably estimated.
Income Taxes
The Company files a consolidated Federal Income Tax return with its
subsidiaries. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amount of assets and liabilities and their respective tax bases and
operating loss carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled.
Pensions
The Company funds accrued pension costs currently on its pension plans, all of
which are noncontributory.
Net Income (Loss) per Common Share
Net income (loss) per common share is 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 the net
loss for preferred dividends. Fully diluted net income (loss) per common share
is not presented because the effect is not material or is antidilutive.
Accounting Changes
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121 - "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
SFAS No. 121 requires companies to review assets for possible impairment and
provides guidelines for recognition of impairment losses related to long-lived
assets, certain intangibles and assets to be disposed.
In October 1995, the FASB issued SFAS No. 123 - "Accounting for Stock-Based
Compensation." As allowable by SFAS No. 123, the Company elected to continue
following Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees. (See note 13)
F-10
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except per share data)
(2) Star Gas Acquisition
In December 1993, the Company acquired an approximate 29.5% equity interest
(42.8% voting interest) in Star Gas for $16.0 million in cash. Each of the
other investors in Star Gas granted the Company an option, exercisable to
December 31, 1998, to purchase such investor's interest in Star Gas.
In December 1994, the Company exercised its right to purchase the remaining
outstanding common equity of Star Gas by paying $3.8 million in cash and
issuing approximately 2.5 million shares ($22.1 million) of the Company's
Class A Common Stock. The Company also incurred $0.9 million of acquisition
related cost in connection with the Star Gas acquisition.
The acquisition was accounted for as a purchase and accordingly, the
purchase price was allocated to the underlying assets and liabilities based
upon the Company's estimate of their respective fair value at the date of
acquisition. The fair value of assets acquired was $141.3 million
(including $3.3 million in cash) and liabilities and preferred stock was
$109.5 million. The excess of the purchase price over the fair value of
assets acquired and liabilities assumed was $9.0 million and was being
amortized over a period of twenty-five years.
The Company's investment in Star Gas Corporation was accounted for using
the equity method from December 23, 1993 to December 7, 1994, at which time
the Company exercised its right to purchase the remaining outstanding
common equity of Star Gas (the "Star Gas Acquisition"). From December 8,
1994 to December 19, 1995 while Star Gas was a wholly owned subsidiary of
Petro, Star Gas operations, assets and liabilities were included in the
consolidated financial statements of the Company.
In November 1995, Star Gas organized Star Gas Partners, L.P. a Delaware
limited partnership ("Partnership") and Star Gas and the Partnership
together organized Star Gas Propane, L.P., a Delaware limited partnership
("Operating Partnership"). In December 1995, Petro transferred
substantially all of its propane assets and liabilities to Star Gas, and
Star Gas transferred ("Star Gas Conveyance") substantially all of its
assets (including the propane assets transferred by Petro) in exchange for
a general partnership interest in the Operating Partnership and the
assumption by the Operating Partnership of substantially all of the
liabilities of Star Gas. The total value of the assets conveyed to the
Operating Partnership was $156.5 million. Concurrently with the Star Gas
Conveyance, Star Gas issued approximately $85.0 million in First Mortgage
Notes to certain institutional investors. In connection with the Star Gas
Conveyance, the Operating Partnership assumed $91.5 million of Star Gas
liabilities including the $85.0 million of First Mortgage Notes; however,
Star Gas retained approximately $83.7 million in cash from the proceeds of
the First Mortgage Notes. As a result of the foregoing transactions, Star
Gas received a 46.5% equity interest in the Partnership and Petro received
distributions from the public sale of Master Limited Partnership units of
$51.0 million in cash. In order for the Partnership to begin operations
with $6.2 million of working capital, Star Gas and the Operating
Partnership agreed that the amount of debt assumed by the Operating
Partnership would be adjusted upward or downwards to the extent that the
working capital of the Operating Partnership at closing was more or less
than $6.2 million. At closing, the net working capital of the Operating
Partnership was $9.2 million and as a result, $3.0 million was paid to
Petro in January 1996.
As a result and from the date of the above transaction, the Company's 46.5%
investment in the Star Gas Partnership is accounted for following the
equity method.
To enhance the Partnership's ability to pay a minimum quarterly
distribution on its common units, Star Gas agreed, subject to certain
limitations, to contribute up to $6.0 million in additional capital to the
Partnership if, and to the extent that, the amount of available cash
constituting operating surplus with respect to any quarter is less than the
amount necessary to distribute the minimum quarterly distribution on all
outstanding common units for such quarter. At December 31, 1996, $3.0
million of these funds were restricted at the Star Gas level, with $3.0
million having been released to Petro in 1996 as certain quarterly
guarantee provisions were fulfilled.
F-11
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except per share data)
(3) Property, Plant and Equipment
The components of property, plant and equipment and their estimated useful lives
were as follows at the indicated dates:
December 31, Estimated
-----------------
1995 1996 Useful Lives
------- ------- ------------
Land $ 2,129 $ 2,049
Buildings 6,475 6,030 20-45 years
Fleet and other equipment 37,985 38,480 3-7 years
Tanks and equipment 1,931 1,438 8-30 years
Furniture and fixtures 15,373 18,436 5-7 years
Leasehold improvements 4,540 5,820 Term of leases
------- -------
68,433 72,253
Less accumulated depreciation 38,170 41,587
------- -------
$30,263 $30,666
======= =======
(4) Notes Payable and Other Long-Term Debt
Notes payable and other long-term debt, including working capital borrowings and
current maturities of long-term debt, consisted of the following at the
indicated dates:
December 31,
-------------------
1995 1996
------- -------
Notes payable to banks under credit
facility (a) $ -- $22,000
Notes payable in connection with the purchase
of fuel oil dealers and other notes payable,
due in monthly, quarterly and annual
installments with interest at various rates
ranging from 6% to 10% per annum, maturing
at various dates through the year 2004 18,930 17,734
------- -------
18,930 39,734
Less current maturities, including working
capital borrowings 1,151 22,947
------- -------
$17,779 $16,787
======= =======
a) Pursuant to a Credit Agreement, dated September 27, 1996 as restated and
amended (Credit Agreement), the Company may borrow up to $60 million under
a working capital revolving credit facility with a sublimit under a
borrowing base established each month. Amounts borrowed under the working
capital revolving credit facility are subject to a 60 day clean-up
requirement during the period April 1 to September 30 of each year, and
this portion of the Credit Agreement terminates on June 30, 1998. The
Company pays a facility fee of 0.375% on the unused portion of this
facility. At December 31, 1996, $22.0 million was outstanding under the
working capital revolving credit facility.
The Credit Agreement also includes a $17.2 million acquisition letter of
credit facility all of which has been used to support notes given to
certain sellers of heating oil companies. The Credit Agreement provides
that on or prior to June 30, 1998, repayments and/or sinking fund deposits
equal to two-thirds of the initial facility outstanding at September 30,
1996 would be payable with the final payment due June 30, 1999.
F-12
<PAGE>
PETROLEUM HEAT AND POWER CO., INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except per share data)
(4) Notes Payable and Other Long-Term Debt - (Continued)
Interest under the Credit Agreement is payable monthly on the working
capital revolving credit facility and is based upon a floating rate
selected by the Company of either the Eurodollar Rate or the Alternate Base
Rate, plus 0 to 75 basis points on Alternate Base Rate Loans and 125 to 200
basis points on Eurodollar Loans, based upon the ratio of Consolidated
Operating Profit to Interest Expense (as defined in the Credit Agreement).
Eurodollar Rate means the prevailing rate in the interbank Eurodollar
market adjusted for reserve requirements. Alternate Base Rate means the
greater of (i) the prime or base rate of The Chase Manhattan Bank in effect
or (ii) the Federal funds rate in effect plus 1/2 of 1%.
The fees for the Credit Agreement acquisition letters of credit range from
175 to 250 basis points based upon the same ratio as that used for the
working capital revolving credit facility. To the extent that the letters
of credit are cash collateralized then the fee is reduced to 25 basis
points.
Under the terms of the Credit Agreement, the Company is restricted from
incurring any indebtedness except subordinated debt and certain other
indebtedness specifically authorized, if certain ratios of EBITDA to
interest are met. The Company is also restricted from selling,
transferring, or conveying customer lists except, among other exceptions,
from a sale where the net cash proceeds are used to cash collateralize the
acquisition letters of credit. The Credit Agreement also provides that the
Company is required to maintain certain minimum levels of cash flow and
EBITDA, as well as certain ratios of EBITDA to net interest expense. In the
event of noncompliance with certain of the covenants, the bank has the
right to declare all amounts outstanding to be due and payable immediately.
As collateral for the Credit Agreement, the Company granted to the lenders
a security interest in the inventories, receivables, and customer lists,
trademarks and trade names which are carried on the December 31, 1996
Consolidated Balance Sheet at $22.1 million, $93.4 million, and $77.8
million respectively.
Aggregate annual maturities including working capital borrowings, are as follows
as of December 31, 1996:
Years Ending
December 31,
------------
1997 $22,947
1998 281
1999 8,122
2000 8,138
2001 58
Thereafter 188
-------
$39,734
=======
F-13
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except per share data)
(5) Senior and Subordinated Notes Payable
Senior and Subordinated notes payable at the dates indicated, consisted of:
December 31,
-------------------
1995 1996
-------- --------
11.85%, 12.17% and 12.18% Subordinated and Senior Notes(a) $ 60,000 $ 60,000
14.10% Subordinated and Senior Notes(b) 12,500 10,400
10 1/8% Subordinated Notes(c) 50,000 50,000
9 3/8% Subordinated Debentures(d) 75,000 75,000
12 1/4% Subordinated Debentures(e) 125,000 81,250
-------- --------
Total Senior and Subordinated Notes Payable 322,500 276,650
Less short-term Subordinated Notes(b)(e) 44,800 1,050
Less short-term Senior Notes(b) 1,050 1,050
Less long-term Senior Notes(a)(b) 35,200 34,150
-------- --------
Total long-term Subordinated Notes Payable $241,450 $240,400
======== ========
(a) On September 1, 1988, the Company authorized the issuance of $60.0 million
of Subordinated Notes originally due October 1, 1998 bearing interest
payable semiannually at an average rate of 11.96% ("11.96% Notes"). In
connection with the Company's 9 3/8% Subordinated Debenture offering in
February 1994 (see note 5d) $30.0 million of the 11.96% Notes became ranked
as senior debt. In February 1997 the Company entered into agreements
("Private Debt Modification") to among other things, exchange $30.0 million
of the 11.96% Notes then ranked as subordinated debt for senior debt, and
to extend the maturity date of the 11.96% Notes from October 1, 1998 to
October 1, 2002 with $15.0 million sinking fund payments due on October 1,
2000 and October 1, 2001 and the remaining $30.0 million balance due on
October 1, 2002. In addition, effective October 1, 1998, the interest on
these notes will be lowered to 10.9%. All such notes are redeemable at the
option of the Company, in whole or in part upon payment of a premium rate
as defined.
(b) On January 15, 1991, the Company authorized the issuance of $12.5 million
of 14.10% Subordinated Notes due January 15, 2001 bearing interest payable
quarterly. In connection with the Company's 9 3/8% Subordinated Debenture
offering in February 1994 (see note 5d) $6.25 million of these notes became
ranked as senior debt. The notes are redeemable at the option of the
Company, in whole or in part upon payment of a premium rate as defined. On
each January 15th commencing 1996 and ending January 15, 2000, the Company
is required to repay $2.1 million of these Notes. The remaining principal
of $2.0 million is due on January 15, 2001. No premium is payable in
connection with these required payments.
(c) On April 6, 1993, the Company issued $50.0 million of 10 1/8% Subordinated
Notes due April 1, 2003 which are redeemable at the Company's option, in
whole or in part, at any time on or after April 1, 1998 upon payment of a
premium rate as defined. Interest is payable semiannually.
(d) On February 3, 1994, the Company issued $75.0 million of 9 3/8%
Subordinated Debentures due February 1, 2006 which are redeemable at the
Company's option, in whole or in part, at any time on or after February 1,
1999 upon payment of a premium rate as defined. Interest is payable
semiannually.
F-14
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except per share data)
(5) Senior and Subordinated Notes Payable (Continued)
In connection with the offering of its 9 3/8% Subordinated Debentures,
the Company received consents of the holders of a majority of each
class of subordinated debt and redeemable preferred stock (see note 7)
to certain amendments to the respective agreements. In consideration
for the consents, the Company paid to the holders of the subordinated
debt due in 1998, 2001 and 2003 a cash payment of $0.6 million and
caused approximately $42.6 million of the subordinated debt at
December 31, 1994 to be ranked as senior debt. In addition, the
Company agreed to increase dividends on the redeemable preferred stock
by $2.00 per share per annum. The Company also paid approximately $1.5
million in fees and expenses to obtain such consents. At December 31,
1996, $35.2 million of the senior debt was outstanding.
(e) On February 3, 1995, the Company issued $125.0 million of 12 1/4%
Subordinated Debentures due February 1, 2005 which are redeemable at
the Company's option, in whole or in part, at any time on or after
February 1, 2000 upon payment of a premium rate as defined. On
February 5, 1996, a portion of the proceeds received as a result of
the Star Gas MLP Offering (see note 2) were used to retire $43.8
million of the $125.0 million 12 1/4% Subordinated Debentures. The
Company paid $4.8 million, representing an 11% premium to retire this
portion of the debt. Interest on these debentures is payable
semi-annually.
Simultaneously with the offering of its 12 1/4% Subordinated
Debentures, the Company also issued 2,875 shares of Class A Common
Stock in a separate public offering. The net proceeds of the two
offerings were approximately $139.0 million and were applied as
follows: (i) to purchase $65.3 million of Star Gas Long-Term Debt,
(ii) to purchase approximately $19.9 million of Star Gas preferred
stock, (iii) $13.6 million to retire approximately 1.5 million shares
of Class A Common Stock issued to a third party in the Star Gas
acquisition and (iv) $14.2 million to repay approximately $12.8
million of subordinated and senior notes due in March 2000 at a
premium of approximately $1.4 million. The balance of the net
proceeds, approximately $26.0 million, was made available for general
corporate purposes.
Expenses connected with the above outstanding offerings, and amendments
thereto, amounted to approximately $15.8 million, which includes $1.2
million paid in debt consents permitting the Star Gas MLP Offering (see
note 2). At December 31, 1995 and 1996, the unamortized balances relating
to notes still outstanding amounted to approximately $11.7 million and $8.7
million respectively, and such balances are included in Deferred Charges
and Pension Costs on the Consolidated Balance Sheet.
Aggregate annual maturities for each of the next five years after adjusting
for the Private Debt Modification (see note 5a), are as follows as of
December 31, 1996:
Years Ended
December 31,
------------
1997 $ 2,100
1998 2,100
1999 2,100
2000 17,100
2001 17,000
F-15
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except per share data)
(6) Common Stock and Common Stock Dividends
The Company's outstanding Common Stock consists of Class A Common Stock, Class B
Common Stock and Class C Common Stock, each with various designations, rights
and preferences. In 1992, the Company restated and amended its Articles of
Incorporation increasing the authorized shares of Class A Common Stock to 40,000
and authorizing 5,000 shares of Class C Common stock, $.10 par value.
Holders of Class A Common Stock and Class C Common Stock have identical rights,
except that holders of Class A Common Stock are entitled to one vote per share
and holders of Class C Common Stock are entitled to ten votes per share. Holders
of Class B Common Stock do not have voting rights, except as required by law, or
in certain limited circumstances.
Holders of Class B Common Stock were entitled to receive Special Dividends based
upon the Company's Cash Flow, as defined, for its prior fiscal year. Special
Dividends were cumulative and payable quarterly. If not paid, dividends on any
other class of stock could not be paid until all Special Dividends in arrears
were declared and paid. 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." As a result of the termination of the Special
Dividends, the holders of Class B Common Stock had 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 for the period
July 1, 1994 through August 31, 1994). As of December 31, 1996, 206 shares of
Class B Common Stock were repurchased for approximately $3.6 million.
The following table summarizes the cash dividends declared on Common Stock and
the cash dividends declared per common share for the years indicated:
Years Ended December 31,
-------------------------------
1994 1995 1996
---- ---- ----
Cash dividends declared
Class A $ 10,791 $ 13,716 $ 13,789
Class B 238 -- --
Class C 1,407 1,559 1,559
Cash dividends declared per share
Class A $ .55 $ .60 $ .60
Class B 1.10 -- --
Class C .55 .60 .60
Under the Company's most restrictive dividend limitation imposed by certain debt
covenants, $8.8 million was available at December 31, 1996 for the payment of
dividends on all classes of Common Stock. The amount available for dividends is
increased each quarter by 50% of the cash flow, as defined, for the previous
fiscal quarter, and by the new issuance of capital stock.
On February 3, 1995, the Company issued 2,875 shares of Class A Common Stock in
a public offering in connection with the issuance of $125.0 million of 12 1/4%
Subordinated Debentures due February 1, 2005 and used a portion of the proceeds
to retire 1,521 shares of Class A Common Stock which shares were issued to a
third party in the Star Gas Acquisition
(see note 5).
On October 1, 1995 the Company began offering a Dividend Reinvestment and Stock
Purchase Plan which provides holders of the Company's Class A Common Stock and
Class C Common Stock a vehicle to reinvest their dividends and purchase
additional shares of Class A Common Stock at a 5% discount from the current
market price without incurring any fees. In addition, optional cash deposits
receive a 3% discount from the market price. Pursuant to the plan offering, 18
and 302 additional Class A Common Shares were issued in 1995 and 1996,
respectively.
F-16
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except per share data)
(7) Preferred Stock
The Company entered into agreements dated as of August 1, 1989 with John Hancock
Mutual Life Insurance Company and Northwestern Mutual Life Insurance Company to
sell up to two hundred and fifty thousand shares of its Redeemable Preferred
Stock, par value $0.10 per share, at a price of one hundred dollars per share,
which shares are exchangeable into Subordinated Notes due August 1, 1999 (1999
Notes). In connection with receiving consents in 1994 to modify certain
covenants under which the Redeemable Preferred Stock was issued, the Company
agreed to increase dividends on the Redeemable Preferred Stock by $2.00 per
share per annum which began in February 1994. The average dividend rate on these
shares is $14.33 per share.
On August 1, 1994, and on August 1 of each year thereafter, one-sixth of the
number of originally issued shares of each series of Redeemable Preferred shares
outstanding, less the number of shares of such series previously exchanged for
1999 Notes, are to be redeemed, with the final redemption occurring on August 1,
1999. The redemption price is one hundred dollars per share plus all accrued and
unpaid dividends to such August 1. As of December 31, 1995 and 1996, 167 shares
and 125 shares respectively were outstanding of which 42 shares were reflected
as current.
The Company entered into an agreement dated September 1, 1991 with United States
Leasing International Inc. to sell up to one hundred sixty thousand shares of
its 1991 Redeemable Preferred Stock, par value $.10 per share, at an initial
price of $78.261 per share, which shares were exchangeable into Subordinated
Notes due March 1, 2000 (2000 Notes). The Company sold sixty-four thousand
shares of the Redeemable Preferred Stock in September 1991 at $78.261 per share
and ninety-five thousand shares in March 1992 at $78.51 per share, the accreted
value of the initial price. The holders of the shares of 1991 Preferred Stock
were entitled to receive monthly dividends based on the annual rate of the sum
of LIBOR plus 4.7%. In March 1993, the Company issued $12,764 of 2000 Notes in
exchange for all of the 1991 Redeemable Preferred Stock. In April 1995, the
Company redeemed these securities and paid a premium of approximately $1.4
million.
Preferred dividends of $3,511, $3,263 and $2,389 were declared on all classes of
preferred stock in 1994, 1995 and 1996, respectively.
Aggregate annual maturities of Redeemable Preferred Stock are as follows as of
December 31, 1996:
Years Ended
December 31,
------------
1997 $ 4,167
1998 4,167
1999 4,166
2000 --
2001 --
-------
$12,500
In February 1997, the Company sold one million two hundred thousand shares of
Exchangeable Preferred Stock, par value $0.10 per share, at a price of
twenty-five dollars per share, mandatorily redeemable on February 15, 2009 with
a dividend rate of 12 7/8%, payable on February 15, May 15, August 15 and
November 15 of each year. The Exchangeable Preferred Stock has a liquidation
preference of twenty-five dollars per share and are redeemable at the option of
the Company in whole or in part beginning February 15, 2002 upon payment of a
premium rate as defined.
F-17
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except per share data)
(8) Pension Plans
Effective December 31, 1996 the Company consolidated all of its defined
contribution pension plans and froze the benefits for nonunion personnel covered
under defined benefit pension plans. In freezing the defined benefit pension
plans the Company incurred $557 in pension curtailment expenses relating to the
amortization of certain previously unrecognized pension costs.
The Company had several noncontributory defined contribution and defined benefit
pension plans covering substantially all of its nonunion employees. Benefits
under the defined benefit plans were generally based on years of service and
each employee's compensation, while benefits under the defined contribution
plans were based solely on compensation. Pension expense under all plans for the
years ended December 31, 1994, 1995 and 1996 was $3,599, $4,378 and $4,350
respectively, net of amortization of the pension obligation acquired.
The following table sets forth the defined benefit plans' funded status, all of
which are underfunded, and amounts recognized in the Company's balance sheets at
the indicated dates:
December 31,
--------------------
1995 1996
---- ----
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including
vested benefits of $27,169 and $28,731 $ 27,646 $ 29,323
======== ========
Projected benefit obligation $(30,930) $(29,323)
Plan assets at fair value (primarily listed stocks
and bonds) 19,749 20,367
-------- --------
Projected benefit obligation in excess of plan assets (11,181) (8,956)
Unrecognized net loss from past experience different from
the assumed and effects of changes in assumptions 8,136 6,053
Unrecognized net transitional obligation (gain) 428 (65)
Unrecognized prior service cost due to plan amendments 714 453
Additional liability (5,994) (6,441)
-------- --------
Accrued pension cost for defined benefit plans $ (7,897) $ (8,956)
======== ========
Net pension cost for defined benefit plans for the periods indicated included
the following components:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 1,341 $ 1,459 $ 1,630
Interest cost on projected benefit obligation 1,911 2,032 1,974
Actual (return) loss on assets 339 (3,116) (2,058)
Net amortization and deferral of (gains) and losses (1,150) 2,517 1,299
------- ------- -------
Net periodic pension cost for defined benefit plans 2,441 2,892 2,845
------- ------- -------
Curtailment loss -- -- 557
------- ------- -------
Total cost $ 2,441 $ 2,892 $ 3,402
======= ======= =======
Assumptions used in the pension calculations were:
Discount rate 7.0% 7.0% 6.5%
Rates of increase in compensation levels 4.0% 4.0% 4.0%
Expected long-term rate of return on assets 8.5% 8.5% 8.5%
</TABLE>
F-18
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except per share data)
(8) Pension Plans - (Continued)
In addition, the Company made contributions to union-administered pension plans
during the years ended December 31, 1994, 1995 and 1996 of $3,078, $3,148, and
$2,996 respectively.
The Company recorded an additional minimum pension liability for underfunded
plans of $6,453 as of December 31, 1996, representing the excess of unfunded
accumulated benefit obligations over plan assets. A corresponding amount is
recognized as an intangible asset except to the extent that these additional
liabilities exceed the related unrecognized prior service costs and net
transition obligation, in which case the increase in liabilities is charged as a
reduction of stockholders' equity of $6,065 as of December 31, 1996.
In connection with the purchase of shares of a predecessor company as of January
1, 1979 by a majority of the Company's present holders of Class C Common Stock,
the Company assumed a pension liability in the aggregate amount of $1,512 as
adjusted, representing the excess of the actuarially computed present value of
accumulated vested plan benefits over the net assets available for such
benefits. Such liability, which amounted to $ 1,134 at December 31, 1996, is
being amortized over 40 years.
Under a 1992 supplemental benefit agreement, Malvin P. Sevin, the Company's then
Chairman and Co-Chief Executive Officer, was entitled to receive $25 per month
for a period of one hundred twenty months following his retirement. In the event
of his death, his designated beneficiary is entitled to receive such benefit.
Mr. Sevin passed away in December 1992, prior to his retirement. The amounts
accrued for such benefit payable net of payments made at December 31, 1995 and
1996 were $1,554 and $1,387 respectively.
(9) Leases
The Company leases office space and other equipment under noncancelable
operating leases which expire at various times through 2008. Certain of the real
property leases contain renewal options and require the Company to pay property
taxes.
The future minimum rental commitments at December 31, 1996 for all operating
leases having an initial or remaining noncancelable term of one year or more are
as follows:
Years Ending Operating
December 31, Leases
------------ ---------
1997 $ 4,405
1998 4,074
1999 3,838
2000 3,377
2001 2,634
Thereafter 10,882
--------
$ 29,210
========
Rental expense under operating leases for the years ended December 31, 1994,
1995 and 1996 was $6,114, $7,624 and $6,461 respectively.
(10) Income Taxes
Income tax expense was comprised of the following for the indicated periods:
Years Ended December 31,
------------------------------------
1994 1995 1996
---- ---- ----
Current:
Federal $ -- $ -- $ --
State 600 500 500
---- ---- ----
$600 $500 $500
==== ==== ====
F-19
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands except per share data)
(10) Income Taxes - (Continued)
The sources of deferred income tax expense (benefit) and the tax effects of each
were as follows:
Years Ended December 31,
-----------------------------
1994 1995 1996
------- ------- -------
Excess of tax over book depreciation $ 1,338 $ 1,624 $ (108)
Excess of book over tax amortization expense (397) (1,139) (2,051)
Excess of book over tax vacation expense (103) (75) (180)
(Excess of book over tax) tax over book
bad debt expense (25) 44 (41)
(Excess of book over tax) tax over book
supplemental benefit expense 7 (14) (14)
Equity in income (loss) of Star Gas (671) (187) 2,596
Other, net (24) (40) (228)
Recognition of tax benefit of net operating
loss to the extent of current and
previously recognized temporary differences (1,185) (7,843) (9,292)
Change in valuation allowance 1,060 7,630 9,318
------- ------- -------
$ -- $ -- $ --
======= ======= =======
The components of the net deferred tax assets and the related valuation
allowance for 1995 and 1996 using current rates were as follows:
Years Ended December 31,
------------------------
1995 1996
---- ----
Net operating loss carryforwards $ 25,907 $ 35,199
Excess of tax over book depreciation (5,086) (4,978)
Excess of book over tax amortization 1,536 3,587
Excess of book over tax vacation expense 1,313 1,493
Excess of book over tax supplemental benefit expense 666 680
Excess of book over tax bad debt expense 329 370
Equity in loss (income) of Star Gas 858 (1,738)
Other, net 182 410
-------- --------
25,705 35,023
Valuation allowance (25,705) (35,023)
-------- --------
$ -- $ --
======== ========
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The Company has
determined, based on the Company's recent history of annual net losses, that a
full valuation allowance is appropriate.
At December 31, 1996, the Company had the following income tax loss
carryforwards for Federal Income Tax reporting purposes:
Expiration
Date Amount
---------- ------
2005 $ 26,651
2006 15,012
2007 1,367
2008 8,400
2009 1,662
2010 23,356
2011 27,078
--------
$103,526
========
F-20
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(In thousands except per share data)
(11) Related Party Transactions
The Company leases a building from certain related parties for $161 per annum
plus escalations, under a lease agreement that expires in the year 2001. The
Company leases another building from certain related parties, some of whom are
stockholders, directors and executive officers of the Company, for $345 per
annum plus escalations, under a lease agreement that expires in the year 2000.
Both those lease agreements were established using an independent fair market
rental evaluation.
In October 1986, Irik P. Sevin purchased one hundred sixty-one thousand shares
of Class A Common Stock and forty thousand shares of Class C Common Stock of the
Company for $1,280 (which was the fair market value as established by the
Pricing Committee pursuant to the Stockholders' Agreement). The purchase price
was financed by a note due December 31, 1999. The note requires annual payments
of interest and principal, payable in cash or Class A Common Stock of the
Company, until complete satisfaction. In accordance with the note repayment
schedule and its stock payment valuation criteria, Mr. Sevin surrendered
fifty-nine thousand Class A Common Shares representing $439 of value, and
sixty-one thousand Class A Common Shares representing $411 of value, in December
1995 and 1996 respectively. The outstanding balance of the note was $1,312 and
$984 at December 31, 1995 and 1996, respectively. Interest accrues on the
outstanding balance of the note at the LIBOR rate in effect for each month plus
0.75%. At any time prior to the due date of the note, Mr. Sevin has the right to
require the Company to repurchase all or any of these shares (as adjusted for
stock splits, dividends and the like) for $6.35 per share. Mr. Sevin has entered
into an agreement with the Company that he will not sell or otherwise transfer
to a third party any of the shares of Class A Common Stock or Class C Common
Stock received pursuant to this transaction until the note has been paid in
full.
The existing holders of Class C Common Stock of the Company have entered into a
Shareholders' Agreement which provides that each will vote his shares to elect
certain designated directors. The Shareholders' Agreement also provides for
first refusal rights to the Company if a holder of Class C Common Stock receives
a bona fide written offer from a third party to buy such holder's Class C Common
Stock.
(12) Restructuring Charges
Under the guidance of the Chief Operating Officer and a leading consulting firm,
a major strategic study aimed at improving the Company's organizational and
marketing effectiveness and financial performance was completed in late 1995.
The study provided management with certain recommendations regarding
improvements in structure, training and technology. The Company utilized the
relatively less operationally demanding non-heating season period from April
1996 to September 1996 to begin to implement the study's recommendations.
As part of the implementation program, Petro undertook certain business
improvement strategies in its Long Island, New York region. These steps included
the consolidation of the region's five home heating oil branches into one
central customer service center and three depots. The regional customer service
center has accounting, credit, customer service and sales functions consolidated
into a single, new facility in central Long Island. All external communications
and marketing previously undertaken in the five branches have been centralized
into this one location freeing the three newly configured depots to focus on oil
delivery and heating equipment repair, maintenance and installation, in mutually
exclusive operating territories.
In April 1996, after finalizing all aspects of this plan the Company formally
announced to the employees its intention to restructure certain aspects of its
Long Island, New York operations and recorded a restructuring charge of $1.2
million in the second quarter of 1996. These charges included accruals and
actual cash expenditures of $0.5 million for severance and outplacement of
employees displaced by the plan, $0.6 million for lease payments remaining on
non-cancelable non-strategic facilities, and $0.1 million for the write-off and
disposal of certain equipment not compatible with equipment in the new region,
along with other expenses directly related to the restructuring plan.
F-21
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(In thousands except per share data)
(13) Stock Options
In 1986, the Company issued stock options to Irik P. Sevin and Malvin P. Sevin,
which after adjustment for stock dividends and other events aggregated three
hundred and fourteen thousand shares of Class A Common Stock and seventy-nine
thousand shares of Class C Common Stock for Irik P. Sevin, and two hundred and
ten thousand shares of Class A Common Stock and fifty-two thousand shares of
Class C Common Stock for Malvin P. Sevin. The adjusted option price for each
such share is $4.10. In November 1994, the options belonging to Malvin P. Sevin
were exercised by his estate, while Irik P. Sevin's options were extended to
November 30, 1997 on generally the same terms and conditions as the original
options, however, Irik P. Sevin's extended options will vest in three equal
annual installments on each November 30th.
On December 28, 1987, the Company issued stock options to purchase twenty-four
thousand shares of Class A Common Stock and six thousand shares of Class C
Common Stock to Irik P. Sevin. The option price for each such share was $7.50.
These options were not transferable and expired unexercised on January 1, 1996.
On March 3, 1989, the Company issued stock options to purchase seventy-two
thousand shares of Class A Common Stock and eighteen thousand shares of Class C
Common to Irik P. Sevin and forty-eight thousand shares of Class A Common Stock
and twelve thousand shares of Class C Common Stock to Malvin P. Sevin. The
option price for each such share is $11.25. These options are nontransferable.
Malvin P. Sevin's options expired in March 1994 unexercised while the expiration
date of Irik P. Sevin's options were extended to March 3, 1999.
In March 1994 the Company issued stock options to Irik P. Sevin to purchase one
hundred thousand shares of Class A Common Stock. The option price for each such
share is $8.50, the then market value of the stock on the date the options were
granted. These options are non-transferable and expire on March 31, 2004.
None of the aforementioned options of Irik and Malvin Sevin were granted under a
Stock Option Plan and no other options were authorized at the time the options
were issued. All options granted vested upon issuance and were issued at an
exercise price that was estimated to be fair value at the date of grant.
In connection with the Star Gas acquisition and in accordance with the option
agreements entered into during the Company's initial investment in Star Gas,
certain other investors of Star Gas received options on seven hundred thirty-two
thousand shares of the Company's Class A Common Stock exercisable through
December 1999 at $8.77 per share in exchange for certain options they held in
Star Gas. Furthermore, as part of this agreement, Petro was given the right to
purchase the options issued in connection with the Star Gas acquisition at a
cost of $2.23 per option, exercisable up to the earlier of the option exercise
or expiration date.
In June 1994, the Board of Directors and shareholders adopted the Petroleum Heat
and Power Co., Inc. 1994 Stock Option Plan, which authorized one million shares
of the Company's Class A Common Stock to be granted from time to time to key
employees, officers, directors, consultants, advisers, or agents, who help
contribute to the long-term success and growth of the firm, at prices not less
than the fair market value at the date of grant and at terms not to exceed ten
years.
As allowable by SFAS No. 123, the Company will continue to apply APB Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations in
accounting for its stock compensation plan, and accordingly will not recognize
compensation expense for its stock-based compensation plan. If the accounting
provisions of SFAS No. 123 had been adopted as of the beginning of 1995, the
effects on 1995 and 1996 net earnings would have been immaterial. Further, based
on current and expected use of stock options, it is not anticipated that the
accounting provisions of SFAS No. 123 will have a material impact in any future
period.
F-22
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(In thousands except per share data)
(13) Stock Options - (Continued)
Information relating to stock options during 1994, 1995 and 1996 are summarized
as follows:
<TABLE>
<CAPTION>
Number of Shares Weighted-Average
Range of --------------------- Option Price
Exercise Prices Class A Class C Per Share Total
--------------- ------- ------- --------- -----
<S> <C> <C> <C> <C> <C>
Shares under option
at December 31, 1994 $4.10 to $11.25 1,343 103 $7.64 $11,047
Granted $8.00 to $8.00 50 - 8.00 400
Exercised - - - - -
Expired - - - - -
Shares under option --------------- ------- ---- ----- -------
at December 31, 1995 $4.10 to $11.25 1,393 103 7.66 11,447
Granted $6.87 to $7.38 132 - 7.21 955
Exercised - - - - -
Expired $7.50 to $7.50 24 6 7.50 225
--------------- ------- ---- ----- -------
Shares under option
at December 31, 1996 $4.10 to $11.25 1,501 97 $7.62 $12,177
=============== ======= ==== ===== =======
Shares exercisable
at December 31, 1996 $4.10 to $11.25 1,361 97 $7.62 $11,100
=============== ===== ==== ===== =======
</TABLE>
(14) Acquisitions
During 1994, the Company acquired the customer lists and equipment of nine
unaffiliated fuel oil dealers. The aggregate consideration for those
acquisitions, accounted for by the purchase method, was approximately $34,100.
During 1995, the Company acquired the customer lists and equipment of ten
unaffiliated fuel oil dealers. The aggregate consideration for these
acquisitions, accounted for by the purchase method, was approximately $32,200.
During 1996, the Company acquired the customer lists and equipment of thirteen
unaffiliated fuel oil dealers. The aggregate consideration for these
acquisitions, accounted for by the purchase method, was approximately $26,600.
Sales and net income of the acquired companies are included in the consolidated
statements of operations from the respective dates of acquisition.
In June 1996, the Company sold its Springfield Massachusetts operations to an
unaffiliated fuel oil dealer. The Company received proceeds of approximately
$4,100 and realized a gain on this transaction of approximately $1,800.
Unaudited pro forma data giving effect to the purchased and disposed businesses,
and to the acquisition of Star Gas Corporation, as described in Note 2, as if
they had been acquired on January 1 of the year preceding the year of purchase
and disposal, with adjustments, primarily for amortization of intangibles are as
follows:
Years Ended December 31,
---------------------------------------
1994 1995 1996
---- ---- ----
Net sales $ 706,956 $ 657,703 $ 616,968
Loss before extraordinary item (6,419) (20,889) (22,720)
Net loss $ (7,194) $ (22,325) $ (29,134)
========= ========= =========
Net income (loss) per common share
Class A Common Stock $ (.42) $ (1.01) $ (1.23)
Class B Common Stock 1.10 -- --
Class C Common Stock $ (.42) $ (1.01) $ (1.23)
========= ========= =========
F-23
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(In thousands except per share data)
(15) Litigation
The Company is not party to any litigation which individually or in the
aggregate could reasonably be expected to have a material adverse effect on the
Company.
(16) Disclosures About the Fair Value of Financial Instruments
Cash, Restricted Cash, Accounts Receivable, Notes Receivable and Other Current
Assets, Working Capital Borrowings, Accounts Payable and Accrued Expenses
The carrying amount approximates fair value because of the short maturity of
these instruments.
Long-Term Debt, Subordinated Notes Payable, Senior Notes Payable and Cumulative
Redeemable Exchangeable Preferred Stock
The fair values of each of the Company's long-term financing instruments,
including current maturities, are based on the amount of future cash flows
associated with each instrument, discounted using the Company's current
borrowing rate for similar instruments of comparable maturity.
The estimated fair value of the Company's financial instruments are summarized
as follows:
At December 31, 1995 At December 31, 1996
-------------------- --------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
Long-term debt $ 18,930 $ 18,390 $ 17,734 $ 17,333
Subordinated notes payable 286,250 304,992 241,450 251,940
Senior notes payable 36,250 38,805 35,200 36,965
Cumulative redeemable
exchangeable preferred stock 16,667 18,302 12,500 13,700
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
F-24
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(In thousands except per share data)
(17) Segment Information
From December 8, 1994 to December 19, 1995 the operations, assets and
liabilities of Star Gas Corporation ("Star Gas"), a wholly owned subsidiary,
were included in the consolidated financial statements of the Company.
Accordingly, during this period the Company's operations were classified into
two business segments: Home Heating Oil and Propane. However, as a result of the
Star Gas Master Limited Partnership transaction in December 1995 involving the
conveyance of the Company's propane operations to Star Gas Propane, L.P., a
minority owned entity, for the twelve months ended December 31, 1996 the Company
had no propane revenues or expenses.
<TABLE>
<CAPTION>
Year Ended December 31, 1994 Year Ended December 31, 1995 Year Ended December 31, 1996
---------------------------- ---------------------------- ----------------------------
Home Home Home
Heating * Heating ** Heating ***
Oil Propane Consolidated Oil Propane Consolidated Oil Propane Consolidated
--- ------- ------------ --- ------- ------------ --- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $527,729 $18,948 $546,677 $509,122 $100,385 $609,507 $608,161 $ - $608,161
Gross profit 173,680 10,016 183,696 167,447 54,235 221,682 180,773 - 180,773
Operating
expenses 122,866 5,443 128,309 125,859 39,070 164,929 143,069 - 143,069
Depreciation
and
amortization 30,669 2,099 32,768 30,863 9,587 40,450 30,818 - 30,818
Operating
income 20,145 2,474 22,619 10,725 5,578 16,303 6,886 - 6,886
-
Assets 237,971 159,203 397,174 357,241 - 357,241 275,025 - 275,025
Capital
expenditures $ 3,281 $ 891 $ 4,172 $ 3,946 $ 7,228 $ 11,174 $ 6,874 $ - $ 6,874
</TABLE>
* In 1994 the Propane segment incurred an equity loss, which is presented in the
Statement of Operations as non-operating loss, of approximately $2.0 million
representing the Company's share of loss of Star Gas.
** In 1995 the Propane segment had equity income, which is presented in the
Statement of Operations as non-operating income, of approximately $0.7 million
representing the Company's share of income of Star Gas Partners, L.P.
*** In 1996 the Propane segment had equity income, which is presented in the
Statement of Operations as non-operating income, of approximately $2.3 million
representing the Company's share of income of Star Gas Partners, L.P.
F-25
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(In thousands except per share data)
(18) Selected Quarterly Financial Data - (Unaudited)
The seasonal nature of the Company's business results in the sale by the Company
of approximately 50% of its volume of home heating oil in the first quarter and
30% of its volume of home heating oil in the fourth quarter of each year. The
Company generally realizes net income in both of these quarters and net losses
during the warmer quarters ending June and September.
Three Months Ended
----------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1995 1995 1995 1995 Total
-------- -------- -------- -------- ---------
Net sales $253,737 $ 87,639 $ 63,541 $204,590 $ 609,507
Gross profit 106,405 26,397 15,773 73,107 221,682
Income (loss) before
taxes, equity interest
and extraordinary item 42,274 (29,824) (40,461) 5,740 (22,271)
Net income (loss) $ 41,874 $(31,235) $(40,386) $ 6,268 $ (23,479)
======== ======== ======== ======== =========
Net income (loss) per
common share
Class A Common Stock $ 1.61 $ (1.23) $ (1.65) $ .25 $ (1.06)
Class B Common Stock -- -- -- -- --
Class C Common Stock $ 1.61 $ (1.23) $ (1.65) $ .25 $ (1.06)
======== ======== ======== ======== =========
Three Months Ended
----------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31,
1996 1996 1996 1996 Total
-------- -------- -------- -------- ---------
Net sales $279,655 $ 91,345 $ 51,060 $186,101 $608,161
Gross profit 100,838 21,952 6,206 51,777 180,773
Income (loss) before
taxes, equity interest
and extraordinary item 42,490 (24,259) (38,777) (3,138) (23,684)
Net income (loss) $ 39,041 $(26,152) $(40,593) $ (611) $(28,315)
======== ======== ======== ======== ========
Net income (loss) per
common share
Class A Common Stock $ 1.49 $ (1.02) $ (1.63) $ (0.02) $ (1.20)
Class B Common Stock -- -- -- -- --
Class C Common Stock $ 1.49 $ (1.02) $ (1.63) $ (0.02) $ (1.20)
======== ======== ======== ======== ========
F-26
<PAGE>
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Additions
----------------------
Balance at Charged to Charged Other Balance
Beginning Costs and to Other Changes Add at End
Year Description of Year Expenses Account / (Deduct) of Year
- ---- --------------------- ---------- ---------- -------- ----------- -------
<S> <C> <C> <C> <C> <C>
1994 Accumulated amortization:
Customer lists $ 189,364 $ 19,749 $ 209,113
Deferred charges 27,826 6,177 34,003
--------- -------- -----------
$ 217,190 $ 25,926 $ 243,116
========= ======== ===========
$(2,210)(2)
Allowance for doubtful 532 (3)
-------
accounts $ 1,026 $ 1,421 $1,000(1) $(1,678) $ 1,769
========= ======== ====== ======= ===========
1995 Accumulated amortization:
Customer lists $ 209,113 $ 20,527 $(4,307)(4) $ 225,333
Deferred charges 34,003 6,142 (1,022)(4) 39,123
--------- -------- ------- -----------
$ 243,116 $ 26,669 $(5,329) $ 264,456
========= ======== ======= ===========
$(3,323)(2)
Allowance for doubtful (250)(4)
-------
accounts $ 1,769 $ 1,856 $ 917(1) $(3,573) $ 969
========= ======== ====== ======= ===========
1996 Accumulated amortization:
Customer lists $ 225,333 $ 18,611 $(4,104)(5) $ 239,840
Deferred charges 39,123 4,760 (237)(5) 43,646
--------- -------- ------- -----------
$ 264,456 $ 23,371 $(4,341) $ 283,486
========= ======== ======= ===========
Allowance for doubtful
accounts $ 969 $ 1,882 $ 1,099(1) $(2,862)(2) $ 1,088
======== ======== ======= ======= ===========
</TABLE>
(1) Recoveries
(2) Bad debts written off
(3) Allowance for doubtful accounts acquired from the Star Gas acquisition
(4) Valuation and qualifying accounts conveyed to Star Gas Partners, L.P. and
the disposition of the New Hampshire branch location
(5) Valuation and qualifying accounts conveyed through the disposition of the
Springfield Massachusetts branch location
F-27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
March 11, 1997
PETROLEUM HEAT AND POWER CO., INC.
(Registrant)
By: /s/ Irik P. Sevin
----------------------------------
Irik P. Sevin
Chairman of the Board, Chief
Executive Officer and Chief Financial
and Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Irik P. Sevin Chairman of the Board March 11, 1997
- ------------------------ Chief Executive Officer,
Irik P. Sevin Chief Financial and
Accounting Officer
and Director
/s/ Audrey L. Sevin Secretary and Director March 11, 1997
- ------------------------
Audrey L. Sevin
/s/ Richard O'Connell Director March 11, 1997
- ------------------------
Richard O'Connell
/s/ Paul Biddelman Director March 11, 1997
- ------------------------
Paul Biddelman
/s/ Wolfgang Traber Director March 11, 1997
- ------------------------
Wolfgang Traber
<PAGE>
(a) Exhibits
Exhibit
No. Description of Exhibit
- ------- ----------------------
3.1 - Restated and Amended Articles of Incorporation, as amended, and
Articles of Amendment thereto.(2)
3.2 - Restated By-Laws of the Registrant.(2)
4.1 - Indenture, dated as of April 1, 1993, between the Company and Chemical
Bank, as trustee, including Form of Notes.(1)
4.2 - Form of Indenture, dated as of October 1, 1985 between the Company and
Manufacturers Hanover Trust Company, as trustee, including Form of
Notes.(3)
4.3 - Restated and Amended Articles of Incorporation and Articles of
Amendment thereto.(3)
4.4 - Certificate of Designation creating a series of preferred stock
designated as Cumulative Redeemable Exchangeable 1991 Preferred Stock
and Certificate of Amendment relating thereto.(6)
4.5 - Certificate of Designation creating a series of preferred stock
designated as Cumulative Redeemable 1991 Preferred Stock.(3)
4.6 - Form of Indenture between the Company and Chemical Bank, as trustee,
including Form of Debentures.(8)
4.7 - Certificate of Designation creating a series of Preferred Stock
designated as Cumulative Redeemable Exchangeable 1993 Preferred
stock.(8)
4.8 - Certificate of Designation, as amended, creating a series of Preferred
Stock designated as 12 7/8% Exchangeable Preferred Stock due 2009.(14)
4.9 - Registration Rights Agreement, dated as of February 18, 1997, by and
between the registrant and Donaldson, Lufkin & Jenrette Securities
Corporation.(14)
9.1 - Shareholders' Agreement dated as of July 1992, among the Company and
certain of its stockholders.(2)
10.1- Fourth Amended and Restated Credit Agreement dated as of September 27,
1996 among the Company, certain banks party thereto and Chase Manhattan
Bank, as Agent.(10)
10.2- Pension Plan, of Petroleum Heat and Power Co., Inc.(2)
10.3- Amendment No. 1 to Pension Plans.(14)
10.4- Supplemental Executive Retirement Plan of Petroleum Heat and Power Co.,
Inc.(2)
10.5- Amendment No. 1 to Supplemental Executive Retirement Plan.(14)
10.6- Lease dated December 1, 1985 with respect to office and garage located
at 3600-3620 19th Avenue, Astoria, New York.(3)
10.7- Lease dated October 26, 1990 with respect to office and garage located
at 1 Coffey Street, Brooklyn, New York.(2)
10.8- Lease dated February 6, 1990 with respect to office and garage located
at 62 Oakland Avenue and 64 Oakland Avenue, East Hartford,
Connecticut.(2)
10.9- Lease dated July 29, 1988 and Addendum to lease dated August 1, 1988
with respect to office, garage and terminal located at 224 North Main
Street, Southampton, New York.(2)
10.10- Lease dated December 1, 1990 with respect to garage located at 10
Coffey Street, Brooklyn, New York.(2)
10.11- Lease dated November 8, 1996 with respect to office located at 467
Creamery Way, Exton, Pennsylvania.(14)
10.12- Option dated October 18, 1984 granted to Irik P. Sevin to purchase
64,000 shares of common stock of Petroleum Heat and Power Co., Inc.(3)
<PAGE>
10.13- Agreement dated October 22, 1986 relating to purchase of 64,000 shares
of Class A Common Stock by Irik P. Sevin.(5)
10.14- Agreement dated December 2, 1986 relating to stock options granted to
Irik P. Sevin.(5)
10.15- Agreements dated December 28, 1987 and March 6, 1989 relating to stock
options granted to Irik P. Sevin and Malvin P. Sevin.(2)
10.16- Lease dated June 17, 1993 with respect to office facilities located at
2187 Atlantic Street in Stamford, Connecticut.(8)
10.17- First Amendment to the Company's 10 1/8% Subordinated Notes Indenture
dated as of January 12, 1994.(8)
10.18- Employment Agreement dated July 21, 1994 with Thomas Isola.(10)
10.19- Agreement dated April 4, 1994 relating to stock options granted to Irik
P. Sevin.(11)
10.20- Employment Agreement dated June 2, 1994 with Alex Szabo.(12)
10.21- Agreement dated December 31, 1995, in the amount of $1,751,468 due
December 31, 1999 from Irik P. Sevin to the Company.(13)
10.22- Lease dated January 25, 1996 with respect to regional office located at
48 Harbor Park Drive, Port Washington, New York.(10)
10.23- Note Purchase Agreement dated as of February 1, 1997 re: 60,000,000 in
Senior Notes due October 1, 2002.(14)
10.24- Third Amendment and Restatements of Purchase Agreements dated as of
February 1, 1997 re: 250,000 shares of 1989 Preferred Stock.(14)
10.25- Sixth Amendment and Restatements of Note Agreement dated as of February
1, 1997 re: 14.10% Senior and Subordinated Notes due January 15, 2001.
(14)
11.0- Computation of Per Share Earnings.(14)
21.0- Subsidiaries of Registrant.(14)
23.1- Consent of KPMG Peat Marwick LLP(14)
27.0- Financial Data Schedule(14)
(1) Filed as Exhibits to Registration Statement on Form S-2, File No. 33-58034.
(2) Filed as Exhibits to Registration Statement on Form S-1, File No. 33-48051,
and incorporated herein by reference.
(3) Filed as Exhibits to Registration Statement on Form S-1, File No. 2-99794,
and incorporated herein by reference.
(4) Filed as Exhibits to Registration Statement on Form S-1, File No. 2-88526,
and incorporated herein by reference.
(5) Filed as Exhibits to Registration Statement on Form S-1, File No. 33-9088,
and incorporated herein by reference.
(6) Filed as Exhibits to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991, File No. 2-88526, and incorporated herein by
reference.
(7) Filed as Exhibits to the Company's Annual Report on Form 10-K for the year
ended December 31, 1988, File No. 2-88526, and incorporated herein by
reference.
(8) Filed as Exhibits to the Registration Statement on Form S-2, File No.
33-72354, and incorporated herein by reference.
(9) Filed as Exhibits to the Company's Periodic Report on Form 8-K filed on
January 4, 1994, File No. 2-88526 and incorporated herein by reference.
(10) Filed as an Exhibit to the Company's Periodic Report on Form 10-Q and
incorporated herein by reference.
(11) Filed as Exhibits to the Registration Statement on Form S-2, File
No.33-57059, and incorporated herein by reference.
(12) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994, File No. 2-88526, and incorporated herein by
reference.
(13) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, File No. 2-88526, and incorporated herein by
reference.
(14) Filed herein.
CERTIFICATE OF DESIGNATION
-----------
SETTING FORTH RESOLUTION CREATING A SERIES
OF PREFERRED STOCK DESIGNATED AS
EXCHANGEABLE PREFERRED STOCK
ADOPTED BY THE BOARD OF DIRECTORS OF
PETROLEUM HEAT AND POWER CO., INC.
Pursuant to the Provisions of Section 302.A401 of the
Minnesota Business Corporation Act, as amended
We, the undersigned, GEORGE LEIBOWITZ and ALAN SHAPIRO, respectively a
Senior Vice President and Assistant Secretary of Petroleum Heat and Power Co.,
Inc., a Minnesota corporation (hereinafter sometimes referred to as the
"Corporation"), hereby certify as follows:
FIRST: That under the Restated and Amended Articles of Incorporation of
the Corporation ("Restated Articles") the total number of authorized shares of
Preferred Stock which the Corporation may issue is 5,000,000 and under said
Restated Articles the Board of Directors of the Corporation ("Board") is
authorized to issue such shares of the Preferred Stock from time to time in one
or more series and to determine in the resolution providing for the issuance of
any series of Preferred Stock the rights and preferences of shares of such
series not fixed and determined by the Restated Articles.
SECOND: That the Board, pursuant to the authority so vested in it by the
Restated Articles and in accordance with the provisions of Section 302A.401 of
the Minnesota Business Corporation Act, as amended, adopted the following
resolution creating two series of Preferred Stock designated as 12 7/8% Series A
Exchangeable Preferred Stock due 2009 ("Series A Exchangeable Preferred Stock")
and 12 7/8% Series B Exchangeable Preferred Stock due 2009 ("Series B
Exchangeable Preferred Stock"), which resolution has not been amended, modified,
rescinded or revoked and is in full force and effect on the Preferred Stock
Closing Date.
WHEREAS, the Restated and Amended Articles of Incorporation (the "Restated
Articles") of Petroleum Heat and Power Co., Inc. a Minnesota corporation (the
"Corporation"), authorize the issuance of 5,000,000 shares of Preferred Stock of
the Corporation; and
<PAGE>
WHEREAS, this Corporation wishes to issue up to 2,000,000 shares of its
Series A Exchangeable Preferred Stock to provide funds primarily for general
corporate purposes;
WHEREAS, pursuant to a Registration Rights Agreement between this
Corporation and Donaldson, Lufkin & Jenrette Securities Corporation (the
"Registration Rights Agreement"), this Corporation may issue up to 2,000,000
shares of its Series B Exchangeable Preferred Stock, which will have been
registered under the Securities Act of 1933, as amended, in exchange for a like
number of shares of its Series A Preferred Stock as provided for therein.
NOW, THEREFORE, be it, and it hereby is, resolved by the Board that two
series of the Preferred Stock of the Corporation is hereby designated 12 7/8%
Series A Exchangeable Preferred Stock due 2009 consisting of 2,000,000 shares
(the "Series A Exchangeable Preferred Stock") and 12 7/8% Series B Exchangeable
Preferred Stock due 2009 consisting of 2,000,000 shares (the "Series B
Exchangeable Preferred Stock" and, together with the Series A Exchangeable
Preferred Stock, the "Exchangeable Preferred Stock"), having the relative rights
and preferences as set forth below:
1. Ranking. The shares of the Exchangeable Preferred Stock shall rank
senior to the Corporation's Class A and Class C Common Stock, junior to the
Corporation's Class B Common Stock and pari passu with the Corporation's 1989
Preferred Stock and Parity Securities which may be issued pursuant to paragraph
10(b) "Limitation on Funded Debt and Preferred Stock" with respect to the
payment of dividends and upon liquidation, dissolution, winding-up or otherwise.
Except as specified in the preceding sentence and as provided in paragraph 7(b),
all other series of Preferred Stock, all other classes of Preferred Stock and
all other capital stock of the Corporation shall rank junior to the Exchangeable
Preferred Stock with respect to the payment of dividends or upon liquidation,
dissolution, winding-up or otherwise.
2. Dividends.
(a) The holders of the shares of the Exchangeable Preferred Stock
shall be entitled to receive dividends thereon at the rate per annum equal to 12
7/8% of the Liquidation Preference per share of Exchangeable Preferred Stock
when and as declared by the Board of Directors of this Corporation, out of funds
legally available therefor. The obligations of this Corporation to pay dividends
on the Exchangeable Preferred Stock pursuant to the provisions of this paragraph
2 shall accrue (whether or not declared) and be cumulative from and including
the date on which each such share is issued. Dividends shall be payable
quarterly in arrears (each a "Quarterly Dividend Period") on the 15th day of
February, May, August and November (each a "Dividend Payment Date"), commencing
with the first Dividend Payment Date following
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the issuance of such shares, to the holders of record as they shall appear on
the stock register of the Corporation on the first day of such calendar month.
All dividends shall be computed on the basis of a 360-day year of twelve 30-day
months and the actual number of days elapsed in the period for which such
dividends are payable. Unpaid dividends for any period less than a full
Quarterly Dividend Period shall accrue on a day-to-day basis and shall be
computed on the basis of a 360-day year.
(b) The obligation of the Corporation to pay dividends pursuant to
the provisions of this paragraph shall be cumulative. If the full amount of
dividends required to be paid as aforesaid for any Quarterly Dividend Period
shall not have been paid, whether or not earned or declared, or a sum sufficient
for the payment thereof set apart, all of the dividends required to be so paid
but not paid (the "Deficiency") shall earn and accrue additional dividends,
effective as of the date on which such dividends were to be paid and continuing
until the full amount of the Deficiency plus all accrued but unpaid dividends
thereon shall have been paid in full, at a per annum rate equal to the per annum
dividend rate payable hereunder throughout such period with respect to
Exchangeable Preferred Stock plus 2%. All payments of dividends made on the
Exchangeable Preferred Stock shall be applied first, to the reduction of all
accrued but unpaid dividends on the Deficiency, second, to the reduction of the
Deficiency and third, to the payment of all accrued but unpaid dividends on the
Exchangeable Preferred Stock, other than the Deficiency. Reference to accrued
and/or cumulative dividends hereunder shall be deemed for all purposes to
include all amounts of Deficiency and all such accrued but unpaid dividends
thereon.
3. Priority as to Dividends.
(a) No dividends or other distributions (other than dividends or
other distributions payable in Class A Common Stock, Class C Common Stock or
other Junior Securities) shall be declared or paid or set apart for payment on
any Junior Securities for any period, and no Junior Securities may be
repurchased, redeemed or otherwise retired, nor may funds be set apart for
payment with payment with respect thereto, unless at the time thereof (1) full
cumulative dividends have been or simultaneously are declared and paid (or
declared and a sum sufficient for the payment thereof set apart for such
payment) on the Exchangeable Preferred Stock for all Quarterly Dividend Periods
terminating on or prior to the date of payment of such dividends on Junior
Securities, (ii) an amount equal to the dividends accrued on the Exchangeable
Preferred Stock as of the date of each proposed distribution or payment on the
Junior Securities has been declared and set apart in cash for payment on the
Exchangeable Preferred Stock and, (iii) any redemption payment required to be
made pursuant hereto on or prior to the date of payment of such dividends on
Junior Securities shall have
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been paid or a sum sufficient for the payment thereof set apart for such
payment.
(b) If the Corporation proposes to pay to the holders of the
outstanding Exchangeable Preferred Stock and the holders of all outstanding
Parity Securities an amount less than full accrued and unpaid cumulative
dividends thereon (whether or not declared or earned) plus Liquidated Damages,
if any, then the amount actually distributed shall be distributed among such
holders ratably per share in proportion to the amount of such accrued and unpaid
dividends plus Liquidated Damages, if any. No Parity Securities may be
repurchased, redeemed or otherwise retired, nor may funds be set apart for
payment with respect thereto, if full cumulative dividends have not been paid in
cash on the Preferred Stock.
4. Mandatory Redemption.
(a) On February 15, 2009 (the "Mandatory Redemption Date") the
Corporation shall redeem all outstanding shares of the Exchangeable Preferred
Stock. The per share redemption price shall be the Liquidation Preference per
share plus all accrued and unpaid cumulative dividends thereon (whether or not
declared or earned) plus all Liquidated Damages, if any, to the date of such
redemption; provided, however, that if such redemption price is not paid on such
Mandatory Redemption Date, such redemption price shall bear interest thereafter
at a per annum rate equal to the per annum dividend rate payable hereunder with
respect to the Exchangeable Preferred Stock plus 2% until such redemption price
is paid.
(b) No redemption may be authorized or made unless prior thereto
full unpaid cumulative dividends shall have been paid in cash or a sum set apart
for such payment on the Exchangeable Preferred Stock and all Parity Securities.
5. Redemption Upon Change of Ownership.
(a) Upon the occurrence of a Change of Control, the Corporation
shall make an offer (the "Change of Control Offer") to each holder of
Exchangeable Preferred Stock to redeem all or any part of such holder's
Exchangeable Preferred Stock at a redemption price equal to 101% of the
Liquidation Preference thereof, plus an amount in cash equal to all accumulated
and unpaid dividends and Liquidated Damages, if any, to the date of redemption
(the "Change of Control Redemption Price"). Within 30 days following any Change
of Control, the Corporation will mail a notice to each holder ("Change of
Control Notice") stating (i) that a Change of Control has occurred and that such
holder has the right to require the Corporation to redeem such holder's
Exchangeable Preferred Stock at a redemption price in cash equal to the Change
of Control Redemption Price, (ii) the circumstances and relevant facts regarding
such Change of Control (including information with respect to pro
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forma historical income, cash flow and capitalization after giving effect to
such Change of Control), (iii) the redemption date (the "Change of Control
Redemption Date") (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed) and (iv) the instructions, determined by
the Corporation consistent with this Certificate of Designation, that a holder
must follow in order to have its Exchangeable Preferred Stock redeemed.
(b) If, at the time of a Change of Control, the Corporation is
prohibited by the terms of any Indebtedness from purchasing shares of
Exchangeable Preferred Stock that may be tendered by holders pursuant to a
Change of Control Offer, then prior to the mailing of the Change of Control
Notice but in any event within 30 days following any Change of Control, the
Corporation shall (i) repay in full such Indebtedness or (ii) obtain the
requisite consent under such Indebtedness to permit the purchase of the
Exchangeable Preferred Stock as described above.
(c) On the Change of Control Redemption Date, the Corporation shall
redeem all shares of the Exchangeable Preferred Stock properly tendered pursuant
to the Change of Control Offer out of funds legally available therefor.
(d) In the event such redemption price is not fully paid on the
Change of Control Redemption Date, such redemption price shall earn interest
from the date fixed for such redemption at a rate per annum equal to the per
annum dividend rate payable hereunder throughout such period on the Exchangeable
Preferred Stock plus 2%, until such redemption price (including all such
interest) shall be paid in full.
(e) No redemption may be authorized or made unless prior thereto
full unpaid cumulative dividends shall have been paid in cash or a sum set apart
for such payment on the Exchangeable Preferred Stock and all Parity Securities.
6. Optional Redemption of Exchangeable Preferred Stock.
(a) In addition to the mandatory redemptions required by paragraphs
4 and 5 hereof, the Corporation shall have the option at any time from time to
time on any Dividend Payment Date on and after (but not before) February 15,
2002 to redeem for cash shares of the Exchangeable Preferred Stock, either in
whole or in part (but if in part then in units of 100 shares or an integral
multiple thereof, unless less than 100 shares are then outstanding or held by
any one holder thereof), at the redemption prices set forth herein, together
with all accumulated and unpaid dividends (including an amount in cash equal to
a prorated dividend for the period from the Dividend Payment Date immediately
prior to the redemption date to the redemption date) and Liquidated Damages, if
any, to the redemption date. The redemption prices (expressed as percentages of
Liquidation Preference) are as follows for shares of
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Exchangeable Preferred Stock redeemed during the twelve-month period beginning
February 15 of the years indicated:
Year Percentage
---- ----------
2002.......................................................... 106.438
2003......................................................... 104.292
2004.......................................................... 102.146
2005 and thereafter........................................... 100.000
(b) At least 30 days but not more than 60 days before an optional
redemption date, the Corporation shall mail or cause to be mailed, by first
class mail, a notice of redemption to each holder whose Exchangeable Preferred
Stock is to be redeemed at its registered address. The notice shall identify the
shares of Exchangeable Preferred Stock to be redeemed and shall state the
redemption date, the redemption price and the procedure to be followed by such
holder to receive the redemption payment.
(c) In the event of partial redemptions of Exchangeable Preferred
Stock, the shares to be redeemed will be determined pro rata or by lot, as
determined by the Company.
(d) No optional redemption may be authorized or made unless prior
thereto full unpaid cumulative dividends shall have been paid in cash or a sum
set apart for such payment on the Exchangeable Preferred Stock and all Parity
Securities.
7. Voting Rights.
(a) Except as provided in subparagraphs (b) and (c) of this
paragraph 7, or as required by the laws of the State of Minnesota or any other
applicable law, the holders of the Exchangeable Preferred Stock shall not be
entitled to any voting rights with respect to general corporate matters. On all
matters upon which holders of the Exchangeable Preferred Stock are entitled to
vote, or give their consent, each such holder shall be entitled to one (1) vote
per share of the Exchangeable Preferred Stock held by such holder.
(b) Except as provided in subparagraph (c)(vi), the Corporation
shall not (i) without the affirmative vote or written consent of the holders of
at least a majority of the then outstanding Exchangeable Preferred Stock (A)
amend, modify or supplement the Restated Articles or any agreement or
understanding, or enter into any agreement or understanding, the effect of which
would be to adversely affect the rights, preferences, privileges or powers of,
or limitations on, the Exchangeable Preferred Stock contained in the Restated
Articles, including without limitation
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this Resolution except as provided in paragraph 10(b) (B) issue any additional
shares of Exchangeable Preferred Stock or authorize any class of Parity
Securities or Senior Securities or (C) consolidate with or merge with or into,
or convey, transfer or lease all or substantially all its assets to, any person
unless: (1) the resulting, surviving or transferee person (if not the
Corporation) is organized and existing under the laws of the United States of
America or any State thereof or the District of Columbia; (2) the Exchangeable
Preferred Stock shall be converted into or exchanged for and shall become shares
of such successor, transferee or resulting corporation, having in respect of
such successor, transferee or resulting corporation the same powers, preferences
and relative, participating, optional or other special rights thereof that the
Exchangeable Preferred Stock had immediately prior to such transaction; (3)
immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the resulting, surviving or
transferee person or any Subsidiary as a result of such transaction as having
been issued by such person or such Subsidiary at the time of such transaction),
no Voting Rights Triggering Event shall have occurred and be continuing; and (4)
either (a) immediately after giving effect to such transaction, the resulting,
surviving or transferee person would be able to issue an additional $1.00 of
Funded Debt pursuant to the first paragraph of paragraph 10(b) "Limitation on
Funded Debt and Preferred Stock" or (b) the Company makes an offer to each
holder of Preferred Stock to repurchase all or any part of such holder's
Preferred Stock at a purchase price equal to 101% of the liquidation preference
thereof, plus an amount in cash equal to all accumulated and unpaid dividends
and Liquidated Damages, if any, to the date of purchase (ii) without the
affirmative vote or written consent of the holders of at least two thirds (66
2/3%) of the then outstanding Exchangeable Preferred Stock amend the Change of
Control provisions (including the related definitions) in paragraph 5.
(c) (i) If and whenever (A) dividends on the Exchangeable Preferred
Stock shall be in arrears and shall not have been fully paid or shall not have
been declared and a sum sufficient for the payment thereof set aside for four
Quarterly Dividend Periods (whether consecutive or not) on all shares of the
Exchangeable Preferred Stock at the time outstanding, or (B) any redemption
payment required to be made pursuant hereto shall not be made on the date
specified for such redemption of the Exchangeable Preferred Stock pursuant
thereto or (C) the Corporation shall fail to make an offer to redeem all
outstanding shares of Exchangeable Preferred Stock following a Change of Control
pursuant to paragraph 5 or (D) a breach or violation of any of the provisions
set forth in paragraph 10 occurs and the breach or default continues for a
period of 30 days or more or (E) a default occurs on the obligation to pay
principal or interest on or any other payment obligation when due ("Payment
Default") at final maturity on any Indebtedness of the Corporation or any
Subsidiary, whether such Indebtedness
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exists on the date of this Certificate of Designation or thereafter, having
individually or in the aggregate an outstanding amount in excess of $1 million
or its foreign currency equivalent, or any other Payment Default occurs on such
Indebtedness and such Indebtedness is declared due and payable prior to
maturity, then and in each such event (each of the events described in
subparagraphs (c)(i)(A) through (c)(i) (E) a "Voting Rights Triggering Event"),
the number of directors constituting the Board shall, without further action, be
increased by two (2) and the holders of the Exchangeable Preferred Stock shall
have, in addition to the other voting rights set forth herein, the exclusive
right (but not the obligation) voting separately as a class, to elect two
directors of the Corporation to fill such newly created directorships, the
remaining directors to be elected by the other class or classes of stock
entitled to vote therefor, at each meeting of stockholders held for the purpose
of electing directors.
(ii) Whenever such voting right shall have vested, such right
may be exercised initially either at a special meeting of the holders of the
Exchangeable Preferred Stock, called as hereinafter provided, by written consent
or at any annual meeting of stockholders held for the purpose of electing
directors, and thereafter at such annual meeting or by the written consent of
the holders of the Exchangeable Preferred Stock pursuant to applicable
provisions of the Minnesota General Corporation Law.
(iii) At any time when such voting rights shall have vested in
the holders of the Exchangeable Preferred Stock, and if such right shall not
already have been initially exercised, a proper officer of the Corporation
shall, upon the written request of any holder of record of the Exchangeable
Preferred Stock then outstanding, addressed to the Secretary of the Corporation,
call a special meeting of the holders of the Exchangeable Preferred Stock and of
any other class or classes of stock having voting power with respect thereto for
the purpose of electing directors. Such meeting shall be held at the earliest
practicable date upon the notice required for annual meetings of stockholders at
the place for holding annual meetings of stockholders of the Corporation or, if
none, at a place designated by the Secretary of the Corporation; provided,
however, that the Secretary shall not be required to call any such special
meeting in the case of any request therefor received less than ninety (90) days
prior to the date fixed for any annual meeting of stockholders of the
Corporation, and if in such case such special meeting is not called, the holders
of Exchangeable Preferred Stock shall be entitled to exercise the special voting
rights provided in this subparagraph (c) (iii) at such annual meeting; provided,
further, that nothing herein shall be deemed to prohibit the holders of
Exchangeable Preferred Stock from exercising their special voting rights by
written consent at any time, including without limitation, during the 90-day
period immediately preceding any annual meeting of stockholders of the
Corporation, with the
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election of such director by the holders of the Exchangeable Preferred Stock
being effective as of the date of such written consent. If such meeting shall
not be called by the proper officers of the Corporation within 10 days after the
personal service of such written request upon the Secretary of the Corporation,
or within 10 days after mailing the same within the United States, by registered
mail, addressed to the Secretary of the Corporation at its principal office
(such mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of 10% or more of the shares of the
Exchangeable Preferred Stock then outstanding may designate in writing a holder
of the Exchangeable Preferred Stock to call such meeting at the expense of the
Corporation, and such meeting may be called by such person so designated upon
the notice required for annual meetings of stockholders and shall be held at the
same place as is elsewhere provided in this subparagraph (c)(iii). Any holder of
the Exchangeable Preferred Stock shall have access to the stock books of the
Corporation for the purposes of causing a meeting of stockholders to be called
pursuant to the provisions of this paragraph.
(iv) At any meeting held for the purpose of electing directors
at which the holders of the Exchangeable Preferred Stock shall have the right to
elect directors as provided herein, the presence in person or by proxy of the
holders of 50% of the then outstanding shares of the Exchangeable Preferred
Stock shall be required and be sufficient to constitute a quorum of such class
for the election of directors by such class. At any such meeting or adjournment
thereof (A) the absence of a quorum of the holders of the Exchangeable Preferred
Stock shall not prevent the election of directors other than those to be elected
by the holders of stock of such class and the absence of a quorum or quorums of
the holders of capital stock entitled to elect such other directors shall not
prevent the election of directors to be elected by the holders of the
Exchangeable Preferred Stock and (B) in the absence of a quorum of the holders
of any class of stock entitled to vote for the election of directors, a majority
of the holders present in person or by proxy of such class shall have the power
to adjourn the meeting for the election of directors which the holders of such
class are entitled to elect, from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
(v) The rights of the holders of outstanding shares of the
Exchangeable Preferred Stock granted by this subparagraph (c) may be exercised
only until (A) all dividends in arrears on the Exchangeable Preferred Stock, if
any, shall have been paid in full or declared and funds sufficient theretofore
set aside and the Corporation shall have paid in full or declared and set aside
funds sufficient for the two consecutive Quarterly Dividend Periods following
the payment of any arrearage, (B) all redemption payments, if any, with respect
to the Exchangeable
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Preferred Stock shall have been made, (C) the Corporation shall not have failed
to make an offer to redeem all outstanding shares of Exchangeable Preferred
Stock following a Change of Control pursuant to paragraph 5, (D) all breaches of
any of the covenants contained in paragraph 10 hereof or this paragraph 7, if
any, shall have been cured or waived by the holders of a majority of the
outstanding shares of Exchangeable Preferred Stock, and (E) all Payment
Defaults, if any, have been cured or waived; and thereafter such rights of the
holders of the Exchangeable Preferred Stock to elect two directors to the Board
shall cease, but subject always to the same provisions for the vesting of such
rights in the future pursuant to this subparagraph (c) above.
8. Payment on Liquidation.
(a) In the event of any liquidation, dissolution or winding-up of
the affairs of the Corporation, whether voluntary or involuntary, after payment
or provision for payment of the debts and other liabilities of the Corporation,
the holders of shares of the Exchangeable Preferred Stock shall be entitled to
receive, out of the assets of the Corporation, whether such assets are capital
or surplus and whether or not any dividends as such are declared, an amount per
share of the Exchangeable Preferred Stock equal to the Liquidation Preference
per such shares at the date fixed for such distribution (or, in the case of a
liquidation, dissolution or winding-up prior to February 15, 2005 the then
applicable redemption price per share for the Exchangeable Preferred Stock
pursuant to paragraph 6 hereof), plus all accrued and unpaid cumulative
dividends thereon (whether or not declared or earned) plus Liquidated Damages,
if any, to the date of such distribution; provided, however, that if upon any
liquidation, dissolution or winding-up of the affairs of the Corporation
(whether voluntary or involuntary) the assets of the Corporation available for
distribution shall be insufficient to pay such amount to the holders of all
outstanding shares of the Exchangeable Preferred Stock and to pay to the holders
of all outstanding Parity Securities and all outstanding shares of Class B
Common Stock the full amounts to which they respectively are entitled under the
Restated Articles, the holders of shares of Class B Common Stock shall be
entitled, prior to any distribution to any holder or holders of the Exchangeable
Preferred Stock or such Parity Securities, to distributions in an amount not to
exceed the amount required to be distributed to such holders of or Class B
Common Stock in the event of any such liquidation, dissolution or winding-up of
the affairs of the Corporation pursuant to the Restated Articles.
(b) Except as provided above with respect to the Class B Common
Stock, in the event of any liquidation, dissolution, or winding-up of the
affairs of the Corporation (whether voluntary or involuntary), payment shall be
made to the holders of the Exchangeable Preferred Stock and all Parity
Securities in the
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amounts provided herein, before any payment shall be made or any assets
distributed to the holders of any Class A Common Stock, the Class C Common Stock
or any other Junior Securities of the Corporation.
(c) If upon the occurrence of any liquidation, dissolution or
winding-up of the affairs of the Corporation (whether voluntary or involuntary),
the assets of the Corporation available for distribution to the holders of the
Exchangeable Preferred Stock and the holders of all Parity Securities shall be
insufficient to pay to them the full amounts to which they shall be entitled,
respectively, then the entire assets of the Corporation available for
distribution to the holders of outstanding shares of the Exchangeable Preferred
Stock and the holders of the outstanding Parity Securities shall be distributed
among such holders ratably per share in proportion to the preferential amount
per share (including Liquidation Preference and accumulated and unpaid
dividends, whether or not declared or earned) to which they are entitled.
(d) Written notice of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, stating a payment
date and the place where the distributive amounts shall be payable, shall be
given by mail, postage prepaid, not less than thirty (30) days prior to the
payment date stated therein, to the holders of record of the Exchangeable
Preferred Stock at their respective addresses as the same shall appear on the
books of the Corporation.
(e) The voluntary sale, lease, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
of its property or asset to, or a consolidation or merger of the Corporation
with, one or more Persons shall not be deemed to be a liquidation, dissolution
or winding up of the affairs of the Corporation within the meaning of this
paragraph 8.
9. Exchange of Exchangeable Preferred Stock for Exchange Debentures.
(a) The Company may at its option exchange all, but not less than
all, of the then outstanding shares of Exchangeable Preferred Stock into the
Company's 12 7/8% Junior Subordinated Exchange Debentures due 2009 (the
"Exchange Debentures") to be issued under an indenture ("Exchange Debenture
Indenture") in the form attached hereto as Annex A to be entered into between
the Corporation and a trustee to be selected by the Corporation ("Trustee") on
any Dividend Payment Date on or after February 15, 2000, provided that on the
date of such exchange: (A) there are no accumulated and unpaid dividends or
Liquidated Damages on the Exchangeable Preferred Stock (including the dividends
payable and Liquidated Damages on such date) or other contractual impediments
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to such exchange; (B) there shall be legally available funds sufficient therefor
(including, without limitation, legally available funds sufficient therefor
under the Minnesota Business Corporation Act); (C) either (i) a registration
statement relating to the Exchange Debentures shall have been declared effective
under the Securities Act of 1933, as amended (the "Securities Act"), prior to
such exchange, and shall continue to be in effect on the date of such exchange;
or (ii)(A) the Corporation shall have obtained a written opinion of counsel that
an exemption from the registration requirements of the Securities Act is
available for such exchange, and that upon receipt of such Exchange Debentures
pursuant to such exchange made in accordance with such exemption, the holders
(assuming such holder is not an Affiliate of the Corporation) thereof shall not
be subject to any restrictions imposed by the Securities Act upon the resale
thereof other than any such restrictions to which the holder thereof already is
subject on the Exchange Date, and (B) such exemption is relied upon by the
Corporation for such exchange; (D) the Exchange Debenture Indenture and the
Trustee thereunder shall have been qualified under the Trust Indenture Act of
1939, as amended; (E) immediately after giving effect to such exchange, no
Default or Event of Default (each as defined in the Exchange Debenture
Indenture) would exist under the Exchange Debenture Indenture; and (F) the
Corporation shall have delivered to the Trustee a written opinion of counsel,
dated the date of exchange, regarding the satisfaction of the conditions set
forth in clauses (A), (B), (C) and (D). In the event that the issuance of the
Exchange Debentures is not permitted on the date of exchange or any of the
conditions set forth in clauses (A) through (F) of the preceding sentence are
not satisfied on the date of exchange, the Corporation shall use its best
efforts to satisfy such conditions and effect such exchange as soon as
practicable.
The Corporation shall send a written notice (the "Exchange Notice")
of exchange by mail to each Holder of record of Exchangeable Preferred Stock,
which notice shall state: (v) that the Corporation is exercising its option to
exchange the Exchangeable Preferred Stock for Exchange Debentures pursuant to
this Certificate of Designation; (w) the date fixed for exchange (the "Exchange
Date"), which date shall not be less than 30 days nor more than 60 days
following the date on which the Exchange Notice is mailed (except as provided in
the last sentence of this paragraph); (x) that the Holder is to surrender to the
Corporation, at the place or places where certificates for shares of
Exchangeable Preferred Stock are to be surrendered for exchange, in the manner
designated in the Exchange Notice, the certificate or certificates representing
the shares of Exchangeable Preferred Stock to be exchanged; (y) that dividends
on the shares of Exchangeable Preferred Stock to be exchanged shall cease to
accrue on the Exchange Date whether or not certificates for shares of
Exchangeable Preferred Stock are surrendered for exchange on the Exchange Date
unless the Corporation shall default in the delivery
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of Exchange Debentures; and (z) that interest on the Exchange Debentures shall
accrue from the Exchange Date whether or not certificates for shares of
Exchangeable Preferred Stock are surrendered for exchange on the Exchange Date.
On the Exchange Date, if the conditions set forth in clauses (A) through (F)
above are satisfied, the Corporation shall issue Exchange Debentures in exchange
for the Exchangeable Preferred Stock as provided in the next paragraph.
(b) Upon any exchange pursuant to this paragraph 9, Exchange
Debentures shall be issued in exchange for Exchangeable Preferred Stock, in
registered form without coupons, in an amount equal to the Liquidation
Preference thereof, plus an amount in cash equal to all accumulated and unpaid
dividends (including a prorated dividend for the period from the immediately
preceding Dividend Payment Date to the Exchange Date). Exchange Debentures will
be issued in principal amounts of $1,000 and integral multiples thereof to the
extent possible, and will also be issued in principal amounts less than $1,000
so that each Holder of Exchangeable Preferred Stock will receive certificates
representing the entire amount of Exchange Debentures to which its shares of
Exchangeable Preferred Stock entitles it, provided that the Corporation may, at
its option, pay cash in lieu of issuing an Exchange Debenture in a principal
amount of less than $1,000.
(c) Procedure for Exchange. (A) On or before the date fixed for
exchange, each Holder of Exchangeable Preferred Stock shall surrender the
certificate or certificates representing such shares of Exchangeable Preferred
Stock, in the manner and at the place designated in the Exchange Notice. The
Corporation shall cause the Exchange Debentures to be executed on the Exchange
Date and, upon surrender in accordance with the Exchange Notice of the
certificates for any shares of Exchangeable Preferred Stock so exchanged
(properly endorsed or assigned for transfer, if the notice shall so state), such
shares shall be exchanged by the Corporation into Exchange Debentures. The
Corporation shall pay interest and Liquidated Damages, if any, on the Exchange
Debentures at the rate and on the dates specified therein from the Exchange
Date.
(d) If notice has been mailed as aforesaid, and if before the
Exchange Date (1) the Exchange Debenture Indenture shall have been duly executed
and delivered by the Corporation and the Trustee and (2) all Exchange Debentures
necessary for such exchange shall have been duly executed by the Corporation and
delivered to the Trustee with irrevocable instructions to authenticate the
Exchange Debentures necessary for such exchange, then on the Exchange Date,
dividends shall cease to accrue on the outstanding shares of Exchangeable
Preferred Stock and all of the rights of the Holders of shares of the
Exchangeable Preferred Stock as stockholders of the Corporation shall cease
(except the right to receive Exchange Debentures), and the Person or Persons
entitled to
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receive the Exchange Debentures issuable upon exchange shall be treated for all
purposes as the registered holder or holders of such Exchange Debentures as of
the date of exchange.
10. Certain Covenants
So long as any shares of Exchangeable Preferred Stock remain
outstanding, the Corporation shall comply with the following covenants:
(a) SEC Reports. In the event that the Corporation ceases to be
subject to the informational reporting requirements of the Exchange Act, the
Corporation shall, whether or not it is required to do so by the rules and
regulations of the U.S. Securities and Exchange Commission ("Commission"), for
so long as any shares of Exchangeable Preferred Stock remain outstanding,
furnish to the holders of the Exchangeable Preferred Stock and file with the
Commission (unless the Commission will not accept such a filing) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the
Corporation were required to file such forms, including a "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and,
with respect to the annual information only, a report thereon by the
Corporation's certified independent public accountants and (ii) all reports that
would be required to be filed with the Commission on Form 8-K if the Corporation
were required to file such reports. In addition, for so long as any shares of
Exchangeable Preferred Stock remain outstanding, the Corporation shall make
available to any prospective purchaser of shares of Exchangeable Preferred Stock
or beneficial owner of shares of Exchangeable Preferred Stock in connection with
any sale thereof the information required by Rule 144A(d)(4) under the
Securities Act.
(b) Limitation on Funded Debt and Preferred Stock. The Corporation
will not, directly or indirectly, create, incur, issue, assume, guaranty or
otherwise become directly or indirectly liable with respect to (collectively,
"incur") any Funded Debt, and the Corporation will not issue any Parity
Securities or any additional shares of Exchangeable Preferred Stock, unless,
after giving effect thereto, the Corporation's Consolidated EBITDA Coverage
Ratio exceeds 2.0 to 1.
Notwithstanding the foregoing paragraph, the Corporation may: (i)
incur Funded Debt owed to and held by a Wholly Owned Subsidiary; provided,
however, that any subsequent issuance or transfer of any Capital Stock which
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of such Funded Debt (other than to a
Wholly Owned Subsidiary) will be deemed, in each case, to constitute the
incurrence of such Funded Debt by the Corporation; (ii) incur Funded Debt (other
than Funded Debt described in clause (i) of this
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paragraph) outstanding on the Exchangeable Preferred Stock Issue Date and incur
Funded Debt and issue Parity Securities or additional shares of Exchangeable
Preferred Stock in exchange for, or the proceeds of which are used to refund or
refinance, any Funded Debt permitted by this clause (ii) or by the first
paragraph of this covenant; provided, however, that (1) the principal amount of
the Funded Debt so incurred or the aggregate liquidation preference of the
Parity Securities or Exchangeable Preferred Stock so issued will not exceed the
principal amount of the Funded Debt so exchanged, refunded or refinanced and (2)
the Funded Debt so incurred or the Parity Securities or Preferred Stock so
issued (A) will not mature prior to the Stated Maturity of the Funded Debt so
exchanged, refunded or refinanced and (B) will have an Average Life equal to or
greater than the remaining Average Life of the Funded Debt so exchanged,
refunded or refinanced; and (iii) incur additional Funded Debt and issue Parity
Securities or additional shares of Exchangeable Preferred Stock having an
aggregate principal amount and liquidation preference not to exceed $50 million
at any one time outstanding; provided, however, that at any time and to the
extent the Corporation is permitted to incur Funded Debt or issue Parity
Securities or additional shares of Exchangeable Preferred Stock pursuant to the
Consolidated EBITDA Coverage Ratio test contained in the immediately preceding
paragraph, the Corporation may elect that amounts of Funded Debt incurred, and
shares of Exchangeable Preferred Stock issued, pursuant to this clause (iii) be
deemed to have been incurred or issued pursuant to the immediately preceding
paragraph and be deemed not to have been incurred or issued pursuant to this
clause (iii).
(c) Limitation on Indebtedness and Preference Stock of Subsidiaries.
The Corporation will not permit any Subsidiary to incur any Indebtedness or
issue any Preference Stock except: (i) Indebtedness or Preference Stock issued
to and held by the Corporation or a Wholly Owned Subsidiary; provided, however,
that any subsequent issuance or transfer of any Capital Stock which results in
any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any
subsequent transfer of such Indebtedness or Preference Stock (other than to the
Corporation or a Wholly Owned Subsidiary) will be deemed, in each case, to
constitute the incurrence of such Indebtedness or the issuance of such
Preference Stock, as the case may be, by the issuer thereof; (ii) Indebtedness
incurred or Preference Stock of a Subsidiary issued and outstanding on or prior
to the date on which such Subsidiary was acquired by the Corporation (other than
Indebtedness incurred or Preference Stock issued in contemplation of, as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary or was
acquired by the Corporation), provided that at the time such Subsidiary is
acquired by the Corporation, after giving effect to such Indebtedness or
Preference Stock of such Subsidiary, the Corporation's Consolidated EBITDA
Coverage Ratio exceeds 2.0 to 1;
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(iii) Indebtedness or Preference Stock (other than Indebtedness or Preference
Stock described in clause (i), (ii), (iv) or (vi) of this covenant) incurred or
issued and outstanding on or prior to the Exchangeable Preferred Stock Issue
Date; (iv) Indebtedness of a Subsidiary consisting of guarantees issued by such
Subsidiary and outstanding on the Exchangeable Preferred Stock Issue Date and
Indebtedness of a Subsidiary consisting of guarantees issued subsequent to the
Exchangeable Preferred Stock Issue Date, in each case, to the extent such
guarantee guarantees Working Capital Debt; (v) Indebtedness of a Subsidiary
(other than Indebtedness described in clause (iv) above) consisting of
guarantees of Funded Debt of the Corporation permitted by the first paragraph of
"Limitation on Funded Debt and Exchangeable Preferred Stock"; and (vi)
Indebtedness or Preference Stock issued in exchange for, or the proceeds of
which are used to refund or refinance, Indebtedness or Preference Stock referred
to in the foregoing clause (ii) or (iii); provided, however, that (1) the
principal amount of such Indebtedness or Preference Stock so incurred or issued
(the "Refinancing Indebtedness") will not exceed the principal amount of the
Indebtedness or Preference Stock so refinanced (the "Refinanced Indebtedness"),
provided that if any such Refinanced Indebtedness was incurred under a revolving
credit or similar working capital facility, the principal amount of the
Refinancing Indebtedness may be in an amount up to the aggregate amount
available under the facility under which the Refinanced Indebtedness was
incurred (A) at the time the Subsidiary that incurred such Indebtedness was
acquired by the Corporation (in the case of Indebtedness described in the
foregoing clause (ii)) or (B) on the Exchangeable Preferred Stock Issue Date (in
the case of Indebtedness described in the foregoing clause (iii)), and (2) the
Refinancing Indebtedness (other than revolving credit or similar working capital
facilities) will (A) have a Stated Maturity later than the Stated Maturity of
the Refinanced Indebtedness and (B) will have an Average Life equal to or
greater than the remaining Average Life of the Refinanced Indebtedness.
(d) Limitation on Restricted Payments. The Corporation will not,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on or in respect of any Junior Securities (including any payment in connection
with any merger or consolidation involving the Corporation) or to the direct or
indirect holders of any Junior Securities (except dividends or distributions
payable solely in shares of its Non-Convertible Capital Stock that are Junior
Securities or in options, warrants or other rights to purchase shares of its
Non-Convertible Capital Stock that are Junior Securities), (ii) purchase, redeem
or otherwise acquire or retire for value any Junior Securities or (iii) make any
Restricted Investment (any such dividend, distribution, purchase, redemption or
other acquisition, or any such Restricted Investment, being herein referred to
as a "Restricted Payment") if at the time the Corporation makes such Restricted
Payment: (1) a Voting Rights Triggering Event will have
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occurred and be continuing (or would result therefrom); or (2) the aggregate
amount of such Restricted Payment and all other Restricted Payments subsequent
to the Exchangeable Preferred Stock Issue Date would exceed the sum of: (A) 50%
of the Cash Flow of the Corporation and its Subsidiaries accrued during the
period (treated as one accounting period) subsequent to December 31, 1996, to
the end of the most recent fiscal quarter ending at least 45 days prior to the
date of such Restricted Payment (or, in case such Cash Flow will be a deficit,
minus 100% of such deficit), minus 100% of any deficit in Subsidiary Cash Flow
for such period of any Subsidiary described in clause (b) of the exception to
the definition of Consolidated Net Income; (B) the aggregate Net Cash Proceeds
received by the Corporation from the issue or sale of any Junior Securities
subsequent to the Exchangeable Preferred Stock Issue Date (other than an
issuance or sale to a Subsidiary or Unrestricted Subsidiary of the Corporation
or an employee stock ownership plan or other trust established by the
Corporation or any Subsidiary or Unrestricted Subsidiary of the Corporation);
(C) the amount by which indebtedness of the Corporation is reduced on the
Corporation's balance sheet upon the conversion or exchange (other than by a
Subsidiary) subsequent to December 31, 1996, of any Indebtedness of the
Corporation convertible or exchangeable for Junior Securities (less the amount
of any cash, or other property, distributed by the Corporation upon such
conversion or exchange); and (D) $30 million.
(e) The provisions of the foregoing paragraph will not prohibit: (i)
any purchase or redemption of Junior Securities made by exchange for, or out of
the proceeds of the substantially concurrent sale of, Junior Securities of the
Corporation (other than Junior Securities issued or sold to a Subsidiary or an
employee stock ownership plan or other trust established by the Corporation or
any Subsidiary); provided, however, that (A) such purchase or redemption will be
excluded in the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale will be excluded from clause (2)(B) of the
foregoing paragraph; (ii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would have
complied with this covenant; provided, however, that at the time of payment of
such dividend, no other Voting Rights Triggering Event will have occurred and be
continuing (or result therefrom); provided further, however, that such dividend
will be included in the calculation of the amount of Restricted Payments; or
(iii) Restricted Investments in an aggregate amount not to exceed the sum of (A)
$30 million, plus (B) $5 million on each anniversary of the Exchangeable
Preferred Stock Issue Date, plus (C) the amount of all dividends or other
distributions received in cash by the Corporation or any of its Wholly Owned
Subsidiaries from, and the amount of any Net Cash Proceeds to the Corporation or
any of its Wholly Owned Subsidiaries from the sale of Capital Stock (other than
a sale of Capital Stock to the Corporation, a Subsidiary or Unrestricted
Subsidiary of the Corporation or an
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employee stock ownership plan or other trust established by the Corporation or
any Subsidiary or Unrestricted Subsidiary of the Corporation) of, an
Unrestricted Subsidiary of the Corporation, to the extent that the aggregate
amount of such dividends, distributions and Net Cash Proceeds referred to in
this clause (C) do not exceed the aggregate amount of Restricted Investments
made by the Corporation in such Unrestricted Subsidiary since the Exchangeable
Preferred Stock Issue Date; provided, however, that Restricted Investments
permitted by this clause (iii) will be excluded in the calculation of the amount
of Restricted Payments.
(f) Limitation on Restrictions on Distributions from Subsidiaries.
The Corporation will not, and will not permit any Subsidiary to, create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to: (i) pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness owed to the Corporation, (ii) make any loans or advances to the
Corporation or (iii) transfer any of its property or assets to the Corporation,
except: (1) any encumbrance or restriction pursuant to an agreement in effect on
the Exchangeable Preferred Stock Issue Date; (2) any encumbrance or restriction
with respect to a Subsidiary pursuant to an agreement relating to any
Indebtedness issued by such Subsidiary on or prior to the date on which such
Subsidiary was acquired by the Corporation (other than Indebtedness issued in
contemplation of, as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or series of
related transactions pursuant to which such Subsidiary became a Subsidiary or
was acquired by the Corporation) and outstanding on such date; (3) any
encumbrance or restriction pursuant to an agreement effecting a refinancing of
Indebtedness issued pursuant to an agreement referred to in the foregoing clause
(1) or (2) or contained in any amendment to an agreement referred to in the
foregoing clause (1) or (2); provided, however, that the encumbrances and
restrictions contained in any such refinancing agreement or amendment are no
less favorable to holders of the Exchangeable Preferred Stock than the
encumbrances and restrictions contained in such agreements; (4) any such
encumbrance or restriction consisting of customary non-assignment provisions in
leases governing leasehold interests to the extent such provisions restrict the
transfer of the lease; (5) in the case of clause (iii) above, restrictions
contained in security agreements securing Indebtedness of a Subsidiary to the
extent such restrictions restrict the transfer of the property subject to such
security agreements; and (6) any restriction with respect to a Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of all
or substantially all of the Capital Stock or assets of such Subsidiary pending
the closing of such sale or disposition.
(g) Limitation on Transactions with Affiliates. The Corporation will
not, and will not permit any Subsidiary to,
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conduct any business or enter into any transaction or series of similar
transactions in an aggregate amount in excess of $100,000 (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of the Corporation or any legal or beneficial owner
of 5% or more of any class of Capital Stock of the Corporation or with an
Affiliate of any such owner (any such business, transaction or series of similar
transactions, an "Affiliate Transaction") unless the terms of such Affiliate
Transaction are: (i) set forth in writing, (ii) fair to the Corporation and its
Subsidiaries from a financial point of view (as determined by the Board of
Directors), (iii) in the case of any Affiliate Transaction (other than an
Affiliate Transaction with an Unrestricted Subsidiary of the Corporation) in an
aggregate amount in excess of $500,000, the disinterested members of the Board
of Directors have determined in good faith that the criteria set forth in clause
(ii) are satisfied and (iv) in the case of any Affiliate Transaction involving
an Unrestricted Subsidiary of the Corporation in an aggregate amount in excess
of $2.0 million, the members of the Board of Directors have determined in good
faith that the criteria set forth in clause (ii) are satisfied. This covenant
will not prohibit: (a) any Restricted Payment permitted under "--Limitation on
Restricted Payments," (b) any issuance of securities, or other payments, awards
or grants in cash, securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans approved by the
Board of Directors, (c) loans or advances to employees in the ordinary course of
business, (d) the payment of reasonable fees to directors of the Corporation and
its subsidiaries who are not employees of the Corporation or its subsidiaries,
(e) any transaction between the Corporation and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries or (f) the Investment represented by the Sevin
Note.
11. Certain Definitions
"101/8% Notes" means the Corporation's 101/8% Subordinated Notes due
2003.
"14.10% Notes" means the Corporation's 14.10% Senior Notes due
January 15, 2001 and the Corporation's 14.10% Subordinated Notes due January 15,
2001.
"1989 Preferred Stock" shall have the meaning set forth in the
Corporation's Restated Articles.
"Affiliate" of any person specified means (i) any person directly or
indirectly controlling or under direct or indirect common control with such
specified person, (ii) any spouse, immediate family member or other relative who
has the same principal residence as any person described in clause (i) above,
(iii) any trust in which any persons described in clause (i) or (ii) above has a
beneficial interest and (iv) in the case of the
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Corporation, any Unrestricted Subsidiary of the Corporation. For the purposes of
this definition, "control," when used with respect to any person, means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, a contract or
otherwise, and the terms "controlling" and "controlled" have meaning correlative
to the foregoing.
"Asset Disposition" means 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 Corporation or any of its Subsidiaries
(including any disposition by means of a merger, consolidation or similar
transaction) other than (i) a disposition by a Subsidiary to the Corporation or
by the Corporation 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.
"Attributable Indebtedness" in respect of a Sale/Leaseback
Transaction means, as of the time of determination, the present value
(discounted at the dividend rate borne by the Exchangeable Preferred Stock or
the interest rate borne by the Exchange Debentures, as the case may be,
compounded annually) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preference Stock, the quotient obtained by dividing (i)
the sum of the products of the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Indebtedness
or redemption or similar payment with respect to such Preference Stock
multiplied by the amount of such payment by (ii) the sum of all such payments.
"Board of Directors" means the Board of Directors of the Corporation
or any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a person means any obligation which
is required to be classified and accounted for as a capital lease on the face of
a balance sheet of such person prepared in accordance with generally accepted
accounting principles; the amount of such obligation will be the capitalized
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amount thereof, determined in accordance with generally accepted accounting
principles; and the Stated Maturity thereof will be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any person means 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
Preference Stock, but excluding any debt securities convertible into or
exchangeable for such equity.
"Cash Flow" of a person for any period means the sum of (i) the
Consolidated Net Income of such person for such period, plus (ii) to the extent
deducted in the calculation of such Consolidated Net Income, the amortization of
customer lists and other deferred charges and the amortization and depreciation
of capital assets, plus (iii) to the extent not included in Consolidated Net
Income, the amount of all dividends or other distributions received in cash by
the Corporation or any of its Wholly Owned Subsidiaries (other than a Wholly
Owned Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income) from, and the amount of any Net Cash Proceeds to the
Corporation or any of its Wholly Owned Subsidiaries (other than a Wholly Owned
Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income) from the sale of Capital Stock of, an Unrestricted
Subsidiary of the Corporation, plus (iv) the amount of any cash actually
distributed by any Subsidiary described in clause (b) of the exception to the
definition of Consolidated Net Income during such period as a dividend or other
distribution to the Corporation or another Subsidiary of the Corporation (other
than another Subsidiary described in such clause (b)), plus (v) to the extent
excluded in calculating Net Income of such person and its Subsidiaries for such
period, any gain realized upon the sale or other disposition of any real
property or equipment or of any Capital Stock of the Corporation or a Subsidiary
owned by such person or any of its Subsidiaries, plus (vi) to the extent
deducted in calculating Net Income of such person and its Subsidiaries for such
period, any non-cash charge relating to the grant of stock options to executives
of the Corporation plus (vii) to the extent deducted in calculating Net Income
of such person and its Subsidiaries for such period, any non-cash expense
associated with deferred compensation plans; provided, however, that (a) Cash
Flow shall not include the amortization of customer lists or other deferred
charges or the amortization and depreciation of capital assets of any person or
Subsidiary described in clause (b) of the exception, or clause (i) of the
proviso, to the definition of Consolidated Net Income, (b) Cash Flow for any
period shall be reduced by the amount that any liability recorded on the books
of the Corporation relating to any deferred compensation expense referred to in
clause (vii) above is
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reduced during such period and (c) any amounts included in clause (iii)(C) of
the second subparagraph of paragraph 10(d) "Limitations on Restricted Payments"
shall be excluded from Cash Flow of the Corporation.
"Change of Control" means (i) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than the
members of the Sevin Group and the Traber Group, becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to be the beneficial owner of all shares that such person
has the right to acquire, regardless of whether such right is exercisable
immediately or after the passage of time), directly or indirectly, of 50% or
more of the total voting power of all classes of the Voting Stock of the
Corporation and the members of the Sevin Group and the Traber Group cease to
have the right to appoint at least a majority of the members of the Board of
Directors of the Corporation, (ii) the holders of the 101/8% Notes have the
right to require the Corporation to purchase any such 101/8% Notes pursuant to
Section 4.08 of the Indenture, dated as of April 1, 1993, between the
Corporation and Chemical Bank, as trustee, relating thereto, (iii) any holder of
Private Notes exercises its right to declare any such notes to be due and
payable pursuant to Section 2.1 of the Note Agreement, dated as of September 1,
1988, relating thereto (the "1988 Note Agreement"), (iv) any holder of 14.10%
Notes exercises its right to declare any such notes to be due and payable
pursuant to Section 5.2(A) of the Note Agreement, dated as of January 15, 1991,
relating thereto (the "1991 Note Agreement") or (v) any holder of Private Notes
or 14.10% Notes shall have received any consideration (whether in the form of
cash, a change in the rate of interest relating to such notes, a change in any
other provision of the terms of such notes, or otherwise) to amend, modify,
waive or otherwise give up its right to declare any such notes to be due and
payable upon a "Change of Ownership," as defined in the 1988 Note Agreement or
the 1991 Note Agreement, as the case may be; provided, however, that an
amendment to or waiver or other modification of Section 2.1 of the 1988 Note
Agreement or Section 5.2(A) of the 1991 Note Agreement shall not, in the absence
of any consideration, constitute a Change of Control.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated EBITDA Coverage Ratio" as of any date of determination
means 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 four
fiscal quarters; provided, however, that (1) if the Corporation 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
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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 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 Corporation 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 Corporation 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 Corporation or any Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Corporation
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 for the
Indebtedness of such Subsidiary to the extent the Corporation and its continuing
Subsidiaries are no longer liable for such Indebtedness after such sale) (3) if
since the beginning of such period the Corporation 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 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 and (4) if the Company has issued any Parity
Securities or additional shares of Preferred Stock described in subparagraph (c)
of the definition "Consolidated Interest Expense" 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 the issuance of such Parity
Securities or such additional shares of Preferred Stock, or both, EBITDA and
Consolidated Interest Expense for such period will be calculated after giving
effect on a pro forma basis to (A) such issuance as if such issuance had
occurred on the first day of such period, (B) the discharge of any Indebtedness
repaid, purchased, defeased or otherwise discharged with the proceeds of such
shares as if such discharge had occurred on the first day of such period
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and (C) the interest income realized by the Company on the proceeds of the sale
of such shares, to the extent not yet applied at the date of determination,
assuming such proceeds earned interest at the Treasury Rate from the dates such
proceeds were received through such date of determination. 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 financial or accounting Officer of the Corporation;
provided, however, that such 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 and (ii) other expenses as if such
assets had been owned by the Corporation 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 calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period.
"Consolidated Interest Expense" means, for any period, the sum of
(a) the total interest expense of the Corporation and its Subsidiaries (other
than a Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income), determined on a consolidated basis, including (i)
interest expense attributable to capital 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
Corporation 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) 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 Corporation) in connection with loans incurred by such plan or trust to
purchase newly issued or treasury shares of the Corporation (but excluding
interest expense associated with the accretion of principal on non-interest
bearing or other discount securities) and (ix) to the extent not already
included in Consolidated Interest Expense, the interest expense attributable to
Indebtedness of another person that is guaranteed by the Corporation or any of
its Subsidiaries, less interest income (exclusive of deferred financing fees) of
the Corporation and its Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles, plus (b) dividends in
respect of all Preference Stock of Subsidiaries (other than a
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Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income) held by persons other than the Corporation or a Wholly
Owned Subsidiary (other than a Subsidiary described in clause (b) of the
exception to the definition of Consolidated Net Income); (c) the amount of all
cash dividends paid with respect to any Parity Securities or shares of Preferred
Stock issued pursuant to the first subparagraph of paragraph 10(b) "--Limitation
on Funded Debt and Preferred Stock"; provided, however, that Consolidated
Interest Expense shall include any interest paid by the Corporation to Star Gas
and Indebtedness owed to Star Gas but only to the extent the amount of such
interest paid during any period exceeds the cash dividends or other cash
distributions on the Capital Stock of Star Gas distributed to the Corporation or
any Subsidiary during such period.
"Consolidated Net Income" of a person, for any period, means the
aggregate of the Net Income of such person and its Subsidiaries (other than (a)
any Subsidiary acquired by such person in a pooling of interests transaction for
any period prior to the date of acquisition and (b) any Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions to such person) for such period,
determined on a consolidated basis in accordance with generally accepted
accounting principles, provided that (i) the Net Income of any other person
(other than a Subsidiary) in which such person has an interest will be included
only to the extent of the amount of dividends or distributions paid to such
person and (ii) the cumulative effect of a change in accounting principles will
be excluded; (iii) notwithstanding clause (i), Consolidated Net Income of the
Corporation shall include cash dividends or other cash distributions on the
Capital Stock of Star Gas distributed to the Corporation by Star Gas but only to
the extent such cash dividends or other cash distributions exceed during any
period the amount of any interest paid by the Corporation during such period to
Star Gas on Indebtedness owed to Star Gas.
"Credit Agreement" means the Amended and Restated Credit Agreement,
dated as of September 27, 1996, between the Corporation and The Chase Manhattan
Bank, as agent, as amended from time to time.
"EBITDA" of a person for any period means the Consolidated Net
Income of such person for such period (but without giving effect to adjustments,
accruals, deductions or entries resulting from purchase accounting,
extraordinary losses or gains and any gains or losses from any Asset
Dispositions), plus (a) 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) non-cash charges
relating to the grant of stock options to executives of the Corporation,
non-cash charges associated with deferred compensation
25
<PAGE>
plans and other non-cash charges of a similar nature, plus (b) the amount of any
cash actually distributed by any Subsidiary described in clause (b) of the
exception to the definition of Consolidated Net Income during such period as a
dividend or other distribution to the Corporation or another Subsidiary of the
Corporation (other than another Subsidiary described in such clause (b), minus
(c) such person's equity in any deficit in Subsidiary Cash Flow for such period
of any Subsidiary described in clause (b) of the exception to the definition of
Consolidated Net Income; provided, however, that EBITDA shall not include any
income tax expense, interest expense, depreciation expense, amortization expense
or other non-cash expense of any person or Subsidiary described in clause (b) of
the exception, or clause (i) of the proviso, to the definition of Consolidated
Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchangeable Preferred Stock Issue Date" means the first date on
which shares of Exchangeable Preferred Stock are issued under the Certificate of
Designation.
"Exchangeable Stock" means any Capital Stock which is exchangeable
or convertible into another security (other than Capital Stock of the
Corporation which is neither Exchangeable Stock nor Redeemable Stock).
"Funded Debt" as applied to any person means, without duplication,
(a) any Indebtedness with a Stated Maturity of more than one year from the date
of incurrence, (b) any Indebtedness, regardless of its term, if such
Indebtedness is renewable or extendable at the option of the obligor of such
Indebtedness pursuant to the terms thereof to a date more than one year from the
date of incurrence; and (c) any Indebtedness, regardless of its term, that by
its terms or by the terms of the agreement pursuant to which it is issued, may
be paid with the proceeds of other Indebtedness that may be incurred pursuant to
the terms of such first-mentioned Indebtedness or by the terms of such
agreement, which other Indebtedness has a Stated Maturity of more than one year
from the date of incurrence of such first-mentioned Indebtedness; provided,
however, that Working Capital Borrowings shall be excluded from Funded Debt
except to the extent that Working Capital Borrowings exceed an amount equal to
(i) 100% of the current assets (excluding cash) of such person and its
Subsidiaries, less (ii) the excess, if any, of current liabilities over current
assets of such person and its Subsidiaries, in each case determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Guarantee" means any obligation, contingent or otherwise, of any
person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other person and any
26
<PAGE>
obligation, direct or indirect, contingent or otherwise, of such person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "guarantee" will not include
endorsements for collection or deposit in the ordinary course of business. The
term "guarantee" used as a verb has a corresponding meaning.
"Hedging Obligations" of any person means the obligations of such
person pursuant to any interest rate swap agreement, foreign currency exchange
agreement, 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" of any person means, without duplication,
(i) the principal of (A) indebtedness of such person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such person is
responsible or liable;
(ii) all Capital Lease Obligations of such person and all
Attributable Indebtedness in respect of Sale/Leaseback Transactions
entered into by such person;
(iii) all obligations of such person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
such person and all obligations of such person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
(iv) all obligations of such person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such
person to the extent such letters of credit are not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the
third Business Day following receipt by such person of a demand for
reimbursement following payment on the letter of credit);
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<PAGE>
(iv) all obligations of the type referred to in clauses (i) through
(iv) of other persons and all dividends of other persons for the payment
of which, in either case, such person is responsible or liable, directly
or indirectly, as obligor, guarantor or otherwise, including any
guarantees of such obligations and dividends, including by means of any
agreement which has the economic effect of a guarantee; and
(vi) all obligations of the type referred to in clauses (i) through
(v) of other persons secured by any Lien on any property or asset of such
person (whether or not such obligation is assumed by such person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
"Investment" in any person means 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. Investments will exclude advances to customers and suppliers in the
ordinary course of business.
"Junior Securities" means the Class A and Class C Common Stock of
the Corporation and each other Class of capital stock or series of preferred
stock, the terms of which do not expressly provide that it ranks senior to or on
a parity with the Exchangeable Preferred Stock as to dividends, and
distributions upon the liquidation, winding-up and dissolution of the
Corporation.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means any mortgage, pledge, security interest, conditional
sale or other title retention agreement or other similar lien.
"Liquidated Damages" shall have the meaning assigned to it in the
Registration Rights Agreement.
"Liquidation Preference" means $25 with respect to each share of
Exchangeable Preferred Stock.
"Mandatory Redemption Date" means February 15, 2009.
"Net Cash Proceeds," with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or
28
<PAGE>
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
actually incurred in connection with such issuance or sale and net of taxes paid
or payable as a result thereof.
"Net Income" of any person means the net income (loss) of such
person, determined in accordance with generally accepted accounting principles;
excluding, however, from the determination of Net Income any gain (but not loss)
realized upon the sale or other disposition (including, without limitation,
dispositions pursuant to leaseback transactions) of any real property or
equipment of such person, which is not sold or otherwise disposed of in the
ordinary course of business, or of any Capital Stock of the Corporation or a
Subsidiary owned by such person.
"Non-Convertible Capital Stock" means, with respect to any
corporation, any non-convertible Capital Stock of such corporation and any
Capital Stock of such corporation convertible solely into non-convertible common
stock of such corporation; provided, however, that Non-Convertible Capital Stock
will not include any Redeemable Stock or Exchangeable Stock.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Treasurer or the Secretary of
the Corporation.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who
is acceptable to the Trustee. The counsel may be an employee of or counsel to
the Corporation or the Trustee.
"Parity Securities" means the 1989 Preferred Stock and any
additional shares of Preferred Stock issued by the Corporation and any other
class of capital stock or series of preferred stock issued by the Corporation,
the terms of which expressly provide that such class or series will rank on a
parity with the Exchangeable Preferred Stock as to dividends and distributions
upon the liquidation, winding-up and dissolution of the Corporation.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preference Stock," as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however designated)
which is preferred as to the payment of
29
<PAGE>
dividends, or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such corporation, over shares of Capital Stock of
any other class of such corporation; provided, however, that Preference Stock
will not include the Corporation's Class B Common.
"Private Notes" means the Corporation's 11.85% Senior Notes due
October 1, 2002, the Corporation's 12.17% Senior Notes due October 1, 2002 and
the Corporation's 12.18% Senior Notes due October 1, 2002.
"Public Notes" means the 101/8% Notes, the Corporation's 93/8%
Subordinated Debentures due 2006 and the Corporation's 12 1/4% Subordinated
Debentures due 2005.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of
the deferred purchase price of property, conditional sale obligations,
obligation under any title retention agreement and other purchase money
obligations, in each case where the maturity of such Indebtedness does not
exceed the anticipated useful life of the asset being financed, and (ii)
incurred to finance the acquisition by the Corporation or a Subsidiary of such
asset, including additions and improvements; provided, however, that any Lien
arising in connection with any such Indebtedness will be limited to the
specified asset being financed or, in the case of real property or fixtures,
including additions and improvements, the real property on which such asset is
attached.
"Redeemable Stock" means any Capital Stock that by its terms or
otherwise is required to be redeemed on or prior to the first anniversary of the
Stated Maturity of the Debentures or is redeemable at the option of the holder
thereof at any time on or prior to the first anniversary of the Stated Maturity
of the Exchange Debentures.
"Refinancing Agreement" means any credit agreement or other
agreement between the Corporation and lenders pursuant to which the Corporation
refinances borrowings under the Credit Agreement or another Refinancing
Agreement.
"Representative" means the holder, trustee, agent or representative
(if any) for an issue of Senior Debt.
"Restricted Investment" means any Investment in an Unrestricted
Subsidiary. At the time any Subsidiary of the Corporation is designated by the
Board of Directors of the Corporation as an Unrestricted Subsidiary, the
Corporation shall be deemed to have made a Restricted Investment in an amount
equal to the fair market value as of such time of the Corporation's interest in
such Unrestricted Subsidiary, as determined in good faith by the Board of
Directors and set forth in a Board Resolution; provided, however, that all
amounts which the Corporation is deemed to have
30
<PAGE>
invested in Star Gas by reason of the designation of Star Gas as an Unrestricted
Subsidiary by the Board of Directors of the Corporation shall not be included in
the definition of Restricted Investment.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Corporation or a Subsidiary
transfers such property to a person and the Corporation or a Subsidiary leases
it from such person.
"Sevin Group" means the Estate of Malvin P. Sevin and trusts created
thereunder, Audrey L. Sevin, Irik P. Sevin, Thomas J. Edelman, Margot Gordon and
Phillip Ean Cohen and any trust over which such persons have sole voting power.
"Sevin Note" means the promissory note, dated December 31, 1994 (as
amended by an agreement dated December 21, 1995), of Irik P. Sevin to the
Corporation in the original principal amount of $1,640,060 which is due in five
equal annual installments commencing as of December 31, 1995, the principal
amount of which may not be increased in any one year by more than the amount of
accrued and unpaid interest during the immediately preceding year.
"Significant Subsidiary" means any Subsidiary of the Corporation
which at the time of determination either (A) had assets which, as of the date
of the Corporation's most recent quarterly consolidated balance sheet,
constituted at least 3% of the Corporation's total assets on a consolidated
basis as of such date, or (B) had revenues for the 12-month period ending on the
date of the Corporation's most recent quarterly consolidated statement of income
which constituted at least 3% of the Corporation's total revenues on a
consolidated basis for such period.
"Stated Maturity" means, with respect to any Indebtedness, the date
specified in such Indebtedness, or in any agreement pursuant to which such
Indebtedness was incurred, as the fixed date on which the principal of such
Indebtedness is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
Indebtedness at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligations" means any Indebtedness of the Corporation
(whether outstanding on the date hereof or hereafter incurred) which is
subordinate or junior in right of payment to the Exchange Debentures.
"Subsidiary" means a corporation of which a majority of the Capital
Stock having voting power under ordinary circumstances to elect a majority of
the board of directors is
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<PAGE>
owned by (i) the Corporation, (ii) the Corporation and one or more Subsidiaries
or (iii) one or more Subsidiaries; provided, however, that an Unrestricted
Subsidiary shall be deemed not to be a Subsidiary (except as used in the
definition thereof).
"Subsidiary Cash Flow" of a person for any period means the Net
Income of such person and its Subsidiaries determined on a consolidated basis
for such period, plus, to the extent deducted in determining such Net Income,
depreciation, amortization, non-cash charges relating to the grant of stock
options to executives of the Corporation, non-cash charges associated with
deferred compensation plans and other non-cash charges of a similar nature, less
accrued preferred stock dividends (excluding preferred stock dividends paid or
payable in additional shares of preferred stock and preferred stock dividends
payable to the Corporation or any of its Subsidiaries (other than a Subsidiary
described in clause (b) of the exception to the definition of Consolidated Net
Income) until actually paid), excluding Net Income derived from investments
accounted for by the equity method except to the extent of any cash dividends
received by such person and its Subsidiaries.
"Traber Group" means (i) all the holders of Class C Common Stock as
of the Exchangeable Preferred Stock Issue Date who are not members of the Sevin
Group, (ii) any person who receives shares from persons described in clause (i)
without such transfer of shares being subject to the first refusal right
referred to in the shareholders agreement among the holders of Class C Common
Stock dated November 25, 1986, as amended through the Exchangeable Preferred
Stock Issue Date, and (iii) any trust over which persons described in clause (i)
or (ii) have sole voting power.
"Treasury Rate" as of any date of determination means 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 five years.
"Trust Officer" means the chairman or vice-chairman of the board of
directors, the chairman or vice-chairman of the executive committee of the board
of directors, the president, any vice president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, the cashier, any assistant
cashier, any trust officer or assistant trust officer, the controller and any
assistant controller or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above-designated officers and
also means, with respect to a particular corporate trust matter, any other
officer
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<PAGE>
to whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Unrestricted Subsidiary" means a Subsidiary of the Corporation, and
each Subsidiary of such Subsidiary, designated by the Board of Directors of the
Corporation as an Unrestricted Subsidiary pursuant to a Board Resolution set
forth in an Officers' Certificate and delivered to the Trustee, (a) no portion
of the Indebtedness or any other obligations (contingent or otherwise) of which
(i) is guaranteed by the Corporation or any other Subsidiary of the Corporation,
(ii) is recourse to or obligates the Corporation or any other Subsidiary of the
Corporation in any way or (iii) subjects any property or asset of the
Corporation or any other Subsidiary of the Corporation, directly or indirectly,
contingently or otherwise, to the satisfaction thereof and (b) with which
neither the Corporation nor any other Subsidiary of the Corporation has any
obligation (i) to subscribe for additional shares of Capital Stock or other
equity interests therein or (ii) to maintain or preserve such Subsidiary's
financial condition or to cause such Subsidiary to achieve certain levels of
operating results. An Unrestricted Subsidiary may be designated a Subsidiary,
provided that (A) no Voting Rights Triggering Event shall have occurred and be
continuing and (B) immediately after giving effect to such designation, the
Corporation would be able to issue an additional $1.00 of Funded Debt pursuant
to the first paragraph 10(b).
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable at the issuer's option.
"Voting Rights Triggering Event" shall have the meaning assigned to
it in paragraph 7(c)(i).
"Voting Stock" of a corporation means all classes of Capital Stock
of such corporation then outstanding and normally entitled to vote in the
election of directors.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock
of which (other than directors' qualifying shares) is owned by the Corporation
or another Wholly Owned Subsidiary.
"Working Capital Borrowings" means, on any date of determination,
all Indebtedness of the Corporation and its Subsidiaries on a consolidated basis
incurred to finance current assets.
"Working Capital Debt" means any and all amounts payable under or in
respect of the Credit Agreement, as amended
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<PAGE>
from time to time, any Refinancing Agreement, any Working Capital Financing
Agreement, or any other loan agreement, including principal, premium (if any),
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Corporation to the extent a
claim for post-filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.
"Working Capital Financing Agreement" means any agreement entered
into after the Exchangeable Preferred Stock Issue Date by the Corporation and
lenders pursuant to which the Corporation issues Working Capital Borrowings.
34
================================================================================
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
Dated as of February 18, 1997
between
Petroleum Heat and Power Co., Inc.
and
Donaldson, Lufkin & Jenrette Securities Corporation
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of February 18, 1997 between Petroleum Heat and Power Co., Inc., a
Minnesota corporation (the "Company"), and Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchaser"). The Initial Purchaser has
agreed to purchase (the "Initial Placement") the Company's 127/8% Exchangeable
Preferred Stock due 2009 (the "Preferred Stock") pursuant to the Purchase
Agreement (as defined below). Pursuant to the terms of the Certificate of
Designation (as defined below), the Preferred Stock is exchangeable under
certain circumstances for the Company's 127/8% Junior Subordinated Exchange
Debentures due 2009 (the "Exchange Debentures") or for the New Preferred Stock
(as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated February
12, 1997 (the "Purchase Agreement"), between the Company and the Initial
Purchaser. In order to induce the Initial Purchaser to purchase the Preferred
Stock, the Company has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Initial Purchaser set forth in Section 3 of the Purchase
Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Broker-Dealer Transfer Restricted Securities: New Preferred Stock or New
Exchange Debentures that are acquired by a Broker-Dealer in the Exchange Offer
in exchange for Preferred Stock or Exchange Debentures, as the case may be, and
that such Broker-Dealer acquired for its own account as a result of
market-making activities or other trading activities (other than Preferred Stock
or Exchange Debentures acquired directly from the Company or any of its
affiliates).
Business Day: Any day except a Saturday, Sunday or other day in the City
of New York, or in the city of the corporate trust office of the Transfer Agent
or the Trustee, on which banks are authorized to close.
Certificate of Designation: The Certificate of Designation pursuant to
which the shares of Preferred Stock and New Preferred Stock are to be issued, as
such Certificate of Designation is amended or supplemented from time to time in
accordance with the terms thereof.
Certificated Securities: As defined in the Certificate of Designation and
the Exchange Debenture Indenture.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (i) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the New
Preferred Stock or, if the Preferred Stock has been exchanged for Exchange
Debentures, the New Exchange Debentures to be issued in the Exchange Offer, (ii)
the
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<PAGE>
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Transfer Agent of shares of New Preferred Stock with the same aggregate
liquidation preference as the aggregate liquidation preference of the shares of
Preferred Stock that were tendered by Holders thereof pursuant to the Exchange
Offer, or, if the Preferred Stock has been exchanged for Exchange Debentures,
the delivery by the Company to the Trustee of New Exchange Debentures in the
same aggregate principal amount as the aggregate principal amount of Exchange
Debentures that were tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: Each Dividend Payment Date or Interest Payment Date,
as the case may be.
Debentures: The Exchange Debentures and the New Exchange Debentures.
Dividend Payment Date: As defined in the Certificate of Designation.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Debenture Indenture: The Exchange Debenture Indenture to be
entered into upon exchange of the Preferred Stock for Exchange Debentures, by
the Company and the Trustee, pursuant to which the Debentures are to be issued,
as such Exchange Debenture Indenture is amended or supplemented from time to
time in accordance with the terms thereof.
Exchange Offer: The registration by the Company under the Act of the New
Preferred Stock or, if the Preferred Stock has been exchanged for Exchange
Debentures, the New Exchange Debentures pursuant to the Exchange Offer
Registration Statement pursuant to which the Company shall offer the Holders of
all outstanding Transfer Restricted Securities the opportunity to exchange all
such outstanding Transfer Restricted Securities held by such Holders for New
Preferred Stock with the same aggregate liquidation preference as the Preferred
Stock tendered in such exchange by such Holders, or New Exchange Debentures in
an aggregate principal amount equal to the aggregate principal amount of the
Exchange Debentures tendered in such exchange offer by such Holders, as the case
may be.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchaser proposes
to sell the Preferred Stock to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, and to certain institutional
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Act ("Accredited Institutions").
Global Security Holder: As defined in the Certificate of Designation and
the Exchange Debenture Indenture.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Interest Payment Date: As defined in the Exchange Debenture Indenture and
the Debentures.
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<PAGE>
Liquidated Damages: As defined in Section 5 hereof.
NASD: National Association of Securities Dealers, Inc.
New Exchange Debentures: The Company's 127/8% Junior Subordinated Exchange
Debentures due 2009 to be issued pursuant to the Exchange Debenture Indenture
(i) in the Exchange Offer or (ii) upon the request of any Holder of Exchange
Debentures covered by a Shelf Registration Statement in exchange for such
Exchange Debentures.
New Preferred Stock: The Company's 127/8% Exchangeable Preferred Stock due
2009 to be issued pursuant to the Certificate of Designation (i) in the Exchange
Offer or (ii) upon the request of any Holder of Preferred Stock covered by a
Shelf Registration Statement in exchange for such Preferred Stock.
Person: An individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date, each Person who
is a Holder of Transfer Restricted Securities on the record date with respect to
the Dividend Payment Date or Interest Payment Date, as the case may be, on which
such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company relating
to (a) an offering of New Preferred Stock or New Exchange Debentures pursuant to
an Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i) which
is filed pursuant to the provisions of this Agreement and (ii) including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Exchange Debenture Indenture.
Transfer Agent: The transfer agent with respect to the Preferred Stock.
Transfer Restricted Securities: Each share of Preferred Stock or each
Exchange Debenture, until the earliest to occur of (a) the date on which such
share of Preferred Stock or such Exchange Debenture is exchanged in the Exchange
Offer and entitled to be resold to the public by the Holder thereof without
complying with the prospectus delivery requirements of the Act, (b) the date on
which such share of Preferred Stock or such Exchange Debenture has been
effectively registered under the Act and disposed of in accordance with a Shelf
Registration Statement, (c) the date on which such share of
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<PAGE>
Preferred Stock or such Exchange Debenture is distributed to the public pursuant
to Rule 144 under the Act or (d) the date on which such share of Preferred Stock
or such Exchange Debenture is disposed of by a Broker-Dealer pursuant to the
"Plan of Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein).
Trustee: The trustee named in the Exchange Debenture Indenture with
respect to the Debentures.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (after the procedures set forth in Section 6(a) below
have been complied with), the Company shall (i) cause to be filed with the
Commission as soon as practicable after the Closing Date, but in no event later
than 60 days after the Closing Date, the Exchange Offer Registration Statement,
(ii) use its best efforts to cause such Exchange Offer Registration Statement to
become effective at the earliest possible time, but in no event later than 120
days after the Closing Date, (iii) in connection with the foregoing, file (A)
all pre-effective amendments to such Exchange Offer Registration Statement as
may be necessary in order to cause such Exchange Offer Registration Statement to
become effective, (B) if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings in connection with the registration and qualification of
the New Preferred Stock or New Exchange Debentures, as the case may be, to be
made under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer and (iv) upon the effectiveness of such
Exchange Offer Registration Statement, commence and Consummate the Exchange
Offer. The Exchange Offer Registration Statement shall be on the appropriate
form permitting registration of the New Preferred Stock or New Exchange
Debentures to be offered in exchange for the Preferred Stock or the Exchange
Debentures, as the case may be, that are Transfer Restricted Securities and to
permit sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement to
be effective continuously and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 Business Days. The Company shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the New Preferred Stock or New Exchange
Debentures shall be included in the Exchange Offer Registration Statement. The
Company shall use its best efforts to cause the Exchange Offer to be
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Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Preferred Stock or Exchange
Debentures that are Transfer Restricted Securities and that were acquired for
its own account as a result of market-making activities or other trading
activities (other than Transfer Restricted Securities acquired directly from the
Company) may exchange such Preferred Stock or Exchange Debentures pursuant to
the Exchange Offer; however, such Broker-Dealer may be deemed to be an
"underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with the initial
sale of the New Preferred Stock or New Exchange Debentures received by such
Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may
be satisfied by the delivery by such Broker-Dealer of the Prospectus contained
in the Exchange Offer Registration Statement. Such "Plan of Distribution"
section shall also contain all other information with respect to such sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers that
the Commission may require in order to permit such resales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Preferred Stock or Exchange Debentures held by any such
Broker-Dealer except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, and to ensure that such Registration
Statement conforms with the requirements of this Agreement, the Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of one year from the date on which the Exchange Offer
Registration Statement is declared effective.
The Company shall provide sufficient copies of the latest version of such
Prospectus to Broker-Dealers promptly upon request at any time during such
one-year period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement or to Consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities shall notify the
Company within 20 Business Days of the Consummation of the Exchange Offer (A)
that such Holder was prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may not resell the
New Preferred Stock or New Exchange Debentures acquired by it in the Exchange
Offer to the public without delivering a prospectus and that the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder, or (C) that such Holder is a
Broker-Dealer and holds Preferred Stock or Exchange Debentures acquired directly
from the Company or one of its affiliates, then the Company shall:
(1) cause to be filed, on or prior to 60 days after the date on
which the Company determines that it is not required to file the Exchange
Offer Registration Statement pursuant to clause (i) above or 60 days after
the date on which the Company receives the notice specified in clause (ii)
above (and in any event within 180 days after the Closing Date), a shelf
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registration statement pursuant to Rule 415 under the Act (which may be an
amendment to the Exchange Offer Registration Statement (in either event,
the "Shelf Registration Statement")), relating to all Transfer Restricted
Securities the Holders of which shall have provided the information
required pursuant to Section 4(b) hereof;
(2) use its best efforts to cause such Shelf Registration Statement
to become effective on or prior to 120 days after the date on which the
Company becomes obligated to file such Shelf Registration Statement (and
in any event within 240 days after the Closing Date);
(3) use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended as required by the
provisions of Sections 6(b) and (c) hereof to the extent necessary to
ensure that it is available for sales of Transfer Restricted Securities by
the Holders thereof entitled to the benefit of this Section 4(a), and to
ensure that it conforms with the requirements of this Agreement, the Act
and the policies, rules and regulations of the Commission as announced
from time to time, for a period of at least three years (as extended
pursuant to Section 6(c)(i)) following the date on which such Shelf
Registration Statement first becomes effective under the Act or such
shorter period ending when all of the Transfer Restricted Securities
available for sale thereunder have been sold.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 15 Business Days after receipt of a request
therefor, such information specified in Item 507 of Regulation S-K under the Act
for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have provided all such reasonably requested
information. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the date specified for such filing in this
Agreement, (ii) any such Registration Statement has not been declared effective
by the Commission on or prior to the date specified for such effectiveness in
this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has
not been Consummated within 30 Business Days after the Effectiveness Target Date
with respect to the Exchange Offer Registration Statement or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded within 5 days thereafter by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself immediately declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), then the Company shall
pay liquidated damages to (A) each Holder of Preferred Stock with respect to the
first 90-day period immediately following the occurrence of such Registration
Default in an amount equal to $.00125 per week per $25 liquidation preference of
Preferred Stock constituting Transfer Restricted Securities for each week or
portion thereof that the Registration Default continues and (B) each Holder of
Exchange Debentures with respect to the first 90-day period immediately
following the occurrence of such Registration Default, in an amount equal
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to $.05 per week per $1,000 in principal amount of Exchange Debentures held by
such Holder for each week or portion thereof that the Registration Default
continues. The amount of the liquidated damages payable to any holder of
Preferred Stock or Exchange Debentures shall increase by an additional $.00125
per week per $25 liquidation preference of Preferred Stock or $.05 per week per
$1,000 in principal amount of Exchange Debentures, as the case may be, held by
such Holder with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of liquidated damages of $.0125
per week per $25 liquidation preference of Preferred Stock or $.50 per week per
$1,000 in principal amount of Exchange Debentures, as the case may be.
All accrued liquidated damages shall be paid in cash to the Global
Security Holder by the Company by wire transfer of same day funds to the
accounts specified by the Global Security Holder and to Holders of Certificated
Securities by wire transfer of same day funds to the accounts specified by the
Holders thereof, or if no account is specified by mailing a check to each
Holder's registered addresses on each Damages Payment Date.
All obligations of the Company set forth in this Section 5 that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Company shall comply with all of the provisions of Section 6(c)
below, shall use its best efforts to effect such exchange and to permit the sale
of Broker-Dealer Transfer Restricted Securities being sold in accordance with
the intended method or methods of distribution thereof, and shall comply with
all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company there is
a question as to whether the Exchange Offer is permitted by applicable
law, the Company shall seek a no-action letter or other favorable decision
from the Commission allowing the Company to Consummate an Exchange Offer
for such Preferred Stock or Exchange Debentures, as the case may be. The
Company hereby agrees to pursue the issuance of such a decision to the
Commission staff level but shall not be required to take commercially
unreasonable action to effect a change of Commission policy. In connection
with the foregoing, the Company hereby agrees to take all such other
actions as are requested by the Commission or otherwise required in
connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared by
counsel to the Company setting forth the legal bases, if any, upon which
such counsel has concluded that such an Exchange Offer should be permitted
and (C) diligently pursuing a resolution (which need not be favorable) by
the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation thereof, a written representation to the Company
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the New Preferred Stock or New Exchange
Debentures to be issued in the Exchange
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Offer and (C) it is acquiring the New Preferred Stock or New Exchange
Debentures in its ordinary course of business. In addition, all such
Holders of Transfer Restricted Securities shall otherwise cooperate in the
Company's preparations for the Exchange Offer. Each Holder hereby
acknowledges and agrees that any Broker-Dealer and any such Holder using
the Exchange Offer to participate in a distribution of the securities to
be acquired in the Exchange Offer (1) could not under Commission policy as
in effect on the date of this Agreement rely on the position of the
Commission enunciated in Morgan Stanley and Co., Inc. (available June 5,
1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated July
2, 1993, and similar no-action letters (including any no-action letter
obtained pursuant to clause (i) above), and (2) must comply with the
registration and prospectus delivery requirements of the Act in connection
with a secondary resale transaction and that such a secondary resale
transaction should be covered by an effective registration statement
containing the selling security holder information required by Item 507 or
508, as applicable, of Regulation S-K if the resales are of New Preferred
Stock or New Exchange Debentures obtained by such Holder in exchange for
Preferred Stock or Exchange Debentures acquired by such Holder directly
from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange Offer
in reliance on the position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley and Co.,
Inc. (available June 5, 1991) and, if applicable, any no-action letter
obtained pursuant to clause (i) above, (B) including a representation that
the Company has not entered into any arrangement or understanding with any
Person to distribute the New Preferred Stock or New Exchange Debentures to
be received in the Exchange Offer and that, to the best of the Company's
information and belief, each Holder participating in the Exchange Offer is
acquiring the New Preferred Stock or New Exchange Debentures in its
ordinary course of business and has no arrangement or understanding with
any Person to participate in the distribution of the New Preferred Stock
or New Exchange Debentures received in the Exchange Offer and (C)
including any other undertaking or representation required by the
Commission as set forth in any no-action letter obtained pursuant to
clause (i) above.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof, and pursuant
thereto the Company shall as expeditiously as possible prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement and
any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Exchange
Offer Registration Statement and the related Prospectus required to permit sales
of Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers),
the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Section 3 or 4 of this Agreement, as applicable;
and upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain
a material misstatement or omission or (B) not to be effective and usable
for resale of Transfer Restricted Securities during the period required by
this Agreement, the Company promptly shall file an appropriate amendment
to such
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Registration Statement, (1) in the case of clause (A), correcting any such
misstatement or omission, and (2) in the case of clauses (A) and (B), use
its best efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for their
intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as applicable, or such shorter
period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424, 430A and 462 under the Act in a
timely manner; and comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the selling Holders thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and if at any
time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
shall use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(iv) furnish to each of the selling Holders, each of the
underwriter(s), if any, and, if requested, the Initial Purchaser, before
filing with the Commission, copies of any Registration Statement or any
Prospectus included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents incorporated
by reference after the initial filing of such Registration Statement),
which documents will be subject to the review and comment of such persons
for a period of at least three Business Days, and the Company shall not
file any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including all
such documents incorporated by reference) to which a selling Holder of
Transfer Restricted Securities covered by such Registration Statement or
the underwriter(s), if any, shall reasonably object within three Business
Days after the receipt thereof; a selling Holder or underwriter, if any,
shall be deemed to have reasonably objected to such filing if such
Registration Statement, amendment, Prospectus or supplement, as
applicable, as
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proposed to be filed, (1) contains a material misstatement or omission or
(2) fails to comply in any material respects with the applicable
requirements of the Act;
(v) promptly upon the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s), if any;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney or accountant retained by
such selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter, attorney
or accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness, and make the Company's representatives
reasonably available for discussion of such document and other customary
due diligence matters;
(vii) if requested by any selling Holders or the underwriter(s), if
any, promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, information with respect to the principal
amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid therefor and any other terms
of the offering of the Transfer Restricted Securities to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment;
(viii) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be rated with the
appropriate rating agencies, if so requested by the Holders of a majority
in liquidation preference of Preferred Stock or aggregate principal amount
of Exchange Debentures, as the case may be, covered thereby or the
underwriter(s), if any;
(ix) furnish to each selling Holder and each of the underwriter(s),
if any, without charge, at least one copy of the Registration Statement,
as first filed with the Commission, and of each amendment thereto,
including all documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
(x) deliver to each selling Holder and each of the underwriter(s),
if any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company hereby consents to the use of
the Prospectus and any amendment or supplement thereto by each of the
selling Holders and each of the underwriter(s), if any, in connection with
the offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(xi) enter into such agreements (including an underwriting agreement
in customary form), and make such representations and warranties in
customary form, and take all such other actions in connection therewith in
order to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any Registration Statement contemplated by this
Agreement, all to such extent as may be reasonably requested by the
Initial Purchaser or by any Holder of Transfer Restricted
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Securities or underwriter in connection with any sale or resale pursuant
to any Registration Statement contemplated by this Agreement; and whether
or not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Company shall:
(A) furnish to each selling Holder, each underwriter, if any,
and, if requested by the Initial Purchaser, in such substance and
scope as they may request and as are customarily made by issuers to
underwriters in primary underwritten offerings, upon the
effectiveness of the Shelf Registration Statement and to each
Restricted Broker-Dealer upon Consummation of the Exchange Offer:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed on behalf
of the Company by (y) the President or any Vice President and
(z) a principal financial or accounting officer of the
Company, confirming, as of the date thereof, the matters set
forth in paragraphs (a), (b), (c) and (d) of Section 9 of the
Purchase Agreement and such other matters as such parties may
reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company covering the matters set forth in clauses (i), (iii),
(xv) and (xix) of paragraph (f)(1) of Section 9 of the
Purchase Agreement and such other matter as the Holders,
underwriters and/or Restricted Broker-Dealers may reasonably
request, and in any event including a statement to the effect
that such counsel has participated in conferences with
officers and other representatives of the Company,
representatives of the independent public accountants for the
Company, the Initial Purchaser's representatives and the
Initial Purchaser's counsel in connection with the preparation
of such Registration Statement and the related Prospectus and
have considered the matters required to be stated therein and
the statements contained therein, although such counsel has
not independently verified the accuracy, completeness or
fairness of such statements; and that such counsel advises
that, on the basis of the foregoing (relying as to materiality
to a large extent upon facts provided to such counsel by
officers and other representatives of the Company and without
independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that
the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto
became effective, and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer,
as of the date of Consummation, contained an untrue statement
of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading (without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules
and other financial or statistical data included in any
Registration Statement contemplated by this Agreement or the
related Prospectus); and
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(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
primary underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section
9(f)(3) of the Purchase Agreement, without exception, other
than those exceptions that, individually and in the aggregate,
are not material;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, in connection with any resale
pursuant to any Shelf Registration Statement the indemnification
provisions and procedures of Section 8 hereof with respect to all
parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders, underwriters, if any,
and Restricted Broker-Dealers, if any, to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company
contained in the certificate described in clause (A)(1) above cease to be
true and correct, the Company shall so advise the selling Holders and each
Restricted Broker-Dealer promptly and, if requested by such Persons, shall
confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the securities
or Blue Sky laws of such jurisdictions as the selling Holders or
underwriter(s), if any, may request and do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that the Company
shall not be required to register or qualify as a foreign corporation
where it is not now so qualified or to take any action that would subject
it to the service of process in suits or to taxation, other than as to
matters and transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xiii) issue, upon the request of any Holder of Preferred Stock or
Exchange Debentures covered by any Shelf Registration Statement, New
Preferred Stock or New Exchange Debentures having a liquidation preference
or an aggregate principal amount, as the case may be, equal to the
liquidation preference or aggregate principal amount of New Preferred
Stock or New Exchange Debentures, as the case may be, surrendered to the
Company by such Holder in exchange therefor or being sold by such Holder;
such New Preferred Stock or New Exchange Debentures to be registered in
the name of such Holder or in the name of the purchaser(s) of such New
Preferred Stock or New Exchange Debentures, as the case may be, in return,
the Preferred Stock or the Exchange Debentures, as the case may be, held
by such Holder shall be surrendered to the Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing
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Transfer Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the Holders or the underwriter(s), if any,
may request at least two Business Days prior to such sale of Transfer
Restricted Securities;
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter(s),
if any, to consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause (xii) above;
(xvi) if any fact or event contemplated by Section 6(c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering
such Transfer Restricted Securities and provide the Transfer Agent or the
Trustee, as the case may be, with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xviii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of
the NASD, and use its reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies
or authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
(xix) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders with regard to any applicable Registration Statement,
as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a
twelve-month period beginning after the effective date of the Registration
Statement (as such term is defined in paragraph (c) of Rule 158 under the
Act);
(xx) in the event that such Transfer Restricted Securities are
Exchange Debentures, cause the Exchange Debenture Indenture to be
qualified under the TIA not later than the later of (a) the date on which
the Preferred Stock is exchanged for Exchange Debentures or (b) the
effective date of the first Registration Statement relating to the
Exchange Debentures required by this Agreement, and, in connection
therewith, cooperate with the Trustee and the Holders of Exchange
Debentures to effect such changes to the Exchange Debenture Indenture as
may be required for such Exchange Debenture Indenture to be so qualified
in accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents required
to be filed with the Commission to enable such Exchange Debenture
Indenture to be so qualified in a timely manner;
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<PAGE>
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed if requested by
the Holders of a majority in liquidation preference of Preferred Stock or
aggregate principal amount of Exchange Debentures or the managing
underwriter(s), if any; and
(xxii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder shall forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of any such notice. In the
event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 6(c)(i)
or Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof
or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement shall be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses (including filings made by the Initial
Purchaser or any Holder with the NASD (and, if applicable, the fees and expenses
of any "qualified independent underwriter" and its counsel that may be required
by the rules and regulations of the NASD)); (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the New Preferred
Stock and New Exchange Debentures to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company and, subject to Section
7(b) below, the Holders of Transfer Restricted Securities; (v) all application
and filing fees in connection with listing the New Preferred Stock or the New
Exchange Debentures on a national securities exchange or automated quotation
system pursuant to the requirements hereof; and (vi) all fees and disbursements
of independent certified public accountants of the Company (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company shall, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
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<PAGE>
(b) In connection with any Registration Statement required by this
Agreement, the Company shall reimburse the Initial Purchaser and the Holders of
Transfer Restricted Securities being tendered in the Exchange Offer and/or
resold pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Latham & Watkins or such other counsel as may be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
SECTION 8. INDEMNIFICATION
(a) The Company shall indemnify and hold harmless (i) the Initial
Purchaser, (ii) each Holder and (iii) each person, if any, who controls (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Initial Purchaser or any Holder (any of the persons referred to in this clause
(iii) being hereinafter referred to as a "controlling person") and (iv) the
respective officers, directors, partners, employees, representatives and agents
of the Initial Purchaser, Holder or controlling person (any person referred to
in clause (i), (ii), (iii) or (iv) may hereinafter be referred to as an
"Indemnified Holder"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending any claim or action, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto),
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or omission or alleged untrue statement or
omission that is made in reliance upon and in conformity with information
relating to any of the Holders furnished in writing to the Company by such
Holder expressly for use therein.
In case any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any of the
Indemnified Holders with respect to which indemnity may be sought against the
Company, such Indemnified Holder (or the Indemnified Holder controlled by such
controlling person) shall promptly notify the Company in writing (provided, that
the failure to give such notice shall not relieve the Company of its obligations
pursuant to this Agreement) and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Holder and payment of all fees and expenses. Such Indemnified Holder shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Holder unless (i) the employment of such counsel has
been specifically authorized in writing by the Company, (ii) the Company shall
have failed to assume the defense and employ counsel or (iii) the named parties
to any such action (including any impleaded parties) include both such
Indemnified Holder and the Company and such Indemnified Holder shall have been
advised by its counsel that there may be one or more legal defenses available to
it which are different from or additional to those available to the Company (in
which case the Company shall not have the right to assume the defense of such
action on behalf of such Indemnified Holder). If separate counsel is employed
pursuant to clauses (i), (ii) or (iii) above, the fees and expenses of such
counsel shall be paid, as incurred, by the Company (regardless of whether it is
ultimately determined that an Indemnified Holder is not entitled to
indemnification hereunder). The Company shall not, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
15
<PAGE>
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) at
any time for such Indemnified Holders, which firm shall be designated by the
Indemnified Holders (selected in the same manner that underwriters are selected
pursuant to Section 11). The Company shall be liable for any settlement of any
such action or proceeding effected with the Company's prior written consent,
which consent shall not be withheld unreasonably, and the Company shall
indemnify and hold harmless any Indemnified Holder from and against any loss,
claim, damage, liability or expense by reason of any settlement of any action
effected with the written consent of the Company. The Company shall not, without
the prior written consent of each Indemnified Holder, settle or compromise or
consent to the entry of judgment in or otherwise seek to terminate any pending
or threatened action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not any
Indemnified Holder is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified
Holder from all liability arising out of such action, claim, litigation or
proceeding.
(b) Each Holder of Transfer Restricted Securities, severally and not
jointly, shall indemnify and hold harmless the Company and its respective
directors, officers, and any person controlling (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Company, and the respective
officers, directors, partners, employees, representatives and agents of each
such person, to the same extent as the foregoing indemnity from the Company to
each of the Indemnified Holders, but only with respect to claims and actions
based on information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement. In case any action or
proceeding shall be brought against the Company or its directors or officers or
any such controlling person in respect of which indemnity may be sought against
a Holder of Transfer Restricted Securities, such Holder shall have the rights
and duties given the Company and such directors or officers or such controlling
person shall have the rights and duties given to each Holder by the preceding
paragraph. In no event shall any Holder be liable or responsible for any amount
in excess of the amount by which the total received by such Holder with respect
to its sale of Transfer Restricted Securities pursuant to a Registration
Statement exceeds (i) the amount paid by such Holder for such Transfer
Restricted Securities plus (ii) the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
(c) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by
reason of exceptions provided in those Sections) in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, from the Initial Placement and the sale of Transfer Restricted Securities
pursuant to the applicable Registration Statement or if such allocation is not
permitted by applicable law, the relative fault of such indemnifying party, on
the one hand, and of such indemnified party, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company shall be deemed to be equal to the
sum of (i) the total proceeds from the Initial Placement (net of the Initial
Purchaser's discounts and commissions, but before deducting expenses) as set
forth on the cover page of the Offering Memorandum and (ii) the total amount of
Liquidated Damages which the Company was not required to pay as a result of
registering the securities covered by the Registration Statement which resulted
in such losses, claims, damages, liabilities or expenses. The relative benefits
of the Initial Purchaser shall be deemed to be equal to the discounts and
commissions received by the Initial Purchaser as set forth on the cover page of
the
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<PAGE>
Offering Memorandum. The relative benefits received by any other Indemnified
Holder shall be deemed to be equal to the value of having such Holder's
Preferred Stock or Debentures registered under the Act. The relative fault of
the Company, on the one hand, and the Indemnified Holders, on the other hand,
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company, the Initial Purchaser and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 8(c) were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or expenses referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, the Initial Purchaser or its related Indemnified
Holders shall not be required to contribute, in the aggregate, any amount in
excess of the amount equal to (A) the amount of the discounts and commissions
received by the Initial Purchaser less (B) any amount paid or contributed by the
Initial Purchaser under the Purchase Agreement, nor shall any Holder or its
related Indemnified Holders be required to contribute, in the aggregate, any
amount in excess of the amount by which the total received by such Holder with
respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Initial Purchaser and the
Holders to contribute pursuant to this Section 8(c) are several in proportion to
the respective principal amount of Preferred Stock or Exchange Debentures held
by each of the Holders hereunder and not joint.
SECTION 9. RULE 144A
For so long as any Transfer Restricted Securities remain outstanding the
Company shall make available upon request of any Holder of Transfer restricted
Securities, to any Holder or beneficial owner of Transfer Restricted Securities
in connection with any sale thereof and any prospective purchaser of such
Transfer Restricted Securities designated by such Holder or beneficial owner,
the information required by Rule 144A(d)(4) under the Act.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
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<PAGE>
SECTION 11. SELECTION OF UNDERWRITERS
For any Underwritten Offering of Transfer Restricted Securities, the
investment banker or investment bankers and manager or managers that will
administer such offering shall be selected by the Holders of a majority in
liquidation preference of Preferred Stock or aggregate principal amount of the
Exchange Debentures, as the case may be, included in such offering.
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
rights provided herein, in the Certificate of Designation, in the Exchange
Debenture Indenture, in the Purchase Agreement or granted by law, including
recovery of liquidated or other damages, shall be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages (including the liquidated damages contemplated hereby) would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company shall not enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. The Company represents that the rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's securities under any agreement in
effect on the date hereof.
(c) Adjustments Affecting the Preferred Stock or Exchange Debentures. The
Company shall not take any action, or permit any change to occur, with respect
to the Preferred Stock or the Exchange Debentures that would materially and
adversely affect the ability of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(D)(i), the Company has obtained the written consent
of the Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority in liquidation preference of Preferred Stock or
aggregate principal amount of Exchange Debentures, as the case may be.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does not
affect directly or indirectly the rights of other Holders whose securities are
not being tendered pursuant to such Exchange Offer may be given by the Holders
of a majority in liquidation preference of Preferred Stock or aggregate
principal amount of Exchange Debentures, as the case may be, tendered pursuant
to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Transfer Agent or the Trustee, as the case may be, with a copy to the
Transfer Agent or the Trustee, as the case may be; and
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<PAGE>
(ii) if to the Company:
Petroleum Heat and Power Co., Inc.,
2187 Atlantic Street,
Stamford, Connecticut 06904
Telecopier No.: (203) 328-7422
Attention: Irik P. Sevin
With a copy to:
Phillips Nizer Benjamin Krim & Balloon LLP
666 Fifth Avenue
New York, New York 10019
Telecopier No.: (212) 262-5152
Attention: Alan Shapiro
All notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Transfer Agent or
the Trustee at the addresses specified in the Certificate of Designation and
Exchange Debenture Indenture, respectively.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other Operative
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties
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hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PETROLEUM HEAT AND POWER CO., INC.
By: _______________________________
Name: George Leibowitz
Title: Senior Vice President-Finance
DONALDSON, LUFKIN & JENRETTE
Securities Corporation
By: _______________________________
Name: Philippe Jacob
Title: Vice President
AMENDMENT NO. 1 TO
THE PETROLEUM HEAT AND POWER CO., INC.
RETIREMENT PLAN
WHEREAS, effective July 1, 1958 Petroleum Heat and Power Co., Inc. (the
"Company") established the Petroleum Heat and Power Co., Inc. Retirement Plan
(the "Plan") to provide retirement benefits for its employees and the employees
of certain affiliates; and
WHEREAS, effective January 1, 1989 the Plan was amended and restated in
order that it continue to qualify as a qualified pension plan under Section
401(a) of the Internal Revenue Code of 1986, as amended, and the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended;
and
WHEREAS, Article XI, Section 11.1 of the Plan vests the Plan's
administrator with the authority to amend the Plan;
WHEREAS, the Plan's administrator desires to amend the Plan in order to
freeze all benefit accruals so that effective December 31, 1996, no additional
benefits shall accrue to Participants under the Plan;
NOW, THEREFORE, effective December 31, 1996, the Plan, which except as
otherwise herein provided shall remain in full force and effect, is hereby
amended as follows:
1. Article I, Section 1.1 "Accrued Benefit", is amended by adding the
following paragraph at the end thereof:
"The Accrued Benefit of all Participants shall be frozen effective
December 31, 1996."
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<PAGE>
2. Article I, Section 1.9 "Average Compensation", is amended by adding the
following paragraph at the end thereof:
"Effective December 31, 1996, benefits shall cease to accrue to
Participants under the Plan and no Compensation of a Participant
earned subsequent to such date shall be counted in determining his
Average Compensation."
3. Article I, Section 1.11 "Benefit Service", is amended by adding the
following paragraph at the end thereof:
"Effective December 31, 1996, benefits shall cease to accrue to
Participants under the Plan and no additional Years of Service of a
Participant subsequent to such date shall be counted in determining
his Benefit Service."
4. Article I, Section 1.8 "Applicable Interest Rate" shall be amended,
effective December 31, 1996, to read as follows:
"1.8 "Applicable Interest Rate" means the annual interest rate on
30-year Treasury securities for the second calendar month preceding
the month which contains the Annuity Starting Date. Solely for the
purpose of calculating the lump-sum value of any benefit, the
applicable mortality table shall be the 1983 Group Annuity Table
(83GAM), blended for males and females, or such other mortality
table prescribed by the Code, or the regulations thereunder, or the
Secretary of the Treasury."
5. Article IV, "Benefits", shall be amended adding a new Section 4.8 as
follows:
"4.8 Freezing of All Benefits Under the Plan.
Notwithstanding anything contained herein to the contrary, the
Accrued Benefit of all Participants shall be frozen effective
December 31, 1996."
6. Article II, "Eligibility", is amended by adding a new sub-paragraph (d)
to Section 2.1 as follows:
"(d) Notwithstanding anything contained herein to the contrary,
effective December 31, 1996 (i) each Employee who was a Participant
in the Plan on such date shall continue as a Participant and (ii) no
other Employee shall become a Participant in the Plan on any Entry
Date subsequent to December 31, 1996; provided that the Plan does
not become Top Heavy prior to its termination."
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<PAGE>
IN WITNESS WHEREOF, the Administrator, on behalf of the Company, has
caused this Amendment to be duly executed this day of October, 1996, effective
December 31, 1996.
Administrator of the Petroleum
Heat and Power Co., Inc.
Retirement Plan
_____________________________
Irik P. Sevin
_____________________________
Joseph Cavanaugh
3
Amendment No. 1
To The Petro, Inc. Supplemental Executive
Retirement Plan
WHEREAS, effective January 1, 1990, Petro, Inc. ("Petro") established the
Petro, Inc. Supplemental Executive Retirement Plan (the "Plan") to provide
certain highly compensated employees of Petro with supplemental retirement
income, disability and survivor benefits in addition to benefits payable from
Petro's qualified plans and Social Security; and
WHEREAS, Article XIV of the Plan vests the Committee (as such term is
defined in the Plan) with the authority to amend the Plan; and
WHEREAS, the Petroleum Heat and Power Co., Inc. Retirement Plan (the
"Basic Plan") has been amended in order to freeze the accrued benefit of all
participants effective December 31, 1996; and
WHEREAS, the Committee desires to amend the Plan in order to freeze all
benefit accruals so that effective December 31, 1996, no additional benefits
shall accrue to Participants in the Plan;
NOW THEREFORE, effective December 31, 1996, the Plan, which except as
otherwise herein provided shall remain in full force and effect, is hereby
amended as follows:
<PAGE>
1. Article II, paragraph 2, "Accrued Benefit", is amended by adding the
following at the end thereof:
"The Accrued Benefit of all Participants shall be frozen effective
December 31, 1996."
2. Article III, Eligibility, is amended by adding a new paragraph as
follows:
"Notwithstanding anything contained herein to the contrary,
effective December 31, 1996 (i) each employee who was a Participant
in the Plan on such date shall continue as a Participant and (ii) no
other employee of Petro shall become a Participant in the Plan."
3. A new Article XVI, Freezing of all Benefits Under the Plan shall be
added as follows:
"Notwithstanding anything contained herein to the contrary, the
Accrued Benefit of all Participants shall be frozen effective
December 31, 1996."
IN WITNESS WHEREOF, the Committee, on behalf of Petro, has caused this
Amendment to be duly executed this day of November, 1996, effective December 31,
1996.
The Committee of the Petro, Inc.
Supplemental Executive Retirement Plan
__________________________________
Irik P. Sevin
__________________________________
Joseph Cavanaugh
LEASE AGREEMENT
AGREEMENT OF LEASE made this 8th day of November, 1996 by and between
Carriage Group with its principal place of business at 467 Creamery Way, Exton,
PA 19341 (Landlord), party of the fist part, and Petroleum Heat & Power Co.,
Inc. with its principal place of business at 2187 Atlantic Street, Stamford, CT
06902 ("Tenant"), party of the second part.
WITNESSETH THAT, for and in consideration of the rents, covenants and
agreements herein contained and intending to be legally bound hereby, the
parties hereto covenant and agree as follows:
1. Reference Data
As used in this Lease, the following terms shall be defined as
indicated and refer to the data set forth in this Section 1.
TENANT'S ADDRESS: 2187 Atlantic Street
Stamford, CT 06902
PREMISES: Approximately 30,000 Rentable Square Feet (inclusive of Tenant's
Pro-rata Share of Mechanical Room) located at 467 Creamery Way, Oaklands
Corporate Center, Exton, PA 19341, as detailed in the Site Plan attached hereto
as Exhibit "A".
TERM: The term of this Lease shall be Ten (10) years. The term of the Lease
shall commence on the Commencement Date and shall expire on the last day of the
One Hundred Twentieth (120th) fully calendar month thereafter.
COMMENCEMENT DATE: March 1, 1997.
BASE RENT: Due on the first day of each calendar month of the Term. See
Paragraph 34 of Addendum "Base Rent Schedule".
OPERATING EXPENSE ALLOWANCE: $5,625.00 per month as further detailed in
Estimated Operating Expenses breakdown attached hereto as Exhibit "C".
FIXED RENT: Base Rent plus Operating Expenses Allowance.
ADDITIONAL RENT: Sums not including Base Rent which Tenant is obligated to pay
to Landlord from time to time pursuant to the terms of this Lease.
SECURITY DEPOSIT: $35,625.00.
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TENANT'S PROPORTIONATE SHARE: 71.4% (determined by dividing the area of the
Premises by the area of the Building).
PERMITTED USES: Tenant shall use and occupy the Premises for General Office use
and for no other purpose.
2. Demise
Landlord hereby demises and lets to Tenant and Tenant hereby hires and
leases from Landlord the Premises for the Term, upon the conditions and
limitations set forth herein.
3. Construction by Landlord
Such construction shall be performed expeditiously in a good and
workmanlike manner and in accordance with all applicable laws, rules and
regulations.
(A) Landlord shall, without cost to Tenant, complete, alter or improve
the Premises in accordance with the plans and specifications attached hereto as
Exhibit "B" and made a part hereof (the "Plans and Specifications"). Tenant
hereby approves the Plans and Specifications attached hereto as Exhibit "B".
(B) If Landlord deems any changes, additions or alterations in the
Plans and Specifications necessary in connection with the construction of the
Premises, such changes, additions or alterations shall be submitted to Tenant
for approval which approval shall not be unreasonably withheld or delayed and
shall be deemed to be given if not disapproved in writing within ten (10) days
after Landlord's submission of the same to Tenant. Any dispute as to the content
of such changes, additions or alterations may, at the option of either party
hereto, be conclusively determined by the independent architect or engineer
retained by Landlord for the construction of the Building.
(C) The Premises shall be substantially completed on or before the
Commencement Date, provided that the Commencement Date shall be extended for the
time equivalent to any time lost by Landlord due to strikes, labor disputes,
governmental restrictions or limitations, scarcity of or inability to obtain
labor or materials, accidents, fire or other casualties, weather conditions, or
any cause similar or dissimilar to the foregoing beyond the reasonable control
of Landlord. All the aforesaid work shall be done in compliance with applicable
law and lawful ordinances. In the event the commencement date is postponed
beyond July 31, 1997, Tenant shall have the right to cancel this Lease and
recover all monies paid hereunder.
(D) Landlord shall be responsible to make any repairs necessitated by
defective workmanship or materials in the aforesaid
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work, provided that such defect appears and Tenant gives Landlord written notice
thereof during the first 365 days of the Term.
4. Term
The Term shall commence on the earlier of (the "Commencement Date"):
(i) the date when Tenant, with Landlord's consent, assumes possession of the
Premises or any part thereof, or (ii) the fifth consecutive business day
following Landlord's notice to Tenant that the Premises are substantially
completed and may be legally occupied. The Premises shall be substantially
completed when the construction work and other items of work for which Landlord
is responsible under Section 3 hereof have been completed to the extent that the
Premises may be fully and legally occupied by Tenant for its intended use,
subject only to completion of minor finishing and adjustment of equipment. The
commencement and expiration dates of the Term, when determined as above
provided, shall be confirmed in writing by Landlord to Tenant.
5. Base Rent
(A) Tenant shall pay to Landlord during the Term of the Lease the Base
Rent, without notice or demand, in the monthly installments specified in Section
1, in advance on the first day of each calendar month of the Term. The first
month's installment of the Base Rent shall be payable upon the execution of this
Lease. If the Term commences other than on the first day of a calendar month,
then the installments of Base Rent for the first calendar month of the Term
shall be adjusted proportionately, and the aforesaid first installment paid by
Tenant upon the execution of this Lease shall be initially applied to the first
partial month of the Term, and the balance to the next month.
(B) Base Rent, Additional Rent and all other sums payable by Tenant to
Landlord hereunder shall be paid, without set-off or deduction, in lawful
currency of the United States of America to Landlord at the address set forth in
Section 1 hereof, or at such other address as Landlord may from time to time
designate in writing to Tenant. Tenant hereby acknowledges that late payment by
Tenant to Landlord of rent or other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges, and late charges which may
be imposed upon Landlord by terms of any mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any sum due from Tenant
shall not be received by Landlord or Landlord's designee within ten (10) days
after said amount is due, then Tenant shall pay to Landlord a late charge of
five (5%) percent of such overdue amount, plus any attorney's fees and court
costs incurred by Landlord by reason of Tenant's failure to pay rent and/or
other charges when due to
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Landlord by reason of Tenant's failure to pay rent and/or other charges when due
hereunder. The parties hereby agree that such late charges represent a fair and
reasonable estimate of the cost that Landlord will incur by reason of the late
payment by Tenant. Acceptance of such late charges by the Landlord shall in no
event constitute a waiver of Tenant's default with respect to such overdue
amount, nor prevent Landlord from exercising any of the other rights and
remedies granted hereunder.
6. Rental Adjustments
(A) Operating Expense. Tenant shall pay to Landlord the Operating
Expense Allowance in equal monthly installments, the first of which shall be
payable upon execution of this Lease. If the term commences other than ont he
first day of the calendar month, then the Operating expense Allowance for the
first calendar month of the Term shall be adjusted to the succeeding month.
Tenant's Proportionate Share of Operating Expense
If Landlord's Operating Expense for any Operating Year shall be
greater than the Operating Expense Allowance, Tenant shall pay to Landlord as
additional rent an amount equal to Tenant's Proportionate Share of the
difference (the amount of Tenant's Proportionate Share of such difference is
hereinafter referred to as the "Operating Expense Adjustment"). If Tenant
occupies the Premises or portion thereof for less than a full Operating Year,
the Operating Expense Adjustment will be calculated in proportion to the amount
of time in such Operating Year that Tenant occupied the Premises.
Such Additional Rent shall be paid in the following manner: within 120
days following the end of the first and each succeeding Operating Year, Landlord
shall furnish Tenant an Operating Expense Statement certified as true and
correct setting forth (i) the Operating Expense for the preceding Operating
Year, (ii) the Operating Expense Allowance and (iii) Tenant's Operating Expense
Adjustment for such Operating Year. Within 10 days following the receipt of such
Operating Expense Statement (the "Expense Adjustment Date") Tenant shall pay to
Landlord as Additional Rent the Operating Expense Adjustment for such Operating
Year.
Commencing with the first month of the second Operating Year, Tenant
shall pay to Landlord, in addition to the Operating Expense Allowance, on
account of the Operating Expense Adjustment for such Operating Year, monthly
installments in advance equal to one-twelfth (1/12) of the estimated Operating
Expense Adjustment for such Operating Year.
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As used in this Section 6(A) and Section 1 where applicable, the
following words and terms shall be defined as hereinafter set forth:
(i) "Operating Year" shall mean each calendar year, or other
period of 12 months as hereafter may be adopted by Landlord as its fiscal year,
or other period of 12 months as hereafter may be adopted by Landlord as its
fiscal year, occurring during the Term.
(ii) "Operating Expense Allowance" shall mean and equal the
amount set forth in Section 1 of this Lease.
(iii) "Operating Expense Statement" shall mean a statement in
writing signed by Landlord, setting forth in reasonable detail (a) the Operating
Expense for the preceding Operating Year, (b) the Operating Expense Allowance
and (c) the Tenant's Operating Expense Adjustment for such Operating Year, or
portion thereof. The Operating Expense for each Operating Year shall be
available for inspection by Tenant at Landlord's office during normal business
hours. Operating expenses are as follows:
(a) Real estate taxes and other taxes or charges levied in lieu
of such taxes, general and special public assessments, charges imposed by any
governmental authority pursuant to anti-pollution or environmental legislation,
taxes on the rentals of the Building or the use, occupancy or renting of space
therein;
(b) Premiums and fees for fire and extended coverage insurance,
insurance against loss of rentals for space in the Building and public liability
insurance, all in amounts and coverages (with additional policies against
additional risks) as may be required by Landlord or the holder of any mortgage
on the Building;
(c) Water and sewer service charges, and common area electric
charges. (provided same are not above prevailing market rates)
(d) Common Area Maintenance and repair costs, including repairs
and replacements described in Section 8 below, repairs and replacements of
supplies and equipment, snow removal and paving, lawn and general grounds
upkeep, maintenance and repair, and the costs of all labor, material and
supplies incidental thereto;
(e) Wages, salaries, fees and other compensation and payments and
payroll taxes and contributions to any social security, unemployment insurance,
welfare, pension or similar fund and payments for other fringe benefits required
by law, union agreement or otherwise made to or on behalf of all employees of
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Landlord performing services rendered in connection with the operation and
maintenance of the Building and/or Land, including without limitation, payments
made directly to or through independent contractors or performance of such
services;
(f) Management fees payable to the managing agent for the
Building, provided that, if the managing agent is affiliated with Landlord, same
shall be at prevailing market rates;
(g) Assessments paid by Landlord for the actual repair,
maintenance and upkeep of common facilities located in the Business Park; and
(h) Any and all other expenditures of Landlord incurred in
connection with the operation, repair or maintenance of the Premises, and the
Building or the Land which are properly expensed in accordance with generally
accepted accounting principles consistently applied in the operation,
maintenance and repair of a first-class office building facility.
The term "Operating Expense" shall not include depreciation of the
Building or equipment therein, interest, net income, franchise or capital stock
taxes payable to Landlord, executive salaries, real estate brokers' commissions
or the costs of services provided specially for any particular tenant at such
tenant's expense and not uniformly available to all tenants of the Building or
any expenses otherwise attributable to any tenanted or tenantable space.
(B) During the calendar year in which the Term ends, Landlord shall
have the right to submit to Tenant a statement of Landlord's reasonable estimate
of the Operating expense Adjustment during the period (the "final period")
beginning on the first day of the final Operating Year of the Term. Upon the
earlier to occur on the thirtieth day following Tenant's receipt of such
statement or the final day of the Term, Tenant shall pay to Landlord said
estimate Operating Expense Adjustment minus the total amount of payments
previously made by Tenant pursuant to subsection (A) above during the final
period. If requested by Tenant, Landlord shall submit to Tenant a statement
setting forth the actual amount of said Operating Expense Adjustment after
Landlord's final calculation for same and within fifteen days after Tenant's
receipt of such statement, Tenant shall pay to Landlord any deficiency, or, as
the case may be, Landlord shall refund to Tenant any overpayment occasioned by
Tenant's payment of the aforesaid estimate.
7. Security Deposit
Upon the date hereof Tenant shall pay to Landlord a security deposit
in the amount set forth in Section 1 hereof which Landlord will hold as security
for the faithful performance by Tenant of all its covenants and agreements under
this Lease, but in
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no event shall Landlord be obliged to apply same to rents or other charges in
arrears or damages for Tenant's default hereunder, but Landlord may so apply the
security deposit at its option. Landlord's right to possession of the Premises
for Tenant's default or any other reason shall not be affected by the fact that
Landlord holds said security deposit. The security deposit, if not so applied by
Landlord, shall be returned to Tenant within thirty (30) days after this Lease
terminates, provided that Tenant shall have vacated the Premises and delivered
the same to Landlord, as herein provided. In the event of any transfer of
Landlord's interest in the Premises, Landlord shall have the right to transfer
its interest in the security deposit, whereupon Tenant's receipt of the
transferee's acknowledgement of receipt of the security deposit, Landlord shall
be released of all liability with respect to such security deposit, and Tenant
shall look solely to such transferee for the return of the same.
8. Landlord's Services
So long as Tenant is not in default hereunder, Landlord shall:
(A) Arrange for all required utility services to the Premises:
PROVIDED, HOWEVER, the Landlord shall not be liable to Tenant for any loss or
damage arising from interruption in such utility service, unless occasioned by
the acts or omissions of Landlord or its Agents.
(B) Make all structural repairs to the foundations, concrete floor
slabs, exterior metal panel or masonry walls, steel frame (including columns)
and roof deck required for safety, tenant ability and compliance with proper
orders or governmental authorities, PROVIDED, HOWEVER, that Landlord shall not
be obligated for any of such repairs until the expiration of a reasonable period
of time after written notice from Tenant that such repair is needed. In no event
shall Landlord be obligated under this paragraph to repair any damage caused by
any act, omission or negligence of Tenant or its employees, agents, invitees,
licensees, subtenants, or contractors.
Tenant shall, throughout the Term and at its sole cost and expense,
take good care of the Premises and the fixtures and appurtenances therein, and
maintain the same in good order and condition, and promptly at Tenant's own cost
and expense make all repairs necessary to maintain such good order and
condition, except for building exterior and structural repairs necessary for the
reasonable use and enjoyment of the Premises which Landlord agrees to make.
Tenant shall at its sole cost and expense repair and replace all damage or
injury to the Premises and the building and to fixtures and equipment caused by
Tenant or its employees, agents, invitees, licensees, subtenants, or
contractors, or as the result of all or any of them moving in or out of the
Building or by
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installation. If Tenant fails to make such repairs or replacements the same may
be made by Landlord and such expense shall be collectible as Additional Rent and
paid by Tenant within fifteen (15) days after rendition of a bill thereof within
a reasonable time. Landlord shall not be liable by reason of any injury to or
interference with tenant's business arising from the making of any repairs,
alterations, additions or improvements in or to the Premises or the Building or
to any appurtenance or equipment therein, unless occasioned by the acts or
omissions of Landlord or its Agents.
9. No Other Services by Landlord
Landlord shall not be required to render any services to Tenant or to
make any repairs or replacements to the Premises, except as provided in Section
3, 8, 11 and 12 hereto. Without limiting the generality of the foregoing, it is
specifically understood and agreed that Tenant shall be solely responsible for
all charges for the following or services used, rendered or supplied to, upon or
in connection with the Premises throughout the Term: electric; gas or any other
utilities; telephone and/or communication services; security system or services;
janitorial services; trash removal.
Tenant agrees to indemnify Landlord and save it harmless against any
liability or damages on the account of the foregoing and, in the event that any
such utilities or services are supplied or furnished by any governmental
corporation or authority, tenant shall pay all bills for same promptly when they
become due and shall at all times during the term hereof keep the Premises free
and clear from any lien that may attach thereto by reason of the non-payment of
said bills.
(A) Tenant, at Tenant's expense, shall maintain in effect throughout
the Term, through insurance carriers reasonably satisfactory to Landlord; (i)
insurance against claims for personal injury (including death) and $100,000 for
property damage; and (ii) such other insurance as may reasonably be required by
the holder of a mortgage on the Building. The insurance policy referred to in
subsection (i) above shall name both Landlord and Tenant as insured parties.
(B) Prior the commencement of the Term, Tenant shall provide Landlord
with certificates of the insurance policies herein required of Tenant. All
policies shall provide that coverage thereunder may not be reduced or terminated
without at least thirty days' prior written notice to Landlord, Tenant shall
furnish to Landlord throughout the Term replacement certificates at least thirty
days prior to the expiration date of the then current polices and, upon requires
of Landlord, shall supply to Landlord copies of all policies herein required of
Tenant.
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(C) Each of the parties hereto hereby releases the other from all
liability for all injury, loss or damage which may be inflicted upon persons or
the property of such party, even if such liability results from the negligence
of the other party; PROVIDED, HOWEVER, that this release shall not affect said
policy or the right of the insured to recover thereunder, and (ii) to the extent
of the coverage of such policy. If any policy does not permit such a waiver, and
if the party to benefit therefrom requests that such a waiver be obtained, the
other party agrees to obtain an endorsement to its insurance policies permitting
such waiver of subrogation, if available, and if an additional premium is
charged for such waiver, the party benefiting therefrom shall pay same promptly
upon being billed therefor. Nothing in the foregoing is intended to require a
tenant to reduce for deductible amounts of its insurance below such amounts as
of the date of execution of this Lease.
10. Insurance
(A) Tenant, at Tenant's expense, shall maintain in effect throughout
the Term, through insurance carriers reasonably satisfactory to Landlord; (i)
insurance against claims for personal injury (including death) and property
damage, under a policy of general public liability insurance, in amounts not
less than $1,000,000 combined single limit in respect of bodily injury
(including death) and $100,000 for property damage; and (ii) such other
insurance as may reasonably be required by the holder of a mortgage on the
Building. The insurance Policy referred to in subsection (i) above shall name
both Landlord and Tenant as insured parties.
(B) Prior to the commencement of the Term, Tenant shall provide
Landlord with certificates of the insurance policies herein required of Tenant.
All policies shall provide that coverage thereunder may not be reduced or
terminated without at least thirty days' prior written notice to Landlord.
Tenant shall furnish to Landlord throughout the Term replacement certificates at
least thirty days prior to the expiration date of the then current policies and,
upon request of Landlord, shall supply to Landlord copies of all policies herein
required of Tenant.
(C) Each of the parties hereto hereby releases the other from all
liability for all injury, loss or damage which may be inflicted upon persons or
the property of such party, even if such liability results from the negligence
of the other party; PROVIDED, HOWEVER, that this release shall be effective only
(i) during such time as the applicable insurance policy carried by such party
names the other party as a co-insured or contains a clause to the effect that
this release shall not affect said policy or the right of the insured to recover
thereunder, and (ii) to the extent of the coverage of such policy. If any policy
does not permit such a waiver, and if the party to benefit therefrom requests
that such
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a waiver be obtained, the other party agrees to obtain an endorsement to its
insurance policies permitting such waiver of subrogation, if available, and if
an additional premium is charged for such waiver, the party benefiting therefrom
shall pay same promptly upon being billed therefor. Nothing in the foregoing is
intended to require the tenant to reduce for deductible amounts of its insurance
below such amounts as of the date of execution of this Lease.
11. Casualty
(A) If the Premises are damaged by fire or other casualty, Tenant
shall promptly notify Landlord and Landlord shall repair the damaged portions of
the Premises (but not any of Tenant's property therein or improvements or
alterations made by Tenant), except that if, in Landlord's reasonable judgment,
the damage would require more than sixty days of work to repair, or if the
insurance proceeds (excluding rent insurance) which Landlord anticipates
receiving must be applied to repay any mortgages encumbering the Building or are
otherwise inadequate to pay the cost of such repair, the Landlord shall have the
right to terminate this Lease by so notifying Tenant, which notice shall specify
a termination date not less than fifteen days after its transmission. If
Landlord is so required to repair, the work shall be commenced promptly and
completed with due diligence, taking into account the time required for Landlord
to procure said insurance proceeds, and construction delays due to shortages of
labor or material or other causes beyond Landlord's reasonable control.
(B) During the period when Tenant shall be deprived of possession of
the Premises by reason of such damage, Tenant's obligation to pay Base Rent
under Section 5 and Operating Expense Allowance under Section 6 shall abate in
the proportion which the damaged area of the Premises bear to the entire
Premises, Landlord represents to Tenant that at all times of this Lease it will
carry insurance covering the loss of the Fixed Rent payable under the terms of
this Lease.
12. Condemnation
(A) If all the Premises is taken through the exercise of the power of
eminent domain, this Lease shall terminate on the date when possession of the
Premises is required by the condemning authority. If only part of the Premises
is taken, then (i) if the condemnation award is insufficient to restore the
remaining portion of the Premises or if such award must be applied to repay any
mortgages encumbering the Building, or (ii) if, in addition to a portion of the
Premises, a portion of the Building or Land is taken and Landlord deems it
commercially unreasonable to continue leasing all or a portion of the remaining
space in the Building, or (iii) if a substantial portion of the Premises is to
taken, and it is commercially impossible for Tenant to continue its business
within
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the Premises, then Landlord in the case of (i) and (ii) above and Tenant in the
case of (iii) above, shall have the right to terminate this Lease on the date
when the condemned portion of the premises, Building or Land is required to be
delivered to the condemning authority, which right shall be exercisable by the
exercising party so notifying the other party no later than thirty (30) days
prior to such date.
(B) If this Lease is not so terminated after a partial condemnation,
then after the date when the condemned portion of the Premises is delivered to
the condemnor, the Fixed Rent shall be reduced in the proportion which the
condemned area bears the entire area of the Premises, and Tenant's Proportionate
Share shall be reduced by the same portion.
(C) Tenant shall have the right to claim against the condemnor only
for removal and moving expenses and business dislocation damages which may be
separately payable to tenants in general under Pennsylvania law, provided such
payment does not reduce the award otherwise payable to Landlord, Subject to the
foregoing. Tenant hereby waives all claims against Landlord with respect to a
condemnation, and hereby assigns to Landlord all claims against the condemnor
including, without limitation, all claims for leasehold damages and diminution
in the value of Tenant's leasehold estate.
13. Tenant's Fixtures
Tenant shall have the right to install trade fixtures, office
machinery and equipment (excluding alterations, improvements and additions which
are governed by Section 14) required by Tenant or used by it in its business,
provided that same do not impair the structural strength of the Building and
further provide that such trade fixtures, office machinery and equipment shall
be limited to items normally used in an office/laboratory building. Without
limiting the generality of the foregoing, it is specifically understood and
agreed that Tenant shall not have the right to install or operate any electrical
equipment or machinery in the Premises (other than normal office machinery and
equipment such as typewriters, adding machines, and copiers) without Landlord's
prior written consent, such consent not be unreasonably withheld or delayed.
Tenant shall remove all such trade fixtures, office machinery and equipment
prior to the end of the Term, and Tenant shall repair and restore any damage to
the Premises and Building caused by such installation or removal.
14. Alterations
Tenant shall not, without on each occasion first obtaining Landlord's
prior written consent, such consent not to be unreasonably withheld or delayed,
make any alterations, improvements or additions to the premises, except that
Tenant may, without
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consent of Landlord but with prior written notice to Landlord, make minor
improvements to the interior of the Premises provided that: (i) they do not
impair the structural strength, operation or value of the Building, and (ii)
Tenant shall, prior to the commencement of the work and to the extent
applicable, (and excluding any personal property therein or trade fixtures
installed therein shall) deliver to Landlord waivers of liens, in form
acceptable to Landlord, from all contractors, subcontractors and materialmen
performing such work, and shall take all steps required or permitted by law to
avoid the imposition of any mechanics' lien upon the Premises, Building and
Land. All alterations, improvements and additions, except for minor alterations
and improvements (and excluding any personal property therein or trade fixtures
installed therein shall) become part of the Premises and the property of
Landlord without payment therefor by Landlord and shall be surrendered to
Landlord at the end of the Term; PROVIDED, HOWEVER, if so notified by Landlord,
Tenant shall, prior to the end of the Term, remove all and any such alterations
and improvements made by Tenant after initial occupancy, or the parts thereof
specified by Landlord, from the Premises and shall repair all damages caused by
installation and removal. For purposes of this Section 14, "minor improvements"
shall be defined as those improvements costing no more than $25,000.
15. Mechanics' Liens
Tenant shall not, in the making of any repairs or alterations pursuant
to the provisions of Section 14 hereof, suffer or permit any mechanic's,
laborer's or materialman's lien to be filed against the Premises, Building, Land
or any part thereof by reason of labor or materials supplied or claimed to have
been supplied to Tenant; and if any such lien shall be filed, Tenant, within
fifteen days after notice of filing, shall cause it to be discharged of record.
16. Use of Premises
Tenant may use and occupy the Premises only for the express and
limited purpose listed in Section 1 of this Lease, and the Premises shall not be
used or occupied, in whole or in part, for any other purpose without the prior
written consent of Landlord. Tenant shall not commit or suffer any waste upon
the Premises or building, or any nuisance or any other act which may disturb the
quiet enjoyment of any other tenant in the Building. Landlord represents to
Tenant that the Premises may be used for the purpose specified in this Lease.
17. Rules and Regulations
Tenant covenants and agrees that Tenant, its employees, agents,
invitees, licensees and other visitors, shall observe faithfully, and comply
strictly with, such reasonable Rules and
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Regulations as Landlord's agents may, after notice to Tenant, from time to time
adopt with respect to the Building.
18. Governmental Regulations
Tenant shall, in the use and occupancy of the Premises, comply with
all applicable laws, ordinances, notices and regulations of all governmental and
municipal authorities, and with regulations of the insurers of the Premises.
Tenant shall keep in force at all times all licenses, consents and permits
necessary for the lawful conduct of Tenant's business at the Premises. Nothing
in the foregoing shall require the Tenant to perform any work or make any
improvement or repairs which the Landlord is required to make pursuant to other
provisions of this Lease.
19. Signs
Landlord, at Tenant's expense, shall construct one standard building
identification sign for Tenant upon the Land at a location to be selected by
Landlord. Except for signs which are located wholly with the interior of the
Premises and which are not visible from the exterior thereof, no signs shall
erected by Tenant anywhere upon the Premises, Building or Land.
20. Landlord's Entry
Landlord and its agents, contractors and invitees shall have the right
to enter the Premises at all reasonable times with reasonable notice to inspect
the same, to exhibit same to prospective purchasers, tenants and mortgagees, and
to make any necessary repairs thereto. During the last six (6) months of the
terms; Landlord shall have the right for a reasonable number of times to show
the Premises to prospective tenants. Landlord shall not be liable in any manner
to Tenant by reason of such entry or the performance of repair work in the
Premises provided reasonable care is exercised by Landlord and for its agents or
representatives, and the obligation of Tenant hereunder shall not thereby be
affected; however, Landlord agrees (except in the case of Tenant's default
hereunder) that all repair work (excepting only emergency work or work which
must, in Landlord's reasonable judgment, be performed on an urgent basis) by
Landlord shall be performed in a reasonable manner at reasonable times.
21. Indemnification
Tenant shall indemnify Landlord from and against any and all losses,
costs (including reasonable counsel fees), claims, sits, actions and causes of
action, whether legal or equitable, sustained or arising by reason of Tenant's
default in any of its obligations hereunder, or of the fault or neglect of
Tenant or of the failure by Tenant or any of its officers, agents, employees or
invitees to fulfill any duty toward the public, or any person or
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persons whomsoever, which Tenant, by reason of its occupancy or use of the
Premises, may owe.
22. Curing Tenant's Defaults
If Tenant shall default in performing any of its obligations
hereunder, Landlord may (but shall not be so obliged), in addition to Landlord's
other rights and remedies and without waiver of such default, cure such default
on behalf of Tenant, thereby entering and possessing the Premises if deemed
reasonable by Landlord, provided that Landlord shall have first given Tenant
notice of such default and Tenant shall have failed within ten (10) days
following said notice to cure or diligently to pursue the cure of said default
(which notice and opportunity to cure shall not be required in case of
emergency), Tenant, upon demand of Landlord, shall reimburse Landlord for all
reasonable costs (including reasonable counsel fees) incurred by Landlord with
respect to such default, and, if Landlord so elects, Landlord's efforts to cure
the same, which costs shall be deemed Additional Rent hereunder.
23. Default
(A) If (i) Tenant fails to pay any installment of Base Rent when due,
(ii) Tenant fails to pay any Additional Rent when due and such failure continues
for a period of ten (10) days after written notice from Landlord, (iii) Tenant
vacates the Premises, (iv) Tenant fails to observe or perform any of Tenant's
other obligations herein contained and such failure continues for more than
fifteen (15) days after written notice from Landlord, (v) Tenant commits an act
of bankruptcy or files a petition or commences any proceeding under any
bankruptcy or insolvency law, (vi) a petition is filed or any proceeding is
commenced against Tenant under any bankruptcy or insolvency law and is not
dismissed within ninety (90) days, (vii) Tenant is adjudicated a bankrupt,
(viii) a receiver or other official is appointed for Tenant or for a substantial
part of Tenant's assets or for Tenant's interest in this Lease, or (ix) any
attachment or execution is filed or levied against a substantial part of
Tenant's assets or Tenant's interests in this Lease or any of Tenant's property
in the Premises, then in any such event, an Event of Default shall be deemed to
exist and Tenant shall be in default hereunder, and, at the option of Landlord:
(a) the balance of the Base Rent and all Additional Rent and all other sums to
which Landlord is entitled hereunder shall be deemed to be due payable in
accordance with the terms hereto and in arrears, as if payable in advance
hereunder; or (b) this Lease and the Term shall, without waiver of Landlord's
other rights and remedies, terminate without any right of Tenant to save the
forfeiture. Any acceleration of the rent by landlord shall not constitute a
waiver of any right or remedy of Landlord, and if Tenant shall fail to pay the
accelerated rent when due, then Landlord may thereafter terminate this Lease, as
aforesaid. Immediately upon such termination by Landlord, Landlord shall have
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<PAGE>
the right to recover possession of the Premises with or without legal process,
breaking locks and replacing locks, and removing Tenant's and any third party's
property therefrom, and making any disposition thereof as Landlord may deem
commercially reasonable.
(B) Following such termination, Landlord shall have the unrestricted
right to lease the Premises or any part thereof to any person and pursuant to
any terms as Landlord may elect, but Landlord shall have no obligations to rent
the Premises so long as Landlord (or any related entity) has other comparable
vacant space available for leasing in the general geographic area of the
Premises.
(C) No act or forbearance by Landlord shall be deemed a waiver or
election of any right or remedy by Landlord with respect to Tenant's obligations
hereunder, unless and to the extent that Landlord shall execute and deliver to
Tenant a written instrument to such effect, and any such written waiver by
Landlord shall not constitute a waiver or relinquishment for the future of any
obligation of Tenant. Landlord's acceptance of any payment from Tenant
(regardless of any endorsement on any check or any writing accompanying such
payment) may be applied by Landlord to Tenant's obligations then due hereunder
in any priority as Landlord may elect, and such acceptance by Landlord shall not
operate as an accord and satisfaction or constitute a waiver of any right or
remedy of Landlord with regard to Tenant's obligations hereunder.
24. Quiet Enjoyment
So long as Tenant is not in default under the covenants and agreements
of this Lease, Tenant's quiet and peaceful enjoyment of the Premises shall not
be disturbed or interfered with by Landlord or by any person claiming by,
through or under Landlord.
25. Assignment and Subletting
Tenant shall not assign, pledge, mortgage or otherwise transfer or
encumber this Lease, nor sublet all or any part of the Premises or permit the
same to be occupied or used by anyone other than Tenant or its employees without
Landlord's prior written approval, which Landlord agrees not unreasonably to
withhold or delay. It will not be unreasonable for Landlord to withhold consent
if the reputation, financial responsibility, or business of a proposed assignee
or subtenant is reasonably unsatisfactory to Landlord, or if Landlord deems such
business not to be consonant with that of other tenants in the Building, or if
the intended use by the proposed assignee or subtenant conflicts with any
commitment made by landlord to any other tenant in the Building.
Tenant's request for approval shall be in writing and contain the name,
address, and description of the business of the proposed assignee or subtenant,
its most recent financial statement
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<PAGE>
and other evidence of financial responsibility, its intended use of the
Premises, and the terms and conditions of the proposed assignment or subletting.
Within thirty (30) days from receipt of such request Landlord shall
either: (a) grant or refuse consent; or (b) elect to require Tenant (i) to
execute an assignment of lease or sublease of Tenant's interest hereunder to
Landlord or its designee upon the same terms and conditions as are contained
herein, together with an assignment of Tenant's interest as sublessor in any
such proposed sublease, or (ii) if the request is for consent to a proposed
assignment of this Lease, to terminate this Lease and the term hereof effective
as of the last day of the third month following the month in which the request
was received.
Each assignee or sublessee of Tenant's interest hereunder shall assume
and be deemed to have assumed this Lease and shall be and remain liable jointly
and severally with Tenant for all payments and for the due performance of all
terms, covenants, conditions and provisions herein contained on Tenant's part to
be observed and performed. No assignment or refusal of an assignee to execute
the same shall not release assignee from its liability as set forth herein.
Any consent by Landlord hereunder shall not constitute a waiver of
strict future compliance by Tenant of the provisions of this Section 25 or a
release of Tenant from the full performance by Tenant of any of the terms,
covenants, provisions, or conditions in this Lease contained.
26. Subordination
This Lease is and shall be subject and subordinate at all times to any
lease under which landlord is in control of the Premises, to the rights of the
owners of the Building and Land, and to all mortgages and other encumbrances now
or hereafter placed upon the Premises or the Building and Land without the
necessity of any further instrument or act on the part of Tenant to effectuate
such subordination. Tenant shall from time to time execute and deliver within
ten days following the request of Landlord or Landlord's mortgagee, grantee or
lessor, recordable instruments evidencing such subordination and Tenant's
agreement to attorn to the holder of such priority right. Notwithstanding the
foregoing, any mortgagee may at any time subordinate its mortgage to this Lease,
without Tenant's consent, by notice in writing to Tenant, whereupon this Lease
shall be deemed prior to such mortgage without regard to their respective dates.
27. Tenant's Certificate
Tenant shall from time to time, within fifteen (15) days after
Landlord's request, execute and deliver to Landlord a
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<PAGE>
recordable written instrument(s) certifying that this Lease is unmodified and in
full effect (or if there have been modifications, that it is in effect as
modified), and the dates to which rental charges have been prepaid by Tenant, if
any, and whether or not Landlord is in default of any of its obligations
hereunder, Tenant agrees that such statement may be relied upon by any
mortgagee, purchaser or assignee of Landlord's interest in this Lease, the
Building or Land.
28. Acceptance; Surrender
By entry and possession of the Premises, Tenant thereby acknowledges
that Tenant has examined the Premises and accepts the same as being in the
condition called for by this Lease subject to completion of Landlord's work and
completion of "punch-list" items. Tenant, shall, at the end of the Term,
promptly surrender the Premises in the order and condition called for by this
Lease. Tenant, shall, at the end of the Term, promptly surrender the Premises in
the same order and condition as on the date hereto and in conformity with the
applicable provisions of this Lease, excepting only reasonable wear and tear
damage by fire or other casualty.
29. Holding Over
This Lease shall expire absolutely and without notice on the last day
of the Term, provided that if Tenant, with the prior written consent of
Landlord, retains possession of the Premises or any part thereof after the
termination of this Lease by expiration of the Term or otherwise, a
month-to-month tenancy shall be deemed to exist, and Tenant shall continue to
pay the Base Rent and Additional Rent due hereunder. If such holding over exists
without Landlord's prior written consent, Tenant shall pay Landlord, as partial
compensation for such unlawful retention, an amount calculated on a per diem
basis for each day of such continued unlawful retention, equal to one and
one-half the Base Rent and Additional Rent for the time Tenant thus remains in
possession. Such payments for unlawful retention shall not limit any rights or
remedies of Landlord resulting by reason of the wrongful holding over by Tenant
or create any right in Tenant to continue in possession of the Premises.
30. Notices
All notices, requests and consents herein required or permitted from
either party or the other shall be in writing and shall be deemed given when
deposited with the Unites States Postal Service, registered or certified mail,
return receipt requested, postage prepaid, addressed to Landlord at its address
aforesaid, with a copy to any mortgagee designated by Landlord, or, as the case
may be, addressed to Tenant at its address aforesaid, or to
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<PAGE>
such other address as the party to receive same may designate by notice to the
other.
31. Broker
Each of the parties represents and warrants that there are no claims
for brokerage commissions or finder's fees in connection with the execution of
this Lease, except for Oakmont Realty Corp. & Grubb & Ellis Company for whose
commission Landlord is solely responsible, and each party agrees to indemnify
the other against, and hold it harmless from, all liability arising from any
such claim including, without limitation, the cost of reasonable counsel fees in
connection therewith.
32. Definition of Parties
The word "Landlord" is used herein to include the Landlord named above
and any subsequent person who succeeds to the rights of Landlord herein, each of
whom shall have the same rights and remedies as he would have had had he
originally signed this Lease as Landlord, but neither Landlord nor any such
person shall have any liability hereunder after he ceases to hold a free or
leasehold interest in the Premises, except for obligations which may have
theretofore accrued; and in all events, Tenant shall look solely to the Premises
and rents derived therefrom for enforcement of any obligation hereunder or by
law assumed or enforceable against Landlord or such other person. The word
"Tenant" is used herein to include the party named above as Tenant as well as
its or their respective heirs, personal representatives, successors and assigns,
each of whom shall be under the same obligations, liabilities and disabilities
and have only such rights, privileges and powers as he would have possessed had
he originally signed this Lease as Tenant.
33. Entire Agreement; Interpretation
This Lease constitutes the entire agreement between the parties hereto
with respect to the Premises and there are no other agreements or
understandings. This Lease shall not be modified except by written instrument
executed by both parties. The captions used herein are for convenience only, and
are not part of the Lease. This Lease shall be construed in accordance with the
laws of the Commonwealth of Pennsylvania.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease, under
seal, as of the day and year first above written.
TENANT: Petroleum Heat &
Power Co., Inc.
WITNESS: /s/ By: /s/
_________________________ ________________________________
Date: November 1, 1996
LANDLORD: Carriage Group
WITNESS: /s/ By: /s/
_________________________ ________________________________
Date: November 8, 1996
Addendum to Lease Agreement attached hereto and made a part hereof.
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<PAGE>
ADDENDUM TO LEASE AGREEMENT
ADDENDUM made this 8th day of November, 1996 to Lease Agreement dated
______________________, 199_ by and between Carriage Group ("Lessor") and
Petroleum Heat & Power Co., Inc. ("Lessee").
Anything in the printed form of the Lease or elsewhere to the contrary
notwithstanding, the parties hereto further expressly agree as follows:
34. Base Rent Schedule:
Base Rent shall be due and payable on the first day of each calendar month
of the term in accordance with the following schedule:
1st - 60th Month: $30,000 per month net of all Operating
Expenses
61st - 120th Month: $33,000 per month net of all Operating
Expenses
35. Option to Renew:
Tenant shall have the option of extending the initial Lease Term for two
(2) additional periods of five (5) years each (said five year periods are
referred to as the "First Renewal Term" and the "Second Renewal Term"). In
order to exercise the Tenant's option to renew this Lease for the First
Renewal Term, the Tenant must provide Landlord with written notice of
Tenant's intention to renew at least 180 days prior to the expiration of
the Initial Lease Term and, at such time, Tenant shall not be in default of
any of its obligations under the Lease beyond any applicable cure or grace
period. The Base Rent during the First Renewal Term shall equal Thirty Six
Thousand Three Hundred Dollars ($36,300.00) per month. In order to exercise
the Tenant's option to renew this Lease for the Second Renewal Term, the
Tenant must have previously exercised its option to renew the Lease for the
First Renewal Term and Tenant must provide the Landlord with written notice
of its intention to renew at least 180 days prior to the expiration of the
First Renewal Term and, at such time, the Tenant shall not be in default of
any of its obligations under this Lease beyond any applicable care or grace
period. The Base Rent during the Second Renewal Term shall equal Thirty
Nine Thousand Nine Hundred Thirty Dollars ($39,930.00) per month. If the
Tenant does elect to renew this Lease as aforesaid, all the terms and
conditions of this Lease shall remain in full force and effect with the
Base Rent being increased as set forth herein. If the Tenant fails to
provide Landlord with written notice of its intention to renew as and
<PAGE>
at the times required herein (said times being of the essence of this
Lease), Tenant's option(s) to renew shall automatically terminate without
the need for additional notice. Tenant shall provide Landlord with written
notice of its intention to renew by certified mail, return receipt
requested, to Carriage Group or to such address as may hereafter be
designated in writing by Landlord to Tenant for such purpose. Any notice
sent in accordance with the aforesaid shall, for the purpose of this Lease,
be deemed received on the date received by Landlord as evidenced by the
return receipt signed by Landlord or Landlord's authorized agent.
36. Modular Furniture:
Landlord and Tenant agree that all Centercore Systems Furniture that is
currently located within the 30,000 SF demised premises shall become the
property of Tenant upon occupancy of Premises by Tenant.
37. Back-Up Generator:
Landlord owns a gas fired back-up generator currently located outside the
southwest corner of the Premises. Landlord and Tenant agree that the
generator shall remain the property of Landlord, however, Tenant shall have
the right to use this back-up generator during the term of this Lease and
any renewal periods exercised by Tenant pursuant to Paragraph 34. Landlord
makes no representations concerning the condition of the generator. Tenant
shall, at Tenant's cost, maintain the generator throughout Tenant's
occupancy of the premises (if it continues to elect to use same) and
Landlord shall at no time be obligated to repair or replace the generator.
38. Nondisturbance Agreement:
Tenant's agreement to subordinate this Lease to all present and future
leases, rights, mortgages and other encumbrances, as provided in Article 26
hereof, is expressly subject to and conditioned upon Landlord obtaining a
nondisturbance agreement from the holder of the present and any future
ground, master or operating Leases of the Premises or the Building and any
and all present and future mortgages, security instruments or other
security interests upon or affecting the Building and to all advances
thereunder and all renewals, replacements, modifications, amendments,
consolidations and extensions thereof. Each such future nondisturbance
agreement shall be in form and substance reasonably satisfactory to Tenant
provided that Landlord shall pay all costs, fees and expenses imposed on
Landlord in connection with obtaining such non-disturbance agreement.
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<PAGE>
39. Available Space Notice:
Notwithstanding anything to the contrary contained herein, if and when any
other space in the Building becomes available for lease, Landlord shall
notify Tenant thereof in writing, and within five (5) days of Tenant's
receipt of such written notice (the "Five (5) Day Period"), Tenant shall
have the exclusive right (but not the obligation), by giving written notice
thereof to Landlord within the Five (5) Day Period, to lease such
additional space, failing which Tenant shall no longer have the exclusive
right to lease the additional space. If Tenant leases the additional space
by written notice given within the Five (5) Day Period, all lease terms and
conditions shall be mutually agreed upon by Landlord and Tenant.
IN WITNESS WHEREOF the parties hereto have executed these presents the day
and year first above written and intent to be legally bound thereby.
LANDLORD: Carriage Group
WITNESS: /s/ By: /s/
_________________________ ________________________________
Date: November 8, 1996
TENANT: Petroleum Heat &
Power Co., Inc.
WITNESS: /s/ By: /s/
_________________________ ________________________________
Date: November 1, 1996
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<PAGE>
EXHIBIT "B"
CONSTRUCTION SPECIFICATION
PETRO at 467 CREAMERY WAY, EXTON, PENNSYLVANIA
Landlord, at Landlord's sole cost and expense, shall construct the following
improvements to the Premises. Any modifications to these improvements must be
agreed upon by Landlord and Tenant. Any additional improvements required by
Tenant shall be at Tenant's sole cost and expense. All improvements will be in
accordance with the following:
1) Landlord shall repaint all drywall surfaces with one coat of flat latex
paint.
2) Landlord shall demise the premises with a fire rated drywall demising wall
pursuant to the Construction Plan attached hereto.
3) Landlord will provide Tenant with a recarpeting allowance of $2.00/SF to
recarpet the premises. Allowance shall be paid to Tenant within sixty (60)
days of Tenant's occupancy of the Premises.
4) Landlord will separately meter the gas and electric service to Tenant's
demised premises.
5) Landlord shall add two (2) additional toilets in each of the restroom
facilities (total of 4 additional toilets). Pursuant to the attached
Construction Plan no other plumbing is included.
<PAGE>
EXHIBIT "C"
467 CREAMERY WAY
EXTON, PENNSYLVANIA
ESTIMATED 1996 OPERATING EXPENSE BUDGET
COMMON AREA SERVICE COST/SQ. FT.
------------------- ------------
REAL ESTATE TAXES $1.15
PROPERTY & LIABILITY INSURANCE .11
LANDSCAPE MAINTENANCE .15
SNOW REMOVAL .13
WATER & SEWER .08
BUILDING MAINTENANCE .10
TRASH REMOVAL .09
WINDOW CLEANING .03
SPRINKLER MAINTENANCE .03
PARK ASSESSMENT .03
HVAC MAINTENANCE .20
PARKING LOT MAINTENANCE .05
Administrative Fee (15%) .10
-----
TOTAL ESTIMATED EXPENSES $2.25
Janitorial to be paid by Tenant directly to Tenant's janitorial company.
Electric/Gas - To be paid by Tenant directly to the utility company.
DRAFT OF FEBRUARY 13, 1997
PETROLEUM HEAT AND POWER CO., INC.
NOTE AGREEMENT
Dated as of February 1, 1997
Re: $60,000,000 Senior Notes
Due October 1, 2002
<PAGE>
TABLE OF CONTENTS
(Not a part of the Agreement)
SECTION HEADING PAGE
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.........................1
Section 1.1. Description of Notes....................................1
Section 1.2. Description of Old Notes................................2
Section 1.3. Commitment, Closing Date................................2
Section 1.4. Other Agreements........................................3
SECTION 2. PREPAYMENT OF NOTES.........................................3
Section 2.1. Required Prepayments....................................3
Section 2.2. Mandatory Prepayment on Change of Ownership.............3
Section 2.3. Optional Prepayments....................................5
Section 2.4. Notice of Prepayments...................................5
Section 2.5. Allocation of Prepayments...............................6
Section 2.6. Direct Payment..........................................6
SECTION 3. REPRESENTATIONS.............................................6
Section 3.1. Representations of the Company..........................6
Section 3.2. Representations of the Purchasers.......................7
SECTION 4. CLOSING CONDITIONS..........................................7
Section 4.1. Closing Certificates....................................7
Section 4.2. Legal Opinions..........................................7
Section 4.3. Related Transactions....................................7
Section 4.4. Consummation of Sale of Preferred Stock.................7
Section 4.5. Payment of Special Counsel Fees.........................7
Section 4.6. Private Placement Numbers...............................8
Section 4.7. Satisfactory Proceedings................................8
Section 4.8. Waiver of Conditions....................................8
SECTION 5. COMPANY COVENANTS...........................................8
Section 5.1. Corporate Existence, etc................................8
Section 5.2. Insurance...............................................8
Section 5.3. Taxes, Claims for Labor and Materials,
Compliance with Laws..................................8
Section 5.4. Maintenance, Etc........................................9
Section 5.5. Nature of Business......................................9
Section 5.6. Limitations on Funded Debt..............................9
Section 5.7. Subsidiary Stock.......................................10
Section 5.8. Dividends, Stock Purchases.............................10
Section 5.9. Mergers, Consolidations and Sales of Assets............10
Section 5.10. Guaranties.............................................11
Section 5.11. Repurchase of Notes....................................11
Section 5.12. Transactions with Affiliates...........................11
Section 5.13. Termination of Pension Plans...........................12
Section 5.14. Reports and Rights of Inspection.......................12
Section 5.15. Limitation on Indebtedness and Preferred Stock
of Subsidiaries......................................14
Section 5.16. Limitation on Restrictions on Distributions from
Subsidiaries.........................................15
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR....................15
Section 6.1. Events of Default......................................15
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<PAGE>
Section 6.2. Notice to Holders......................................17
Section 6.3. Acceleration of Maturities.............................17
Section 6.4. Rescission of Acceleration.............................18
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS...........................18
Section 7.1. Consent Required.......................................18
Section 7.2. Effect of Amendment or Waiver..........................18
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS...................19
Section 8.1. Definitions............................................19
Section 8.2. Accounting Principles..................................29
Section 8.3. Directly or Indirectly.................................29
SECTION 9. MISCELLANEOUS..............................................29
Section 9.1. Registration and Transfers of the Notes................29
Section 9.2. Exchange of Notes......................................29
Section 9.3. Loss, Theft, etc. of Notes.............................30
Section 9.4. Expenses, Stamp Tax Indemnity..........................30
Section 9.5. Powers and Rights Not Waived...........................30
Section 9.6. Notices................................................31
Section 9.7. Designation of Notes as Designated Senior Debt.........31
Section 9.8. Successors and Assigns.................................31
Section 9.9. Survival of Covenants and Representations..............31
Section 9.10. Severability...........................................31
Section 9.11. Governing Law..........................................31
Section 9.12. Captions...............................................31
ATTACHMENTS TO NOTE AGREEMENT:
Schedule I -- Names and Addresses of Purchasers
Schedule II -- Names of Beneficial Owners of Class C Common Stock
Exhibit A -- Form of Senior Note due October 1, 2002
Exhibit B -- Closing Certificate of the Company
Exhibit C -- Description of Special Counsel's Closing Opinion
Exhibit D -- Description of Closing Opinion of Counsel to the Company
-ii-
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
PETROLEUM HEAT AND POWER CO., INC.
Davenport Street
Stamford, Connecticut 06904
NOTE AGREEMENT
Re: $60,000,000 Senior Notes Due October 1, 2002
Dated as of
February 1, 1997
To the Purchaser named in Schedule I hereto which is a signatory of this
Agreement
Gentlemen:
The undersigned, PETROLEUM HEAT AND POWER CO., INC., a Minnesota
corporation (the "Company"), agrees with you as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
Section 1.1. Description of Notes. The Company will authorize the issue
and sale of:
(a) $40,000,000 aggregate principal amount of its Senior Notes,
Series A, to be dated October 1, 1996, to bear interest at the rate of (i)
during the period from October 1, 1996 to but not including October 1,
1998, 11.85% per annum and (ii) during the period from and including
October 1, 1998 until maturity, 10.9% per annum, and to be expressed to
mature on October 1, 2002 (the "Series A Notes");
(b) $15,000,000 aggregate principal amount of its Senior Notes,
Series B, to be dated October 1, 1996, to bear interest at the rate of (i)
during the period from October 1, 1996 to but not including October 1,
1998, 12.17% per annum and (ii) during the period from and including
October 1, 1998 until maturity, 10.9% per annum, and to be expressed to
mature on October 1, 2002 (the "Series B Notes"); and
(c) $5,000,000 aggregate principal amount of its Senior Notes,
Series C, to be dated October 1, 1996, to bear interest at the rate of (i)
during the period from October 1, 1996 to but not including October 1,
1998, 12.18% per annum and (ii) during the period from and including
October 1, 1998 until maturity, 10.9% per annum, and to be expressed to
mature on October 1, 2002 (the "Series C Notes").
The Series A Notes, the Series B Notes and the Series C Notes are
hereinafter referred to collectively as the "Notes." The Series A Notes, the
Series B Notes and the Series C Notes are each herein referred to as Notes of a
"Series." The Notes shall be substantially in the form attached hereto as
Exhibit A. Interest on the Notes shall be payable semi-annually on the first day
of each April and October in each year (commencing on the first such date after
the date of issue) and at maturity. The Notes of each Series shall bear interest
during any period on overdue principal and premium, if any, and (to the extent
legally
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
enforceable) on any overdue installment of interest at the applicable Overdue
Rate after the date due, whether by acceleration or otherwise, until paid.
Interest on the Notes shall be computed on the basis of a 360-day year of twelve
30-day months. The Notes are not subject to prepayment or redemption at the
option of the Company prior to their expressed maturity dates except on the
terms and conditions and in the amounts and with the premium, if any, set forth
in Section 2 of this Agreement. The term "Notes" as used herein shall include
each Note delivered pursuant to this Agreement and the separate agreements with
the other purchasers named in Schedule I. You and the other purchasers named in
Schedule I are hereinafter sometimes referred to as the "Purchasers".
Section 1.2. Description of Old Notes. Pursuant to the separate Note
Agreements dated as of September 1, 1988 between the Company and each of the
respective Purchasers named therein, the Company has heretofore issued (i)
$30,000,000 aggregate principal amount of its Subordinated Notes due October 1,
1998 (the "Old Subordinated Notes") and (ii) $30,000,000 aggregate principal
amount of its Senior Notes due October 1, 1998 (the "Old Senior Notes" and,
collectively with the Old Subordinated Notes, the "Old Notes"). The Purchasers
of the Notes hereunder are also the current holders of the Old Notes.
Section 1.3. Commitment, Closing Date. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to you, and you
agree to purchase from the Company, Notes of the Company in the aggregate
principal amount set forth opposite your name in Schedule I and the Notes shall
be paid for by delivery to the Company of an equal principal amount of Old Notes
which bear the same interest rate (to but not including October 1, 1998) as the
Notes being purchased on the Closing Date hereinafter mentioned; provided that
the Old Notes surrendered in exchange for the Notes will be canceled with no
interest due thereon.
The exchange of the Old Notes for the Notes will be made at the offices of
Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, subject to
satisfaction of the conditions precedent set forth in ss.4 hereof (the "Closing
Conditions"), on February 18, 1997 or, in the event that all Closing Conditions
have not been satisfied as of February 18, 1997, such later date on or prior to
February 28, 1997 as of which all such Closing Conditions have been satisfied
(such date or such later date is herein referred to as the "Closing Date"). The
Notes delivered to you on the Closing Date will be delivered to you in the form
of a single registered Note for the full amount of your purchase (unless
different denominations are
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<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
specified by you), registered in your name or in the name of such nominee as you
may specify and in substantially the form attached hereto as Exhibit A, all as
you may specify at any time prior to the date fixed for delivery.
Section 1.4. Other Agreements. Simultaneously with the execution and
delivery of this Agreement, the Company is entering into similar agreements with
the other Purchasers under which such other Purchasers agree to purchase from
the Company the principal amount of Notes set opposite such Purchasers' names in
Schedule I, and your obligation and the obligations of the Company hereunder are
subject to the execution and delivery of the similar agreements by the other
Purchasers. This Agreement and said similar agreements with the other Purchasers
are herein collectively referred to as the "Agreements". The obligations of each
Purchaser shall be several and not joint and no Purchaser shall be liable or
responsible for the acts of any other Purchaser.
SECTION 2. PREPAYMENT OF NOTES.
Section 2.1. Required Prepayments. The Company agrees that on October 1,
2000 and on October 1, 2001, it will prepay and apply and there shall become due
and payable on the principal indebtedness evidenced by the Notes an amount equal
to the lesser of (i) $15,000,000 or (ii) the principal amount of the Notes then
outstanding. The entire remaining principal amount of the Notes shall become due
and payable on October 1, 2002. No premium shall be payable in connection with
any required prepayment made pursuant to this ss.2.1.
In the event of any prepayment, redemption, purchase or other acquisition
by the Company of less than all of the Notes other than a prepayment pursuant to
this ss.2.1 each subsequent prepayment required to be made pursuant to this
ss.2.1 shall be reduced in the proportion that the principal amount of such
prepayment, redemption, purchase or other acquisition bears to the unpaid
principal amount of the Notes immediately prior to such prepayment, redemption,
purchase or other acquisition (after giving effect to any prepayment made
pursuant to this ss.2.1 on the date of such prepayment, redemption, purchase or
other acquisition).
Section 2.2. Mandatory Prepayment on Change of Ownership. In the event
the Company has knowledge of a Change of Ownership the Company will give written
notice (herein called "Company Notice") of such fact to all holders of the Notes
then outstanding. Said Company Notice shall be delivered within 30 days after
the occurrence of such Change of Ownership; provided, however that if the
Company does not then have knowledge of such fact, such Company Notice shall be
delivered upon receipt of such knowledge by the Company. The Company Notice
shall state the
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Petroleum Heat and Power Co., Inc. Note Agreement
number of shares and percentage of each class of Voting Stock of the Company
which shall continue to be beneficially owned and controlled by the Sevin Group
and/or the Traber Group (and specifying the number of shares of each such class
held by each group), either directly or indirectly, immediately after the
occurrence of such Change of Ownership.
As used herein, the term "Change of Ownership" shall mean
(a) any issue, sale or other disposition of shares of common stock
of the Company which results in the number of shares of the common stock
beneficially owned by the Sevin Group being less than 15% of the issued
and outstanding shares of common stock (other than the Permitted Common
Stock defined below), other than (i) the issuance, in connection with an
underwritten public offering pursuant to a registration statement filed
with the Securities and Exchange Commission (a "public offering"), of
additional common stock ranking equally with Class A Common Stock as to
payment of dividends and as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of the Company
("Permitted Common Stock") or the issuance of any Permitted Common Stock
upon the conversion of any convertible preferred stock issued pursuant to
a public offering, (ii) a sale or disposition of shares of common stock to
one or more members of the Traber Group, and (iii) a disposition of shares
of common stock to a testamentary trust, all beneficiaries of which are
members of the immediate family of a member of the Sevin Group and all
trustees of which are members of the Sevin Group and, under the terms of
the trust, have the power to vote such shares on all matters as to which
the holders of such shares have the power to vote, so long as, giving
effect to any of the events referred to in the foregoing clauses (i), (ii)
and (iii), the Sevin Group and the Traber Group together have beneficial
ownership (or, in the case of an event referred to in the foregoing clause
(iii), voting control) of a sufficient number of shares of the capital
stock of the Company to entitle them to elect, and they do elect, at least
the smallest number of directors that is necessary to constitute a
majority of the Company's Board of Directors;
(b) any event which results in the number of directors of the
Company's Board of Directors who are designated by the Sevin Group
constituting less than a majority of the Board; or
(c) any of the following events: (i) the holders of any of the
Public Debentures have the right to require the Company to purchase any
such Public Debentures pursuant
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Petroleum Heat and Power Co., Inc. Note Agreement
to Section 4.08 of any of the Public Indentures, (ii) any holder of 2001
Notes exercises its right to declare any such notes to be due and payable
pursuant to Section 5.2(A) of the Sixth Amendment and Restatement of Note
Agreement, dated as of February 1, 1997, relating thereto (the "Sixth
Amendment and Restatement"), (iii) the Company is required to make an
offer to each holder of the 1997 Preferred Stock to redeem all or any part
of such holder's 1997 Preferred Stock pursuant to paragraph 5(a) of the
Certificate of Designation, (iv) the Company is required to make an offer
to each holder of the 1989 Preferred Stock to redeem all or any part of
such holder's 1989 Preferred Stock pursuant to Article III (1)(c) of the
Restated and Amended Articles of Incorporation of the Company, (v) any
holder of any Subordinated Indebtedness issued in exchange for the 1989
Preferred Stock exercises its rights to declare such notes to be due and
payable pursuant to Section 6.1 of the 1989 Preferred Stock Purchase
Agreements or (vi) any holder of 2001 Notes, Public Debentures, 1997
Preferred Stock or 1989 Preferred Stock shall have received any
consideration (whether in the form of cash, a change in the rate of
interest or dividends relating to such notes, debentures or preferred
stock, a change in any other provision of the terms of such notes,
debentures or preferred stock, or otherwise) to amend, modify, waive or
otherwise give up its right to declare any such notes, debentures or
preferred stock to be due and payable upon a "Change of Ownership," as
defined in the 1989 Preferred Stock Purchase Agreements, the Sixth
Amendment and Restatement or the Restated and Amended Articles of
Incorporation of the Company, or a "Change of Control" as defined in the
Public Indentures or the Certificate of Designation, as the case may be;
provided, however, that an amendment to or waiver or other modification of
Article III (1)(c) of the Restated and Amended Articles of Incorporation
of the Company, paragraph 5(a) of the Certificate of Designation, Section
6.1 of the 1989 Preferred Stock Purchase Agreements or Section 5.2(A) of
the Sixth Amendment and Restatement shall not, in the absence of any
consideration, constitute a Change of Ownership.
Upon the receipt of such Company Notice or, if no Company Notice is given,
upon the occurrence of a Change of Ownership the holder or holders of any Notes
shall have the privilege, upon written notice to the Company declaring all Notes
held by such holder or holders serving such notice to become due and payable,
and thereupon such Notes shall become due and payable on such date as the
Company shall specify (which date
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Petroleum Heat and Power Co., Inc. Note Agreement
shall be not later than 90 days after such declaration), and the Company
covenants and agrees to prepay in full all Notes held by such holder or holders
serving such notice; provided, however, that in the event Company Notice has in
fact been given as hereinabove contemplated, such declaration shall be made
within 30 days after receipt of such Company Notice.
All prepayments on the Notes pursuant to this ss.2.2 shall be made by the
payment of the aggregate principal amount remaining unpaid on such Notes
together with accrued interest thereon to the date of such prepayment, plus a
premium equal to 1% of such prepaid principal.
Notwithstanding the provisions of ss.2.5, the Company may prepay all Notes
held by any holder or holders who serve such notice on the Company without
applying said prepayments ratably among all outstanding Notes.
Section 2.3. Optional Prepayments. In addition to the prepayments
required by ss.2.1 and ss.2.2 and upon compliance with ss.2.4, the Company shall
have the privilege, at any time and from time to time of prepaying the
outstanding Notes, either in whole or in part (but if in part then in units of
$100,000 or an integral multiple of $10,000 in excess thereof) by payment of the
principal amount of each Note, or portion thereof to be prepaid, and accrued
interest thereon to the date of such prepayment, together with, if such
prepayment is made on or prior to March 31, 2002, a premium equal to the
Make-Whole Amount determined as of two Business Days prior to the date of such
prepayment pursuant to this ss.2.3.
Section 2.4. Notice of Prepayments. The Company will give notice of any
prepayment of the Notes pursuant to ss.2.3 to each holder thereof not less than
30 days nor more than 60 days before the date fixed for such optional prepayment
specifying (i) such date, (ii) the principal amount of the holder's Notes to be
prepaid on such date, (iii) the accrued interest applicable to the prepayment,
(iv) that a premium may be payable, (v) the date when such premium will be
calculated, (vi) the estimated premium, and (vii) a copy of the Bloomberg
Financial Markets Services Screen from which the Reinvestment Yield was
calculated. Such notice of prepayment shall also certify all facts which are
conditions precedent to any such prepayment. Notice of prepayment having been so
given, the aggregate principal amount of the Notes specified in such notice,
together with the premium, if any, and accrued interest thereon shall become due
and payable on the prepayment date specified in said notice. Two Business Days
prior to the prepayment date specified in such notice, the Company shall provide
each holder written notice of the premium, if any, payable in connection with
such prepayment and, whether
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Petroleum Heat and Power Co., Inc. Note Agreement
or not any premium is payable, a reasonably detailed computation of the
Make-Whole Amount.
Section 2.5. Allocation of Prepayments. All partial prepayments pursuant
toss.2.3 shall be applied on all outstanding Notes ratably in accordance with
the unpaid principal amounts thereof.
Section 2.6. Direct Payment. Notwithstanding anything to the contrary in
this Agreement or the Notes, in the case of any Note owned by a Purchaser or its
nominee or owned by any other institutional holder who has given written notice
to the Company requesting that the provisions of this Section shall apply, the
Company will promptly and punctually pay when due the principal thereof and
premium, if any, and interest thereon, without any presentment thereof directly
to such Purchaser or such subsequent holder at the address of such Purchaser set
forth in Schedule I or at such other address as such Purchaser or such
subsequent holder may from time to time designate in writing to the Company or,
if a bank account is designated for such Purchaser on Schedule I hereto or in
any written notice to the Company from such Purchaser or any such subsequent
holder, the Company will make such payments in immediately available funds to
such bank account, marked for attention as indicated, or in such other manner or
to such other account of such Purchaser or such holder in any bank in the United
States as the Purchaser or any such subsequent holder may from time to time
direct in writing. The Company will cause such payments to be made by noon,
Eastern time, on the date such payment is due. Any such payment which is
received after noon, Eastern time, on any business day shall, for all purposes
of this Agreement and the Notes, be deemed to have been received on the
following business day. The holder of any Notes to which this Section applies
agrees that in the event it shall sell or transfer any such Notes (i) it will,
prior to the delivery of such Notes (unless it has already done so), make a
notation thereon of all principal, if any, prepaid on such Notes and will also
note thereon the date to which interest has been paid on such Notes, and (ii) it
will promptly notify the Company of the name and address of the transferee of
any Notes so transferred. With respect to Notes to which this Section applies,
the Company shall be entitled to presume conclusively that the original or such
subsequent institutional holder as shall have requested the provisions hereof to
apply to its Notes remains the holder of such Notes until (y) the Company shall
have received notice of the transfer of such Notes, and of the name and address
of the transferee, or (z) such Notes shall have been presented to the Company as
evidence of the transfer.
SECTION 3. REPRESENTATIONS.
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Petroleum Heat and Power Co., Inc. Note Agreement
Section 3.1. Representations of the Company. The Company represents and
warrants that all representations set forth in the form of certificate attached
hereto as Exhibit B are true and correct as of the date hereof and are
incorporated herein by reference with the same force and effect as though herein
set forth in full.
Section 3.2. Representations of the Purchasers. You represent, and in
entering into this Agreement the Company understands, that you are acquiring the
Notes for the purpose of investment and not with a view to the resale or
distribution thereof, and that you have no present intention of selling,
negotiating or otherwise disposing of the Notes; provided that the disposition
of your property shall at all times be and remain within your control.
SECTION 4. CLOSING CONDITIONS.
Your obligation to purchase the Notes on the Closing Date shall be subject
to the performance by the Company of its agreements hereunder which by the terms
hereof are to be performed at or prior to the time of delivery of the Notes on
the Closing Date and to the following further conditions precedent:
Section 4.1. Closing Certificates. Concurrently with the delivery of Notes
to you on the Closing Date, you shall have received a certificate dated the
Closing Date, signed by the President or a Vice President of the Company
substantially in the form attached hereto as Exhibit B, the truth and accuracy
of which shall be a condition to your obligation to purchase the Notes proposed
to be sold to you.
Section 4.2. Legal Opinions. Concurrently with the delivery of Notes to
you on the Closing Date, you shall have received from Chapman and Cutler, who
are acting as your special counsel in this transaction, and from Phillips Nizer
Benjamin Krim & Ballon LLP, counsel for the Company, their respective opinions
dated the Closing Date, in form and substance satisfactory to you, and covering
applicable matters set forth in Exhibits C and D, respectively, hereto.
Section 4.3. Related Transactions. Prior to or concurrently with the
issuance and sale of Notes to you on the Closing Date, the Company shall have
consummated the sale of the entire principal amount of the Notes scheduled to be
sold on the Closing Date pursuant to this Agreement and the other Agreements
referred to in ss.1.3.
Section 4.4. Consummation of Sale of Preferred Stock. Prior to or
concurrently with the issuance and sale of the Notes to you on the Closing Date,
the Company shall have consummated the issuance and sale pursuant to Rule 144A
under the Securities Act of 1933, as amended, of $30,000,000 aggregate
liquidation preference of its Exchangeable Preferred Stock, which
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Petroleum Heat and Power Co., Inc. Note Agreement
Exchangeable Preferred Stock may not be redeemed at the option of the Company at
any time prior to the sixth anniversary of the Closing Date and which may only
be exchangeable for subordinated debentures as set forth in the Certificate of
Designation (the "1997 Preferred Stock").
Section 4.5. Payment of Special Counsel Fees. Without limiting the
provisions of ss.9.4, the Company shall have paid on the Closing Date the
reasonable fees, charges and disbursements of the Purchasers' special counsel
referred to in ss.4.2 above to the extent reflected in a statement of such
counsel rendered to the Company at least one Business Day prior to the Closing
Date.
Section 4.6. Private Placement Numbers. A Private Placement Number issued
by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for each Series of the Notes.
Section 4.7. Satisfactory Proceedings. All proceedings taken in
connection with the transactions contemplated by this Agreement, and all
documents necessary to the consummation thereof, shall be satisfactory in form
and substance to you and your special counsel, and you shall have received a
copy (executed or certified as may be appropriate) of all legal documents or
proceedings taken in connection with the consummation of said transactions.
Section 4.8. Waiver of Conditions. If on the Closing Date the Company
fails to tender to you the Notes to be issued to you on such date or if the
conditions specified in this ss.4 have not been fulfilled, you may thereupon
elect to be relieved of all further obligations under this Agreement. Without
limiting the foregoing, if the conditions specified in this ss.4 have not been
fulfilled, you may waive compliance by the Company with any such condition to
such extent as you may in your sole discretion determine. Nothing in this ss.4.8
shall operate to relieve the Company of any of its obligations hereunder or to
waive any of your rights against the Company.
SECTION 5. COMPANY COVENANTS.
From and after the Closing Date and continuing so long as any amount
remains unpaid on any Note:
Section 5.1. Corporate Existence, etc. The Company will preserve and keep
in force and effect, and will cause each Subsidiary to preserve and keep in
force and effect, its corporate existence and all licenses and permits necessary
to the proper conduct of its business, the absence of which would materially and
adversely affect the properties, business, prospects or the condition of the
Company and its Subsidiaries, provided that the foregoing shall not prevent any
transaction permitted by ss.5.9.
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Petroleum Heat and Power Co., Inc. Note Agreement
Section 5.2. Insurance. The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers rated by A.M. Best & Company A-X or better, in such forms and amounts
and against such risks as are customary for corporations of established
reputation engaged in the same or a similar business and owning and operating
similar properties; provided, however, that if insurance coverage by an insurer
with such rating is not available for any such risk, then the Company shall
maintain insurance coverage, for such risk, by an insurer with the highest
rating for insurers which provide insurance coverage for such risk.
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws.
The Company will promptly pay and discharge, and will cause each Subsidiary
promptly to pay and discharge, all lawful taxes, assessments and governmental
charges or levies imposed upon the Company or such Subsidiary, respectively, or
upon or in respect of all or any part of the property or business of the Company
or such Subsidiary, all trade accounts payable in accordance with usual and
customary business terms, and all claims for work, labor or materials, which if
unpaid might become a lien or charge upon any property of the Company or such
Subsidiary; provided the Company or such Subsidiary shall not be required to pay
any such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company or such Subsidiary or any material interference with
the use thereof by the Company or such Subsidiary, and (ii) the Company or such
Subsidiary shall set aside on its books adequate reserves with respect thereto,
if required by generally accepted accounting principles. The Company will
promptly comply and will cause each Subsidiary to comply with all laws,
ordinances or governmental rules and regulations to which it is subject,
including without limitation, the Occupational Safety and Health Act of 1970,
the Employee Retirement Income Security Act of 1974 and all laws, ordinances,
governmental rules and regulations relating to environmental protection in all
applicable jurisdictions, the violation of which would materially and adversely
affect the properties, business, prospects, profits or condition of the Company
and its Subsidiaries or would result in any lien or charge upon any property of
the Company or any Subsidiary; provided the Company or such Subsidiary shall not
be required to pay any such tax, assessment, charge, levy, account payable or
claim if (i) the validity, applicability or amount thereof is being contested in
good faith by appropriate actions or
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Petroleum Heat and Power Co., Inc. Note Agreement
proceedings which will prevent the forfeiture or sale of any property of the
Company or such Subsidiary or any material interference with the use thereof by
the Company or such Subsidiary, and (ii) the Company or such Subsidiary shall
set aside on its books adequate reserves with respect thereto, if required by
generally accepted accounting principles.
Section 5.4. Maintenance, Etc. The Company will maintain, preserve and
keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in repair and working order as is
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties and from time to
time will make all necessary repairs, replacements, renewals and additions so
that at all times the efficiency thereof shall be maintained.
Section 5.5. Nature of Business. Neither the Company nor any Subsidiary
will engage in any business if, after giving effect thereto, less than 80% of
the Consolidated Operating Cash Flow of the Company for the 12 months ended with
its most recently ended fiscal quarter would be attributable to the distribution
of home heating oil (#2 fuel oil), propane and related products (including the
distribution of other petroleum products which were distributed by the Company
during its fiscal year ending December 31, 1996), all as determined in
accordance with generally accepted accounting principles.
Section 5.6. Limitations on Funded Debt. Neither the Company nor any of
its Subsidiaries will incur, create, assume, guarantee or otherwise become
liable for any additional Funded Debt unless, after giving effect thereto, the
Company's Consolidated EBITDA Coverage Ratio exceeds 2.0 to 1.
The foregoing restriction on additional Funded Debt shall not be
applicable to (i) Funded Debt incurred to refund, extend or renew up to an equal
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 subordinate to the Notes, such Funded Debt must be subordinated to the
Notes to the extent such Indebtedness is so subordinated, and (ii) additional
Funded Debt in an aggregate amount not to exceed $25 million at any one time
outstanding; provided, however, that Funded Debt incurred pursuant to this
subsection (ii) shall be deemed not to be outstanding for purposes of this
subsection (ii) if at the end of any period of four consecutive fiscal quarters
ending after the incurrence of such Funded Debt the Company's Consolidated
EBITDA Coverage Ratio exceeds 2.0 to 1.
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Petroleum Heat and Power Co., Inc. Note Agreement
Section 5.7. Subsidiary Stock. The Company shall not directly or
indirectly create, assume or suffer to exist any lien, charge or encumbrance on
any capital stock of any of its Subsidiaries. The Company shall not permit any
Subsidiary to issue or at any time to have outstanding any shares of Preferred
Stock except as permitted under ss.5.15.
Section 5.8. Dividends, Stock Purchases. The Company shall not declare or
pay any dividend or make any distribution on its capital stock or to its
shareholders or make any loan or advance to its shareholders (other than
dividends or distributions payable in its capital stock) or purchase, redeem or
otherwise acquire or retire for value, or permit any Subsidiary to purchase or
otherwise acquire for value, any capital stock of the Company (i) if at the time
of such action an Event of Default shall have occurred and be continuing, or
(ii) if, upon giving effect to such dividend, distribution, loan, advance,
purchase, redemption, or other acquisition or retirement, the aggregate amount
expended for all such purposes subsequent to December 31, 1987, (giving effect
to any repayments of such loans or advances), shall exceed the sum of (a) 50% of
the aggregate Cash Flow of the Company accrued on a cumulative basis for each of
the fiscal years subsequent to December 31, 1986 and (b) the aggregate net
proceeds, including the fair market value of property other than cash (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive), received by the Company from the issue or
sale after July 1, 1987, of capital stock of the Company, including capital
stock issued upon the conversion of, or exchange for, Indebtedness; provided,
however, that (x) the foregoing shall not prevent the payment of any dividend
within 60 days after the date of declaration of such dividend, if at said date
such declaration complied with this covenant; and (y) that in the event that the
Company purchases, redeems or otherwise acquires or retires any capital stock of
the Company in exchange for promissory notes of the Company then, so long as
such promissory notes are junior and subordinate to the Notes, the principal of
and interest on such subordinated promissory notes shall not be included for
purposes of the foregoing until such time as payments of principal or interest
are made thereon.
Section 5.9. Mergers, Consolidations and Sales of Assets. The Company
shall not consolidate with or merge into any other corporation or transfer all
or substantially all of its properties and assets as an entirety to any person,
unless:
(a) either the Company shall be the continuing person, or the person
(if other than the Company) formed by such consolidation or into which the
Company is merged or to which the properties and assets of the Company as
an
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Petroleum Heat and Power Co., Inc. Note Agreement
entirety are transferred (i) shall be a corporation organized and existing
under the laws of the United States of America or any state thereof or the
District of Columbia, (ii) shall expressly assume all the obligations of
the Company under the Note Agreement, (iii) shall be a person with a
consolidated net worth immediately after such transaction at least equal
to the Consolidated Net Worth of the Company immediately prior to such
transaction and (iv) would, after giving effect to such transaction, be
able to issue at least one dollar ($1.00) of additional Funded Debt under
the provisions of ss.5.6;
(b) immediately after giving effect to such transaction, no Event of
Default or no Default shall have occurred and be continuing; and
(c) the Company has delivered to the Noteholders an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer complies with this covenant.
Any sale or other transfer by the Company of a material part of any of its
properties or assets not in the ordinary course of business shall be for a price
which is not less than the fair market value of the property or assets so sold
or transferred, as determined in good faith by the Board of Directors of the
Company.
Notwithstanding the foregoing, any Subsidiary may consolidate with, merge
into or transfer all or part of its properties and assets to the Company or any
other Subsidiary or Subsidiaries.
Section 5.10. Guaranties. In addition to the other restrictions contained
herein, including, without limitation, the restrictions contained in ss.ss.5.6
and 5.15 hereof, the Company will not and will not permit any Subsidiary to
become or be liable in respect of any Guaranty except (i) any Guaranty of the
Company of any obligation of any Subsidiary, (ii) any Guaranty of any Subsidiary
of any obligation of any other Subsidiary or of the Company, and (iii)
Guaranties of the Company which are limited in amount to a stated maximum dollar
exposure and included in Indebtedness.
Section 5.11. Repurchase of Notes. Neither the Company nor any Subsidiary
or Affiliate, directly or indirectly, may repurchase or make any offer to
repurchase any Notes unless the offer has been made to repurchase Notes, pro
rata, from all holders of the Notes at the same time and upon the same terms. In
case the Company repurchases any Notes, such Notes shall thereafter be cancelled
and no Notes shall be issued in substitution therefor.
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Petroleum Heat and Power Co., Inc. Note Agreement
Section 5.12. Transactions with Affiliates. The Company will not, and
will not permit any Subsidiary to, enter into or be a party to, any transaction
or arrangement with any Affiliate (including without limitation, the purchase
from, sale to or exchange of property with, or the rendering of any service by
or for, any Affiliate), except upon fair and reasonable terms no less favorable
to the Company or such Subsidiary than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate, nor detrimental to the
interest of the Company or such Subsidiary.
Section 5.13. Termination of Pension Plans. The Company will not and will
not permit any Subsidiary to permit any employee benefit plan maintained by it
to be terminated in a manner which could result in the imposition of a lien on
any property of the Company or any Subsidiary pursuant to Section 4068 of the
Employee Retirement Income Security Act of 1974, as amended, if the enforcement
of all such liens then in effect would have a material and adverse effect on the
properties, business, prospects or the condition of the Company and its
Subsidiaries.
Section 5.14. Reports and Rights of Inspection. The Company will keep, and
will cause each Subsidiary to keep, proper books of record and account in which
full and correct entries will be made of all dealings or transactions of or in
relation to the business and affairs of the Company or such Subsidiary, in
accordance with generally accepted principles of accounting consistently
maintained (except for changes disclosed in the financial statements furnished
to you pursuant to this ss.5.14 and concurred in by the independent public
accountants referred to in ss.5.14(b) hereof), and will furnish to you so long
as you are the holder of any Note and to each other institutional holder of the
then outstanding Notes (in duplicate if so specified below or otherwise
requested):
(a) Quarterly Statements. As soon as available and in any event
within 45 days after the end of each quarterly fiscal period (except the
last) of each fiscal year, duplicate copies of:
(1) consolidated balance sheets of the Company and its
Subsidiaries as of the close of such quarter setting forth in
comparative form the amount for the end of the preceding fiscal
year,
(2) consolidated statements of income and retained earnings of
the Company and its Subsidiaries for such quarterly period, setting
forth in comparative form the amount for the corresponding period of
the preceding fiscal year, and
(3) consolidated statements of cash flows of the Company and
its Subsidiaries for the portion of the
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Petroleum Heat and Power Co., Inc. Note Agreement
fiscal year ending with such quarter, setting forth in comparative
form the amount for the corresponding period of the preceding fiscal
year,
all in reasonable detail and certified as complete and correct, by the
chief financial officer of the Company;
(b) Annual Statements. As soon as available and in any event within
90 days after the close of each fiscal year of the Company, duplicate
copies of:
(1) consolidated balance sheets of the Company and its
Subsidiaries as of the close of such fiscal year, and
(2) consolidated statements of income and retained earnings
and cash flows of the Company and its Subsidiaries for such fiscal
year,
in each case setting forth in comparative form the consolidated figures
for the preceding fiscal year, all in reasonable detail and accompanied by
an opinion thereon of a firm of independent public accountants of
recognized national standing selected by the Company to the effect that
the consolidated financial statements have been prepared in accordance
with generally accepted accounting principles consistently applied (except
for changes in application in which such accountants concur) and present
fairly the financial condition of the Company and its Subsidiaries and
that the examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards and accordingly, includes such tests of the accounting records
and such other auditing procedures as were considered necessary in the
circumstances;
(c) Audit Reports. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of
the Company or any Subsidiary;
(d) SEC and Other Reports. Promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement
sent by the Company to stockholders generally and of each regular or
periodic report, and any registration statement or prospectus filed by the
Company or any Subsidiary with any securities exchange or the Securities
and Exchange Commission or any successor agency, and copies of any orders
in any proceedings to which the Company or any of its Subsidiaries is a
party, issued by any governmental agency, Federal or state, having
jurisdiction over the Company or any of its Subsidiaries;
(e) Requested Information. With reasonable promptness, such other
data and information (including
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Petroleum Heat and Power Co., Inc. Note Agreement
information as to the ownership of the capital stock of the Company) as
you or any such institutional holder may reasonably request;
(f) Officers' Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of the chief financial officer
of the Company stating that he has reviewed the provisions of this
Agreement and setting forth: (i) the information and computations (in
sufficient detail) required in order to establish whether the Company was
in compliance with the requirements of ss.5.6 through ss.5.13, inclusive,
and ss.5.15 at the end of the period covered by the financial statements
then being furnished, and (ii) whether there existed as of the date of
such financial statements and whether, to the best of his knowledge after
reasonable inquiry, there exists on the date of the certificate or existed
at any time during the period covered by such financial statements any
Default or Event of Default and, if any such condition or event exists on
the date of the certificate, specifying the nature and period of existence
thereof and the action the Company is taking and proposes to take with
respect thereto; and
(g) Accountant's Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they have
reviewed this Agreement and stating further, whether in making their
audit, such accountants have become aware of any Default or Event of
Default under any of the terms or provisions of this Agreement, and if any
such condition or event then exists, specifying the nature and period of
existence thereof.
Without limiting the foregoing, the Company will permit you, so long as
you are the holder of any Note, and each institutional holder of the then
outstanding Notes (or such Persons as either you or such holder may designate)
to visit and inspect, any of the properties of the Company or any Subsidiary, to
examine all their books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs, finances
and accounts with their respective officers, corporate staff and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss with you the finances and affairs of the Company and its
Subsidiaries) all at such reasonable times and as often as may be reasonably
requested. The Company shall not be required to pay or reimburse you or any such
holder for expenses which you or any such holder may incur in connection with
any such visitation or inspection.
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Petroleum Heat and Power Co., Inc. Note Agreement
Section 5.15. Limitation on Indebtedness and Preferred Stock of
Subsidiaries. The Company will not permit any Subsidiary to incur or in any
manner be or become liable in respect of any Indebtedness or issue or have
outstanding any Preferred Stock except: (i) Indebtedness or Preferred Stock
issued to and held by the Company or a Wholly-owned Subsidiary; provided,
however, that any subsequent issuance or transfer of any Capital Stock which
results in any such Wholly-owned Subsidiary ceasing to be a Wholly-owned
Subsidiary or any subsequent transfer of such Indebtedness or Preferred Stock
(other than to the Company or a Wholly-owned Subsidiary) will be deemed, in each
case, to constitute the incurrence of such Indebtedness or the issuance of such
Preferred Stock, as the case may be, by the issuer thereof; (ii) Indebtedness
incurred or Preferred Stock of a Subsidiary issued and outstanding on or prior
to the date on which such Subsidiary was acquired by the Company (other than
Indebtedness incurred or Preferred Stock issued in contemplation of, as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary or was
acquired by the Company), provided that at the time such Subsidiary is acquired
by the Company, after giving effect to such Indebtedness or Preferred Stock of
such Subsidiary, the Company's Consolidated EBITDA Coverage Ratio exceeds 2.0 to
1; (iii) Indebtedness or Preferred Stock (other than Indebtedness or Preferred
Stock described in clause (i), (ii), (iv) or (vi) of this covenant) incurred or
issued and outstanding on or prior to January 26, 1994; (iv) Indebtedness of a
Subsidiary consisting of guarantees issued by such Subsidiary and outstanding on
January 26, 1994 and Indebtedness of a Subsidiary consisting of guarantees
issued subsequent to such date, in each case, to the extent such guarantee
guarantees Bank Debt; (v) Indebtedness of a Subsidiary (other than Indebtedness
described in clause (iv) above) consisting of guarantees of Funded Debt of the
Company permitted by the first paragraph of Section 5.6, provided that
contemporaneously with the incurrence of such Indebtedness by such Subsidiary,
such Subsidiary issues a guarantee for the pro rata benefit of the holders of
the Notes; and (vi) Indebtedness or Preferred Stock issued in exchange for, or
the proceeds of which are used to refund or refinance, Indebtedness or Preferred
Stock referred to in the foregoing clause (ii) or (iii); provided, however, that
(1) the principal amount of such Indebtedness or Preferred Stock so incurred or
issued will not exceed the principal amount of the Indebtedness or Preferred
Stock so exchanged or refinanced and (2) the Indebtedness or Preferred Stock so
incurred or issued will (A) have a Stated Maturity later than the Stated
Maturity of the
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Petroleum Heat and Power Co., Inc. Note Agreement
Indebtedness or Preferred Stock being exchanged or refinanced and (B) will have
an Average Life equal to or greater than the remaining Average Life of the
Indebtedness or Preferred Stock so exchanged, refunded or refinanced.
Section 5.16. Limitation on Restrictions on Distributions from
Subsidiaries. The Company will not, and will not permit any Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to: (i) pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness owed to the Company, (ii) make any loans or advances to the Company
or (iii) transfer any of its property or assets to the Company, except: (1) any
encumbrance or restriction pursuant to an agreement in effect on January 26,
1994; (2) any encumbrance or restriction with respect to a Subsidiary pursuant
to an agreement relating to any Indebtedness issued by such Subsidiary on or
prior to the date on which such Subsidiary was acquired by the Company (other
than Indebtedness issued in contemplation of, as consideration in, or to provide
all or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Subsidiary
became a Subsidiary or was acquired by the Company) and outstanding on such
date; (3) any encumbrance or restriction pursuant to an agreement effecting a
refinancing of Indebtedness issued pursuant to an agreement referred to in the
foregoing clause (1) or (2) or contained in any amendment to an agreement
referred to in the foregoing clause (1) or (2); provided, however, that the
encumbrances and restrictions contained in any such refinancing agreement or
amendment are no less favorable to holders of the Notes than the encumbrances
and restrictions contained in such agreements; (4) any such encumbrance or
restriction consisting of customary nonassignment provisions in leases governing
leasehold interests to the extent such provisions restrict the transfer of the
lease; (5) in the case of clause (iii) above, restrictions contained in security
agreements securing Indebtedness of a Subsidiary to the extent such restrictions
restrict the transfer of the property subject to such security agreements; and
(6) any restriction with respect to a Subsidiary imposed pursuant to an
agreement entered into for the sale or disposition of all or substantially all
of the Capital Stock or assets of such Subsidiary pending the closing of such
sale or disposition.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 6.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as the term is used herein:
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Petroleum Heat and Power Co., Inc. Note Agreement
(a) Default shall occur in the payment of interest on any Note when
the same shall have become due and such default shall continue for more
than five days; or
(b) Default shall occur in the making of any payment of the
principal of any Note or the premium thereon at the expressed or any
accelerated maturity date; or
(c) Default shall be made in the payment of the principal of or
interest on any Indebtedness of the Company (other than the Notes) or any
Subsidiary aggregating more than $2,000,000, as and when the same shall
become due and payable in accordance with its terms (including any
optional or required prepayment or redemption) and either (i) as the
result of such default such Indebtedness is declared (or, in the case of
Subordinated Indebtedness, may be declared) by the holders thereof to be,
or becomes in accordance with its terms, due and payable before its stated
maturity date or (ii) such default shall continue beyond the longer of 180
days or the period of grace, if any, allowed with respect thereto; or
(d) The Company shall default in complying with any covenant under
any indenture, agreement, or other instrument under which any Indebtedness
(other than the Notes) of the Company or any Subsidiary aggregating more
than $2,000,000 may be issued and as the result of such default the
Indebtedness outstanding thereunder is declared (or, in the case of
Subordinated Indebtedness, may be declared) by the holders thereof, to be
or becomes, in accordance with its terms, due and payable before its
stated maturity date; or
(e) Default shall occur in the observance or performance of any
covenant or agreement contained inss.5.6 throughss.5.13 or inss.ss.5.15 or
5.16 hereof; or
(f) Default shall occur in the observance or performance of any
other provision of this Agreement which is not remedied within 30 days
after notice thereof to the Company by the holder of any Note; or
(g) If any representation or warranty made by the Company herein, or
made by the Company in any statement or certificate furnished by the
Company in connection with the consummation of the issuance and delivery
of the Notes or furnished by the Company pursuant hereto, is untrue in any
material respect as of the date of the issuance or making thereof; or
(h) The Company or any Subsidiary becomes insolvent or bankrupt, is
generally not paying its debts as they become due or makes an assignment
for the benefit of creditors, or the Company or any Subsidiary causes or
suffers an order for relief to be entered with respect to it under
applicable
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Petroleum Heat and Power Co., Inc. Note Agreement
Federal bankruptcy law or applies for or consents to the appointment of a
custodian, trustee or receiver for the Company or such Subsidiary or for
the major part of the property of either; or
(i) A custodian, trustee or receiver is appointed for the Company or
any Subsidiary or for the major part of the property of either and is not
discharged within 30 days after such appointment; or
(j) Final judgment or judgments for the payment of money aggregating
in excess of $250,000 is or are outstanding against the Company or any
Subsidiary or against any property or assets of either and any one of such
judgments has remained unpaid, unvacated, unbonded or unstayed by appeal
or otherwise for a period of 30 days from the date of its entry; or
(k) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company or any Subsidiary and, if instituted against the
Company or any Subsidiary, are consented to or are not dismissed within 60
days after such institution.
Section 6.2. Notice to Holders. When any Event of Default described in the
foregoing ss.6.1 has occurred, or if the holder of any Note or of any other
evidence of Indebtedness of the Company gives any notice to the Company or takes
any other action known to the Company with respect to a claimed default, the
Company agrees to give notice within five business days of such event to all
holders of the Notes then outstanding, such notice to be in writing and sent by
registered or certified mail or by telegram.
Section 6.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a) or (b) of ss.6.1 has happened and is continuing, any
holder of any Note may, and when any Event of Default described in paragraphs
(c) through (j), inclusive, of said ss.6.1 has happened and is continuing, the
holder or holders of 25% or more of the principal amount of Notes at the time
outstanding may, by notice in writing sent by registered or certified mail to
the Company, declare the entire principal and all interest accrued on all Notes
to be, and all Notes shall thereupon become, forthwith due and payable, without
any presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. When any Event of Default described in paragraph (k) of
ss.6.1 has occurred, then all outstanding Notes shall immediately become due and
payable without presentment, demand or notice of any kind. Upon the Notes
becoming due and payable as a result of any Event of Default as aforesaid, the
Company will forthwith pay to the
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Petroleum Heat and Power Co., Inc. Note Agreement
holders of the Notes the entire principal and interest accrued on the Notes and,
to the extent permitted by law and if such Notes so become due and payable on or
prior to March 31, 2002, a premium equal to the Make-Whole Amount determined as
of the date on which the Notes shall so become due and payable. No course of
dealing on the part of any Noteholder nor any delay or failure on the part of
any Noteholder to exercise any right shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and remedies. The Company
further agrees, to the extent permitted by law, to pay to the holder or holders
of the Notes all reasonable costs and expenses incurred by them in the
collection of any Notes upon any default hereunder or thereon, including
reasonable compensation to such holder's or holders' attorneys for all services
rendered in connection therewith.
Section 6.4. Rescission of Acceleration. The provisions of ss.6.3 are
subject to the condition that if the principal of and accrued interest on all or
any outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in paragraphs (a) through
(j), inclusive, of ss.6.1, the holders of 66-2/3% in aggregate principal amount
of the Notes then outstanding may, by written instrument filed with the Company,
rescind and annul such declaration and the consequences thereof, provided that
at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal,
interest or premium on the Notes which has become due and payable solely
by reason of such declaration underss.6.3) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have
been made good, cured or waived pursuant toss.7.1; and provided further,
that no such rescission and annulment shall extend to or affect any
subsequent Default or Event of Default or impair any right consequent
thereto.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
Section 7.1. Consent Required. Any term, covenant, agreement or condition
of this Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the holders of at least 66-2/3% in aggregate principal amount of
outstanding Notes; provided that without the written consent of the holders of
all of the Notes then outstanding, no such waiver, modification,
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Petroleum Heat and Power Co., Inc. Note Agreement
alteration or amendment shall be effective (i) which will extend the time of
payment (including any prepayment required by ss.2.1) of the principal of or the
interest on any Note or reduce the principal amount thereof or change the rate
of interest thereon, or (ii) which will change any of the provisions with
respect to optional prepayments, or (iii) which will change the provisions with
respect to mandatory prepayment upon a change of ownership of the Company, or
(iv) which will change the percentage of holders of the Notes required to
consent to any such amendment, alteration or modification or any of the
provisions of this ss.7 or ss.6.
Section 7.2. Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the holders of the Notes and shall be binding upon
them, upon each future holder of any Note and upon the Company, whether or not
such Note shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 8.1. Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than a Subsidiary) (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Company or (iii) 5% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"Asset Disposition" means 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 a 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
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Petroleum Heat and Power Co., Inc. Note Agreement
at fair market value in the ordinary course of business or (iii) a disposition
of obsolete assets in the ordinary course of business.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as of the time of determination, the present value (discounted at the
average interest rate borne by the Notes, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Debt" means any loan agreement with a bank, finance company or other
financial institution, including principal, premium (if any), interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company to the extent a claim
for post filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any person means 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.
"Capital Lease Obligations" of a person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such person prepared in accordance with generally accepted
accounting principles; the amount of such obligation will be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles; and the Stated Maturity thereof will be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
"Cash Flow", for any fiscal year, means the sum of (i) Consolidated Net
Income for such fiscal year and (ii) to the extent the following deferred
charges are deducted in the calculation of Consolidated Net Income, the
amortization of
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Petroleum Heat and Power Co., Inc. Note Agreement
customer lists and other deferred charges included in the purchase price in
connection with the acquisition of fuel oil distributorships (other than legal,
accounting, financing and other transaction charges) and the amortization and
depreciation of plant and equipment of the Company and its Subsidiaries for such
fiscal year determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Certificate of Designation" shall mean the Certificate of Designation
adopted by the Board of Directors of the Company on February 12, 1997
establishing the 1997 Preferred Stock and setting forth the relative rights and
preferences thereof.
The terms "Class A Common Stock", "Class B Common Stock" and "Class C
Common Stock" shall each mean the class of equity securities designated as such
in the Restated and Amended Articles of Incorporations of the Company.
"Consolidated EBITDA Coverage Ratio" as of any date of determination means
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 four
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 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
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Petroleum Heat and Power Co., Inc. Note Agreement
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 financial or accounting officer of the Company;
provided, however, that such officer shall assume (i) the historical sales and
gross profit margins associated with such assets for the most recent consecutive
12-month period ended prior to the date of purchase for which financial
statements are available (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 5%) 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 calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period.
"Consolidated Indebtedness" shall mean Indebtedness of the Company and its
Subsidiaries on a consolidated basis as determined in accordance with generally
accepted accounting principles.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Subsidiaries, determined on a consolidated basis,
including (i) interest expense in respect of money borrowed and interest expense
attributable to capital leases, (ii) amortization of debt discount, (iii)
capitalized interest, (iv) non-cash interest
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Petroleum Heat and Power Co., Inc. Note Agreement
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 generally
accepted accounting principles; provided, however, that Consolidated Interest
Expense shall include such interest as may be paid by the Company or any
Subsidiary to Star Gas only to the extent the amount of such interest paid
during any period exceeds the dividends or other distributions on the Capital
Stock of Star Gas distributed to the Company or any Subsidiary during such
period.
"Consolidated Net Income" of a person, for any period, means the aggregate
of the Net Income of such person and its Subsidiaries for such period,
determined on a consolidated basis in accordance with generally accepted
accounting principles, provided that (i) the Net Income of any other person
(other than a Subsidiary) in which such person has an interest will be included
only to the extent of the amount of dividends or distributions paid to such
person, (ii) the Net Income of any person acquired by such person in a pooling
of interests transaction for any period prior to the date of such acquisition
will be excluded, (iii) any Net Income of any Subsidiary will be excluded if
such Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Subsidiary, directly
or indirectly, to such person, except that (A) such person's equity in the Net
Income of any such Subsidiary for such period will be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Subsidiary during such period to such person as a dividend or other
distribution (subject, in the
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Petroleum Heat and Power Co., Inc. Note Agreement
case of a dividend or other distribution to another subsidiary, to the
limitation contained in this clause) and (B) such person's equity in a net loss
of any such Subsidiary for such period will be included in determining such
Consolidated Net Income, (iv) the cumulative effect of a change in accounting
principles will be excluded and (v) dividends or other distributions on the
Capital Stock of Star Gas distributed to the Company or any Subsidiary by Star
Gas shall be included in Consolidated Net Income of the Company only to the
extent such dividends or other distributions exceed during any period the amount
of interest paid to Star Gas by the Company or any Subsidiary during such
period.
"Consolidated Net Worth" means the total consolidated stockholders' equity
of the Company and its consolidated Subsidiaries determined on a consolidated
basis in accordance with generally accepted accounting principles.
"Consolidated Operating Cash Flow", for any period, means the sum of (i)
Consolidated Net Income for such period and (ii) depreciation and amortization
expense of the Company and its Subsidiaries for such period, as determined in
accordance with generally accepted accounting principles. Consolidated Operating
Cash Flow of the Company and its Subsidiaries shall include the sum of the items
enumerated in clauses (i) and (ii) above of all persons (and each of their
subsidiaries, if any, on a consolidated basis) then or theretofore acquired for
the 12 months ended with the most recently completed fiscal quarter for such
person. Consolidated Operating Cash Flow of such acquired persons shall be
determined on a pro forma basis, giving effect to the financial results of such
persons as if they had been owned by the Company for the twelve months
immediately preceding the date of acquisition of such persons.
"Default" shall mean any event or condition, the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default as defined in ss.6.1.
"EBITDA" for any period means the Consolidated Net Income for such period
(but without giving effect to adjustments, accruals, deductions or entries
resulting from purchase 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 noncash expenses.
Exchange Indenture" shall mean the Exchange Debenture Indenture
substantially in the form appended as Annex A to the Certificate of Designation.
"Funded Debt" as applied to any person, means (a) Indebtedness incurred by
such person with a stated maturity of
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Petroleum Heat and Power Co., Inc. Note Agreement
more than one year from the date of incurrence; (b) any Indebtedness which,
regardless of its term, may be renewed or extended at the option of the obligor
to a date more than one year from the date of incurrence; and (c) any
Indebtedness which by its terms or pursuant to the agreement under which it is
issued, regardless of its term, may be paid with the proceeds of other
Indebtedness, which may be incurred pursuant to the terms of such
first-mentioned Indebtedness or the agreement under which such first
Indebtedness is issued, which other Indebtedness has a stated maturity more than
one year from the incurrence of such first-mentioned Indebtedness; excluding in
each case (a), (b) and (c) Working Capital Borrowings.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation, of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (ii) to advance or supply
funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, or (iii) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Hedging Obligations" of any person means the obligations of such person
pursuant to any interest rate swap agreement, foreign currency exchange
agreement, 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" of any person means, without duplication,
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Petroleum Heat and Power Co., Inc. Note Agreement
(i) the principal of (A) indebtedness of such person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such person is
responsible or liable;
(ii) all Capital Lease Obligations of such person and all
Attributable Indebtedness in respect of Sale/Leaseback Transactions
entered into by such person;
(iii) all obligations of such person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
such person and all obligations of such person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
(iv) all obligations of such person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such
person to the extent such letters of credit are not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the
third Business Day following receipt by such person of a demand for
reimbursement following payment on the letter of credit);
(v) all obligations of the type referred to in clauses (i) through
(iv) of other persons and all dividends of other persons for the payment
of which, in either case, such person is responsible or liable, directly
or indirectly, as obligor, guarantor or otherwise, including any
guarantees of such obligations and dividends, including by means of any
agreement which has the economic effect of a guarantee; and
(vi) all obligations of the type referred to in clauses (i) through
(v) of other persons secured by any Lien on any property or asset of such
person (whether or not such obligation is assumed by such person), the
amount of such obligation being deemed to be the lesser of the value of
such property or assets or the amount of the obligation so secured.
"Investment" in any person means 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.
Investments will exclude advances to customers and suppliers in the ordinary
course of business.
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Petroleum Heat and Power Co., Inc. Note Agreement
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means any mortgage, pledge, security interest, conditional sale or
other title retention agreement or other similar lien.
"Make-Whole Amount" means, with respect to any Note, an amount equal to
the excess, if any, of the Discounted Value of the Remaining Scheduled Payments
with respect to the Called Principal of such Note over the amount of such Called
Principal, provided that the Make-Whole Amount may in no event be less than
zero. For the purposes of determining the Make-Whole Amount, the following terms
have the following meanings:
"Called Principal" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to ss.2.3 or has become or is
declared to be immediately due and payable pursuant to ss.6.3, as the
context requires.
"Discounted Value" means, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
any Note, the Reinvestment Yield Adjustment Percentage over the yield to
maturity implied by (i) the yields reported, as of 10:00 A.M. (New York
City time) on the second Business Day preceding the Settlement Date with
respect to such Called Principal, on the display designated as "Page PX1"
on the Bloomberg Financial Markets Services Screen (or such other display
as may replace Page PX1 on the Bloomberg Financial Markets Services
Screen) for actively traded U.S. Treasury securities having a maturity
equal to the Remaining Average Life of such Called Principal as of such
Settlement Date, or (ii) if such yields are not reported as of such time
or the yields reported as of such time are not ascertainable, the Treasury
Constant Maturity Series Yields reported, for the latest day for which
such yields have been so reported as of the second Business Day
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Petroleum Heat and Power Co., Inc. Note Agreement
preceding the Settlement Date with respect to such Called Principal, in
Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having
a constant maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date. Such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill quotations
to bond-equivalent yields in accordance with accepted financial practice
and (b) interpolating linearly between (1) the actively traded U.S.
Treasury security with the duration closest to and greater than the
Remaining Average Life and (2) the actively traded U.S. Treasury security
with the duration closest to and less than the Remaining Average Life.
"Reinvestment Yield Adjustment Percentage" means (i) for any payment
or prepayment of the Notes to be made at any time on or prior to September
30, 2000, 0.50% and (ii) for any payment or prepayment of the Notes to be
made after September 30, 2000 and on or prior to March 31, 2002, 1.25%.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum of
the products obtained by multiplying (a) the principal component of each
Remaining Scheduled Payment with respect to such Called Principal by (b)
the number of years (calculated to the nearest one-twelfth year) that will
elapse between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a
date on which interest payments are due to be made under the terms of the
Notes, then the amount of the next succeeding scheduled interest payment
will be reduced by the amount of interest accrued to such Settlement Date
and required to be paid on such Settlement Date pursuant to ss.2.3 or
ss.6.3.
"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
ss.2.3 or has become or is declared to be immediately due and payable
pursuant to ss.6.3, as the context requires.
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Petroleum Heat and Power Co., Inc. Note Agreement
"Net Income" of any person means the net income (loss) of such person,
determined in accordance with generally accepted accounting principles;
excluding, however, from the determination of Net Income any gain (but not loss)
realized upon the sale or other disposition (including, without limitation,
dispositions pursuant to leaseback transactions) of any real property or
equipment of such person, which is not sold or otherwise disposed of in the
ordinary course of business, or of any capital stock of such person or
subsidiary owned by such person.
"1989 Preferred Stock" shall mean the Exchangeable Preferred Stock of the
Company in the aggregate original liquidation preference of $25,000,000 issued
under the 1989 Preferred Stock Purchase Agreements.
"1989 Preferred Stock Purchase Agreements" shall mean the separate
Purchase Agreements dated as of August 1, 1989 between the Company and the
respective Purchasers named therein, as amended by the First and Second
Amendments thereto and as amended and restated by the Third Amendment and
Restatement of Purchase Agreements dated as of February 1, 1997 among the
Company and the holders of 1989 Preferred Stock named therein, as such Purchase
Agreements may be amended, modified or restated.
"1997 Preferred Stock" shall have the meaning set forth therefor in
ss.4.4.
"Officer" means the Chairman of the Board, the Chief Executive Officer,
the President, any Vice President, the Treasurer or the Secretary of the
Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Overdue Rate" shall mean, with respect to any Series of Notes during any
period, a rate of interest equal to the sum of (i) the annual rate of interest
otherwise borne by the Notes of such Series during such period (or, in the case
of amounts due or overdue but not paid at maturity, the annual rate of interest
otherwise borne by the Notes of such Series immediately prior to maturity) plus
(ii) 2% per annum.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means 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 or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Public Debentures" shall mean, collectively, the Company's 12-1/4%
Subordinated Debentures due 2005, 10-1/8% Subordinated Notes due 2003 and 9-3/8%
Subordinated Debentures due 2006.
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Petroleum Heat and Power Co., Inc. Note Agreement
"Public Indentures" shall mean, collectively, (i) the Indenture dated as
of February 9, 1995, the Indenture dated as of April 1, 1993 and the Indenture
dated as of February 3, 1994, each between the Company and Chemical Bank (now
Chase Manhattan Bank), as Trustee thereunder, (ii) the Exchange Indenture and
(iii) any other indenture or other agreement under which the Company may issue
Subordinated Indebtedness.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Subsidiary transfers such
property to a person and the Company or a Subsidiary leases it from such person.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Sevin Group" means the Estate of Malvin P. Sevin and trusts created
thereunder, Audrey L. Sevin, Irik P. Sevin, Thomas J. Edelman, Margot Gordon and
Phillip Ean Cohen and any trust over which such persons have the sole voting
power.
"Star Gas" shall mean Star Gas Corporation, a Delaware corporation.
"Stated Maturity" means, with respect to any Indebtedness, the date
specified in such Indebtedness, or in any agreement pursuant to which such
Indebtedness was incurred, as the fixed date on which the principal of such
Indebtedness is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
Indebtedness at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Indebtedness" shall mean any Indebtedness of the Company
which by its terms is subordinated or junior in right of payment to the Notes.
The term "Subsidiary" means (i) a corporation a majority of whose capital
stock with voting power, under ordinary circumstances, to elect directors is at
the time, directly or indirectly, owned by the Company, by the Company and a
Subsidiary of the Company or by a Subsidiary of the Company or (ii) any other
person (other than a corporation) in which the Company, a Subsidiary of the
Company or the Company and a Subsidiary of the Company, direct or indirectly, at
the date of determination thereof, has at least 50% ownership interest or over
which it exercises control; provided, however, that Star Gas, and any Person
owned or controlled directly or indirectly by Star Gas, shall not be a
Subsidiary.
"Traber Group" means (i) all the holders of Class C Common Stock of the
Company as listed on Schedule II hereto who are not members of the Sevin Group,
(ii) any person who is, or concurrently with the transfer of shares to such
person becomes,
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Petroleum Heat and Power Co., Inc. Note Agreement
a party to the shareholders agreement among the holders of Class C Common Stock
of the Company dated November 25, 1986, as amended and restated through the
Closing Date, and (iii) any trust over which persons described in clause (i) or
(ii) have sole voting power.
"Treasury Rate" as of any date of determination means 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
date)) of one year.
"Voting Stock" shall mean Securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Indebtedness for
borrowed money shall be owned by the Company and/or one or more of Petroleum
Heat and Power Co., Inc. Note Agreement its Wholly-owned Subsidiaries.
"Working Capital Borrowings" shall mean, on any date of determination, all
Indebtedness of the Company and its Subsidiaries on a consolidated basis
incurred to finance current assets, excluding from such definition of Working
Capital Borrowings (but not from the definition of Indebtedness) the excess of
current liabilities over current assets on such date (determined in accordance
with generally accepted accounting principles).
Section 8.2. Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with generally
accepted accounting principles, to the extent applicable, except where such
principles are inconsistent with the requirements of this Agreement.
Section 8.3. Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
SECTION 9. MISCELLANEOUS.
Section 9.1. Registration and Transfers of the Notes. The Company shall
cause to be kept at its principal office a register
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Petroleum Heat and Power Co., Inc. Note Agreement
for the registration and transfer of the Notes (hereinafter called the "Note
Register"), and the Company will register or transfer or cause to be registered
or transferred, as hereinafter provided and under such reasonable regulations as
it may prescribe, any Note issued pursuant to this Agreement.
At any time and from time to time the registered holder of any Note which
has been duly registered as hereinabove provided may transfer such Note upon
surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or its attorney duly authorized in writing.
The Person in whose name any registered Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes of this
Agreement. Payment of or on account of the principal, premium, if any, and
interest on any registered Note shall be made to or upon the written order of
such registered holder.
Section 9.2. Exchange of Notes. At any time, and from time to time, upon
not less than ten days' notice to that effect given by the holder of any Note
initially delivered or of any Note substituted therefor pursuant to ss.9.1, this
ss.9.2 or ss.9.3, and, upon surrender of such Note at its office, the Company
will deliver in exchange therefor, without expense to the holder, except as set
forth below, Notes for the same aggregate principal amount as the then unpaid
principal amount of the Note so surrendered, in the denomination of $100,000 or
any amount in excess thereof as such holder shall specify, dated as of the date
to which interest has been paid on the Note so surrendered or, if such surrender
is prior to the payment of any interest thereon, then dated as of the date of
issue, payable to such Person or Persons, or order, as may be designated by such
holder, and otherwise of the same form and tenor as the Notes so surrendered for
exchange. The Company may require the payment of a sum sufficient to cover any
stamp tax or governmental charge imposed upon such exchange or transfer.
Section 9.3. Loss, Theft, etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If the Purchaser or any subsequent institutional holder is the
owner of any such lost, stolen or destroyed Note, then the affidavit of an
authorized officer of such owner,
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Petroleum Heat and Power Co., Inc. Note Agreement
setting forth the fact of loss, theft or destruction and of its ownership of the
Note at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the execution and delivery of a new Note other than the written
agreement of such owner to indemnify the Company.
Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of your out-of-pocket expenses in connection with the preparation,
execution and delivery of this Agreement and the transactions contemplated
hereby, including but not limited to the reasonable charges and disbursements of
Chapman and Cutler, your special counsel, duplicating and printing costs and
charges for shipping the Notes, adequately insured to you at your home office or
at such other place as you may designate, and all such expenses relating to any
amendment, waivers or consents pursuant to the provisions hereof. The Company
also agrees that it will pay and save you harmless against any and all liability
with respect to stamp and other taxes, if any, which may be payable or which may
be determined to be payable in connection with the execution and delivery of
this Agreement or the Notes, whether or not any Notes are then outstanding. The
Company agrees to protect and indemnify you against any liability for any and
all brokerage fees and commissions payable or claimed to be payable to any
Person in connection with the transactions contemplated by this Agreement.
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No delay
or failure on the part of the holder of any Note in the exercise of any power or
right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of the holder
of any Note are cumulative to and are not exclusive of any rights or remedies
any such holder would otherwise have, and no waiver or consent, given or
extended pursuant to ss.7 hereof, shall extend to or affect any obligation or
right not expressly waived or consented to.
Section 9.6. Notices. All communications provided for hereunder shall be
in writing and, if to you, delivered or mailed by registered or certified mail,
addressed to you at your address appearing on Schedule I to this Agreement or
such other address as you or the subsequent holder of any Note initially issued
to you, may designate to the Company in writing, and if to the Company,
delivered or mailed by registered or certified mail to the Company at Post
Office Box 1457, Stamford, Connecticut 06904, Attention: President, or to such
other address as the
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Petroleum Heat and Power Co., Inc. Note Agreement
Company may in writing designate to you or to a subsequent holder of the Note
initially issued to you.
Section 9.7. Designation of Notes as Designated Senior Debt. The Company
hereby designates and agrees that the Notes are and will be Designated Senior
Debt (as defined in and for purposes of the Public Indentures).
Section 9.8. Successors and Assigns. This Agreement shall be binding upon
you and your successors and assigns, including each successive holder or holders
of any Notes, and the Company and its successors and assigns and shall inure to
your benefit and to the benefit of your successors and assigns, including each
successive holder or holders of any Notes and to the benefit of the Company and
its successor and assigns.
Section 9.9. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Notes.
Section 9.10. Severability. Should any part of this Agreement for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in force and effect as
if this Agreement had been executed with the invalid portion thereof eliminated
and it is hereby declared the intention of the parties hereto that they would
have executed the remaining portion of this Agreement without including therein
any such part, parts, or portion which may, for any reason, be hereafter
declared invalid.
Section 9.11. Governing Law. This Agreement and the Notes issued and sold
hereunder shall be governed by and construed in accordance with New York law.
Section 9.12. Captions. The descriptive headings of the various Sections
or parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
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Petroleum Heat and Power Co., Inc. Note Agreement
The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinabove set forth, and this Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one agreement.
PETROLEUM HEAT AND POWER CO., INC.
By
Its
Accepted as of February 1, 1997.
[VARIATION]
By
Its
[By
Its ]
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Petroleum Heat and Power Co., Inc. Note Agreement
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED
JOHN HANCOCK MUTUAL LIFE Series B - $ 2,812,500.00
INSURANCE COMPANY (for the General Account) Series C - $ 937,499.99
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Payments
All payments on or in respect of the Notes shall be made by bank wire transfer
of Federal or other immediately available funds (which shall identify each
payment as "Petroleum Heat and Power Co., Inc., Senior Notes due 2002, principal
or interest or other payments") to:
The First National Bank of Boston
(ABA #011 000 390)
100 Federal Street
Boston, Massachusetts 02110
Attention: Insurance Division
for the account of John Hancock
Mutual Life Insurance Company
Private Placement Collection Account
Account Number 541-55417
On Order of: [Name of Issuer and PPN]
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) the full
name, interest rate and maturity date of the Notes or other obligations; (2)
allocation of payment between principal and interest and any special payment;
and (3) name and address of Bank (or Trustee) from which wire transfer was sent,
shall be delivered or mailed to:
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department, T-57
Name of Nominee in which Notes are to be issued:
John Hancock Mutual Life Insurance Company
Taxpayer I.D. Number: 04-1414660
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED
JOHN HANCOCK MUTUAL LIFE Series B - $ 2,187,500.00
INSURANCE COMPANY (Guaranteed Benefit Sub-Account) Series C - $ 729,166.67
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Payments
All payments on or in respect of the Notes shall be made by bank wire transfer
of Federal or other immediately available funds (which shall identify each
payment as "Petroleum Heat and Power Co., Inc., Senior Notes due 2002, principal
or interest or other payments") to:
The First National Bank of Boston
(ABA #011 000 390)
100 Federal Street
Boston, Massachusetts 02110
Attention: Insurance Division
for the account of John Hancock
Mutual Life Insurance Company
Private Placement Collection Account
Account No. 541-55417
On Order of: [Name of Issuer and PPN]
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) the full
name, interest rate and maturity date of the Notes or other obligations; (2)
allocation of payment between principal and interest and any special payment;
and (3) name and address of Bank (or Trustee) from which wire transfer was sent,
shall be delivered or mailed to:
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department, T-57
Name of Nominee in which Notes are to be issued:
John Hancock Mutual Life Insurance Company
Taxpayer I.D. Number: 04-1414660
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED
JOHN HANCOCK MUTUAL LIFE Series A - $3,333,333.34
INSURANCE COMPANY
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Payments
All payments on or in respect of the Notes shall be made by bank wire transfer
of Federal or other immediately available funds (which shall identify each
payment as "Petroleum Heat and Power Co., Inc., Senior Notes due 2002, principal
or interest or other payments") to: The First National Bank of Boston
(ABA #011 000 390)
100 Federal Street
Boston, Massachusetts 02110
Attention: Insurance Division
for the account of John Hancock
Mutual Life Insurance Company
Private Placement Collection Account
Account No. 541-55417
On Order of: [Name of Issuer and PPN]
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) the full
name, interest rate and maturity date of the Notes or other obligations; (2)
allocation of payment between principal and interest and any special payment;
and (3) name and address of Bank (or Trustee) from which wire transfer was sent,
shall be delivered or mailed to:
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department, T-57
Name of Nominee in which Notes are to be issued:
John Hancock Mutual Life Insurance Company
Taxpayer I.D. Number: 04-1414660
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED
BARNETT & CO. Series A - $10,000,000
c/o Bankers Trust Company
P. O. Box 998
Bowling Green Station
New York, New York 10274
Payments
All payments on or in respect of the Notes shall be made by bank wire transfer
of Federal or other immediately available funds (which shall identify each
payment as "Petroleum Heat and Power Co., Inc., Senior Notes due 2002, principal
or interest or other payments") to: Bankers Trust Company
(ABA #021-001-033)
Account of Barnett & Co.
Account Number: 99-911-145
On Order of: [Name of Issuer and PPN]
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) the full
name, interest rate and maturity date of the Notes or other obligations; (2)
allocation of payment between principal and interest and any special payment;
and (3) name and address of Bank (or Trustee) from which wire transfer was sent,
shall be delivered or mailed to:
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
Barnett & Co.
c/o Bankers Trust Company
P. O. Box 998
Bowling Green Station
New York, New York 10274
with a copy to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall be delivered or mailed to:
c/o Bankers Trust Company
P. O. Box 998
Bowling Green Station
New York, New York 10274
with a copy to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department, T-57
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-6819932
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED
MELLON BANK, N.A., as Trustee for Series A - $3,333,333.33
the Long-Term Investment Trust Series B - $1,250,000.00
One Mellon Bank Center Series C - $ 416,666.67
Pittsburgh, Pennsylvania 15258
Attention: Bernadette Rist
Payments
All payments on or in respect of the Notes shall be made by bank wire transfer
of Federal or other immediately available funds (which shall identify each
payment as "Petroleum Heat and Power Co., Inc., Senior Notes due 2002, principal
or interest or other payments") to:
Federal Reserve Bank of Boston
A/C Boston Safe Deposit & Trust Company
ABA #: 011001234
DDA: 125261
Ref: ATTF 179168
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) the full
name, interest rate and maturity date of the Notes or other obligations; (2)
allocation of payment between principal and interest and any special payment;
and (3) name and address of Bank (or Trustee) from which wire transfer was sent,
shall be delivered or mailed to:
Mellon Bank, N.A.
Three Mellon Bank Center
Room 153-3610
Attention: Principal & Interest Unit
Pittsburgh, Pennsylvania 15259-0001
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
All other communications shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Stephen A. MacLean, Bond and Corporate Finance
Dept., T-57
with a copy to:
Mellon Bank, N.A.
One Mellon Bank Center, Room 151-1935
Pittsburgh, Pennsylvania 15258
Attention: Bernadette Rist
Name of Nominee in which Notes are to be issued: MELLON BANK, N.A., TRUSTEE
UNDER THE LONG-TERM INVESTMENT TRUST DATED OCTOBER 1, 1996
Taxpayer I.D. Number: 13-3187026
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED
MELLON BANK, N.A., as Trustee for the
NYNEX Master Pension Trust Series A - $2,000,000.00
One Mellon Bank Center Series B - $ 750,000.00
Pittsburgh, Pennsylvania 15258 Series C - $ 250,000.00
Attention: Bernadette T. Rist
Payments
All payments on or in respect of the Notes shall be made by bank wire transfer
of Federal or other immediately available funds (which shall identify each
payment as "Petroleum Heat and Power Co., Inc., Senior Notes due 2002, principal
or interest or other payments") to:
Federal Reserve Bank of Boston
A/C Boston Safe Deposit and Trust Company
ABA #: 011001234
DDA: 16-229-9
Reference: NYNEX: NYXF 1783332
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) the full
name, interest rate and maturity date of the Notes or other obligations; (2)
allocation of payment between principal and interest and any special payment;
and (3) name and address of Bank (or Trustee) from which wire transfer was sent,
shall be delivered or mailed to:
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
Mellon Bank, N.A.
One Mellon Bank Center, Room 3346
Pittsburgh, Pennsylvania 15258-0001
Attention: Fran Sistek
All other communications shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
200 West Clarendon Street
Boston, Massachusetts 02117
Attention: Stephen A. MacLean
Bond and Corporate Finance Department, T-57
Telefacsimile Number: (617) 572-1606
with a copy to:
Mellon Bank, N.A.
One Mellon Bank Center, Room 1935
Pittsburgh, Pennsylvania 15258
Attention: Bernadette T. Rist
Name of Nominee in which Notes are to be issued: MELLON BANK, N.A., TRUSTEE
UNDER MASTER TRUST AGREEMENT OF NYNEX CORPORATION DATED JANUARY 1, 1984 FOR
EMPLOYEE PENSION PLANS-NYNEX-JOHN HANCOCK-PRIVATE PLACEMENT
Taxpayer I.D. Number: 25-1448208
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED
JOHN HANCOCK VARIABLE LIFE Series A - $1,333,333.33
INSURANCE COMPANY (for the General Account) Series C - $ 166,666.67
John Hancock Place Series B - $ 500,000.00
200 Clarendon Street
Boston, Massachusetts 02117
Payments
All payments on or in respect of the Notes shall be made by bank wire transfer
of Federal or other immediately available funds (which shall identify each
payment as "Petroleum Heat and Power Co., Inc., Senior Notes due 2002, principal
or interest or other payments") to:
The First National Bank of Boston
(ABA #011 000390)
100 Federal Street
Boston, Massachusetts 02110
Attention: Insurance Division for the account of John Hancock Variable Life
Insurance Company Private Placement Collection Account Account Number 541-55417
On Order of: [Name of Issuer and PPN]
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) the full
name, interest rate and maturity date of the Notes or other obligations; (2)
allocation of payment between principal and interest and any special payment;
and (3) name and address of Bank (or Trustee) from which wire transfer was sent,
shall be delivered or mailed to:
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
John Hancock Variable Life
Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Administration T-56
All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Securities Accounting Division T-10
All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department, T-57
Name of Nominee in which Notes are to be issued: John Hancock Variable Life
Insurance Company
Taxpayer I.D. Number: 04-2664016
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED
THE NORTHWESTERN MUTUAL LIFE Series A - $10,000,000
INSURANCE COMPANY Series B - $ 3,750,000
720 East Wisconsin Avenue Series C - $ 1,250,000
Milwaukee, Wisconsin 53202
Attention: Securities Department
Telefacsimile Number: (414) 299-7124
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Petroleum Heat and Power Co., Inc., Senior Notes due 2002, principal or
interest") to:
Bankers Trust Company
(ABA #0210-01033)
16 Wall Street
Insurance Unit 4th Floor
New York, New York 10015
for credit to The Northwestern Mutual Life
Insurance Company's Account No. 00-000-027
Notices
All notices and communications, to be addressed as first provided
above, except notices with respect to payment, and written
confirmation of each such payment, to be addressed Attention:
Investment Operations, Telefacsimile Number (414) 299-2111. Name of
Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 39-0509570
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASERS PURCHASED
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY Series A - $10,000,000
711 High Street Series B - $ 3,750,000
Des Moines, Iowa 50392-0800 Series C - $ 1,250,000
Attention: Investment Department,
Securities Division
Telefacsimile: (515) 248-2490
Confirmation: (515) 248-3495
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Petroleum Heat and Power Co., Inc. Senior Notes due 2002, Bond No. 1-B-60043
for Series A, 1-B-60044 for Series B and 1-B-60045 for Series C, principal or
interest and/or premium") to:
Norwest Bank Iowa, N.A.
ABA #073 000 228
Seventh and Walnut Streets
Des Moines, Iowa 50304
for credit to Principal Mutual
Life Insurance Company's
General Account No. 014752
OBI:PFGSE(S) B____ ( ) Principal $_____ Interest $_____
Notices
All notices concerning payment on or in respect of the Notes, to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0960
Attention: Investment Accounting and Treasury - Securities
Facsimile: (515) 248-2643
Confirmation: (515) 248-8301
All notices and communications other than those in respect to payments to be
addressed as provided above. Name of Nominee in which Notes are to be issued:
None
Taxpayer I.D. Number: 42-0127290
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
OWNERS OF BENEFICIAL INTEREST OF
COMPANY'S CLASS C COMMON STOCK
SHAREHOLDER NUMBER OF SHARES
Phillip Ean Cohen 113,423
Thomas J. Edelman 129,019
Margot Gordon 75,615
Irik P. Sevin 201,641
Audrey L. Sevin 477,716
Jorg Bennemann 4,000
Brentwood Corp. 120,985
Albert Bull 25,400
Gabes S.A. 124,314
Barcel Corporation 151,231
Hubertus Langen 9,038
Tortosa GmbH 298,717
Minneford Corp. 12,000
Fernando Montero 35,287
Mortimer Corp. 63,013
Richard O'Connell 302,461
Wolfgang Traber 9,038
M.M. Warburg & Co. 31,808
Max Warburg 38,481
Ravenna Financial Corp. 15,123
Eduardo G. Mestre 15,123
Wrinston Financial, S.A. 30,246
Altama Financiera, S.A. 15,123
Hanseatic Corporation 298,717
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
PETROLEUM HEAT AND POWER CO., INC.
Senior Note
Due October 1, 2002
No. R- __________________, 19____
$
PETROLEUM HEAT AND POWER CO., INC., a Minnesota corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns,
on the first day of October, 2002
the principal amount of
DOLLARS ($____________)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of (i) from the date hereof to but not including October 1, 1998,
_________% per annum and (ii) from and including October 1, 1998 until maturity,
_________% per annum, payable semi-annually on the first of each April and
October in each year commencing with the first such date after the date of issue
hereof, and at maturity. The Company agrees to pay interest during any period on
overdue principal and premium, if any, and (to the extent legally enforceable)
on any overdue installment of interest, at the Overdue Rate (as defined in the
Note Agreements described below), whether by acceleration or otherwise, until
paid. Both the principal hereof and interest hereon are payable at the principal
office of the Company in Stamford, Connecticut in coin or currency of the United
States of America which at the time of payment shall be legal tender for the
payment of public and private debts.
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
This Note is one of the Senior Notes of the Company in the aggregate
principal amount of $60,000,000 issued or to be issued under and pursuant to the
terms and provisions of separate and several Note Agreements each dated as of
February 1, 1997, entered into by the Company with the original purchasers
therein referred to and this Note and the holder hereof are entitled equally and
ratably with the holders of all other Notes outstanding under the Note
Agreements to all the benefits and security provided for thereby or referred to
therein, to which Note Agreements reference is hereby made for the statement
thereof.
This Note and the other Notes outstanding under the Note Agreements may be
declared due prior to their expressed maturity dates, all in the events, on the
terms and in the manner and amounts as provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in Section
2 of the Note Agreements.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
PETROLEUM HEAT AND POWER CO., INC.
By
Its
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
PETROLEUM HEAT AND POWER CO., INC.
CLOSING CERTIFICATE
John Hancock Mutual Life The Northwestern Mutual
Insurance Company Life Insurance Company
Boston, Massachusetts 02117 Milwaukee, Wisconsin 53202
Mellon Bank, N.A. Principal Mutual Life
Pittsburgh, Pennsylvania 15258 Insurance Company
Des Moines, Iowa 50309
John Hancock Variable Life
Insurance Company Barnett & Co.
Boston, Massachusetts 02117 c/o Bankers Trust Company
New York, New York 10274
Gentlemen:
This certificate is delivered to you in compliance with the requirements
of the separate and several Note Agreements dated as of February 1, 1997, (the
"Agreements") entered into by the undersigned, Petroleum Heat and Power Co.,
Inc., a Minnesota corporation (the "Company"), with each of you, respectively,
and as an inducement to and as part of the consideration for your purchase on
this date aggregating $60,000,000 principal amount of the Senior Notes due
October 1, 2002 (the "Notes") of the Company pursuant to the Agreements. The
terms which are capitalized herein shall have the same meanings as in the
Agreements.
The Company represents and warrants to each of you as follows:
1. Subsidiaries. Annex A attached hereto states the name of each of
the Company's Subsidiaries, its jurisdiction of incorporation and the
percentage of its Voting Stock owned by the Company and/or its
Subsidiaries. The Company and each Subsidiary has good and marketable
title to all of the shares it purports to own of the stock of each
Subsidiary, free and clear in each case of any lien. All such shares have
been duly issued and are fully paid and non-assessable.
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
2. Corporate Organization and Authority. The Company, and each
Subsidiary,
(a) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry
on its business as now conducted and as presently proposed to be
conducted; and
(c) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the nature of the
business transacted by it or the nature of the property owned or
leased by it makes such licensing or qualification necessary.
3. Business and Property. You have heretofore been furnished with a
copy of the Company's Preliminary Offering Memorandum dated January 29,
1997 prepared by Donaldson Lufkin & Jenrette Securities Corporation
regarding the issuance and sale of the Company's 1997 Preferred Stock
referred to in Section 4.4 of the Agreements (the "Memorandum") which
generally sets forth the business conducted and proposed to be conducted
by the Company and its Subsidiaries and the principal properties of the
Company and its Subsidiaries.
4. Financial Statements. (a) The consolidated balance sheets of the
Company and its Subsidiaries as of December 31 in each of the years 1991
to 1995 both inclusive, and the statements of income and retained earnings
and changes in financial position for the fiscal years ended on said dates
accompanied by a report thereon containing an opinion unqualified as to
scope limitations imposed by the Company and otherwise without
qualification except as therein noted, by KPMG Peat Marwick LLP, have been
prepared in accordance with generally accepted accounting
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
principles consistently applied except as therein noted, are correct and
complete and present fairly the financial position of the Company and its
Subsidiaries as of such dates and the results of their operations and
changes in their financial position for such periods. The unaudited
consolidated balance sheets of the Company and its Subsidiaries as of
September 30, 1996, and the unaudited statements of income and retained
earnings and changes in financial position for the nine-month period ended
on said date prepared by the Company have been prepared in accordance with
generally accepted accounting principles consistently applied, are correct
and complete and present fairly the financial position of the Company and
its Subsidiaries as of said date and the results of their operations and
changes in their financial position for such period.
(b) Since December 31, 1995, there has been no change in the
condition, financial or otherwise, of the Company and its
Subsidiaries as shown on the consolidated balance sheet as of such
date except changes in the ordinary course of business, none of
which individually or in the aggregate has been materially adverse.
5. Indebtedness. Annex B attached hereto correctly describes all
Current Debt, Funded Debt, Capitalized Leases and Long-Term Leases of the
Company and its Subsidiaries outstanding as of January 31, 1997.
6. Full Disclosure. Neither the financial statements referred to in
paragraph 4 nor the Agreements, the Memorandum or any other written
statement furnished by the Company to you in connection with the
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
negotiation of the sale of the Notes, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact peculiar to
the Company or its Subsidiaries which the Company has not disclosed to you
in writing which materially affects adversely nor, so far as the Company
can now foresee, will materially affect adversely the properties,
business, prospects, profits or condition (financial or otherwise) of the
Company and its Subsidiaries.
7. Pending Litigation. There are no proceedings pending or, to the
knowledge of the Company threatened, against or affecting the Company or
any Subsidiary in any court or before any governmental authority or
arbitration board or tribunal which involve the possibility of materially
and adversely affecting the properties, business, prospects, profits or
condition (financial or otherwise) of the Company and its Subsidiaries.
Neither the Company nor any Subsidiary is in default with respect to any
order of any court or governmental authority or arbitration board or
tribunal.
8. Title to Properties. The Company and each Subsidiary has good and
marketable title in fee simple (or its equivalent under applicable law) to
all the real property and has good title to all the other property it
purports to own, including that reflected in the most recent balance sheet
referred to in paragraph 4 except as sold or otherwise disposed of in the
ordinary course of business and except for liens disclosed in notes to the
financial statements referred to in paragraph 4 hereof or
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
otherwise permitted by the Agreements.
9. Patents and Trademarks. The Company and each Subsidiary owns or
possesses all the patents, trademarks, trade names, service marks,
copyright, licenses and rights with respect to the foregoing necessary for
the present and planned future conduct of its business, without any known
conflict with the rights of others.
10. Sale is Legal and Authorized. The sale of the Notes and
compliance by the Company with all of the provisions of the Agreements and
the Notes--
(a) are within the corporate powers of the Company and have
been duly authorized by proper corporate action on the part of the
Company; and
(b) will not violate any provisions of any law or any order of
any court or governmental authority or agency and will not conflict
with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under the Articles of
Incorporation or By-laws of the Company or any indenture or other
agreement or instrument to which the Company is a party or by which
it may be bound or result in the imposition of any liens or
encumbrances on any property of the Company.
11. No Defaults; Performance of Obligations. (a) No Default or Event
of Default as defined in the Agreements has occurred and is continuing.
The Company is not in default in the payment of principal or interest on
any Indebtedness for borrowed money and is not in default under any
instrument or instruments or agreements under and subject to which any
Indebtedness for borrowed money has been issued and no event has occurred
and is continuing under the provisions of any such instrument or agreement
which with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder.
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
(b) The Company has performed all of its obligations under the
Agreements which are to be performed on or prior to the date hereof,
including, without limitation, the issuance of the 1997 Preferred
Stock as contemplated by Section 4.4. As of the date hereof, the
1997 Preferred Stock has been duly and validly issued and is fully
paid and non-assessable.
12. Governmental Consent. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Company of
the Agreements or the Notes or compliance by the Company with any of the
provisions of the Agreements or the Notes.
13. Taxes. All tax returns required to be filed by the Company or
any Subsidiary in any jurisdiction have, in fact, been filed, and all
taxes, assessments, fees and other governmental charges upon the Company
or any Subsidiary or upon any of their respective properties, income or
franchises, which are shown to be due and payable in such returns have
been paid. The Company does not know of any proposed additional tax
assessment against it for which adequate provision has not been made on
its accounts. The Federal income tax liability of the Company and its
Subsidiaries has been finally determined by the Internal Revenue Service
and satisfied for all taxable years up to and including the taxable year
ended December 31, 1991 and no controversy in respect of a material amount
of additional income taxes due since said date is pending or to the
knowledge of the Company threatened. The provisions for taxes on the books
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
of the Company and each Subsidiary are adequate for all open years, and
for its current fiscal period.
14. Use of Proceeds. The net proceeds from the sale of the Notes
(being the Old Notes surrendered in exchange therefor) will be used for
corporate purposes. None of the transactions contemplated in the
Agreements (including, without limitation thereof, the use of proceeds
from the issuance of the Notes) will violate or result in a violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or any
regulation issued pursuant thereto, including, without limitation,
Regulations G, T and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II. Neither the Company nor any Subsidiary owns
or intends to carry or purchase any "margin stock" within the meaning of
said Regulation G. None of the proceeds from the sale of the Notes will be
used to purchase, or refinance any borrowing, the proceeds of which were
used to purchase any " security" within the meaning of the Securities
Exchange Act of 1934, as amended.
15. Private Offering. Neither the Company, directly or indirectly,
nor any agent on its behalf has offered or will offer the Notes or any
similar Security or has solicited or will solicit an offer to acquire the
Notes or any similar Security from or has otherwise approached or
negotiated or will approach or negotiate in respect of the Notes or any
similar Security with any Person other than you. Neither the Company,
directly or indirectly, nor any agent on its behalf has offered or will
offer the Notes or any similar Security or has solicited or will
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
solicit an offer to acquire the Notes or any similar Security from any
Person so as to bring the issuance and sale of the Notes within the
provisions of Section 5 of the Securities Act of 1933, as amended.
16. Employee Retirement Income Security Act of 1974. The
consummation of the transactions provided for in the agreement and
compliance by the Company with the provisions thereof and the Notes issued
thereunder will not involve any prohibited transaction within the meaning
of the Employee Retirement Income Security Act of 1974 ("ERISA") or
Section 4975 of the Internal Revenue Code of 1954, as amended. No
"employee pension benefit plans", as defined in ERISA ("Plans"),
maintained by the Company or any Person which is under common control with
the Company within the meaning of Section 4001(b) of ERISA, nor any trusts
created thereunder, have incurred any "accumulated funding deficiency" as
defined in Section 302 of ERISA nor did the present value of all benefits
vested under all Plans exceed, as of January 1, 1996, the last annual
valuation date, the value of the assets of the Plans allocable to such
vested benefits by more than $7,200,000.
17. Party in Interest. The Company is neither a "party in interest"
(as defined in title I, Section 3(14) of ERISA) nor a "disqualified
person" (as defined in Section 497(e) (2) of the Internal Revenue Code of
1986, as amended), with respect to any plan identified pursuant to
paragraphs (e) or (f) of ss.3.2 of the Note Agreements; and, with respect
to any plan identified pursuant to ss.3.2(e) of the Note Agreements,
neither it nor any
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
"affiliate" (as defined in Section V(c) of PTE 84-14) is described in the
proviso to said ss.3.2(e) of the Note Agreements.
Dated: February ___, 1997
PETROLEUM HEAT AND POWER CO., INC.
By
Its
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
SUBSIDIARIES OF THE COMPANY
1. SUBSIDIARIES:
PERCENTAGE OF VOTING
STOCK OWNED BY COMPANY
JURISDICTION OF AND EACH OTHER
NAME OF SUBSIDIARY INCORPORATION SUBSIDIARY
A. P. Woodson Company Washington, D.C. 100%
C.B.W. Realty Corp. of
Connecticut Connecticut 100%
Marex Corporation Maryland 100%
Maxwhale Corp. Minnesota 100%
Ocennet Fuel Oil Corp. Connecticut 100%
Ortep of Connecticut, Inc. Connecticut 100%
Ortep of New Jersey, Inc. New Jersey 100%
Ortep of Pennsylvania, Inc. Pennsylvania 100%
Ortep of Staten Island, Inc. New York 100%
Petro/Crystal Corp. New York 100%
Petro, Inc. Delaware 100%
Public Fuel Services Co., Inc. New York 100%
Reliance Utilities Corp. New York 100%
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
DESCRIPTION OF DEBT AND LEASES
1. Current Debt of the Company and its Subsidiaries outstanding as of January
31, 1997 is as follows:
Current portion of 14.10% Subordinated Notes $1,050,000
Current portion of 14.10% Senior Notes` 1,050,000
Current portion of other Long-Term Debt 947,000
Working capital borrowings 35,000,000
----------
$38,047,000
===========
2. Funded Debt of the Company and its Subsidiaries outstanding as of January
31, 1997 is as follows:
Senior and Subordinated Notes due 10/01/1998 $60,000,000
14.10% Senior and Subordinated Notes 6,200,000
10.125% Subordinated Notes 50,000,000
9-3/8% Subordinated Debentures 75,000,000
12-1/4% Subordinated Debentures 81,250,000
Other Long-Term Notes 16,687,000
----------
$289,137,000
3. Long-Term Leases of the Company and its Subsidiaries outstanding as of
January 31, 1997 are as follows:
Leased Facilities $22,500,000
4. Capitalized Leases of the Company and its Subsidiaries outstanding as of
January 31, 1997 are as follows:
None.
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to the
Purchasers, called for by ss.4.2 of the Note Agreement on the Closing Date,
shall be dated the Closing Date and addressed to the Purchasers, shall be
satisfactory in form and substance to the Purchasers and shall be to the effect
that:
1. The Company is a corporation, validly existing and in good
standing under the laws of the State of Minnesota and has the corporate
power and the corporate authority to execute and deliver the Note
Agreements and to issue the Notes.
2. The Note Agreements have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding
contract of the Company enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent conveyance and similar laws
affecting creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is considered in
a proceeding in equity or at law).
3. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, and the Notes being delivered on the
date hereof have been duly executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting creditors'
rights generally, and general principles of equity (regardless of whether
the application of such principles is considered in a proceeding in equity
or at law).
4. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Agreements do not, under existing
law, require the registration of the Notes under the Securities Act of
1933, as amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the opinion of
Philips Nizer Benjamin Krim & Ballon LLP is satisfactory in scope and form to
Chapman and Cutler and that, in their opinion, the Purchasers are justified in
relying thereon and shall cover such other matters relating to the sale of the
Notes as the Purchasers may reasonably request. With respect to matters of fact
upon which such opinion is based, Chapman and Cutler may rely on appropriate
certificates of public officials and officers of the Company.
<PAGE>
Petroleum Heat and Power Co., Inc. Note Agreement
DESCRIPTION OF CLOSING OPINION OF COUNSEL TO THE COMPANY
The closing opinion of Philips Nizer Benjamin Krim & Ballon LLP, counsel
for the Company, which is called for by ss.4.2 of the Note Agreement, shall be
dated the Closing Date and addressed to the Purchasers, shall be satisfactory in
scope and form to the Purchasers and shall cover the matters referred to in
paragraphs 1 through 4 of Exhibit C and shall also be to the effect that:
(1) The Company has full power and authority and is duly authorized
to conduct the activities in which it is now engaged and is duly licensed
or qualified and is in good standing as a foreign corporation in each
jurisdiction in which the character of the properties owned or leased by
it or the nature of the business transacted by it makes such licensing or
qualification necessary;
(2) Each Subsidiary is a corporation duly organized, legally
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly licensed or qualified and is in good standing in
each jurisdiction in which the character of the properties owned or leased
by it or the nature of the business transacted by it makes such licensing
or qualification necessary and all of the issued and outstanding shares of
capital stock of each such Subsidiary have been duly issued, are fully
paid and non-assessable and are owned by the Company, by one or more
Subsidiaries, or by the Company and one or more Subsidiaries;
(3) The issuance and sale of the Notes and the execution, delivery
and performance by the Company of the Note Agreements do not conflict with
or result in any breach of any of the provisions of or constitute a
default under or result in the creation or imposition of any lien or
encumbrance upon any of the property of the Company pursuant to the
provisions of the Certificate of Incorporation or By-laws of the Company
or any agreement or other instrument known to such counsel after
reasonable inquiry to which the Company is a party or by which the Company
may be bound;
(4) No approval, consent or withholding of objection on the part of,
or filing, registration or qualification with, any governmental body,
Federal, state or local, is necessary in connection with the execution and
delivery of the Note Agreements or the Notes;
(5) The Notes are Designated Senior Debt (as defined in and for the
purposes of the Public Debentures); and
(6) The 1997 Preferred Stock when issued by the Company will be duly
and validly issued, fully paid and non-assessable. The opinion of Philips
Nizer Benjamin Krim & Ballon LLP shall cover such other matters relating
to the sale of the Notes as the Purchasers may reasonably request.
Draft of February 13, 1997
PETROLEUM HEAT AND POWER CO., INC.
THIRD AMENDMENT AND RESTATEMENT OF
PURCHASE AGREEMENTS
Dated as of February 1, 1997
Re: 250,000 Shares of 1989 Preferred Stock, Par Value $.10
Exchangeable for
Subordinated Notes
DUE AUGUST 1, 1999
Amending and Restating the
Purchase Agreements dated as of August 1, 1989,
as heretofore amended
<PAGE>
TABLE OF CONTENTS
(Not a part of the Agreement)
SECTION HEADING PAGE
ARTICLE I AMENDMENT AND RESTATEMENT OF THE EXISTING PURCHASE
AGREEMENTS.................................................2
SECTION 2. REPRESENTATIONS..............................................2
Section 2.1. Representations of the Company...........................2
SECTION 3. EFFECTIVE DATE CLOSING CONDITIONS............................6
Section 3.1. Closing Certificate......................................6
Section 3.2. Legal Opinions...........................................7
Section 3.3. Satisfactory Proceedings.................................7
Section 3.4. Consummation of Sale of 1997 Preferred Stock.............7
Section 3.5. Payment of Special Counsel Fees..........................7
SECTION 4. EXCHANGE OF PREFERRED STOCK FOR NOTES........................7
Section 4.1. Exchange of Preferred Stock for Notes....................7
Section 4.2. Note Closing Conditions..................................8
SECTION 5. COMPANY COVENANTS............................................9
Section 5.1. Corporate Existence, etc.................................9
Section 5.2. Insurance................................................9
Section 5.3. Taxes, Claims for Labor and Materials, Compliance
with Laws..............................................9
Section 5.4. Maintenance, etc........................................10
Section 5.5. Nature of Business......................................10
Section 5.6. Limitations on Funded Debt..............................10
Section 5.7. Subsidiary Stock........................................11
Section 5.8. Dividends, Stock Purchases..............................11
Section 5.9. Mergers, Consolidations and Sales of Assets.............12
Section 5.10. Guaranties..............................................12
Section 5.11. Repurchase of Notes.....................................12
Section 5.12. Transactions with Affiliates............................13
Section 5.13. Termination of Pension Plans............................13
Section 5.14. Reports and Rights of Inspection........................13
Section 5.15. Limitation on Indebtedness and Preferred Stock
of Subsidiaries.......................................15
Section 5.16. Limitation on Restrictions on Distributions from
Subsidiaries..........................................16
SECTION 6. PREPAYMENT OF NOTES.........................................17
Section 6.1. Mandatory Prepayment on Change of Ownership.............17
Section 6.2. Optional Prepayments....................................19
Section 6.3. Notice of Prepayments...................................20
Section 6.4. Allocation of Prepayments...............................20
SECTION 7. SUBORDINATION OF NOTES......................................20
Section 7.1. Subordination to Senior Indebtedness....................20
Section 7.2. Proofs of Claim.........................................21
Section 7.3. No Waiver...............................................21
Section 7.4. Rights of Holders of Senior Indebtedness................22
Section 7.5. Rights of Holders of Notes..............................22
-i-
<PAGE>
SECTION 8. EVENTS OF DEFAULT WITH RESPECT TO NOTES AND REMEDIES
THEREFOR..................................................22
Section 8.1. Events of Default.......................................22
Section 8.2. Notice to Holders.......................................23
Section 8.3. Acceleration of Maturities..............................23
Section 8.4. Rescission of Acceleration..............................24
SECTION 9. AMENDMENTS, WAIVERS AND CONSENTS............................24
Section 9.1. Consent Required........................................24
Section 9.2. Effect of Amendment or Waiver...........................25
SECTION 10. INTERPRETATION OF AGREEMENT; DEFINITIONS....................25
Section 10.1. Definitions.............................................25
Section 10.2. Accounting Principles...................................34
Section 10.3. Directly or Indirectly..................................34
SECTION 11. MISCELLANEOUS...............................................34
Section 11.1. Designation of Observers................................34
Section 11.2. Agreement to Amend Charter..............................35
Section 11.3. Direct Payment..........................................35
Section 11.4. Registration and Transfers of the Notes.................36
Section 11.5. Exchange of Preferred Stock and Notes...................36
Section 11.6. Loss, Theft, etc. of Preferred Stock or Notes...........37
Section 11.7. Repurchase of Preferred Stock or Notes..................37
Section 11.8. Expenses, Stamp Tax Indemnity...........................38
Section 11.9. Notices.................................................38
Section 11.10. Successors and Assigns..................................38
Section 11.11. Survival of Covenants and Representations...............38
Section 11.12. Severability............................................38
Section 11.13. Governing Law...........................................39
Section 11.14. Captions................................................39
ARTICLE II AMENDMENTS TO SCHEDULES AND EXHIBITS TO EXISTING
PURCHASE AGREEMENTS.......................................39
ARTICLE III MISCELLANEOUS...............................................39
Section 3.1. Ratification of Existing Purchase Agreements............39
Section 3.2. Counterparts............................................39
Section 3.3. Fees and Expenses.......................................39
Section 3.4. References to Original Purchase Agreements..............39
Section 3.5. Governing Law...........................................39
Section 3.6. Consent to Issuance of 1997 Preferred Stock.............40
Signature Page................................................................41
ATTACHMENTS TO THIRD AMENDMENT AND RESTATEMENT:
Schedule I -- Name and Address of Holders of 1989 Preferred Stock
Schedule II -- Names of Holders of Beneficial Interest of Class C Common Stock
-ii-
<PAGE>
Exhibit A -- Certificate of Designation
Exhibit B -- Preferred Stock Closing Certificate of the Company
Exhibit C -- Description of Chapman and Cutler's Preferred Stock Closing
Opinion
Exhibit D -- Description of Phillips Nizer Benjamin Krim & Ballon LLP
Preferred Stock Closing Opinion
Exhibit E -- Form of Subordinated Note
Exhibit F -- Note Closing Certificate of the Company
Exhibit G -- Description of Note Closing Opinion of Special Counsel to
Holders
Exhibit H -- Description of Note Closing Opinion of Counsel to Company
Exhibit I -- Description of Minnesota Counsel Note Closing Opinion
Exhibit J -- Subsidiaries of the Company
Exhibit K -- Current Debt, Funded Debt, Capitalized Leases and Long-Term
Leases of the Company and its Subsidiaries
-iii-
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
PETROLEUM HEAT AND POWER CO., INC.
DAVENPORT STREET
STAMFORD, CONNECTICUT 06904
THIRD AMENDMENT AND RESTATEMENT OF
PURCHASE AGREEMENTS
RE: 250,000 ORIGINALLY ISSUED SHARES OF 1989
PREFERRED STOCK EXCHANGEABLE
FOR SUBORDINATED NOTES
DUE AUGUST 1, 1999
Amending and Restating the
Purchase Agreements dated as of August 1, 1989,
as heretofore amended
Dated as of February 1, 1997
To the Holders of the 1989 Preferred Stock
Listed on the Attached Schedule I
Ladies and Gentlemen:
Reference is hereby made to the separate Purchase Agreements each dated as
of August 1, 1989 (the "Original Purchase Agreements") between Petroleum Heat
and Power Co., Inc., a Minnesota corporation (the "Company"), and the respective
Purchasers named therein (the Original Purchase Agreements, as heretofore
amended by the First Amendment dated as of January 24, 1994 (the "First
Amendment") and the Second Amendment dated as of November 28, 1995, are herein
referred to as the "Existing Purchase Agreements"), pursuant to which the
Company issued 250,000 shares of its 1989 Preferred Stock, due August 1, 1999
(the "Preferred Stock").
The Company now proposes to (i) issue $60,000,000 aggregate principal
amount of its Senior Notes due October 1, 2002 (the "2002 Notes") pursuant to
the separate Note Agreements each dated as of February 1, 1997 between the
Company and each of the respective Purchasers named therein, in exchange for the
$30,000,000 aggregate principal amount of the Company's Senior Notes due October
1, 1998 and the $30,000,000 aggregate principal amount of the Company's
Subordinated Notes due October 1, 1998, (ii) issue $30,000,000 aggregate
liquidation preference of its Exchangeable Preferred Stock (the "1997 Preferred
Stock") pursuant to Rule 144A under the Securities Act of 1933, as amended, and
(iii) amend the terms of the $6,250,000 original principal amount 14.10%
Subordinated Notes of the Company and the $6,250,000 original principal amount
14.10% Senior Notes of the Company pursuant to that certain Sixth Amendment and
Restatement of Note Agreement dated as of February 1, 1997 between the Company
and the holder of such Notes (the transactions described in the foregoing
clauses (i) through (iii) are herein referred to as the "Proposed
Transactions").
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
In order to permit the Proposed Transactions, the Company now desires, and
the Company and each of you hereby agree, subject to satisfaction of the
conditions precedent set forth in ss.3 hereof (the "Closing Conditions"), to
amend and restate the Existing Purchase Agreements as of February 18, 1997 or,
in the event that all Closing Conditions have not been satisfied as of February
18, 1997, such later date on or prior to February 28, 1997 as of which all such
closing conditions have been satisfied (such date or such later date is herein
referred to as the "Effective Date") in the respects, but only in the respects,
hereinafter set forth in this Third Amendment and Restatement of Purchase
Agreements (this "Agreement"):
ARTICLE I
AMENDMENT AND RESTATEMENT
OF THE EXISTING PURCHASE AGREEMENTS
Sections 2 through 10 of the Existing Purchase Agreements shall be and are
hereby amended and restated in their entirety to read as follows:
SECTION 2. REPRESENTATIONS.
Section 2.1. Representations of the Company. The Company represents and
warrants to you as of the date hereof that:
(a) Subsidiaries. Exhibit J attached hereto states the name of each
of the Company's Subsidiaries, its jurisdiction of incorporation and the
percentage of its Voting Stock owned by the Company and/or its
Subsidiaries. The Company and each Subsidiary has title to all of the
shares it purports to own of the stock of each Subsidiary, free and clear
in each case of any lien except as disclosed in the notes to the financial
statements referred to in paragraph (d) hereof or in Exhibit K attached
hereto. All such shares have been duly issued and are fully paid and
non-assessable.
(b) Corporate Organization and Authority. The Company and each
Subsidiary
(i) is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
and
(ii) has all requisite corporate power and authority to own
and operate its properties and to carry on its business as now
conducted and as presently proposed to be conducted.
(c) Business and Property. You have heretofore been furnished with a
copy of the Company's Preliminary Offering Memorandum dated January 29,
1997 prepared by Donaldson Lufkin & Jenrette Securities Corporation
regarding the
-2-
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
issuance and sale of the Company's 1997 Preferred Stock referred to in
ss.3.4 (the "Memorandum") which generally sets forth the business
conducted and proposed to be conducted by the Company and its Subsidiaries
and the principal properties of the Company and its Subsidiaries.
(d) Financial Statements. The balance sheets of the Company as of
December 31 in each of the years 1991 through 1995, and the statements of
income and shareholders equity and changes in financial position for the
fiscal years ended on said dates accompanied by a report thereon
containing an opinion unqualified as to scope limitations imposed by the
Company and otherwise without qualification except as therein noted, by
KPMG Peat Marwick LLP, certified public accountants, and the unaudited
balance sheet of the Company as of September 30, 1996 and the unaudited
statements of income and shareholders' equity and changes in financial
position for the nine-month period ended on such date, copies of which
have been delivered to you, have been prepared in accordance with
generally accepted accounting principles consistently applied except as
therein noted, are correct and complete and present fairly the financial
position of the Company and its Subsidiaries as of such dates and the
results of its operations and changes in its financial position or
consolidated statements of its cash flow for such periods.
(e) Indebtedness. Exhibit K attached hereto correctly describes all
Working Capital Borrowings, Funded Debt, Capitalized Leases and Long-Term
Leases of the Company and its Subsidiaries outstanding as of January 31,
1997.
(f) Full Disclosure. Neither the financial statements referred to in
paragraph (d) nor this Agreement, the Memorandum or any written statement
furnished by the Company to you in connection with the execution and
delivery of this Agreement, contains any untrue statement of a material
fact or omits a material fact necessary to make the statements contained
therein or herein not misleading. There is no fact peculiar to the Company
which the Company has not disclosed to you in writing which materially
affects adversely nor, so far as the Company can now foresee, will
materially affect adversely the properties, business, prospects, profits
or condition (financial or otherwise) of the Company, or the ability of
the Company to perform this Agreement, the Notes or the Restated and
Amended Articles of Incorporation of the Company as they apply to the
Preferred Stock.
(g) Pending Litigation. There are no proceedings pending or, to the
knowledge of the Company, threatened
-3-
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
against or affecting the Company or any Subsidiary in any court or before
any governmental authority or arbitration board or tribunal which involve
the possibility of materially and adversely affecting the properties,
business, prospects, profits or condition (financial or otherwise) of the
Company and its Subsidiaries, or the ability of the Company to perform
this Agreement, the Notes or the Restated and Amended Articles of
Incorporation of the Company as they apply to the Preferred Stock. Neither
the Company nor any Subsidiary is in default with respect to any order of
any court or governmental authority or arbitration board or tribunal.
(h) Title to Properties. The Company and each Subsidiary has good
and marketable title in fee simple (or its equivalent under applicable
law) to all the real property and has title to all the other property it
purports to own, including that reflected in the balance sheet as of
September 30, 1996 referred to in paragraph (d) except as sold or
otherwise disposed of in the ordinary course of business and except for
liens disclosed in notes to the financial statements referred to in
paragraph (d) hereof or in Exhibit K attached hereto and except for liens,
easements and minor defects in title thereto that do not materially
adversely affect the value of such property.
(i) Patents and Trademarks. The Company and each Subsidiary owns or
possesses all the patents, trademarks, trade names, service marks,
copyright, licenses and rights with respect to the foregoing necessary for
the present conduct of its business, without any known material conflict
with the rights of others.
(j) Sale is Legal and Authorized. (i) On (A) the Effective Date the
compliance by the Company with all of the provisions of this Agreement and
the Restated and Amended Articles of Incorporation of the Company as they
apply to the Preferred Stock and (B) each Note Closing Date, the issuance
of the Notes in exchange for the Preferred Stock and compliance by the
Company with all of the provisions of this Agreement and the Notes --
(y) will be within the corporate powers of the Company and
will have been duly authorized by proper corporate action on the
part of the Company; and
(z) will not violate any provisions of any law or any order of
any court or governmental authority or agency and will not conflict
with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under the Restated and
Amended Articles of Incorporation or By-laws of the
-4-
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
Company or any indenture or other agreement or instrument to which
the Company is a party or by which it may be bound or result in the
imposition of any liens or encumbrances on any property of the
Company.
(ii) When executed and delivered pursuant hereto on each Note
Closing Date, the Notes will be, legal, valid and binding
obligations of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency and other laws and legal
and equitable principles affecting or limiting the enforcement of
creditors' rights generally.
(k) No Defaults. On the Effective Date and on each Note Closing
Date, no Default or Event of Default as defined in this Agreement will
have occurred and be continuing and no event will have occurred and be
continuing which would constitute a Default or an Event of Default were
any Notes outstanding on such date. Neither the Company nor any Subsidiary
is in default in the payment of principal or interest on any Indebtedness
for borrowed money nor in default under any instrument or instruments or
agreements under and subject to which any Indebtedness for borrowed money
has been issued and no event has occurred and is continuing under the
provisions of any such instrument or agreement which with the lapse of
time or the giving of notice, or both, would constitute an event of
default thereunder.
(l) Governmental Consent. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Company of
this Agreement or the Notes or the compliance by the Company with any of
the provisions of this Agreement, the Notes or the Restated and Amended
Articles of Incorporation of the Company as they apply to the Preferred
Stock.
(m) Taxes. All tax returns required to be filed by the Company or
any Subsidiary in any jurisdiction have, in fact, been filed, and all
taxes, assessments, fees and other governmental charges upon the Company
or any Subsidiary or upon any of their respective properties, income or
franchises, which are shown to be due and payable in such returns have
been paid. The Company does not know of any proposed additional tax
assessment against it or any Subsidiary for which adequate provision has
not been made on its accounts. The Federal income tax liability of the
Company and its Subsidiaries has been finally determined by the Internal
Revenue Service and satisfied for all taxable years up to and including
the taxable year ended December 31, 1991 and no controversy in respect of
a material amount
-5-
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
of additional income taxes due since said date is pending or to the
knowledge of the Company threatened. The provisions for taxes on the books
of the Company and each Subsidiary is adequate for all open years, and for
its current fiscal period.
(n) No Violation of Section 7 of Securities Exchange Act. None of
the transactions contemplated in this Agreement (including, without
limitation thereof, the use of proceeds, upon any exchange of Preferred
Stock for Notes) will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulation issued
pursuant thereto, including, without limitation, Regulations G, T and X of
the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter
II.
(o) Registration. The Preferred Stock is not an equity security of a
class which is, or is required to be, registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended, and the provisions of
Section 13(d)(1) of said Act are not applicable to the Preferred Stock.
(p) Private Offering. Neither the Company, directly or indirectly,
nor any agent on its behalf has offered or will offer the Preferred Stock
or the Notes or any similar Security (other than the 1997 Preferred Stock)
to, or has solicited or will solicit an offer to acquire the Preferred
Stock or the Notes or any similar Security (other than the 1997 Preferred
Stock) from, or has otherwise approached or negotiated or will approach or
negotiate in respect of the Preferred Stock or the Notes or any similar
Security (other than the 1997 Preferred Stock) with any Person other than
you and the other Purchaser. Neither the Company, directly or indirectly,
nor any agent on its behalf has offered or will offer the Preferred Stock
or the Notes or any similar Security to, or has solicited or will solicit
an offer to acquire the Preferred Stock or the Notes or any similar
Security from any Person so as to bring the issuance and sale of the
Preferred Stock or the Notes within the provisions of Section 5 of the
Securities Act of 1933, as amended.
(q) Employee Retirement Income Security Act of 1974. The
consummation of the transactions provided for in this Agreement and
compliance by the Company with the provisions hereof and the Preferred
Stock and Notes issued hereunder will not involve any prohibited
transaction within the meaning of the Employee Retirement Income Security
Act of 1974 ("ERISA") or Section 4975 of the Internal Revenue Code of
1954, as amended. No "employee pension benefit plans",
-6-
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
as defined in ERISA ("Plans"), maintained by the Company or any Person
which is under common control with the Company within the meaning of
Section 4001(b) of ERISA, nor any trusts created thereunder, have incurred
any "accumulated funding deficiency" as defined in Section 302 of ERISA
nor did the present value of all benefits vested under all Plans exceed,
as of January 1, 1996, the last annual valuation date, the value of the
assets of the Plans allocable to such vested benefits by more than
$7,200,000.
(r) Investment Company Act. Neither the Company nor any Subsidiary
is, and neither is directly or indirectly controlled by, or acting on
behalf of any Person which is, an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(s) Absence of Holding Company Status. The Company is not a "holding
company" or a subsidiary or affiliate of a "holding company", or a
subsidiary company of a "holding company", or a "public utility" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
(t) Dividends. The Company is not in arrears in the payment of any
dividends on any outstanding shares of its capital stock.
SECTION 3. EFFECTIVE DATE CLOSING CONDITIONS.
The effectiveness of this Agreement shall be subject to the performance by
the Company of its agreements hereunder which by the terms hereof are to be
performed at or prior to the Effective Date and to the following further
conditions precedent, and the Company will use its best efforts to fulfill all
of such conditions:
Section 3.1. Closing Certificate. On the Effective Date, all
representations and warranties of the Company set forth in ss.2.1 hereof shall
be true and correct, and you shall have received a certificate dated the
Effective Date to such effect, signed by a Chief Executive Officer or any Vice
President of the Company, substantially in the form attached hereto as Exhibit
B.
Section 3.2. Legal Opinions. On the Effective Date, you shall have
received from Chapman and Cutler, who are acting as your special counsel in this
transaction and from Phillips Nizer Benjamin Krim & Ballon LLP counsel for the
Company, their respective opinions, dated the Effective Date, in form and
substance satisfactory to you and covering the matters set forth in Exhibits C
and D, respectively, hereto.
Section 3.3. Satisfactory Proceedings. All proceedings taken in
connection with the transactions contemplated by this Agreement, and all
documents necessary to the consummation thereof, shall be satisfactory in form
and substance to you and your special counsel, and you shall have received a
copy
-7-
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
(executed or certified as may be appropriate) of all legal documents or
proceedings taken in connection with the consummation of said transactions.
Section 3.4. Consummation of Sale of 1997 Preferred Stock. On or prior to
the Effective Date, the Company shall have consummated the issuance and sale
pursuant to Rule 144A under the Securities Act of 1933, as amended, of
$30,000,000 aggregate liquidation preference of its Exchangeable Preferred Stock
(the "1997 Preferred Stock").
Section 3.5. Payment of Special Counsel Fees. Without limiting the
provisions of ss.11.8, the Company shall have paid on the Effective Date the
reasonable fees, charges and disbursements of your special counsel referred to
in ss.3.2 above to the extent reflected in a statement of such counsel rendered
to the Company at least one Business Day prior to the Effective Date.
SECTION 4. EXCHANGE OF PREFERRED STOCK FOR NOTES.
Section 4.1. Exchange of Preferred Stock for Notes. The Company, from
time to time, on any Business Day specified by the Company, upon not less than
14 days' nor more than 30 days' prior written notice to each holder of the then
outstanding shares of Preferred Stock (any such day, with respect to the Notes
to be issued on such day the "Note Closing Date"), may cause all or any part of
such then outstanding shares of Preferred Stock to be redeemed by issuing, in
exchange therefor, its Subordinated Notes due August 1, 1999 (the "Notes")
substantially in the form attached hereto as Exhibit E, provided, that the
amount of Preferred Stock exchanged on any Note Closing Date shall be not less
than 10,000 shares and increments of 2,000 shares in excess thereof. Dividends
on the Preferred Stock so redeemed shall cease to accrue on the Note Closing
Date and the Company will pay interest on the Notes, at the rate and on the
dates specified therein, on and after the Note Closing Date. As contemplated by
Section 1.3 of the First Amendment, Notes issued in exchange for any shares of
Preferred Stock shall bear interest at the rate of 12% per annum.
At 10:00 A.M. local time on any Note Closing Date, each holder of any then
outstanding shares of Preferred Stock to be exchanged shall deliver the
certificate or certificates evidencing such shares to the Company at the address
then designated for the receipt of notices in ss.11.9 hereof upon receipt from
the Company of the following:
(i) payment to such holder of an amount equal to all accrued and
unpaid cumulative dividends on the outstanding shares of Preferred Stock
held by such holder (whether or not earned or declared) to, but not
including, the Note Closing Date; and
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(ii) Notes, dated the Note Closing Date, in the aggregate principal
amount (after giving effect to any mandatory redemptions made with respect
to the Preferred Stock on such Note Closing Date) which would then be
payable with respect to the Preferred Stock held by such holder in the
event of an involuntary liquidation, dissolution or winding up of the
Company.
The Notes delivered to each holder will be delivered in such denominations
and in such holder's name or the name of such nominee or nominees as such holder
may specify at least three days prior to the Note Closing Date. Unless any
holder shall otherwise request, the Notes to be delivered to each holder will be
in the form of a single Note registered in the name of such holder. All partial
exchanges of Preferred Stock shall be applied on all outstanding Preferred Stock
ratably in accordance with the liquidation preference thereof and in inverse
order of the date of original issuance thereof, but only in units of whole
shares, and to the extent that such ratable application shall not result in
non-fractional shares, the Company shall exchange, as nearly as practicable on
such Note Closing Date, that number of shares of Preferred Stock issued on each
date of issuance thereof (each such date a "Preferred Stock Closing Date") then
held by each holder that bears the same proportion to the total number of shares
to be exchanged as the total number of shares of Preferred Stock issued on such
Preferred Stock Closing Date held by such holder bears to the total number of
shares of Preferred Stock issued on such Preferred Stock Closing Date then
outstanding. Adjustment may be made by the Company to the end that successive
applications shall result in substantially ratable exchanges.
Section 4.2. Note Closing Conditions. Your obligation to exchange
Preferred Stock for Notes on each Note Closing Date shall be subject to the
performance by the Company of its agreements hereunder which by the terms hereof
are to be performed at or prior to the time of delivery of the Notes on such
Note Closing Date and to the following further conditions precedent and the
Company will use its best efforts to fulfill all of such conditions:
(a) Closing Certificates. On each Note Closing Date, all
representations and warranties of the Company set forth in ss.2.1 hereof
shall be true and correct, and concurrently with the delivery of Notes to
you on such Note Closing Date, you shall have received a certificate dated
such Note Closing Date to such effect, signed by a Chief Executive Officer
of the Company substantially in the form attached hereto as Exhibit F, the
truth and accuracy of which shall be a condition to your obligation to
purchase the Notes proposed to be sold to you.
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(b) Legal Opinions. Concurrently with the delivery of Notes to you
on each Note Closing Date, you shall have received from Chapman and
Cutler, who are acting as your special counsel in this transaction, and
from Phillips Nizer Benjamin Krim & Ballon LLP, counsel for the Company
and Dorsey & Whitney, Minnesota counsel to the Company, their respective
opinions dated such Note Closing Date, in form and substance satisfactory
to you, and covering applicable matters set forth in Exhibits G, H and I,
respectively, hereto.
(c) Satisfactory Proceedings. All proceedings taken in connection
with the transactions contemplated by this Agreement, and all documents
necessary to the consummation thereof, shall be satisfactory in form and
substance to you and your special counsel, and you shall have received a
copy (executed or certified as may be appropriate) of all legal documents
or proceedings taken in connection with the consummation of said
transactions.
(d) Related Transactions. Prior to or concurrently with the exchange
of Notes for Preferred Stock on each Note Closing Date, the Company shall
have consummated the exchange of the entire principal amount of the Notes
scheduled to be exchanged on such Note Closing Date pursuant to this
Agreement and the other agreements referred to in ss.1.3.
SECTION 5. COMPANY COVENANTS.
From and after the First Note Closing Date and continuing so long as any
Notes remain outstanding:
Section 5.1. Corporate Existence, etc. The Company will preserve and keep
in force and effect, and will cause each Subsidiary to preserve and keep in
force and effect, its corporate existence and all licenses and permits necessary
to the proper conduct of its business, the absence of which would materially and
adversely affect the properties, business, prospects or the condition of the
Company and its Subsidiaries, provided that the foregoing shall not prevent any
transaction permitted by ss.5.9.
Section 5.2. Insurance. The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers rated by A.M. Best & Company A-X or better, in such forms and amounts
and against such risks as are customary for corporations of established
reputation engaged in the same or a similar business and owning and operating
similar properties; provided, however, that if insurance coverage by an insurer
with such rating is not available for any such risk, then the Company shall
maintain insurance coverage, for such risk, by an insurer with the highest
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rating for insurers which provide insurance coverage for such risk.
Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws.
The Company will promptly pay and discharge, and will cause each Subsidiary
promptly to pay and discharge, all lawful taxes, assessments and governmental
charges or levies imposed upon the Company or such Subsidiary, respectively, or
upon or in respect of all or any part of the property or business of the Company
or such Subsidiary, all trade accounts payable in accordance with usual and
customary business terms, and all claims for work, labor or materials, which if
unpaid might become a lien or charge upon any property of the Company or such
Subsidiary; provided the Company or such Subsidiary shall not be required to pay
any such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company or such Subsidiary or any material interference with
the use thereof by the Company or such Subsidiary, and (ii) the Company or such
Subsidiary shall set aside on its books adequate reserves with respect thereto,
if required by generally accepted accounting principles. The Company will
promptly comply and will cause each Subsidiary to comply with all laws,
ordinances or governmental rules and regulations to which it is subject,
including without limitation, the Occupational Safety and Health Act of 1970,
the Employee Retirement Income Security Act of 1974 and all laws, ordinances,
governmental rules and regulations relating to environmental protection in all
applicable jurisdictions, the violation of which would materially and adversely
affect the properties, business, prospects, profits or condition of the Company
and its Subsidiaries or would result in any lien or charge upon any property of
the Company or any Subsidiary; provided the Company or such Subsidiary shall not
be required to pay any such tax, assessment, charge, levy, account payable or
claim if (i) the validity, applicability or amount thereof is being contested in
good faith by appropriate actions or proceedings which will prevent the
forfeiture or sale of any property of the Company or such Subsidiary or any
material interference with the use thereof by the Company or such Subsidiary,
and (ii) the Company or such Subsidiary shall set aside on its books adequate
reserves with respect thereto, if required by generally accepted accounting
principles.
Section 5.4. Maintenance, etc. The Company will maintain, preserve and
keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold
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interest) in repair and working order as is customary for corporations of
established reputation engaged in the same or a similar business and owning and
operating similar properties and from time to time will make all necessary
repairs, replacements, renewals and additions so that at all times the
efficiency thereof shall be maintained.
Section 5.5. Nature of Business. Neither the Company nor any Subsidiary
will engage in any business if, giving effect thereto, less than 80% of the
Consolidated Operating Cash Flow of the Company for the 12 months ended with its
most recently ended fiscal quarter would be attributable to the distribution of
home heating oil (#2 fuel oil), propane and related products (including the
distribution of other petroleum products which were distributed by the Company
during its fiscal year ending December 31, 1996), all as determined in
accordance with generally accepted accounting principles.
Section 5.6. Limitations on Funded Debt. Neither the Company nor any of
its Subsidiaries will incur, create, assume, guarantee or otherwise become
liable for any additional Funded Debt unless, after giving effect thereto, the
Company's Consolidated EBITDA Coverage Ratio exceeds 2.0 to 1.
The foregoing restriction on additional Funded Debt shall not be
applicable to (i) Funded Debt incurred to refund, extend or renew up to an equal
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 subordinate to the Senior Notes, such Funded Debt must be subordinated
to the Senior Notes to the extent such Indebtedness is so subordinated, and (ii)
additional Funded Debt in an aggregate amount not to exceed $25 million at any
one time outstanding; provided, however, that Funded Debt incurred pursuant to
this subsection (ii) shall be deemed not to be outstanding for purposes of this
subsection (ii) if at the end of any period of four consecutive fiscal quarters
ending after the incurrence of such Funded Debt the Company's Consolidated
EBITDA Coverage Ratio exceeds 2.0 to 1.
Section 5.7. Subsidiary Stock. The Company shall not directly or
indirectly create, assume or suffer to exist any lien, charge or encumbrance on
any capital stock of any of its Subsidiaries. The Company shall not permit any
Subsidiary to issue or at any time to have outstanding any shares of preferred
stock, except as permitted underss.5.15.
Section 5.8. Dividends, Stock Purchases. The Company shall not declare or
pay any dividend or make any distribution on its capital stock or to its
shareholders or make any loan or advance to its shareholders (other than
dividends or distributions payable in its capital stock) or purchase, redeem or
otherwise
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acquire or retire for value, or permit any Subsidiary to purchase or otherwise
acquire for value, any capital stock of the Company (i) if at the time of such
action an Event of Default shall have occurred and be continuing, or (ii) if,
upon giving effect to such dividend, distribution, loan, advance, purchase,
redemption, or other acquisition or retirement, the aggregate amount expended
for all such purposes subsequent to December 31, 1987 (giving effect to any
repayments of such loans or advances), shall exceed the sum of (a) 50% of the
aggregate Cash Flow of the Company accrued on a cumulative basis for each of the
fiscal years subsequent to December 31, 1986, and (b) the aggregate net
proceeds, including the fair market value of property other than cash (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive), received by the Company from the issue or
sale after July 1, 1987, of capital stock of the Company, including capital
stock issued upon the conversion of, or exchange for, Indebtedness; provided,
however, that (x) the foregoing shall not prevent the payment of any dividend
within 60 days after the date of declaration of such dividend, if at said date
such declaration complied with this covenant; (y) in the event that the Company
purchases, redeems or otherwise acquires or retires any capital stock of the
Company in exchange for promissory notes of the Company then, so long as no
Preferred Stock shall remain outstanding and such promissory notes are junior
and subordinate to the Notes, the principal of and interest on such subordinated
promissory notes shall not be included for purposes of the foregoing until such
time as payments of principal or interest are made thereon; and (z)
notwithstanding the limitations of this ss.5.8, the Company may in each fiscal
year, so long as no Default or Event of Default shall have occurred and be
continuing, pay dividends on, and make mandatory or optional redemptions and
exchanges of, the Preferred Stock pursuant to this Agreement, it being
understood that any such dividends, redemptions and exchanges permitted by this
clause (z) shall be taken into account in determining the amount of any other
dividend, distribution, loan, advance, purchase, acquisition, redemption or
retirement to be made.
Section 5.9. Mergers, Consolidations and Sales of Assets. The Company
shall not consolidate with or merge into any other corporation or transfer all
or substantially all of its properties and assets as an entirety to any person,
unless:
(a) either the Company shall be the continuing person, or the person
(if other than the Company) formed by such consolidation or into which the
Company is merged or to which the properties and assets of the Company as
an entirety are transferred (i) shall be a corporation organized and
existing under the laws of the United States
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of America or any state thereof or the District of Columbia, (ii) shall
expressly assume all the obligations of the Company under the Note
Agreement, (iii) shall be a person with a consolidated net worth
immediately after such transaction at least equal to the Consolidated Net
Worth of the Company immediately prior to such transaction and (iv) would,
after giving effect to such transaction, be able to issue at least one
dollar ($1.00) of additional Funded Debt under the provisions of ss.5.6;
(b) immediately after giving effect to such transaction, no Event of
Default or no Default shall have occurred and be continuing; and
(c) the Company has delivered to the Noteholders an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer complies with this covenant.
Any sale or other transfer by the Company of a material part of any of its
properties or assets not in the ordinary course of business shall be for a price
which is not less than the fair market value of the property or assets so sold
or transferred, as determined in good faith by the Board of Directors of the
Company.
Notwithstanding the foregoing, any Subsidiary may consolidate with, merge
into or transfer all or part of its properties and assets to the Company or any
other Wholly-owned Subsidiary or Wholly-owned Subsidiaries.
Section 5.10. Guaranties. In addition to the other restrictions contained
herein, including, without limitation, the restrictions contained in ss.ss.5.6
and 5.15 hereof, the Company will not and will not permit any Subsidiary to
become or be liable in respect of any Guaranty except (i) any Guaranty of the
Company of any obligation of any Wholly-owned Subsidiary, (ii) any Guaranty of
any Subsidiary of any obligation of any Wholly-owned Subsidiary or of the
Company, and (iii) Guaranties of the Company which are limited in amount to a
stated maximum dollar exposure and included in Indebtedness permitted by this
Agreement.
Section 5.11. Repurchase of Notes. Neither the Company nor any Subsidiary
or Affiliate, directly or indirectly, may repurchase or make any offer to
repurchase any Notes unless the offer has been made to repurchase Notes, pro
rata, from all holders of the Notes at the same time and upon the same terms. In
case the Company repurchases any Notes, such Notes shall thereafter be cancelled
and no Notes shall be issued in substitution therefor.
Section 5.12. Transactions with Affiliates. The Company will not, and
will not permit any Subsidiary to, enter into or be a party to, any transaction
or arrangement with any Affiliate
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(including without limitation, the purchase from, sale to or exchange of
property with, or the rendering of any service by or for, any Affiliate), except
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person other than an Affiliate, not detrimental to the interest of the Company
or such Subsidiary.
Section 5.13. Termination of Pension Plans. The Company will not and will
not permit any Subsidiary to permit any employee benefit plan maintained by it
to be terminated in a manner which could result in the imposition of a lien on
any property of the Company or any Subsidiary pursuant to Section 4068 of the
Employee Retirement Income Security Act of 1974, as amended, if the enforcement
of all such liens then in effect would have a material and adverse effect on the
properties, business, prospects or the condition of the Company and its
Subsidiaries.
Section 5.14. Reports and Rights of Inspection. The Company will keep,
and will cause each Subsidiary to keep, proper books of record and account in
which full and correct entries will be made of all dealings or transactions of
or in relation to the business and affairs of the Company or such Subsidiary, in
accordance with generally accepted principles of accounting consistently
maintained (except for changes disclosed in the financial statements furnished
to you pursuant to this ss.5.14 and concurred in by the independent public
accountants referred to in ss.5.14(b) hereof), and will furnish to you so long
as you are the holder of any Note and to each other institutional holder of the
then outstanding Notes (in duplicate if so specified below or otherwise
requested):
(a) Quarterly Statements. As soon as available and in any event
within 45 days after the end of each quarterly fiscal period (except the
last) of each fiscal year, duplicate copies of:
(1) consolidated balance sheets of the Company and its
Subsidiaries as of the close of such quarter setting forth in
comparative form the amount for the end of the preceding fiscal
year,
(2) consolidated statements of income and retained earnings of
the Company and its Subsidiaries for such quarterly period, setting
forth in comparative form the amount for the corresponding period of
the preceding fiscal year, and
(3) consolidated statements of cash flows of the Company and
its Subsidiaries for the portion of the fiscal year ending with such
quarter, setting forth in comparative form the amount for the
corresponding period of the preceding fiscal year,
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all in reasonable detail and certified as complete and correct, by
the chief financial officer of the Company;
(b) Annual Statements. As soon as available and in any event within
90 days after the close of each fiscal year of the Company, duplicate
copies of:
(1) consolidated balance sheets of the Company and its
Subsidiaries as of the close of such fiscal year, and
(2) consolidated statements of income and retained earnings
and cash flows of the Company and its Subsidiaries for such fiscal
year,
in each case setting forth in comparative form the consolidated figures
for the preceding fiscal year, all in reasonable detail and accompanied by
a report thereon of a firm of independent public accountants of recognized
national standing selected by the Company to the effect that the
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which such accountants concur) and present
fairly the financial condition of the Company and its Subsidiaries and
that the examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards and accordingly, includes such tests of the accounting records
and such other auditing procedures as were considered necessary in the
circumstances;
(c) Audit Reports. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of
the Company or any Subsidiary;
(d) SEC and Other Reports. Promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement
sent by the Company to stockholders generally and of each regular or
periodic report, and any registration statement or prospectus filed by the
Company or any Subsidiary with any securities exchange or the Securities
and Exchange Commission or any successor agency, and copies of any orders
in any proceedings to which the Company or any of its Subsidiaries is a
party, issued by any governmental agency, Federal or state, having
jurisdiction over the Company or any of its Subsidiaries;
(e) Requested Information. With reasonable promptness, such other
data and information (including information as to the ownership of the
capital stock of the Company) as you or any such institutional holder may
reasonably request;
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(f) Officers' Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of the chief financial officer
of the Company stating that he has reviewed the provisions of this
Agreement and setting forth: (i) the information and computations (in
sufficient detail) required in order to establish whether the Company was
in compliance with the requirements of ss.5.6 through ss.5.13, inclusive,
at the end of the period covered by the financial statements then being
furnished, and (ii) whether there existed as of the date of such financial
statements and whether, to the best of his knowledge after reasonable
inquiry, there exists on the date of the certificate or existed at any
time during the period covered by such financial statements any Default or
Event of Default and, if any such condition or event exists on the date of
the certificate, specifying the nature and period of existence thereof and
the action the Company is taking and proposes to take with respect
thereto; and
(g) Accountants' Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they have
reviewed this Agreement and stating further, whether in making their
audit, such accountants have become aware of any Default or Event of
Default under any of the terms or provisions of this Agreement, and if any
such condition or event then exists, specifying the nature and period of
existence thereof.
Without limiting the foregoing, the Company will permit you, so long as
you are the holder of any Note, and each institutional holder of the then
outstanding Notes (or such Persons as either you or such holder may designate)
to visit and inspect, any of the properties of the Company or any Subsidiary, to
examine all their books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs, finances
and accounts with their respective officers, corporate staff and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss with you the finances and affairs of the Company and its
Subsidiaries) all at such reasonable times and as often as may be reasonably
requested. The Company shall not be required to pay or reimburse you or any such
holder for expenses which you or any such holder may incur in connection with
any such visitation or inspection.
Section 5.15. Limitation on Indebtedness and Preferred Stock of
Subsidiaries. The Company will not permit any Subsidiary to incur or in any
manner be or become liable in respect of any
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Indebtedness or issue or have outstanding any preferred stock except: (i)
Indebtedness or preferred stock issued to and held by the Company or a
Wholly-owned Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly-owned Subsidiary
ceasing to be a Wholly-owned Subsidiary or any subsequent transfer of such
Indebtedness or preferred stock (other than to the Company or a Wholly-owned
Subsidiary) will be deemed, in each case, to constitute the incurrence of such
Indebtedness or the issuance of such preferred stock, as the case may be, by the
issuer thereof; (ii) Indebtedness incurred or preferred stock of a Subsidiary
issued and outstanding on or prior to the date on which such Subsidiary was
acquired by the Company (other than Indebtedness incurred or preferred stock
issued in contemplation of, as consideration in, or to provide all or any
portion of the funds or credit support utilized to consummate, the transaction
or series of related transactions pursuant to which such Subsidiary became a
Subsidiary or was acquired by the Company), provided that at the time such
Subsidiary is acquired by the Company, after giving effect to such Indebtedness
or preferred stock of such Subsidiary, the Company's Consolidated EBITDA
Coverage Ratio exceeds 2. 0 to 1; (iii) Indebtedness or preferred stock (other
than Indebtedness or preferred stock described in clause (i), (ii), (iv) or (vi)
of this covenant) incurred or issued and outstanding on or prior to the January
26, 1994; (iv) Indebtedness of a Subsidiary consisting of guarantees issued by
such Subsidiary and outstanding on January 26, 1994 and Indebtedness of a
Subsidiary consisting of guarantees issued subsequent to such date, in each
case, to the extent such guarantee guarantees Bank Debt; (v) Indebtedness of a
Subsidiary (other than Indebtedness described in clause (iv) above) consisting
of guarantees of Funded Debt of the Company permitted by the first paragraph of
ss.5.6, provided that contemporaneously with the incurrence of such Indebtedness
by such Subsidiary, such Subsidiary issues a guarantee for the pro rata benefit
of the holders of the Notes; and (vi) Indebtedness or preferred stock issued in
exchange for, or the proceeds of which are used to refund or refinance,
Indebtedness or preferred stock referred to in the foregoing clause (ii) or
(iii); provided, however, that (1) the principal amount of such Indebtedness or
preferred stock so incurred or issued will not exceed the principal amount of
the Indebtedness or preferred stock so exchanged or refinanced and (2) the
Indebtedness or preferred stock so incurred or issued will (A) have a Stated
Maturity later than the Stated Maturity of the Indebtedness or preferred stock
being exchanged or refinanced and (B) will have an Average Life equal to or
greater than the
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remaining Average Life of the Indebtedness or preferred stock so exchanged,
refunded or refinanced.
For purposes of this ss.5.15, the term "preferred stock" 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 or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
Section 5.16. Limitation on Restrictions on Distributions from
Subsidiaries. The Company will not, and will not permit any Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to: (i) pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness owed to the Company, (ii) make any loans or advances to the Company
or (iii) transfer any of its property or assets to the Company, except: (1) any
encumbrance or restriction pursuant to an agreement in effect on the January 26,
1994; (2) any encumbrance or restriction with respect to a Subsidiary pursuant
to an agreement relating to any Indebtedness issued by such Subsidiary on or
prior to the date on which such Subsidiary was acquired by the Company (other
than Indebtedness issued in contemplation of, as consideration in, or to provide
all or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Subsidiary
became a Subsidiary or was acquired by the Company) and outstanding on such
date; (3) any encumbrance or restriction pursuant to an agreement effecting a
refinancing of Indebtedness issued pursuant to an agreement referred to in the
foregoing clause (1) or (2) or contained in any amendment to an agreement
referred to in the foregoing clause (1) or (2); provided, however, that the
encumbrances and restrictions contained in any such refinancing agreement or
amendment are no less favorable to holders of the Notes than the encumbrances
and restrictions contained in such agreements; (4) any such encumbrance or
restriction consisting of customary nonassignment provisions in leases governing
leasehold interests to the extent such provisions restrict the transfer of the
lease; (5) in the case of clause (iii) above, restrictions contained in security
agreements securing Indebtedness of a Subsidiary to the extent such restrictions
restrict the transfer of the property subject to such security agreements; and
(6) any restriction with respect to a Subsidiary imposed pursuant to an
agreement entered into for the sale or disposition of all or substantially all
of the Capital Stock or assets of such Subsidiary pending the closing of such
sale or disposition.
SECTION 6. PREPAYMENT OF NOTES.
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Section 6.1. Mandatory Prepayment on Change of Ownership. In the event the
Company has knowledge of a Change of Ownership, the Company will give written
notice (herein called "Company Notice") of such fact to all holders of the Notes
then outstanding. Said Company Notice shall be delivered within 30 days after
the occurrence of such Change of Ownership; provided, however that if the
Company does not then have knowledge of such fact, such Company Notice shall be
delivered upon receipt of such knowledge by the Company. The Company Notice
shall (i) provide a summary of the nature of the Change of Ownership giving rise
to the mandatory prepayment and a summary of the terms of, or a copy of, this
ss.6.1, and (ii) state the number of shares and percentage of each Class of
Voting Stock of the Company which shall continue to be beneficially owned and
controlled by the Sevin Group and/or the Traber Group (and specifying the number
of shares of each such class held of each such group), either directly or
indirectly, immediately after the occurrence of such Change of Ownership.
As used herein, the term "Change of Ownership" shall mean
(a) any issue, sale or other disposition of shares of common stock
of the Company which results in the number of shares of the common stock
beneficially owned by the Sevin Group being less than 15% of the issued
and outstanding shares of common stock (other than the Permitted Common
Stock defined below), other than (i) the issuance, in connection with an
underwritten public offering pursuant to a registration statement filed
with the Securities and Exchange Commission (a "public offering"), of
additional common stock ranking equally with Class A Common Stock as to
payment of dividends and as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of the Company
("Permitted Common Stock") or the issuance of any Permitted Common Stock
upon conversion of any convertible preferred stock issued pursuant to a
public offering, (ii) a sale or disposition of shares of common stock to
one or more members of the Traber Group, and (iii) a disposition of shares
of common stock to a testamentary trust, all beneficiaries of which are
members of the immediate family of a member of the Sevin Group and all
trustees of which are members of the Sevin Group and, under the terms of
the trust, have the power to vote such shares on all matters as to which
the holders of such shares have the power to vote, so long as, giving
effect to any of the events referred to in the foregoing clauses (i), (ii)
and (iii), the Sevin Group and the Traber Group together have beneficial
ownership (or, in the case of an event referred
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to in the foregoing clause (iii), voting control) of a sufficient number
of shares of the capital stock of the Company to entitle them to elect,
and they do elect, at least the smallest number of directors that is
necessary to constitute a majority of the Company's Board of Directors;
(b) any event which results in the number of directors of the
Company's Board of Directors who are designated by the Sevin Group
constituting less than a majority of the Board; or
(c) any of the following events: (i) the holders of any of the
Public Debentures have the right to require the Company to purchase any
such Public Debentures pursuant to Section 4.08 of any of the Public
Indentures, (ii) any holder of 2002 Notes exercises its right to declare
any such notes to be due and payable pursuant to Section 2.1 of the
separate Note Agreements, dated as of February 1, 1997, relating thereto
(the "1997 Note Agreements"), (iii) any holder of 2001 Notes exercises its
right to declare any such notes to be due and payable pursuant to Section
5.2(A) of the Sixth Amendment and Restatement of Note Agreement, dated as
of February 1, 1997, relating thereto (the "Amendment and Restatement"),
(iv) the Company is required to make an offer to each holder of the 1997
Preferred Stock to redeem all or any part of such holder's 1997 Preferred
Stock pursuant to paragraph 5(a) of the Certificate of Designation, or (v)
any holder of 2002 Notes, 2001 Notes, 1997 Preferred Stock or Public
Debentures shall have received any consideration (whether in the form of
cash, a change in the rate of interest or dividends relating to such
notes, debentures or preferred stock, a change in any other provision of
the terms of such notes, debentures or preferred stock, or otherwise) to
amend, modify, waive or otherwise give up its right to declare any such
notes, debentures or preferred stock to be due and payable upon a "Change
of Ownership," as defined in the 1997 Note Agreements or the Amendment and
Restatement, or a "Change of Control" as defined in the Public Indentures
and the Certificate of Designation, as the case may be; provided, however,
that an amendment to or waiver or other modification of paragraph 5(a) of
the Certificate of Designation, Section 2.1 of the 1997 Note Agreements or
Section 5.2(A) of the Amendment and Restatement shall not, in the absence
of any consideration, constitute a Change of Ownership.
Upon the receipt of such Company Notice or, if no Company Notice is given,
upon the occurrence of a Change of Ownership, the holder or holders of any Notes
shall have the privilege, upon written notice to the Company declaring all Notes
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held by such holder or holders serving such notice to become due and payable, to
have such Notes become due and payable, and thereupon such Notes shall become
due and payable on such date as the Company shall specify (which date shall be
not later than 90 days after such declaration), and the Company covenants and
agrees to prepay in full all Notes held by such holder or holders serving such
notice; provided, however, that in the event Company Notice has in fact been
given as hereinabove contemplated, such declaration shall be made within 30 days
after receipt of such Company Notice.
All prepayments on the Notes pursuant to this ss.6.1 shall be made by the
payment of the aggregate principal amount remaining unpaid on such Notes
together with accrued interest thereon to the date of such prepayment, plus a
premium equal to 1% of such prepaid principal.
Notwithstanding the provisions of ss.6.4, the Company may prepay all Notes
held by any holder or holders who serve such notice on the Company without
applying said prepayments ratably among all outstanding Notes.
Section 6.2. Optional Prepayments. In addition to the prepayments
required by ss.6.1 and upon compliance with ss.6.3, the Company shall have the
privilege, at any time and from time to time, of prepaying the outstanding
Notes, either in whole or in part (but if in part then in units of $100,000 or
an integral multiple of $10,000 in excess thereof) by payment of the principal
amount of each Note, or portion thereof to be prepaid, and accrued interest
thereon to the date of such prepayment, together with a premium equal to the
remainder of (x) the present value, discounted on a semiannually compounded
basis utilizing an interest factor equal to the Reinvestment Yield of such Note,
of the principal payments of such Note allocable to such prepayment and the
scheduled interest payments on such Note allocable to such prepayment (in the
case of any prepayment to be made on other than a regular interest payment date,
after deducting from the next succeeding regular interest payment the amount of
interest accrued to the prepayment date and required by this ss.6.2 to be paid
in conjunction with the prepayment) from the respective dates on which, but for
the prepayment under this ss.6.2, such principal payments and interest payments
would have been payable, minus (y) the principal amount of such Note to be
prepaid under this ss.6.2.
For purposes of ss.6.2, "Reinvestment Yield" of each Note shall mean the
lesser of (A) the interest rate borne by such Note and (B) the sum of 0.50% plus
the arithmetic mean of the two most recent weekly average yields to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities equal to the remaining Weighted Average
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Life to Maturity as of the date of the proposed prepayment of the Notes), as
published by the Federal Reserve Board in its Statistical Release H.15(519) for
the two calendar weeks ending on the Saturday next preceding such date or, if
such average is not published for such period, of such reasonably comparable
index as may be designated by the holder or holders of a least 66-2/3% of the
unpaid principal amount of the Notes to be prepaid for such period. If no
possible maturity exactly corresponds to such rounded Weighted Average Life to
Maturity, yields for the two most closely corresponding published maturities
shall be calculated pursuant to the immediately preceding sentence and the
Reinvestment Yield shall be interpolated from such yields on a straight-line
basis, rounding in each of such relevant periods to the nearest month.
The "Weighted Average Life to Maturity" of any Indebtedness means as at
the time of the determination thereof the number of years obtained by dividing
the then Remaining Dollar-years of such Indebtedness by the then outstanding
principal amount of such Indebtedness. The term "Remaining Dollar-years" of any
Indebtedness means the amount obtained by (1) multiplying the amount of the
repayment at final maturity, by the number of years (calculated at the nearest
one-twelfth) which will elapse between the date of determination of the Weighted
Average Life to Maturity of such Indebtedness and the date of that repayment at
final maturity.
Section 6.3. Notice of Prepayments. The Company will give notice of any
prepayment of the Notes pursuant to ss.6.2 to each holder thereof not less than
30 days nor more than 60 days before the date fixed for such optional prepayment
specifying (i) such date, (ii) the principal amount of the holder's Notes to be
prepaid on such date, and (iii) the accrued interest applicable to the
prepayment. Such notice of prepayment shall also certify all facts which are
conditions precedent to any such prepayment. The Company will also give written
notice to each holder by telex or other same-day written communication five days
prior to the date fixed for prepayment of the premium, if any, applicable to
such prepayment and the details of the calculations used to determine the amount
of any such premium. Notice of prepayment having been so given, the aggregate
principal amount of the Notes specified in such notice, together with the
premium, if any, and accrued interest thereon shall become due and payable on
the prepayment date.
Section 6.4. Allocation of Prepayments. All partial prepayments pursuant
toss.6.2 shall be applied on all outstanding Notes ratably in accordance with
the unpaid principal amounts thereof.
SECTION 7. SUBORDINATION OF NOTES.
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Section 7.1. Subordination to Senior Indebtedness. From and after the
issuance of any Notes, the indebtedness evidenced by the Notes, and any renewals
or extensions thereof, shall be wholly subordinate and junior in right of
payment to any and all Senior Indebtedness of the Company, whether outstanding
at the date of the Notes or incurred after such date, all in the manner and with
the force and effect hereafter set forth:
(a) In the event of any liquidation, dissolution or winding up of
the Company, or of any receivership, insolvency, bankruptcy, liquidation,
readjustment, reorganization, or other similar proceeding relative to the
Company or its property, all principal and interest owing on all Senior
Indebtedness shall first be paid in full before any payment is made upon
the indebtedness evidenced by the Notes; and in any such event any payment
or distribution of any kind or character, whether in cash, property or
securities (other than in securities or other evidences of indebtedness,
the payment of which is subordinated to the payment of all Senior
Indebtedness which may at the time be outstanding) which shall be made
upon or in respect of the Notes shall be paid over to the holders of such
Senior Indebtedness, pro rata, for application in payment thereof unless
and until such Senior Indebtedness shall have been paid or satisfied in
full;
(b) In the event that, pursuant to the terms of this Agreement, the
Notes are declared or become due and payable because of the occurrence of
any Event of Default described in ss.8.1 hereof or otherwise than at the
option of the Company, under circumstances when the foregoing clause (a)
shall not be applicable, the holders of the Notes shall be entitled to
payments only after there shall first have been paid in full all Senior
Indebtedness outstanding at the time the Notes so become due and payable
because of any such event, or payment shall have been provided for in a
manner satisfactory to the holders of such Senior Indebtedness; and
(c) During the continuance of any failure in the payment of either
principal or interest of any Senior Indebtedness when due, no payment of
principal, premium or interest shall be made on the Notes, nor shall any
acceleration of the maturity of the Notes pursuant to ss.8.3 hereof by any
holder of the Notes be effective unless the maturity of such Senior
Indebtedness has been accelerated, if either (i) notice (a "Payment
Blockage Notice") of such failure in writing or by telegram has been given
to the Company by any holder or holders of any Senior Indebtedness,
provided that judicial proceedings shall be commenced with respect to such
failure within one hundred eighty (180) days
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and shall be pending thereafter, or (ii) judicial proceedings shall be
pending in respect of such failure. No Payment Blockage Notice shall be
effective to preclude any payment on or acceleration of the Notes if
either (x) any other Payment Blockage Notice shall have been given within
the 360-day period ending with the date of such Payment Blockage Notice or
(y) an aggregate of three Payment Blockage Notices shall previously have
been given. Any Payment Blockage Notice that is given at a time when a
previous Payment Blockage Notice is in effect shall be disregarded for all
purposes of this Agreement, including any determination of the number of
Payment Blockage Notices that have been given for purposes of the
preceding sentence of this Section. Notwithstanding anything contained in
this ss.7.1(c) to the contrary, the holders of the Notes shall have the
right during the period from such Payment Blockage Notice to the
commencement of judicial proceedings to commence any action or proceeding
to (i) preserve any of their rights that would otherwise be extinguished
prior to the end of such period, and (ii) prevent a sale or transfer of
assets or stock or a merger in contravention of the terms of this
Agreement (it being understood that, in the case of both clauses (i) and
(ii) of this sentence, all Senior Indebtedness of the Company then or
thereafter due or declared to be due shall first be paid in full before
the holders of the Notes shall be entitled to receive any payment from the
Company of principal of, or premium or interest on, the Notes).
Section 7.2. Proofs of Claim. The holder of each Note undertakes and
agrees for the benefit of each holder of Senior Indebtedness to execute, verify,
deliver and file any proofs of claim, consents, assignments or other instruments
which any holder of Senior Indebtedness may at any time require in order to
prove and realize upon any rights or claims pertaining to the Notes and to
effectuate the full benefit of the subordination contained herein; and upon
failure of the holder of any Note so to do, any such holder of Senior
Indebtedness shall be deemed to be irrevocably appointed the agent and
attorney-in-fact of the holder of such Note to execute, verify, deliver and file
any such proofs of claim, consents, assignments or other instrument.
Section 7.3. No Waiver. No right of any holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time or in any way be
affected or impaired by any failure to act on the part of the Company or the
holders of Senior Indebtedness, or by any noncompliance by the Company with any
of the terms, provisions and covenants of the Notes or the Agreements under
which they are issued, regardless of any
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knowledge thereof that any such holder of Senior Indebtedness may have or be
otherwise charged with.
Section 7.4. Rights of Holders of Senior Indebtedness. The Company
agrees, for the benefit of the holders of Senior Indebtedness, that in the event
that any Note is declared due and payable before its expressed maturity because
of the occurrence of a default hereunder, the Company will give prompt notice in
writing of such happening to the holders of Senior Indebtedness.
Section 7.5. Rights of Holders of Notes. The foregoing provisions are
solely for the purpose of defining the relative rights of the holders of Senior
Indebtedness on the one hand, and the holders of the Notes on the other hand,
and nothing herein shall impair, as between the Company and the holders of the
Notes, the obligation of the Company which is unconditional and absolute, to pay
the principal, premium, if any, and interest on the Notes in accordance with
their terms, nor shall anything herein prevent the holders of the Notes from
exercising all remedies otherwise permitted by applicable law or hereunder upon
default hereunder, subject to the rights of the holders of Senior Indebtedness
as herein provided for.
SECTION 8. EVENTS OF DEFAULT WITH RESPECT TO NOTES AND REMEDIES THEREFOR.
Section 8.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as the term is used herein:
(a) Default shall occur in the payment of interest on any Note when
the same shall have become due and such default shall continue for more
than five days; or
(b) Default shall occur in the making of any payment of the
principal of any Note or the premium thereon at the expressed or any
accelerated maturity date or at any optional or mandatory prepayment date;
or
(c) Default shall be made in the payment of the principal of or
interest on any Indebtedness of the Company (other than the Notes) or any
Subsidiary aggregating more than $2,000,000, as and when the same shall
become due and payable in accordance with its terms (including any
optional or required prepayment or redemption) and either (i) as the
result of such default such Indebtedness is declared (or, in the case of
Subordinated Indebtedness, may be declared) by the holders thereof to be,
or becomes in accordance with its terms, due and payable before its stated
maturity date or (ii) such default shall continue beyond the longer of 180
days or the period of grace, if any, allowed with respect thereto; or
(d) The Company shall default in complying with any covenant under
any indenture, agreement, or other instrument
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under which any Indebtedness (other than the Notes) of the Company or any
Subsidiary aggregating more than $2,000,000 may be issued and as the
result of such default the Indebtedness outstanding thereunder is declared
(or, in the case of Subordinated Indebtedness, may be declared) by the
holders thereof to be, or becomes in accordance with its terms, due and
payable before its stated maturity date; or
(e) Default shall occur in the observance or performance of any
covenant or agreement contained inss.5.6 throughss.5.13 or inss.ss.5.15 or
5.16 hereof;
(f) Default shall occur in the observance or performance of any
other provision of this Agreement which is not remedied within 30 days
after notice thereof to the Company by the holder of any Note; or
(g) If any representation or warranty made by the Company herein, or
made by the Company in any statement or certificate furnished by the
Company in connection with the consummation of the issuance and delivery
of the Notes or furnished by the Company pursuant hereto, is untrue in any
material respect as of the date of the issuance or making thereof; or
(h) The Company or any Subsidiary becomes insolvent or bankrupt, is
generally not paying its debts as they become due or makes an assignment
for the benefit of creditors, or the Company or any Subsidiary causes or
suffers an order for relief to be entered with respect to it under
applicable Federal bankruptcy law or applies for or consents to the
appointment of a custodian, trustee or receiver for the Company or such
Subsidiary or for the major part of the property of either; or
(i) A custodian, trustee or receiver is appointed for the Company or
any Subsidiary or for the major part of the property of either and is not
discharged within 30 days after such appointment; or
(j) Final judgment or judgments for the payment of money aggregating
in excess of $250,000 is or are outstanding against the Company or any
Subsidiary or against any property or assets of either and any one of such
judgments has remained unpaid, unvacated, unbonded or unstayed by appeal
or otherwise for a period of 30 days from the date of its entry; or
(k) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company or any Subsidiary and, if instituted against the
Company or any
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Subsidiary, are consented to or are not dismissed within 60 days after
such institution.
Section 8.2. Notice to Holders. When any Event of Default described in
the foregoing ss.8.1 has occurred, or if the holder of any Note or of any other
evidence of Indebtedness of the Company gives any notice to the Company or takes
any other action known to the Company with respect to a claimed default, the
Company agrees to give notice within five business days of such event to all
holders of the Notes then outstanding, such notice to be in writing and sent by
registered or certified mail or by telegram.
Section 8.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a) or (b) of ss.8.1 has happened and is continuing, any
holder of any Note may, and when any Event of Default described in paragraphs
(c) through (j), inclusive, of said ss.8.1 has happened and is continuing, the
holder or holders of 25% or more of the principal amount of Notes at the time
outstanding may, by notice in writing sent by registered or certified mail to
the Company, declare the entire principal and all interest accrued on all Notes
to be, and all Notes shall thereupon become, forthwith due and payable, without
any presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. When any Event of Default described in paragraph (k) of
ss.8.1 has occurred, then all outstanding Notes shall immediately become due and
payable without presentment, demand or notice of any kind. Upon the Notes
becoming due and payable as a result of any Event of Default as aforesaid, the
Company will forthwith pay to the holders of the Notes the entire principal and
interest accrued on the Notes and, to the extent permitted by law, a premium in
the amount of the amount which would be payable if the Company then had elected
to prepay the Notes at a premium pursuant to ss.6.2. No course of dealing on the
part of any Noteholder nor any delay or failure on the part of any Noteholder to
exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. The Company further agrees,
to the extent permitted by law, to pay to the holder or holders of the Notes all
reasonable costs and expenses incurred by them in the collection of any Notes
upon any default hereunder or thereon, including reasonable compensation to such
holder's or holders' attorneys for all services rendered in connection
therewith.
Section 8.4. Rescission of Acceleration. The provisions of ss.8.3 are
subject to the condition that if the principal of and accrued interest on all or
any outstanding Notes have been declared immediately due and payable by reason
of the occurrence of any Event of Default described in paragraphs (a) through
(j), inclusive, of ss.8.1, the holders of 66-2/3% in aggregate principal
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amount of the Notes then outstanding may, by written instrument filed with the
Company, rescind and annul such declaration and the consequences thereof,
provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal,
interest or premium on the Notes which has become due and payable solely
by reason of such declaration underss.8.3) shall have been duly paid; and
(c) each and every other Default and Event of Default shall have
been made good, cured or waived pursuant toss.9.1; and provided further,
that no such rescission and annulment shall extend to or affect any
subsequent Default or Event of Default or impair any right consequent
thereto.
SECTION 9. AMENDMENTS, WAIVERS AND CONSENTS.
Section 9.1. Consent Required. Any term, covenant, agreement or condition
of this Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the holders of at least 66-2/3% of the then outstanding shares of
Preferred Stock and at least 66-2/3% in aggregate principal amount of the then
outstanding Notes; provided that without the written consent of the holders of
all of the Preferred Stock and Notes then outstanding, no such waiver,
modification, alteration or amendment shall be effective (i) which will change
the time of payment (including any prepayment required by ss.6.1) of the
principal of, or the interest on, any Note or change the principal amount
thereof or change the rate of interest thereon, or (ii) which will change any of
the provisions with respect to optional prepayments, or (iii) which will change
the percentage of holders of the Preferred Stock or Notes required to consent to
any such amendment, alteration or modification or any of the provisions of ss.7,
ss.8 or this ss.9. Each and every holder of Preferred Stock or Notes, by
acceptance thereof, shall undertake and agree to consider and respond to any
request made by the Company with respect to this ss.9 without unreasonable
delay.
Section 9.2. Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the holders of the Preferred Stock and Notes and
shall be binding upon them, upon each future holder of any Preferred Stock or
any Notes and upon the Company, whether or not such Preferred Stock or Notes
shall have been marked to indicate such amendment or waiver. No
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such amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
SECTION 10. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 10.1. Definitions. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following meanings
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined: "Affiliate" shall mean any
Person (other than a Subsidiary) (i) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, the Company, (ii) which beneficially owns or holds 5% or more of any class
of the Voting Stock of the Company or (iii) 5% or more of the Voting Stock (or
in the case of a Person which is not a corporation, 5% or more of the equity
interest) of which is beneficially owned or held by the Company or a Subsidiary.
The term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of Voting Stock, by contract or otherwise.
"Asset Disposition" means 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 a 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.
"Attributable Indebtedness" in respect of a Sale/Leaseback
Transaction means, as of the time of determination, the present value
(discounted at 12.07% compounded annually) of the total obligations of the
lessee for rental payments during the remaining term of the lease included
in such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the quotient obtained by dividing
(i) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment
of such
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Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (ii) the sum
of all such payments.
"Bank Debt" means, any loan agreement with a bank, finance company
or other financial institution, including principal premium (if any),
interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company to
the extent a claim for post filing interest is allowed in such
proceedings), fees, charges, expenses, reimbursement obligations,
guarantees and all other amounts payable thereunder or in respect thereof.
"Business Day" means each day which is not a Legal Holiday.
"Capital Stock" of any person means 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.
"Capital Lease Obligations" of a person means any obligation which
is required to be classified and accounted for as a capital lease on the
face of a balance sheet of such person prepared in accordance with
generally accepted accounting principles; the amount of such obligation
will be the capitalized amount thereof, determined in accordance with
generally accepted accounting principles; and the Stated Maturity thereof
will be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty.
"Cash Flow", for any fiscal year, means the sum of (i) Consolidated
Net Income for such fiscal year and, (ii) to the extent the following
deferred charges are deducted in the calculation of Consolidated Net
Income, the amortization of customer lists and other deferred charges
included in the purchase price in connection with the acquisition of fuel
oil distributorships (other than legal, accounting, financing and other
transaction charges) and the amortization and depreciation of plant and
equipment of the Company and its Subsidiaries for such fiscal year
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Certificate of Designation" shall mean the Certificate of
Designation adopted by the Board of Directors of the Company on February
12, 1997, establishing the 1997 Preferred Stock and setting forth the
relative rights and
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preferences thereof, substantially in the form attached hereto as Exhibit
A.
The terms "Class A Common Stock", "Class B Common Stock" and "Class
C Common Stock" shall each mean the class of equity securities designated
as such in the Restated and Amended Articles of Incorporation of the
Company.
"Consolidated EBITDA Coverage Ratio" as of any date of determination
means 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 four 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 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
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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 financial or accounting Officer of the Company;
provided, however, that such Officer shall assume (i) the historical sales
and gross profit margins associated with such assets for the most recent
consecutive 12-month period ended prior to the date of purchase for which
financial statements are available (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 5%)
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 calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period.
"Consolidated Indebtedness" shall mean Indebtedness of the Company
and its Subsidiaries on a consolidated basis as determined in accordance
with generally accepted accounting principles.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its Subsidiaries, determined on a
consolidated basis, including (i) interest expense in respect of money
borrowed and interest expense attributable to capital 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
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any guarantee of Indebtedness or other obligation of any other Person,
(vii) net costs associated with Hedging Obligations (including
amortization of fees), 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 generally accepted accounting
principles; provided, however, that Consolidated Interest Expense shall
include such interest as may be paid by the Company or any Subsidiary to
Star Gas only to the extent the amount of such interest paid during any
period exceeds the dividends or other distributions on the Capital Stock
of Star Gas distributed to the Company or any Subsidiary during such
period.
"Consolidated Net Income" of a person, for any period, means the
aggregate of the Net Income of such person and its Subsidiaries for such
period, determined on a consolidated basis in accordance with generally
accepted accounting principles, provided that (i) the Net Income of any
other person (other than a Subsidiary) in which such person has an
interest will be included only to the extent of the amount of dividends or
distributions paid to such person, (ii) the Net Income of any person
acquired by such person in a pooling of interests transaction for any
period prior to the date of such acquisition will be excluded, (iii) any
Net Income of any Subsidiary will be excluded if such Subsidiary is
subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Subsidiary, directly or
indirectly, to such person, except that (A) such person's equity in the
Net Income of any such Subsidiary for such period will be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Subsidiary during such period to such person as a
dividend or other distribution (subject,
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in the case of a dividend or other distribution to another subsidiary, to
the limitation contained in this clause) and (B) such person's equity in a
net loss of any such Subsidiary for such period will be included in
determining such Consolidated Net Income, (iv) the cumulative effect of a
change in accounting principles will be excluded, and (v) dividends or
other distributions on the Capital Stock of Star Gas distributed to the
Company or any Subsidiary by Star Gas shall be included in Consolidated
Net Income of the Company only to the extent such dividends or other
distributions exceed during any period the amount of interest paid to Star
Gas by the Company or any Subsidiary during such period.
"Consolidated Net Worth" means the total consolidated stockholders'
equity of the Company and its consolidated Subsidiaries determined on a
consolidated basis in accordance with generally accepted accounting
principles.
"Consolidated Operating Cash Flow", for any period, means the sum of
(i) Consolidated Net Income for such period and (ii) depreciation and
amortization expense of the Company and its Subsidiaries for such period,
as determined in accordance with generally accepted accounting principles.
Consolidated Operating Cash Flow of the Company and its Subsidiaries shall
include the sum of the items enumerated in clauses (i) and (ii) above of
all persons (and each of their subsidiaries, if any, on a consolidated
basis) then or theretofore acquired for the 12 months ended with the most
recently completed fiscal quarter for such person. Consolidated Operating
Cash Flow of such acquired persons shall be determined on a pro forma
basis, giving effect to the financial results of such persons as if they
had been owned by the Company for the twelve months immediately preceding
the date of acquisition of such persons.
"Default" shall mean any event or condition, the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute
an Event of Default as defined in ss.8.1.
"EBITDA" for any period means the Consolidated Net Income for such
period (but without giving effect to adjustments, accruals, deductions or
entries resulting from purchase 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.
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"Exchange Indenture" shall mean the Exchange Debenture Indenture
substantially in the form appended as Annex A to the Certificate of
Designation. "First Amendment" shall have the meaning set forth therefor
in the introductory paragraphs to this Agreement.
"Funded Debt" as applied to any person, means (a) Indebtedness
incurred by such person with a stated maturity of more than one year from
the date of incurrence; (b) any Indebtedness which, regardless of its
term, may be renewed or extended at the option of the obligor to a date
more than one year from the date of incurrence; and (c) any Indebtedness
which by its terms or pursuant to the agreement under which it is issued,
regardless of its term, may be paid with the proceeds of other
Indebtedness, which may be incurred pursuant to the terms of such
first-mentioned Indebtedness or the agreement under which such first
Indebtedness is issued, which other Indebtedness has a stated maturity
more than one year from the incurrence of such first-mentioned
Indebtedness; excluding in each case (a), (b) and (c) Working Capital
Borrowings.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments
for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any Indebtedness, dividend or other obligation, of any other
Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred
through an agreement, contingent or otherwise, by such Person: (i) to
purchase such Indebtedness or obligation or any property or assets
constituting security therefor, (ii) to advance or supply funds (x) for
the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such
Indebtedness or obligation, or (iii) to lease property or to purchase
Securities or other property or services primarily for the purpose of
assuring the owner of such Indebtedness or obligation of the ability of
the primary obligor to make payment of the Indebtedness or obligation, or
(iv) otherwise to assure the owner of the Indebtedness or obligation of
the primary obligor against loss in respect thereof. For the purposes of
all computations made under this Agreement, a Guaranty in respect of any
Indebtedness for borrowed money shall be deemed to be Indebtedness equal
to the principal amount of such Indebtedness for borrowed money which has
been guaranteed, and a Guaranty in respect of any other
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obligation or liability or any dividend shall be deemed to be Indebtedness
equal to the maximum aggregate amount of such obligation, liability or
dividend.
"Hedging Obligations" of any person means the obligations of such
person pursuant to any interest rate swap agreement, foreign currency
exchange agreement, 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" of any person means, without duplication,
(i) the principal of (A) indebtedness of such person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such person is
responsible or liable;
(ii) all Capital Lease Obligations of such person and all
Attributable Indebtedness in respect of Sale/Leaseback Transactions
entered into by such person;
(iii) all obligations of such person issued or assumed as the
deferred purchase price of property, all conditional sale
obligations of such person and all obligations of such person under
any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business);
(iv) all obligations of such person for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar
credit transaction (other than obligations with respect to letters
of credit securing obligations (other than obligations described in
(i) through (iii) above) entered into in the ordinary course of
business of such person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third Business Day following receipt by
such person of a demand for reimbursement following payment on the
letter of credit);
(v) all obligations of the type referred to in clauses (i)
through (iv) of other persons and all dividends of other persons for
the payment of which, in either case, such person is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise,
including any guarantees of such obligations
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and dividends, including by means of any agreement which has the
economic effect of a guarantee; and
(vi) all obligations of the type referred to in clauses (i)
through (v) of other persons secured by any Lien on any property or
asset of such person (whether or not such obligation is assumed by
such person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets or the amount of the
obligation so secured.
"1997 Preferred Stock" shall have the meaning set forth therefor in
ss.3.4.
"Person" shall mean an individual, partnership, corporation, trust
or unincorporated organization, and a government or agency or political
subdivision thereof.
"Public Debentures" shall mean, collectively, the Company's 12-1/4%
Subordinated Debentures due 2005, 10-1/8% Subordinated Notes due 2003 and
9-3/8% Subordinated Debentures due 2006.
"Public Indentures" shall mean, collectively, (i) the Indenture
dated as of February 9, 1995, the Indenture dated as of April 1, 1993 and
the Indenture dated as of February 3, 1994, each between the Company and
Chemical Bank (now Chase Manhattan Bank), as Trustee thereunder, (ii) the
Exchange Indenture and (iii) any other indenture or other agreement under
which the Company may issue Subordinated Indebtedness.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Senior Indebtedness" is defined as Indebtedness which the Company
is permitted to have outstanding at any time under the provisions of the
Agreement, except Indebtedness which by its terms is not superior in right
of payment to the Notes. Senior Indebtedness, however, shall not include
(a) indebtedness or amounts owed for compensation to employees, or for
goods or materials purchased in the ordinary course of business, or for
services or (b) indebtedness of the Company to a Subsidiary or Affiliate
for money borrowed or advances from such Subsidiary or Affiliate. The
Company's outstanding Public Debentures will not constitute Senior
Indebtedness and will rank pari passu with the Notes.
"Senior Notes" shall mean the $60,000,000 aggregate principal amount
Senior Notes of the Company issued or to be issued under the separate Note
Purchase Agreements each dated as of February 1, 1997 and between the
Company and each of the respective Purchasers named therein.
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"Sevin Group" shall mean the Estate of Malvin P. Sevin and trusts
created thereunder, Audrey L. Sevin, Irik P. Sevin, Thomas J. Edleman,
Margot Gordon and Phillip Ean Cohen and any trust over which such person
have sole voting power.
"Star Gas" shall mean Star Gas Corporation, a Delaware corporation.
"Stated Maturity" means, with respect to any Indebtedness, the date
specified in such Indebtedness, or in any agreement pursuant to which such
Indebtedness was incurred, as the fixed date on which the principal of
such Indebtedness is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the
repurchase of such Indebtedness at the option of the holder thereof upon
the happening of any contingency unless such contingency has occurred).
"Subordinated Indebtedness" shall mean all Indebtedness of the
Company, other than Senior Indebtedness.
The term "Subsidiary" means (i) a corporation a majority of whose
capital stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by the Company, by
the Company and a Subsidiary of the Company or by a Subsidiary of the
Company or (ii) any other person (other than a corporation) in which the
Company, a Subsidiary of the Company or the Company and a Subsidiary of
the Company, direct or indirectly, at the date of determination thereof,
has at least 50% ownership interest or over which it exercises control;
provided, however, that Star Gas, and any Person owned or controlled
directly or indirectly by Star Gas, shall not be a Subsidiary.
"Traber Group" means (i) all the holders of Class C Common Stock of
the Company as listed on Schedule II hereto who are not members of the
Sevin Group, (ii) any person who is, or concurrently with the transfer of
shares to such person becomes, a party to the shareholders agreement among
the holders of Class C Common Stock of the Company dated November 25,
1986, as amended and restated through the Effective Date, and (iii) any
trust over which persons described in clause (i) or (ii) have sole voting
power.
"Treasury Rate" as of any date of determination means 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
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published, any publicly available source of similar market date)) of one
year.
"2001 Notes" shall mean, collectively, the $6,250,000 original
aggregate principal amount 14.10% Subordinated Notes of the Company due
January 15, 2001 and the $6,250,000 original aggregate principal amount
14.10% Senior Notes of the Company due January 15, 2001 outstanding under
the Sixth Amendment and Restatement of Note Agreement dated as of February
1, 1997 between the Company and the Purchasers named therein.
"2002 Notes" shall mean the $60,000,000 aggregate principal amount
Senior Notes of the Company due October 1, 2002 issued or to be issued
under the separate Note Agreements, each dated as of February 1, 1997
between the Company and the respective Purchasers named therein.
"Voting Stock" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing
similar functions).
"Wholly-owned" when used in connection with any Subsidiary shall
mean a Subsidiary of which all of the issued and outstanding shares of
stock (except shares required as directors' qualifying shares) shall be
owned by the Company and/or one or more of its Wholly-owned Subsidiaries.
"Working Capital Borrowings" shall mean, on any date of
determination, all Indebtedness of the Company and its Subsidiaries on a
consolidated basis incurred to finance current assets, excluding the
excess of current liabilities over current assets on such date (determined
in accordance with generally accepted accounting principles).
Section 10.2. Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with generally
accepted accounting principles, to the extent applicable, except where such
principles are inconsistent with the requirements of this Agreement.
Section 10.3. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
SECTION 11. MISCELLANEOUS.
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Section 11.1. Designation of Observers; Until such time as the Restated
and Amended Articles of Incorporation have been amended as required by ss.5.17,
if and whenever (a) dividends on the Preferred Stock shall be in arrears and
shall not have been fully paid or shall not have been declared and a sum
sufficient for the payment thereof set aside, for four semi-annual dividends
(whether consecutive or not) on all shares of the Preferred Stock at the time
outstanding, (b) any mandatory redemption payment to be made pursuant to Article
III, paragraph 1(b) or (c) of the Restated and Amended Articles of Incorporation
of the Company shall not be made on the date specified for such redemption of
Preferred Stock pursuant thereto or (c) a Voting Rights Triggering Event occurs
under Section 7(c) of the Certificate of Designation, then and in any such event
(i) each holder of 40% or more of the then outstanding shares of Preferred Stock
and, (ii) if at the time specified in (a) or (b) above there shall be no holder
of 40% or more of the then outstanding shares of Preferred Stock, the holders of
66-2/3% or more, in the aggregate, of the then outstanding shares of Preferred
Stock, shall have the right, by written instrument filed with the Secretary of
the Company, to appoint an observer who shall be entitled (i) to receive the
same notice in respect of all meetings (both regular and special) of the Board
of Directors of the Company (the "Board") as are required to be furnished to
members of the Board by law or by the Articles or By-laws of the Company, (ii)
to attend all meetings of the Board, (iii) to receive all information and
reports and all requests for written consent which are furnished to members of
the Board and (iv) to participate in all discussions conducted at meetings of
the Board. Such observers shall not constitute members of the Board and shall
not be entitled to vote on any matters presented to the Board. In the event the
Company shall at any time fail to perform fully and completely its obligations
under this Section 11.1, any holder of shares of Preferred Stock shall, in
addition to all other rights or remedies available at law or in equity, have the
right to petition any court with jurisdiction in the premises for an order
enjoining the Company specifically to perform said obligations, it being
recognized that monetary damages are not adequate compensation for any such
failure. Such right of each holder of 40% or more of the then outstanding shares
of Preferred Stock (or of the holders of 66-2/3% or more of the then outstanding
shares of Preferred Stock) may be exercised until (a) all dividends in arrears
on the Preferred Stock shall have been paid in full or declared and funds
sufficient therefore set aside and (b) all mandatory redemption payments shall
have been made, and when such dividends and payments have been so paid or
provided for such right of each holder of 40% or more of the then outstanding
shares of Preferred
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Stock (or of the holders of 66-2/3% or more of the then outstanding shares of
Preferred Stock) shall cease, but subject always to the same provisions for the
vesting of such rights in the case any one semi-annual dividend payment shall in
the future be in arrears or any mandatory redemption payment shall in the future
not be made when due.
If, at any time at which the holders of the Preferred Stock shall have
appointed observers as provided above and while the holders of Preferred Stock
shall be entitled to appoint observers as provided above, one or both of such
observers shall retire, resign or die, the holder or holders of Preferred Stock
who appointed such observer or observers shall be entitled to appoint a
replacement observer or observers in the manner set forth above.
Section 11.2. Agreement to Amend Charter. At the first meeting of the
shareholders of the Company which occurs after the Effective Date, and in any
event not later than August 1, 1997, the Company shall submit to and recommend
for approval by its shareholders an amendment to the Restated and Amended
Articles of Incorporation of the Company, in a form approved in writing by the
holders of the Preferred Stock, pursuant to which terms relating to voting
rights and rights upon Change of Ownership applicable to the Preferred Stock
will be conformed to the corresponding terms applicable to the 1997 Preferred
Stock and the definition of "Change of Ownership" set forth in such Restated and
Amended Articles of Incorporation applicable to the Preferred Stock will be
conformed to the definition thereof set forth in ss.6.1 hereof; provided that,
except as specifically provided in this ss.11.2, no amendments or other
modifications will be made to any terms of the Restated and Amended Articles of
Incorporation applicable to the Preferred Stock.
Section 11.3. Direct Payment. Notwithstanding anything to the contrary in
this Agreement, the Restated and Amended Articles of Incorporation of the
Company, the Preferred Stock or the Notes, in the case of any Preferred Stock or
Notes owned by you or your nominee or owned by any other institutional holder
which has given written notice to the Company requesting that the provisions of
this Section shall apply, the Company will promptly and punctually pay when due
all amounts payable with respect to such Preferred Stock or Notes, without any
presentment thereof, directly to you or such subsequent holder at your address
set forth in Schedule I hereto or at such other address as you or such
subsequent holder may from time to time designate in writing to the Company or,
if a bank account is designated for you on Schedule I to this Agreement or in
any written notice to the Company from you or any such subsequent holder, the
Company will make such payments in immediately available funds to such bank
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account, marked for attention as indicated, or in such other manner or to such
other account of yours or of such holder in any bank in the United States as you
or any such subsequent holder may from time to time direct in writing.
The holder of any Preferred Stock to which this Section applies agrees
that in the event it shall sell or transfer any such Preferred Stock it will,
prior to the delivery of any certificate evidencing such Preferred Stock, make a
notation thereon of the number of shares, if any, evidenced by such certificate
which have been redeemed and the date to which dividends have been paid with
respect to the shares evidenced by such Certificate.
The holder of any Notes to which this Section applies agrees that in the
event it shall sell or transfer any such Notes it will, prior to the delivery
thereof, make a notation thereon of all principal, if any, prepaid on such Notes
and the date to which interest has been paid on such Notes.
With respect to Preferred Stock or Notes to which this Section applies,
the Company shall be entitled to presume conclusively that the holder remains
the holder thereof until the Company shall have received notice from such holder
of the transfer of such Preferred Stock or Notes and of the name and address of
the transferee, or such Preferred Stock or Notes shall have been presented to
the Company in the manner described in ss.11.4 hereof.
Section 11.4. Registration and Transfers of the Notes. The Company shall
cause to be kept at its principal office a register for the registration and
transfer of the Notes (hereinafter called the "Note Register"), and the Company
will register or transfer or cause to be registered or transferred, as
hereinafter provided and under such reasonable regulations as it may prescribe,
any Note issued pursuant to this Agreement.
At any time and from time to time the registered holder of any Note which
has been duly registered as hereinabove provided may transfer such Note upon
surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or its attorney duly authorized in writing.
The Person in whose name any registered Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes of this
Agreement. Payment of or on account of the principal, premium, if any, and
interest on any registered Note shall be made to or upon the written order of
such registered holder.
Section 11.5. Exchange of Preferred Stock and Notes. (a) At any time, and
from time to time, upon not less than ten days' notice to that effect given by
the holder of any Preferred Stock
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initially delivered or any Preferred Stock substituted therefor pursuant to the
provisions of this Agreement and, upon surrender of the certificate or
certificates evidencing such Preferred Stock at its office, the Company will
deliver, in exchange therefor without expense to the holder, except as set forth
below, certificates for the same number of outstanding shares of Preferred Stock
as were then evidenced by the certificate so surrendered in any denomination of
whole shares as such holder shall specify, dated as of the date of transfer.
Such certificates shall be registered in the name of such Person or Persons as
may be designated by such holder. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
(b) At any time, and from time to time, upon not less than ten days'
notice to that effect given by the holder of any Note initially delivered or of
any Note substituted therefor pursuant to ss.11.4, this ss.11.5 or ss.11.6, and,
upon surrender of such Note at its office, the Company will deliver in exchange
therefor, without expense to the holder, except as set forth below, Notes for
the same aggregate principal amount as the then unpaid principal amount of the
Note so surrendered, in the denomination of $100,000 or any amount in excess
thereof as such holder shall specify (or such lesser amount as may be necessary
to reflect any Note with an outstanding principal amount of less than $100,000),
dated as of the date to which interest has been paid on the Note so surrendered
or, if such surrender is prior to the payment of any interest thereon, then
dated as of the date of issue, payable to such Person or Persons, or order, as
may be designated by such holder, and otherwise of the same form and tenor as
the Notes so surrendered for exchange. The Company may require the payment of a
sum sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
Section 11.6. Loss, Theft, etc. of Preferred Stock or Notes. Upon receipt
of evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of any certificate evidencing Preferred Stock or any Note, and in
the case of any such loss, theft or destruction upon delivery of a bond of
indemnity in such form and amount as shall be reasonably satisfactory to the
Company, or in the event of such mutilation upon surrender and cancellation of
the certificate or Note, the Company will make and deliver without expense to
the holder thereof, a new certificate or Note, of like tenor, in lieu of such
lost, stolen, destroyed or mutilated certificate or Note. If the initial
Purchasers or any subsequent institutional holder is the owner of any such lost,
stolen or destroyed certificate or Note, then the affidavit of an authorized
officer of such owner, setting forth the fact of loss, theft or destruction and
of its ownership of
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Third Amendment and Restatement of Purchase Agreement
the certificate or Note at the time of such loss, theft or destruction shall be
accepted as satisfactory evidence thereof and no further indemnity shall be
required as a condition to the execution and delivery of a new certificate or
Note other than the written agreement of such owner to indemnify the Company.
Section 11.7. Repurchase of Preferred Stock or Notes. Except as
specifically provided herein or in the Restated and Amended Articles of
Incorporation of the Company, neither the Company nor any Subsidiary or
Affiliate, directly or indirectly, may repurchase, or make any offer to
repurchase, any Preferred Stock or Notes unless the offer has been made to
repurchase such Preferred Stock or Notes, pro rata, from all holders thereof at
the same time and upon the same terms. In case the Company repurchases any
Preferred Stock or Notes, such Preferred Stock or Notes shall thereafter be
cancelled and, except as provided in ss.4 hereof, no Preferred Stock or Notes
shall be issued in substitution therefor.
Section 11.8. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of your out-of-pocket expenses in connection with the preparation,
execution and delivery of this Agreement and the transactions contemplated
hereby, including but not limited to the reasonable charges and disbursements of
Chapman and Cutler, your special counsel, duplicating and printing costs and
charges for shipping the Preferred Stock or Notes, adequately insured to you at
your home office or at such other place as you may designate and all such
expenses relating to any amendment, waivers or consents pursuant to the
provisions hereof. The Company also agrees that it will pay and save you
harmless against any and all liability with respect to stamp and other taxes, if
any, which may be payable or which may be determined to be payable in connection
with the execution and delivery of this Agreement or the Preferred Stock or
Notes, whether or not any Preferred Stock or Notes are then outstanding. The
Company agrees to protect and indemnify you against any liability for any and
all brokerage fees and commissions payable or claimed to be payable to any
Person in connection with the transactions contemplated by this Agreement.
Section 11.9. Notices. All communications provided for hereunder shall be
in writing and, if to you, delivered or mailed by registered or certified mail
or air express courier, addressed to you at your address appearing on Schedule I
hereto or such other address as you or the subsequent holder of any Preferred
Stock or Notes may designate to the Company in writing, and if to the Company,
delivered or mailed by registered or certified mail or air express courier to
the Company at Post Office Box 1457, Stamford, Connecticut 06904, Attention:
President or to such
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Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
other address as the Company may in writing designate to you or to a subsequent
holder of the Preferred Stock or Notes.
Section 11.10. Successors and Assigns. This Agreement shall be binding
upon each of the parties hereto and its respective successors and assigns and
shall inure to its benefit and to the benefit of its successors and assigns,
including each successive holder or holders of any Preferred Stock or Notes and
to the benefit of the Company and its successor and assigns.
Section 11.11. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Effective Date or the Note Closing Date, shall survive the closings and the
delivery of this Agreement and the Preferred Stock and Notes.
Section 11.12. Severability. Should any part of this Agreement for any
reason be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in force and effect as
if this Agreement had been executed with the invalid portion thereof eliminated
and it is hereby declared the intention of the parties hereto that they would
have executed the remaining portion of this Agreement without including therein
any such part, parts, or portion which may, for any reason, be hereafter
declared invalid.
Section 11.13. Governing Law. This Agreement and the Preferred Stock and
Notes issued and sold hereunder shall be governed by and construed in accordance
with New York law.
Section 11.14. Captions. The descriptive headings of the various Sections
or parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
ARTICLE II
AMENDMENTS TO SCHEDULES AND
EXHIBITS TO EXISTING PURCHASE AGREEMENTS
Schedules I and II and Exhibits A through L of the Existing Purchase
Agreements are hereby amended in their entirety so that the same shall
henceforth read as provided in Schedule I and II and Exhibits A through Exhibit
K attached hereto.
ARTICLE III
MISCELLANEOUS
Section 3.1. Ratification of Existing Purchase Agreements. Except as
amended and restated herein, the terms and provisions of the Existing Purchase
Agreements and the Preferred Stock are hereby ratified, confirmed and approved
in all respects.
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Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
Section 3.2. Counterparts. This Agreement may be executed in any number
of counterparts, each executed counterpart constituting an original but
altogether one and the same instrument.
Section 3.3. Fees and Expenses. The Company agrees to pay all reasonable
fees and expenses of you and your special counsel connection with the
preparation of this Agreement.
Section 3.4. References to Original Purchase Agreements. Any and all
notices, requests, certificates and any other instruments, including the
Preferred Stock, may refer to the Original Purchase Agreements or the Existing
Purchase Agreements or the Purchase Agreements dated as of August 1, 1989
without making specific reference to this Agreement, but nevertheless all such
references shall be deemed to include this Agreement unless the context shall
otherwise require.
Section 3.5. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York.
Section 3.6. Consent to Issuance of 1997 Preferred Stock. Pursuant to
Article III, paragraph (1)(g)(iv) of the Restated and Amended Articles of
Incorporation of the Company, each of you hereby consents to the Company's
issuance of 1,200,000 shares (of the 2,000,000 shares authorized) of its 1997
Preferred Stock pursuant to the terms of the Certificate of Designation.
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Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
Signature Page
The execution hereof by you shall constitute a contract
between us for the uses and purposes hereinabove set forth, and this Agreement
may be executed in any number of counterparts, each executed counterpart
constituting an original but all together only one agreement.
PETROLEUM HEAT AND POWER CO., INC.
By
Its
Accepted as of the date first above written.
[VARIATION]
By
Its
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Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
TOTAL NUMBER OF
SHARES OF PREFERRED AMOUNT OF LIQUIDATION
NAME AND ADDRESS STOCK HELD ON THE PREFERENCE REPRESENTED
OF HOLDERS EFFECTIVE DATE BY SUCH SHARES
JOHN HANCOCK MUTUAL LIFE 25,000 $2,500,000
INSURANCE COMPANY
(for the General Account)
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Payments
All payments on or in respect of the Preferred Stock or Notes shall be made by
bank wire transfer of Federal or other immediately available funds for credit no
later than 12 noon Boston time (which shall identify each payment as "Petroleum
Heat and Power Co., Inc., Preferred Stock, dividend or other payment" or
"Petroleum Heat and Power Co., Inc., Subordinated Notes due 1999, principal or
interest or other payments", as the case may be) to:
The First National Bank of Boston
(ABA #011 000 390)
100 Federal Street
Boston, Massachusetts 02110
Attention: Insurance Division
for the account of John Hancock
Mutual Life Insurance Company's
Private Placement Collection Account
Account No. 541-55417
on order of Petroleum Heat and
Power Co., Inc.
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) (a) the
full name and dividend rate of the Preferred Stock and (b) allocation of payment
between dividends and redemptions, or (2) (a) the full name, interest rate and
maturity date of the Notes or other obligations and (b) allocation of payment
between principal and interest and any special payment; and (3) name and address
of Bank (or Trustee) from which wire transfer was sent, and all notices with
respect to prepayments or redemptions, both scheduled and unscheduled, whether
partial or in full, and notice of maturity, shall be delivered or mailed to:
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Accounting Division T-10
All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
delivered or mailed to:
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department, T-57
Name of Nominee in which Certificates are to be issued: None
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
TOTAL NUMBER OF
SHARES OF PREFERRED AMOUNT OF LIQUIDATION
NAME AND ADDRESS STOCK HELD ON THE PREFERENCE REPRESENTED
OF HOLDERS EFFECTIVE DATE BY SUCH SHARES
JOHN HANCOCK MUTUAL 37,500 $3,750,000
LIFE INSURANCE COMPANY
(Guaranteed Benefit Sub-Account)
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Payments
All payments on or in respect of the Preferred Stock or Notes shall be made by
bank wire transfer of Federal or other immediately available funds for credit no
later than 12 noon Boston time (which shall identify each payment as "Petroleum
Heat and Power Co., Inc., Preferred Stock, dividend or other payment" or
"Petroleum Heat and Power Co., Inc., Subordinated Notes due 1999, principal or
interest or other payments", as the case may be) to:
The First National Bank of Boston
(ABA #011 000 390)
100 Federal Street
Boston, Massachusetts 02110
Attention: Insurance Division
for the account of John Hancock
Mutual Life Insurance Company's
Private Placement Collection Account
Account No. 541-55417
on order of Petroleum Heat and
Power Co., Inc.
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) (a) the
full name and dividend rate of the Preferred Stock and (b) allocation of payment
between dividends and redemptions, or (2) (a) the full name, interest rate and
maturity date of the Notes or other obligations and (b) allocation of payment
between principal and interest and any special payment; and (3) name and address
of Bank (or Trustee) from which wire transfer was sent, and all notices with
respect to prepayments or redemptions, both scheduled and unscheduled, whether
partial or in full, and notice of maturity, shall be delivered or mailed to:
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Accounting Division T-10
All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
delivered or mailed to:
John Hancock Mutual Life
Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department, T-57
Name of Nominee in which Certificates are to be issued: None
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
TOTAL NUMBER OF
SHARES OF PREFERRED AMOUNT OF LIQUIDATION
NAME AND ADDRESS STOCK HELD ON THE PREFERENCE REPRESENTED
OF HOLDERS EFFECTIVE DATE BY SUCH SHARES
THE NORTHWESTERN MUTUAL 62,500 $6,250,000
LIFE INSURANCE COMPANY
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Securities Department
Telefacsimile Number: (414) 299-7124
Payments
All payments on or in respect of the Preferred Stock or Notes shall be made by
bank wire transfer of immediately available funds for credit no later than 12
noon Boston time (which shall identify each payment as "Petroleum Heat and Power
Co., Inc., Preferred Stock, dividend or other payment" or " Petroleum Heat and
Power Co., Inc., Subordinated Notes due 1999, principal or interest or other
payments", as the case may be) to:
Bankers Trust Company
(ABA #0210-01033)
16 Wall Street
Insurance Unit 4th Floor
New York, New York 10015
for credit to The Northwestern Mutual Life
Insurance Company's Account No. 00-00-027
Notices
All notices and communications, to be addressed as first provided above, except
notices with respect to payment, and written confirmation of each such payment,
to be addressed Attention: Investment Operations, Telefacsimilie Number (414)
299-2111
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 39-0509570
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
EXHIBIT A
CERTIFICATE OF DESIGNATION
[TO COME]
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
PETROLEUM HEAT AND POWER, INC.
THIRD AMENDMENT
CLOSING CERTIFICATE
The Holders of 1989 Preferred Stock listed on Schedule I to the Third Amendment
referred to below
This certificate is delivered in compliance with the requirements of the
Third Amendment and Restatement of Purchase Agreement dated as of February 1,
1997 (the "Third Amendment") entered into by the undersigned, Petroleum Heat and
Power, Inc., a Minnesota corporation (the "Company"), with each of you, as a
condition and concurrently with the effectuation on the date hereof of the Third
Amendment. Capitalized terms used herein shall have the same meanings as in the
Third Amendment.
The undersigned represents and warrants to each of you as follows:
1. The undersigned is the duly elected, qualified and acting
________ of the Company and is familiar with the operations, records and
affairs of the Company;
2. The representations and warranties of the Company set forth in
Section 3 of the Third Amendment are true and correct on and with respect
to the date hereof;
3. The Company has performed all of its obligations under the Third
Amendment which are to be performed on or prior to the date hereof;
4. No Default or Event of Default has occurred and is continuing;
and
5. As of the date hereof, the 1997 Preferred Stock has been duly and
validly issued and is fully paid and non-assessable.
Dated: February ____, 1997
PETROLEUM HEAT AND POWER, INC.
By
Its ____________________
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
DESCRIPTION OF CHAPMAN AND CUTLER'S
CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to the holders
of the Preferred Stock (the "Holders"), called for by ss.3.2 of the Third
Amendment and Restatement of Purchase Agreement (the "Amendment and
Restatement"), shall be dated the Effective Date and addressed to the Holders,
shall be satisfactory in form and substance to the Holders and shall be to the
effect that:
(1) The Company is a corporation, duly organized and existing and in good
standing under the laws of the State of Minnesota and has all requisite
corporate power and authority to enter into and perform the Amendment and
Restatement;
(2) The Amendment and Restatement has been duly authorized, executed and
delivered by the Company and all provisions of the Amendment and Restatement
pertaining to the Preferred Stock and other matters (other than the Notes)
constitute the legal, valid and binding agreements of the Company enforceable
against the Company in accordance with their terms, except as such terms may be
limited by bankruptcy, insolvency or similar laws and legal and equitable
principles affecting or limiting the enforcement of creditors' rights generally;
(3) No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any United States governmental body,
Federal, state or local, is necessary in connection with the execution and
delivery of the Amendment and Restatement. The opinion of Chapman and Cutler
shall also state that the opinion of Philips Nizer Benjamin Krim & Ballon LLP
called for by ss.3.2 is satisfactory in scope and form to Chapman and Cutler and
that, in their opinion, the Holders are justified in relying thereon and shall
cover such other matters relating to the execution and delivery of the Amendment
and Restatement as the Holders may reasonably request. With respect to matters
of fact upon which such opinion is based, Chapman and Cutler may rely on
appropriate certificates of public officials and officers of the Company.
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
DESCRIPTION OF PHILLIPS NIZER BENJAMIN KRIM & BALLON LLP'S
PREFERRED STOCK CLOSING OPINION
The closing opinion of Phillips Nizer Benjamin Krim & Ballon LLP, which is
called for by ss.3.2 of the Third Amendment and Restatement of Purchase
Agreements (the "Amendment and Restatement"), shall be dated the Effective Date
and addressed to the Holders, shall be satisfactory in scope and form to the
Holders and shall cover the matters referred to in paragraphs 1, 2 and 3 of
Exhibit C and shall also be to the effect that:
(1) The Certificate of Designation of the Company in the form attached to
the Amendment and Restatement as Exhibit A has been duly adopted by all
necessary corporate action on the part of the Company, has been filed with the
Secretary of State of the State of Minnesota and constitutes the legal and valid
Certificate of Designation of the Company;
(2) Each Subsidiary is a corporation duly organized, legally existing and
in good standing under the laws of its jurisdiction of incorporation and is duly
licensed or qualified and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or the nature of the business
transacted by it makes such licensing or qualification necessary and all of the
issued and outstanding shares of capital stock of each such Subsidiary have been
duly issued, are fully paid and non-assessable and are owned by the Company, by
one or more wholly-owned Subsidiaries, or by the Company and one or more
wholly-owned Subsidiaries;
(3) The Company has full power and authority and is duly authorized to
conduct the activities in which it is now engaged and is duly licensed or
qualified and is in good standing as a foreign corporation in each jurisdiction
in which the character of the properties owned or leased by it or the nature of
the business transacted by it makes such licensing or qualification necessary
and all of the issued and outstanding shares of capital stock of the Company
have been duly issued, are fully paid and non-assessable;
(4) None of the transactions contemplated in the Amendment and Restatement
will violate or result in a violation of Section 7 of the Securities Exchange
Act of 1934, as amended, or any regulations issued pursuant thereto, including,
without limitation, Regulations, G, T and X of the Board of Governors of the
Federal Reserve System (12 CFR, Chapter II);
(5) To the best of such counsel's knowledge and belief, after due inquiry,
the Company is not a party under or bound by any contract, indenture, agreement,
instrument, order of any court, or governmental agency, rule or regulation known
to such counsel, or any note, debenture, bond, or other security known to such
counsel, under the terms of or pursuant to which the Company's right and
obligation to declare and pay the dividends on the Preferred Stock or to
otherwise make distributions in respect of the Preferred Stock or to make
mandatory redemptions of shares of the Preferred Stock pursuant to the
provisions of the Restated and Amended Articles of Incorporation of the Company
is expressly limited or restricted (not including as such covenants or other
provisions requiring the maintenance of levels of shareholders' equity, net
worth, cash flow and current assets);
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
(6) The 1997 Preferred Stock when issued by the Company will be duly and
validly issued, fully paid and non-assessable; and
(7) No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal,
state or local, is necessary in connection with the execution and delivery of
the Amendment and Restatement.
With respect to matters of fact on which the opinion of Phillips Nizer
Benjamin Krim & Ballon LLP is based, such counsel shall be entitled to rely on
appropriate certificates of public officials and officers of the Company.
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
PETROLEUM HEAT AND POWER CO., INC.
______ SUBORDINATED NOTE
DUE AUGUST 1, 1999
No. R- ________________, 19__
PETROLEUM HEAT AND POWER CO., INC., a Minnesota corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns,
on the first day of August, 1999
the principal amount of
DOLLARS ($_____________)
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of ____% per annum from the date hereof until maturity, payable
semi-annually on the first day of each February and August in each year
commencing on the first such date after the date of issue hereof, and at
maturity. The Company agrees to pay interest on overdue principal and premium,
if any, and (to the extent legally enforceable) on any overdue installment of
interest, at the rate of ____% per annum after due, whether by acceleration or
otherwise, until paid. The principal hereof and interest hereon and premium, if
any, are payable at the principal office of the Company in Stamford, Connecticut
in coin or currency of the United States of America which at the time of payment
shall be legal tender for the payment of public and private debts.
This Note is one of the Subordinated Notes of the Company in the aggregate
principal amount not to exceed $25,000,000 issued or to be issued under and
pursuant to the terms and provisions of separate and several Purchase Agreements
each dated as of August 1, 1989, entered into by the Company with the original
purchasers therein referred to (as amended and restated, the "Purchase
Agreements") and this Note and the holder hereof are entitled equally and
ratably with the holders of all other Notes outstanding under the Purchase
Agreements to all the benefits and security provided for thereby or referred to
therein, to which Purchase Agreements reference is hereby made for the statement
thereof.
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
This Note and the other Notes outstanding under the Purchase Agreements
may be declared due prior to their expressed maturity dates, all in the events,
on the terms and in the manner and amounts as provided in the Purchase
Agreements.
The Notes are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in Section
6 of the Purchase Agreements.
This Note and the indebtedness evidenced hereby is and shall at all times
be and remain junior and subordinate in right of payment to any and all Senior
Indebtedness of the Company as defined in the Purchase Agreements, all to the
extent more fully set forth in said Purchase Agreements.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
PETROLEUM HEAT AND POWER CO., INC.
By
Its
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
PETROLEUM HEAT AND POWER CO., INC.
NOTE CLOSING CERTIFICATE
[To Be Addressed to Holders
of Preferred Stock]
Ladies and Gentlemen:
This certificate is delivered to you in compliance with the requirements
of the separate Purchase Agreements dated as of August 1, 1989 (as amended, the
"Agreements"), entered into by the undersigned, Petroleum Heat and Power Co.,
Inc., a Minnesota corporation (the "Company"), with each of you, and as an
inducement to and as part of the consideration for your exchange on this date of
shares of Series A Exchangeable Preferred Stock (the "Preferred Stock") of the
Company, for ____% Subordinated Notes due August 1, 1999 (the "Notes") of the
Company pursuant to the Agreements. The terms which are capitalized herein shall
have the same meanings as in the Agreements.
The Company represents and warrants to you as of the date hereof that each
and every representation and warranty of the Company set forth in Section 2.1 of
the Agreements are true and correct as of the date hereof.
The Company further represents and warrants to you as of the date hereof
that the proceeds of the Notes being issued on the date hereof (such proceeds
being the shares of Preferred Stock being exchanged) will be used [Description
of use of proceeds] and will not be used in a manner which would violate or
result in a violation of Section 7 of the Securities Act of 1934, as amended, or
any regulation issued pursuant thereto, including, without limitation,
Regulations G, T and X of the Board of Governors of the Federal Reserve System,
12 C.F.R. Chapter II. The Company further represents and warrants to you as of
the date hereof that [either] neither the Company nor any Subsidiary owns or
intends to carry or purchase any "margin security" within the meaning of said
Regulation G and none of the proceeds of the Notes, will be used to purchase, or
refinance, any borrowing, the proceeds of which were used to purchase any
"security" within the meaning of the Securities Exchange Act of 1934, as amended
[or] the Company does own or intend to carry or purchase any margin security or
use the proceeds of the Notes as aforesaid, and the Company has so notified you
of such fact in writing, and you have not objected in writing on the grounds
that such ownership or intention to purchase or carry would cause you or the
Company to be in violation of Regulations G, T and X or the Securities Act of
1934.
Dated:
PETROLEUM HEAT AND POWER CO., INC.
By
Its
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
DESCRIPTION OF NOTE CLOSING OPINION OF
SPECIAL COUNSEL TO HOLDERS
The closing opinion of special counsel to the holders of Preferred Stock
(the "Holders"), called for by ss.4.2 of the Purchase Agreements, shall be dated
the Note Closing Date and addressed to the Holders, shall be satisfactory in
form and substance to the Holders and shall be to the effect that:
(1) The Company is a corporation, duly organized and existing and in good
standing under the laws of the State of Minnesota, has all requisite corporate
power and authority to enter into and perform the Purchase Agreements and to
issue the Notes and incur the Indebtedness to be evidenced thereby;
(2) The Purchase Agreements have been duly authorized, executed and
delivered by the Company and all provisions of the Purchase Agreements
pertaining to the Notes and other matters (other than the Preferred Stock)
constitute the legal, valid and binding agreements of the Company enforceable
against the Company in accordance with their terms, except as such terms may be
limited by bankruptcy, insolvency or similar laws and legal and equitable
principles affecting or limiting the enforcement of creditors' rights generally;
(3) The Notes have been duly authorized by proper corporate action on the
part of the Company, have been duly executed by authorized officers of the
Company and delivered and constitute the legal, valid and binding obligations of
the Company enforceable in accordance with their terms, except as such terms may
be limited by bankruptcy, insolvency or similar laws and legal and equitable
principles affecting or limiting the enforcement of creditors' rights generally;
(4) No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any United States governmental body,
Federal, state or local, is necessary in connection with the execution and
delivery of the Purchase Agreements or the Notes; and
(5) The issuance and delivery of the Notes in exchange for the Preferred
Stock under the circumstances contemplated by the Purchase Agreements is an
exempt transaction under the Securities Act of 1933, as amended, and does not
under existing law require the registration of the Notes under the Securities
Act of 1933, as amended, or the qualification of an indenture in respect thereof
under the Trust Indenture Act of 1939.
The opinion of special counsel to the Holders shall also state that the
opinion of counsel to the Company called for by ss.4.2 of the Purchase
Agreements is satisfactory in scope and form to special counsel to the Holders
and that, in their opinion, the Holders are justified in relying thereon and
shall cover such other matters relating to the exchange of the Preferred Stock
for the Notes as the Holders may reasonably request. With respect to matters of
fact upon which such opinion is based, special counsel to the Holders may rely
on appropriate certificates of public officials and officers of the Company.
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
DESCRIPTION OF NOTE CLOSING OPINION OF
COUNSEL TO THE COMPANY
The closing opinion of counsel to the Company, which is called for by
ss.4.2 of the Purchase Agreement, shall be dated the Note Closing Date and
addressed to the holders of Preferred Stock (the "Holders"), shall be
satisfactory in scope and form to the Holders and shall cover the matters
referred to in paragraphs 1 through 5 of Exhibit G and shall also be to the
effect that: The issuance and delivery of the Notes in exchange for the
Preferred Stock and the performance by the Company of the Purchase Agreements as
they pertain to the Notes and other matters (other than the Preferred Stock) do
not conflict with or result in any breach of any of the provisions of or
constitute a default under or result in the creation or imposition of any lien
or encumbrance upon any of the property of the Company pursuant to the
provisions of the Articles of Incorporation, Certificate of Designation or
By-laws of the Company or any agreement or other instrument known to such
counsel after due investigation to which the Company is a party or by which the
Company may be bound.
With respect to matters of fact on which such opinion is based, such
counsel shall be entitled to rely on appropriate certificates of public
officials and officers of the Company.
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
DESCRIPTION OF NOTE CLOSING OPINION OF
MINNESOTA COUNSEL TO THE COMPANY
The closing opinion of Dorsey & Whitney, which is called for by ss.4.2 of
the Purchase Agreement, shall be dated the Note Closing Date and addressed to
the Holders, shall be satisfactory in form and substance to the Holders and
shall be to the effect that:
(1) The Company is a corporation, duly organized and existing and in good
standing under the laws of the State of Minnesota, has all requisite corporate
power and authority to enter into and perform the Purchase Agreements and to
issue the Notes and incur the Indebtedness to be evidenced thereby;
(2) The Purchase Agreements and the Notes have been duly authorized by
proper corporate action on the part of the Company;
(3) No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any Minnesota governmental body,
state or local, is necessary in connection with the execution and delivery of
the Purchase Agreements or the Notes; and With respect to matters of fact upon
which the opinion of Dorsey & Whitney is based, such counsel may rely on
appropriate certificates of public officials and officers of the Company.
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
SUBSIDIARIES OF THE COMPANY
1. SUBSIDIARIES:
JURISDICTION OF PERCENTAGE OF VOTING
NAME OF SUBSIDIARY INCORPORATION STOCK OWNED BY
COMPANY AND EACH
OTHER SUBSIDIARY
A. P. Woodson Company Washington, D.C. 100%
C.B.W. Realty Corp. of Connecticut Connecticut 100%
Marex Corporation Maryland 100%
Maxwhale Corp. Minnesota 100%
Ocennet Fuel Oil Corp. Connecticut 100%
Ortep of Connecticut, Inc. Connecticut 100%
Ortep of New Jersey, Inc. New Jersey 100%
Ortep of Pennsylvania, Inc. Pennsylvania 100%
Ortep of Staten Island, Inc. New York 100%
Petro/Crystal Corp. New York 100%
Petro, Inc. Delaware 100%
Public Fuel Services Co., Inc. New York 100%
Reliance Utilities Corp. New York 100%
<PAGE>
Petroleum Heat and Power Co., Inc.
Third Amendment and Restatement of Purchase Agreement
DESCRIPTION OF DEBT AND LEASES
1. Current Debt of the Company and its Subsidiaries outstanding as of January
31, 1997 is as follows:
Current portion of 14.10% Subordinated Notes $1,050,000
Current portion of 14.10% Senior Notes 1,050,000
Current portion of other Long-Term Debt 947,000
Working capital borrowings 35,000,000
-----------
$38,047,000
===========
2. Funded Debt of the Company and its Subsidiaries outstanding as of January
31, 1997 is as follows:
Senior and Subordinated Notes due 10/01/1998 $60,000,000
14.10% Senior and Subordinated Notes 6,200,000
10.125% Subordinated Notes 50,000,000
9-3/8% Subordinated Debentures 75,000,000
12-1/4% Subordinated Debentures 81,250,000
Other Long-Term Notes 16,687,000
------------
$289,137,000
============
3. Long-Term Leases of the Company and its Subsidiaries outstanding as of
January 31, 1997 are as follows:
Leased Facilities $22,500,000
4. Capitalized Leases of the Company and its Subsidiaries outstanding as of
January 31, 1997 are as follows:
None.
Draft of February 13, 1997
PETROLEUM HEAT AND POWER CO., INC.
SIXTH AMENDMENT AND RESTATEMENT OF NOTE AGREEMENT
Dated as of February 1, 1997
Re: $6,250,000 Original Principal Amount 14.10% Subordinated
Notes
Due January 15, 2001
and
$6,250,000 Original Principal Amount 14.10% Senior Notes
Due January 15, 2001
AMENDING AND RESTATING THE NOTE AGREEMENT
dated as of January 15, 1991, as heretofore amended
<PAGE>
TABLE OF CONTENTS
(NOT A PART OF THE AGREEMENT)
SECTION HEADING PAGE
ARTICLE I AMENDMENT AND RESTATEMENT OF THE EXISTING NOTE
AGREEMENT ......................................... 2
SECTION 2. REPRESENTATIONS ..................................... 2
SECTION 3. CLOSING CONDITIONS .................................. 6
Section 3.1. Closing Certificates .............................. 6
Section 3.2. Legal Opinions .................................... 6
Section 3.3. Satisfactory Proceedings .......................... 6
Section 3.4. Fees of Special Counsel ........................... 6
Section 3.5. Consummation of Proposed Transactions ............. 6
Section 3.6. Payment of Fee .................................... 6
SECTION 4. COMPANY COVENANTS ................................... 7
Section 4.1. Corporate Existence, etc. ......................... 7
Section 4.2. Insurance ......................................... 7
Section 4.3. Taxes, Claims for Labor and Materials,
Compliance with Laws ............................ 7
Section 4.4. Maintenance, etc. ................................. 8
Section 4.5. Nature of Business ................................ 8
Section 4.6. Limitations on Funded Debt ........................ 8
Section 4.7. Subsidiary Stock .................................. 8
Section 4.8. Restricted Investments, Dividends,
Stock Purchases ................................. 9
Section 4.9. Mergers, Consolidations and Sales of
Assets .......................................... 9
Section 4.10. Guaranties ........................................ 10
Section 4.11. Repurchase of Notes ............................... 10
Section 4.12. Transactions with Affiliates ...................... 10
Section 4.13. Termination of Pension Plans ...................... 11
Section 4.14. Reports and Rights of Inspection .................. 11
Section 4.15. Restrictions on Futures Trading ................... 13
Section 4.16. Limitation on Fuel Oil Tank Ownership ............. 13
SECTION 5. PREPAYMENT OF NOTES ................................. 13
Section 5.1. Required Prepayments .............................. 13
Section 5.2(A) Mandatory Prepayment on Change of
Ownership ....................................... 14
Section 5.2(B) Prepayment upon Failure of Holders to
Grant Certain Consents .......................... 16
Section 5.3. Optional Prepayments .............................. 17
Section 5.4. Notice of Prepayments ............................. 18
Section 5.5. Allocation of Prepayments ......................... 18
SECTION 6. SUBORDINATION OF SERIES A NOTES ..................... 18
Section 6.1. Subordination to Senior Indebtedness .............. 18
Section 6.2. Proofs of Claim ................................... 20
Section 6.3. No Waiver ......................................... 20
Section 6.4. Rights of Holders of Senior Indebtedness .......... 20
Section 6.5. Rights of Holders of Series A Notes ............... 20
SECTION 7. EVENTS OF DEFAULT AND REMEDIES THEREFOR ............. 20
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<PAGE>
Section 7.1. Events of Default ................................. 20
Section 7.2. Notice to Holders ................................. 22
Section 7.3. Acceleration of Maturities ........................ 22
Section 7.4. Rescission of Acceleration ........................ 22
SECTION 8. AMENDMENTS, WAIVERS AND CONSENTS .................... 23
Section 8.1. Consent Required .................................. 23
Section 8.2. Effect of Amendment or Waiver ..................... 23
SECTION 9. INTERPRETATION OF AGREEMENT ......................... 24
Section 9.1. Definitions ....................................... 24
Section 9.2. Accounting Principles ............................. 32
Section 9.3. Directly or Indirectly ............................ 33
SECTION 10. MISCELLANEOUS ....................................... 33
Section 10.1. Direct Payment .................................... 33
Section 10.2. Registration and Transfers of the Notes ........... 33
Section 10.3. Exchange of Notes ................................. 34
Section 10.4. Loss, Theft, etc. of Notes ........................ 34
Section 10.5. Repurchase of Notes ............................... 34
Section 10.6. Expenses, Stamp Tax Indemnity ..................... 35
Section 10.7. Notices ........................................... 35
Section 10.8. Agreement to Amend Public Indentures .............. 35
Section 10.9. Successors and Assigns ............................ 35
Section 10.10. Survival of Covenants and Representations ......... 35
Section 10.11. Severability ...................................... 35
Section 10.12. Governing Law ..................................... 36
Section 10.13. Captions .......................................... 36
Section 10.14. Reproduction of Documents ......................... 36
ARTICLE II AMENDMENTS TO SCHEDULE AND EXHIBITS TO EXISTING
NOTE AGREEMENT .................................... 36
ARTICLE III MISCELLANEOUS ....................................... 36
Section 3.1. Ratification of Existing Note Agreement ........... 36
Section 3.2. Counterparts ...................................... 37
Section 3.3. Fees and Expenses ................................. 37
Section 3.4. References to Original Note Agreement ............. 37
Section 3.5. Governing Law ..................................... 37
ATTACHMENTS TO AMENDMENT AND RESTATEMENT:
Schedule I -- Name and Address of Noteholder and Amount of
Original and Current Principal of the Notes
Schedule II -- Names of Beneficial Owners of Class C Common
Stock
Exhibit A-1 -- Form of Subordinated Note
Exhibit A-2 -- Form of Senior Note
Exhibit B -- Description of Chapman and Cutler's Closing
Opinion
Exhibit C -- Description of Phillips Nizer Benjamin Krim &
Ballon LLP Closing Opinion
Exhibit D -- Subsidiaries of the Company
Exhibit E -- Current Debt, Funded Debt, Capitalized Leases and
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Long-Term Leases of the Company and its Subsidiaries
Exhibit F -- Form of Company Closing Certificate
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<PAGE>
Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
PETROLEUM HEAT AND POWER CO., INC.
Davenport Street
Stamford, Connecticut 06904
SIXTH AMENDMENT AND RESTATEMENT OF NOTE AGREEMENT
Re: $6,250,000 Original Principal Amount 14.10% Subordinated
Notes
and
$6,250,000 Original Principal Amount 14.10% Senior Notes
Amending and Restating the Note Agreement
dated as of February 1, 1997, as heretofore amended
Dated as of February 1, 1997
Connecticut General Life
Insurance Company
c/o CIGNA Investments, Inc.
Hartford, Connecticut
Ladies and Gentlemen:
Reference is hereby made to that certain Note Agreement dated as of January
15, 1991 (the "Original Note Agreement") between Petroleum Heat and Power Co.,
Inc., a Minnesota corporation (the "Company") and you (the "Noteholder") (the
Original Note Agreement, as heretofore amended by the First Amendment dated as
of May 31, 1991, the Second Amendment dated as of December 25, 1991, the Third
Amendment dated as of January 24, 1994, the Fourth Amendment dated as of
November 28, 1995 and the Fifth Amendment dated as of January 31, 1997, is
herein referred to as the "Existing Note Agreement"), pursuant to which the
Company issued its $6,250,000 original aggregate principal amount 14.10%
Subordinated Notes, Series A, due January 15, 2001 (the "Series A Notes") and
its $6,250,000 original aggregate principal amount 14.10% Senior Notes, Series
B, due January 15, 2001 (the "Series B Notes" and, collectively with the Series
A Notes, the "Notes"). The Series A Notes are substantially in the form attached
hereto as Exhibit A-1. The Series B Notes are substantially in the form attached
hereto as Exhibit A-2.
The Company now proposes to (i) issue $60,000,000 aggregate principal
amount of its Senior Notes due October 1, 2002 (the "2002 Notes") pursuant to
the separate Note Agreements each dated as of February 1, 1997 between the
Company and each of the respective Purchasers named therein, in exchange for the
$30,000,000 aggregate principal amount of the Company's Senior Notes due October
1, 1998 and the $30,000,000 aggregate principal amount of the Company's
Subordinated Notes due October 1, 1998, (ii) issue $30,000,000 aggregate
liquidation preference of its Exchangeable Preferred Stock (the "1997 Preferred
Stock")
<PAGE>
Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
pursuant to Rule 144A under the Securities Act of 1933, as amended, and (iii)
amend and restate the separate Purchase Agreements dated as of August 1, 1989
pursuant to which its 1989 Exchangeable Preferred Stock (the "1989 Preferred
Stock") was issued (the transactions described in the foregoing clauses (i)
through (iii) are herein referred to as the "Proposed Transactions").
In order to permit the Proposed Transactions, the Company now desires and
the Company and you hereby agree, subject to satisfaction of the conditions
precedent set forth in ss.3 hereoF (the "Closing Conditions"), to amend and
restate the Existing Note Agreement as of February 18, 1997 or, in the event
that the Closing Conditions have not been satisfied as of February 18, 1997,
such later date on or prior to February 28, 1997 as of which all the Closing
Conditions have been satisfied (such date or such later date being the
"Effective Date") in the respects, but only in the respects, hereinafter set
forth in this Sixth Amendment and Restatement of Note Agreement (this "Amendment
and Restatement"):
ARTICLE I
AMENDMENT AND RESTATEMENT
OF THE EXISTING NOTE AGREEMENT
Sections 2 through 10 of the Existing Note Agreement shall be and are hereby
amended and restated in their entirety to read as follows:
SECTION 2. REPRESENTATIONS.
The Company represents and warrants to you as of the date hereof that:
(a) Subsidiaries. Exhibit D attached hereto states the name of each of
the Company's Subsidiaries, its jurisdiction of incorporation and the
percentage of its Voting Stock owned by the Company and/or its
Subsidiaries. The Company and each Subsidiary has title to all of the
shares it purports to own of the stock of each Subsidiary, free and clear
in each case of any lien except as disclosed in the notes to the financial
statements referred to in paragraph (d) hereof or in Exhibit E attached
hereto. All such shares have been duly issued and are fully paid and
non-assessable.
(b) Corporate Organization and Authority. The Company and each
Subsidiary
(i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation; and
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
(ii) has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted
and as presently proposed to be conducted.
(c) Business and Property. You have heretofore been furnished with a
copy of the Company's Preliminary Offering Memorandum dated January 29,
1997 prepared by Donaldson, Lufkin & Jenrette Securities Corporation
regarding the issuance and sale of the 1997 Preferred Stock (the
"Memorandum") which generally sets forth the business conducted and
proposed to be conducted by the Company and its Subsidiaries and the
principal properties of the Company and its Subsidiaries.
(d) Financial Statements. The balance sheets of the Company as of
December 31 in each of the years 1991 through 1995, and the statements of
income and stockholders' equity and changes in financial position or the
statements of operations and cash flow, as the case may be, for the fiscal
years ended on said dates accompanied by a report thereon containing an
opinion unqualified as to scope limitations imposed by the Company and
otherwise without qualification except as therein noted, by KPMG Peat
Marwick LLP, certified public accountants, and the unaudited balance sheet
of the Company as of September 30, 1996 and the unaudited statements of
operations and cash flow for the nine-month period ended on such date,
copies of which have been delivered to you, have been prepared in
accordance with generally accepted accounting principles consistently
applied except as therein noted, are correct and complete and present
fairly the financial position of the Company and its Subsidiaries as of
such dates and the results of their operations and changes in their
financial position or consolidated statements of their cash flow for such
periods.
(e) Indebtedness. Exhibit E attached hereto correctly describes all
Working Capital Borrowings, Funded Debt, Capitalized Leases and Long-Term
Leases of the Company and its Subsidiaries outstanding as of January 31,
1997.
(f) Full Disclosure. Neither the financial statements referred to in
paragraph (d) nor this Amendment and Restatement, the Memorandum or any
other written statement furnished by the Company to you in connection with
the negotiation of this Amendment and Restatement contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained therein or herein not misleading. There is no fact
peculiar to the Company which the Company has not disclosed to you in
writing which materially affects adversely nor, so far as the Company can
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<PAGE>
Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
now foresee, will materially affect adversely the properties, business,
prospects, profits or condition (financial or otherwise) of the Company, or
the ability of the Company to perform this Amendment and Restatement.
(g) Pending Litigation. There are no proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or
any Subsidiary in any court or before any governmental authority or
arbitration board or tribunal which involve the possibility of materially
and adversely affecting the properties, business, prospects, profits or
condition (financial or otherwise) of the Company and its Subsidiaries, or
the ability of the Company to perform this Amendment and Restatement.
Neither the Company nor any Subsidiary is in default with respect to any
order of any court or governmental authority or arbitration board or
tribunal.
(h) Title to Properties. The Company and each Subsidiary has good and
marketable title in fee simple (or its equivalent under applicable law) to
all the real property and has title to all the other property it purports
to own, including that reflected in the balance sheet as of September 30,
1996 referred to in paragraph (d) except as sold or otherwise disposed of
in the ordinary course of business and except for liens which do not
violate the provisions of this Amendment and Restatement.
(i) Patents and Trademarks. The Company and each Subsidiary owns or
possesses all the patents, trademarks, trade names, service marks,
copyrights, licenses and rights with respect to the foregoing necessary for
the present conduct of its business, without any known material conflict
with the rights of others.
(j) Sale is Legal and Authorized. (i) The compliance by the Company
with all of the provisions of this Amendment and Restatement and the
Notes--
(y) are within the corporate powers of the Company and have been
duly authorized by proper corporate action on the part of the Company;
and
(z) do not violate any provisions of any law or any order of any
court or governmental authority or agency and do not conflict with or
result in any breach of any of the terms, conditions or provisions of,
or constitute a default under the Restated Articles or By-laws of the
Company or any indenture or other agreement or instrument to which the
Company is a party or by which it may be bound or result in the
imposition of any liens or encumbrances on any property of the
Company.
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<PAGE>
Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
(ii) The Notes are legal, valid and binding obligations of the Company
enforceable in accordance with their terms, subject to bankruptcy,
insolvency and other laws and legal and equitable principles affecting or
limiting the enforcement of creditors' rights generally.
(k) No Defaults. No Default or Event of Default has occurred and is
continuing, and no event has occurred and is continuing and no condition
exists which would constitute a Default or an Event of Default were any
Notes outstanding on the date hereof (other than a Default or Event of
Default arising from the issuance of such Notes and the incurrence of the
Indebtedness evidenced thereby). Neither the Company nor any Subsidiary is
in default in the payment of principal or interest on any Indebtedness for
borrowed money nor in default under any instrument or instruments or
agreements under and subject to which any Indebtedness for borrowed money
has been issued and no event has occurred and is continuing under the
provisions of any such instrument or agreement which with the lapse of time
or the giving of notice, or both, would constitute an event of default
thereunder.
(l) Governmental Consent. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Company of
this Amendment and Restatement or the compliance by the Company with any of
the provisions of this Amendment and Restatement or the Notes.
(m) Taxes. All tax returns required to be filed by the Company or any
Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Company or any
Subsidiary or upon any of their respective properties, income or
franchises, which are shown to be due and payable in such returns have been
paid. The Company does not know of any proposed additional tax assessment
against it or any Subsidiary for which adequate provision has not been made
on its accounts. The Federal income tax liability of the Company and its
Subsidiaries has been finally determined by the Internal Revenue Service
and satisfied for all taxable years up to and including the taxable year
ended December 31, 1991 and no controversy in respect of a material amount
of additional income taxes due since said date is pending or to the
knowledge of the Company threatened. The provisions for taxes on the books
of the Company and each Subsidiary is adequate for all open years, and for
its current fiscal period.
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<PAGE>
Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
(n) Use of Proceeds. None of the transactions contemplated in this
Amendment and Restatement will violate or result in a violation of Section
7 of the Securities Exchange Act of 1934, as amended, or any regulation
issued pursuant thereto, including, without limitation, Regulations G, T
and X of the Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter II.
(o) Private Offering. Neither the Company, directly or indirectly, nor
any agent on its behalf has offered or will offer the Notes or any similar
Security to, or has solicited or will solicit an offer to acquire the Notes
or any similar Security from any Person so as to bring the issuance and
sale of the Notes within the provisions of Section 5 of the Securities Act
of 1933, as amended.
(p) Employee Retirement Income Security Act of 1974. The consummation
of the transactions provided for in this Amendment and Restatement and
compliance by the Company with the provisions hereof and the Notes issued
hereunder will not involve any prohibited transaction within the meaning of
the Employee Retirement Income Security Act of 1974 ("ERISA") or Section
4975 of the Internal Revenue Code of 1954, as amended. No "employee pension
benefit plans", as defined in ERISA ("Plans"), maintained by the Company or
any Person which is under common control with the Company within the
meaning of Section 4001(b) of ERISA, nor any trusts created thereunder,
have incurred any "accumulated funding deficiency" as defined in Section
302 of ERISA nor did the present value of all benefits vested under all
Plans exceed, as of January 1, 1996, the last annual valuation date, the
value of the assets of the Plans allocable to such vested benefits by more
than $7,200,000.
(q) Investment Company Act. Neither the Company nor any Subsidiary is,
or is directly or indirectly controlled by or acting on behalf of any
Person which is, an "investment Company" within the meaning of the
Investment Company Act of 1940, as amended.
(r) Absence of Holding Company Status. The Company is not a "holding
Company" or a subsidiary or affiliate of a "holding Company," or a
subsidiary Company of a "holding Company," or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(s) Dividends. The Company is not in arrears in the payment of any
dividends on any outstanding shares of its capital stock.
SECTION 3. CLOSING CONDITIONS.
The effectiveness of this Amendment and Restatement shall be subject to the
performance by the Company of its
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<PAGE>
Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
agreements hereunder which by the terms hereof are to be performed at or prior
to the Effective Date and to the following further conditions precedent and the
Company will use its best efforts to fulfill all of such conditions:
Section 3.1. Closing Certificates. On the Effective Date, all
representations and warranties of the Company set forth in ss.2 hereof shall be
true and correct with respect to the Effective Date and you shall have received
a certificate, the truth and accuracy of which shall be a condition to the
effectiveness of this Amendment and Restatement, dated the Effective Date,
signed by a Chief Executive Officer or any Vice President of the Company and
substantially in the form attached hereto as Exhibit F.
Section 3.2. Legal Opinions. On the Effective Date you shall have received
from Chapman and Cutler, who are acting as your special counsel in this
transaction and from Phillips Nizer Benjamin Krim & Ballon LLP, counsel for the
Company, their respective opinions, dated the Effective Date, in form and
substance satisfactory to you and covering the matters set forth in Exhibits B
and C, respectively, hereto.
Section 3.3. Satisfactory Proceedings. All proceedings taken in connection
with the transactions contemplated by this Amendment and Restatement, and all
documents necessary to the consummation thereof, shall be satisfactory in form
and substance to you and your special counsel, and you shall have received a
copy (executed or certified as may be appropriate) of all legal documents or
proceedings taken in connection with the consummation of said transactions.
Section 3.4. Fees of Special Counsel. The Company shall have paid the fees
and disbursements of special counsel for the Noteholder for which the Company
shall have received statements on or prior to the Effective Date.
Section 3.5. Consummation of Proposed Transactions. On or prior to the
Effective Date, the Company shall have consummated the Proposed Transactions.
Section 3.6. Payment of Fee. On or prior to the Effective Date, you shall
have received payment of a fee in the amount of $41,500, which fee shall be paid
by bank wire transfer pursuant to the wiring instructions set forth in Schedule
I.
SECTION 4. COMPANY COVENANTS.
From and after the Effective Date and continuing so long as any Notes
remain outstanding:
Section 4.1. Corporate Existence, etc. The Company will preserve and keep
in force and effect, and will cause each Subsidiary to preserve and keep in
force and effect, its corporate existence and all licenses and permits necessary
to the proper conduct of its business, the absence of which would materially and
adversely affect the properties, business,
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
prospects or the condition of the Company and its Subsidiaries, provided that
the foregoing shall not prevent any transaction permitted by ss.4.9.
Section 4.2. Insurance. The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers rated by A.M. Best & Company A-X or better, in such forms and amounts
and against such risks as are customary for corporations of established
reputation engaged in the same or a similar business and owning and operating
similar properties; provided, however, that if insurance coverage by an insurer
with such rating is not available for any such risk, then the Company shall
maintain insurance coverage, for such risk, by an insurer with the highest
rating for insurers which provide insurance coverage for such risk.
Section 4.3. Taxes, Claims for Labor and Materials, Compliance with Laws.
The Company will promptly pay and discharge, and will cause each Subsidiary
promptly to pay and discharge, all lawful taxes, assessments and governmental
charges or levies imposed upon the Company or such Subsidiary, respectively, or
upon or in respect of all or any part of the property or business of the Company
or such Subsidiary, all trade accounts payable in accordance with usual and
customary business terms, and all claims for work, labor or materials, which if
unpaid might become a lien or charge upon any property of the Company or such
Subsidiary; provided the Company or such Subsidiary shall not be required to pay
any such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company or such Subsidiary or any material interference with
the use thereof by the Company or such Subsidiary, and (ii) the Company or such
Subsidiary shall set aside on its books adequate reserves with respect thereto,
if required by generally accepted accounting principles. The Company will
promptly comply and will cause each Subsidiary to comply with all laws,
ordinances or governmental rules and regulations to which it is subject,
including without limitation, the Occupational Safety and Health Act of 1970,
the Employee Retirement Income Security Act of 1974 and all laws, ordinances,
governmental rules and regulations relating to environmental protection in all
applicable jurisdictions, the violation of which would materially and adversely
affect the properties, business, prospects, profits or condition of the Company
and its Subsidiaries or would result in any lien or charge upon any property of
the Company or any Subsidiary; provided the Company or such Subsidiary shall not
be required to
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
pay any such tax, assessment, charge, levy, account payable or claim if (i) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any property of the Company or such Subsidiary or any material interference with
the use thereof by the Company or such Subsidiary, and (ii) the Company or such
Subsidiary shall set aside on its books adequate reserves with respect thereto,
if required by generally accepted accounting principles.
Section 4.4. Maintenance, etc. The Company will maintain, preserve and
keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in repair and working order as is
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties and from time to
time will make all necessary repairs, replacements, renewals and additions so
that at all times the efficiency thereof shall be maintained.
Section 4.5. Nature of Business. Neither the Company nor any Subsidiary
will engage in any business if, giving effect thereto, less than 80% of the
Consolidated Operating Cash Flow of the Company for the 12 months ended with its
most recently ended fiscal quarter would be attributable to the distribution of
the home heating oil (#2 fuel oil), propane and related products (including the
distribution of other petroleum products which were distributed by the Company
during its fiscal year ending December 31, 1996), all as determined in
accordance with generally accepted accounting principles.
Section 4.6. Limitations on Funded Debt. Neither the Company nor any of its
Subsidiaries will incur, create, assume, guarantee or otherwise become liable
for any additional Funded Debt unless, after giving effect thereto, the
Company's Consolidated EBITDA Coverage Ratio exceeds 2.0 to 1.
The foregoing restriction on additional Funded Debt shall not be applicable
to (i) Funded Debt incurred to refund, extend or renew up to an equal 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
subordinate to the Series B Notes, such Funded Debt must be subordinated to the
Series B Notes, to the extent such Indebtedness is so subordinated, and
provided, further, that, if any Funded Debt is incurred for the purpose of
refunding, extending or renewing any Indebtedness which is of equal rank with
the Series B Notes, such Funded Debt may not be Senior Indebtedness, and (ii)
additional Funded Debt in an aggregate amount not to exceed $25 million at any
one time outstanding;
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
provided, however, that Funded Debt incurred pursuant to this subsection (ii)
shall be deemed not to be outstanding for purposes of this subsection (ii) if at
any later determination date, the Company's Consolidated EBITDA Coverage Ratio
exceeds 2.0 to 1.
Section 4.7. Subsidiary Stock. The Company shall not directly or indirectly
create, assume or suffer to exist any lien, charge or encumbrance on any capital
stock of any of its Subsidiaries. The Company shall not permit any Subsidiary to
issue or at any time to have outstanding any shares of capital stock
("Preference Stock") having any preference or priority over the common stock of
such Subsidiary as to dividends, liquidation or voting rights, other than (i)
Preference Stock held by the Company or a wholly-owned Subsidiary, and (ii)
Preference Stock of a corporation which was outstanding at the time such
corporation became a Subsidiary, provided that such Preference Stock was not
issued in connection with, or in contemplation of, such corporation's becoming a
Subsidiary.
Section 4.8. Restricted Investments, Dividends, Stock Purchases. The
Company shall not make any Restricted Investment and shall not declare or pay
any dividend or make any distribution on its capital stock or to its
shareholders or make any loan or advance to its shareholders (other than
dividends or distributions payable in its capital stock) or purchase, redeem or
otherwise acquire or retire for value, or permit any Subsidiary to purchase or
otherwise acquire for value, any capital stock of the Company (any such
Restricted Investment, dividend, distribution, loan, advance, purchase,
redemption, or other acquisition or retirement being referred to herein as a
"Restricted Payment") (i) if at the time of such Restricted Payment an Event of
Default shall have occurred and be continuing, or (ii) if, upon giving effect to
such Restricted Payment, the aggregate amount of all Restricted Payments made
subsequent to December 31, 1987 shall exceed the sum of (a) 50% of the aggregate
Cash Flow of the Company accrued on a cumulative basis for each of the fiscal
years subsequent to December 31, 1986, plus (b) the aggregate net proceeds,
including the fair market value of property other than cash (as determined in
good faith by the Board of Directors of the Company, whose determination shall
be conclusive), received by the Company from the issue or sale after July 1,
1987, of capital stock of the Company, including capital stock issued upon the
conversion of, or exchange for, Indebtedness, plus (c) the aggregate principal
amount of loans and advances included in the computation of Restricted Payments
which has been repaid, plus (d) the aggregate return of capital on any
Restricted Investment up to but not exceeding the original cost thereof included
in Restricted
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
Payments; provided, however, that (x) the foregoing shall not prevent the
payment of any dividend within 60 days after the date of declaration of such
dividend, if at said date such declaration complied with this covenant; (y) in
the event that the Company purchases, redeems or otherwise acquires or retires
any capital stock of the Company in exchange for promissory notes of the Company
then, so long as such promissory notes are junior and subordinate to the Notes,
the principal of and interest on such subordinated promissory notes shall not be
included for purposes of the foregoing until such time as payments of principal
or interest are made thereon; and (z) notwithstanding the limitations of this
ss.4.8, the Company may in each fiscal year, so long as no Default or Event of
Default in the payment of principal of or interest or premium, if any, on any
Indebtedness shall have occurred and be continuing, pay dividends on, and make
mandatory or optional redemptions and exchanges of, the 1989 Preferred Stock, it
being understood that any such dividends, redemptions and exchanges permitted by
this clause (z) shall be taken into account in determining the amount of any
other Restricted Payment.
Notwithstanding the limitations of this covenant, the Company may make such
Restricted Investments if, after giving pro forma effect thereto, the Interest
and Preferred Dividend Coverage Ratio is not less than 2.2 to 1 for the twelve
months ended with the most recently completed fiscal quarter.
Section 4.9. Mergers, Consolidations and Sales of Assets. The Company shall
not consolidate with or merge into any other corporation or transfer all or
substantially all of its properties and assets as an entirety to any person,
unless:
(a) either the Company shall be the continuing person, or the person
(if other than the Company) formed by such consolidation or into which the
Company is merged or to which the properties and assets of the Company as
an entirety are transferred (i) shall be a corporation organized and
existing under the laws of the United States of America or any state
thereof or the District of Columbia, (ii) shall expressly assume all the
obligations of the Company under the Agreement, (iii) shall be a person
with a consolidated net worth immediately after such transaction at least
equal to the Consolidated Net Worth of the Company immediately prior to
such transaction and (iv) would, after giving effect to such transaction,
be able to issue at least one dollar ($1.00) of additional Funded Debt
under the provisions of ss.4.6;
(b) immediately after giving effect to such transaction, no Event of
Default or no Default shall have occurred and be continuing; and
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
(c) the Company has delivered to the Noteholders an Officer's
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer complies with this covenant.
Any sale or other transfer by the Company of a material part of any of its
properties or assets not in the ordinary course of business shall be for a price
which is not less than the fair market value of the property or assets so sold
or transferred, as determined in good faith by the Board of Directors of the
Company.
Notwithstanding the foregoing, any Subsidiary may consolidate with, merge
into or transfer all or part of its properties and assets to the Company or any
other Wholly-owned Subsidiary or Wholly-owned Subsidiaries.
Section 4.10. Guaranties. The Company will not and will not permit any
Subsidiary to become or be liable in respect of any Guaranty except (i) any
Guaranty of the Company of any obligation of any Wholly-owned Subsidiary, (ii)
any Guaranty of any Subsidiary of any obligation of any Wholly-owned Subsidiary
or of the Company, and (iii) Guaranties of the Company which are limited in
amount to a stated maximum dollar exposure and included in Indebtedness
permitted by this Amendment and Restatement.
Section 4.11. Repurchase of Notes. Neither the Company nor any Subsidiary
or Affiliate, directly or indirectly, may repurchase or make any offer to
repurchase any Notes unless the offer has been made to repurchase Notes, pro
rata, from all holders of the Notes at the same time and upon the same terms. In
case the Company repurchases any Notes, such Notes shall thereafter be cancelled
and no Notes shall be issued in substitution therefor.
Section 4.12. Transactions with Affiliates. The Company will not, and will
not permit any Subsidiary to, enter into or be a party to, any transaction or
arrangement with any Affiliate (including without limitation, the purchase from,
sale to or exchange of property with, or the rendering of any service by or for,
any Affiliate), except upon fair and reasonable terms no less favorable to the
Company or such Subsidiary than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate, not detrimental to the
interest of the Company or such Subsidiary.
Section 4.13. Termination of Pension Plans. The Company will not and will
not permit any Subsidiary to permit any employee benefit plan maintained by it
to be terminated in a manner which could result in the imposition of a lien on
any property of the Company or any Subsidiary pursuant to Section 4068 of the
Employee Retirement Income Security Act of 1974, as amended, if
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
the enforcement of all such liens then in effect would have a material and
adverse effect on the properties, business, prospects or the condition of the
Company and its Subsidiaries.
Section 4.14. Reports and Rights of Inspection. The Company will keep, and
will cause each Subsidiary to keep, proper books of record and account in which
full and correct entries will be made of all dealings or transactions of or in
relation to the business and affairs of the Company or such Subsidiary, in
accordance with generally accepted accounting principles consistently maintained
(except for changes disclosed in the financial statements furnished to you
pursuant to this ss.4.14 and concurred in by the independent public accountants
referred to in ss.4.14(b) hereof), and will furnish to you so long as you are
the holder of any Note and to each other institutional holder of the then
outstanding Notes (in duplicate if so specified below or otherwise requested):
(a) Quarterly Statements. As soon as available and in any event within
45 days after the end of each quarterly fiscal period (except the last) of
each fiscal year, duplicate copies of:
(1) the consolidated balance sheet of the Company and its
Subsidiaries as of the close of such quarter setting forth in
comparative form the amount for the end of the preceding fiscal year,
and
(2) a consolidated statement of operations and cash flows of the
Company and its Subsidiaries for such quarterly period and for the
portion of the fiscal year ending with such quarter, setting forth in
comparative form the amount for the corresponding periods of the
preceding fiscal year,
all in reasonable detail and certified as complete and correct, by the
chief financial officer of the Company;
(b) Annual Statements. As soon as available and in any event within 90
days after the close of each fiscal year of the Company, duplicate copies
of:
(1) the consolidated balance sheet of the Company and its
Subsidiaries as of the close of such fiscal year, and
(2) a consolidated statement of operations and cash flows of the
Company and its Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated figures for
the preceding fiscal year, all in reasonable detail and accompanied by a
report thereon of a firm of independent public accountants of recognized
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
national standing selected by the Company to the effect that the
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which such accountants concur) and present
fairly the financial condition of the Company and its Subsidiaries and
that the examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards and accordingly, includes such tests of the accounting records
and such other auditing procedures as were considered necessary in the
circumstances;
(c) Audit Reports. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of
the Company or any Subsidiary;
(d) SEC and Other Reports. Promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement
sent by the Company to stockholders generally and of each regular or
periodic report, and any registration statement or prospectus filed by the
Company or any Subsidiary with any securities exchange or the Securities
and Exchange Commission or any successor agency, and copies of any orders
in any proceedings to which the Company or any of its Subsidiaries is a
party, issued by any governmental agency, Federal or state, having
jurisdiction over the Company or any of its Subsidiaries;
(e) Requested Information. With reasonable promptness, such other
data and information (including information as to the ownership of the
capital stock of the Company) as you or any such institutional holder may
reasonably request;
(f) Officers' Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of the chief financial officer
of the Company stating that he has reviewed the provisions of this
Amendment and Restatement and setting forth: (i) the information and
computations (in sufficient detail) required in order to establish whether
the Company was in compliance with the requirements of ss.4.5 through
ss.4.13, inclusive, ss.4.15 and ss.4.16 at the end of the period covered
by the financial statements then being furnished, and (ii) whether there
existed as of the date of such financial statements and whether, to the
best of his knowledge after reasonable inquiry, there exists on the date
of the certificate or existed at any time during the period covered by
such financial statements any Default or Event of Default and, if
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
any such condition or event exists on the date of the certificate,
specifying the nature and period of existence thereof and the action the
Company is taking and proposes to take with respect thereto; and
(g) Accountants' Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they have
reviewed this Amendment and Restatement and stating further, whether in
making their audit, such accountants have become aware of any Default or
Event of Default under any of the terms or provisions of this Amendment
and Restatement, and if any such condition or event then exists,
specifying the nature and period of existence thereof.
Without limiting the foregoing, the Company will permit you, so long
as you are the holder of any Note, and each institutional holder of the then
outstanding Notes (or such Persons as either you or such holder may designate)
to visit and inspect, any of the properties of the Company or any Subsidiary, to
examine all their books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs, finances
and accounts with their respective officers, corporate staff and independent
public accountants (and by this provision the Company authorizes said
accountants to discuss with you the finances and affairs of the Company and its
Subsidiaries) all at such reasonable times and as often as may be reasonably
requested. The Company shall not be required to pay or reimburse you or any such
holder for expenses which you or any such holder may incur in connection with
any such visitation or inspection.
Section 4.15. Restrictions on Futures Trading. The Company will not, and
will not permit any Subsidiary to, engage in any trading of commodity or
oil-related futures contracts if the aggregate short positions of the Company
and its Subsidiaries would exceed the current aggregate fair market value of the
inventory of such commodity or oil-related product of the Company and its
Subsidiaries.
Section 4.16. Limitation on Fuel Oil Tank Ownership. Before the Company or
any Subsidiary acquires any installed underground storage tanks the Company
shall, and will cause its Subsidiaries to, undertake appropriate testing of such
storage tanks such as testing pursuant to 40 C.F.R. ss.280.43(c) and the Company
covenants and agrees that it will, and it will cause each of its Subsidiaries
to, comply with and satisfy the federal Hazardous and Solid Waste Amendments of
1984 to the Resource Conservation and Recovery Act of 1976, 42 U.S ss.ss.6991 et
seq., and any similar state statute or law, and the rules promulgated
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
thereunder, including those provisions requiring the owner or operator to
maintain evidence of financial responsibility. The Company shall, and will cause
each of its Subsidiaries to, provide release detection for any underground
storage tanks so as to satisfy the requirements of 40 C.F.R. ss.ss.280.40,
280.41, 280.43 and 280.44.
SECTION 5. PREPAYMENT OF NOTES.
Section 5.1. Required Prepayments. In addition to prepayments of principal
heretofore made by the Company on the Notes on January 15, 1996 and January 15,
1997, the Company agrees that on January 15 in each year commencing January 15,
1998 and ending January 15, 2000, both inclusive, it will repay and apply and
there shall become due and payable an amount equal to $1,050,000 on the
principal indebtedness evidenced by the Series A Notes and $1,050,000 on the
principal indebtedness evidenced by the Series B Notes. The entire remaining
principal amount of the Notes shall become due and payable on January 15, 2001.
No premium shall be payable in connection with any required prepayment made
pursuant to this ss.5.1. For purposes of this ss.5.1, any prepayment of less
than all of the outstanding Notes pursuant to ss.5.3 shall be deemed to be
applied first, to the amount of principal scheduled to remain unpaid on January
15, 2001, and then, to the remaining scheduled principal payments in inverse
chronological order.
Section 5.2(A) Mandatory Prepayment on Change of Ownership. In the event
the Company has knowledge of a Change of Ownership, the Company will give
written notice (herein called "Company Notice") of such fact to all holders of
the Notes then outstanding. Said Company Notice shall be delivered within 30
days after the occurrence of such Change of Ownership; provided, however that if
the Company does not then have knowledge of such fact, such Company Notice shall
be delivered upon receipt of such knowledge by the Company. The Company Notice
shall (i) provide a summary of the nature of the Change of Ownership giving rise
to the mandatory prepayment and a summary of the terms of, or a copy of, this
ss.5.2(A), and (ii) state the number of shares and percentage of each class of
Voting Stock of the Company which shall continue to be beneficially owned and
controlled by the Sevin Group and/or the Traber Group (and specifying the number
of shares of each such class held by each group), either directly or indirectly,
immediately after the occurrence of such Change of Ownership.
As used herein, the term "Change of Ownership" shall mean
(a) any issue, sale or other disposition of shares of common stock
of the Company which results in the number of shares of the common stock
beneficially owned by the Sevin
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
Group being less than 15% of the issued and outstanding shares of common
stock (other than the Permitted Common Stock defined below), other than
(i) the issuance, in connection with an underwritten public offering
pursuant to a registration statement filed with the Securities and
Exchange Commission (a "public offering"), of additional common stock
ranking equally with Class A Common Stock as to payment of dividends and
as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of the Company ("Permitted Common Stock") or
the issuance of any Permitted Common Stock upon conversion of any
convertible preferred stock issued pursuant to a public offering, (ii) a
sale or disposition of shares of common stock to one or more members of
the Traber Group, and (iii) a disposition of shares of common stock to a
testamentary trust, all beneficiaries of which are members of the
immediate family of a member of the Sevin Group and all trustees of which
are members of the Sevin Group and, under the terms of the trust, have the
power to vote such shares on all matters as to which the holders of such
shares have the power to vote, so long as, giving effect to any of the
events referred to in the foregoing clauses (i), (ii) and (iii), the Sevin
Group and the Traber Group together have beneficial ownership (or, in the
case of an event referred to in the foregoing clause (iii), voting
control) of a sufficient number of shares of the capital stock of the
Company to entitle them to elect, and they do elect, at least the smallest
number of directors that is necessary to constitute a majority of the
Company's Board of Directors;
(b) any event which results in the number of directors of the
Company's Board of Directors who are designated by the Sevin Group
constituting less than a majority of the Board; or
(c) any of the following events: (i) the holders of any of the
Public Debentures have the right to require the Company to purchase any
such Public Debentures pursuant to Section 4.08 of any of the Public
Indentures, (ii) any holder of 2002 Notes exercises its right to declare
any such notes to be due and payable pursuant to Section 2.1 of the
separate Note Agreements, dated as of February 1, 1997, relating thereto
(the "1997 Note Agreements"), (iii) the Company is required to make an
offer to each holder of the 1997 Preferred Stock to redeem all or any part
of such holder's 1997 Preferred Stock pursuant to paragraph 5(a) of the
Certificate of Designation, (iv) the Company is required to make an offer
to each holder of the 1989 Preferred Stock to redeem all or any part of
such holder's 1989 Preferred
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
Stock pursuant to Article III (1)(c) of the Restated and Amended Articles
of Incorporation of the Company, (v) any holder of any Subordinated
Indebtedness issued in exchange for the 1989 Preferred Stock exercises its
rights to declare such Indebtedness to be due and payable pursuant to
Section 6.1 of the 1989 Preferred Stock Purchase Agreements or (vi) any
holder of 2002 Notes, Public Debentures, 1997 Preferred Stock or 1989
Preferred Stock shall have received any consideration (whether in the form
of cash, a change in the rate of interest or dividends relating to such
notes, debentures or preferred stock, a change in any other provision of
the terms of such notes, debentures or preferred stock, or otherwise) to
amend, modify, waive or otherwise give up its right to declare any such
notes, debentures or preferred stock to be due and payable upon a "Change
of Ownership," as defined in the 1997 Note Agreements, the Restated and
Amended Articles of Incorporation of the Company, or the 1989 Preferred
Stock Purchase Agreements, or a "Change of Control" as defined in the
Public Indentures or the Certificate of Designation, as the case may be;
provided, however, that an amendment to or waiver or other modification of
Article III (1)(c) of the Restated and Amended Articles of Incorporation
of the Company, paragraph 5(a) of the Certificate of Designation, Section
6.1 of the 1989 Preferred Stock Purchase Agreements or Section 2.1 of the
1997 Note Agreements shall not, in the absence of any consideration,
constitute a Change of Ownership.
Upon the receipt of such Company Notice or, if no Company Notice is
given, upon the occurrence of a Change of Ownership, the holder or holders of
any Notes shall have the privilege, upon written notice to the Company declaring
all Notes held by such holder or holders serving such notice to become due and
payable, to have such Notes become due and payable, and thereupon such Notes
shall become due and payable on such date as the Company shall specify (which
date shall be not later than 90 days after such declaration), and the Company
covenants and agrees to prepay in full all Notes held by such holder or holders
serving such notice; provided, however, that in the event Company Notice has in
fact been given as hereinabove contemplated, such declaration shall be made
within 30 days after receipt of such Company Notice.
All prepayments on the Notes pursuant to this ss.5.2(A) shall be made by
the payment of the aggregate principal amount remaining unpaid on such Notes
together with accrued interest thereon to the date of such prepayment, plus a
premium equal to 1% of such prepaid principal.
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
Notwithstanding the provisions of ss.5.5, the Company may prepay all Notes
held by any holder or holders who serve such notice on the Company without
applying said prepayments ratably among all outstanding Notes.
Section 5.2(B) Prepayment upon Failure of Holders to Grant Certain
Consents. (a) In the event the Company shall request the holders of the Notes to
consent, pursuant to ss.8.1 hereof, to engage in any business or to make a
Restricted Investment not otherwise permitted pursuant to the provisions of
ss.4.5 or ss.4.8 hereof (a "Prohibited Transaction") and the Company shall have
failed to obtain the consent of the holder or holders of at least 66-2/3% in
aggregate principal amount of the Notes then outstanding within 30 days from the
date of such request, then the Company may, on a date which is not less than 60
days nor more than 120 days from the date of such request, prepay all (but not
less than all) of the Notes held by each holder which has failed or refused to
give such consent within such 30-day period, other than any Notes held by any
non-consenting holder which has, within 10 days after receipt of notice of
prepayment (given as hereinafter provided), notified the Company in writing that
such holder (i) consents to such Prohibited Transaction and (ii) elects not to
have Notes owned by such holder so prepaid; such prepayment to be made on the
date set forth in a notice from the Company to each of the holders of the Notes,
which notice shall be given within 15 days after the expiration of such 30-day
period and upon the conditions set forth in paragraphs (c) and (d) of this
ss.5.2(B). The foregoing right of prepayment is conditioned on such Prohibited
Transaction contemplated under this ss.5.2(B) being consummated within 120 days
from the date of request for consent. Notice of prepayment having been so given,
the aggregate principal amount of the Notes specified in such notice (other than
Notes as to which an election not to be prepaid has been made) and accrued
interest thereon shall become due and payable on the prepayment date.
(b) The Company shall not engage in such a Prohibited Transaction until
(i) a period of 60 days shall have elapsed after the date of the Company's
notice to the holders of the Notes requesting their consent thereto pursuant to
paragraph (a) of this Section, and (ii) the Notes of the non-consenting holders
shall have been prepaid, together with accrued interest thereon, in accordance
with this Section; provided, however, that the Company may engage in such
Prohibited Transaction as to which the Company shall have requested the consent
of the holders of the Notes for a consent pursuant to paragraph (a) of this
Section if the Company shall have irrevocably deposited in trust for the benefit
of the holders of the Notes an amount equal to the sum of the unpaid principal
amount of the Notes held by holders who have
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
not consented under paragraph (a) of this ss.5.2(B) plus 60 days' interest
thereon. Any amount of such deposit remaining after the prepayment of the Notes
in accordance with this Section shall be released to or for the benefit of the
Company.
(c) Any prepayment of Notes pursuant to paragraph (a) of this ss.5.2(B)
shall be made:
(i) (x) if the Prohibited Transaction shall have occurred prior to
the expiration of 60 days after the Company's request pursuant to
paragraph (a) of this Section, then upon the expiration of such 60-day
period, or (y) if the Prohibited Transaction shall not have occurred prior
to the expiration of 60 days after the Company's request pursuant to
paragraph (a) of this Section, then concurrently with the consummation of
the Prohibited Transaction concerned, and
(ii) by the payment of the principal amount remaining unpaid on the
Notes then being prepaid, plus all accrued interest thereon to the date of
such prepayment, but without premium.
(d) Any request of the Company for a waiver of compliance with or
modification of the provisions of said ss.4.5 or ss.4.8 hereof referred to in
paragraph (a) of this ss.5.2(B) shall be accompanied by a reasonably detailed
description of the terms and purpose of such proposed Prohibited Transaction and
shall, in any event, contain or be accompanied by sufficient information to
permit each of the holders of the Notes to make an informed decision as to the
effect of such proposed Prohibited Transaction upon the business, prospects and
financial condition of the Company and its Subsidiaries.
Section 5.3. Optional Prepayments. In addition to the prepayments required
by ss.5.1 and permitted by ss.5.2 and upon compliance with ss.5.4, the Company
shall have the privilege, at any time and from time to time from and after (but
not before) January 15, 1993 of prepaying the outstanding Notes, either in whole
or in part (but if in part then in units of $100,000 or an integral multiple of
$10,000 in excess thereof) by payment of the principal amount of each Note, or
portion thereof to be prepaid, and accrued interest thereon to the date of such
prepayment, together with a premium equal to the remainder of (x) the present
value, discounted on a quarterly compounded basis utilizing an interest factor
equal to the Reinvestment Yield of such Note, of the principal payments of such
Note allocable to such prepayment and the scheduled interest payments on such
Note allocable to such prepayment (in the case of any prepayment to be made on
other than a regular interest payment date, after deducting from the next
succeeding regular interest payment the amount of interest accrued to the
prepayment date and required by this ss.5.3
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
to be paid in conjunction with the prepayment) from the respective dates on
which, but for the prepayment under this ss.5.3, such principal payments and
interest payments would have been payable, minus (y) the principal amount of
such Note to be prepaid under this ss.5.3.
For purposes of this ss.5.3, "Reinvestment Yield" of each Note shall
mean the lesser of (A) the interest rate borne by such Note and (B) the sum of
0.50% plus the arithmetic mean of the two most recent weekly average yields to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities equal to the remaining Weighted
Average Life to Maturity as of the date of the proposed prepayment of the
Notes), as published by the Federal Reserve Board in its Statistical Release
H.15(519) for the two calendar weeks ending on a Saturday which is not more than
15 days prior to the date of the proposed prepayment or, if such average is not
published for such period, of such reasonably comparable index as may be
designated by the holder or holders of a least 66-2/3% of the unpaid principal
amount of the Notes to be prepaid for such period. If no possible maturity
exactly corresponds to such rounded Weighted Average Life to Maturity, yields
for the two most closely corresponding published maturities shall be calculated
pursuant to the immediately preceding sentence and the Reinvestment Yield shall
be interpolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month.
The "Weighted Average Life to Maturity" of any Indebtedness means as at
the time of the determination thereof the number of years obtained by dividing
the then Remaining Dollar-years of such Indebtedness by the then outstanding
principal amount of such Indebtedness. The term "Remaining Dollar-years" of any
Indebtedness means the amount obtained by (1) multiplying the amount of the
repayment at final maturity, by the number of years (calculated at the nearest
one-twelfth) which will elapse between the date of determination of the Weighted
Average Life to Maturity of such Indebtedness and the date of that repayment at
final maturity.
Section 5.4. Notice of Prepayments. The Company will give notice of any
prepayment of the Notes pursuant to ss.5.3 to each holder thereof not less than
30 days nor more than 60 days before the date fixed for such optional prepayment
specifying (i) such date, (ii) the principal amount of the holder's Notes to be
prepaid on such date, and (iii) the accrued interest applicable to the
prepayment. Such notice of prepayment shall also certify all facts which are
conditions precedent to any such prepayment. The Company will also give written
notice to each holder by telex or other same-day written communication five days
prior to the
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
date fixed for prepayment of the premium, if any, applicable to such prepayment
and the details of the calculations used to determine the amount of any such
premium. Notice of prepayment having been so given, the aggregate principal
amount of the Notes specified in such notice, together with the premium, if any,
and accrued interest thereon shall become due and payable on the prepayment
date.
Section 5.5. Allocation of Prepayments. All partial prepayments other than
pursuant to ss.5.2 shall be applied on all outstanding Notes ratably in
accordance with the unpaid principal amounts thereof.
SECTION 6. SUBORDINATION OF SERIES A NOTES.
Section 6.1. Subordination to Senior Indebtedness. From and after the
issuance of any Series A Notes, the indebtedness evidenced by the Series A
Notes, and any renewals or extensions thereof, shall be wholly subordinate and
junior in right of payment to any and all Senior Indebtedness of the Company,
whether outstanding at the date of the Series A Notes or incurred after such
date, all in the manner and with the force and effect hereafter set forth:
(a) In the event of any liquidation, dissolution or winding up of
the Company, or of any receivership, insolvency, bankruptcy, liquidation,
readjustment, reorganization, or other similar proceeding relative to the
Company or its property, all principal and interest owing on all Senior
Indebtedness shall first be paid in full before any payment is made upon
the indebtedness evidenced by the Series A Notes; and in any such event
any payment or distribution of any kind or character, whether in cash,
property or securities (other than in securities or other evidences of
indebtedness, the payment of which is subordinated to the payment of all
Senior Indebtedness which may at the time be outstanding) which shall be
made upon or in respect of the Series A Notes shall be paid over to the
holders of such Senior Indebtedness, pro rata, for application in payment
thereof unless and until such Senior Indebtedness shall have been paid or
satisfied in full;
(b) In the event that, pursuant to the terms of this Amendment and
Restatement, the Series A Notes are declared or become due and payable
because of the occurrence of any Event of Default described in ss.7.1
hereof or otherwise than at the option of the Company, under circumstances
when the foregoing clause (a) shall not be applicable, the holders of the
Series A Notes shall be entitled to payments only after there shall first
have been paid in full all Senior Indebtedness outstanding at the time the
Series A Notes so become due and payable because of any such event, or
payment
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shall have been provided for in a manner satisfactory to the holders of
such Senior Indebtedness; and
(c) During the continuance of any failure in the payment of either
principal or interest of any Senior Indebtedness when due, no payment of
principal, premium or interest shall be made on the Series A Notes, nor
shall any acceleration of the maturity of the Series A Notes pursuant to
ss.7.3 hereof by any holder of the Series A Notes be effective unless the
maturity of such Senior Indebtedness has been accelerated, if either (i)
notice (a "Payment Blockage Notice") of such failure in writing or by
telegram has been given to the Company by any holder or holders of any
Senior Indebtedness, provided that judicial proceedings shall be commenced
with respect to such failure within one hundred eighty (180) days and
shall be pending thereafter, or (ii) judicial proceedings shall be pending
in respect of such failure. No Payment Blockage Notice shall be effective
to preclude any payment on or acceleration of the Series A Notes if either
(x) any other Payment Blockage Notice shall have been given within the
360-day period ending with the date of such Payment Blockage Notice or (y)
an aggregate of three Payment Blockage Notices shall previously have been
given. Any Payment Blockage Notice that is given at a time when a previous
Payment Blockage Notice is in effect shall be disregarded for all purposes
of this Amendment and Restatement, including any determination of the
number of Payment Blockage Notices that have been given for purposes of
the preceding sentence of this Section. Notwithstanding anything contained
in this ss.6.1(c) to the contrary, the holders of the Series A Notes shall
have the right during the period from such Payment Blockage Notice to the
commencement of judicial proceedings to commence any action or proceeding
to (i) preserve any of their rights that would otherwise be extinguished
prior to the end of such period, and (ii) prevent a sale or transfer of
assets or stock or a merger in contravention of the terms of this
Amendment and Restatement (it being understood that, in the case of both
clauses (i) and (ii) of this sentence, all Senior Indebtedness of the
Company then or thereafter due or declared to be due shall first be paid
in full before the holders of the Series A Notes shall be entitled to
receive any payment from the Company of principal of, or premium or
interest on, the Series A Notes).
Section 6.2. Proofs of Claim. The holder of each Series A Note undertakes
and agrees for the benefit of each holder of Senior Indebtedness to execute,
verify, deliver and file any proofs of claim, consents, assignments or other
instruments which
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any holder of Senior Indebtedness may at any time require in order to prove and
realize upon any rights or claims pertaining to the Series A Notes and to
effectuate the full benefit of the subordination contained herein; and upon
failure of the holder of any Series A Note so to do, any such holder of Senior
Indebtedness shall be deemed to be irrevocably appointed the agent and
attorney-in-fact of the holder of such Series A Note to execute, verify, deliver
and file any such proofs of claim, consents, assignments or other instrument.
Section 6.3. No Waiver. No right of any holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time or in any way be
affected or impaired by any failure to act on the part of the Company or the
holders of Senior Indebtedness, or by any noncompliance by the Company with any
of the terms, provisions and covenants of the Series A Notes or the Agreement
under which they are issued, regardless of any knowledge thereof that any such
holder of Senior Indebtedness may have or be otherwise charged with.
Section 6.4. Rights of Holders of Senior Indebtedness. The Company agrees,
for the benefit of the holders of Senior Indebtedness, that in the event that
any Series A Note is declared due and payable before its expressed maturity
because of the occurrence of a default hereunder, the Company will give prompt
notice in writing of such happening to the holders of Senior Indebtedness.
Section 6.5. Rights of Holders of Series A Notes. The foregoing provisions
are solely for the purpose of defining the relative rights of the holders of
Senior Indebtedness on the one hand, and the holders of the Series A Notes on
the other hand, and nothing herein shall impair, as between the Company and the
holders of the Series A Notes, the obligation of the Company which is
unconditional and absolute, to pay the principal of and accrued interest and
premium, if any, on the Series A Notes in accordance with their terms, nor shall
anything herein prevent the holders of the Series A Notes from exercising all
remedies otherwise permitted by applicable law or hereunder upon default
hereunder, subject to the rights of the holders of Senior Indebtedness as herein
provided for.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 7.1. Events of Default. Any one or more of the following shall
constitute an "Event of Default" as the term is used herein:
(a) Default shall occur in the payment of interest on any Note when
the same shall have become due and such default shall continue for more
than five days; or
(b) Default shall occur in the making of any payment of the
principal of any Note or the premium thereon at the
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expressed or any accelerated maturity date or at any optional or mandatory
prepayment date; or
(c) Default shall be made in the payment of the principal of or
interest on any Indebtedness of the Company (other than the Notes) or any
Subsidiary aggregating more than $2,000,000, as and when the same shall
become due and payable in accordance with its terms (including any
optional or required prepayment or redemption) and either (i) as the
result of such default such Indebtedness is declared (or, in the case of
Subordinated Indebtedness, may be declared) by the holders thereof to be,
or becomes in accordance with its terms, due and payable before its stated
maturity date or (ii) such default shall continue beyond the longer of 180
days or the period of grace, if any, allowed with respect thereto; or
(d) The Company shall default in complying with any covenant under
any indenture, agreement, or other instrument under which any Indebtedness
(other than the Notes) of the Company or any Subsidiary aggregating more
than $2,000,000 may be issued and as the result of such default the
Indebtedness outstanding thereunder is declared (or, in the case of
Subordinated Indebtedness, may be declared) by the holders thereof, to be
or becomes, in accordance with its terms, due and payable before its
stated maturity date; or
(e) Default shall occur in the observance or performance of any
covenant or agreement contained in ss.4.6 through ss.4.13, and ss.4.15 and
ss.4.16 hereof; or
(f) Default shall occur in the observance or performance of any
other provision of this Amendment and Restatement which is not remedied
within 30 days after notice thereof to the Company by the holder of any
Note; or
(g) If any representation or warranty made by the Company herein, or
made by the Company in any statement or certificate furnished by the
Company in connection with the consummation of the issuance and delivery
of the Notes or furnished by the Company pursuant hereto, is untrue in any
material respect as of the date of the issuance or making thereof; or
(h) The Company or any Subsidiary becomes insolvent or bankrupt, is
generally not paying its debts as they become due or makes an assignment
for the benefit of creditors, or the Company or any Subsidiary causes or
suffers an order for relief to be entered with respect to it under
applicable Federal bankruptcy law or applies for or consents to the
appointment of a custodian, trustee or receiver for the Company or such
Subsidiary or for the major part of the property of either; or
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(i) A custodian, trustee or receiver is appointed for the Company or
any Subsidiary or for the major part of the property of either and is not
discharged within 30 days after such appointment; or
(j) Final judgment or judgments for the payment of money aggregating
in excess of $250,000 is or are outstanding against the Company or any
Subsidiary or against any property or assets of either and any one of such
judgments has remained unpaid, unvacated, unbonded or unstayed by appeal
or otherwise for a period of 30 days from the date of its entry; or
(k) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company or any Subsidiary and, if instituted against the
Company or any Subsidiary, are consented to or are not dismissed within 60
days after such institution.
Section 7.2. Notice to Holders. When any Event of Default described in the
foregoing ss.7.1 has occurred, or if the holder of any Note or of any other
evidence of Indebtedness of the Company gives any notice to the Company or takes
any other action known to the Company with respect to a claimed default, the
Company agrees to give notice within five Business Days of such event to all
holders of the Notes then outstanding, such notice to be in writing and sent by
registered or certified mail or by telegram.
Section 7.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a) or (b) of ss.7.1 has happened and is continuing, the
holder of any Note may declare such Note due and payable. When any Event of
Default described in paragraphs (c) through (g), inclusive, or (j) of said
ss.7.1 has happened and is continuing, the holder or holders of 25% or more of
the principal amount of Notes at the time outstanding may, by notice in writing
sent by registered or certified mail to the Company, declare the entire
principal and all interest accrued on all Notes to be due and payable. Upon any
such declaration, such Note or Notes shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived. When any Event of Default described in
paragraphs (h), (i) or (k) of ss.7.1 has occurred, then all outstanding Notes
shall immediately become due and payable without presentment, demand or notice
of any kind. Upon the Notes becoming due and payable as a result of any Event of
Default as aforesaid, the Company will forthwith pay to the holders of the Notes
the entire principal of and interest accrued on the Notes and, to the extent
permitted by law, a premium in the amount which would be payable if the Company
then had elected
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to prepay the Notes at a premium pursuant to ss.5.3. No course of dealing on the
part of any Note holder nor any delay or failure on the part of any Note holder
to exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. The Company further agrees,
to the extent permitted by law, to pay to the holder or holders of the Notes all
reasonable costs and expenses incurred by them in the collection of any Notes
upon any default hereunder or thereon, including reasonable compensation to such
holder's or holders' attorneys for all services rendered in connection
therewith.
Section 7.4. Rescission of Acceleration. The provisions of ss.7.3 are
subject to the condition that if the principal of and accrued interest and
premium, if any, on all or any outstanding Notes have been declared immediately
due and payable by reason of the occurrence of any Event of Default described in
paragraphs (a) through (g), inclusive, or (j), of ss.7.1, the holders of 66-2/3%
in aggregate principal amount of the Notes then outstanding may, by written
instrument filed with the Company, rescind and annul such declaration and the
consequences thereof, provided that at the time such declaration is annulled and
rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Amendment and Restatement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Amendment and Restatement (except
any principal, interest or premium on the Notes which has become due and
payable solely by reason of such declaration under ss.7.3) shall have been
duly paid; and
(c) each and every other Default and Event of Default shall have
been made good, cured or waived pursuant to ss.8.1; and provided further,
that no such rescission and annulment shall extend to or affect any
subsequent Default or Event of Default or impair any right consequent
thereto.
SECTION 8. AMENDMENTS, WAIVERS AND CONSENTS.
Section 8.1. Consent Required. Any term, covenant, agreement or condition
of this Amendment and Restatement may, with the consent of the Company, be
amended or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), if the Company
shall have obtained the consent in writing of the holders of at least 66-2/3% in
aggregate principal amount of the then outstanding Notes; provided that without
the written consent of the holders of all Notes then outstanding, no such
waiver, modification, alteration or amendment shall be effective (i)
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which will change the time of payment (including any prepayment required by
ss.5.1) of the principal of, or the interest on, any Note or change the
principal amount thereof or change the rate of interest or premium thereon, or
(ii) which will change any of the provisions with respect to optional
prepayments, or (iii) which will change the percentage of holders of the Notes
required to consent to any such amendment, alteration or modification or any of
the provisions of ss.6, ss.7 or this ss.8. Each and every holder OF Notes, by
acceptance thereof, shall undertake and agree to consider and respond to any
request made by the Company with respect to this ss.8 without unreasonable
delay.
Section 8.2. Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the holders of the Notes and shall be binding upon
them, upon each future holder of any Notes and upon the Company, whether or not
such Notes shall have been marked to indicate such amendment or waiver. No such
amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
SECTION 9. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 9.1. Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (other than a Subsidiary) (i)
which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, the Company, (ii)
which beneficially owns or holds 5% or more of any class of the Voting
Stock of the Company or (iii) 5% or more of the Voting Stock (or in the
case of a Person which is not a corporation, 5% or more of the equity
interest) of which is beneficially owned or held by the Company or a
Subsidiary. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
Voting Stock, by contract or otherwise.
"Asset Disposition" means 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 a merger,
consolidation or similar transaction) other than (i) a disposition by a
Subsidiary to the Company or by the
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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.
"Business Day" shall mean any day other than a Saturday or Sunday on
which banks and financial institutions are generally open for business in
New York, New York.
"Capital Stock" of any person means 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 Flow", for any fiscal year, means the sum of (i) Consolidated
Net Income for such fiscal year and, (ii) to the extent the following
deferred charges are deducted in the calculation of Consolidated Net
Income, the amortization of customer lists and other deferred charges
included in the purchase price in connection with the acquisition of fuel
oil distributorships (other than legal, accounting, financing and other
transaction charges) and the amortization and depreciation of plant and
equipment of the Company and its Subsidiaries for such fiscal year
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Certificate of Designation" shall mean the Certificate of
Designation adopted by the Board of Directors of the Company on February
12, 1997, establishing the 1997 Preferred Stock and setting forth the
relative rights and preferences thereof.
The terms "Class A Common Stock", "Class B Common Stock" and "Class
C Common Stock" shall each mean the class of equity securities designated
as such in the Restated and Amended Articles of Incorporation of the
Company.
"Consolidated EBITDA Coverage Ratio" as of any date of determination
means 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 four 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 basis to (A) such Indebtedness as if
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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 suc 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
financial or accounting Officer of the Company; provided, however, that
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such 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 calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period.
"Consolidated Indebtedness" shall mean Indebtedness of the Company
and its Subsidiaries on a consolidated basis as determined in accordance
with generally accepted accounting principles.
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its Subsidiaries, determined on a
consolidated basis, including (i) interest expense attributable to capital
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 generally accepted accounting
principles; provided, however, that Consolidated Interest Expense shall
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include such interest as may be paid by the Company or any Subsidiary to
Star Gas only to the extent the amount of such interest paid during any
period exceeds the dividends or other distributions on the Capital Stock
of Star Gas distributed to the Company or any Subsidiary during such
period.
"Consolidated Net Income" of a person, for any period, means the
aggregate of the Net Income of such person and its Subsidiaries for such
period, determined on a consolidated basis in accordance with generally
accepted accounting principles, provided that (i) the Net Income of any
other person (other than a Subsidiary) in which such person has an
interest will be included only to the extent of the amount of dividends or
distributions paid to such person, (ii) the Net Income of any person
acquired by such person in a pooling of interests transaction for any
period prior to the date of such acquisition will be excluded, (iii) any
Net Income of any Subsidiary will be excluded if such Subsidiary is
subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Subsidiary, directly or
indirectly, to such person, except that (A) such person's equity in the
Net Income of any such Subsidiary for such period will be included in such
Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Subsidiary during such period to such person as a
dividend or other distribution (subject, in the case of a dividend or
other distribution to another subsidiary, to the limitation contained in
this clause) and (B) such person's equity in a net loss of any such
Subsidiary for such period will be included in determining such
Consolidated Net Income, (iv) the cumulative effect of a change in
accounting principles will be excluded, and (v) dividends or other
distributions on the Capital Stock of Star Gas distributed to the Company
or any Subsidiary by Star Gas shall be included in Consolidated Net Income
of the Company only to the extent such dividends or other distributions
exceed during any period the amount of interest paid to Star Gas by the
Company or any Subsidiary during such period.
"Consolidated Net Worth" means the total consolidated stockholders'
equity of the Company and its consolidated Subsidiaries determined on a
consolidated basis in accordance with generally accepted accounting
principles.
"Consolidated Operating Cash Flow", for any period, means the sum of
(i) Consolidated Net Income for such period and (ii) depreciation and
amortization expense of the Company and its Subsidiaries for such period,
as determined
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in accordance with generally accepted accounting principles. Consolidated
Operating Cash Flow of the Company and its Subsidiaries shall include the
sum of the items enumerated in clauses (i) and (ii) above of all persons
(and each of their subsidiaries, if any, on a consolidated basis) then or
theretofore acquired for the 12 months ended with the most recently
completed fiscal quarter for such person. Consolidated Operating Cash Flow
of such acquired companies shall be determined on a pro forma basis,
assuming (i) historical sales and gross profit margins less estimated
post-acquisition loss of customers and (ii) other expenses as if such
businesses had been owned by the Company for the twelve months immediately
preceding the date of purchase.
"Consolidated Operating Profit", for any period, means operating
profit before depreciation and amortization expense of the Company and its
Subsidiaries for such period, on a consolidated basis, determined in
accordance with generally accepted accounting principles.
"Default" shall mean any event or condition, the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute
an Event of Default as defined in ss.7.1.
"EBITDA" for any period means the Consolidated Net Income for such
period (but without giving effect to adjustments, accruals, deductions or
entries resulting from purchase 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.
"Effective Date" shall have the meaning set forth in the
introductory paragraphs to this Amendment and Restatement.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall also be construed to refer to any
successor sections.
"Exchange Indenture" shall mean the Exchange Debenture Indenture
substantially in the form appended as Annex A to the Certificate of
Designation.
"Funded Debt", as applied to any person, means (a) Indebtedness
incurred by such person with a stated maturity of more than one year from
the date of incurrence; (b) any
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Indebtedness which, regardless of its term, may be renewed or extended at
the option of the obligor to a date more than one year from the date of
incurrence; and (c) any Indebtedness which by its terms or pursuant to the
agreement under which it is issued, regardless of its term, may be paid
with the proceeds of other Indebtedness, which may be incurred pursuant to
the terms of such first-mentioned Indebtedness or the agreement under
which such first Indebtedness is issued, which other Indebtedness has a
stated maturity more than one year from the incurrence of such
first-mentioned Indebtedness; excluding in each case (a), (b) and (c)
Working Capital Borrowings.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments
for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any Indebtedness, dividend or other obligation, of any other
Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred
through an agreement, contingent or otherwise, by such Person: (i) to
purchase such Indebtedness or obligation or any property or assets
constituting security therefor, (ii) to advance or supply funds (x) for
the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such
Indebtedness or obligation, or (iii) to lease property or to purchase
Securities or other property or services primarily for the purpose of
assuring the owner of such Indebtedness or obligation of the ability of
the primary obligor to make payment of the Indebtedness or obligation, or
(iv) otherwise to assure the owner of the Indebtedness or obligation of
the primary obligor against loss in respect thereof. For the purposes of
all computations made under this Amendment and Restatement, a Guaranty in
respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for
borrowed money which has been guaranteed, and a Guaranty in respect of any
other obligation or liability or any dividend shall be deemed to be
Indebtedness equal to the maximum aggregate amount of such obligation,
liability or dividend.
"Hedging Obligations" of any person means the obligations of such
person pursuant to any interest rate swap agreement, foreign currency
exchange agreement, interest rate collar agreement, option or futures
contract or other similar agreement or arrangement designed to
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
protect such person against changes in interest rates or foreign exchange
rates.
"Indebtedness" of any Person shall mean (1) any liability of such
Person (a) for borrowed money, (b) evidenced by a note, debenture or
similar instrument (including a purchase money obligation) given in
connection with the acquisition of any property or assets (other than
inventory or similar property acquired in the ordinary course of
business), including securities, or (c) for the payment of money relating
to the lease of any property to the extent capitalized on the consolidated
balance sheet of the person in accordance with generally accepted
accounting principles; (2) any liability of others described in the
preceding clause (1) under Guaranties of such person or which is otherwise
its legal liability; and (3) any amendment, renewal, extension or
refunding of any such liability.
"Interest and Preferred Dividend Charges" shall mean, for any
period, the sum of (i) net interest expenses of the Company and its
Subsidiaries for such period and (ii) dividends payable during such period
on the 1989 Preferred Stock and any other series of preferred stock at the
time outstanding which is exchangeable at the option of the Company or of
the holder of such preferred stock for Indebtedness of the Company
(determined on a consolidated basis in accordance with generally accepted
accounting principles).
"Interest and Preferred Dividend Coverage Ratio" shall mean, for any
period, the ratio of Consolidated Operating Profit for such period to
Interest and Preferred Dividend Charges for such period.
"Investment" in any person means 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. Investments will exclude advances to customers
and suppliers in the ordinary course of business.
"1989 Preferred Stock" shall have the meaning set forth therefor in
the introductory paragraphs to this Amendment and Restatement.
"1989 Preferred Stock Purchase Agreements" shall mean the separate
Purchase Agreements dated as of August 1, 1989 between the Company and the
respective Purchasers named therein, as amended by the First and Second
Amendments thereto and as amended and restated by the Third Amendment and
Restatement of Purchase Agreements dated as of February 1, 1997 among the
Company and the holders of 1989 Preferred
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
Stock named therein, as such Purchase Agreements may be amended, modified
or restated.
"1997 Preferred Stock" shall have the meaning set forth therefor in
the introductory paragraphs to this Amendment and Restatement.
Notwithstanding any provision to the contrary, the term "Notes"
means $6,250,000 of the Company's Series A Subordinated Notes due January
15, 2001 ("Series A Notes") and $6,250,000 of the Company's Series B Notes
due January 15, 2001 ("Series B Notes").
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Treasurer or the Secretary
of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Person" shall mean an individual, partnership, corporation, trust
or unincorporated organization, and a government or agency or political
subdivision thereof.
"Preferred Stock," as applied to the Capital Stock of any
corporation, means 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 or involuntary 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.
"Public Debentures" shall mean, collectively, the Company's 12-1/4%
Subordinated Debentures due 2005, 10-1/8% Subordinated Notes due 2003 and
9-3/8% Subordinated Debentures due 2006.
"Public Indentures" shall mean, collectively (i) the Indenture dated
as of February 9, 1995, the Indenture dated as of April 1, 1993 and the
Indenture dated as of February 3, 1994, each as amended through the
Effective Date, and each between the Company and Chemical Bank (now Chase
Manhattan Bank), as Trustee thereunder, (ii) the Exchange Indenture and
(iii) any other indenture or other agreement under which the Company may
issue Subordinated Indebtedness.
"Restricted Investment" shall mean any investment, except for (a)
investments in Subsidiaries; (b) investments in property and assets to be
used in the ordinary course of business of the Company and its
Subsidiaries; (c) investments in current assets arising from the sale of
goods and services in the ordinary course of business of the Company and
its Subsidiaries; (d) advances to and guaranties of loans to employees of
the Company and Subsidiaries for expenses incurred in the ordinary course
of business; (e)
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
investments in direct obligations of the United States or any
instrumentality thereof, (f) investments in certificates of deposit
maturing within one year from the date of acquisition thereof issued by a
bank organized under the laws of the United States or any state thereof or
the District of Columbia, having capital, surplus and undivided profits
aggregating at least $100,000,000 whose long-term corporate debt is, at
the time of acquisition thereof by the Company (i) in the case of
Manufacturers Hanover Trust Company or Chemical Bank, accorded a rating of
Baa1 or better by Moody's Investors Service, Inc., or a rating of BBB+ or
better by Standard & Poor's Corporation or (ii) in the case of any other
such bank, accorded a rating of A or better by Moody's Investors Service,
Inc., or A or better by Standard & Poor's Corporation; (g) commercial
paper issued by any corporation organized under the laws of the United
States or any state thereof, rated in the highest category by Moody's
Investors Services, Inc. or Standard & Poor's Corporation, maturing not
more than one year from the date of acquisition thereof; (h) investments
in bond or brokerage house money market funds and tax-exempt municipal
bonds maturing not more than one year from the date of issue and which
bear at least a MIG 1 rating; and (i) all amounts which the Company is
deemed to have invested in Star Gas as a consequence of the Transaction
and the MLP Offering (as such terms are defined in that certain Fourth
Amendment dated as of November 28, 1995 among the Company and the
Purchasers amending the Note Agreements dated as of January 15, 1991).
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Senior Indebtedness" is defined as Indebtedness which the Company
is permitted to have outstanding at any time under the provisions of the
Agreement, except Indebtedness which by its terms is not superior in right
of payment to the Series A Notes. Senior Indebtedness, however, shall not
include (a) indebtedness or amounts owed for compensation to employees, or
for goods or materials purchased in the ordinary course of business, or
for services or (b) indebtedness of the Company to a Subsidiary or
Affiliate for money borrowed or advances from such Subsidiary or
Affiliate. The Company's outstanding Public Debentures will not constitute
Senior Indebtedness and will rank pari passu with the Series A Notes.
"Sevin Group" means the Estate of Malvin P. Sevin and trusts created
thereunder, Audrey L. Sevin, Irik P. Sevin, Thomas J. Edelman, Margot
Gordon and Phillip Ean Cohen and
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
any trust over which such persons have the sole voting power.
"Star Gas" shall mean Star Gas Corporation, a Delaware corporation.
"Subordinated Indebtedness" shall mean all Indebtedness of the
Company, other than Senior Indebtedness.
The term "Subsidiary" means (i) a corporation a majority of whose
capital stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by the Company, by
the Company and a Subsidiary of the Company or by a Subsidiary of the
Company or (ii) any other person (other than a corporation) in which the
Company, a Subsidiary of the Company or the Company and a Subsidiary of
the Company, direct or indirectly, at the date of determination thereof,
has at least 50% ownership interest or over which it exercises control;
provided, however, that Star Gas, and any Person owned or controlled
directly or indirectly by Star Gas, shall not be a Subsidiary.
"Traber Group" means (i) all the holders of Class C Common Stock of
the Company as listed on Schedule II who are not members of the Sevin
Group, (ii) any person who is, or concurrently with the transfer of shares
to such person becomes, a party to the shareholders agreement among the
holders of Class C Common Stock of the Company dated November 25, 1986, as
amended and restated through the Effective Date, and (iii) any trust over
which persons described in clause (i) or (ii) have sole voting power.
"Treasury Rate" as of any date of determination means 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 date)) of one year.
"2002 Notes" shall have the meaning set forth therefor in the
introductory paragraphs to this Amendment and Restatement.
"Voting Stock" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing
similar functions).
"Wholly-owned" when used in connection with any Subsidiary shall
mean a Subsidiary of which all of the
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
issued and outstanding shares of stock (except shares required as
directors' qualifying shares) shall be owned by the Company and/or one or
more of its Wholly-owned Subsidiaries.
"Working Capital Borrowings" shall mean, on any date of
determination, all Indebtedness of the Company and its Subsidiaries on a
consolidated basis incurred to finance current assets, excluding the
excess of current liabilities over current assets on such date (determined
in accordance with generally accepted accounting principles).
Section 9.2. Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Amendment and Restatement, the same shall be done in accordance
with generally accepted accounting principles, to the extent applicable, except
where such principles are inconsistent with the requirements of this Amendment
and Restatement.
Section 9.3. Directly or Indirectly. Where any provision in this Amendment
and Restatement refers to action to be taken by any Person, or which such Person
is prohibited from taking, such provision shall be applicable whether the action
in question is taken directly or indirectly by such Person.
SECTION 10. MISCELLANEOUS.
Section 10.1. Direct Payment. Notwithstanding anything to the contrary in
this Amendment and Restatement or the Notes, in the case of any Notes owned by
you or your nominee or owned by any other institutional holder which has given
written notice to the Company requesting that the provisions of this Section
shall apply, the Company will promptly and punctually pay when due all amounts
payable with respect to such Notes, without any presentment thereof, directly to
you or such subsequent holder at your address set forth in Schedule I hereto or
at such other address as you or such subsequent holder may from time to time
designate in writing to the Company or, if a bank account is designated for you
on Schedule I to this Amendment and Restatement or in any written notice to the
Company from you or any such subsequent holder, the Company will make such
payments in immediately available funds to such bank account, marked for
attention as indicated, or in such other manner or to such other account of
yours or of such holder in any bank in the United States as you or any such
subsequent holder may from time to time direct in writing.
The holders of any Notes to which this Section applies agrees that
in the event it shall sell or transfer any such Notes it will, prior to the
delivery thereof, make a notation thereon
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
of all principal, if any, prepaid on such Notes and the date to which interest
has been paid on such Notes.
With respect to Notes to which this Section applies, the Company shall be
entitled to presume conclusively that the holder remains the holder thereof
until the Company shall have received notice from such holder of the transfer of
such Notes and of the name and address of the transferee, or such Notes shall
have been presented to the Company in the manner described in ss.10.2.
Section 10.2. Registration and Transfers of the Notes. The Company shall
cause to be kept at its principal office a register for the registration and
transfer of the Notes (hereinafter called the "Note Register"), and the Company
will register or transfer or cause to be registered or transferred, as
hereinafter provided and under such reasonable regulations as it may prescribe,
any Note issued pursuant to this Amendment and Restatement.
At any time and from time to time the registered holder of any Note
which has been duly registered as hereinabove provided may transfer such Note
upon surrender thereof at the
principal office of the Company duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
its attorney duly authorized in writing.
The Person in whose name any registered Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes of this
Amendment and Restatement. Payment of or on account of the principal, premium,
if any, and interest on any registered Note shall be made to or upon the written
order of such registered holder.
Section 10.3. Exchange of Notes. At any time, and from time to time, upon
not less than ten days' notice to that effect given by the holder of any Note
initially delivered or of any Note substituted therefor pursuant to ss.10.2,
this ss.10.3 or ss.10.4, anD, upon surrender of such Note at its office, the
Company will deliver in exchange therefor, without expense to the holder, except
as set forth below, Notes for the same aggregate principal amount as the then
unpaid principal amount of the Note so surrendered, in the denomination of
$100,000 or any amount in excess thereof as such holder shall specify (or such
lesser amount as may be necessary to reflect any Note with an outstanding
principal amount of less than $100,000), dated as of the date to which interest
has been paid on the Note so surrendered or, if such surrender is prior to the
payment of any interest thereon, then dated as of the date of issue, payable to
such Person or Persons, or order, as may be designated by such holder, and
otherwise of the same form and tenor as the Notes so surrendered for exchange.
The Company may require the payment of a sum sufficient to cover any stamp tax
or governmental charge
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
imposed upon such exchange or transfer. Notwithstanding the foregoing, Series A
Notes may be exchanged only for other Series A Notes and Series B Notes may be
exchanged only for other Series B Notes.
Section 10.4. Loss, Theft, etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If the initial Purchaser or any subsequent institutional holder
is the owner of any such lost, stolen or destroyed Note, then the affidavit of
an authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of the Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof and no further
indemnity shall be required as a condition to the execution and delivery of a
new Note other than the written agreement of such owner to indemnify the
Company. Notwithstanding the foregoing, Series A Notes will be replaced only by
Series A Notes and Series B Notes will be replaced only by other Series B Notes.
Section 10.5. Repurchase of Notes. Except as specifically provided herein
or in the Restated Articles, neither the Company nor any Subsidiary or
Affiliate, directly or indirectly, may repurchase, or make any offer to
repurchase, any Notes unless the offer has been made to repurchase such Notes,
pro rata, from all holders thereof at the same time and upon the same terms. In
case the Company repurchases any Notes, such Notes shall thereafter be cancelled
and no Notes shall be issued in substitution therefor.
Section 10.6. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of your out-of-pocket expenses in connection with the preparation,
execution and delivery of this Amendment and Restatement and the transactions
contemplated hereby, including but not limited to the reasonable charges and
disbursements of Chapman and Cutler, your special counsel, duplicating and
printing costs and charges for shipping the Notes, adequately insured to you at
your home office or at such other place as you may designate and all such
expenses relating to any amendment, waivers or consents pursuant to the
provisions hereof. The Company also agrees that it will pay and save you
harmless against any and all liability with respect to stamp and
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
other taxes, if any, which may be payable or which may be determined to be
payable in connection with the execution and delivery of this Amendment and
Restatement or the Notes, whether or not any Notes are then outstanding. The
Company agrees to protect and indemnify you against any liability for any and
all brokerage fees and commissions payable or claimed to be payable to any
Person in connection with the transactions contemplated by the Original Note
Agreement or this Amendment and Restatement.
Section 10.7. Notices. All communications provided for hereunder shall be
in writing and, if to you, delivered or mailed by registered or certified mail
or air express courier, addressed to you at your address appearing on Schedule I
hereto or such other address as you or the subsequent holder of Notes may
designate to the Company in writing, and if to the Company, delivered or mailed
by registered or certified mail or air express courier to the Company at Post
Office Box 1457, Stamford, Connecticut 06904, Attention: President or to such
other address as the Company may in writing designate to you or to a subsequent
holder of the Notes.
Section 10.8. Agreement to Amend Public Indentures. In the event the
Company shall at any time seek an amendment, waiver or consent from the holders
of any Public Debentures, in connection therewith it will use its best efforts
to cause the definition of the term "Designated Senior Debt" in the Public
Indenture under which such Public Debentures are issued to be amended to conform
with the definition of such term contained in the Exchange Indenture.
Section 10.9. Successors and Assigns. This Amendment and Restatement shall
be binding upon each of the parties hereto and its respective successors and
assigns and shall inure to its benefit and to the benefit of its successors and
assigns, including each successive holder or holders of any Notes and to the
benefit of the Company and its successor and assigns.
Section 10.10. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Effective Date, shall survive the closings and the delivery of this Amendment
and Restatement.
Section 10.11. Severability. Should any part of this Amendment and
Restatement for any reason be declared invalid, such decision shall not affect
the validity of any remaining portion, which remaining portion shall remain in
force and effect as if this Amendment and Restatement had been executed with the
invalid portion thereof eliminated and it is hereby declared the intention of
the parties hereto that they would have executed the remaining portion of this
Amendment and Restatement without
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
including therein any such part, parts, or portion which may, for any reason, be
hereafter declared invalid.
Section 10.12. Governing Law. This Amendment and Restatement and the Notes
outstanding hereunder shall be governed by and construed in accordance with New
York law.
Section 10.13. Captions. The descriptive headings of the various Sections
or parts of this Amendment and Restatement are for convenience only and shall
not affect the meaning or construction of any of the provisions hereof.
Section 10.14. Reproduction of Documents. This Amendment and Restatement
and all documents relating thereto, including without limitation, (a) consents,
waivers and modifications which may hereafter be executed, (b) documents
received by you at the Closing of your purchase of the Notes (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process and you may destroy any original document so reproduced.
The Company agrees and stipulates that any such reproduction shall be admissible
in evidence as an original in any judicial or administrative proceeding (whether
or not the original is in existence and whether or not such reproduction was
made by you in the regular course of business) and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
ARTICLE II
AMENDMENTS TO SCHEDULE AND
EXHIBITS TO EXISTING NOTE AGREEMENT
Schedules I and II and Exhibits A through E of the Existing Note Agreement
are hereby amended in their entirety so that the same shall henceforth read as
provided in Schedule I and II and Exhibits A (Exhibits A-1 and A-2) through
Exhibit E attached hereto.
ARTICLE III
MISCELLANEOUS
Section 3.1. Ratification of Existing Note Agreement. Except as amended
and restated herein, the terms and provisions of the Existing Note Agreement and
the Notes are hereby ratified, confirmed and approved in all respects.
Section 3.2. Counterparts. This Amendment and Restatement may be executed
in any number of counterparts, each executed counterpart constituting an
original but altogether one and the same instrument.
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
Section 3.3. Fees and Expenses. The Company agrees to pay all reasonable
fees and expenses of you and your special counsel connection with the
preparation of this Amendment and Restatement.
Section 3.4. References to Original Note Agreement. Any and all notices,
requests, certificates and any other instruments, including the Notes, may refer
to the Original Note Agreement or the Existing Note Agreement or the Note
Agreement dated as of January 15, 1991 without making specific reference to this
Amendment and Restatement, but nevertheless all such references shall be deemed
to include this Amendment and Restatement unless the context shall otherwise
require.
Section 3.5. Governing Law. This Amendment and Restatement shall be
construed in accordance with and governed by the laws of the State of New York.
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
Upon the acceptance of this Amendment and Restatement by you, this
agreement shall become effective and the Existing Note Agreement shall be
amended and restated as herein set forth, such amendment to be effective as of
the Effective Date.
PETROLEUM HEAT AND POWER CO.,
INC.
By
Its
Accepted as of the date first above written.
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By CIGNA Investments, Inc.
By
Its
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Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
SCHEDULE I
Name and Address
of Holder
Outstanding Notes
----------------------
CONNECTICUT GENERAL LIFE
Series A Notes
Series B Notes
INSURANCE COMPANY
$6,250,000 (original)
$6,250,000 (original)
c/o CIGNA Investments, Inc.
$4,150,000 (current)
$4,150,000 (current)
900 Cottage Grove Road
Hartford, Connecticut
06152-2307
Attention: Private
Securities Division, S-307
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds to:
Chase Manhattan Bank, N.A.
FED ABA #021000021
Chase NYC/CTR/
BNF=CIGNA Private Placements/
AC=9009001802
OBI=Petroleum Heat and Oil Co.,
PPN: [716600 C* 0 for Subordinated Notes and 716600 G* 6 for Senior Notes],
14.10% Subordinated Notes or 14.10% Senior Notes, as the case may be, the
amount of interest and/or principal, the amount of any prepayment, the
payable date, contact name and telephone number
Notices
<PAGE>
Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
All notices and communications, except notice with respect to payment, and
written confirmation of each such payment, to be addressed:
CIG & Co.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division, S-307
Notices with respect to payment, and written
confirmation of each such payment, to be addressed:
CIG & Co.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2309
Attention: Securities Processing, S-309
Copies of all notices with respect to payment and written confirmation of each
such payment also to be addressed to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 5
Attn: CIGNA Private Placements
Bowling Green Station
New York, New York 10275-0072
Name of Nominee in which Certificates or Notes are to be issued: CIG & Co.
<PAGE>
Petroleum Heat and Power Co., Inc. Sixth Amendment and Restatement
OWNERS OF BENEFICIAL INTEREST OF
COMPANY'S CLASS C COMMON STOCK
SHAREHOLDER NUMBER OF SHARES
Phillip Ean Cohen 113,423
Thomas J. Edelman 129,019
Margot Gordon 75,615
Irik P. Sevin 201,641
Audrey L. Sevin 477,716
Jorg Bennemann 4,000
Brentwood Corp. 120,985
Albert Bull 25,400
Gabes S.A. 124,314
Barcel Corporation 151,231
Hubertus Langen 9,038
Tortosa GmbH 298,717
Minneford Corp. 12,000
Fernando Montero 35,287
Mortimer Corp. 63,013
Richard O'Connell 302,461
Wolfgang Traber 9,038
M.M. Warburg & Co. 31,808
Max Warburg 38,481
Ravenna Financial Corp. 15,123
Eduardo G. Mestre 15,123
Wrinston Financial, S.A. 30,246
Altama Financiera, S.A. 15,123
Hanseatic Corporation 298,717
<PAGE>
PETROLEUM HEAT AND POWER
CO., INC.
14.10% Subordinated
Note
Due January 15, 2001
PPN: 716600 C* 0
No. R- _____________, ______
PETROLEUM HEAT AND POWER CO., INC., a Minnesota corporation (the
"Company"), for value received, hereby promises to pay to _____________________
or registered assigns, on the fifteenth day of January, 2001 the principal
amount of _____________________________________ DOLLARS ($___________) and to
pay interest (computed on the basis of a 360-day year of twelve 30-day months)
on the principal amount from time to time remaining unpaid hereon at the rate of
14.10% per annum from the date hereof until maturity, payable quarterly on the
fifteenth day of each April, July, October and January in each year commencing
on the first such date after the date of issue hereof, and at maturity. The
Company agrees to pay interest on overdue principal and premium, if any, and (to
the extent legally enforceable) on any overdue installment of interest, at the
rate of 16.10% per annum after due, whether by acceleration or otherwise, until
paid. The principal hereof and interest hereon and premium, if
<PAGE>
any, are payable at the principal office of the Company in Stamford, Connecticut
in coin or currency of the United States of America which at the time of payment
shall be legal tender for the payment of public and private debts.
This Note is one of the Subordinated Notes of the Company in the aggregate
principal amount not to exceed $6,250,000 issued or to be issued under and
pursuant to the terms and provisions of the Note Agreement dated as of January
15, 1991, entered into by the Company with the original purchaser therein
referred to, as amended pursuant to the First, Second, Third, Fourth and Fifth
Amendments thereto and as amended and restated pursuant to the Sixth Amendment
and Restatement of Note Agreement dated as of February 1, 1997 (as so amended
and restated, the "Note Agreement"), and this Note and the holder hereof are
entitled equally and ratably with the holders of all other Notes outstanding
under the Note Agreement to all the benefits and security provided for thereby
or referred to therein, to which Note Agreement reference is hereby made for the
statement thereof.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates, all in the events, on the
terms and in the manner and amounts as provided in the Note Agreement.
The Notes are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in Section
5 of the Note Agreement.
This Note and the indebtedness evidenced hereby is and shall at all times
be and remain junior and subordinate in right of payment to any and all Senior
Indebtedness of the Company as defined in the Note Agreement, all to the extent
more fully set forth in said Note Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
<PAGE>
PETROLEUM HEAT AND POWER CO.,
INC.
By
Its
<PAGE>
PETROLEUM HEAT AND POWER
CO., INC.
14.10% Senior Note
Due January 15, 2001
PPN: 716600 G* 6
No. R- ____________, ______
PETROLEUM HEAT AND POWER CO., INC., a Minnesota corporation (the
"Company"), for value received, hereby promises to pay to _____________________
or registered assigns, on the fifteenth day of January, 2001 the principal
amount of ______________ DOLLARS ($___________) and to pay interest (computed on
the basis of a 360-day year of twelve 30-day months) on the principal amount
from time to time remaining unpaid hereon at the rate of 14.10% per annum from
the date hereof until maturity, payable quarterly on the fifteenth day of each
April, July, October and January in each year commencing on the first such date
after the date of issue hereof, and at maturity. The Company agrees to pay
interest on overdue principal and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest, at the rate of 16.10% per
annum after due, whether by acceleration or otherwise, until paid. The principal
hereof and interest hereon and premium, if any, are payable at the
<PAGE>
principal office of the Company in Stamford, Connecticut in coin or currency of
the United States of America which at the time of payment shall be legal tender
for the payment of public and private debts.
This Note is one of the Senior Notes of the Company in the aggregate
principal amount not to exceed $6,250,000 issued or to be issued under and
pursuant to the terms and provisions of the Note Agreement dated as of January
15, 1991, entered into by the Company with the original purchaser therein
referred to, as amended pursuant to the First, Second, Third, Fourth and Fifth
Amendments thereto and as amended and restated pursuant to the Sixth Amendment
and Restatement of Note Agreement dated as of February 1, 1997 (as so amended
and restated, the "Note Agreement"), and this Note and the holder hereof are
entitled equally and ratably with the holders of all other Notes outstanding
under the Note Agreement to all the benefits and security provided for thereby
or referred to therein, to which Note Agreement reference is hereby made for the
statement thereof.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates, all in the events, on the
terms and in the manner and amounts as provided in the Note Agreement.
The Notes are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in Section
5 of the Note Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
PETROLEUM HEAT AND POWER CO.,
INC.
By
Its
<PAGE>
DESCRIPTION OF CHAPMAN AND
CUTLER'S
CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to the
Noteholder, called for by ss.3.2 of the Note Agreement, shall be dated the
Effective Date and addressed to the Noteholder, shall be satisfactory in form
and substance to the Noteholder and shall be to the effect that:
(1) The Company is a corporation, duly organized and existing and in good
standing under the laws of the State of Minnesota and has all requisite
corporate power and authority to enter into and perform the Amendment and
Restatement; and
(2) The Amendment and Restatement has been duly authorized, executed and
delivered by the Company and all provisions of the Amendment and Restatement
constitute the legal, valid and binding agreements of the Company enforceable
against the Company in accordance with their terms, except as such terms may be
limited by bankruptcy, insolvency or similar laws and legal and equitable
principles affecting or limiting the enforcement of creditors' rights generally.
The opinion of Chapman and Cutler shall also state that the opinions of
Phillips Nizer Benjamin Krim & Ballon LLP called for by ss.3.2 are satisfactory
in scope and form to Chapman and Cutler and that, in their opinion, the
Noteholder is justified in relying thereon and shall cover such other matters as
the Noteholder may reasonably request. With respect to matters of fact upon
which such opinion is based, Chapman and Cutler may rely on appropriate
certificates of public officials and officers of the Company.
<PAGE>
DESCRIPTION OF COMPANY
COUNSEL'S
CLOSING OPINION
The closing opinion of Phillips Nizer Benjamin Krim & Ballon LLP, which is
called for by ss.3.2 of the Agreement, shall be dated the Effective Date and
addressed to the Noteholder, shall be satisfactory in form and substance to the
Noteholder, and shall cover the matters referred to in paragraphs 1 and 2 of
Exhibit B and shall be to the effect that:
(1) The execution, delivery and performance by the Company of the Amendment
and Restatement do not conflict with or result in any breach of any of the
provisions of or constitute a default under or result in the creation or
imposition of any lien or encumbrance upon any of the property of the Company
pursuant to the provisions of the Restated and Amended Articles of Incorporation
or By-laws of the Company or any agreement or other instrument known to such
counsel after due investigation to which the Company is a party or by which the
Company may be bound;
(2) Each Subsidiary is a corporation duly organized, legally existing and
in good standing under the laws of its jurisdiction of incorporation and is duly
licensed or qualified and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or the nature of the business
transacted by it makes such licensing or qualification necessary and all of the
issued and outstanding shares of capital stock of each such Subsidiary have been
duly issued, are fully paid and non-assessable and are owned by the Company,
and/or by one or more wholly-owned Subsidiaries;
(3) The Company has full power and authority and is duly authorized to
conduct the activities in which it is now engaged and is duly licensed or
qualified and is in good standing as a foreign corporation in each jurisdiction
in which the character of the properties owned or leased by it or the nature of
the business transacted by it makes such licensing or qualification necessary
and all of the issued and outstanding shares of capital stock of the Company
have been duly issued, are fully paid and non-assessable;
(4) The 1997 Preferred Stock when issued by the Company will be duly and
validly issued, fully paid and non-assessable; and
(5) No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal,
state or local, is necessary in connection with the execution and delivery of
the Amendment and Restatement.
<PAGE>
With respect to matters of fact on which the opinion of Phillips Nizer
Benjamin Krim & Ballon LLP is based, such counsel may rely on appropriate
certificates of public officials and officers of the Company.
<PAGE>
SUBSIDIARIES OF THE COMPANY
1. SUBSIDIARIES:
PERCENTAGE OF VOTING
STOCK OWNED BY COMPANY
JURISDICTION OF AND EACH OTHER
NAME OF SUBSIDIARY INCORPORATION SUBSIDIARY
A. P. Woodson Company Washington, D.C. 100%
C.B.W. Realty Corp. of Connecticut 100%
Connecticut
Marex Corporation Maryland 100%
Maxwhale Corp. Minnesota 100%
Ocennet Fuel Oil Corp. Connecticut 100%
Ortep of Connecticut, Inc. Connecticut 100%
Ortep of New Jersey, Inc. New Jersey 100%
Ortep of Pennsylvania, Inc. Pennsylvania 100%
Ortep of Staten Island, Inc. New York 100%
Petro/Crystal Corp. New York 100%
Petro, Inc. Delaware 100%
Public Fuel Services Co., Inc. New York 100%
Reliance Utilities Corp. New York 100%
-1-
<PAGE>
DESCRIPTION OF DEBT AND LEASES
1. Current Debt of the Company and its Subsidiaries outstanding as of January
31, 1997 is as follows:
Current portion of 14.10% Subordinated $ 1,050,000
Notes
Current portion of 14.10% Senior Notes` 1,050,000
Current portion of other Long-Term Debt 947,000
Working capital borrowings 35,000,000
-----------
$38,047,000
===========
2. Funded Debt of the Company and its Subsidiaries outstanding as of January
31, 1997 is as follows:
Senior and Subordinated Notes due $ 60,000,000
10/01/1998
14.10% Senior and Subordinated Notes 6,200,000
10.125% Subordinated Notes 50,000,000
9-3/8% Subordinated Debentures 75,000,000
12-1/4% Subordinated Debentures 81,250,000
Other Long-Term Notes 16,687,000
------------
$289,137,000
3. Long-Term Leases of the Company and its Subsidiaries outstanding as of
January 31, 1997 are as follows:
Leased Facilities $ 22,500,000
4. Capitalized Leases of the Company and its Subsidiaries outstanding as of
January 31, 1997 are as follows:
None.
-1-
<PAGE>
PETROLEUM HEAT AND POWER, INC.
SIXTH AMENDMENT
CLOSING CERTIFICATE
Connecticut General Life
Insurance Company
c/o CIGNA Investments, Inc.
Hartford, Connecticut
This certificate is delivered in compliance with the requirements of the
Sixth Amendment and Restatement of Note Agreement dated as of February 1, 1997
(the "Sixth Amendment and Restatement") entered into by the undersigned,
Petroleum Heat and Power, Inc., a Minnesota corporation (the "Company"), with
you, as a condition and concurrently with the effectuation on the date hereof of
the Sixth Amendment and Restatement. Capitalized terms used herein shall have
the same meanings as in the Sixth Amendment and Restatement.
The undersigned represents and warrants to each of you as follows:
1. The undersigned is the duly elected, qualified and acting
______________ of the Company and is familiar with the operations, records
and affairs of the Company;
2. The representations and warranties of the Company set forth in
Section 2 of the Sixth Amendment and Restatement are true and correct on
and with respect to the date hereof;
3. The Company has performed all of its obligations under the Sixth
Amendment and Restatement which are to be performed on or prior to the date
hereof;
4. No Default or Event of Default has occurred and is continuing;
5. Each of the Proposed Transactions have been consummated as
contemplated by Section 3.5 of the Sixth Amendment and Restatement; and
6. As of the date hereof, the 1997 Preferred Stock has been duly and
validly issued and is fully paid and non-assessable.
Dated: February ____, 1997
PETROLEUM HEAT AND POWER, INC.
By
Its _____________________
-2-
Exhibit 11.0
PETROLEUM HEAT AND POWER CO., INC. AND SUBSIDIARIES
Computation of Net Income (Loss) Per Share
(In thousands except per share data)
Year Ended December 31,
------------------------------
1994 1995 1996
-------- -------- --------
Net Loss $ (4,265) $(23,479) $(28,315)
Preferred Dividends (3,511) (3,263) (2,389)
-------- -------- --------
Net loss applicable to common stock
(7,776) (26,742) (30,704)
-------- -------- --------
Common stock dividends
Class A Common Stock 10,791 13,716 13,789
Class B Common Stock 238 -- --
Class C Common Stock 1,407 1,559 1,559
-------- -------- --------
12,436 15,275 15,348
-------- -------- --------
Undistributed net loss(1) $(20,211) $(42,017) $(46,052)
======== ======== ========
Weighted average number of common shares
outstanding
Class A Common Stock 19,195 22,711 22,983
Class B Common Stock 152 15 12
Class C Common Stock 2,550 2,598 2,598
-------- -------- --------
21,897 25,324 25,593
======== ======== ========
Net Income (loss) per common share:
Class A Common stock
Distributed $ 0.55 $ 0.60 $ 0.60
Undistributed(1) (0.92) (1.66) (1.80)
-------- -------- --------
$ (0.37) $ (1.06) $ (1.20)
======== ======== ========
Class B Common Stock
Distributed $ 1.10 -- --
======== -------- --------
Class C Common Stock
Distributed $ 0.55 $ 0.60 $ 0.60
Undistributed (0.92) (1.66) (1.80)
-------- -------- --------
$ (0.37) $ (1.06) $ (1.20)
======== ======== ========
- ----------
(1) All of the undistributed net loss has been allocated to the Class A Common
Stock and Class C Common Stock since the Company exercised its right to
terminate the Special Dividends on the Class B Common Stock effective August 31,
1994 "the expiration date". As a result of the termination of the Special
Dividends, the holders of Class B Common Stock had 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 for the period
July 1, 1994 through August 31, 1994). As of December 31, 1996, 206 shares of
Class B Common Stock were repurchased for approximately $3.6 million.
Prior to the termination of the Special Dividends, the Class B Common Stock
could not participate in any additional dividends until the aggregate amount of
dividends paid on Class A Common Stock and Class C Common Stock exceeded the
Common Stock Allocation as defined. In 1994 an additional $112.3 million had to
be paid as dividends on the Class A Common Stock and Class C Common Stock to
reach the Common Stock Allocation.
EXHIBIT 21.0
Ortep of New Jersey, Inc. - New Jersey
Ortep of Staten Island - New York
Ortep of Pennsylvania, Inc. - Pennsylvania
Ortep of Connecticut, Inc. - Connecticut
Petro/Crystal Corp. - New York
Maxwhale Corp. - Minnesota
Petro, Inc. - Delaware
Public Fuel Services Co., Inc. - New York
CBW Realty Corp. of Connecticut - Connecticut
Marex Corporation - Maryland
Ocennet Fuel Oil Corp. - Connecticut
A.P. Woodson Co., Inc. - District of Columbia
Star Gas Corporation - Delaware
Silgas, Inc. - Indiana
Silgas of Illinois Corporation - Illinois
Star Gas Holdings - Delaware
EXHIBIT 23.0
The Board of Directors
Petroleum Heat and Power Co., Inc.
We consent to incorporation by reference in the registration statement (No.
33-54053 and No. 33-60741) on Form S-8 and Form S-3, respectively, of Petroleum
Heat and Power Co., Inc. and subsidiaries of our report dated March 3, 1997,
relating to the consolidated balance sheets of Petroleum Heat and Power Co.,
Inc. and subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of operations, stockholders' equity (deficiency) and
cash flows for each of the years in the three-year period ended December 31,
1996, and the related schedule, which report appears in the December 31, 1996,
annual report on Form 10-K of Petroleum Heat and Power Co., Inc.
/s/ KPMG Peat Marwick LLP
Stamford, CT
March 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information (in thousands
except per share data) extracted from Petroleum Heat and Power Co., Inc. and
Subsidiaries financial statements as of December 31, 1996 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,257
<SECURITIES> 0
<RECEIVABLES> 94,450
<ALLOWANCES> 1,088
<INVENTORY> 22,084
<CURRENT-ASSETS> 130,010
<PP&E> 72,253
<DEPRECIATION> 41,587
<TOTAL-ASSETS> 275,025
<CURRENT-LIABILITIES> 111,917
<BONDS> 291,337
8,333
0
<COMMON> 2,552
<OTHER-SE> (148,285)
<TOTAL-LIABILITY-AND-EQUITY> 275,025
<SALES> 567,329
<TOTAL-REVENUES> 608,161
<CGS> 348,338
<TOTAL-COSTS> 427,388
<OTHER-EXPENSES> 172,005
<LOSS-PROVISION> 1,882
<INTEREST-EXPENSE> 34,669
<INCOME-PRETAX> (23,684)
<INCOME-TAX> 500
<INCOME-CONTINUING> (21,901)
<DISCONTINUED> 0
<EXTRAORDINARY> (6,414)
<CHANGES> 0
<NET-INCOME> (28,315)
<EPS-PRIMARY> (1.20)
<EPS-DILUTED> (1.20)
</TABLE>
