<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Huntway Partners, L.P.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Huntway Partners, L.P.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
Huntway Partners, L.P. Letterhead
September ,1996
TO THE HOLDERS OF CERTAIN SECURITIES OF HUNTWAY PARTNERS, L.P.:
On behalf of the general partner of Huntway Partners, L.P. ("Huntway" or
the "Company"), we wish to extend our warm thanks to you in advance for
reviewing the enclosed information about our debt restructuring and for signing
and returning the enclosed consent and ballot at your earliest convenience. It
is extremely important to Huntway's success in restructuring its debt that we
receive your completed consent and ballot before October , 1996.
On April 15, 1996, Huntway announced the terms of a consensual debt
restructuring agreement in principle reached with the Company's senior lenders.
This agreement (the "Consensual Restructuring Agreement") is attached as
Appendix B to the enclosed Consent Solicitation and Disclosure Statement (the
"Consent Solicitation Statement"). The Consensual Restructuring Agreement was
the result of an approximately eighteen-month effort to put Huntway on a solid
financial footing and was approved and signed by senior lenders holding
approximately 86% of the Company's senior secured debt. If consummated, the debt
restructuring contemplated by the Consensual Restructuring Agreement (1) will
reduce Huntway's debt by nearly $70 million (from approximately $95.5 million to
$25.6 million) as measured at December 31, 1995; (2) will increase the Company's
equity by a corresponding amount; (3) will provide that existing Unitholders
will retain their equity interest in the Company, subject to dilution through
the issuance of new Common Units and options to acquire Common Units; (4) will
not require any cash principal or interest payments in calendar year 1996; (5)
will reduce annual interest expense by approximately $1.7 million, and (6) will
provide other significant favorable modifications to the Company's debt
obligations to, among other things, better fit the seasonality of the Company's
business. In connection with the $70 million debt reduction, the Company will
issue initially approximately 14.4 million new Common Units and options to
acquire approximately 2.8 million Common Units while retiring approximately 1
million options and approximately 3.3 million warrants. As a result, on a fully
diluted basis total units outstanding will increase initially from 16.5 million
to 29.3 million and total debt will decline approximately $70 million.
The Consensual Restructuring Agreement provides by its terms that the
unanimous consent of all senior lenders to its terms is required for its
consummation. The Company has been unable to secure the consent of one holder of
its senior debt (representing 14% of the outstanding senior debt) and has
determined that a reorganization of the Company under the federal bankruptcy
laws pursuant to the "prepackaged" plan of reorganization set forth as Appendix
A to the Consent Solicitation Statement (the "Prepackaged Plan") is the best
alternative available to the Company to realize the benefits of the Consensual
Restructuring Agreement and preserve an investment in the Company by existing
Unitholders. Therefore, in order to complete the negotiated debt restructuring
on the foregoing terms, Huntway Managing Partner, L.P. (the "General Partner")
is seeking pursuant to the attached Consent Solicitation Statement the written
consent of the holders (the "Unitholders") of the Company's Common Units and
certain other classes of creditors and equity interest holders of the Company to
accept, prior to the commencement of a case under chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code"), the Prepackaged Plan. The
Company is also soliciting the consent of the Unitholders (i) to approve the
issuance, in accordance with the New York Stock Exchange listing rules, the
issuance of Common Units in connection with the Consensual Restructuring
Agreement (in the event the Consensual Restructuring Agreement is consummated)
and (ii) to approve the 1996 Huntway Employee Incentive Option Plan (the
"Huntway Incentive Option Plan") in the form attached as Appendix C to the
Consent Solicitation Statement.
<PAGE> 3
The restructuring contemplated by the Prepackaged Plan is generally
designed to achieve the goals of the Consensual Restructuring Agreement by
reducing the debt service obligations of the Company and creating a capital
structure that will allow it to enhance the competitive position of its business
and operations. The terms of each of the Prepackaged Plan and the Consensual
Restructuring Agreement provide, among other things, for the reduction in
outstanding indebtedness of the Company by approximately $70 million, the
issuance of approximately 13.7 million new Common Units initially, representing
approximately 54.4% of the equity of the reorganized Company to outstanding upon
consummation of the debt restructuring, and the issuance of options to acquire
new Common Units for $0.50 per Common Unit to the Company's management, which
will represent approximately 10% of the fully diluted equity of the reorganized
Company (after taking into account the cancellation of existing options pursuant
to the debt restructuring). Each of the Prepackage Plan and the Consensual
Restructuring Agreement also provides for the potential issuance in the future
of additional Common Units and options to purchase Common Units as
"anti-dilution protection" to certain persons other than existing unitholders in
connection with any payment of interest on new junior indebtedness through the
issuance of Common Units. Under each of the Prepackaged Plan and the Consensual
Restructuring Agreement, the existing Unitholders will retain their equity
interests in the Company as diluted by the foregoing issuances. See "PROPOSAL
1 -- Purposes of the Prepackaged Plan," "-- Principal Elements of the
Prepackaged Plan," and "-- Chapter 11 Overview."
Upon receipt of the requisite number of votes of the beneficial owners of
the Common Units and impaired claims and equity interests to accept the
Prepackaged Plan, Huntway intends to commence a case under chapter 11 of the
Bankruptcy Code and use such votes to obtain confirmation of the Prepackaged
Plan pursuant to Section 1126 of the Bankruptcy Code. AS OF THE DATE OF THIS
LETTER, HUNTWAY HAS NOT FILED A PETITION FOR RELIEF UNDER THE BANKRUPTCY CODE.
Under the Bankruptcy Code, confirmation will require that the bankruptcy court
determine that the pre-petition solicitation made pursuant to the enclosed
materials complies with all applicable non-bankruptcy law regarding the adequacy
of disclosure.
The Company has developed a liquidation analysis of the Company and Sunbelt
in the event the Prepackaged Plan is not confirmed and Huntway's creditors force
the Company to discontinue its operations. That analysis is included in the
Consent Solicitation Statement. The analysis demonstrates that in the most
probable case scenario, if the Company were to liquidate, no cash or other
property would be available after paying priority claims, liquidation expenses
and secured creditors. The General Partner believes that the Company's unsecured
creditors and the Unitholders would receive no distribution whatsoever in a
liquidation. See "PROPOSAL 1 -- Liquidation Analysis."
The Company believes that by proposing the Prepackaged Plan and obtaining
acceptances in advance of commencing a case under the Bankruptcy Code, the
pendency of the case will be shortened significantly and the administration of
such case and related proceedings will be simplified and less costly. If the
requisite consents and acceptances for approval and confirmation of the
Prepackaged Plan are not obtained, the Company may nevertheless file a petition
under chapter 11 of the Bankruptcy Code and request the Bankruptcy Court to
confirm a plan of reorganization (which may or may not be similar to the
Prepackaged Plan) on a nonconsensual basis. In such event, Unitholders may be
treated differently than they are treated under the Prepackage Plan and may
retain little, if any, interest in the reorganized Company.
In addition to the benefits described above there are also risk factors
that should be considered by Huntway securityholders prior to deciding whether
to accept the Prepackage Plan and other proposals described in the Consent
Solicitation Statement. See "RISK FACTORS." Security holders should also
consider the significant tax considerations relating to the Prepackaged Plan
that are discussed under "PROPOSAL 1 -- Certain Federal Income Tax
Consequences."
The close of business on September 16, 1996 has been fixed as the record
date for determining persons entitled to notice of, and to submit consents with
respect to, the proposals described in the Consent Solicitation Statement. The
consent period will remain open until at least , 1996, and
Unitholders and other securityholders receiving these materials are urged to
read the enclosed materials and complete and return the enclosed ballot and
consent form as promptly as possible, but in any event no later than 5:00 p.m.,
Los Angeles time, on , 1996. The Company will not hold a meeting to
vote on the Prepackaged
ii
<PAGE> 4
Plan. Only the Unitholders and other securityholders who return the enclosed
ballot will be counted for purposes of determining whether the requisite
Prepackaged Plan acceptance has been received. See "RECORD DATE; VOTING AND
REVOCATION OF BALLOTS."
IF THE PREPACKAGED PLAN IS CONFIRMED BY THE BANKRUPTCY COURT, ALL HOLDERS
OF CLAIMS AGAINST OR EQUITY INTEREST IN THE COMPANY (INCLUDING THOSE WHO ABSTAIN
OR VOTE AGAINST THE PREPACKAGE PLAN) WILL BE BOUND BY THE PREPACKAGED PLAN AND
THE RELATED TRANSACTIONS CONTEMPLATED THEREBY.
The General Partner is aware of unrelated companies that have undergone
debt restructurings in situations similar to the Company's that have resulted in
equity holders receiving little or no interest in the reorganized entity on
account of their interest prior to the restructuring. In contrast, the
Prepackaged Plan and the Consensual Restructuring Agreement permit the
Unitholders to retain their equity interests in the reorganized Company on a
diluted basis, as described above. The General Partner has approved each of the
proposals described in the Consent Solicitation Statement and recommends that
the Unitholders consent to each of the proposals.
Before reviewing the enclosed materials, Unitholders may wish to read again
the Company's letter to Unitholders on pages 2-3 of the 1995 Annual Report, a
copy of which is enclosed. It explains why the General Partner believes the
terms of the proposed debt restructuring are very favorable for both the Company
and Unitholders.
<TABLE>
<S> <C>
Juan Y. Forster Warren J. Nelson
President and Chief Executive Vice President
Executive Officer and Chief Financial Officer
</TABLE>
iii
<PAGE> 5
THE PREPACKAGED PLAN HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS CONSENT SOLICITATION STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. BECAUSE NO BANKRUPTCY CASE
HAS YET BEEN FILED, THIS CONSENT SOLICITATION STATEMENT HAS NOT BEEN APPROVED BY
ANY BANKRUPTCY COURT WITH RESPECT TO THE ADEQUACY OF INFORMATION OR ANY OTHER
MATTER. HOWEVER, IF A CASE IS SUBSEQUENTLY COMMENCED, THE COMPANY WILL SEEK
BANKRUPTCY COURT APPROVAL OF THIS CONSENT SOLICITATION STATEMENT AS PART OF THE
ORDER CONFIRMING THE PREPACKAGED PLAN.
------------------------
ALL HOLDERS SHOULD READ AND CAREFULLY CONSIDER THE CONSENT SOLICITATION
STATEMENT PRIOR TO RESPONDING TO THE SOLICITATION AND THE OTHER MATTERS
ADDRESSED HEREIN, INCLUDING, WITHOUT LIMITATION, ALL OF THE FACTORS SET FORTH
UNDER THE HEADING "RISK FACTORS." Holders should not construe the contents of
this Consent Solicitation Statement as providing any legal, business, financial
or tax advice. Each Holder should, therefore, consult with its own legal,
business, financial and tax advisors on any matters concerning the contents of
this Consent Solicitation Statement and the transactions contemplated hereby.
The Company reserves the right to amend, modify or supplement the Prepackaged
Plan, subject to the conditions in the Prepackaged Plan and any consent required
from its lenders, prior to its effectiveness. The Company also reserves the
right to cancel the Solicitation at any time prior to the Expiration Date and
revoke the Prepackaged Plan, subject to the conditions contained in the
Prepackaged Plan. The Company will give the Beneficial Interest Holders as of
the Record Date notice of any amendments, modifications or supplements as may be
required by applicable law.
------------------------
To the extent that the Solicitation is deemed to result in offers of new
securities that are not exempted by section 1145(a) of the Bankruptcy Code, they
are being made by the Company in reliance on the exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
afforded by Section 4(2) or Section 3(a)(9) thereof. The Company will not pay
any commission or other remuneration to any broker, dealer, salesman or other
person for soliciting acceptances of the Prepackaged Plan. Regular employees of
the Company, who will not receive additional compensation therefor, may solicit
acceptances. The Company has made no arrangements for and has no understandings
with any broker, dealer, salesman or other person regarding the Solicitation.
------------------------
This Consent Solicitation Statement, the form of Consent and the applicable
Ballot and Master Ballot are first being mailed to Unitholders and to other
holders of Claims or Equity Interests impaired under the Prepackaged Plan or
about September , 1996.
INFORMATION AGENT
MacKenzie Partners, Inc. will act as Information Agent in connection with
the Solicitation (the "Information Agent" or the "Solicitation Agent").
Questions and requests for assistance may be directed to the Information Agent
at 156 5th Avenue, New York, New York 10010, attention: Lawrence Dennedy,
(telephone: 212-929-5239).
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the Exchange Act), and in
accordance therewith, files reports and other information
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<PAGE> 6
with the Securities and Exchange Commission (the "Commission"). Such reports and
other information can be inspected and copies at the public reference facilities
maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located in the New York Regional Office, 7 World Trade Center, Suite 1300, New
York, New York 10048 and the Chicago Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at Room 1024, 450 Fifth Street N.W., Washington, D.C.
20549. In addition, such reports and other information can be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005, on which the Company's Common Units are listed.
v
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY................................................................................
GENERAL................................................................................
ACTION BY WRITTEN CONSENT..............................................................
General..............................................................................
Prepackaged Plan of Reorganization...................................................
RECORD DATE; VOTING AND REVOCATION OF BALLOTS..........................................
NUMBER OF UNITS, WARRANTS AND OPTIONS OUTSTANDING......................................
NUMBER OF HOLDERS AND AMOUNT OF DEBT IN IMPAIRED
CLASSES OF CLAIMS....................................................................
PROPOSAL 1 -- ACCEPTANCE OF HUNTWAY'S "PREPACKAGED" PLAN OF REORGANIZATION PURSUANT TO
CHAPTER 11 OF THE BANKRUPTCY CODE........................................
Introduction.........................................................................
Purposes of the Prepackaged Plan.....................................................
Principal elements of the Prepackaged Plan...........................................
Interests of Certain Persons in the Prepackaged Plan.................................
Risk Factors.........................................................................
Industrial Governmental and Cyclical Factors......................................
Bankruptcy Considerations.........................................................
Risk of Non-Confirmation or Non-Acceptance of the Prepackaged Plan..............
Liquidation Under Chapter 7.....................................................
Alternative Plans of Reorganization.............................................
Federal Income Tax Treatment......................................................
Summary of the Prepackaged Plan......................................................
Chapter 11 Overview..................................................................
General...........................................................................
Classification and Treatment of Claims and Equity Interests.......................
Executory Contracts, Unexpired Leases and Other Obligations.......................
Description of Certain Current Indentures and Post-Restructuring Documents and
Instruments......................................................................
Description of the Old Collateralized Note Indenture and Old Collateralized
Notes............................................................................
Description of the New Collateralized Note Indenture and New Collateralized
Notes............................................................................
Comparison of Old Collateralized Note Indenture and New Collateralized Note
Indenture........................................................................
Description of the Old Subordinated Indenture and Old Subordinated Notes..........
Description of the Old Junior Subordinated Debenture Indenture and Old Junior
Subordinated Notes...............................................................
Description of the New Junior Subordinated Debenture Indenture....................
The Existing Guarantees and Existing Intercreditor Agreement......................
The New Guaranties and New Intercreditor Agreement................................
The Old Letter of Credit Agreement and New Letter of Credit Agreement.............
The Unitholders Agreement.........................................................
The Support Agreement.............................................................
Liquidation Analysis.................................................................
General...........................................................................
The Liquidation Analysis..........................................................
Confirmation of the Prepackaged Plan.................................................
Requirements for the Confirmation of the Plan.....................................
Acceptances.......................................................................
Feasibility of the Plan...........................................................
</TABLE>
vi
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<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Best Interests Test...............................................................
Summary of Other Provisions of the Plan and Related Matters..........................
Waiver of Subordination...........................................................
Amendment to Amended and Restated Partnership Agreement...........................
Disputed Claims...................................................................
Management........................................................................
Surrender and Cancellation of Instruments.........................................
Unclaimed Distributions...........................................................
Modification of the Prepackaged Plan..............................................
Withdrawal of the Plan............................................................
Consummation and Effectiveness....................................................
Effects of Confirmation..............................................................
Discharge.........................................................................
Huntway Incentive Option Plan.....................................................
Exculpation.......................................................................
Rights of Action..................................................................
Revesting.........................................................................
Retention of Jurisdiction.........................................................
Term of Injunctions or Stays......................................................
Voting Procedures....................................................................
General...........................................................................
Record Date.......................................................................
Expiration Date; Extensions; Amendments...........................................
Persons Entitled to Vote..........................................................
Instructions for Beneficial Interest Holders......................................
Instructions For Brokerage Firms, Banks, and Other Nominees.......................
Securities Clearing Agencies......................................................
Execution of Ballots by Representatives...........................................
Disputed Claims...................................................................
Certifications....................................................................
Ballots...........................................................................
Voting Multiple Claims and Equity Interests.......................................
Incomplete Ballots................................................................
Agreements Upon Furnishing Ballots................................................
Method of Delivery of Ballots.....................................................
Withdrawal of Ballots; Revocation.................................................
Waivers of Defects, Irregularities, Etc...........................................
First Day Motions....................................................................
Cash Collateral...................................................................
Prepetition Unsecured Trade Claims................................................
Prepetition Employee Claims and Existing Benefit Programs.........................
Cash Management System............................................................
Investment Strategy...............................................................
Capital Expenditures..............................................................
Postpetition Letter of Credit Facility............................................
Extension of Section 362..........................................................
Disclosure Statement and Prepackaged Plan.........................................
Claims Bar Date...................................................................
Miscellaneous Procedural and Administrative Motions...............................
Certain Federal Income Tax Considerations............................................
Risk of Cancellation of Indebtedness Income.......................................
</TABLE>
vii
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<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Consequences if CODI Recognized...................................................
Certain Other Consequences of the Exchange to Holders of Class 2 Claims, Class 5
Claims and Class 6 Claims.........................................................
Holders of Class 2 Claims and Class 5 Claims......................................
Original Issue Discount Rules.....................................................
Holders of Class 6 Equity Interests...............................................
Allocations of Income, Gain, Expense and Loss.....................................
Securities Law Considerations........................................................
Huntway and Sunbelt..................................................................
Business and Properties of Huntway and Sunbelt....................................
Products and Markets..............................................................
Huntway's Business Strategy.......................................................
Employees.........................................................................
Operating Committee.............................................................
Executive Management............................................................
Executive Compensation..........................................................
Financial Projections.............................................................
Accounting Treatment..............................................................
PROPOSAL 2 -- APPROVAL OF THE ISSUANCE OF COMMON UNITS UPON CONSUMMATION OF AN
OUT-OF-COURT RESTRUCTURING ON TERMS SUBSTANTIALLY SIMILAR TO THE
CONSENSUAL RESTRUCTURING AGREEMENT.......................................
Background and Reasons For Seeking Approval to Issue Additional Common Units.........
Effects of Issuance..................................................................
Required Vote........................................................................
PROPOSAL 3 -- ADOPTION OF THE HUNTWAY INCENTIVE OPTION PLAN............................
Background and Purpose of the Huntway Incentive Option Plan..........................
Term.................................................................................
Administration.......................................................................
Eligibility..........................................................................
Securities Subject to the Huntway Incentive Option Plan..............................
Effect of Termination of Employment or Change in Control on Grants...................
Unit Options.........................................................................
Amendment, Termination and Adjustment................................................
No Employment Rights.................................................................
Federal Income Tax Consequences......................................................
Grant of Unit Options................................................................
Exercise of Options..................................................................
Tax Consequences of Anti-Dilution Protection.........................................
Tax Consequences of Ownership of Common Units........................................
Short Swing Profit Liability Considerations..........................................
Securities Law Restrictions..........................................................
Required Vote........................................................................
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA........................................
CONDENSED PRO FORMA FINANCIAL STATEMENTS...............................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION............................................................................
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS...........................................
BENEFICIAL OWNERSHIP OF COMMON UNITS...................................................
CONSENT SOLICITATION...................................................................
</TABLE>
viii
<PAGE> 10
LIST OF APPENDICES
<TABLE>
<S> <C>
Appendix A
Prepackaged Plan of Reorganization.................................................. A-1
Appendix B
Consensual Restructuring Agreement.................................................. B-1
Appendix C
1996 Huntway Employee Incentive Option Plan......................................... C-1
Appendix D
Projected Financial Information..................................................... D-1
Appendix E
Amendment to Partnership Agreement.................................................. E-1
</TABLE>
ix
<PAGE> 11
GLOSSARY OF DEFINED TERMS
"1993 ACT" shall mean the Omnibus Budget Reconciliation Act of 1993.
"ADMINISTRATIVE EXPENSE" shall mean any cost or expense of administration
of the Prepackaged Chapter 11 Case under subsections 503(b) and 507(a)(1) of the
Bankruptcy Code.
"ALLOWED" shall mean with respect to any Claim, such claim, to the extent
(i) proof or application for allowance of which was timely and properly filed
or, if no proof of claim or application for allowance was properly filed, which
has been or hereafter is listed by Huntway on its Schedules, as liquidated in
amount and not disputed or contingent, and, in either case, as to which no
objection to the allowance thereof has been interposed on or before any
applicable period of limitation fixed by the Bankruptcy Code, the Federal Rules
of Bankruptcy Procedure, or the Bankruptcy Court, or as to which any objection
has been determined by a Final Order of the Bankruptcy Court to the extent such
objection is determined in favor of the respective Holder or as to which any
such objection has been settled by the parties thereto or (ii) such Claim is
allowed pursuant to the Prepackaged Plan. Notwithstanding the foregoing, except
for claimants under rejected executory contracts and unexpired leases who must
file proofs of claim, Holders of Class 3 Claims and Class 4 Claims will be
treated as if the Prepackaged Chapter 11 Case had not been filed (except as
otherwise provided for in the Prepackaged Plan), and the determination of
whether any Class 3 Claim or Class 4 Claim will be paid and/or the amount of any
Class 3 Claim or Class 4 Claim (which, subject to Bankruptcy Court approval,
shall not be listed on the Schedules, and as to which no proof of Claim need be
filed) will be determined, resolved or adjudicated as if the Prepackaged Chapter
11 Case had not been commenced. Allowed means, with respect to Equity Interests,
such Equity Interests that are listed on Huntway's transfer ledgers.
"BALLOT" shall mean any ballot for voting on Proposals 1, 2 and 3 enclosed
in the Consent Solicitation Statement.
"BANKERS TRUST" shall mean Bankers Trust Company.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, 11 U.S.C.
sec. 101 et. seq.
"BANKRUPTCY COURT" shall mean the United States District Court having
jurisdiction over the Prepackaged Chapter 11 Case and, to the extent of any
reference made pursuant to Section 157 of Title 28 of the United States Code,
the unit of such District Court constituted pursuant to Section 151 of Title 28
of the United States Code.
"BENEFICIAL INTEREST HOLDER" shall mean a Holder of beneficial interest in
a Claim or Equity Interest which entitles such Holder to rights or benefits of
ownership even though such Holder might not be the Holder of record on the
Record Date.
"BPD" shall mean barrels per day.
"CASH" shall mean cash and cash equivalents.
"CASH COLLATERAL" shall mean all of the cash located in Huntway's various
bank accounts subject to security interests held by the Senior Lenders.
"CLAIM" shall mean (a) any right to payment from Huntway whether or not
such right is reduced to judgment, liquidated, unliquidated, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured; or (b) any right to an equitable remedy for breach of performance if
such performance gives rise to a right of payment from Huntway whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured.
"CLASS" shall mean a category of Holders of Claims or Equity Interests as
set forth in Section II of the Prepackaged Plan.
"CLASS 1" shall mean Other Priority Claims that are entitled to a priority
in right of payment under Section 507(a) of the Bankruptcy Code.
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<PAGE> 12
"CLASS 2" shall mean all of the Claims of the Senior Lenders arising under
the Old Collateralized Note Indenture and Old Subordinated Note Indenture,
including interest, fees, costs and expenses provided thereunder, including any
post-petition interest, fees, costs and expenses permitted under Section 506(b)
of the Bankruptcy Code.
"CLASS 2A" shall mean all of the Senior Lender Claims of Bankers Trust.
"CLASS 2B" shall mean all of the Senior Lender Claims other than those of
Bankers Trust, to the extent such Claims are Secured Claims.
"CLASS 2C" shall mean all Senior Lender Claims other than those of Bankers
Trust, to the extent such Claims are not Secured Claims.
"CLASS 3" shall mean the Other Secured Claims.
"CLASS 4" shall mean the Unsecured Claims.
"CLASS 5" shall mean the Claims of Holders of Old Junior Subordinated
Notes.
"CLASS 6" shall mean the Equity Interests of Holders of Warrants.
"CLASS 7" shall mean the Equity Interests of Holders of Common Units.
"CLASS 8" shall mean the Equity Interests of Holders of Existing Unit
Options.
"CLASS 9" shall mean the Equity Interests of Danesh Options.
"CLASS 10" shall mean the General Partner Interests.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CODI" shall mean cancellation of indebtedness income.
"COMMISSION" shall mean the Securities and Exchange Commission.
"COMMON UNITS" shall mean the common units of Huntway.
"COMPANY" shall mean Huntway Partners, L.P., a Delaware limited
partnership.
"CONFIRMATION ORDER" shall mean the order of the Bankruptcy Court
confirming the Prepackaged Plan in accordance with the provisions of Chapter 11
of the Bankruptcy Code.
"CONSENSUAL RESTRUCTURING AGREEMENT" shall mean the out-of-court
restructuring agreement dated July 15, 1996 by and among the Huntway Group, the
Special Managing Partner, four out of five of the Senior Lenders and the Junior
Lenders.
"CONSENT SOLICITATION STATEMENT" shall mean the Consent Solicitation and
Disclosure Statement dated September , 1996 distributed by Huntway.
"CONSUMMATION" shall mean the occurrence of the Effective Date.
"CREDITOR" shall mean the Holder of a Claim in a particular Class under the
Prepackaged Plan.
"DANESH OPTION" shall mean the option issued by Huntway to Andre Danesh
pursuant to the Option Agreement dated March 13, 1996.
"DEBTOR-IN-POSSESSION" shall mean Huntway, upon the automatic entry of an
order for relief simultaneously with the filing of its voluntary petition.
"EQUITY HOLDERS" shall mean the holders of Equity Interests in Huntway
consisting of the Holders of the Warrants, Unit Options, the General Partner
Interests and the Unitholders.
"EQUITY INTEREST" shall mean any equity interest in Huntway represented by
the General Partner Interests, Common Units, the Danesh Options, the Warrants,
and the Existing Unit Options.
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<PAGE> 13
"ESTATE" shall mean the estate of Huntway created by Section 541 of the
Bankruptcy Code upon the commencement of the Prepackaged Chapter 11 Case.
"EXCHANGE" shall mean the exchanges of by Holders of Class 2 Claims,
Holders of Class 5 Claims and Holders of Class 6 Equity Interests.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXECUTIVE OFFICER" shall mean Huntway's chairman, president, principal
financial officer, principal accounting officer, any vice president in charge of
a principal business unit, division or function (such as sales, administration
or finance) and any other individual who performs similar policy making
functions.
"EXISTING INTERCREDITOR AGREEMENT" shall mean the Intercreditor and
Collateral Trust Agreement dated as of June 22, 1993 among the Senior Lenders,
Bankers Trust and United States National Trust Company, as collateral agent.
"EXISTING UNIT OPTIONS" shall mean the options to purchase Common Units
granted under Huntway's "1989 Salaried Employee Partnership Unit Option Plan"
and issued and outstanding as of the Record Date.
"EXPIRATION DATE" shall mean 5:00 p.m. Los Angeles time, on October ,
1996, unless Huntway, in its sole discretion, extends the period during which
Ballots and Master Ballots will be accepted by Huntway, in which case Expiration
Date shall mean the last time and date to which the solicitation of Ballots and
Master Ballots is extended.
"FCCC" shall mean First Chicago Equity Corporation, formerly known as First
Capital Corporation of Chicago.
"FINAL DECREE" shall mean the decree contemplated under Bankruptcy Rule
3022.
"FINAL ORDER" shall mean an order of the Bankruptcy Court:
(i) as to which the time to appeal, petition for certiorari, or motion
for reargument, rehearing or new trail has expired and as to which no
appeal, petition for certiorari, or other proceedings for reargument,
rehearing or new trial shall then be pending, or
(ii) as to which any right to appeal, petition for certiorari,
reargue, rehear or retry shall have been waived in writing in form and
substance satisfactory to the Company, or
(iii) in the event that an appeal, writ of certiorari, or reargument
or rehearing or new trial has been sought, as to which (x) such order of
the Bankruptcy Court shall have been affirmed by the highest court to which
such order was appealed, (y) certiorari has been denied as to such order,
or (z) reargument or rehearing or new trial from such order shall have been
denied, and in each case, the time to take any further appeal, petition for
certiorari or move for reargument, rehearing or new trial shall have
expired.
"FIRST DAY MOTIONS" shall mean the motions and applications which Huntway
is filing simultaneously with its voluntary petition commencing the Prepackaged
Chapter 11 Case.
"FIRST PLAZA" shall mean Mellon Bank, as trustee, for the First Plaza Group
Trust.
"GENERAL PARTNER" shall mean Huntway Managing Partner, L.P.
"GENERAL PARTNER INTEREST" shall mean the general partner interests in
Huntway held by the General Partner and the Special Managing Partner.
"HOLDER" shall mean any entity holding an Equity Interest or Claim, and
with respect to a vote on the Prepackaged Plan, means the holder of the
beneficial interest in such Claim or Equity Interest as of the Record Date or
any authorized signatory who has completed and executed a Ballot or on whose
behalf a Master Ballot has been completed and executed in accordance with the
Voting Instructions.
xii
<PAGE> 14
"HOLDING PERIOD" shall mean the six month period before or after the grant
of an Unit Option during which it is impractical for an executive officer, among
others, to sell any Common Units in accordance with Section 16(b) of the
Exchange Act.
"HUNTWAY" shall mean Huntway Partners, L.P., a Delaware limited
partnership.
"HUNTWAY GROUP" shall mean Sunbelt and Huntway.
"HUNTWAY INCENTIVE OPTION PLAN" shall mean the 1996 Huntway Employee
Incentive Option Plan in the form attached as Appendix C to the Consent
Solicitation Statement.
"HUNTWAY RELEASORS" shall mean Huntway, Reorganized Huntway (in each case
whether as debtor, Debtor-in-Possession or on behalf of its creditors) and all
persons and entities asserting claims or who may assert claims derivatively or
otherwise through or on behalf of them, Huntway and their respective
predecessors, successors and assigns, and the respective parents, subsidiaries,
affiliates and partners of the foregoing entities.
"IMPAIRED CLAIM" means a Claim classified in an Impaired Class.
"IMPAIRED CLASS" means a Class that is impaired within the meaning of
Section 1124 of the Bankruptcy Code.
"INFORMATION AGENT" shall mean MacKenzie Partners, Inc.
"INTEREST UNITS" shall mean the Common Units issued to the Junior Lenders
as accrued interest on the New Junior Notes.
"IRS" shall mean the Internal Revenue Service.
"JUNIOR LENDERS" shall mean collectively FCCC and MDP, each individually is
a "Junior Lender."
"MASS MUTUAL" shall mean Massachusetts Mutual Life Insurance Company.
"MASTER BALLOT" shall mean the master ballots accompanying the Solicitation
Materials upon which nominees for Holders of the beneficial interest of any
Impaired Class of Claims or any Impaired Class of Equity Interests shall have
indicated the acceptance or rejection of the Prepackaged Plan, in accordance
with the Prepackaged Plan and the Voting Instructions.
"MDP" shall mean Madison Dearborn Partners III, L.P.
"NEW COLLATERALIZED NOTE INDENTURE" shall mean an Indenture among
Reorganized Huntway, Sunbelt, and IBJ Schroder Bank & Trust Company, as Trustee,
respecting the New Senior Notes issued by Reorganized Huntway pursuant to the
Prepackaged Plan.
"NEW INDENTURES" shall mean the New Collateralized Note Indenture and the
New Junior Indenture.
"NEW INTERCREDITOR AGREEMENT" shall mean that certain Amended and Restated
Intercreditor and Collateral Trust Agreement dated as of the Effective Date by
and among Reorganized Huntway, Bankers Trust, as LOC Bank, the Parties receiving
New Senior Notes, and United States Trust Company of New York, as Collateral
Agent.
"NEW JUNIOR NOTES" shall mean Reorganized Huntway's Junior Subordinated
Notes Due 2005, in the original aggregate principal amount of $2,070,000, to be
issued in accordance with the provisions of the Prepackaged Plan and governed by
the New Junior Subordinated Debenture Indenture.
"NEW JUNIOR SUBORDINATED DEBENTURE INDENTURE" shall mean an Indenture among
Reorganized Huntway, Sunbelt and IBJ Schroder Bank & Trust Company, as Trustee,
respecting the New Junior Notes issued by Reorganized Huntway pursuant to the
Prepackaged Plan.
"NEW LETTER OF CREDIT AGREEMENT" shall mean the amended or restated Old
Letter of Credit Agreement.
"NEW NOTES" shall mean the New Senior Notes and the New Junior Notes.
xiii
<PAGE> 15
"NEW SENIOR NOTES (OTHER)" shall mean the Company's 12% Senior Secured
Notes (Other) Due 2005 issued and outstanding pursuant to the New Collateralized
Note Indenture (including any additional New Senior Notes (Other) issued in
payment of interest accrued on the already existing New Senior Notes (Other) and
New Senior Notes (Sunbelt IDB) but excluding the Senior Notes (Sunbelt IDB)).
"NEW SENIOR NOTES (SUNBELT IDB)" shall mean the Company's 12% Senior
Secured Notes (Sunbelt IDB) Due 2005 issued and outstanding pursuant to the New
Collateralized Note Indenture.
"NEW SENIOR NOTES" shall mean the New Senior Notes (Other) and the New
Senior Notes (Sunbelt IDB).
"NEWCO" shall mean a newly formed corporation.
"NORTHERN MARKET" shall mean the market area covered by the Benicia
refinery including most of northern California from Monterey and Modesto north
to southern Oregon and east to northern Nevada and Utah.
"NYSE" shall mean the New York Stock Exchange.
"NYSE RULES" shall mean the listing rules of the NYSE.
"OFFICIAL COMMITTEE" shall mean any official committee of unsecured
creditors appointed by the United States Trustee in a bankruptcy case.
"OID" shall mean original issue discount.
"OLD COLLATERALIZED NOTE INDENTURE" shall mean the Collateralized Note
Indenture, dated as of June 23, 1993, as amended, among Huntway, Sunbelt and
Fleet National Bank of Massachusetts, formerly known as Shawmut Bank, N.A., as
trustee.
"OLD COLLATERALIZED NOTES" shall mean the 8% Senior Secured Notes Due 2000,
issued under the Old Collateralized Note Indenture, together with all interest
earned thereon, including Secondary Securities issued with respect thereto.
"OLD INDENTURES" shall mean, collectively, the Old Collateralized Note
Indenture, the Old Subordinated Note Indenture and the Old Junior Subordinated
Debenture Indenture.
"OLD LETTER OF CREDIT AGREEMENT" shall mean the Letter of Credit and
Reimbursement Agreement dated June 23, 1993 executed by Huntway, Sunbelt and
Bankers Trust.
"OLD NOTES" shall mean, collectively, the Old Collateralized Notes, Old
Subordinated Notes and the Old Junior Subordinated Notes.
"OLD JUNIOR SUBORDINATED NOTES" shall mean the Increasing Rate Junior
Subordinated Debentures Due 2020 issued under the Old Junior Subordinated Note
Indenture, together with all interest earned thereon, including Secondary
Securities issued with respect thereto.
"OLD SUBORDINATED NOTE INDENTURE" shall mean the Subordinated Note
Indenture dated as of June 23, 1993 among Huntway, Sunbelt and Fleet Bank
National Association, a national banking association, formerly known as Shawmut
Bank Connecticut National Association, as trustee.
"OLD SUBORDINATED NOTES" shall mean the Increasing Rate Subordinated Notes
Due 2008 issued under the Old Subordinated Note Indenture, together with all
interest earned thereon, including Secondary Securities issued with respect
thereto.
"OPERATING COMMITTEE" shall mean the Special Operating Committee of the
Huntway Division of Reprise.
"OPPENHEIMER" shall mean Oppenheimer & Company, Inc., for itself and as
agent.
"OPTION COMMITTEE" shall mean the committee administering the Huntway
Incentive Option Plan.
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<PAGE> 16
"OTHER PRIORITY CLAIMS" shall mean any Claims accorded a priority and right
of payment under subsection 507(a) of the Bankruptcy Code, other than a Priority
Tax Claim or an Administrative Expense.
"OTHER SECURED CLAIMS" shall mean all Secured Claims, other than Senior
Lender Claims, against Huntway held by an entity.
"PARTNERSHIP AGREEMENT" shall mean the Company's Amended and Restated
Agreement of Limited Partnership.
"PETITION DATE" shall mean the date on which the Debtor's petition for
relief commencing the Prepackaged Chapter 11 Case is filed.
"POST-RESTRUCTURING LETTER OF CREDIT AGREEMENT" shall mean either (i) a
Letter of Credit Agreement to be entered into on the Effective Date between
Bankers Trust and Reorganized Huntway or (ii) the Old Letter of Credit Agreement
as amended by a First Amendment to Letter of Credit and Reimbursement Agreement
to be entered into on the Effective Date by Bankers Trust, Reorganized Huntway,
and Sunbelt.
"PREPACKAGED CHAPTER 11 CASE" shall mean the prepackaged bankruptcy case
the Company plans to commence pursuant to chapter 11 of the Bankruptcy Code if
the requisite acceptances are obtained.
"PREPACKAGED PLAN" shall mean the Company's proposed "prepackaged" plan of
reorganization in the form attached as Appendix A to the Consent Solicitation
Statement.
"PREPACKAGED RESTRUCTURING" shall mean the proposed reorganization of
Huntway pursuant to the Prepackaged Plan.
"PRIORITY TAX CLAIMS" shall mean the Claims of governmental units entitled
to a priority in right of payment under Section 507(a)(7) of the Bankruptcy
Code.
"PROJECTIONS" shall mean financial projections prepared, through December
31, 2000, as prepared by the Company and set forth in the Consent Solicitation
Statement.
"PROPOSAL 1" shall mean the proposed Prepackaged Plan contained in the
Consent Solicitation Statement.
"PROPOSAL 2" shall mean the proposal to issue Common Units upon
consummation of an out-of-court restructuring on terms substantially similar to
the Consensual Restructuring Agreement.
"PROPOSAL 3" shall mean the proposed adoption of the Huntway Incentive
Option Plan.
"PTP" shall mean a publicly traded partnership.
"QUALIFYING INCOME" shall mean income that meet certain requirement of the
Code that enables Huntway to be treated as a partnership for Federal income tax
purposes.
"RECORD DATE" shall mean 5:00 p.m. Los Angeles time, on September 16, 1996.
"REORGANIZED HUNTWAY" shall mean Huntway or any successor thereto, by
merger, consolidation or otherwise, on and after the Effective Date.
"REPLACEMENT LETTER OF CREDIT AGREEMENT" shall mean the Company's new
letter of credit facility.
"REPRISE" shall mean Reprise Holdings, Inc., a Texas corporation.
"RYBACK" shall mean Ryback Management Corporation.
"SABA" shall mean Saba Petroleum Company.
"SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP" shall mean
the Amended and Restated Agreement of Limited Partnership of Reorganized
Huntway, as amended as described in Section V.F. of the Prepackaged Plan.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
xv
<PAGE> 17
"SENIOR LENDERS" means, collectively, Ryback, Bankers Trust, Mass Mutual,
First Plaza and Oppen-heimer.
"SENIOR LENDER RELEASORS" shall mean the Senior Lenders (other than any
Senior Lender who elects not to provide a release in accordance with the Voting
Instructions and this Consent Solicitation Statement), on behalf of itself, its
creditors and all persons and entities asserting claims or who may assert claims
derivately or otherwise through or on behalf of it and its respective
predecessors, successors and assigns, and the respective parents, subsidiaries,
affiliates and partners of the foregoing entities.
"SOLICITATION AGENT" shall mean MacKenzie Partners, Inc.
"SOLICITATION MATERIALS" shall mean the Consent Solicitation Statement and
the Prepackaged Plan.
"SOUTHERN MARKET" shall mean the market area which includes the southern
portion of California from Bakersfield to San Diego, into Baja, California and
Mexico, and east into southern Nevada and Arizona.
"SPECIAL MANAGING PARTNER" shall mean Huntway Holdings, L.P., a Delaware
limited partnership and the special general partner of Huntway.
"STOCK-FOR-DEBT EXCEPTION" shall mean when the debtor issues stock of the
debtor to creditors in exchange for a reduction in its debt.
"SUNBELT" shall mean Sunbelt Refining Co., L.P., an affiliate of Huntway
which is 99.99% owned by Huntway.
"SUNBELT BONDS" means the $8,600,000 aggregate principal amount of
Variable/Fixed Fate Demand Industrial Development Revenue Bonds, Series 1988
(Sunbelt Refining Company, L.P. project) issued pursuant to that certain
Indenture of Trust, dated as of August 1, 1988 between the Industrial
Development Authority of the County of Pinal and Dai-ichi Kangyo Bank of
California.
"SUPPORT AGREEMENT" shall mean the Agreement dated July 22, 1996 among the
General Partner, the Special Managing Partner, the Junior Lenders, Bankers
Trust, Mass Mutual, Oppenheimer and First Plaza relating to the potential
conversion of Huntway to corporate form.
"TREASURY" shall mean the United States Department of the Treasury.
"UNITHOLDER" shall mean a Holder of the Company's Common Units.
"UNIT OPTION" shall mean an option to purchase Common Units of Reorganized
Huntway granted under the New Unit Option Plan.
"UNSECURED CLAIMS" shall mean any Claims that are not an Other Secured
Claim, a Senior Lender Claim, a Junior Lender Claim, an Administrative Expense,
a Priority Tax Claim or an Other Priority Claim.
"VOTING INSTRUCTIONS" shall mean the instructions for voting on the
Prepackaged Plan contained in the section of the Consent Solicitation Statement
entitled "VOTING PROCEDURES" and in the Ballots and the Master Ballots.
"WARRANTS" shall mean warrants exercisable into Common Units and any
replacement thereof.
xvi
<PAGE> 18
HUNTWAY PARTNERS, L.P.
- -------------------------------------------------------------------------------
Consent Solicitation and Disclosure Statement
- -------------------------------------------------------------------------------
<PAGE> 19
SUMMARY
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Consent Solicitation and Disclosure
Statement.
PURPOSES OF THE CONSENT SOLICITATION
This Consent Solicitation Statement and the Consent and the Ballots are
being furnished to holders of certain securities of Huntway in connection with
the solicitation of written consents and acceptances on behalf of the General
Partner, of the proposals described herein.
The purpose of this consent solicitation, among other things, is to obtain
the requisite number of acceptances of the Prepackaged Plan under the Bankruptcy
Code described in Proposal 1. Assuming the requisite acceptances are obtained to
Proposal 1, the Company intends to commence the Prepackaged Chapter 11 Case
promptly upon receipt of such acceptances and seek confirmation of the
Prepackaged Plan. Although the Company is not currently aware of any
circumstances under which it would not commence the Prepackaged Chapter 11 Case
if the requisite consents are obtained, the Company reserves the right not to
commence the Prepackaged Chapter 11 Case for any reason, including the Company's
receipt of the agreement of 100% of the Company's lenders to the terms of the
Consensual Restructuring Agreement. The Prepackaged Plan and the Consensual
Restructuring Agreement, as they relate to and treat the existing Unitholders,
contain substantially identical terms, although the holders of Senior Notes and
Warrants are treated differently under the two plans. See "PROPOSAL
1 -- Comparison of Treatment of Claims and Equity Interests under Prepackaged
Plan and Consensual Restructuring Agreement."
Proposal 2 of this Consent Solicitation Statement seeks, pursuant to the
NYSE Rules, on which the Common Units are listed for trading, the approval of
the Unitholders to issue additional Common Units pursuant to the Consensual
Restructuring Agreement or any other out-of-court, consensual restructuring of
the Company's indebtedness on terms substantially similar to the Consensual
Restructuring Agreement. Proposal 3 of this Consent Solicitation Statement seeks
Unitholder approval of the adoption of the Huntway Incentive Option Plan.
RECORD DATE; VOTING; REQUIRED APPROVALS
The General Partner has established the Record Date for determining which
beneficial holders of Huntway securities are eligible to vote on Proposal 1 with
respect to the Prepackaged Plan and which Unitholders are eligible to vote on
Proposals 2 and 3. The solicitation pursuant to this Consent Solicitation
Statement will expire at 5:00 p.m., Los Angeles time, on October , 1996,
unless extended. Consents are required to be made, and may be revoked or
changed, in accordance with the procedures described in this Consent
Solicitation Statement. See "RECORD DATE; VOTING AND REVOCATION OF BALLOTS" and
"PROPOSAL 1 -- Voting Procedures."
In addition to the solicitation of written votes of the Unitholders with
respect to Proposal 1, the Company is soliciting votes to accept the Prepackaged
Plan from each holder that was a beneficial interest holder as of the Record
Date of (i) the Old Collateralized Notes, (ii) the Old Subordinated Notes, (iii)
the Old Junior Subordinated Notes, (iv) the Warrants, (v) the Existing Unit
Options and (vi) the General Partnership Interests, in each case as defined
herein. Only Unitholders are entitled to vote with respect to Proposal 2 and
Proposal 3.
Under the Bankruptcy Code, the holders of at least two-thirds in face
amount and more than one-half in number of the claims of each class of impaired
claims actually voting must timely vote the Ballot in order to accept the
Prepackaged Plan. The Bankruptcy Code also provides that the holders of at least
two-thirds in amount of the equity interests of each class of impaired equity
interests actually voting must timely vote the Ballot in order to accept the
Prepackaged Plan under Proposal 1. Under the Bankruptcy Code, there is no
minimum number (or quorum) of votes that must be cast to accept the Prepackaged
Plan and thus the failure to vote, or an abstention, with respect to Proposal 1
has no effect on the outcome of Proposal 1. The approval of each of Proposals 2
and Proposal 3 requires the consent of the holders of at least a majority of the
2
<PAGE> 20
outstanding Common Units and thus the failure to vote, or an abstention, with
respect to Proposal 2 or Proposal 3 acts as a vote against Proposal 2 or
Proposal 3, as the case may be.
The General Partner has recommended that the Unitholders vote their Ballots
to accept and consent to each of Proposal 1, Proposal 2 and Proposal 3. Both the
General Partner and the Special Managing Partner intend to vote their respective
Ballots to accept Proposal 1. To the best knowledge of the General Partner, all
of the Company's executive officers that are Unitholders entitled to vote their
Ballots currently intend to submit votes with respect to Proposal 1 to accept
the Prepackaged Plan, Proposal 2 to approve the issuance of additional Common
Units and Proposal 3 to adopt the Huntway Incentive Option Plan. Such officers
beneficially hold in the aggregate approximately 5.4% of the outstanding Common
Units and approximately 83.3% of the Existing Unit Options. The following
Beneficial Owners of greater than 5% of the Company's Common Units have also
indicated to the Company their intention to vote in favor of the Prepackaged
Plan:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
COMMON UNITS OUTSTANDING
------------ -------------
<S> <C> <C>
First Chicago Equity Corporation............................ 2,986,835 29.8%
Mr. Andre Danesh............................................ 914,900 7.9
Reprise Holdings............................................ 653,286 5.7
Officers and Operating Committee Members as a Group......... 1,054,508 9.1
--------- ----
Total............................................. 5,609,529 48.5%
========= ====
</TABLE>
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
The terms of the Prepackaged Plan provide that upon its consummation (i)
each outstanding Existing Unit Option will be exchanged for a new Unit Option
with terms and conditions the same in all material respects as the Existing Unit
Options, except that all new Unit Options will have an exercise price of $0.50
per Common Unit (which exceeds the market value of the Common Units at the time
the Consensual Restructuring Agreement was agreed to) and (ii) 22 members of the
Company's management will be issued new Unit Options to acquire an aggregate of
1,793,850 Common Units at an exercise price of $0.50 per Common Unit. The Unit
Options in (i) and (ii) above collectively will represent approximately 10% of
the Company's fully-diluted equity upon consummation of the Prepackaged Plan.
The terms of the Prepackaged Plan also provide that the Company will issue to
the holders of new Unit Options from time to time after consummation of the
Prepackaged Plan additional Unit Options in amount sufficient to prevent
dilution to the amount of the fully-diluted equity of the Company represented by
such originally issued new Unit Options, which dilution may be caused by the
issuance of Common Units after consummation of the Prepackaged Plan (i) to the
holders of Class 5 Claims as payment of interest on the New Junior Notes to be
issued to such holders, pursuant to the terms of such notes, and (ii) to the
holders of Class 2 Claims and Class 6 Equity Interests as anti-dilution
protection for the Common Units to be issued to such holders.
The terms of the Prepackaged Plan provide that each $1,000 original
principal amount of the Old Junior Subordinated Notes will be exchanged for (i)
$295.71 principal amount of New Junior Notes and (ii) 159.3 Common Units. The
Old Junior Subordinated Notes are held by two affiliates of the General Partner.
Annual interest expense on the New Junior Notes will be $248,400 (12% of the
$2,070,000 principal amount) and will be paid through the issuance of Common
Units with a market value equal to the amount of interest. This payment will be
made once a year and paid no later than the March 31 following the year to which
it relates.
Under the terms of the Consensual Restructuring Agreement and the
Prepackaged Plan, any Common Units issued as interest on the New Junior Notes
will not dilute the equity interest represented by the Common Units to be issued
initially to the Senior Lenders and the Warrant holders (approximately 50% of
the Common Units initially outstanding), nor will it dilute the equity interest
represented by the Common Units to be issued initially to the holders of the Old
Junior Subordinated Note (approximately 4.4% of the Common Units initially
outstanding), nor will it dilute the equity interest represented by the Unit
Options to be issued to management (initially representing approximately 10% of
the Company's fully diluted equity). Any Unit Options issued to management as
anti-dilution protection will have an exercise price equal to the market price
of the Common Units at the time of issuance.
3
<PAGE> 21
The issuance of Common Units and Unit Options to such parties over time
will have the effect of diluting the equity ownership interest of the existing
Unitholders. For example, assuming annual New Junior Note interest expense of
$248,400 and a Common Unit market price of $1.50, a total of 363,158 additional
Common Units and Unit Options to acquire 40,351 Common Units would be issued in
payment of interest and as anti-dilution protection at the end of the first year
the New Junior Notes are outstanding. At the end of three years, assuming the
market price of the Common Units remained the same, a total of 1,089,474
additional Common Units and Unit Options to acquire 121,053 additional Common
Units would have been issued in payment of interest and as anti-dilution
protections during such period. These issuances would have the effect of
reducing the percentage of the Company's fully diluted equity represented by
existing Common Units from approximately 40% at the consummation of the
Prepackaged Plan to approximately 37% of the fully diluted equity after three
years. So long as interest on the New Junior Notes continued to be paid in
Common Units (the term of the New Junior Notes is 10 years), additional annual
dilution to the equity interest represented by the existing Common Units would
occur.
The holders of existing Unit Options and the holders of Old Junior
Subordinated Notes will each receive more value under the Prepackaged Plan than
the Company estimates would be available to be distributed to such holders upon
a liquidation of the Company. See "PROPOSAL 1 -- Liquidation Analysis."
Members of management receiving Unit Options pursuant to the terms of the
Prepackaged Plan, Reprise, the corporate general partner of the General Partner
of the Company, through its ownership of Common Units, and the Junior Lenders,
affiliates of the General Partner, through their ownership of Common Units and
the Old Junior Subordinated Notes, have interests in the Company and the
consummation of the Prepackaged Plan that are different from (or in the case
members of management, Reprise and the Junior Lenders holding Common Units, in
addition to) those of the holders of Common Units and, accordingly, have a
potential conflict of interest with the other holders of Common Units with
respect to the approval and consummation of the Prepackaged Plan. No person was
retained by the Company to represent solely the interests of the Unitholders in
connection with the negotiation of the Consensual Restructuring Agreement and
the Prepackaged Plan. See "PROPOSAL 1 -- Interests of Certain Persons in the
Prepackaged Plan." Management believes the restructuring plan is fair to
existing Unitholders, considering that the Company is in default under its debt
agreements and the proposed restructuring among other things, reduces debt by
approximately $70 million while reducing Unitholder equity on a fully diluted
basis by approximately 30.7% (from approximately 70.2% to 39.5%). See "SUMMARY
- -- Terms of the Prepackaged Plan."
HUNTWAY AND SUNBELT
Huntway owns and operates two asphalt refineries located in Wilmington and
Benicia, California, serving the California region for over 15 years. The
refineries process primarily California crude oils to produce liquid asphalt for
use in road construction and repair, as well as other refined petroleum
light-end products such as gas oil, naphtha, kerosene distillate, and bunker
fuels. The refineries supply liquid asphalt to hot mix asphalt producers,
material supply companies, contractors and government agencies principally for
use in road paving in California, and to a lesser extent Arizona, Nevada, Utah,
Oregon and Mexico. The Wilmington and Benicia refineries have refining
capacities of 6,000 bpd and 9,000 bpd, respectively.
Huntway generates income principally through maintaining the margins
between prices for its refined products and the cost of crude oil. Most
competing refineries typically produce liquid asphalt as a residual by-product
from the refining of higher cost and high quality, light crude oil into products
such as gasoline. In contrast, Huntway's California refineries were designed
specifically for the production of liquid asphalt from lower cost, lower
quality, heavy crude oil produced in California.
Sunbelt owns a refinery in Coolidge, Arizona. The refinery, which was built
in 1989 but did not become operational until 1991, has a capacity of 8,500 bpd
and, in addition to the products made by the Huntway refineries, produced jet
and diesel fuel. The Sunbelt refinery also has the capacity to store 100,000
barrels of crude oil and 195,000 barrels of liquid asphalt and other refined
products.
The Sunbelt refinery was shut down in August 1993 due to poor margins at
the facility and a limitation on working capital availability. The refinery will
remain closed until such time that there is a significant
4
<PAGE> 22
improvement in market conditions, a processing arrangement is established, or
the refinery is sold. Management currently intends to reopen the refinery as a
terminal if and when the market conditions sufficiently improve.
There will be no change to the Company's current operations if the
Prepackaged Plan is approved. If the Prepackaged Plan is not approved, the
Company believes that it is likely that either (i) an alternative plan of
reorganization would be proposed, (ii) the Company's lenders would seek to
foreclose upon the Company's assets, substantially all of which serve as
collateral for the indebtedness owed to such lenders, or (iii) the Company's
assets would be liquidated. The Company does not currently have any alternative
plan of reorganization and is not aware of such a plan proposed by any of its
lenders or other securityholders. In the event foreclosure proceedings against
the Company's assets are initiated or the Company's assets are otherwise
liquidated, it is not possible to predict with certainty the effect of such
actions on the Company's operations or its securityholders.
BACKGROUND, PURPOSES AND EFFECTS OF THE PREPACKAGED PLAN
After consideration of its alternatives to improve the financial condition
and capital structure of Huntway, the General Partner has concluded that the
restructuring of Huntway's indebtedness embodied in the Prepackaged Plan is
necessary if Huntway is to deal with its serious financial problems and to
continue to operate as a going concern. In October 1995, anticipating a payment
default under the Old Collateralized Note Indenture, the Company initiated
discussions with all of its lenders regarding potential out-of-court
restructuring of the Company's outstanding indebtedness. As a result of such
deliberations, on April 15, 1996, all of the Senior Lenders other than Ryback
(representing 86% of the outstanding senior indebtedness) and all of the Junior
Lenders agreed to consummate a restructuring consistent with the terms of the
Consensual Restructuring Agreement.
Specifically, the Consensual Restructuring Agreement contemplates (1) the
reduction of Huntway's debt by nearly $70 million; (2) that the existing
Unitholders will retain their equity interests in the Company on a diluted
basis; and (3) other significant favorable modifications to the Company's debt
obligations.
Since April 15, 1996, the General Partner has carefully considered the
financial condition and prospects of Huntway, the absence of feasible
alternative solutions and the various aspects of the Prepackaged Plan and has
determined that, so long as the Company cannot obtain the consent of 100% of the
Senior Lenders to the Consensual Restructuring Agreement, seeking confirmation
of the Prepackaged Plan is the most favorable solution to the Company's current
inability to service its outstanding indebtedness while providing the
Unitholders with the ability to retain an economic interest in the Company. The
Prepackaged Plan and the Consensual Restructuring Agreement, solely as each
relates to and treats the existing Unitholders, contain substantially identical
terms which are delineated below in Proposal 1 with respect to the Prepackaged
Plan. Under each of the Prepackaged Plan and the Consensual Restructuring
Agreement, the Unitholders will retain their Equity Interests in the Company on
a diluted basis and there will be no changes to the existing Common Units (other
than the amendment of the Partnership Agreement to clarify the tax treatment of
the transactions contemplated by the Prepackaged Plan). In contrast, in the
event that neither the Consensual Restructuring Agreement nor the Prepackaged
Plan is consummated, there exists a substantial likelihood that the Equity
Holders will receive little, if anything, in respect of their Equity Interests
in the Company as a result of a foreclosure, bankruptcy or liquidation.
Therefore, the General Partner has approved and recommends that the Unitholders
consent to Proposal 1 and vote the Ballot to accept the Prepackaged Plan.
The purpose of the Prepackaged Plan is to enhance the long term viability
of the Company by aligning its capital structure with its present and future
operating prospects. The Prepackaged Plan will reduce the principal amount and
lower the debt service requirements of the Company's indebtedness. By offering
Common Units to Holders of certain of the Company's indebtedness and Holders of
warrants to acquire new Common Units, such Holders will participate in any
long-term appreciation of the Company's value, which the Company expects to be
enhanced by the deleveraging of the Company's capital structure.
The terms of each of the Prepackaged Plan and the Consensual Restructuring
Agreement provide, among other things, for the reduction in outstanding
indebtedness of the Company by approximately $70 million, the
5
<PAGE> 23
issuance of new Common Units representing approximately 55% of the equity of the
reorganized Company to be outstanding upon consummation of the Prepackaged Plan,
and the issuance of options to acquire new Common Units for $.50 per Common Unit
(including options issued to the Company's management which will represent
approximately 10% of the fully diluted equity of the reorganized Company upon
consummation of the Prepackaged Plan) (after taking into account the
cancellation of existing options held by management personnel pursuant to the
Prepackaged Plan).
The General Partner believes that the financial restructuring contemplated
by the Prepackaged Plan is in the best interests of all Creditors and Equity
Holders. If the Prepackaged Plan is not confirmed, the General Partner believes
that Huntway will be forced to either file an alternate plan of reorganization
under Chapter 11 of the Bankruptcy Code, liquidate under Chapter 7 of the
Bankruptcy code, or be subject to a foreclosure by the Senior Lenders. In the
event of either a liquidation under Chapter 7 of the Bankruptcy Code or a
foreclosure by the Senior Lenders on Huntway's assets, the General Partner
believes that Huntway's unsecured Creditors and Equity Holders would realize no
distributions or value for their Claims or Equity Interests, as Huntway has
assets worth approximately $17.5 million (liquidation value) to satisfy $95.5
million of secured debt. See PROPOSAL 1 -- "Liquidation Analysis." In contrast,
if the Bankruptcy Court confirms the Prepackaged Plan, Unitholders will retain
their Equity Interests on a diluted basis and Holders of other Equity Interests
will receive a distribution in respect thereof.
CERTAIN COMPARATIVE HISTORICAL AND PRO FORMA FINANCIAL DATA
Set forth below is certain comparative historical and pro forma financial
data showing the effects of the consummation of the Prepackaged Plan.
<TABLE>
<CAPTION>
AT JUNE 30, 1996
--------------------------
HISTORICAL PRO FORMA
------------ -----------
<S> <C> <C>
Total Debt................................................................. $ 94,345,000 $25,570,000
Accrued Interest on Debt................................................... 3,336,000 1,534,000(1)
Units Outstanding.......................................................... 11,672,000 25,599,000
Book Value per Unit........................................................ (2.70) 1.56
Unitholder Equity.......................................................... (31,482,000) 39,833,000
</TABLE>
<TABLE>
<CAPTION>
YEAR 1995 FIRST SIX MONTHS 1996
--------------------------- ----------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
------------ ------------ ---------- ---------
<S> <C> <C> <C> <C>
Income/(Loss) Before Extraordinary Item........... $(14,461,000) $(13,045,000)(2) $ (968,000) $(365,000)(3)
Income/(Loss) per Unit Before Extraordinary
Item............................................ (1.24) (0.51) (0.08) (0.01)
</TABLE>
- ---------------
(1) Assumes interest expense accrues on $25,570,000 of debt at 12% beginning
January 1, 1996.
(2) Unitholder equity excludes extraordinary gain of $57,002,000 and excludes
capital contribution of $10,350,000. Income/(loss) before extraordinary
item and income/(loss) per unit before extraordinary item excludes
extraordinary gain.
(3) Includes lower net interest expense of $843,000 for the six months ended
June 30, 1996. Also includes amortization of debt issue costs of $20,000
for the six months ended June 30, 1996.
TERMS OF THE PREPACKAGED PLAN
Upon consummation of the Prepackaged Plan, the Old Collateralized Notes,
the Old Subordinated Notes, the Old Junior Subordinated Notes, the Warrants and
the Existing Unit Options will be exchanged as described herein. Pursuant to the
Prepackaged Plan, the Senior Lenders will exchange the Old Collateralized Notes
and the Old Subordinated Notes, which represent in excess of $87.79 million of
face principal amount and accrued interest owed to the Senior Lenders by the
Company, for $23.5 million in New Senior Notes, together with 6,335,663 Common
Units representing approximately 25% of the Common Units issued and outstanding
on the Effective Date. This exchange reflects a reduction in face principal
amount of the Company's debt and accrued interest of approximately $64.29
million.
6
<PAGE> 24
Also pursuant to the Prepackaged Plan, the Junior Lenders will exchange the
Old Junior Subordinated Notes, which represent in excess of $7.7 million in
principal and accrued interest owed by the Company, for $2.07 million principal
amount of New Junior Notes, together with 1,115,077 Common Units representing
4.4% of the Common Units issued and outstanding on the Effective Date. This
exchange reflects a reduction in debt and accrued interest of approximately
$5.67.
In addition to the Common Units issued to the Senior Lenders and the Junior
Lenders as described above, the Prepackaged Plan provides for the issuance of
6,335,663 Common Units to the holders of the Warrants and the issuance of Unit
Options to the Company's management for the purchase of 1,793,850 Common Units.
These New Unit Options, together with the New Unit Options to purchase 1,022,000
Common Units issued to the holders of the Company's Existing Unit Options,
represent approximately 10% of the Company's equity on a fully-diluted basis
(assuming exercise of such Options) on the Effective Date.
The Company has agreed to issue to Andre Denesh, upon consumation of the
Prepackaged Plan, options for the purchase of 600,000 Common Units. See
PROPOSAL--"Danesh Options."
The Prepackaged Plan provides that the existing Unitholders retain their
Common Units, subject to (i) the dilution (54.4% as of the Effective Date)
resulting from the above-described issuances of Common Units to the Senior
Lenders, the Junior Lenders and the holders of the Warrants, (ii) the potential
dilution resulting from the above-described issuance of the New Unit Options for
the purchase of 1,793,850 Common Units, and the above described issuance of
options to Andre Danesh (iii) the dilution resulting from further issuances of
Common Units to the Junior Lenders as provided in the New Junior Notes and
summarized below, and (iv) the consequent issuances of Common Units to the
Senior Lenders and holders of Warrants, and New Unit Options to the holders of
New Unit Options, to prevent dilution caused by the foregoing issuances to the
Junior Lenders.
The following comparative table sets forth the equity ownership of the
Company on an outstanding unit basis and on a fully diluted basis, both pre- and
post-restructuring:
HUNTWAY PARTNERS, L.P.
COMMON UNIT OWNERSHIP*
<TABLE>
<CAPTION>
PRE-RESTRUCTURING POST-RESTRUCTURING
---------------------------------------- ----------------------------------------
FULLY FULLY
OUTSTANDING % OF DILUTED % OF OUTSTANDING % OF DILUTED % OF
UNITS TOTAL UNITS TOTAL UNITS TOTAL UNITS TOTAL
----------- ----- ---------- ----- ----------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Senior Debt
Holders............. -- -- -- -- 6,335,664 25.0 6,335,664 21.6
2. Warrant Holders.... -- -- 3,340,757 20.3 6,335,663 25.0 6,335,663 21.6
3. Junior Debt
Holders............. -- -- -- -- 1,115,077 4.4 1,115,077 3.8
4. Existing Common.... 11,556,250 100.0 11,556,250 70.2 11,556,250 45.6 11,556,250 39.5
5. Management
Options............ -- -- 1,022,000 6.2 -- -- 2,815,850 9.6
6. Danesh Options..... -- -- 546,059 3.3 -- -- 1,146,059 3.9
---------- ----- ---------- ----- ---------- ----- ---------- -----
Total
Fully-Diluted
Units
Outstanding.... 11,556,250 100.0 16,465,066 100.0 25,342,654 100.0 29,304,563 100.0
========== ===== ========== ===== ========== ===== ========== =====
</TABLE>
- ---------------
* Fully diluted amounts include all outstanding warrants and options without
regard to vesting provisions or exercise price. Amounts shown do not take into
account any post-restructuring issuances of Common Units as payment of
interest on the New Junior Notes and related issuance of Common Units and Unit
Options as anti-dilution protection, which issuances will be dilutive to other
holders. See "PROPOSAL--1 Interests of Certain Persons in Prepackage Plan."
Pursuant to the Prepackaged Plan, the Senior Lenders will receive new debt
securities in the aggregate principal amount of $23.5 million. These debt
securities mature on December 31, 2005 and consist of a new secured note issued
to Bankers Trust in the aggregate face principal amount of approximately $9.1
million and new secured notes issued to the Senior Lenders in the aggregate
principal amount of approximately $14.4
7
<PAGE> 25
million. The $9.1 million secured note issued to Bankers Trust accrues interest
at a rate of 12% per annum, less the applicable tax exempt bond rate on the
Pinal County, Arizona Industrial Development Bonds (but not less than 1.75%).
The other new secured notes accrue interest at the rate of 12% per annum. The
new secured notes rank senior to all other indebtedness of the Company
(including indebtedness to the Junior Lenders and trade creditors), except for
limited exceptions specified in the New Collateralized Note Indenture described
herein. Commencing in 1998, the Company is required to make sinking fund
payments on the new secured notes in the amount of $2,937,500, with 40% of such
amount to be paid on or before September 30 and 60% of such amount to be paid on
or before December 31 of each applicable year. For a more detailed description
of the new secured notes and related indenture, see "PROPOSAL 1 -- Description
of New Collateralized Note Indenture and New Collateralized Notes."
Pursuant to the Prepackaged Plan, the Junior Lenders will receive new debt
securities in the aggregate principal amount of $2.07 million. These debt
securities mature in December 31, 2005 and accrue interest at the rate of 12%
per annum payable in Interest Units as described above. The new junior debt
securities rank junior to the new secured debt securities issued to the Senior
Lenders, and the Company's indebtedness under its letter of credit facility with
Bankers Trust, but are senior to trade debt and all other indebtedness of the
Company, except for limited exceptions specified in the New Junior Note
Indenture described herein. For a detailed description of the new junior notes
and related indenture, see "PROPOSAL 1 -- Description of New Junior Note
Indenture and New Junior Notes."
BEST INTERESTS TEST; LIQUIDATION ANALYSIS
Huntway has analyzed its ability to meet its obligations under the
Prepackaged Plan and believes it will be able not only to perform its
obligations under the Prepackaged Plan, but also continue to operate its
business without the need for further reorganizations. Huntway's analysis
included the preparation of financial projections of, among other things, its
financial performance for the three-year period ending December 31, 2000
(assuming the consummation of the Prepackaged Plan). Huntway has forecast a
positive net worth and cash flow through the end of such period. These forecasts
also support the feasibility of the Prepackaged Plan (subject to the limitations
and conditions set forth therein in the narrative). For a review of the
projections, the significant assumptions on which they are based, and Huntway's
forecasts, see "PROPOSAL 1 -- Confirmation of the Prepackaged
Plan -- Feasibility of the Plan" and the Projected Financial Information set
forth in Appendix D.
For the Prepackaged Plan to be confirmed, the Bankruptcy Code requires,
among other things, that (i) the Prepackaged Plan be feasible (that is,
confirmation is not likely to be followed by liquidation or further
reorganization of Huntway); and (ii) the Prepackaged Plan satisfy the so-called
"best interests test." The best interests test is satisfied if each holder of a
Claim or Equity Interest in an impaired class (that is, a class of creditors or
equity holders whose contractual or other rights are being altered by the
Prepackaged Plan) either accepts the Prepackaged Plan or receives or retains at
least as much pursuant to the Prepackaged Plan as such holder would receive in a
liquidation of Huntway under chapter 7 of the Bankruptcy Code.
Huntway believes that the Prepackaged Plan satisfies the best interest
tests. After consideration of the effects that a chapter 7 liquidation would
have on the ultimate proceeds available for distribution to creditors and
holders of equity interests (including the increased costs and expenses of a
liquidation arising from fees payable to a trustee and such trustee's
professional advisors in bankruptcy, the potential failure to realize the full
going concern value of Huntway's assets and the probable erosion in asset value
in a chapter 7 case due to expeditious liquidation and prevailing "forced sale"
atmosphere, the potential substantial period of time elapsing prior to any
distribution in a chapter 7 case, and the additional expenses and claims (some
of which would be afforded priority) generated during the liquidation and from
the rejection of leases and executory contracts in connection with a cessation
of Huntway's operations, Huntway has determined that confirmation of the
Prepackaged Plan will provide each creditor and equity holder with a recovery
that is greater that such creditor or equity holder (as the case may be) would
receive in a chapter 7 liquidation.
In a chapter 7 liquidation, Huntway believes the most likely outcome would
be the application of the rule of absolute priority of distributions. Under this
rule, no junior creditor receives any distribution until all senior
8
<PAGE> 26
creditors are paid the full amount of their allowed claims and no Unitholder or
other equity holder receives any distribution until all creditors are paid the
full amount of their allowed claims.
In analyzing the potential returns to its creditors, including for purposes
of the best interests test, the Company developed a liquidation analysis of the
Company in the event the Prepackaged Plan is not confirmed and Huntway's
creditors force the Company to discontinue its operations. See "PROPOSAL
1 -- Liquidation Analysis." Based on the assumptions set forth therein, the
liquidation analysis estimates that the liquidation of Huntway's assets would
result in proceeds of $17,530,182 in the aggregate (consisting of $2,735,151 in
cash, $5,471,301 on account of the liquidation of accounts receivable,
$6,325,586 on account of the liquidation of inventory, $2,700,000 on account of
the liquidation of property, plant and equipment, $223,164 on account of the
liquidation of miscellaneous other assets of Huntway and $75,000 of interest
income accrued during the liquidation process). The liquidation analysis also
estimates that the costs associated with a chapter 7 liquidation of Huntway's
assets would be approximately $7,423,655 (consisting of $6,000,000 incurred as
operating costs in connection with the cessation of business, $523,655 in fees
to a chapter 7 trustee and $900,000 in fees and expenses to such trustee's
professionals). Under the absolute priority rule described above, after payment
of these costs, which would be afforded administrative expense priority, only
$10,106,527 in proceeds would be available to the creditors of Huntway.
Huntway's senior secured lenders, the holders of claims in excess of $92.7
million with a priority senior to all other claims, would be entitled to the
remaining proceeds prior to any distribution to any other creditors.
Accordingly, the liquidation analysis demonstrates that in the most probable
case scenario (as of June 30, 1996), if the Company were to liquidate, no cash
or other property would be available after paying priority claims, liquidation
expenses and secured creditors. The General Partner believes that each of the
Company's unsecured noteholders and other unsecured creditors and the
Unitholders would receive no distribution whatsoever.
Underlying the Liquidation Analysis are a number of estimates and
assumptions, which are subject to significant economic and competitive
uncertainties and contingencies beyond the control of Huntway. These assumptions
and estimates include (i) that a court-appointed trustee would liquidate the
assets of Huntway in a chapter 7 liquidation; (ii) estimated proceeds that
Huntway would receive if so liquidated; (iii) that the liquidation would be of
nine-months duration following the discontinuance of Huntway's operations; (iv)
that Huntway will dispose of asphalt and light-end inventory by refining all
crude on hand to finished liquid asphalt and other light-end products; and (v)
that assets are not sold as a going concern and that goodwill has no estimated
liquidation value. Huntway continues to operate its businesses and, accordingly,
the Liquidation Analysis is subject to change dependent on events which may
occur that impact the recovery of proceeds.
CONFIRMATION OF THE PREPACKAGED PLAN
For the Prepackaged Plan to be confirmed, in addition to the considerations
described above, the Bankruptcy Court will evaluate whether Huntway and the
Prepackaged Plan are otherwise in compliance with the other applicable
provisions of the Bankruptcy Code. See PROPOSAL I -- "Risk Factors." Although
Huntway believes that the Prepackaged Plan and Huntway comply with such
provisions and otherwise meets the tests and other requirements set forth in
Section 1129 of the Bankruptcy Code, there can be no assurance that the
Bankruptcy Court will reach the same conclusion. Classes 2, 5, 6, 7, 8 and 10
must accept the Prepackaged Plan in order for it to be confirmed without
application of further requirements set forth in Section 1129(b) of the
Bankruptcy Code. The requirements for acceptance of these Classes are described
herein. See PROPOSAL 1 -- "Summary of Prepackaged Plan."
Upon confirmation and consummation of the Prepackaged Plan, except as
otherwise expressly provided in the Prepackaged Plan and the agreements related
thereto, (i) the Prepackaged Plan binds all holders of Claims against and Equity
Interests in Huntway, whether or not such holders have accepted the Prepackaged
Plan, and (ii) all such Claims and Equity Interests shall be satisfied,
discharged and released in full, and Huntway's liability in respect thereof
shall be replaced by the liabilities and obligations set forth in the
Prepackaged Plan.
9
<PAGE> 27
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Consummation of the Prepackaged Plan involves significant and potentially
adverse tax consequences to the Company's securityholders. Such persons are
urged to consult with their own tax advisors regarding the federal, state, local
and foreign tax consequences of the Prepackaged Plan. Many of these consequences
are unclear under existing law and, as a result, alternative tax results are
possible and there is a significant risk that the Internal Revenue Service may
disagree with the tax positions taken by the Company relating to the Prepackaged
Plan. See "PROPOSAL 1 -- Certain Federal Income Tax Considerations" for a
discussion of federal tax considerations relating to the Prepackaged Plan to be
considered by Huntway securityholders and tax positions to be taken by the
Company in connection therewith.
RISK FACTORS
Investment in Huntway securities involves a high degree of risk. Prior to
deciding whether to vote on the Prepackaged Plan and the other proposals set
forth in this Consent Solicitation Statement, each Unitholder and each other
impaired creditor or equity interest holder, as the case may be, should
carefully consider all of the information contained in this Consent Solicitation
Statement, including the factors outlined below and described in greater detail
under "PROPOSAL 1 -- Risk Factors."
Risk Factors Relating to the Prepackaged Plan. Such persons should
consider that (a) the Prepackaged Plan may not be confirmed by the Bankruptcy
Court even if accepted by all classes of impaired creditors and equity interest
holders in the event that the Bankruptcy Court deems various requirements of
confirmation not to have been met in the Prepackaged Chapter 11 Case, (b) the
Prepackaged Plan may be confirmed by the Bankruptcy Court even if it is not
accepted by each class of impaired equity interest holders, pursuant to the
so-called "cram-down" provisions of the Bankruptcy Code, (c) if the Prepackaged
Plan cannot be confirmed, the Prepackaged Chapter 11 Case could be converted to
a case under Chapter 7 of the Bankruptcy Code, pursuant to which a trustee would
be elected or appointed to liquidate the assets of the Company, (d) if the
Prepackaged Plan cannot be confirmed, a party in interest may propose an
alternative plan of reorganization of the Company, (e) no person was retained by
the Company to represent solely the interests of the Unitholders in connection
with the negotiation of the Consensual Restructuring Agreement and the
Prepackaged Plan, (f) members of the Company's management and the General
Partner have interests in the Consensual Restructuring Agreement and the
Prepackaged Plan that are different from (or in the case members of management
and the General Partner holding Common Units, in addition to) those of the
Unitholders and, accordingly, have a potential conflict of interest with the
other Unitholders with respect to the approval and consummation of the
Prepackaged Plan and (g) consummation of the Prepackaged Plan may cause certain
adverse tax consequences to Unitholders and other holders of claims against or
interests in the Company that are affected by the Prepackaged Plan.
Risk Factors Relating to the Company's Operations. Such persons should
consider that (a) the margins for the Company's principal products are extremely
volatile, (b) the markets in which the Company participates are highly
competitive, (c) the occurrence of an earthquake, such as the January 1994
Northridge earthquake, in the California market could have a material adverse
effect of the Company's business, (d) the expiration of certain crude oil
tankering permits to Southern California has resulted in a reduction of certain
crude oil supplies to the Company that are cheaper and better suited to the
Company's production needs than alternatives, (e) demand for liquid paving
asphalt products is primarily affected by government funding levels, which are
beyond the control of the Company, (f) the Company's business is directly
affected by the state of the California economy, which has experienced recession
from time to time, (g) the Company's business is adversely affected by cold, wet
weather in the Northern California market, (h) there are limited barriers to
entry for potential competitors in the asphalt market, (i) the Company's
financial projections are based on a number of assumptions, many of which are
beyond the Company's control, (j) the Company's operations are subject to
compliance with various laws and regulations respecting protection of the
environment, which laws and regulations can impose significant liabilities, and
(k) the Company has been involved in certain proceedings with the Commission,
and certain related litigation, regarding irregularities in its financial
accounts uncovered in December 1992.
10
<PAGE> 28
HUNTWAY INCENTIVE OPTION PLAN
Proposal 3 seeks Unitholder approval of the Huntway Incentive Option Plan,
which provides for the issuance of up to 4,000,000 Unit Options to eligible
employees of the Company. Each of the Prepackaged Plan and the Consensual
Restructuring Agreement provides for the issuance to the Company's management of
Unit Options upon consummation of the related debt restructuring. In each case,
such issuance would be pursuant to the Huntway Incentive Option Plan, if
approved. The Company believes that the Huntway Incentive Option Plan is
necessary to attract and retain high-quality individuals to the Company's
management.
11
<PAGE> 29
GENERAL
The purpose of this consent solicitation, among other things, is to obtain
the requisite number of acceptances of the Prepackaged Plan in the form attached
as Appendix A. Assuming the requisite acceptances are obtained, the Company
intends to commence the Prepackaged Chapter 11 Case promptly upon receipt of
such acceptances and seek confirmation of the Prepackaged Plan. Although the
Company is not currently aware of any circumstance under which it would not
commence the Prepackaged Chapter 11 Case if the requisite acceptances are
obtained, the Company reserves the right not to commence the Prepackaged Chapter
11 Case for any reason, including the Company's receipt of the agreement of 100%
of the Company's lenders to the terms of the Consensual Restructuring Agreement
attached as Appendix B to this Consent Solicitation Statement. This consent
solicitation also seeks, pursuant to the NYSE Rules, under which the Common
Units are listed for trading, the approval of the Unitholders to issue
additional Common Units pursuant to the Consensual Restructuring Agreement or
any other out-of-court restructuring on terms substantially similar to those set
forth in Appendix B hereto. The terms and conditions of the Consensual
Restructuring Agreement are substantially identical to those contained in the
Prepackaged Plan as each relates to and treats existing unitholders. For a
discussion of the material differences between the Consensual Restructuring
Agreement and the Prepackaged Plan, see "PROPOSAL 1 -- Comparison of Treatment
of Claims and Equity Interests under Prepackaged Plan and Consensual
Restructuring Agreement". In addition, this consent solicitation seeks approval
of a majority of the Unitholders to adopt the Huntway Incentive Option Plan, a
copy of which is attached as Appendix C to this Consent Solicitation Statement.
ACTION BY WRITTEN CONSENT
GENERAL
This Consent Solicitation Statement, together with the Ballot, are being
furnished to the Unitholders on behalf of the General Partner in connection with
the solicitation of written consents from the Unitholders in lieu of a meeting
of the Unitholders pursuant to Section 15.11 of the Partnership Agreement and
Section 302(c) of the Delaware Revised Uniform Limited Partnership Act. The
General Partner is soliciting the written consent of the Unitholders with
respect to the following proposals: (i) Proposal 1 to accept the Prepackaged
Plan, (ii) Proposal 2 to approve, in accordance with the NYSE Rules, the
issuance of additional Common Units in connection with consummation of the
Consensual Restructuring Agreement (or a substantially similar out-of-court
restructuring), and (iii) Proposal 3 to approve the Huntway Incentive Option
Plan.
PREPACKAGED PLAN OF REORGANIZATION
This Consent Solicitation Statement, together with the Ballot, is being
distributed pursuant to Section 1125 of the Bankruptcy Code to all Beneficial
Interest Holders of Claims or Equity Interests impaired under the terms of the
Prepackaged Plan (including the Unitholders) to solicit votes to accept or
reject the Prepackaged Plan. A holder of a Claim or Equity Interest in the
Company is considered "Impaired" pursuant to section 1124 of the Bankruptcy Code
if such holder's legal, equitable or contractual rights with respect to such
Claim or Equity Interest is altered under the Prepackaged Plan. The Claims and
Equity Interests impaired under the Prepackaged Plan include, in addition to the
Common Units, the Claims held by the Senior Lenders, the Claims held by the
Junior Lenders and the Equity Holders. Certain of the Claims and Equity
Interests impaired under the Prepackaged Plan are held by persons and entities
affiliated with Huntway or the General Partner. The Junior Lenders are the
shareholders of Reprise. Reprise, the Junior Lenders and certain management
personnel of Huntway own or hold Common Units. Certain management personnel of
Huntway also own Unit Options in impaired Class 8 Equity Interests. In addition,
the General Partner and the Special Managing Partner own the General Partner
Interests impaired (Class 10 Equity Interests) under the Prepackaged Plan. All
other Classes of Claims are unimpaired and holders of Claims in such other
Classes would be conclusively presumed to have accepted the Prepackaged Plan
pursuant to Section 1126(f) of the Bankruptcy Code. See "SUMMARY OF PREPACKAGED
PLAN -- Confirmation of the Prepackaged Plan."
12
<PAGE> 30
Assuming the requisite number of Ballots are submitted by the holders of
impaired Claims and Equity Interests, if the Prepackaged Plan is confirmed by
the Bankruptcy Court and the Effective Date occurs, all Beneficial Interest
Holders of Claims and Equity Interests (including those who do not vote to
accept or reject the Prepackaged Plan and those who vote to reject the
Prepackaged Plan) will be bound by the terms of the Prepackaged Plan. Securities
owned beneficially would include not only securities held by such Beneficial
Interest Holder for its own benefit in its own name, but would also include
securities held by others for such Beneficial Interest Holder's benefit, such as
securities held by banks or other custodians, brokers (whether in such
Beneficial Interest Holder's name, the nominee's name or "street name"),
executors, administrators or trustees, guardians, attorneys-in-fact, officers of
a corporation, general partners of a partnership or other persons acting in a
fiduciary or representative capacity.
RECORD DATE; VOTING AND REVOCATION OF BALLOTS
Consistent with the Partnership Agreement and Rule 3018 of the Bankruptcy
Rules, the General Partner has fixed the Record Date for determining which
Beneficial Interest Holders are eligible to vote the Ballot to accept or reject
the Prepackaged Plan (Proposal 1) and which Unitholders are eligible to vote the
Ballot with respect to Proposals 2 and 3 described in this Consent Solicitation
Statement. Only Beneficial Interest Holders of record as of the Record Date will
be entitled to vote in accordance with this Consent Solicitation Statement. The
solicitation pursuant to this Consent Solicitation Statement will expire on
, 1996, unless extended. Ballots which are properly executed in
accordance with the voting instructions contained herein and returned in a
timely manner will be counted in accordance with the directions noted thereon.
To be counted, all Ballots (including Master Ballots), as appropriate, must be
received on or prior to the Expiration Date unless the Company in its sole
discretion extends the period during which Ballots will be accepted by the
Company.
In addition to the foregoing, all Unitholders of record as of the Record
Date (including, but not limited to, all such Unitholders who are Beneficial
Interest Holders) are urged to vote the Ballot with respect to each of Proposal
2 and Proposal 3 described in this Consent Solicitation Statement. All
Beneficial Interest Holders are urged to vote the Ballot to accept or reject the
Prepackaged Plan. Such persons should follow the specific procedures set forth
in Proposal 1 contained in this Consent Solicitation Statement. See "PROPOSAL 1
- -- Voting Procedures."
A Unitholder's consent to the Proposals contained in this Consent
Solicitation Statement will not be effective unless such Unitholder signs and
dates the enclosed Ballot and promptly returns such Ballot in the enclosed
self-addressed envelope. Unitholders are urged to specify their choice with
respect to each matter being submitted for Unitholder consent or approval by
checking the appropriate boxes on the Ballot. A Unitholder giving written
consent to any Proposal may revoke it at any time prior to the Expiration Date
by giving written notice of such revocation to the Secretary of the Company at
the address set forth in the heading above. If an incomplete Ballot is returned
to the Company, the Company shall be deemed to have failed to have received such
Ballot with respect to those Proposals for which such Ballot is not complete.
Under the NYSE Rules, brokers who hold Common Units in street names may not
execute and submit the enclosed Ballot on behalf of customers with respect to
non-routine proposals such as Proposal 1, Proposal 2 and Proposal 3. Thus,
"broker non-votes" will have the same effect as the failure of any Unitholder to
execute and return the Ballot with respect to any Proposal. With respect to
voting rights that are attributable to Common Units that have been transferred
(by assignment of a depository receipt or otherwise, in a manner permitted under
the Partnership Agreement) to an assignee who has not yet become a limited
partner of the Company, the General Partner shall be deemed to be the Holder
with respect thereto and shall, in exercising the voting rights in respect of
such Common Units on any matter, vote such Common Units at the direction of such
assignee.
This Consent Solicitation Statement, together with the Ballot and a
pre-addressed postage-paid envelope, is being furnished to record Unitholders
(i.e., Holders whose respective names (or the names of whose nominees) appear as
of the Record Date on Huntway's Common Unit lists or, if applicable, who are
listed as participants in the clearing agency's security position listing). The
Common Units represented by each Ballot submitted with respect to, together with
a Ballot voted by the Beneficial Interest Holder of such Common
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<PAGE> 31
Unit in acceptance of, Proposal 1 will be deemed to have accepted the
Prepackaged Plan. The Common Units represented by each Ballot submitted with
respect to Proposal 2 will be deemed to have authorized the issuance of Common
Units in connection with either the Plan or the Consensual Restructuring
Agreement. The Common Units represented by each Ballot submitted with respect to
Proposal 3 will be deemed to have consented to the adoption of the Huntway
Incentive Option Plan. Unitholders have no appraisal or dissenter's rights under
Delaware law with respect to either Proposal 1, Proposal 2 or Proposal 3.
In addition to the solicitation of written votes of the Unitholders, the
Company is soliciting votes to accept the Prepackaged Plan from each Holder that
was a Beneficial Interest Holder as of the Record Date of (i) the Old
Collateralized Notes, (ii) the Old Subordinated Notes, (iii) the Old Junior
Subordinated Notes, (iv) the Warrants, (v) the Existing Unit Options and (vi)
the General Partnership Interests. Accordingly, this Consent Solicitation
Statement, together with the Ballot, and a pre-addressed postage-paid envelope
is also being furnished to (i) registered Holders of Old Collateralized Notes
(i.e., Holders whose respective names appear as of the Record Date on the
security holder lists maintained by the trustee under the Old Collateralized
Note Indenture), (ii) registered Holders of Old Subordinated Notes (i.e.,
Holders whose respective names appear as of the Record Date on the security
holder lists maintained by the trustee under the Old Subordinated Note
Indenture), (iii) registered Holders of Old Junior Subordinated Notes (i.e.,
Holders whose respective names appear of the Record Date on the security holder
lists maintained by the trustee under the Old Junior Subordinated Debenture
Indenture), (iv) record holders of Warrants (i.e., Holders whose respective
names (or the names of whose nominees) appear as of the Record Date on Huntway's
list of Warrant Holders) (v) Holders of interests arising under Existing Unit
Options (i.e., Holders whose respective names appear as of the Record Date in
Huntway's list of Existing Unit Options Holders) and (vi) Holders of General
Partnership Interests (i.e., the General Partner and the Special Managing
Partner).
Registered or record holders may include brokerage firms, commercial banks,
trust companies or other nominees. IF SUCH PERSON OR ENTITIES DO NOT HOLD FOR
THEIR OWN ACCOUNT, THEY SHOULD PROMPTLY PROVIDE COPIES OF THIS CONSENT
SOLICITATION STATEMENT TO THEIR CUSTOMERS AND TO BENEFICIAL INTEREST HOLDERS FOR
WHOSE ACCOUNT THEY HOLD. Any Beneficial Interest Holder who received this
Consent Solicitation Statement and has not received appropriate voting materials
should contact his, her or its brokerage firm, nominee or the Information Agent
at each of the addresses or phone numbers listed on the back cover.
Under the Bankruptcy Code, the Holders of at least two-thirds in face
amount and more than one-half in number of the Claims of each Class of impaired
Claims actually voting must timely vote the Ballot in order to accept the
Prepackaged Plan. The aggregate number of holders and amount of debt entitled to
vote in each eligible voting class is described more specifically herein. See
"PROPOSAL 1 -- Summary of the Prepackaged Plan." The Bankruptcy Code also
provides that the Holders of at least two-thirds in amount of the Equity
Interests of each Class of impaired Equity Interests actually voting must timely
vote the Ballot in order to accept the Prepackaged Plan. No Ballot will be
effective to vote on the Prepackaged Plan unless the number of votes required
for acceptance of the Prepackaged Plan are delivered to the Company as of the
Expiration Date. Under the Bankruptcy Code, there is no minimum number (or
quorum) of votes that must be cast to accept the Prepackaged Plan and thus the
failure to vote, or an abstention, with respect to Proposal 1 has no effect on
the outcome of Proposal 1. The approval of each of Proposal 2 and Proposal 3
requires the consent of the holders of at least a majority of the outstanding
Common Units and thus the failure to vote, or an abstention, with respect to
Proposal 2 or Proposal 3 acts as a vote against Proposal 2 or Proposal 3, as the
case may be. For a more detailed explanation of the voting procedures with
respect to the Prepackaged Plan, see "PROPOSAL 1 -- Voting Procedures." For
purpose of determining whether the requisite number of votes to accept the
Prepackaged Plan is received to approve the Prepackaged Plan, only votes which
are cast by or at the direction of Beneficial Interest Holders in accordance
with the procedures set forth in this Consent Solicitation Statement may be
counted, and only the votes of Holders of Allowed Claims or Equity Interests
will be counted. For a full description of the voting procedures to be followed
with respect to the Prepackaged Plan, see "PROPOSAL 1 -- Voting Procedures."
The General Partner has recommended that the Unitholders vote the Ballot to
accept and consent to each of Proposal 1, Proposal 2 and Proposal 3. Both the
General Partner and the Special Managing Partner intend to vote their respective
Ballots to accept Proposal 1, Proposal 2 and Proposal 3. All of the Company's
14
<PAGE> 32
executive officers that are Unitholders entitled to vote the Ballot have
indicated to the General Partner their current intention to submit votes with
respect to Proposal 1 to accept the Prepackaged Plan, Proposal 2 to approve the
issuance of additional Common Units and Proposal 3 to adopt the Huntway
Incentive Option Plan.
NUMBER OF UNITS, WARRANTS AND OPTIONS OUTSTANDING
The Company has one class of outstanding common partnership units, the
Common Units. Except as may otherwise be required by law, holders of the Common
Units vote together as a single class on all matters submitted to the
Unitholders and are entitled to one vote per Common Unit.
As of the Record Date, there were approximately 11,556,250 issued and
outstanding Common Units held by approximately 1,700 Holders of record,
outstanding Warrants exercisable to purchase an aggregate of 3,340,757 Common
Units held by four Holders of record, and an aggregate of 1,022,000 Existing
Unit Options held by 22 Holders of record. On the Record Date, officers of the
Company beneficially owned an aggregate of 623,419 Common Units (or
approximately 5% of the outstanding Common Units), and 851,250 Existing Unit
Options (or approximately 5% of the outstanding Common Units determined on a
fully diluted basis). Certain information relating to the security ownership of
certain beneficial owners and management of Huntway is set forth under
"BENEFICIAL OWNERSHIP OF COMMON UNITS."
Huntway believes that all of the Holders of Warrants and Existing Unit
Options intend to vote to accept the Prepackaged Plan. The Warrants are held by
Bankers Trust, Mass Mutual, First Plaza and Oppenheimer. The Existing Unit
Options are held by management personnel of Huntway.
NUMBER OF HOLDERS AND AMOUNT OF DEBT IN IMPAIRED CLASSES OF CLAIMS
As Impaired Classes under the Prepackaged Plan, Class 2A, Class 2B, Class
2C and Class 5 Claims are entitled to vote on the Prepackaged Plan. Bankers
Trust holds all of the Class 2A Claims and Huntway believes Bankers Trust
intends to vote to accept the Prepackaged Plan. The Senior Lenders (other than
Bankers Trust) hold all of the Class 2B Claims and Class 2C Claims. Huntway
believes that at least three of the four holders of Class 2B Claims and Class 2C
Claims, representing % of the aggregate outstanding amount of such Claims
(which exceeds the 66 2/3% necessary for acceptance under the Bankruptcy Code),
intend to vote to accept the Prepackaged Plan.
The Junior Lenders hold all of the Class 5 Claims. The Junior Lenders are
shareholders of Reprise, and Huntway believes each of the Junior Lenders intends
to vote to accept the Prepackaged Plan.
PROPOSAL 1
ACCEPTANCE OF HUNTWAY'S "PREPACKAGED" PLAN OF REORGANIZATION PURSUANT TO CHAPTER
11 OF THE BANKRUPTCY CODE
INTRODUCTION
After consideration of its alternatives to improve the financial condition
and capital structure of Huntway, the General Partner has concluded that the
restructuring of Huntway's indebtedness embodied in the Prepackaged Plan is
necessary if Huntway is to deal with its serious financial problems and to
continue to operate as a going concern. In October 1995, anticipating a payment
default under the Old Collateralized Note Indenture, the Company initiated
discussions with all of its lenders regarding potential out-of-court
restructuring of the Company's outstanding indebtedness. As a result of such
deliberations, on April 15, 1996, all of the Senior Lenders other than Ryback
(representing 86% of the outstanding senior indebtedness) and all of the Junior
Lenders agreed to consummate a restructuring consistent with the terms of the
Consensual Restructuring Agreement.
15
<PAGE> 33
Specifically, the Consensual Restructuring Agreement contemplates (1) the
reduction of Huntway's debt by nearly $70 million; (2) that the existing
Unitholders will retain their equity interests in the Company on a diluted
basis; and (3) other significant favorable modifications to the Company's debt
obligations.
Since April 15, 1996, the General Partner has carefully considered the
financial condition and prospects of Huntway, the absence of feasible
alternative solutions and the various aspects of the Prepackaged Plan and has
determined that, so long as the Company cannot obtain the consent of 100% of the
Senior Lenders to the Consensual Restructuring Agreement, seeking confirmation
of the Prepackaged Plan is the most favorable solution to the Company's current
inability to service its outstanding indebtedness while providing the
Unitholders with the ability to retain an economic interest in the Company. The
Prepackaged Plan and the Consensual Restructuring Agreement, solely as each
relates to and treats the existing Unitholders, contain substantially identical
terms which are delineated below in this Proposal 1 with respect to the
Prepackaged Plan. For a discussion of the material differences between the
Consensual Restructuring Agreement and the Prepackaged Plan as each relates to
Holders of claims and other equity interests, see "PROPOSAL 1 -- Summary of the
Prepackaged Plan -- Comparison of Treatment of Claims and Equity Interests under
Prepackaged Plan and Consensual Restructuring Agreement."
UNDER EACH OF THE PREPACKAGED PLAN AND THE CONSENSUAL RESTRUCTURING
AGREEMENT, THE UNITHOLDERS WILL RETAIN THEIR EQUITY INTERESTS IN THE COMPANY ON
A DILUTED BASIS AND THERE WILL BE NO CHANGES TO THE EXISTING COMMON UNITS (OTHER
THAN THE AMENDMENT OF THE PARTNERSHIP AGREEMENT TO CLARIFY THE TAX TREATMENT OF
THE TRANSACTIONS CONTEMPLATED BY THE PREPACKAGED PLAN). IN CONTRAST, IN THE
EVENT THAT NEITHER THE CONSENSUAL RESTRUCTURING AGREEMENT NOR THE PREPACKAGED
PLAN IS CONSUMMATED, THERE EXISTS A SUBSTANTIAL LIKELIHOOD THAT THE EQUITY
HOLDERS WILL RECEIVE LITTLE, IF ANYTHING IN RESPECT OF THEIR EQUITY INTERESTS IN
THE COMPANY AS A RESULT OF A FORECLOSURE, BANKRUPTCY OR LIQUIDATION. THEREFORE,
THE GENERAL PARTNER HAS APPROVED AND RECOMMENDS THAT THE UNITHOLDERS CONSENT TO
PROPOSAL 1 AND VOTE THE BALLOT TO ACCEPT THE PREPACKAGED PLAN.
Proposal 1 of this Consent Solicitation Statement includes discussion of
all material terms of the Prepackaged Plan and the information required to be
disclosed in the Disclosure Statement to be filed with the Bankruptcy Court in
accordance with Sections 1125, 1126(b) and 1145 of the Bankruptcy Code and
Bankruptcy Rule 3018(b). Accordingly all Beneficial Interest Holders of impaired
Claims and Equity Interests should read the Solicitation Materials in their
entirety before voting the Ballot to accept or reject the Prepackaged Plan.
ALTHOUGH THIS CONSENT SOLICITATION STATEMENT HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, THE PREPACKAGED PLAN HAS NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THE PREPACKAGED PLAN
OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS CONSENT
SOLICITATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. FURTHERMORE THIS CONSENT SOLICITATION STATEMENT HAS NOT BEEN REVIEWED
OR APPROVED BY THE BANKRUPTCY COURT. ACCORDINGLY, THE BANKRUPTCY COURT HAS
NEITHER CONDUCTED AN ANALYSIS OF THE FACTUAL OR FINANCIAL INFORMATION CONTAINED
HEREIN NOR APPROVED OR RULED UPON THE MERITS OF THE PREPACKAGED PLAN.
The following summary of the Prepackaged Plan is qualified in its entirety
by reference to more detailed information included elsewhere herein and in the
Appendices hereto.
PURPOSES OF THE PREPACKAGED PLAN
The purpose of the Prepackaged Plan is to enhance the long term viability
of the Company by aligning its capital structure with its present and future
operating prospects. The Prepackaged Plan will reduce the principal amount and
lower the debt service requirements of the Company's indebtedness. By offering
Holders of certain of the Company's indebtedness and warrants to acquire new
Common Units, such Holders will participate in any long-term appreciation of the
Company's value, which the Company expects to be enhanced by the deleveraging of
the Company's capital structure.
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<PAGE> 34
The General Partner believes that the financial restructuring contemplated
by the Prepackaged Plan is in the best interests of all Creditors and Equity
Holders. If the Prepackaged Plan is not confirmed, the General Partner believes
that Huntway will be forced to either file an alternate plan of reorganization
under Chapter 11 of the Bankruptcy Code, liquidate under Chapter 7 of the
Bankruptcy Code, or be subject to a foreclosure by the Senior Lenders. The
Company does not currently have any alternative plan of reorganization and is
not aware of such a plan proposed by any of its Lenders or other
securityholders. Although, it is not possible to predict with certainty the
effect on the Company's operations or its securityholders, in the event of
either a liquidation under Chapter 7 of the Bankruptcy Code or a foreclosure by
the Senior Lenders on Huntway's assets, the General Partner believes that
Huntway's unsecured Creditors and Equity Holders would realize no distributions
or value for their Claims or Equity Interests, as Huntway has assets worth
approximately $15.9 million (liquidation value) to satisfy $95.5 million of
secured debt. See Proposal 1 -- "Liquidation Analysis." In contrast, if the
Bankruptcy Court confirms the Prepackaged Plan, Unitholders will retain their
Equity Interests on a diluted basis and Holders of other Equity Interests will
receive a distribution in respect thereof.
PRINCIPAL ELEMENTS OF THE PREPACKAGED PLAN
Upon consummation of the Prepackaged Plan, the Old Collateralized Notes,
the Old Subordinated Notes, the Old Junior Subordinated Notes, the Warrants, and
the Existing Unit Options will be exchanged as set forth below:
<TABLE>
<CAPTION>
FOR EACH: HOLDERS WILL RECEIVE APPROXIMATELY:
- --------------------------------------------- ---------------------------------------------
<S> <C>
$1,000 original principal amount of Old $292.27 principal amount of New Senior Notes
Collateralized Notes and Old Subordinated (Other) and 78.80 Common Units
Notes not held by Bankers Trust
$1,000 original principal amount of Old $222.67 principal amount of New Senior Notes
Collateralized Notes and Old Subordinated (Sunbelt IDB), $69.60 principal amount of New
Notes held by Bankers Trust Senior Notes (Other) and 78.80 Common Units
$1,000 original principal amount of Old $295.71 principal amount of New Junior Notes
Junior Subordinates Notes and 159.30 Common Units
Common Unit issuable upon exercise of Warrant 1.90 Common Units
Existing Unit Option One Unit Option
</TABLE>
In the aggregate, the exchanges of Old Collateralized Notes, Old
Subordinated Notes, Old Junior Subordinated Notes, Warrants, and Existing Unit
Options in accordance with the terms of the Prepackaged Plan will result in the
following:
<TABLE>
<CAPTION>
AMOUNT OUTSTANDING AS OF JUNE 30, 1996 EXCHANGED FOR:
- --------------------------------------------- ---------------------------------------------
<S> <C>
$39,537,606 aggregate principal amount of Old $11,555,656 principal amount of New Senior
Collateralized Notes and Old Subordinated Notes (Other) and 3,115,436 Common Units
Notes not held by Bankers Trust representing approximately 12.3% of the
Common Units outstanding upon consummation of
the Prepackaged Plan
$40,867,844 aggregate principal amount of Old $2,844,345 principal amount of New Senior
Collateralized Notes and Old Subordinated Notes (Other) $9,100,000 principal amount of
Notes held by Bankers Trust New Senior Notes (Sunbelt IDB) and 3,220,227
Common Units outstanding upon consummation of
the Prepackaged Plan
</TABLE>
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<PAGE> 35
<TABLE>
<CAPTION>
AMOUNT OUTSTANDING AS OF JUNE 30, 1996 EXCHANGED FOR:
- --------------------------------------------- ---------------------------------------------
<S> <C>
$7,000,000 original aggregate principal $2,070,000 principal amount of New Junior
amount of Old Junior Subordinated Notes Notes and 1,115,077 Common Units,
representing 4.4% of the Common Units
outstanding upon consummation of the
Prepackaged Plan
3,340,757 Common Units issuable upon exercise 6,335,663 Common Units Representing 25% of
of Warrants the Common Units outstanding upon
consummation of the Prepackaged Plan
1,022,000 Existing Unit Options 1,022,000 Unit Options upon consummation of
the Prepackaged Plan
</TABLE>
The Prepackaged Plan also provides for the issuance of Unit Options for the
purchase of approximately 1,800,000 additional Common Units in accordance with
the Huntway Incentive Option Plan to approximately 20 management personnel of
Huntway.
The Prepackaged Plan also provides for all Holders of Unsecured Claims,
including trade Claims, and Other Secured Claims to be paid in full.
INTERESTS OF CERTAIN PERSONS IN THE PREPACKAGED PLAN
At June 30, 1996, Existing Unit Options to purchase an aggregate of
1,022,000 Common Units were outstanding, held by 22 members of the Company's
management. The Existing Unit Options are ten-year options that have terms
expiring between 1999 and 2005 and have exercise prices ranging between $0.625
and $1.00 per Common Unit. At such date, the Existing Unit Options represented
6.2% of the Company's fully diluted equity. The terms of the Prepackaged Plan
provide that upon consummation (i) each outstanding Existing Unit Option will be
exchanged for a new Unit Option with terms and conditions the same in all
material respects as the Existing Unit Options, except that all new Unit Options
will have an exercise price of $0.50 per underlying Common Unit, and (ii) 22
members of the Company's management will be issued new Unit Options to acquire
an aggregate of 1,793,850 Common Units at an exercise price of $0.50 per Common
Unit. Collectively, such Unit Options to acquire an aggregate of 2,815,850
Common Units at an exercise price of $0.50 per Common Unit will represent 10% of
the Company's fully diluted equity upon consummation of the Prepackaged Plan.
The terms of the Prepackaged Plan also provide that the Company will issue to
the holders of new Unit Options from time to time after consummation of the
Prepackaged Plan additional Unit Options in amount sufficient to prevent
dilution to the amount of the fully diluted equity of the Company represented by
such originally issued new Unit Options through the issuance of Common Units
after consummation of the Prepackaged Plan (i) to the holders of Class 5 Claims,
as payment of interest on the New Junior Notes to be issued to such holders,
pursuant to the terms of such notes, and (ii) to the holders of Class 2 Claims
and Class 6 Equity Interests as anti-dilution protection for the Common Units to
be issued to such holders. The additional Unit Options to be issued to members
of management pursuant to this anti-dilution protection will have a term of ten
years and will have an exercise price equal to the market price per Common Unit
used to determine the number of Common Units to be issued in payment of accrued
interest on the New Junior Notes. The specific number of Unit Options to be
issued to the Company's Chief Executive Officer and the other four most highly
compensated executive officers is set forth under "PROPOSAL 3 -- ADOPTION OF THE
HUNTWAY INCENTIVE OPTION PLAN -- Background and Purpose of the Huntway Incentive
Option Plan."
At June 30, 1996, there was $7.7 million principal amount of the Old Junior
Subordinated Notes outstanding. The terms of the Prepackaged Plan provide that
each $1,000 original principal amount of such notes will be exchanged for (i)
$295.71 principal amount of New Junior Notes and (ii) 159.3 Common Units. The
Old Junior Subordinated Notes are held by an affiliate of the General Partner.
Under the terms of the Consensual Restructuring Agreement and the
Prepackaged Plan, any Common Units issued as interest on the New Junior Notes
will not dilute the equity interest represented by the Common Units to be issued
initially to the Senior Lenders and the Warrant holders (approximately 50% of
18
<PAGE> 36
the Common Units initially outstanding), nor will it dilute the equity interest
represented by the Common Units to be issued initially to the holders of the Old
Junior Subordinated Note (approximately 4.4% of the Common Units initially
outstanding), nor will it dilute the equity interest represented by the Unit
Options to be issued to management (initially representing approximately 10% of
the Company's fully diluted equity). Any Unit Options issued to management as
anti-dilution protection will have an exercise price equal to the market price
of the Common Units at the time of issuance.
The issuance of Common Units and Unit Options to such parties over time
will have the effect of diluting the equity ownership interest of the existing
Unitholders. For example, assuming annual New Junior Note interest expense of
$248,400 and a Common Unit market price of $1.50, a total of 363,158 additional
Common Units and Unit Options to acquire 40,351 Common Units would be issued in
payment of interest and as anti-dilution protection at the end of the first year
the New Junior Notes are outstanding. At the end of three years, assuming the
market price of the Common Units remained the same, a total of 1,089,474
additional Common Units and Unit Options to acquire 121,053 additional Common
Units would have been issued in payment of interest and as anti-dilution
protections during such period. These issuances would have the effect of
reducing the percentage of the Company's fully diluted equity represented by
existing Common Units from approximately 40% at the consummation of the
Prepackaged Plan to approximately 37% of the fully diluted equity after three
years. So long as interest on the New Junior Notes continued to be paid in
Common Units (the term of the New Junior Notes is 10 years), additional annual
dilution to the equity interest represented by the existing Common Units would
occur.
The holders of existing Unit Options and the holders of Old Junior
Subordinated Notes will each receive more value under the Prepackaged Plan than
the Company estimates would be available to be distributed to such holders upon
a liquidation of the Company. See "Liquidation Analysis."
Members of management receiving Unit Options pursuant to the terms of the
Prepackaged Plan and the General Partner of the Company, through its ownership
of the Old Junior Subordinated Notes, have interests in the Company and the
Consummation of the Prepackaged Plan that are different from (or in the case
members of management and the General Partner holding Common Units, in addition
to) those of the holders of Common Units and, accordingly, have a potential
conflict of interest with the other holders of Common Units with respect to the
approval and Consummation of the Prepackaged Plan. No person was retained by the
Company to represent solely the interests of the Common Unit holders in
connection with the negotiation of the Consensual Restructuring Agreement and
the Prepackaged Plan.
RISK FACTORS
ALL IMPAIRED CREDITORS AND EQUITY HOLDERS, BENEFICIAL OR OTHERWISE, SHOULD
READ AND CAREFULLY CONSIDER THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER
INFORMATION SET FORTH OR OTHERWISE REFERENCED IN THIS CONSENT SOLICITATION
STATEMENT, PRIOR TO VOTING TO ACCEPT OR REJECT THE PREPACKAGED PLAN.
Industrial, Governmental and Cyclical Factors
Volatility of Refining Margins
The Company's income and cash flow are derived from the difference between
its costs to obtain and refine crude oil and the price for which it can sell its
asphalt and light-end refined products. The Company buys crude oil and sells
refined products on the spot market. The Company maintains inventories of crude
oil, intermediate products, and refined products, the values of which are
subject to fluctuations in market prices. Factors that are beyond the control of
the Company may cause the cost of crude oil purchased by the Company and the
price of refined projects sold by the Company to fluctuate. Although prices of
crude oil and refined products generally move in the same direction, prices of
refined products often do not respond immediately to changes in crude oil costs.
An increase in market prices for crude oil or a decrease in market prices for
refined products could have an adverse impact on the Company's earnings and cash
flow. Although the Company believes that refining margins will improve, there
can be no assurance that refining margins will not remain at current levels or
deteriorate. In order to partially mitigate the risk of widely fluctuating crude
costs, the Company has and will engage in hedging activities.
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<PAGE> 37
Competition
The markets for refined petroleum products are highly competitive and
pricing is a primary competitive factor. With respect to liquid asphalt,
Huntway's management believes that Huntway's reputation for consistently high
product quality, its ability to provide high levels of service and its
long-standing relationships with its major customers are important to its
continued success.
Huntway's five-state market area is served by numerous refineries,
including refineries operated by major integrated oil companies and by other
independent refiners. All of Huntway's primary competitors are located in
California and many have larger refining capacity and greater financial
resources than does Huntway. In 1995, Huntway's management believes that Shell
Oil Company accounted for a majority of the volume of liquid asphalt sales in
the Northern Market and that Huntway accounted for 20% to 25% of liquid asphalt
sales in this market area. The remaining 10% to 20% estimated market share is
apportioned amongst several other competitors located outside of the Northern
California area. Chevron ceased producing asphalt in Northern California
effective January 1, 1994. Huntway's management believes that Paramount
(formerly EOTT) accounts for approximately 50% of the liquid asphalt sales in
the Southern Market and that Huntway and two other competing refineries account
for the majority of the remainder of liquid asphalt sales.
Due to limited barriers to entry into the industry, there is a risk of
additional competition in the future. Recently, Saba Petroleum Company ("Saba")
received government approval to commence operations at the 10,000 bpd refinery
previously owned by Conoco in Santa Maria, California. Saba has entered into a
processing agreement with Petro Source Corporation whereby they would supply
crude oil and sell the finished product. The refinery will produce a full range
of asphalt products including asphalt emulsion and polymer-modified asphalt.
Management believes that Saba is likely to be constrained by limited crude oil
supplies and will need to market the majority of its asphalt products out of
state and will have to transport its light-end products to refining centers such
as Los Angeles.
Threat of Earthquakes
The Northridge earthquake that occurred on January 17, 1994 adversely
impacted 1994 and 1995 operating results by slowing road repair bidding activity
while freeway overpasses were replaced and rupturing a major pipeline that
supplies crude oil to the Company. The Company is vulnerable to disruption of
its business due to earthquakes. For example, the January 17, 1994 Northridge
earthquake slowed road repair bidding activity in 1994 and to a lesser degree in
1995 while freeway overpasses were replaced. Moreover, the Northridge earthquake
destroyed one of two major pipelines that supplied crude oil to the Los Angeles
basin. This caused prorations on the remaining pipeline (and resulting higher
crude costs) that were not mitigated until July 1995 when capacity on the
remaining pipeline was expanded. Although both of the Refineries are vulnerable
to disruption in operations and reduced operating results due to the possibility
of additional earthquakes in California, the Company maintains $10 million of
earthquake and business disruption insurance to mitigate this risk.
Expiration of Crude Oil Tankering Permits
The expiration of certain crude oil tankering permits to southern
California resulted in a reduction in locally produced off-shore crude oil
supplies which are cheaper and better suited to the Company's production needs.
The pipeline disruption and the expiration of tankering permits resulted in
higher overall prices for crude oil. At this time, there are no indications if
or when crude tankering will resume.
Government Funding
Demand for liquid paving asphalt products is primarily affected by Federal,
state and local highway spending, commercial construction and the level of
housing starts, all of which are beyond the control of the Company. Government
highway spending provides a source of demand which is relatively unaffected by
normal business cycles but is dependent upon appropriations. During 1994,
approximately 85% of liquid asphalt sales were ultimately funded by the public
sector. However, the January 17, 1994 earthquake diverted substantial public
funds designated for road transportation to freeway and bridge repair. This
repair effort
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primarily utilized concrete and steel, thereby depressed 1994 public funding of
conventional asphalt paving. Historically, approximately 70% of Huntway's liquid
asphalt sales have been made to purchasers whose business is directly tied to
these various governmental expenditures. Over the long-term, the demand for
liquid asphalt will also tend to be influenced by changes in population, the
level of commercial construction, and housing activity.
Federal funding of highway projects is accomplished through the Federal Aid
Highway Program. The Federal Aid Highway Program is a Federally assisted, state
administered program that distributes Federal funds to the states to construct
and improve urban and rural highway system. Substantially all Federal highway
funds are derived from gasoline user taxes assessed at the pump. In addition to
Federal funding for highway projects, states individually fund transportation
improvements with the proceeds of a variety of gasoline and other taxes. In
California, CALTRANS administers state expenditures for highway projects.
In June, 1990, voters in the state of California passed a measure which
increased state gasoline taxes from 9 cents per gallon to 14 cents per gallon
effective August 1, 1990, and by an additional 1 cent per gallon on each January
1 thereafter through 1994. The additional sales available to the state are now
estimated to be approximately $14 billion over the decade. However, in June
1994, California voters rejected a measure that would have provided an
additional $2 billion to pay for damage to freeways and bridges resulting from
the January 17, 1994 earthquake. Accordingly, state funding for earthquake
repair projects was achieved by utilizing funds from the existing California
transportation budget. Local governmental units, such as cities, counties and
townships, provide additional funding for road and highway projects through
various taxes and bond issues. On March 26, 1996, the California electorate
approved the $2.0 billion Seismic Retrofit Proposition. Passage of Proposition
192 will result in a net increase in construction of new, and repair of
existing, asphalt road projects in the State over that which would have occurred
if Proposition 192 had not been approved, as the Proposition raises $2 billion
of new money to be used to Seismic retrofit California bridges, highways and
overpasses.
California Economy
The depressed business environment in California in recent years has
adversely impacted demand for asphalt by the private sector. Private asphalt
demand remained depressed in 1994 and, although the economy improved in 1995 and
the first half of 1996, there can be no assurances that the California economy
may not experience another recession.
Adverse Weather Conditions
Generally cold, wet weather is not conducive to asphalt road construction
and repair. Accordingly, fourth quarter 1994 and first quarter 1995 results were
adversely impacted by unseasonably wet weather in California, resulting in the
Company experiencing the lowest first quarter volume of asphalt in its history
as a publicly traded limited partnership.
Limited Barriers to Entry
Barriers to entry in the asphalt market are limited. The sophistication
level of the required facilities is low indicating that refineries could enter
the market if they chose to do so. The capital needed to undertake asphalt
manufacturing at an existing refinery operation is small by refinery standards.
Permit issues for these existing refineries, while they exist, are not of such a
nature that they are likely to be a significant deterrent to new entrants.
However, construction of new asphalt refineries is very unlikely due to the
inability to obtain required permits. Greenfield refineries would have high
barriers to entry due to environmental regulations and the limited size of the
market.
Risk Related to the Projections
The projections included herein represent the Company's best estimate of
the Company's projected results of operations for the years ending December 31,
2000. The projections are based upon a number of assumptions, some of which may
not materialize, and unanticipated events may occur that could affect the
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actual results achieved by the Company during the period covered by the
projections. Consequently, actual results will vary from the projections and
those variations may be material. The projections were not prepared with a view
toward compliance with published guidelines of the American Institute of
Certified Public Accountants or generally accepted accounting principles and
have not been examined, reviewed, or compiled by the Company's independent
public accountants.
Environmental Matters
The Company is subject to Federal, state, and local laws, regulations, and
ordinances that govern activities or operations that might have adverse
environmental effects, and that impose liability for the costs of cleaning up,
and certain damages resulting from, sites of past spills, disposals, or other
releases of hazardous substances. Although Management believes that the
Company's operational procedures and safety precautions are enforced
stringently, there can be no assurance that environmental problems will not
occur in the future.
On May 19, 1995, during testing pursuant to the closure of a waste water
treatment pond, Huntway discovered that several drums of hazardous materials had
been improperly disposed of at the site of the Wilmington refinery. Subsequent
geophysical testing to date indicates that approximately 20 to 30 of such drums
had been improperly disposed of at the site. The materials had been stored in
drums and disposed of under the waste water treatment pond apparently at the
time of its construction. The Partnership has expended approximately $120,000
for evaluation and remediation of the contamination. Of this amount,
approximately $75,000 has been recovered from former owners and operators of the
site, as well as entities involved in the construction of the pond. Management
does not believe, based on the information available at this time, that any
additional costs will be incurred.
Litigation
In December 1992, Huntway uncovered certain irregularities in its financial
accounts. These irregularities extended to the accounting records utilized in
the preparation of Huntway's quarterly reports on Form 10-Q for 1992, as filed
with the Commission. As a result, the quarterly financial information was
restated and presented as a part of Huntway's Annual Report on Form 10-K which
was filed with the Commission on March 30, 1993. Huntway has reported all of
these irregularities to appropriate governmental authorities, including the
Commission and the U.S. Attorney's office. Huntway was notified in early
December 1992 that the Commission was commencing an informal investigation into
these financial irregularities and was further notified in late April 1993 that
a formal investigation had begun. Huntway has cooperated fully with the
Commission in its investigation. In July of 1994, Huntway was notified that the
Commission had concluded its investigation and issued an order specifying that
Huntway permanently cease and desist from committing or causing any violations
or future violations of Sections 13(a), 13(b) (2) (A) and 13(b) (2) (B) of the
Exchange Act and Rules 12b-20, 13a-13 and 13b1-2 thereunder. The Commission did
not order a monetary penalty as a result of the investigations. Huntway has
consented to the order without admitting or denying any factual allegations
contained in the order.
As a result of the Company's disclosures to the U.S. Attorney's office, the
Company received a federal grand jury subpoena in 1993 seeking documents in
conjunction with its investigation of the Company's former Chief Financial
Officer. The Company is responding to the subpoena and cooperating with the U.S.
Attorney's office in the course of this investigation. The Company has not been
charged with any wrongdoing by the U.S. Attorney's office.
In December 1992, two lawsuits were filed against Huntway and certain of
its present and former officers. The lawsuits sought an unspecified amount of
damages and alleged that certain statements made by Huntway failed to adequately
disclose material facts that would have impacted the trading value of Huntway's
units. These lawsuits were settled in August 1993 pursuant to which the
plaintiffs would receive a combination of $1,200,000 in insurance proceeds and a
$150,000 unsecured 7% note payable which was paid in full by Huntway on December
15, 1995.
Also in 1992, Huntway and Sunbelt were charged by the State of Arizona with
violations of certain environmental regulations and provisions of the Sunbelt
refinery's installation permit. Sunbelt acknowledged
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that it had certain environmental compliance problems in the past, but believed
that none of these resulted in any harm to public health or to the environment.
While Huntway and Sunbelt have consistently denied that any criminal activity
occurred, the parties agreed on December 21, 1993 to settle both the State's
civil and criminal charges. As part of the settlement, Sunbelt has agreed to pay
a penalty of $700,000 over a period of seven years without interest and to
undertake certain environmental improvements at the Sunbelt refinery. On
December 21, 1993 and January 7, 1994, Huntway made payments against the penalty
of $150,000 and $100,000, respectively. The next installment payment of $100,000
was paid on January 7, 1996. The settlement, which consists of a civil consent
judgment and a plea agreement, has been reviewed and approved by the court, the
U.S. Attorney's office and the U.S. Environmental Protection Agency. Under the
terms of the settlement, Huntway is released from any further liability for the
alleged violations and considers the matter closed. Huntway has instituted new
programs and procedures to ensure that it is operating in compliance with all
environmental laws and regulations.
Factors Relating to the Prepackaged Plan
Risk of Non-Confirmation or Non-Acceptance of the Prepackaged Plan
Even if all Impaired Classes accept the Prepackaged Plan, the Prepackaged
Plan may not be confirmed by the Bankruptcy Court. Section 1129 of the
Bankruptcy Code sets forth the requirements for confirmation and requires, among
other things, that the confirmation of the Prepackaged Plan not be followed by a
need for further financial reorganization, that the value of distributions to
dissenting Creditors and Equity Holders not be less than the value of
distributions such Creditors and Equity Holders would receive if Huntway were
liquidated under chapter 7 of the Bankruptcy Code and that the Prepackaged Plan
and Huntway otherwise comply with the applicable provisions of the Bankruptcy
Code. Although Huntway believes that the Prepackaged Plan will meet all
applicable tests, there can be no assurance that the Bankruptcy Court will reach
the same conclusion.
If the Company commences the Prepackaged Chapter 11 Case and the
Prepackaged Plan is not subsequently confirmed by the Bankruptcy Court and
consummated, the alternatives include (i) liquidations of the Company under
chapter 7 of the Bankruptcy Code or (ii) confirmation of an alternative plan of
reorganization under Chapter 11 of the Bankruptcy Code.
"Cramdown" Under Section 1129(b)
If the Company does not have the necessary acceptances to confirm the
Prepackaged Plan, the Company may nevertheless file a petition for relief under
Chapter 11 of the Bankruptcy Code and seek confirmation of the Prepackaged Plan
notwithstanding the dissent of Class 7 Equity Interests. In such event, the
Company would seek to satisfy the Bankruptcy Code standards for confirmation by
means of a "cramdown," which could require the Prepackaged Plan to be modified
in a manner which would be material to any class junior to any class which has
rejected the Prepackaged Plan. In the event any Impaired Class of Equity
Interests does not accept the Prepackaged Plan, pursuant to the 'cramdown"
provisions of the Bankruptcy Code, the Bankruptcy Court may nevertheless confirm
the Prepackaged Plan at the Company's request if at least one Impaired Class has
accepted the Prepackaged Plan (with such acceptance being determined without
including the acceptance of any "insider" in such Class) and, as to each
Impaired Class of Equity Interests which has not accepted the Prepackaged Plan,
the Bankruptcy Court determines that the Prepackaged Plan "does not discriminate
unfairly" and is "fair and equitable" with respect to such Impaired Classes. In
the event that any Impaired Class of Equity Interest fails to accept the
Prepackaged Plan in accordance with subsection 1129(a)(8) of the Bankruptcy
Code, the Company reserves the right to request confirmation of the Prepackaged
Plan without the acceptance of all Impaired Classes of Equity Interests in
accordance with subsection 1129(b) of the Bankruptcy Code. The Company will not
seek to obtain confirmation of the Prepackaged Plan unless it has been accepted
by Impaired Classes 2, 5, 6 and 8.
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Liquidation Under Chapter 7
If no plan can be confirmed (and in certain other circumstances), the
Company's Prepackaged Chapter 11 Case may be converted to a case under Chapter 7
of the Bankruptcy Code, pursuant to which a trustee would be elected or
appointed to liquidate the assets of the Company for distribution to creditors
in accordance with the priorities established by the Bankruptcy Code. A
discussion of the effect that a Chapter 7 liquidation would have on the recovery
of holders of Claims and Equity Interests is set forth under "Liquidation
Analysis." In a liquidation, the assets of the Company would be sold in exchange
for cash, securities or other property, the proceeds of which would then be
distributed to creditors. In contrast to the Prepackaged Plan (or an alternative
reorganization under Chapter 11 of the Bankruptcy Code) in which creditors would
receive debt or equity securities of the Company and would be subject to the
risks associated with holding such securities, in a liquidation, creditors might
receive cash which would not be subject to those risks. However, the Company
believes that liquidation under Chapter 7 would result in smaller distributions
being made to creditors (and, as to certain classes, no distributions) than
those provided for in the Prepackaged Plan because of, among other things, (a)
the likelihood that the assets of the Company would have to be sold for a
foreclosure value that is lower than their going concern value, (b) additional
administrative expenses involved in the appointment of a trustee and
professional advisors to such trustee and (c) additional expenses and claims,
some of which would be entitled to priority, which would be generated during the
liquidation and from the rejection of leases and other executory contracts in
connection with a cessation of the Company's operations. In addition, a Chapter
7 liquidation is likely to result in substantial litigation and delays in
ultimate distribution to creditors. In the event of a Chapter 7 liquidation, the
Company believes that there would be proceeds of only approximately $17.5
million, which proceeds would not be sufficient to make any distribution to the
Holders of Claims in Class 4, 5 and 6 and Equity Interests. See "Liquidation
Analysis."
Alternative Plans of Reorganization
If the Prepackaged Plan is not confirmed, the Company (or if the Company's
exclusive period in which to file a plan of reorganization has expired, any
other party in interest) could attempt to formulate a different plan. Such a
plan might involve either a reorganization and continuation of the Company's
business or an orderly liquidation of its assets. With respect to an alternative
plan, the Company has explored various alternatives during the process involved
in the formulation and development of the Prepackaged Plan. The Company believes
that the Prepackaged Pan, as described herein, enables creditors to realize the
most value under the circumstances. In a liquidation under Chapter 11, the
Company's assets would be sold in an orderly fashion over a more extended period
of time than in a liquidation under Chapter 7, probably resulting in somewhat
greater (but indeterminate) recoveries. Further, if a trustee were not
appointed, because such appointment is not required in a Chapter 11 case, the
expenses for professional fees would likely be lower than those incurred in a
Chapter 7 case. Although preferable to a Chapter 7 liquidation, the Company
believes that any liquidation under Chapter 11 is a much less attractive
alternative to creditors than the Prepackaged Plan because of the greater return
provided for by the Prepackaged Plan.
In addition, notwithstanding anything contained herein or in the
Prepackaged Plan to the contrary, in the event that any Impaired Class of Claims
or Equity Interests shall fail to accept the Prepackaged Plan in accordance with
subsection 1129(a)(8) of the Bankruptcy Code, Huntway reserves the right to (i)
request that the Bankruptcy Court confirm an alternative plan of reorganization
in accordance with subsection 1129(b) of the Bankruptcy Code so long as holders
of Class 2 Claims and Class 6 Equity Interests have voted to accept such
alternative plan of reorganization and/or (ii) modify the Prepackaged Plan in
accordance with Section IX.C. of the Prepackaged Plan.
No Person Retained to Represent Unitholders
No person was retained by the Company to represent solely the interests of
the existing Unitholders in connection with the negotiation of the Consensual
Restructuring Agreement and the Prepackaged Plan. The equity ownership interests
of Unitholders in the Company will be diluted significantly by the terms of the
Consensual Restructuring Agreement and the Prepackaged Plan, including potential
dilution occurring after
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the consummation of the restructuring as a result of the issuance of Common
Units as interest on the New Junior Notes and the resulting issuances of
additional Common Units or Unit Options to other security holders as
anti-dilution protection. See "Interests of Certain Persons in the Prepackaged
Plan." Nevertheless, the Company believes the proposed restructuring is fair to
existing Unitholders, considering that the Company is in default under its loan
agreements, the restructuring will reduce debt by approximately $70 million
while current Unitholder percentage ownership in the Company as a result of the
restructuring declines 30.7%, as on a fully-diluted basis post-restructuring
current Unitholders will retain 39.5% ownership in the Company versus 70.2%
pre-restructuring. See "SUMMARY -- Terms of the Prepackaged Plan."
Potential Conflict of Interest
Members of management receiving Unit Options pursuant to the terms of the
Prepackaged Plan, Reprise, the corporate general partner of the General Partner
of the Company, through its ownership of Common Units, and the Junior Lenders,
affiliates of the General Partner, through their ownership of Common Units and
the Old Junior Subordinated Notes, have interests in the Company and the
consummation of the Prepackaged Plan that are different from (or in the case
members of management, Reprise and the Junior Lenders holding Common Units, in
addition to) those of the holders of Common Units and, accordingly, have a
potential conflict of interest with the other holders of Common Units with
respect to the approval and consummation of the Prepackaged Plan.
Federal Income Tax Treatment
There are potentially significant tax consequences to the Unitholders
arising from the consummation of the transactions contemplated in the
Prepackaged Plan. One such tax consequence is the risk that Unitholders will
recognize income as a result of the Prepackaged Plan without any corresponding
receipt of cash. Given the unusual nature of contemplated transactions and the
lack of precedent regarding certain of the tax issues presented, many of the tax
consequences of these transactions are uncertain under existing law. See
"PROPOSAL 1 -- Certain Federal Income Tax Considerations."
SUMMARY OF THE PREPACKAGED PLAN
The following description is only intended as a summary of the material
terms of the Prepackaged Plan and is qualified in its entirety by reference to
the copy of the Prepackaged Plan attached as Appendix A hereto.
CHAPTER 11 OVERVIEW
A proceeding for voluntary reorganization under chapter 11 of the
Bankruptcy Code is commenced upon the filing of a petition in the Bankruptcy
Court. The filing of a chapter 11 petition creates a bankruptcy estate comprised
of all legal or equitable interest of the debtor in property as of the
commencement of the chapter 11 case, wherever located and by whomever held. Upon
the filing of the voluntary petition an order for relief is automatically
entered. Generally, upon the commencement of a case under chapter 11 of the
Bankruptcy Code, any "party-in-interest" (including all Creditors and Equity
Holders) may raise and may appear and be heard on any issue in such chapter 11
case.
The automatic entry of the order for relief causes the automatic stay
arising under Section 362 of the Bankruptcy Code to become effective. The
automatic stay is one of the fundamental protections afforded a debtor in a
bankruptcy case. The automatic stay is a pervasive statutory injunction that
provides that, with limited exceptions, no creditor or other entity may continue
or commence any action against a debtor, its property or property in its
possession unless the creditor or other entity first obtains permission from the
Bankruptcy Court. The exceptions to the automatic stay are based, for the most
part, on governmental entities' authority to regulate a debtor's effect on the
health and welfare of the person within its jurisdiction. Creditors and other
entities may be entitled to relief from the automatic stay if certain statutory
criteria are met, e.g., (i) cause, including the lack of adequate protection of
an entity's interest in property, or (ii) if the debtor lacks equity in property
and the property is not necessary for the debtor's effective reorganization.
The United States Trustee for each judicial district is an employee of the
United States Justice Department that administers certain aspects of bankruptcy
cases. The United States Trustee may appoint the members of the Official
Committee in a prepackaged chapter 11 case. The selection of the members of the
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Official Committee is made by the United States Trustee. The United States
Trustee ordinarily holds a meeting of approximately the twenty largest unsecured
creditors of a debtor shortly after the filing of a prepackaged chapter 11 case,
from which group the United States Trustee generally selects a number (often
approximately 5 to 9) of unsecured creditors willing to serve on the Official
Committee. However, a United States Trustee has the discretion to appoint any
non-insider unsecured creditors to the Official Committee. If the Official
Committee is not representative of the unsecured creditors as a whole, upon its
own initiative or upon request of a party in interest, the Bankruptcy Court may
direct the United States Trustee to change the membership or size of the
Official Committee, or to appoint additional committees.
The Official Committee serves as a fiduciary to all general unsecured
creditors. The duties of the Official Committee include, among other things,
investigation of a debtor's financial affairs, consultation with the debtor
concerning the administration of the case and participation in the plan of
reorganization confirmation process. The Official Committee is a separate entity
distinct from the specific creditors who serve on the Official Committee.
Upon the automatic entry of an order for relief simultaneously with the
filing of the voluntary petition, a debtor becomes a "debtor-in-possession." A
debtor-in-possession, unless otherwise ordered by the bankruptcy court,
automatically is authorized to retain possession of its assets and manage its
business in the ordinary course, without the need for of any specific bankruptcy
court approval. A debtor-in-possession may use, sell or lease property of the
estate in the ordinary course of business without specific bankruptcy court
approval, with the exception of the use of cash and cash equivalents as to which
use secured creditors consent or the debtor obtains court authority.
In general, a chapter 11 plan of reorganization (i) divides claims and
equity interest into separate classes, (ii) specifies the property that each
class is to receive under the plan, and (iii) contains other provisions
concerning the reorganization of the debtor. Under the Bankruptcy Code, "claims"
and "equity interests" are classified rather than "creditors" and "shareholders"
because such entities may hold claims or equity interests in more than one
class. For purposes of this Consent Solicitation Statement, the terms "Creditor"
and "Equity Holder" refer to the Holder of a Claim or Equity Interest,
respectively, in a particular Class under the Prepackaged Plan. The terms
"Impaired Creditor" and "Equity Holders" refer to the Creditors and Equity
Holders, respectively, to whom this Consent Solicitation Statement and the other
Solicitation Materials are being furnished.
Section 1122 of the Bankruptcy Code provides that only claims or equity
interests which are similar may be placed within the same class. This
requirement is designed to prohibit unfair dilution of potential dissenters'
votes. If a plan of reorganization improperly classifies a claim or equity
interest, the holder of such claim or equity interest may object to such
classification and if the Bankruptcy Court upholds the objection, the Bankruptcy
Court may deny confirmation of such plan.
A chapter 11 plan may specify that certain classes of claims or equity
interest are either to be paid in full upon effectiveness of the plan or are to
remain unchanged by the reorganization effectuated by the plan. Such classes are
referred to as "unimpaired" and, because of such favorable treatment, are deemed
to accept the plan. Accordingly, it is not necessary to solicit votes from the
holders of claims or equity interests in such classes. A chapter 11 plan also
may specify that certain classes will not receive any distribution of property
or retain any claim against a debtor. Such classes are deemed to reject the plan
and, therefore, need not be solicited to vote to accept or reject the plan.
General
In order for the Prepackaged Plan to be confirmed by the Bankruptcy Court
(i) Holders of Allowed Claims in each Class who cast votes in favor of the
Prepackaged Plan must hold (a) at least two-thirds in dollar amount and (b) more
than one-half in number of the Allowed Claims actually voting in such Class, and
(ii) Holders of Equity Interests in each Class who cast votes in favor of the
Prepackaged Plan must hold at least two-thirds in amount of the Allowed Equity
Interests actually voting in such Class.
The terms proposed by Huntway and recommended by the General Partner for
the payment of Allowed Claims and Equity Interests under the Prepackaged Plan
are based on Huntway's assessment of its ability to repay all of its obligations
under the Prepackaged Plan, consistent with the working capital requirements of
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Huntway's businesses. In conjunction with the Prepackaged Plan, Huntway has made
financial projections of earnings and cash flow for each of the fiscal years
ending in 1996 through 2000. See "Financial Projections."
The Effective Date of the Prepackaged Plan will be the date selected by
Huntway, which shall be no later than the 30th Business Day after the date on
which all conditions referred to in Sections VIIA and VIIB of the Prepackaged
Plan have been satisfied or waived by Huntway and Holders of a majority of
Senior Lender Claims. See "Consummation and Effectiveness." Payments to be made
under the Prepackaged Plan will be made on the Effective Date or as soon
thereafter as is practicable, or at such other time or times as are specified in
the Prepackaged Plan.
The General Partner and management of the Company believes that (i) under
the Prepackaged Plan, each Creditor and Equity Holder will obtain a greater
recovery from Huntway than any recovery which otherwise would be obtained if the
assets of Huntway were liquidated under chapter 7 of the Bankruptcy Code and
(ii) the Prepackaged Plan will enable Huntway to service its post confirmation
debt obligations and fund its capital expenditures in the future. See
"Liquidation Analysis."
Classification and Treatment of Claims and Equity Interests
Only Allowed Claims (as defined in the Prepackaged Plan) and Allowed Equity
Interests (as defined in the Prepackaged Plan) are entitled to receive
distributions or retain their Equity Interests under the Prepackaged Plan. An
Allowed Claim or Allowed Equity Interest is a Claim or Equity Interest (i)
listed by Huntway in its Schedules filed with the Bankruptcy Court and not
designated as "contingent," "unliquidated" or "disputed," or (ii) as to which a
proof of claim or interest has been timely and properly filed, and, in all
cases, as to which no objection to the allowance thereof has been interposed on
or before the 60th day after the Effective Date or any such other period of
limitation fixed by the Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy
Court, or as to which any objection has been determined by a Final Order in
favor of the respective Holder of a Claim or Equity Interest or (iii) which is
allowed by the Prepackaged Plan. If an objection is made, the validity and
amount of the Claim or Equity Interest will be determined by the Bankruptcy
Court. Pursuant to the Prepackaged Plan, the Claims of the Senior Lenders and
the Junior Lenders are deemed Allowed Claims for all purposes under the
Prepackaged Plan.
Administrative Expenses
Administrative Expense means any cost or expense of administration of the
Prepackaged Chapter 11 Case under subsections 503(b) and 507(a)(1) of the
Bankruptcy Code, including, without limitation, the actual and necessary
expenses of preserving the Estate and operating the businesses of Huntway, all
compensation or reimbursement of expenses to the extent Allowed under Sections
330 or 503 of the Bankruptcy Code, including the fees or charges assessed
against the Estates under Section 1930, Chapter 123 of Title 28 of the United
States Code.
In the event that the Bankruptcy Court confirms the Prepackaged Plan within
the time frame anticipated by Huntway, it is expected that the amount of
Administrative Expenses would be approximately $100,000, which is significantly
less than would be expected if Huntway were to commence a non-prepackaged
Chapter 11 case without the prepetition solicitation. In particular,
professional fees and expenses incurred in the Prepackaged Chapter 11 Case are
likely to be much lower due to the prepetition solicitation. If the Prepackaged
Plan is not confirmed within the time frame anticipated by Huntway or otherwise,
the amount of professional fees, even absent potential contested proceedings in
the Chapter 11 Case, would likely exceed $50,000 per month.
Pursuant to the Prepackaged Plan, Allowed Administrative Expenses will be
paid in full, in Cash, on the later of the Effective Date or the date on which a
Claim becomes an Allowed Administrative Expense, except to the extent that the
Holder of an Allowed Administrative Expense agrees to a different treatment;
provided, however, that Allowed Administrative Expenses representing liabilities
incurred in the ordinary course of business by Huntway (including amounts owed
to vendors and suppliers which have sold goods or furnished services to Huntway
since the commencement of the Prepackaged Chapter 11 Case) will be paid in full
or
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performed by Huntway in the ordinary course of business in accordance with the
terms and conditions of the particular transactions and any agreements and
instruments relating thereto.
In addition to the foregoing, Section 503(b) of the Bankruptcy Code
provides for payment of compensation to Creditors, indenture trustees, and other
persons making a "substantial contribution" to the Prepackaged Chapter 11 Case,
and to attorneys for, and other professional advisors to, such persons. Certain
entities may file applications with the Bankruptcy Court for allowance of
compensation and reimbursement of expenses for substantial contribution. The
amounts which such entities may seek for such compensation cannot be estimated
by Huntway at this time. Requests for compensation must be approved by the
Bankruptcy Court after notice and a hearing at which Huntway and other parties
in interest may participate, and if appropriate, object to the allowance of any
compensation and reimbursement of expenses.
All payments to professionals retained postpetition by Huntway will be made
in accordance with the procedures established by the Bankruptcy Code, the
Bankruptcy Rules and the Bankruptcy Court relating to the payment of interim and
final compensation and expenses. The Bankruptcy Court will review and determine
all requests for compensation and reimbursement of expenses with expenses with
respect to the period after filing the Prepackaged Chapter 11 Case and before
the Confirmation Date.
Effects of Confirmation and Absence of Confirmation
If the Prepackaged Plan is confirmed as contemplated by Huntway, Holders of
Allowed Administrative Expenses will be paid on the Effective Date, or as
otherwise may be agreed by the holders of such claims, in accordance with the
provisions of the Bankruptcy Code. In the event that the Prepackaged Plan is not
confirmed, the alternatives are (i) liquidation of Huntway's assets under
chapter 7 of the Bankruptcy Code, (ii) foreclosure on the assets by the Senior
Lenders and liquidation of such assets pursuant to a foreclosure sale or (iii)
confirmation of an alternative plan of reorganization under Chapter 11 of the
Bankruptcy Code. In these alternative scenarios, the Holders of Administrative
Expenses would be paid in accordance with the priorities set forth in the
Bankruptcy Code or other applicable law, but there is a no assurance that such
Claims would be paid in full. See "PROPOSAL 1 -- Bankruptcy Considerations" for
a discussion of the risk of non-confirmation, liquidation under chapter 7 and
alternative plans of reorganization.
Priority Tax Claims
Priority Tax Claims include the Claims of governmental units entitled to a
priority in right of payment under Section 507(a)(7) of the Bankruptcy Code.
Huntway estimates that, as of the assumed Effective Date of September 30, 1996,
the aggregate amount of Priority Tax Claims will not exceed approximately
$800,000. Pursuant to the Prepackaged Plan, Allowed Priority Tax Claims will be
paid in full, in Cash, on the Effective Date or as soon thereafter as is
practicable, except to the extent the Holder of an Allowed Priority Tax Claim
agrees to a different treatment; provided, however, at Huntway's option, Huntway
may pay Allowed Priority Tax Claims plus interest accrued thereon (in amounts
and at a rate to be agreed upon between Huntway and the Holder of the Claim, or
in the absence of such agreement, as determined by the Bankruptcy Court) over a
period not exceeding six years after the date of assessment of the Priority Tax
Claim, as provided in subsection 1129 (a)(9)(C) of the Bankruptcy Code. Huntway
has not yet determined whether it will pay all or any portion of the Priority
Tax Claims (currently estimated at $800,000) on the Effective Date or over a
period not exceeding six years after such date. To the extent payment of Allowed
Priority Tax Claims on the Effective Date would materially adversely affect
Huntway, the Company will pay such Claims in accordance with subsection 1129
(a)(9)(C) of the Bankruptcy Code.
Effects of Confirmation and Absence of Confirmation
If the Prepackaged Plan is confirmed as contemplated by Huntway, the
Holders of Allowed Priority Tax Claims will be paid in accordance with the terms
of the Prepackaged Plan as described above. In the event that the Prepackaged
Plan is not confirmed, the alternatives are (i) liquidation of Huntway's assets
under chapter 7 of the Bankruptcy Code, (ii) foreclosure on the assets by the
Senior Lenders and liquidation of such assets pursuant to a foreclosure sale or
(iii) confirmation of an alternative plan of reorganization under
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<PAGE> 46
Chapter 11 of the Bankruptcy Code. In these alternative scenarios, the Holders
of Priority Tax Claims would be paid in accordance with the priorities set forth
in the Bankruptcy Code or other applicable law, but there is a no assurance that
such Claims would be paid in full. See "PROPOSAL 1 -- Bankruptcy Considerations"
for a discussion of the risk of non-confirmation, liquidation under chapter 7
and alternative plans of reorganization.
Class 1 -- Other Priority Claims
Class 1 consists of Other Priority Claims that are entitled to a priority
in right of payment under Section 507(a) of the Bankruptcy Code (other than
Priority Tax Claims or Administrative Expenses). Examples of such Other Priority
Claims include, without limitation (i) Unsecured Claims for accrued employee
compensation, including vacation, severance and sick-leave pay earned within the
90 days prior to the Petition Date, to the extent of $4,000 per employee and
(ii) contributions to employee benefit plans arising from services rendered
within the 180-day period next preceding the Petition Date, but only for such
plans to the extent of (a) the number of employees covered by such plans
multiplied by $4,000 less (b) the aggregate amount paid to such employees for
accrued employee compensation pursuant to subsection 507(a) of the Bankruptcy
Code. Huntway intends to request the Bankruptcy Court's authorization to pay all
prepetition employee compensation and benefits on a current basis. No assurance,
however, can be given that such authorization will be obtained. See "Summary of
Other Provisions of the Plan and Related Matters -- First Day Motions." Huntway
estimates that, as of an assumed Effective Date of September 30, 1996, the
aggregate amount of such Other Priority Claims will not exceed $400,000.00.
Pursuant to the Prepackaged Plan, Allowed Other Priority Claims will be paid in
full, in Cash, on the Effective Date or as soon thereafter as practicable,
except to the extent that the Holder of a Claim in such Class agrees to a
different treatment.
Class 1 is unimpaired and Holders of Allowed Class 1 Claims are deemed to
have accepted the Prepackaged Plan.
Effects of Confirmation and Absence of Confirmation
If the Prepackaged Plan is confirmed as contemplated by Huntway, the
Holders of Class 1 Claims will be paid in accordance with the terms of the
Prepackaged Plan as described above. In the event that the Prepackaged Plan is
not confirmed, the alternatives are (i) liquidation of Huntway's assets under
chapter 7 of the Bankruptcy Code, (ii) foreclosure on the assets by the Senior
Lenders and liquidation of such assets pursuant to a foreclosure sale or (iii)
confirmation of an alternative plan of reorganization under Chapter 11 of the
Bankruptcy Code. In these alternative scenarios, the Holders of Class 1 Claims
would be paid in accordance with the priorities set forth in the Bankruptcy Code
or other applicable law, but there is a no assurance that such Claims would be
paid in full. See "PROPOSAL 1 -- Bankruptcy Considerations" for a discussion of
the risk of non-confirmation, liquidation under chapter 7 and alternative plans
of reorganization.
Class 2 -- Senior Lender Claims
Class 2 consists of all of the Claims of the Senior Lenders arising under
the Old Collateralized Note Indenture and Old Subordinated Note Indenture,
including interest, fees, costs and expenses provided thereunder, including any
post-petition interest, fees, costs and expenses permitted under section 506(b)
of the Bankruptcy Code. Class 2 Claims are separated into three subclasses.
Class 2A Claims will consist of all of the Senior Lender Claims of Bankers
Trust. Class 2B Claims consist of all of the Senior Lender Claims (other than
those of Bankers Trust), to the extent such Claims are Secured Claims. Class 2C
Claims consist of all Senior Lenders Claims other than those of Bankers Trust,
to the extent such Claims are not Secured Claims. Class 2B Claims and Class 2C
Claims are held by Mass Mutual, First Plaza, Oppenheimer and Ryback. The Holder
of Class 2A Claims will receive $9,100,000 in New Senior Notes (Sunbelt IDB),
$2,844,345 in New Senior Notes (Other) and 3,220,227 Common Units. In addition,
the Holder of Class 2A Claims will receive on the Effective Date reimbursement
of all fees and expenses of its counsel incurred up to and including the
Effective Date in connection with the Old Collateralized Note Indenture, the Old
Subordinated Note Indenture, the restructuring of such indentures, the
Prepackaged Chapter 11 Case, the Prepackaged Plan and the transactions
contemplated thereby. The Holders of Class 2B and Class 2C Claims will receive
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<PAGE> 47
their pro-rata share of $11,555,656 in New Senior Notes (Other) and 3,115,436
Common Units. Upon receipt by Huntway of a Holder's Old Collateralized Note and
Old Subordinated Note and consent to the New Intercreditor Agreement, such
Holder will receive the consideration provided for in the Prepackaged Plan. The
rights of holders of the New Senior Notes will be subject to the New
Intercreditor Agreement. For a discussion of the New Intercreditor Agreement,
see PROPOSAL 1 -- "The New Guarantee and New Intercreditor Agreement." The
rights of the holders of Common Units received in respect of Class 2 Claims will
be subject to the Unitholders Agreement. For a discussion of the Unitholders
Agreement, see PROPOSAL 1 -- "Unitholders Agreement." Each Holder of Class 2
Claims shall also receive, unless such Holder elects not to provide the release
set forth in subsection V.I(ii) of the Prepackaged Plan, the Release described
below (See "Release of Consenting Lenders").
On the Effective Date, the Old Collateralized Note Indenture will be
amended, restated and superseded by the New Collateralized Note Indenture, the
Old Subordinated Note Indenture will be terminated, and the obligations under
such indentures and under the Old Subordinated Notes and the Old Collateralized
Notes will be replaced by obligations under the New Senior Notes. Except to the
extent that the obligations of Huntway are continued under the New
Collateralized Note Indenture and the New Senior Notes, the obligations of
Huntway pursuant to the Old Collateralized Note Indenture, the Old
Collateralized Notes, the Old Subordinated Note Indenture and the Old
Subordinated Notes will be discharged. On each date that interest is paid on the
New Junior Notes in the form of Common Units, the Company will issue pursuant to
the Prepackaged Plan such additional Common Units to the Holders of Class 2
Claims as are necessary to prevent any dilution as a result of the issuances of
(a) such Common Units as interest on the New Junior Notes and (b) Unit Options
(or equivalent rights to receive additional Common Units) issued to Holders of
Class 8 Equity Interests to prevent dilution of the outstanding Unit Options
issued to such Holders of Class 8 Equity Interests pursuant to the Prepackaged
Plan. Additional provisions relating to this anti-dilution right will be
contained in the Unitholders Agreement. The Unitholders Agreement will also
provide that the Holders of Class 2 Claims may not transfer or assign the Common
Units received by them pursuant to the Prepackaged Plan for a period of 180 days
from the Effective Date and will provide for registration of those Common Units
thereafter and that these Common Units shall be freely transferable thereafter.
The General Partner, the Special Managing Partner, the Senior Lenders holding
approximately 86% of the Class 2 Claims and the Junior Lenders have entered into
an agreement (the "Support Agreement") which provides, inter alia, that if, on
the later of (i) the date 3 months after the Effective Date, or (ii) January 1,
1997, either the General Partner or holders of a majority of the outstanding New
Collateralized Notes have submitted a written proposal to one another requesting
that Huntway convert to corporate form, then the General Partner, the Special
Managing Partner, such Senior Lenders, in their capacities as Unitholders, and
such Junior Lenders, in their capacities as Unitholders, shall support and vote
for such conversion on terms and conditions reasonably satisfactory to the
General Partner, the Special Managing Partner, such Senior Lenders and the
Junior Lenders. The effectiveness of the Support Agreement shall survive
confirmation of the Prepackaged Plan. For a discussion of the Support Agreement,
see "PROPOSAL I -- The Support Agreement." In the event a written proposal is
submitted in accordance with the Support Agreement, Huntway will seek Unitholder
approval thereof in accordance with the Second Amended and Restated Agreement of
Limited Partnership.
The obligations owed by Huntway under the New Collateralized Note Indenture
and the New Senior Notes will be secured by substantially all assets of Huntway,
subject to a first priority lien on such assets to secure obligations under the
New Letter of Credit Agreement and any Replacement Letter of Credit Agreement
(as such term is defined in the New Intercreditor Agreement). Such obligations
will also be guaranteed by Sunbelt and certain of Huntway's affiliates and
secured by a pledge of assets of Sunbelt and such affiliates.
Claims in Classes 2A, 2B and 2C are each Impaired. Holders of Allowed Class
2A, 2B and 2C Claims are entitled to vote on the Prepackaged Plan in accordance
with the Prepackaged Plan and the Voting Instructions. Approval of the
Prepackaged Plan by Holders of at least two-thirds in dollar amount and more
than one-half of Allowed Class 2A Claims, Class 2B Claims and Class 2C Claims
with respect to which votes are received is required to confirm the Prepackaged
Plan.
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<PAGE> 48
Effects of Confirmation and Absence of Confirmation
If the Prepackaged Plan is confirmed as contemplated by Huntway, the
Holders of Class 2A Claims, Class 2B Claims and Class 2C Claims will obtain
consideration in accordance with the terms of the Prepackaged Plan as described
above. In the event that the Prepackaged Plan is not confirmed, the alternatives
are (i) liquidation of Huntway's assets under chapter 7 of the Bankruptcy Code,
(ii) foreclosure on the assets by the Senior Lenders and liquidation of such
assets pursuant to a foreclosure sale or (iii) confirmation of an alternative
plan of reorganization under Chapter 11 of the Bankruptcy Code. In these
alternative scenarios, the Holders of Class 2 Claims would receive consideration
in accordance with the priorities set forth in the Bankruptcy Code or other
applicable law, but there is a no assurance that such Claims would receive all
or any portion of the consideration prescribed by the Prepackaged Plan or other
proceeds. See "PROPOSAL 1 -- Bankruptcy Considerations" for a discussion of the
risk of non-confirmation, liquidation under chapter 7 and alternative plans of
reorganization.
Class 3 -- Other Secured Claims
Class 3 consists of all Secured Claims, other than Senior Lender Claims,
against Huntway (the "Other Secured Claims") held by an entity, including a
Creditor holding a judgment with respect to which a lien has been perfected
against Huntway and is not subject to avoidance under the Bankruptcy Code, to
the extent of the value, determined by the Bankruptcy Court pursuant to
subsection 506(a) of the Bankruptcy Code, of any interest in property of the
Estate securing such Allowed Claim. The legal, equitable and contractual rights
of the Holders of Class 3 Claims are unaltered by the Prepackaged Plan. On the
Effective Date, subject to the requirements of section 1124(2) of the Bankruptcy
Code, the legal, equitable and contractual rights of the Holders of Allowed
Class 3 Claims shall be reinstated in full, in accordance with the terms of the
prepetition agreements, rights or obligations of Huntway respecting such Class 3
Claims; provided, however, that the maturity date or dates of all Class 3 Claims
shall be reinstated to the date or dates which existed prior to the date of any
acceleration of such Class 3 Claims, subject to the legal and equitable rights
of the parties with respect to such Claims as they existed immediately prior to
the filing of the Prepackaged Plan. Huntway will make payments required by
Section 1124(2) of the Bankruptcy Code, together with interest from and after
the Petition Date required to be paid to maintain the unimpaired status of Class
3 Claims, to Holders of Allowed Class 3 Claims on the Effective Date and will
cure any defaults under such Class 3 claims to the extent required by section
1124(2) of the Bankruptcy Code. Any defaults of such Class 3 Claims which
existed immediately prior to the filing of the Prepackaged Chapter 11 Case shall
be deemed cured upon the Effective Date upon Huntway's making such payments.
Subject to the foregoing, Holders of Class 3 Claims will be treated as if the
Prepackaged Chapter 11 Case has not been filed (except as otherwise provided
herein), and the determination of whether any Class 3 Claim (which, subject to
Bankruptcy Court approval, shall not be listed on the Schedules, and as to which
no proof of Claim need be filed) will be determined, resolved or adjudicated as
if the Prepackaged Chapter 11 Case had not been commenced.
Nothing in the Prepackaged Plan, the Confirmation Order or any order in aid
of confirmation of the Prepackaged Plan, shall constitute, or be deemed to
constitute, a waiver or release of any claim, cause of action, right of setoff,
or other legal or equitable defense which Huntway had immediately prior to the
commencement of the Prepackaged Chapter 11 Case, against or with respect to any
Claim in Class 3. During the pendency of the Prepackaged Chapter 11 Case and
upon confirmation thereof, Huntway shall have, retain, reserve and be entitled
to assert all such claims, causes of action, rights of setoff and other legal or
equitable defenses which it had immediately prior to the commencement of the
Prepackaged Chapter 11 Case fully as if the Prepackaged Chapter 11 Case had not
been commenced. No Class 3 Claim shall be deemed Allowed or not Allowed by
virtue of the Prepackaged Plan.
Class 3 is unimpaired and Holders of Allowed Class 3 Claims are deemed to
have accepted the Prepackaged Plan.
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Effects of Confirmation and Absence of Confirmation
If the Prepackaged Plan is confirmed as contemplated by Huntway, the
Holders of Allowed Class 3 Claims will be treated in accordance with the terms
of the Prepackaged Plan as described above. In the event that the Prepackaged
Plan is not confirmed, the alternatives are (i) liquidation of Huntway's assets
under chapter 7 of the Bankruptcy Code, (ii) foreclosure on the assets by the
Senior Lenders and liquidation of such assets pursuant to a foreclosure sale or
(iii) confirmation of an alternative plan of reorganization under Chapter 11 of
the Bankruptcy Code. In these alternative scenarios, the Holders of Class 3
Claims would be paid in accordance with the priorities set forth in the
Bankruptcy Code or other applicable law, but there is a no assurance that all or
any portion of such Claims would be paid. See "PROPOSAL 1 -- Bankruptcy
Considerations" for a discussion of the risk of non-confirmation, liquidation
under chapter 7 and alternative plans of reorganization.
Class 4 -- Unsecured Claims
Class 4 consists of all Claims that are not Administrative Expenses,
Priority Tax Claims, Other Priority Claims (Class 1), Senior Lender Claims
(Class 2), Other Secured Claims (Class 3), Junior Lender Claims (Class 5),
Equity Interests evidenced by Warrants (Class 6), or Common Units (Class 7),
Existing Unit Options (Class 8), Danesh Options (Class 9) or General Partner
Interests (Class 10). Huntway estimates that, excluding unliquidated, contingent
and Disputed Unsecured Claims, as of an assumed filing date of , 1996,
the aggregate outstanding amount of Unsecured Claims will not exceed
approximately $3,800,000. Huntway intends to seek the approval of the Bankruptcy
Court, as soon as is practicable after commencement of the Prepackaged Chapter
11 Case to pay all undisputed trade Claims and certain other Class 4 Claims in
the ordinary course of business, notwithstanding commencement of the Prepackaged
Chapter 11 Case. No assurance, however, can be given that such authorization
will be obtained.
The legal, equitable and contractual rights of the Holders of Class 4
Claims are unaltered by the Prepackaged Plan. On the Effective Date, subject to
the requirements of section 1124(2)(B) of the Bankruptcy Code, the legal,
equitable and contractual rights of the Holders of Allowed Class 4 Claims shall
be reinstated in full in accordance with the terms of the pre-petition
agreements, rights or obligations of Huntway respecting such Class 4 Claims;
provided, however that the maturity date or dates of all Unsecured Claims shall
be reinstated to the date or dates which existed prior to the date of any
acceleration of such Class 4 Claims, subject to the legal and equitable rights
of the parties with respect to such Class 4 Claims as they existed immediately
prior to the filing of the Prepackaged Plan. Huntway will make payments required
by Section 1124(2) of the Bankruptcy Code, together with interest from and after
the Petition Date required to be paid to maintain the unimpaired status of Class
4 Claims, to Holders of Allowed Class 4 Claims on the Effective Date and will
cure any defaults under such Class 4 claims to the extent required by Section
1124(2) of the Bankruptcy Code. Any defaults of such Class 4 Claims which
existed immediately prior to the filing of the Prepackaged Chapter 11 Case shall
be deemed cured upon the Effective Date upon Huntway's making such payments.
Subject to the foregoing, and except for Creditors under rejected executory
contracts and unexpired leases, who must file proofs of Claim, Holders of Class
4 Claims will be treated as if the Prepackaged Chapter 11 Case has not been
filed (except as otherwise provided herein), and the determination of whether
any Class 4 Unsecured Claim (which, subject to Bankruptcy Court approval, shall
not be listed on the Schedules, and as to which no proof of Claim need be filed)
will be determined, resolved or adjudicated as if the Prepackaged Chapter 11
Case had not been commenced.
Nothing in the Prepackaged Plan, the Confirmation Order or any order in aid
of confirmation of the Prepackaged Plan, shall constitute, or be deemed to
constitute, a waiver or release of any Claim, cause of action, right of setoff
or recoupment, or other legal or equitable defense which Huntway had immediately
prior to the commencement of the Prepackaged Chapter 11 Case, against or with
respect to any Claim in Class 4. During the pendency of the Prepackaged Chapter
11 Case and upon confirmation thereof, Huntway shall have, retain, reserve and
be entitled to assert all such Claims, causes of action, rights of setoff and
recoupment and other legal or equitable defenses which it had immediately prior
to the commencement of the Prepackaged Chapter 11 Case fully as if the
Prepackaged Chapter 11 Case had not been commenced. No Class 4 Claim shall be
deemed Allowed or not Allowed by virtue of the Prepackaged Plan.
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<PAGE> 50
Class 4 is unimpaired and Holders of such Claims are deemed to have
accepted the Prepackaged Plan.
Effects of Confirmation and Absence of Confirmation
If the Prepackaged Plan is confirmed as contemplated by Huntway, the
Holders of Allowed Class 4 Claims will be treated in accordance with the terms
of the Prepackaged Plan as described above. In the event that the Prepackaged
Plan is not confirmed, the alternatives are (i) liquidation of Huntway's assets
under chapter 7 of the Bankruptcy Code, (ii) foreclosure on the assets by the
Senior Lenders and liquidation of such assets pursuant to a foreclosure sale or
(iii) confirmation of an alternative plan of reorganization under Chapter 11 of
the Bankruptcy Code. In these alternative scenarios, the Holders of Class 4
Claims would be paid in accordance with the priorities set forth in the
Bankruptcy Code or other applicable law, but there is a no assurance that all or
any portion of such Claims would be paid. See "PROPOSAL 1 -- Bankruptcy
Considerations" for a discussion of the risk of non-confirmation, liquidation
under chapter 7 and alternative plans of reorganization.
Class 5 -- Claims of Holders of Old Junior Subordinated Notes
Class 5 consists of all Claims of Holders of each of the Old Junior
Subordinated Notes. FCCC and MDP, affiliates of Huntway and the General Partner,
are the only Holders of Class 5 Claims. The outstanding aggregate principal
amount of the Old Junior Subordinated Notes was $7,586,668 as of December 31,
1995. On the Effective Date or as soon thereafter as is practicable, a Holder of
an Allowed Class 5 Claim shall receive, in full and final satisfaction of such
Holder's Allowed Class 5 Claim, its pro-rata portion of (a) $2,070,000 principal
of New Junior Notes; and (b) 1,115,077 Common Units, representing 4.4% of
Reorganized Huntway's Common Units issued and outstanding on the Effective Date.
On the Effective Date, all Old Junior Subordinated Notes will be canceled, and
the obligations of Huntway represented by such instruments will be completely
discharged. Upon receipt by Huntway of a Holder's Old Junior Subordinated Note,
such Holder will receive the consideration provided for in the Prepackaged Plan.
The rights of Holders of Common Units received in respect of their Class 5
Claims will be subject to the Unitholders Agreement. The Unitholders Agreement
will provide that the Holders of Class 5 Claims may not transfer or assign the
Common Units received by them pursuant to the Prepackaged Plan for a period of
180 days from the Effective Date.
Class 5 is Impaired. Holders of Allowed Class 5 Claims are entitled to vote
on the Prepackaged Plan in accordance with the Prepackaged Plan and the Voting
Instructions. Approval of the Prepackaged Plan by Holders of at least two-thirds
in dollar amount and more than one-half in number of Allowed Class 5 Claims with
respect to which votes are received is required to confirm the Prepackaged Plan.
Effects of Confirmation and Absence of Confirmation
If the Prepackaged Plan is confirmed as contemplated by Huntway, the
Holders of Allowed Class 5 Claims will receive consideration in accordance with
the terms of the Prepackaged Plan as described above. In the event that the
Prepackaged Plan is not confirmed, the alternatives are (i) liquidation of
Huntway's assets under chapter 7 of the Bankruptcy Code, (ii) foreclosure on the
assets by the Senior Lenders and liquidation of such assets pursuant to a
foreclosure sale or (iii) confirmation of an alternative plan of reorganization
under Chapter 11 of the Bankruptcy Code. In these alternative scenarios, the
Holders of Class 5 Claims would be paid in accordance with the priorities set
forth in the Bankruptcy Code or other applicable law, but there is a no
assurance that all or any portion of such Claims would be paid. See "PROPOSAL
1 -- Bankruptcy Considerations" for a discussion of the risk of
non-confirmation, liquidation under chapter 7 and alternative plans of
reorganization.
Class 6 -- Equity Interests of Holders of Warrants
Class 6 consists of all Equity Interests of Holders of Warrants for the
purchase of Huntway's Common Units. As of June 30, 1996, Warrants to purchase an
aggregate of 3,340,757 Common Units for $.875 per Common Unit expiring December
31, 2008 were outstanding. Bankers Trust, Mass Mutual, First Plaza and
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<PAGE> 51
Oppenheimer are the Holders of the Warrants. The Prepackaged Plan provides that
each Holder of an Allowed Equity Interest in Class 6 will receive on the
Effective Date such Holder's pro-rata share of 6,335,663 of Reorganized
Huntway's Common Units. To receive a distribution of Huntway's Common Units
under the Prepackaged Plan, Holders of Class 6 Equity Interests shall execute
the Unitholders Agreement which contains certain restrictions on transfer and
other terms and conditions relating to the Common Units held by such Holders. On
each date that interest is paid on the New Junior Notes in the form of Common
Units, the Company will issue pursuant to the Prepackaged Plan such additional
Common Units to the Holders of Class 6 Equity Interests as are necessary to
prevent any dilution as a result of the issuances of (a) such Common Units as
interest on the New Junior Notes and (b) Unit Options (or equivalent rights to
receive additional Common Units) issued to Holders of Class 8 Equity Interests
to prevent dilution of the outstanding Unit Options issued to such Holders of
Class 8 Equity Interests pursuant to the Prepackaged Plan. Additional provisions
relating to this anti-dilution right will be contained in the Unitholders
Agreement. The Unitholders Agreement will also provide that the Holders of Class
6 Equity Interests may not transfer or assign the Common Units received by them
pursuant to the Prepackaged Plan for a period of 180 days from the Effective
Date and will provide for registration of those Common Units thereafter so that
such Common Units will be freely transferable.
Class 6 is impaired. Holders of Allowed Class 6 Equity Interests are
entitled to vote on the Prepackaged Plan in accordance with the Prepackaged Plan
and the Voting Instructions. Approval of the Prepackaged Plan by Holders of at
least two-thirds in amount of Allowed Class 6 Equity Interests with respect to
which votes are received is required to confirm the Prepackaged Plan.
Effects of Confirmation and Absence of Confirmation
If the Prepackaged Plan is confirmed as contemplated by Huntway, the
Holders of Class 6 Equity Interests will receive consideration in accordance
with the terms of the Prepackaged Plan as described above. In the event that the
Prepackaged Plan is not confirmed, the alternatives are (i) liquidation of
Huntway's assets under chapter 7 of the Bankruptcy Code, (ii) foreclosure on the
assets by the Senior Lenders and liquidation of such assets pursuant to a
foreclosure sale or (iii) confirmation of an alternative plan of reorganization
under Chapter 11 of the Bankruptcy Code. In these alternative scenarios, the
Holders of Class 6 Equity Interests would be paid on account of their Warrants
in accordance with the priorities set forth in the Bankruptcy Code or other
applicable law, but there is a no assurance that such Holders would receive any
consideration. See "PROPOSAL 1 -- Bankruptcy Considerations" for a discussion of
the risk of non-confirmation, liquidation under chapter 7 and alternative plans
of reorganization.
Class 7 -- Equity Interest of Holders of Common Units
Class 7 consists of all Equity Interests of Holders of Common Units. As of
the Record Date, there were 11,556,230 Common Units outstanding and officers of
the Company beneficially owned an aggregate of 623,419 Common Units and Reprise
beneficially owned 653,286 Common Units. The Prepackaged Plan provides that each
Holder of an Allowed Equity Interest in Class 7 will retain such Holder's Common
Units from and after the Effective Date. However, as a result of the issuance to
Holders of Class 2 Claims of approximately 6,335,663 additional Common Units
deliverable as of the Effective Date, of the issuance to Holders of Class 5
Claims of approximately 1,115,077 additional Common Units and the issuance to
Holders of Class 6 Equity Interests of 6,335,664 additional units deliverable as
of the Effective Date, the ownership interest in Huntway represented by Holders
of Common Units outstanding immediately prior to the Effective Date will be
reduced to approximately 45.6 percent, based on the number of Common Units
outstanding as of the date of filing of the Prepackaged Plan. In addition,
interest accruing on the New Junior Notes is payable in Common Units with a
value on each applicable interest payment date equal to the then market value of
such Common Units. Under the terms of the Unitholders Agreement, on each such
interest payment date, the Company has agreed to issue such additional Common
Units to the Holders of Allowed Class 2 Claims and Allowed Class 6 Equity
Interests as are necessary to prevent any dilution as a result of the issuance
of the Common Units as interest on the New Junior Notes. Both of the foregoing
issuances will dilute the equity held by other Holders of Common Units.
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<PAGE> 52
Class 7 is Impaired. Holders of Allowed Class 7 Equity Interests are
entitled to vote on the Prepackaged Plan in accordance with the Prepackaged Plan
and the Voting Instructions. Approval of the Prepackaged Plan by Holders of at
least two-thirds in amount of Allowed Class 7 Equity Interests with respect to
which votes are received is required to confirm the Prepackaged Plan.
Effects of Confirmation and Absence of Confirmation
If the Prepackaged Plan is confirmed as contemplated by Huntway, the
Holders of Class 7 Equity Interests will retain their interests in accordance
with the terms of the Prepackaged Plan as described above. In the event that the
Prepackaged Plan is not confirmed, the alternatives are (i) liquidation of
Huntway's assets under chapter 7 of the Bankruptcy Code, (ii) foreclosure on the
assets by the Senior Lenders and liquidation of such assets pursuant to a
foreclosure sale or (iii) confirmation of an alternative plan of reorganization
under Chapter 11 of the Bankruptcy Code. In these alternative scenarios, the
Holders of Class 7 Equity Interests would receive consideration on account of
such Interests in accordance with the priorities set forth in the Bankruptcy
Code or other applicable law, but there is a no assurance that any consideration
would be so received. See "PROPOSAL 1 -- Bankruptcy Considerations" for a
discussion of the risk of non-confirmation, liquidation under chapter 7 and
alternative plans of reorganization.
Class 8 -- Equity Interests of Holders of Existing Unit Options
Class 8 consists of all Equity Interests of Holders of Existing Unit
Options. As of June 15, 1996, Existing Unit Options to purchase 1,022,000 Common
Units were outstanding, 851,250 of which Options are beneficially owned by
officers of the Company. The Existing Unit Options are ten-year options that
have terms expiring between 1999 and 2005 and have exercise prices ranging
between $0.625 and $1.00 per Common Unit. The Prepackaged Plan provides that all
Existing Unit Options will be canceled and each Holder of an Allowed Equity
Interest in Class 8 will receive such Holders' pro rata share of 1,022,000 Unit
Options, which Unit Options will have terms and conditions in all material
respects the same as the Existing Unit Options, except that they shall have an
exercise price of $.50 per Common Unit. Holders of Class 8 Equity Interests will
also receive additional Unit Options for the purchase of Common Units from time
to time sufficient to prevent dilution caused by the issuance from time to time
to Holders of (a) Class 5 Claims of Common Units as payment of accrued interest
on the New Junior Notes and (b) Class 2 Claims and Class 6 Equity Interests of
Common Units issued to prevent dilution to such Holders. On the Effective Date,
the Existing Option Plan shall be terminated and of no further force and effect.
To the extent that any anti-dilution provisions in the Existing Option Plan may
be interpreted to be triggered by consummation of the Prepackaged Plan,
confirmation of the Prepackaged Plan eliminates: (i) the rights of Holders of
Allowed Equity Interests evidenced by Existing Unit Options to receive any
additional Common Units or to receive any other type of security pursuant to
such anti-dilution provisions; and (ii) the authority (whether mandatory or
discretionary) of any committee under the Existing Option Plan or the Board to
make adjustments under the Existing Option Plan on account of the transaction
implemented by the Prepackaged Plan.
Class 8 is Impaired. The Existing Unit Options are being canceled under the
Prepackaged Plan. Therefore, the Existing Unit Options are impaired, as the
legal, equitable and/or contractual rights of the Holders thereof are being
altered by the Prepackaged Plan. Holders of Allowed Class 8 Equity Interests are
entitled to vote on the Prepackaged Plan in accordance with the Prepackaged Plan
and the Voting Instructions. Approval of the Prepackaged Plan by Holders of at
least two-thirds in amount of Allowed Class 8 Equity Interests with respect to
which votes are received is required to confirm the Prepackaged Plan.
Effects of Confirmation and Absence of Confirmation
If the Prepackaged Plan is confirmed as contemplated by Huntway, the
Holders of Class 8 Equity Interests will receive consideration in accordance
with the terms of the Prepackaged Plan as described above. In the event that the
Prepackaged Plan is not confirmed, the alternatives are (i) liquidation of
Huntway's assets under chapter 7 of the Bankruptcy Code, (ii) foreclosure on the
assets by the Senior Lenders and liquidation of such assets pursuant to a
foreclosure sale or (iii) confirmation of an alternative plan of reorganization
under Chapter 11 of the Bankruptcy Code. In these alternative scenarios, the
Holders of
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Class 8 Equity Interests would be paid on account of such Interests in
accordance with the priorities set forth in the Bankruptcy Code or other
applicable law, but there is a no assurance that such Holders would receive any
consideration on account of such Equity Interests. See "PROPOSAL 1 -- Bankruptcy
Considerations" for a discussion of the risk of non-confirmation, liquidation
under chapter 7 and alternative plans of reorganization.
Class 9 -- Equity Interests of Danesh Options.
Class 9 consists of the Equity Interests in Huntway of Holders of Danesh
Options. On the Effective Date, a Holder of an Allowed Equity Interest evidenced
by Danesh Options shall retain such Allowed Equity Interest. The Holder of all
Danesh Options has agreed to the treatment of such Options under the Prepackaged
Plan. Therefore, Class 9 is unimpaired. Holders of Class 9 Equity Interests are
deemed to have accepted the Prepackaged Plan.
Effects of Confirmation and Absence of Confirmation
If the Prepackaged Plan is confirmed as contemplated by Huntway, the
Holders of Class 9 Equity Interests will retain such Equity Interests in
accordance with the terms of the Prepackaged Plan as described above. In the
event that the Prepackaged Plan is not confirmed, the alternatives are (i)
liquidation of Huntway's assets under chapter 7 of the Bankruptcy Code, (ii)
foreclosure on the assets by the Senior Lenders and liquidation of such assets
pursuant to a foreclosure sale or (iii) confirmation of an alternative plan of
reorganization under Chapter 11 of the Bankruptcy Code. In these alternative
scenarios, the Holders of Class 9 Equity Interests would receive consideration
on account of such Interests in accordance with the priorities set forth in the
Bankruptcy Code or other applicable law, but there is a no assurance that such
Holders would receive any consideration on account of such Interests. See
"PROPOSAL 1 -- Bankruptcy Considerations" for a discussion of the risk of
non-confirmation, liquidation under chapter 7 and alternative plans of
reorganization.
Class 10 -- General Partner Interests
Class 10 consists of all Equity Interests of Holders of general partner
interests in Huntway. The General Partner and the Special Managing Partner
currently hold in the aggregate 100% of such general partner interests. The
Prepackaged Plan provides that on the Effective Date, the General Partner and
the Special Managing Partner shall retain their respective general partner
interests in Reorganized Huntway subject to the New Guaranty and the other New
Collateral Documents executed by the General Partner and the Special Managing
Partner as of the Effective Date.
Class 10 is Impaired. Pursuant to the Prepackaged Plan, Holders of Class 10
Equity Interests are required to enter into the New Guarantees and related
Pledge Agreements. Therefore, Class 10 Equity Interests are impaired, as the
legal, equitable and/or contractual rights of such Holders are altered under the
Prepackaged Plan. Approval of the Prepackaged Plan by Holders of at least
two-thirds in amount of Allowed Class 10 Equity Interests with respect to which
votes are received is required to confirm the Prepackaged Plan.
Effects of Confirmation and Absence of Confirmation
If the Prepackaged Plan is confirmed as contemplated by Huntway, the
Holders of Class 10 Equity Interests will retain such Interests in accordance
with the terms of the Prepackaged Plan as described above. In the event that the
Prepackaged Plan is not confirmed, the alternatives are (i) liquidation of
Huntway's assets under chapter 7 of the Bankruptcy Code, (ii) foreclosure on the
assets by the Senior Lenders and liquidation of such assets pursuant to a
foreclosure sale or (iii) confirmation of an alternative plan of reorganization
under Chapter 11 of the Bankruptcy Code. In these alternative scenarios, the
Holders of Class 10 Equity Interests would receive consideration on account of
such Interests in accordance with the priorities set forth in the Bankruptcy
Code or other applicable law, but there is a no assurance that such Holders
would receive any consideration on account of such Equity Interests. See
"PROPOSAL 1 --
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Bankruptcy Considerations" for a discussion of the risk of non-confirmation,
liquidation under chapter 7 and alternative plans of reorganization.
Comparison of Treatment of Claims and Equity Interests under Prepackaged Plan
and Consensual Restructuring Agreement
Except as specified below, Creditors and Holders of Equity Interests of
Huntway receive substantially identical treatment under the Consensual
Restructuring Agreement as they do under the Prepackaged Plan. Under the
Prepackaged Plan, the Senior Lenders (Class 2 Claims), will receive 6,335,663
Common Units in the aggregate in addition to their pro rata share of New Senior
Notes. The Prepackaged Plan also provides that Holders of Warrants (Equity
Interests in Class 6) will receive 6,335,663 Common Units in exchange for the
cancellation of such Warrants. The Warrants were initially issued in connection
with the Company's restructuring in June 1993. The Consensual Restructuring
Agreement provides that the Senior Lenders will receive 12,671,362 Common Units
in addition to their pro rata share of New Senior Notes upon consummation of the
transaction thereby, but there is no provision for the issuance of Common Units
upon cancellation of the Warrants. Holders of Class 2 Claims and Class 6 Equity
Interests otherwise receive substantially identical treatment under the
Consensual Restructuring Agreement as prescribed in the Prepackaged Plan.
The transactions contemplated by the Consensual Restructuring Agreement do
not involve the commencement of a chapter 11 case and, therefore, other material
differences to the treatment of particular claims exist. Claims given
Administrative Expense or Other Priority (Class 1 Claims) under the Bankruptcy
Code and treated accordingly under the Prepackaged Plan, would be paid as any
other unsecured obligation of Huntway in the ordinary course of business in
accordance with their terms. Claims of governmental units entitled to priority
in right of payment under the Bankruptcy Code would be paid as and when due if
the Consensual Restructuring Agreement is implemented. Under the Prepackaged
Plan, such claims, plus accrued interest thereon, would be paid over a period
not exceeding six years after the date of assessment of such claims.
Class 4 Claims, Class 5 Claims, Class 7 Equity Interests, Class 8 Equity
Interests, Class 9 Equity Interests and Class 10 Equity Interests also will
receive substantially identical treatment if the Consensual Restructuring
Agreement is implemented as they would receive under the Prepackaged Plan.
Executory Contracts, Unexpired Leases and Other Obligations
Executory Contracts and Unexpired Leases
Subject to the approval of the Bankruptcy Court, the Bankruptcy Code
empowers Huntway to assume or reject executory contracts and unexpired leases.
As a general matter, an "executory contract" is a contract under which material
performance (other than the payment of money) is due by each party. If an
executory contract or unexpired lease is rejected, the other party to the
agreement may file a Claim for damages incurred by reason of the rejection. In
the case of rejection of employment agreements and leases of real property, such
damage Claims are subject to certain limitations imposed by the Bankruptcy Code.
If an executory contract or unexpired lease is assumed, Huntway has the
obligation to perform its obligations thereunder in accordance with the terms of
such agreement. Failure to perform its obligations would result in a Claim for
damages which ordinarily would be entitled to Administrative Expense status. See
"Summary of Prepackaged Plan -- Classification and Treatment of Claims and
Equity Interests."
At this point, Huntway intends to assume all executory contracts and
unexpired leases that exist between Huntway and any person or entity. Entry of
the Confirmation Order will constitute approval of such assumptions pursuant to
Section 365(a) of the Bankruptcy Code. No adequate assurance of future
performance (other than promise to perform under the executory contracts and
unexpired leases) shall be required pursuant to Section 365(b)(1)(C) of the
Bankruptcy Code, unless otherwise ordered by the Bankruptcy Court.
Huntway does not currently intend to reject any executory contracts or
unexpired leases. If Huntway does reject an executory contract or an unexpired
lease, the Holder of such a Claim must file a proof of claim. Such
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proofs of claim on account of Claims created by the rejection of executory
contracts or unexpired leases and cure Claims asserted to exist pursuant to
Section 365(b)(1)(A) or 365(b)(1)(B) of the Bankruptcy Code with respect to
assumed executory contracts or unexpired leases must be filed with the
Bankruptcy Court no later than twenty (20) days after (i) in the case of
rejection, the later of (a) a Final Order authorizing such rejection and (b) the
Effective Date, and (ii) in the case of assumption, the Effective Date. Any
Claims not filed within such time will be forever barred from assertion against
Huntway, Reorganized Huntway, the Estate, and Huntway's property. Unless
otherwise ordered by the Bankruptcy Court, all such Claims arising from the
rejection of executory contracts and unexpired leases shall be treated as
Unsecured Claims (Class 4) under the Prepackaged Plan.
Employment and Compensation Agreements, Plans and Policies
Huntway currently intends to assume all employment and severance agreements
and policies, and all employee compensation and benefit plans, contracts,
agreements, policies, undertakings and programs of Huntway, including, without
limitation, savings plans, key employee retention plans, retirement plans,
health care plans, disability plans, severance benefit plans, incentive plans,
and life and accidental death and dismemberment insurance plans are, except as
otherwise provided herein, treated as executory contracts under the Prepackaged
Plan and are assumed by Huntway for all purposes.
Retiree Benefits
On and after the Effective Date, pursuant to Section 1129(a)(13) of the
Bankruptcy Code, Huntway will continue to pay all retiree benefits, as that term
is defined in Section 1114 of the Bankruptcy Code, at the level established
pursuant to subsection (e)(1)(B) or (g) of Section 1114, at any time prior to
confirmation of the Prepackaged Plan, for the duration of the period Huntway has
obligated itself to provide such benefits.
Collective Bargaining Agreements
The employees of Huntway are not affiliated with any union or subject to
any collective bargaining agreements. Accordingly, the Prepackaged Plan will not
affect or modify Huntway's obligations under any collective bargaining
agreement.
Indemnification
The obligations of Huntway as of the Petition Date to indemnify its
present, and any individuals or entities who formerly were partners, members of
the Operating Committee or officers, respectively, against any obligations
pursuant to the Amended and Restated Agreement of Limited Partnership,
applicable state law or specific agreement, or any combination of the foregoing
shall survive confirmation of the Prepackaged Plan, remain unaffected thereby,
be assumed and not be discharged, irrespective of whether indemnification is
owed in connection with an event occurring before, on, or after the Petition
Date.
Huntway shall fully indemnify any person or entity by reason of the fact
that he, she or it is or was a partner, member of the Operating Committee,
officer, employee, attorney or agent of Huntway, or is or was serving at the
request of Huntway as a member of the Operating Committee or director, officer,
employee or agent of another corporation, partnership, joint venture or other
enterprise, against any liabilities, actions, suits, damages, fines, judgments
or expenses (including reasonable attorneys' fees), arising during the course
of, or otherwise in connection with or any way related to, the preparation and
consummation of the Prepackaged Plan and the transactions contemplated thereby.
Huntway is unaware of any pending claims against persons or entities
entitled to indemnification by Huntway as described above.
Release of Consenting Senior Lenders
The Prepackaged Plan provides that Huntway, Reorganized Huntway (in each
case whether as debtor, debtor-in-possession or on behalf of its creditors) and
all persons and entities asserting claims or who may
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assert claims derivatively or otherwise through or on behalf of them, Huntway
and their respective predecessors, successors and assigns, and the respective
parents, subsidiaries, affiliates and partners of the foregoing entities
(collectively, the "Huntway Releasors") shall upon Consummation fully,
absolutely and forever release and discharge each of the Senior Lenders (other
than any Senior Lender who has elected not to provide the release described in
the next paragraph below) and the parents, subsidiaries, partners, directors,
officers, attorneys, financial advisors, agents and employees past and present,
of such Senior Lenders and the foregoing entities from any and all manner of
liabilities, accounts, reckonings, obligations, liens, suits, proceedings,
controversies, debts, dues, counterclaims, cross claims, setoffs, demands and
causes of action of whatever kind or nature, in law, equity or otherwise
(including, without limitation, any causes of action under sections 502, 510,
544, 545, 547, 548, 549 or 550 of the Bankruptcy Code), whether now known or
unknown and whether suspected or unsuspected, anticipated and unanticipated, and
whether or not concealed or hidden, which now or has at any time heretofore
owned or held, which are based upon or arise out of or in connection with any
matter, cause or thing related to the Old Collateralized Notes, the Old
Collateralized Note Indenture, the Old Subordinated Note Indenture, the Old
Subordinated Notes, the Agreement of Understanding, the Old Letter of Credit
Agreement or any transaction or agreement arising from or related thereto or
entered into in connection therewith, whether existing at any time prior to the
Effective Date or whether such matter, cause or thing was done, omitted or
suffered to be done or omitted at any time prior to the Effective Date.
The Prepackaged Plan also provides that each of the Senior Lenders (other
than any Senior Lender who elects not to provide a release in accordance with
the Voting Instructions and this Consent Solicitation Statement), on behalf of
itself, its creditors and all persons and entities asserting claims or who may
assert claims derivatively or otherwise through or on behalf of it and its
respective predecessors, successors and assigns, and the respective parents,
subsidiaries, affiliates and partners of the foregoing entities (collectively,
the "Senior Lender Releasors") shall, on the Effective Date, fully, absolutely
and forever release and discharge (except as described below) each of the
Huntway Releasors and the parents, subsidiaries, partners, directors, officers,
attorneys, financial advisors, agents and employees, past and present, of the
Huntway Releasors from any and all manner of claims, demands, actions, costs,
expenses, damages, liabilities, accounts, reckonings, obligations, liens, suits,
proceedings, controversies, debts, dues, counterclaims, cross claims, setoffs,
demands and causes of action of whatever kind or nature, in law, equity or
otherwise, whether now known or unknown and whether suspected or unsuspected,
anticipated and unanticipated, and whether or not concealed or hidden, which now
exist or heretofore have existed, which such Senior Lender Releasor or Senior
Lender Releasors may now hold or has at any time heretofore owned or held, which
are based upon or arise out of or in connection with any matter, cause or thing
related to the Old Collateralized Notes, the Old Collateralized Note Indenture,
the Old Subordinated Notes, the Old Subordinated Note Indenture, the Agreement
of Understanding, the Old Letter of Credit Agreement or any transaction or
agreement arising from or related thereto or entered into in connection
therewith, whether existing at any time prior to the Effective Date or whether
such matter, cause or thing was done, omitted or suffered to be done or omitted
at any time prior to the Effective Date.
The Prepackaged Plan will not release any claim, right or cause of action
held by the Senior Lenders based on or arising out of the Prepackaged Plan or
based on or arising out of or in connection with the instruments and documents
to be issued or entered into in connection with the Prepackaged Plan (including,
but not limited to, the New Collateralized Note Indenture, the New Senior Notes,
the New Intercreditor Agreement, the New Collateral Documents, the New
Guaranties, the Common Units, the Unitholders Agreement, the New Letter of
Credit Agreement) or the documents securing the Senior Lender Claims and the
Claims of Bankers Trust.
DESCRIPTION OF CERTAIN CURRENT INDENTURES AND POST-RESTRUCTURING DOCUMENTS AND
INSTRUMENTS
General
Huntway's indebtedness under the Old Indentures is evidenced by the Old
Notes. As of June 30, 1996, indebtedness in the aggregate amount of
approximately $95.5 million (including accrued interest) was outstanding under
the Old Indentures. The Old Notes are subject to their respective indentures.
The
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obligations evidenced by the Old Collateralized Notes and Old Subordinated Notes
are secured by substantially all of the assets of Huntway and Sunbelt. Sunbelt,
the General Partner and the Special Managing Partner have guarantied the
obligations of Huntway under the Old Collateralized Note Indenture, the Old
Subordinated Note Indenture and the Old Letter of Credit Agreement. The General
Partner and the Special Managing Partner have pledged their general partner
interests in Huntway to secure their obligations under those guaranties. The
rights of holders of the Old Collateralized Notes and Old Subordinated Notes are
subject to the Existing Intercreditor Agreement.
On the Effective Date, the Old Collateralized Note Indenture will be
amended, restated and superseded by the New Collateralized Note Indenture, the
Old Subordinated Note Indenture shall be canceled, and the Old Junior
Subordinated Debenture Indenture will be amended, restated and superseded by the
New Junior Indenture. Huntway's obligations to the Senior Lenders under the Old
Collateralized Notes and the Old Subordinated Notes shall be continued in part
and evidenced by the New Senior Notes, which shall be issued under and subject
to the New Collateralized Note Indenture and subject to the New Intercreditor
Agreement. Huntway's obligations to the Junior Lenders under the Old Junior
Subordinated Notes shall be continued in part and evidenced by the New Junior
Notes, which shall be issued under and subject to the New Junior Indenture.
Except to the extent that Huntway's obligations under the Old Notes and Old
Indentures are continued under the New Senior Notes and the New Junior Notes
(collectively, the "New Notes") and the New Collateralized Note Indenture and
the New Junior Indenture (collectively, the "New Indentures"), Huntway's
obligations under the Old Notes and Old Indentures shall be discharged.
The New Collateralized Notes in the original principal amount of $23.5
million will be senior to the New Junior Notes and other indebtedness of
Huntway, including trade payables and junior only to indebtedness of the Company
under the Old Letter of Credit. The New Junior Notes in the original principal
amount of $2.07 million will be senior to other indebtedness of Huntway,
including trade payables and junior only to indebtedness under the New
Collateralized Notes and the Old Letter of Credit.
The following summarizes the principal terms of the Old Notes, the Old
Indentures, the New Notes and the New Indentures and a comparison of certain
provisions thereof. To the extent any summary of these documents contained in
this Consent Solicitation Statement varies from the terms of the Prepackaged
Plan and the Old Notes, Old Indentures, New Notes and New Indentures, the terms
of the Prepackaged Plan, the Old Notes, Old Indentures, New Notes and New
Indentures are controlling. The New Notes and New Indentures are contained in
the Prepackaged Plan Supplement and are available upon request. Capitalized
terms not defined below are defined in the respective Old Notes, Old Indentures,
New Notes or the New Indentures.
Description of the Old Collateralized Note Indenture and Old Collateralized
Notes
Set forth below are summaries of the material provisions of the Old
Collateralized Note Indenture and Old Collateralized Notes. All
parties-in-interest are referred to the Old Collateralized Note Indenture and
Old Collateralized Notes for a complete statement of those provisions. The
statements made under this caption relating to the Old Collateralized Note
Indenture are summaries and do not purport to be complete. Moreover, such
summaries use certain terms defined in the Old Collateralized Note Indenture and
are qualified in their entirety by reference thereto.
Certain Definitions
Set forth below is a summary of certain defined terms used in the Old
Collateralized Note Indenture, modified where appropriate to use terms defined
elsewhere in this Consent Solicitation Statement. Reference is made to the Old
Collateralized Note Indenture for the full definition of all such terms, as well
as any other terms used in this section and the summary of the provisions of the
Old Collateralized Note Indenture for which no definition is provided.
"Capital Lease," as applied to any Person, means any lease of any property
(whether real, personal or mixed) by that Person as lessee which would, in
conformity with GAAP, be accounted for as a capital lease on the balance sheet
of that Person.
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"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six months from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within six months from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either Standard & Poor's Corporation or Moody's Investors Service; (iii)
commercial paper maturing no more than 270 days from the date of creation
thereof and, at the time of acquisition, having a rating of at least A-2 or P-2
from either Standard & Poor's Corporation or Moody's Investors Services; and
(iv) time deposits, certificates of deposit (whether or not Eurodollar in
nature), bankers' acceptances, repurchase agreements, reverse repurchase
agreements, Eurodollar time deposits maturing within one year or similar
investments maturing within 12 months from the date of acquisition thereof
issued by Bankers Trust Company.
"CDSA" means Cash Available for Debt Service and Amortization, for a
specified period, which is calculated as the sum of (i) Consolidated Net Income,
(ii) to the extent Consolidated Net Income has been reduced thereby,
amortization expense, depreciation expense, and other non-cash expenses, (iii)
the decrease, if any, in Consolidated Net Working Capital on the final day of
such period from Consolidated Net Working Capital on the final day of the
immediately preceding quarter or year, as the case may be, and (iv) Consolidated
Interest Expense, minus the sum of (a) non-cash items increasing Consolidated
Net Income, (b) Consolidated Principal and Interest Payments during such period,
(c) the increase, if any, in Consolidated Net Working Capital on the final day
of such period from Consolidated Net Working Capital on the final day of the
immediately preceding quarter or year, as the case may be, and (d) Consolidated
Capital Expenditures paid in cash during such year (which shall in no event
exceed the amount permitted for such year pursuant to Section 418 of the Old
Collateralized Note Indenture [restrictions on Capital Expenditures] for
purposes of calculating CDSA), all as determined on a consolidated basis for
such period no later than 45 days after the end of each of the first three
quarters of each year, and no later than 90 days after the end of each year, for
the Company and its Subsidiaries in conformity with GAAP. The Consolidated Net
Working Capital adjustment contemplated by clause (c) above shall exclude any
amount by which (i) the Consolidated Net Working Capital on the final day of
such period exceeds (ii) $3,500,000.
"Consolidated Capital Expenditures" means, for any period, the aggregate of
all expenditures (whether paid in cash or accrued as liabilities and including
that portion of Capital Leases capitalized on the consolidated balance sheet of
the Company and its Subsidiaries, excluding (i) the interest portion of
Capitalized Leases to the extent not required to be capitalized and (ii)
expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (a) from insurance proceeds
received from third party insurers paid on account of the loss of or damage to
the assets being replaced or restored or (b) with awards of compensation arising
from the taking by eminent domain or condemnation of the assets being replaced)
by the Company and its Subsidiaries during the relevant period that, in
conformity with GAAP, should be included in the property, plant or equipment
reflected in the consolidated balance sheet of the Company and its Subsidiaries.
"Consolidated Current Assets" means, as at any date of determination, the
total assets of the Company and its Subsidiaries on a consolidated basis which
may properly be classified as current assets in conformity with GAAP; provided
that inventory shall continue to be valued on a last-in first-out basis and
excluding non-current assets of Sunbelt which become current assets under GAAP
solely by reason of the Company's decision to sell Sunbelt or its assets.
"Consolidated Current Liabilities" means, as at any date of determination,
the total liabilities of the Company and its Subsidiaries on a consolidated
basis which may properly be classified as current liabilities in conformity with
GAAP, but in no event shall accrued interest be included in Consolidated Current
Liabilities except for current portions of Indebtedness evidenced by the
Priority Notes, Old Collateralized Notes and Old Subordinated Notes.
"Consolidated EBITDA" means, for any period, the sum (without duplication)
of (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii)
provisions for taxes based on income, (iv) to the extent
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Consolidated Net Income has been reduced thereby, amortization expense,
depreciation expense and other non-cash expenses, and (v) other non-cash items
reducing Consolidated Net Income less other non-cash items increasing
Consolidated Net Income, all as determined on a consolidated basis for Company
and its Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" means, for any period, interest expense
with respect to all outstanding Indebtedness of the Company and its Subsidiaries
for such period determined on a consolidated basis in conformity with GAAP;
provided that Consolidated Interest Expense shall not include (i) letter of
credit fees and commissions on letters of credit issued by Bankers Trust Company
(other than the letter of credit issued by Bankers Trust Company to support the
Sunbelt Bonds), (ii) amortization of original issue discount or (iii) for
purposes of Section 415 of the Old Collateralized Note Indenture [financial
covenants], any interest not paid in cash.
"Consolidated Net Income" means, for any period, the net income (or loss)
determined in conformity with GAAP of the Company and its Subsidiaries on a
consolidated basis, consolidated in conformity with GAAP for such period taken
as a single accounting period; provided that there shall be excluded (i) the
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of the Company or is merged into or consolidated with the Company or any of its
Subsidiaries or that Person's assets are acquired by the Company or any of its
Subsidiaries, (ii) the income (or loss) related to (x) any merger,
consolidation, liquidation, winding up or dissolving of the Company or any of
its Subsidiaries or (y) any conveyance, sale, lease, sub-lease, transfer or
other disposition of all or any substantial part of the Company's or any
Subsidiary's business or rights related thereto, property (whether leased or
owned in fee) or fixed assets outside the ordinary course of business and (iii)
the income of any Subsidiary of the Company to the extent that the declaration
or payment of dividends or similar distributions by that Subsidiary of that
income is not at the time permitted by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary; and provided further,
that letter of credit fees and commissions on letters of credit issued by
Bankers Trust Company (other than the letter of credit issued by Bankers Trust
Company to support the Sunbelt Bonds) shall be treated as an operating expense
in calculating Consolidated Net Income.
"Consolidated Net Working Capital" means, as at any date of determination,
the excess of Consolidated Current Assets excluding cash and Cash Equivalents
over Consolidated Current Liabilities.
"Consolidated Principal and Interest Payments" means, for any period, the
lesser of (i) the total of all payments of principal and interest made in cash
during such period on the Company's Priority Notes, Old Collateralized Notes and
Old Subordinated Notes, and (ii) for 1993, $0; for 1994 $4,500,000; and for 1995
and thereafter $5,000,000.
"Contingent Obligation", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation of another
Person, including, without limitation, any such obligation directly or
indirectly guarantied, endorsed (otherwise than for collection or deposit in the
ordinary course of business), co-made or sold on a recourse basis by that
Person, or in respect of which that Person is otherwise directly or indirectly
liable, including, without limitation, any such obligation for which that Person
is in effect liable through any agreement (contingent or otherwise) to purchase,
repurchase or otherwise acquire such obligation or any security therefor, or to
provide funds for the payment or discharge of such obligation, (whether in the
form of loans, advances, stock purchases, capital contributions or otherwise),
or to maintain the solvency or any balance sheet item, level of income or other
financial condition of the obligor of such obligation, or to make payment for
any products, materials or supplies or for any transportation, services or lease
regardless of the non-delivery or non-furnishing thereof, or to provide
collateral to secure payment of such obligation, in any such case if the purpose
or intent of such agreement is to provide assurance that such obligation will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such obligation will be protected (in whole or in
part) against loss in respect thereof. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guarantied or otherwise
supported.
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"Indebtedness," without duplication, means (a) any liability of any Person
(i) for borrowed money, or under any reimbursement obligation relating to a
letter of credit or a bankers' acceptance, or (ii) evidenced by a bond, note,
debenture or similar instrument (including a purchase money obligation given in
connection with the acquisition of any businesses, properties or assets of any
kind, other than a trade payable or a current liability arising in the ordinary
course of business), or (iii) for the payment of money with respect to a Capital
Lease, or (iv) in respect of an interest rate, currency, commodity or other
hedge or protection arrangement; (b) any guarantee with respect to Indebtedness
(of the kind otherwise described in this definition) of another Person; and (c)
any amendment, supplement, modification, deferral, renewal, extension or
refunding of any liability of the types referred to in clauses (a) and (b)
above.
"Interest Payment Date" means March 31, June 30, September 30 or December
31, as the case may be, of each year commencing on December 31, 1993.
"Lien" means any mortgage, pledge, hypothecation, assignment for security,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement), any Capital Lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement (other than notice filings not perfecting a security interest) under
the UCC or comparable law of any jurisdiction in respect of any of the
foregoing.
"Permitted Encumbrances" means the following types of Liens: (i) Liens
(other than any Lien imposed by ERISA) for taxes (including Liens for real
property taxes), assessments or governmental charges or governmental claims the
payment of which is not at the time required by Section 405 of the Old
Collateralized Note Indenture [payment of taxes]; (ii) Statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics, materialmen and other
Liens imposed by law incurred in the ordinary course of business for sums not
yet delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor; (iii) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-of-money bonds
and other similar obligations (exclusive of obligations for the payment of
borrowed money); (iv) any attachment or judgment Lien not in excess of $100,000
(exclusive of any amount adequately covered by insurance as to which the
insurance company has acknowledged coverage) and any other attachment or
judgment lien unless the judgment it secures shall, within 45 days after the
entry thereof, not have been discharged or execution thereof stayed pending
appeal, or shall not have been discharged within 45 days after the expiration of
any such stay; (v) Leases or subleases granted to others not interfering in any
material respect with the business of the Company or any of its Subsidiaries;
(vi) Easements, rights-of-way, restrictions, minor defects or irregularities in
title and other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of the Company or any of its
Subsidiaries; (vii) Liens arising from UCC financing statements regarding leases
permitted by this Agreement; (viii) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (ix) Liens securing obligations not in
excess of $50,000 in aggregate outstanding amount arising from automobile and
personal property leases; and (x) Liens arising from indebtedness permitted
under Section 406(e) of the Old Collateralized Note Indenture [limitation on
indebtedness].
"Priority Notes" means the Company's 8% Priority Secured Notes Due 1994
issued and outstanding pursuant to the Old Collateralized Note Indenture.
"Required Amount of Debt Service to Holders" means, for the year indicated,
the respective aggregate dollar amount of principal and interest payments
(including payments with respect to Secondary Securities) set forth below
required to be made by the Company in cash for such year with respect to the
Priority Notes, the Old Collateralized Notes and the Old Subordinated Notes
until all of such instruments are paid in full:
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<TABLE>
<CAPTION>
YEAR AGGREGATE PAYMENTS
---------------------- -------------------------------------------
<S> <C>
1994.................. $4,500,000
1995.................. $5,000,000
Thereafter............ $5,000,000 until such time as the Old
Collateralized Notes and Priority Notes and
Old Subordinated Notes are paid in full
</TABLE>
"Requisite Holders" means the Holders of in excess of two thirds of the sum
of (i) the Aggregate Outstanding Amount of Old Collateralized Notes and Priority
Notes and (ii) the Aggregate Outstanding Amount of the Old Subordinated Notes
including at least two of the Holders or the Holders of such Notes, as the case
may be, other than Bankers Trust Company (or its successor).
"Restricted Junior Payment" means any distribution, direct or indirect,
whether in cash or other property on account of (i) the units of ownership in
the Company or any other partnership interest in the Company or dividend,
distribution or similar payment, redemption, purchase, retirement or other
acquisition for value, direct or indirect, of any units of ownership in the
Company or any other partnership interest in the Company, (ii) the Old
Subordinated Notes for the payment or prepayment of principal or the redemption,
purchase, retirement, defeasance, sinking fund or similar payment with respect
to such securities, (iii) the Old Junior Subordinated Notes for the payment or
prepayment of principal or interest or the redemption, purchase, retirement,
defeasance, sinking fund or similar payment with respect to such securities, and
(iv) warrants, options or other rights to acquire units of ownership in the
Company in order to retire, or to obtain the surrender of, such securities.
"Scheduled Principal Payments" means, at a specified date, the scheduled
quarterly principal payment due on the Old Collateralized Notes as set forth in
Section 307(b)(2) of the Old Collateralized Note Indenture plus the amount of
scheduled principal payments then due on all outstanding Secondary Securities
issued in respect of the Old Collateralized Notes.
"Secondary Securities" means, for purposes of the description of the Old
Collateralized Note Indenture only, additional Priority Notes and Old
Collateralized Notes issued pursuant to Section 307 of the Old Collateralized
Note Indenture in payment of interest accrued on Priority Notes and Old
Collateralized Notes.
"Special General Partner" means Huntway Holdings, L.P., a Delaware limited
partnership.
"Sunbelt Bonds" means the $8,600,000 aggregate principal amount of
Variable/Fixed Rate Demand Industrial Development Revenue Bonds, Series 1988
(Sunbelt Refining Company, L.P. project) issued pursuant to that certain
Indenture of Trust, dated as of August 1, 1988 between the Industrial
Development Authority of the County of Pinal and Dai-ichi Kangyo Bank of
California.
"Termination Event" means (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder (other than a "Reportable
Event" not subject to the provisions for 30-day notice to the Pension Benefit
Guaranty Corporation under such regulations), or (ii) the withdrawal of the
Company or any of their ERISA Affiliates from a Pension Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, or (iii) the filing of a notice of intent to terminate a Pension Plan or
the treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA, or (iv) the institution of proceedings to terminate a Pension Plan by the
Pension Benefit Guaranty Corporation, or (v) any other event or condition which
would constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan.
Principal and Interest
The Old Collateralized Note Indenture provided for the issuance of two
classes of securities: Priority Notes in an maximum principal amount of
$3,994,542 (plus Secondary Securities issued in respect thereof) due December
31, 1994, and Old Collateralized Notes in the maximum original principal amount
of $22,170,000 (plus Secondary Securities issued in respect thereof) due
December 31, 2000. The interest rate
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<PAGE> 62
(prior to default) on the Priority Notes and Old Collateralized Notes was 8% per
annum. The interest rates were subject to increase upon default. The Priority
Notes have been paid in full.
The Old Collateralized Note Indenture provided for the payment of interest
that accrued on the Priority Notes and the Old Collateralized Notes before
December 31, 1993 through the issuance of Secondary Securities of the same class
with a principal amount equal to the accrued but unpaid interest. The principal
amount of the Secondary Securities was to be reduced by the amount CDSA exceeded
$3,500,000 as of December 31, 1993. Such Secondary Securities are governed by
the Old Collateralized Note Indenture and are identical in all respects to the
Priority Notes or Old Collateralized Notes, as the case may be, initially issued
under the Old Collateralized Note Indenture (except with respect to the issuance
date and aggregate principal amount). Interest accrued on each Old
Collateralized Note after December 31, 1993 is due and payable on each Interest
Payment Date until payment in full of such Old Collateralized Note.
Commencing on March 31, 1995 and continuing through December 31, 2000,
principal payments on the Old Collateralized Notes are payable in quarterly
installments with $461,875 due in the first and fourth quarters and $1,385,625
due in the second and third quarters of each calendar year. The principal amount
of Secondary Securities is to be repaid in quarterly installments on the same
dates as the Old Collateralized Note payments in amounts equal to a percentage
of the annual principal amount payable for such year as follows: 12 1/2% for the
first and fourth quarters and 37 1/2% for the second and third quarters. No
principal was to be paid in respect of the Old Collateralized Notes until the
Priority Notes were paid in full.
The Old Collateralized Note Indenture requires the Company to apply 100% of
CDSA (except that with respect to each of the first three quarters of each year,
only 75% of CDSA) that is not required to be applied to the Liquidity Reserve
established under the Old Collateralized Note Indenture ratably within each
class of the outstanding Priority Notes, Old Collateralized Notes and Old
Subordinated Notes in the following priorities: first to pay interest on the
Priority Notes; second to pay principal of the Priority Notes; third to pay
interest on the Old Collateralized Notes; fourth to pay principal on the Old
Collateralized Notes to the extent of scheduled principal payments; fifth to pay
interest on the Old Subordinated Notes (Sunbelt IDB); sixth to pay interest on
the Old Subordinated Notes (Other) (including Secondary Securities issued with
respect thereto) and accrued but unpaid principal of an interest on the Old
Subordinated Note (Sunbelt IDB) Secondary Securities; seventh to pay scheduled
principal payments (as defined in the Old Subordinated Note Indenture) of the
Old Subordinated Notes; eighth to principal of the Old Collateralized Notes
applied to scheduled principal payments in inverse order of maturity. After the
end of each calendar quarter, the Company is required to calculate the amount of
CDSA and pay a portion of the CDSA into a bank account maintained with the
Collateral Agent. Certain portions of the CDSA that are not required to be
applied to the Liquidity Reserve or to be applied against the notes issued under
the Old Indentures may be released to the Company.
Redemption
Each Old Collateralized Note is subject to redemption upon not less than 30
nor more than 60 days' notice by first-class mail, at any time, as a whole or in
part, at the election of the Company, at Redemption Prices equal to 100% of par,
together in the case of any such redemption with accrued interest thereon to the
Redemption Date (excluding interest evidenced by Secondary Securities).
In the case of any redemption of Old Collateralized Notes, interest
installments whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Old Collateralized Notes or one or more
Predecessor Securities, of record at the close of business on the relevant
Regular Record Date referred to on the face of such security. Old Collateralized
Notes (or portions thereof) for whose redemption and payment provision is made
in accordance with the Old Collateralized Note Indenture cease to bear interest
from and after the date fixed for redemption.
Covenants and Other Provisions
The Old Collateralized Note Indenture contains covenants and other
provisions pertaining to, among other things, (i) the maintenance of an office
or agency of the Company where the Old Collateralized Notes may be presented for
payment, (ii) the holding of certain payments in trust, (iii) compliance with
laws and
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<PAGE> 63
the maintenance of the Company's existence, (iv) the payment of taxes, (v)
limitations on restrictions affecting subsidiaries, (vi) delivery of financial
statements and other reports, (vii) inspection rights of the Holders, (viii)
maintenance of properties and insurance, (ix) the waiver of stay or usury laws,
(x) limitations on certain loans and advances, (xi) restrictions on certain
fundamental changes, (xii) restrictions on incurrence of contingent obligations,
(xiii) restrictions on changes in the Company's business, (xiv) certain
environmental covenants, (xv) restrictions on amendments of other indentures and
(xvi) the listing of the Common Units. Some of the material covenants and other
provisions are summarized below.
Limitation on Indebtedness
Section 406 of the Old Collateralized Note Indenture prohibits the Company
and its Subsidiaries from directly or indirectly creating, incurring, assuming,
guaranteeing, or otherwise becoming directly or indirectly liable with respect
to any Indebtedness, except (a) the Old Letter of Credit Agreement; (b) the Old
Subordinated Notes and the Old Junior Subordinated Debentures; (c) the Priority
Notes and the Old Collateralized Notes, (d) intercompany loans and advances in
an aggregate amount not to exceed $100,000, (e) additional letters of credit
issued to support crude oil purchases and exchanges in an amount not to exceed
the amount in an account maintained at Bankers Trust (the "Working Capital
Account") immediately prior to the posting of any letter of credit, (f) hedging
agreements relating to the price of crude oil in an amount not to exceed
$1,500,000, (g) Sunbelt may remain liable with respect to the Sunbelt Bonds so
long as Sunbelt owns the Pinal Property, (h) the Company may become liable with
respect to capitalized leases otherwise permitted thereunder, and (i) other
indebtedness not exceeding $500,000 at any one time.
Limitation on Liens
Section 410 of the Old Collateralized Note Indenture prohibits the Company
and its Subsidiaries from directly or indirectly creating, incurring, assuming
or permitting to exist any Lien on or with respect to any of their properties or
assets, or any income or profits therefrom, except (a) Permitted Encumbrances;
(b) Liens existing with respect to the Trust Estate and transferred as security
for the benefit of the Holders of the Priority Notes and Old Collateralized
Notes; (c) Liens securing obligations under the Old Subordinated Note Indenture;
(d) Liens securing obligations under the Old Letter of Credit Agreement; (e)
Liens on cash collateral securing certain letters of credit permitted under the
Old Collateralized Note Indenture; and (f) Liens which have previously been
consented to by the Requisite Holders.
Financial Covenants
Section 415 of the Old Collateralized Note Indenture requires the Company
to maintain Consolidated EBITDA on the last day of each four consecutive fiscal
quarter period after December 31, 1993 to be not less than $3,000,000. This
section requires the Company to prevent its Consolidated Net Working Capital
from exceeding $3,500,000.
Limitation on Consolidated Capital Expenditures
Section 418 of the Old Collateralized Note Indenture prohibits the Company
and its Subsidiaries from making, in the aggregate, Consolidated Capital
Expenditures in excess of $1,250,000 during 1995 and each year thereafter,
subject to possible increases with the agreement of the Holders.
Limitation on Fundamental Changes
Section 419 of the Old Collateralized Note Indenture prohibits the Company
and its Subsidiaries from engaging in certain fundamental changes including (i)
restrictions on certain amendments of the partnership agreement of the Company
or of Sunbelt and (ii) restrictions on transactions of merger, dissolution,
liquidation or winding up.
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<PAGE> 64
Contingent Obligations
Section 420 of the Old Collateralized Note Indenture prohibits the Company
and its Subsidiaries from directly or indirectly creating or becoming or being
liable with respect to any Contingent Obligation with respect to the Trust
Estate, except with respect to: (a) guarantees resulting from endorsement of
negotiable instruments for collection in the ordinary course of business; (b)
Contingent Obligations in an aggregate amount not in excess of $100,000
outstanding at any one time; (c) that certain Equipment Lease Guaranty executed
in favor of GECC Leasing in an amount not to exceed $860,000; (d) additional
letters of credit issued to support crude oil purchases and exchanges in an
amount not to exceed the amount in the Working Capital Account immediately prior
to the posting of any letter of credit; (e) hedging agreements relating to the
price of crude oil in an amount not to exceed $1,500,000; (f) guarantee of
letters of credit issued on behalf of Sunbelt under the Old Letter of Credit
Agreement and other obligations solely as a result of the Company being the
general partner of Sunbelt; and (g) obligations arising under the Old Letter of
Credit Agreement.
Maintenance of Liquidity Reserve
Section 422 of the Old Collateralized Note Indenture requires the Company
to maintain a liquidity reserve into which the Company is required to deposit a
certain portion of its CDSA as follows: (i) in 1993, the Company was required to
deposit of 100% of CDSA up to a maximum of $3,500,000 into the Liquidity
Reserve, (ii) in 1994, the Company was required to deposit 100% of CDSA up to a
maximum $1,000,000 after payment of the Required Amount of Debt Service to
Holders had been made, (iii) in 1994, after the Company had deposited $1,000,000
in the Liquidity Reserve, the Company was required to deposit 50% of the
remaining CDSA into the Liquidity Reserve and 50% of CDSA was to be applied to
payment of the Priority Notes and Old Collateralized Notes and the Old
Subordinated Notes until the amounts deposited in Liquidity Reserve totalled
$5,000,000 subject to certain adjustments, and thereafter the Company was
required to apply 100% CDSA in 1994 to the payment of the Priority Notes, Old
Collateralized Notes and Old Subordinated Notes; (iv) in 1995, the Company was
required to apply 50% of its CDSA to the Liquidity Reserve and the remainder to
payment of the Priority Notes, Old Collateralized Notes and Old Subordinated
Notes until certain targets for previous years had been met and thereafter was
required to apply 100% of CDSA to payment of the Priority Notes, Old
Collateralized Notes and Old Subordinated Notes; (v) in 1996 or, if certain
target were achieved in 1994, in 1995 and each year thereafter, the Company is
required to make payments of 20% of CDSA up to $1,000,000 into the Liquidity
Reserve or, at the Company's option use all or a portion of such amount to
redeem the Old Collateralized Notes or Old Subordinated Notes. The amounts on
deposit in the Liquidity Reserve Account are subject to the lien for the benefit
of the Holders of Priority Notes and Old Collateralized Notes.
Limitation on Restricted Junior Payments
Section 407 of the Old Collateralized Note Indenture prohibits the Company
and its Subsidiaries from, directly or indirectly, declaring, ordering, paying,
making or setting apart any sum for any Restricted Junior Payment prior to the
payment in full of the principal and interest on the Priority Notes and the Old
Collateralized Notes, except to the extent that the Company is obligated to
apply CDSA to payment of the Old Subordinated Notes as provided in Sections 307
and 422 of the Old Collateralized Note Indenture.
Transactions with Partners and Affiliates
Section 414 of the Old Collateralized Note Indenture prohibits the Company
and its Subsidiaries from entering into any transaction with any holder of 5% or
more of the total partnership interests on terms that are less favorable than
might be obtained from an unrelated entity.
Supplemental Indentures
The Old Collateralized Note Indenture permits the Company and the Trustee,
with the consent of Requisite Holders, to amend or supplement the Old
Collateralized Note Indenture or modify the right of the holders of the Old
Collateralized Notes; provided that, without the consent of each Holder of Old
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<PAGE> 65
Collateralized Notes affected thereby, no such modification, amendment or
supplemental indenture will (a) extend the Stated Maturity of, or any
installment of interest on, any Old Collateralized Note, or reduce the principal
amount thereof or the interest rate thereon, or change the provisions of the Old
Collateralized Note Indenture relating to the application of proceeds of the
Trust Estate to the payment of the Old Collateralized Notes or change any place
where or the matter in which any Old Collateralized Note is payable, or impair
the right to institute suit for the enforcement of such payment after the Stated
Maturity thereof, or (b) reduce the percentage of the amount of outstanding Old
Collateralized Notes, the consent of whose holders is required for any such
supplemental indenture, or (c) impair or adversely affect the Trust Estate, or
(d) permit the creation of a lien ranking prior to or on a parity the lien of
the Old Collateralized Note Indenture or deprive the holder of any Old
Collateralized Note of the security afforded by the lien of that Indenture, or
(e) change the percentage of outstanding Old Collateralized Notes the consent of
whose holders is required to exercise certain remedies, or (f) modify the
definitions of "Aggregate Outstanding Amount," "Requisite Holders" and
"Outstanding", or (g) modify certain provisions regarding amendment of the Old
Collateralized Note Indenture, or provisions of the Old Collateralized Note
Indenture regarding waiver of defaults, except to increase such percentage or to
provide that certain or other provisions of the Old Collateralized Note
Indenture cannot be modified or waived without the consent of the holder of each
Old Collateralized Note affected thereby, or (h) modify any of the provisions in
the Old Collateralized Note Indenture relating to the subordination of the Old
Collateralized Notes in a manner materially adverse to the holders of the
Priority Notes, or (i) modify the provisions of the Old Collateralized Note
Indenture relating to the Liquidity Reserve or CDSA to the extent any amendment
would adversely affect the amount of payments on the Old Collateralized Notes or
the timing of such payments or (j) modify the provisions of Section 501(d)
[cross-defaults], 508 [right of holders to receive payment] or 904 [selection by
Trustee of Old Collateralized Notes to be redeemed] of the Old Collateralized
Note Indenture.
Events of Default
The Old Collateralized Note Indenture defines an Event of Default to
include, inter alia, any of the following events:
(a) default in the payment of (i) any interest on any Priority Note or Old
Collateralized Note when the same becomes due and payable, and
continuance of such default for a period of three days or (ii) the
principal of any Priority Note or Old Collateralized Note at its
Maturity, in each case including payments from CDSA provided that
failure to make payments of principal and interest constitute events of
default only if the cumulative amount of all payments received in
respect of the Priority Notes and Old Collateralized Notes is less than
certain specified thresholds; or
(b) default in the performance, or breach, of any covenant, obligation or
agreement of the Company in the Old Collateralized Note Indenture or
breach of warranty, subject to in certain cases to a 15 day grace
period;
(c) (i) failure of the Company or any of its Subsidiaries to pay or any
default in the payment of any principal or interest on any other
Indebtedness in the outstanding principal amount of $250,000 or more, or
in the payment of any Contingent Obligation the outstanding principal
amount of which is $250,000 or more in each case beyond any period of
grace provided; or (ii) breach or default with respect to any other term
of any evidence of any other Indebtedness the outstanding principal
amount of which is $250,000 or more or of any loan agreement, mortgage,
indenture or other material agreement relating thereto, if the effect of
such default or breach is to cause, or to permit the holder or holders
of that Indebtedness (or a trustee on behalf of such holder or holders)
to cause, that Indebtedness to become or be declared due prior to its
stated maturity (upon the giving or receiving of notice, lapse of time,
both, or otherwise); provided, however, that in the case of failure or
default as described in (i) and (ii) above with respect to the Priority
Notes and Old Collateralized Notes on the part of any Person, such
default constitutes an Event of Default without regard to amount; or
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<PAGE> 66
(d) bankruptcy, insolvency and similar events involving the Company,
Sunbelt, their respective subsidiaries, or partners of the Company
holding in excess of 51% of the Common Units; or
(e) except as otherwise agreed to by the Requisite Holders, any money
judgement, writ or warrant of attachment, or similar process involving
in any case an amount in excess of $350,000 not adequately covered by
insurance shall be entered or filed against the Company or any of its
material Subsidiaries or any of their respective assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period of 30 days or
in any event later than five days prior to the date of any proposed sale
thereunder; or
(f) any order, judgment or decree shall be entered against the Company or
any of its material Subsidiaries, decreeing the dissolution or split up
of the Company or that Subsidiary and such order shall remain
undischarged or unstayed for a period in excess of 30 days; or
(g) termination of any ERISA Pension Plan maintained by the Company or its
ERISA affiliates resulting in a liability in excess of $250,000; or
withdrawal by the Company or any of its ERISA affiliates of a
multi-employer pension plan if such withdrawal results in an annual
liability exceeding $100,000; or
(h) revocation by the Company of the Old Collateralized Note Indenture or
the Priority Notes or Old Collateralized Notes or impairment of the
security therefor; or
(i) the General Partner and the Special Managing Partner shall cease to
be the sole general partners of the Company or the Company shall cease
to be the Sunbelt Managing General Partner.
Remedies
(a) Subject to the terms of the Existing Intercreditor Agreement, if an
Event of Default shall have occurred and be continuing, and the Priority
Notes or Old Collateralized Notes have been declared due and payable and
such declaration and its consequences have not been rescinded and
annulled, the Trustee or the Collateral Agent may do one or more of the
following:
(i) institute Proceedings for the collection of all amounts then
payable on the Priority Notes or Old Collateralized Notes or under
this Indenture, whether by declaration or otherwise, enforce any
judgment obtained, and collect from the Trust Estate monies
adjudged due;
(ii) sell all or a portion of the Trust Estate or rights or interests
therein, at one or more public or private sales called and
conducted in any manner permitted by law;
(iii) institute Proceedings from time to time for the complete or
partial foreclosure of the Lien of the Old Collateralized Note
Indenture with respect to the Trust Estate;
(iv) exercise any remedies of a secured party under the UCC and, subject
to the UCC, take any other appropriate action to protect and
enforce the rights and remedies of the Trustee or the Holders of
the Priority Notes or Old Collateralized Notes under the Old
Collateralized Note Indenture; or
(v) exercise any remedies available to it under the deeds of trust
securing the Old Collateralized Note Indenture;
provided, however, that the Collateral Agent may not sell or otherwise liquidate
the Trust Estate following an Event of Default, unless either (i) the Requisite
Holders consent thereto, or (ii) the Trustee determines that the proceeds of
such sale or liquidation distributable to the Holders are sufficient to
discharge in full the amounts then due and unpaid upon the Priority Notes and
Old Collateralized Notes for principal and interest and the amounts due and
payable to discharge senior liens and pay expenses incurred in connection with
such sale or liquidation and the Requisite Holders agree with such
determination.
(b) If an Event of Default based on breach of a covenant occurs, the
Trustee may, and at the request of the Requisite Holders shall,
institute a Proceeding solely to compel performance of the covenant or
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<PAGE> 67
agreement or to cure the representation or warranty, the breach of which
gave rise to the Event of Default under such Section; the Trustee may
enforce any equitable decree or order arising from such Proceeding.
(c) Upon the occurrence and during the continuance of an Event of Default,
the interest rate payable with respect to the outstanding principal
amount of the Priority Notes and Old Collateralized Notes and interest
payments thereon not paid when due, shall be increased to a rate which
is 5% per annum in excess of the rate of interest otherwise payable with
respect to such securities.
If the Old Collateralized Note Indenture becomes subject to the Trust
Indenture Act, then no Holder of any Old Collateralized Notes has any right to
institute any Proceeding, judicial or otherwise, with respect to that Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(a) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(b) the Requisite Holders shall have made written request to the
Trustee to institute Proceedings in respect of such Event of
Default in its own name as Trustee thereunder;
(c) such Holder or Holders have offered to the Trustee an indemnity
satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(d) the Trustee for 30 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such Proceeding;
and
(e) no direction inconsistent with such written request has been given
to the Trustee during such 30-day period by the Requisite Holders;
it being understood and intended that no one or more Holders will have any right
in any manner whatsoever by virtue of, or by availing of, any provision of the
Old Collateralized Note Indenture to affect, disturb or prejudice the rights of
any other Holders, or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under that Indenture.
Description of the New Collateralized Note Indenture and New Collateralized
Notes
Set forth below are summaries of certain material provisions of the New
Collateralized Note Indenture and New Collateralized Notes. The New
Collateralized Note Indenture will amend and restate the Old Collateralized Note
Indenture and, except where noted below, the New Collateralized Note Indenture
is substantially similar to the Old Collateralized Note Indenture, to which
reference is made. Moreover, because the summaries set forth below do not
purport to be complete, all parties-in-interest are referred to the New
Collateralized Note Indenture for a complete statement of those provisions. Such
summaries make use of certain terms defined in the New Collateralized Note
Indenture and are qualified in their entirety by reference thereto.
Certain Definitions
Set forth below is a summary of certain defined terms used in the New
Collateralized Note Indenture, modified where appropriate to use terms defined
elsewhere in this Consent Solicitation Statement. Except as set forth below,
defined terms used in the New Collateralized Note Indenture generally have
substantially the same meanings as in the Old Collateralized Note Indenture.
Reference is made to the Old Collateralized Note Indenture and the New
Collateralized Note Indenture for the full definition of all such terms, as well
as any other terms used herein or in the summaries for which no definition is
provided.
"Excess Cash" means an amount of cash equal to the excess, if any, of (i)
(x) the amount of cash and Cash Equivalents of the Company on December 31, 1996
minus (y) the amount of all unfunded commitments of the Company to incur
Consolidated Capital Expenditures described in and permitted under Section
418(a) of the New Collateralized Note Indenture [limitation on capital
expenditures] (but all such Consolidated Capital Expenditures shall not exceed
$4,150,000) over (ii) $6,000,000.
50
<PAGE> 68
"IDB Letter of Credit" means that certain Irrevocable Letter of Credit No.
S04377 dated October 5, 1988 in the original stated amount of $9,510,411.00
issued by Bankers Trust Company to the trustee under that certain Indenture of
Trust, dated August 1, 1988, pursuant to which the Sunbelt Bonds were issued.
"Interest Drawing" means any drawing under the IDB Letter of Credit for the
purpose of paying interest coming due on the Sunbelt Bonds. If any drawing under
the IDB Letter of Credit is applied to the payment of both interest on the
Sunbelt Bonds and principal, premium and other amounts other than interest, it
shall be deemed a Principal Drawing to the extent that such drawing is applied
to the payment of principal, premium and amounts other than interest and an
Interest Drawing to the extent proceeds of such drawing are applied to pay
interest on the Sunbelt Bonds.
"Interest Payment Date" means March 31, June 30, September 30 or December
31, as the case may be, of each year commencing on the first such date to occur
after the initial issuance of New Senior Notes.
"New Senior Notes (Other)" means the Company's 12% Senior Secured Notes
(Other) Due 2005 issued and outstanding pursuant to the New Collateralized Note
Indenture (including any Secondary Securities, but excluding the Senior Notes
(Sunbelt IDB)).
"New Senior Notes (Sunbelt IDB)" means the Company's 12% Senior Secured
Notes (Sunbelt IDB) Due 2005 issued and outstanding pursuant to the New
Collateralized Note Indenture.
"Principal Drawing" means any drawing under the IDB Letter of Credit for
the purpose of paying the principal, premium, if any or other amounts coming due
and payable on the IDB Bonds, other than interest. If any drawing under the IDB
Letter of Credit is applied to the payment of both interest on the Sunbelt Bonds
and principal, premium and other amounts other than interest, it shall be deemed
a Principal Drawing to the extent that such drawing is applied to the payment of
principal, premium and amounts other than interest and an Interest Drawing to
the extent proceeds of such drawing are applied to pay interest on the Sunbelt
Bonds.
"Replacement Letter of Credit Agreement" has the meaning given to that term
in Section 425.
"Requisite Holders" means holders of in excess of two thirds of the
aggregate outstanding amount of the New Senior Notes.
"Secondary Securities" means, for purposes of this summary of the New
Collateralized Note Indenture only, additional New Senior Notes (Other) issued
in payment of interest accrued on the New Senior Notes (Other) and New Senior
Notes (Sunbelt IDB).
"Tax Exempt Bond Interest Rate" means the weighted average interest rate or
rates on the Sunbelt Bonds for the applicable Interest Accrual Period.
Principal and Interest
The New Collateralized Note Indenture will provide for the issuance of two
classes of securities: A New Senior Note (Sunbelt IDB) in the maximum principal
amount of $9,100,000 due December 31, 2005 and New Senior Notes (Other) in the
maximum original principal amount of $14,400,000 (plus Secondary Securities
issued in respect of the New Senior Notes) due December 31, 2005. The interest
rate (prior to default) on the New Senior Notes (Sunbelt IDB) will be equal to
12% per annum less the Tax Exempt Bond Interest Rate (as supplied to the Trustee
by the Company at least five Business Days prior to each Interest Payment Date),
but in no event less than 1.75% per annum. The interest rate (prior to default)
on the Senior Notes (Other) will be equal to 12% per annum. The interest rates
will be subject to increase following default.
The New Collateralized Note Indenture will provide for the payment of
accrued interest on the New Senior Note (Other) during the period from January
1, 1996 to December 31, 1996 through the issuance on each Interest Payment Date
occurring during the period from the initial issuance of New Senior Notes to
December 31, 1996 of Secondary Securities with a principal amount equal to the
accrued but unpaid interest. Any such Secondary Securities will be governed by
the New Collateralized Note Indenture and will be identical in all respects to
the New Senior Notes (Other) initially issued under the New Collateralized Note
Indenture (except with respect to the issuance date and aggregate principal
amount).
51
<PAGE> 69
Except as set forth below, interest accrued on each New Senior Note after
December 31, 1996 will be due and payable on each Interest Payment Date until
payment in full of such New Senior Note as follows: (1) 66.67% of the interest
that shall accrue during the first calendar quarter of each year will be due and
payable in cash on March 31 of such year; (2) 66.67% of the interest that shall
accrue during the second calendar quarter of each year will be due and payable
in cash on June 30 of such year; (3) all interest that shall accrue during the
third calendar quarter of each year plus 33.33% of the interest that shall
accrue during the first calendar quarter of such year will be due and payable in
cash on September 30 of such year; (4) all interest that shall accrue during the
fourth calendar quarter of each year, plus 33.33% of the interest that shall
accrue during the second calendar quarter of such year will be due and payable
in cash on December 31 of such year.
Generally, the principal of the New Senior Notes of each Class will be
payable as follows: (1) the principal amount of the New Senior Notes will be due
and payable in full on December 31, 2005, unless payment is required before that
date; (2) in addition to the principal payments required above, the principal
amount of the New Senior Notes will be payable annually as set forth below from
CDSA and Excess Cash; (3) upon the occurrence of either (i) a Principal Drawing
under the IDB Letter of Credit, (ii) an unreimbursed Interest Drawing under the
IDB Letter of Credit or (iii) an acceleration of the obligations under the New
Letter of Credit Agreement, New Senior Notes (Other) in the amount of such
drawing shall be issued in exchange for New Senior Notes (Sunbelt IDB); (4)
except as set forth above with respect to payments on Secondary Securities, all
payments of principal on the New Senior Notes of each Class made pursuant to
this subsection shall be allocated on a pro rata basis among all outstanding New
Senior Notes of such Class, without preference or priority of any kind within
such Class.
The New Collateralized Note Indenture will require the Company to apply 50%
of CDSA for calendar year 1997, to the payment of the New Senior Notes as
described below. The Company will deliver to the Trustee and the Holders within
45 days after the end of each of the first three quarters in each year (and
within 90 days after the end of each year) detailed calculations of the amount
of CDSA for such calendar quarter and for the period from the first day of the
year to which such calculation relates through the end of such calendar quarter.
Within 45 days after the end of each calendar quarter (in the case of the first
three calendar quarters of each year) and within 90 days after the end of each
calendar quarter (in the case of the fourth quarter of each year), the Company
will deposit into the CDSA Account an amount equal to the excess, if any, of (i)
an amount equal to 50% of cumulative CDSA from the beginning of the relevant
year through the end of the calendar quarter (the "Cumulative CDSA Amount") over
(ii) the amount in the CDSA Account on the end of such calendar quarter. The
"CDSA Account" shall be a bank account maintained with the Collateral Agent that
shall have limited withdrawal rights as described below and shall be subject to
a Lien for the benefit of the New Senior Notes and the New Letter of Credit
Agreement and included in the Trust Estate.
After the calculation of the Cumulative CDSA Amount has been made for the
fourth calendar quarter in each year and the Company has made any payments to
the CDSA Account that may be required in accordance with the New Collateralized
Note Indenture, (i) the Collateral Agent will release to the Company the Excess
CDSA, if any, for such quarter upon the Company's written request and compliance
with its requirements to deposit funds into the CDSA Account, and (ii) the
Collateral Agent will apply the funds in the CDSA Account (but not to exceed the
Cumulative CDSA Amount for such year) in the following priorities: first, to pay
accrued but unpaid interest (excluding Secondary Securities issued to evidence
such interest) on the New Senior Notes ratably within each Class of Outstanding
New Senior Notes; and second, an amount equal to any excess will be applied to
pay unpaid principal of the New Senior Notes ratably within each Class of
Outstanding Securities.
The New Collateralized Note Indenture will require the Company to apply the
amount of Excess Cash on December 31, 1996, to the payment of the New Senior
Notes as follows: the Company will, on or before January 15, 1997, apply the
amount of Excess Cash in the following priorities: first, to pay accrued but
unpaid interest (excluding Secondary Securities issued to evidence such
interest) on the New Senior Notes ratably within each class of outstanding
Securities; and second, an amount equal to any excess will be applied to pay
unpaid principal of the New Senior Notes ratably within each class of
outstanding New Senior Notes.
52
<PAGE> 70
Any amounts of Excess Cash on December 31, 1996 so applied shall reduce on a
dollar-for-dollar basis the mandatory sinking fund payments required to be paid
by the Company in 1998.
Special Exchange Provision
Under the New Letter of Credit Agreement and the New Collateralized Note
Indenture, the Company will agree that upon any Principal Drawing under the IDB
Letter of Credit, the New Senior Notes (Sunbelt IDB) will be automatically
exchanged for New Senior Notes (Other) in the principal amount of such drawing.
The Holder of the New Senior Notes (Sunbelt IDB) may surrender to the Trustee
the certificate representing the New Senior Notes (Sunbelt IDB) accompanied by a
certificate of the Holder stating that an Principal Drawing under the IDB Letter
of Credit has occurred, and setting forth the amount of such drawing, the
Company will execute, and the Trustee will authenticate and deliver, in the name
of the Holder, New Senior Notes (Other) in the amount of the drawing, and shall
return to the Holder a new certificate representing the principal amount of the
New Senior Note (Sunbelt IDB) certificate not so exchanged.
In addition, upon the occurrence of an event of default under the New
Letter of Credit Agreement and to the extent that the obligations under the New
Letter of Credit Agreement are accelerated, the principal amount of the New
Senior Notes (Sunbelt IDB) will be automatically converted into New Senior Notes
(Other); provided that if after such acceleration, the IDB Letter of Credit
expires or terminates, the New Senior Notes (Other) issued in exchange for the
principal amount of New Senior Notes (Sunbelt IDB) (but excluding any Senior
Notes (Sunbelt IDB) Secondary Securities) will be canceled to the extent of the
undrawn amount under the IDB Letter of Credit.
Mandatory Sinking Fund Payments
As a mandatory sinking fund for the retirement of the New Senior Notes, the
Company will be required to pay to the Trustee, on or prior to 12:00 noon, New
York City time on September 30 and December 31 of each year commencing with
September 30, 1998, an amount of same day funds equal to the Sinking Fund
Payment Amount for such date. The "Sinking Fund Payment Amount" means, with
respect to the sinking fund payment due on each date set forth below, an amount
equal to the aggregate principal amount of all New Senior Notes Outstanding on
the September 1 immediately preceding such date multiplied by the percentage set
forth opposite such date; provided, however, that the amount of Excess Cash paid
by the Company against the New Senior Notes will be applied against the Sinking
Fund Payment Amounts due in 1998 in inverse order of occurrence:
<TABLE>
<CAPTION>
SINKING FUND PAYMENT DATE PERCENTAGE
---------------------------------------------------------- ----------
<S> <C>
September 30, 1998........................................ 5.0%
December 31, 1998......................................... 7.5%
September 30, 1999........................................ 5.714%
December 31, 1999......................................... 8.571%
September 30, 2000........................................ 6.667%
December 31, 2000......................................... 10.00%
September 30, 2001........................................ 8.00%
December 30, 2001......................................... 12.00%
September 30, 2002........................................ 10.00%
December 30, 2002......................................... 15.00%
September 30, 2003........................................ 13.333%
December 30, 2003......................................... 20.00%
September 30, 2004........................................ 20.00%
December 30, 2004......................................... 30.00%
September 30, 2005........................................ 40.00%
December 30, 2005......................................... 60.00%
</TABLE>
53
<PAGE> 71
The Trustee will apply the sinking fund payments received by it toward the
redemption of the New Senior Notes.
Redemption
Each New Senior Note will be subject to redemption upon not less than 30
nor more than 60 days' notice by first-class mail, at any time, as a whole or in
part, at the election of the Company, at Redemption Prices (expressed in
percentages of principal amount) set forth below, together in the case of any
such redemption with accrued interest thereon to the Redemption Date (excluding
interest evidenced by Secondary Securities), if redeemed during the calendar
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---------------------------------------------------------- ----------
<S> <C>
1996...................................................... 112.0%
1997...................................................... 109.6%
1998...................................................... 107.2%
1999...................................................... 104.8%
2000...................................................... 102.4%
2001 and thereafter....................................... 100.0%
</TABLE>
In the case of any redemption of New Senior Notes, interest installments
whose Stated Maturity is on or prior to the Redemption Date will be payable to
the Holders of such New Senior Notes or one or more Predecessor Securities, of
record at the close of business on the relevant Regular Record Date referred to
on the face such security. New Senior Notes (or portions thereof) for whose
redemption and payment provision is made in accordance with the New
Collateralized Note Indenture will cease to bear interest from and after the
date fixed for redemption. The New Senior Notes are subject to redemption upon
not less than 30 nor more than 60 days' notice by mail, on December 31 in any
year commencing with the year 1998 through operation of the sinking fund at a
Redemption Price equal to 100% of the principal amount.
Covenants and Other Provisions
In general, the New Collateralized Note Indenture contains covenants and
other provisions that are substantially similar to those in the Old
Collateralized Note Indenture, except as set forth below.
Limitation on Indebtedness
Section 406 of the New Collateralized Note Indenture provides that the
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness, except: (a) the
Company may become and remain liable with respect to the New Letter of Credit
Agreement; (b) the Company may become and remain liable with respect to the New
Junior Subordinated Notes; (c) the Company and its subsidiaries may become and
remain liable with respect to the New Senior Notes; (d) the Company and its
subsidiaries may become and remain liable with respect to the intercompany loans
and advances in an amount not to exceed $100,000 plus all intercompany loans and
advances reflected on the balance sheet of the Company dated December 31, 1993;
(e) the Company and its subsidiaries may become and remain liable with respect
to additional letters of credit issued to support crude purchases and exchanges;
(f) the Company and is subsidiaries may become and remain liable for with
respect to hedging agreements relating to the price of crude in an amount not to
exceed $1,500,000; (g) Sunbelt may remain liable with respect to the Sunbelt
Bonds so long as it owns the Pinal Property; (h) the Company may become liable
with respect to capitalized leases otherwise permitted under the New
Collateralized Note Indenture; (i) the Company may become and remain liable with
respect to indebtedness in an amount not exceeding $4,150,000 the proceeds of
which are used to pay for capital expenditures permitted under the New
Collateralized Note Indenture; (j) after (i) cancellation or termination of all
letters of credit issued under the New Letter of Credit Agreement (other than
the IDB Letter of Credit) and (ii) the payment in full of all amounts owed under
or in respect of all letters of credit issued under the New Letter of Credit
Agreement (other than the IDB Letter of Credit), the
54
<PAGE> 72
Company may become and remain liable with respect to the Replacement Letter of
Credit Agreement; (k) the Company may become and remain liable with respect to
unsecured Indebtedness in an aggregate principal amount not to exceed
$2,000,000; provided that all such Indebtedness is repaid in full by December
31, 1996; and (l) the Company and its Subsidiaries may become and remain liable
with respect to Indebtedness in an amount not to exceed $500,000 in the
aggregate at any one time.
Limitation on Liens
Section 410 of the New Collateralized Note Indenture provides that the
Company will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create, incur, assume or permit to exist any Lien on or with respect
to any of their properties or assets, or any income or profits therefrom,
except: (a) Permitted Encumbrances; (b) Liens securing the New Senior Notes; (c)
Liens on assets acquired with the proceeds of Indebtedness to secure the payment
of such Indebtedness; (d) Liens securing obligations under the New Letter of
Credit Agreement; (e) if Huntway shall be permitted to become liable with
respect to the Replacement Letter of Credit Agreement, Liens that Requisite
Holders have consented in writing to securing obligations under the Replacement
Letter of Credit Agreement; (f) Liens on cash collateral in an aggregate amount
not exceeding $2,000,000 at any one time securing letters of credit permitted by
Section 406(e) [permitting certain letters of credit to support purchases of
inventory]; and (g) Liens consented to by Requisite Holders.
Financial Covenants
Section 415 of the New Collateralized Note Indenture provides that the
Company must cause its Consolidated EBITDA as of the last day of each quarter of
the last four fiscal quarter period to be not less than $3,000,000.
Limitation on Consolidated Capital Expenditures
Section 418 of the New Collateralized Note Indenture provides that the
Company will not, and will not permit any of its Subsidiaries to make, in the
aggregate, Consolidated Capital Expenditures, except: (a) Consolidated Capital
Expenditures in an aggregate amount not in excess of $4,150,000 used to build a
80,000 barrel asphalt tank located in Benicia, California, to expand the storage
capacity of two existing asphalt storage tanks located in Benicia, California,
by a combined amount of approximately 19,000 barrels and to build three 3,500
barrel polymer asphalt tanks and associated hardware located in Benicia,
California in 1996 and 1997; and (b) other Consolidated Capital Expenditures in
an amount not in excess of $1,250,000 during each calendar year.
Limitation on Fundamental Changes
Section 419 of the New Collateralized Note Indenture generally imposes the
same restrictions on fundamental changes involving the Company and its
Subsidiaries as set forth in the Old Collateralized Indenture except that the
New Collateralized Note Indenture permits the Company to incorporate on certain
terms and conditions set forth therein.
Limitation on Contingent Obligations
Section 420 of the New Collateralized Note Indenture generally imposes the
same restrictions on incurrence by the Company and its Subsidiaries of
Contingent Obligations as set forth in the Old Collateralized Note Indenture
except that the New Collateralized Note Indenture also permits the Company to
become and remain liable with respect to obligations under the Replacement
Letter of Credit Agreement.
Maintenance of Liquidity Reserve
The New Collateralized Note Indenture deletes the requirement set forth in
Section 422 of the Old Collateralized Note Indenture, which required the Company
to maintain a Liquidity Reserve.
55
<PAGE> 73
Limitation on Restricted Junior Payments
Section 407 of the New Collateralized Note Indenture prohibits the Company
and its Subsidiaries from, directly or indirectly, declaring, ordering, paying,
making or setting apart any sum for any Restricted Junior Payment prior to the
payment in full of the principal and interest on the New Collateralized Notes.
Transactions with Partners and Affiliates
Section 414 of the New Collateralized Note Indenture prohibits the Company
and its Subsidiaries from entering into any transaction with any holder of 5% or
more of the total partnership interests on terms that are less favorable that
might be obtained from an unrelated entity.
New Letter of Credit Agreement and Replacement Letter of Credit Agreement
Section 425 of the New Collateralized Note Indenture provides that, upon
the expiration or termination of the commitment of Bankers Trust Company to
issue letters of credit under the New Letter of Credit Agreement, the Company is
required to enter into a new letter of credit facility (the "Replacement Letter
of Credit Agreement") providing for a commitment to issue letters of credit used
to support purchases of crude oil and to support hedging obligations in an
aggregate stated amount not to exceed $17,500,000 at any one time for a period
of not less than 12 months from the effective date thereof. The Company will
not, without the consent of the Requisite Holders, amend the New Letter of
Credit Agreement if any such amendment would shorten the term of, or increase or
decrease the amount of credit under, the New Letter of Credit Agreement.
Supplemental Indentures
The New Collateralized Note Indenture permits the Company and the Trustee,
with the consent of Requisite Holders, to amend or supplement the New
Collateralized Note Indenture or modify the right of the holders of the New
Collateralized Notes; provided that no such modification, amendment or
supplemental indenture will (a) extend the Stated Maturity of, or any
installment of interest on, any New Senior Note, or reduce the principal amount
thereof or the interest rate thereon, or change the provisions of the New
Collateralized Note Indenture relating to the application of proceeds of the
Trust Estate to the payment of the New Senior Notes or change any place where or
the matter in which any New Senior Note is payable, or impair the right to
institute suit for the enforcement of such payment after the Stated Maturity
thereof, or (b) reduce the percentage of the amount of outstanding New Senior
Notes, the consent of whose holders is required for any such supplemental
indenture, or (c) impair or adversely affect the Trust Estate, or (d) permit the
creation of a lien ranking prior to or on a parity the lien of the New
Collateralized Note Indenture or deprive the holder of any New Senior Note of
the security afforded by the lien of that Indenture, or (e) change the
percentage of outstanding New Senior Notes the consent of whose holders is
required to exercise certain remedies, or (f) modify the definitions of
"Aggregate Outstanding Amount," "Requisite Holders" and "Outstanding", or (g)
modify certain provisions regarding amendment of the New Collateralized Note
Indenture, or provisions of the New Collateralized Note Indenture regarding
waiver of defaults, except to increase such percentage or to provide that
certain or other provisions of the New Collateralized Note Indenture cannot be
modified or waived without the consent of the holder of each New Senior Note
affected thereby, or (h) modify the provisions of the New Collateralized Note
Indenture relating to CDSA to the extent any amendment would adversely affect
the amount of payments on the New Senior Notes or the timing of such payments or
(i) modify the provisions of Section 501(D) [cross-defaults], 508 [right of
holders to receive payment] or 904 [selection by Trustee of New Senior Notes to
be redeemed] of the New Collateralized Note Indenture.
Events of Default
The events of default under the New Collateralized Note Indenture are
substantially similar to those in the Old Collateralized Note Indenture except
that: (1) the New Collateralized Note Indenture provides that failure to make
payments of interest or principal on any New Senior Note, including from Excess
Cash
56
<PAGE> 74
constitutes an Event of Default; and (2) the New Collateralized Note Indenture
permits the General Partner to transfer its general partner interest in the
Company to a corporation or a limited partnership formed and owned by the
Company's senior management if such transfer does not result in the loss of
limited liability for the Company's limited partners, cause the Company to be
treated as a corporation for federal income tax purposes or result in adverse
tax consequences to the holders of the New Senior Notes.
Remedies
The remedies in the New Collateralized Note Indenture are substantially
similar to those in the Old Collateralized Note Indenture.
Comparison of Old Collateralized Note Indenture and New Collateralized Note
Indenture
Set forth below is a comparison of certain material provisions of the Old
Collateralized Note Indenture and the corresponding changes (or deletions, if
applicable) in the New Collateralized Note Indenture:
<TABLE>
<CAPTION>
OLD COLLATERALIZED NOTE INDENTURE NEW COLLATERALIZED NOTE INDENTURE
- ------------------------------------------------- -------------------------------------------
<S> <C> <C>
1. Original Principal -- Old Collateralized $23,500,000 original principal outstanding.
Notes ($22,170,000), together with original
principal -- Old Subordinated Notes
($58,235,450.52), including $9,099,726.06
of Old Subordinated Note (Sunbelt IDB).
2. Interest accrues at 4% per annum payable in Interest on New Senior Notes (Other)
cash in equal quarterly installments. accrues at 12% per annum. Interest on New
Senior Notes (Sunbelt IDB) accrues at 12%
per annum minus the Tax Exempt Bond Rate
(but not less than 1.75%). Interest is
payable 1/6 in first and fourth fiscal
quarters and 1/3 in second and third
fiscal quarters. Payable-in-kind for all
accrued interest through December 31, 1996.
</TABLE>
<TABLE>
<S> <C> <C>
3. Maturity Date -- December 31, 2000 Maturity Date -- December 31, 2005
4. Optional Redemption: redeemable at Optional Redemption: redeemable at
Huntway's option, in whole or in part, upon Huntway's option, in whole or in part, upon
not less than 30 nor more than 60 days' not less than 30 nor more than 60 days'
notice, at a redemption price equal to 100% notice, at the redemption prices (expressed
of principal amount, plus all accrued as percentages of aggregate principal
interest. amount) set forth below, plus accrued and
unpaid interest thereon to the applicable
date of redemption, if redeemed during the
12-month period beginning on the periods
indicated below:
1996 -- 112.00%
1997 -- 109.60%
1998 -- 107.20%
1999 -- 104.80%
2000 -- 102.40%
2001 -- Par
</TABLE>
57
<PAGE> 75
<TABLE>
<CAPTION>
OLD COLLATERALIZED NOTE INDENTURE NEW COLLATERALIZED NOTE INDENTURE
- ------------------------------------------------- -------------------------------------------
<S> <C> <C>
5. Application of Excess Cash: None Huntway will pay the Senior Lenders all
cash in excess of $6,000,000 on December
31, 1996 by January 15, 1997. Such cash
balance will be net of funding required for
1996 capital expenditure projects including
equipment outlined below. Such capital
expenditures in total will not exceed
$4,150,000. Any payment made to the Senior
Lenders on January 15, 1997 will reduce
required 1998 sinking fund described below.
6. Application of CDSA: Huntway is required to Beginning in 1997, based on fiscal 1997
apply 100% of its CDSA to payment of the cash flow, Huntway will pay to the Senior
outstanding Priority Notes, Old Lenders 50% of excess CDSA.
Collateralized Notes and Old Subordinated
Notes.
7. Sinking Fund Payments: None Commencing in 1998, Huntway will make
annual sinking fund payments on the New
Senior Notes in the amount of $2,937,500,
with 40% of such amount to be paid on or
before September 30 and 60% of such amount
to be paid on or before December 31 of each
applicable year. The sinking fund payments
in 1998 through 2005 will be increased by
an amount necessary to fully amortize any
outstanding paid-in-kind New Senior Notes
over that eight-year period.
8. Ranking. The Old Collateralized Notes are The New Senior Notes are senior to all
senior to all Indebtedness of the Huntway indebtedness of Huntway (including the New
(including Old Junior Subordinated Notes Junior Notes and trade debt), other than
and trade debt) other than obligations obligations under the New Letter of Credit
under the Old Priority Notes which have Agreement and Replacement Letter of Credit
been paid in full and obligations under the Agreement, subject to any applicable terms
Old Letter of Credit Agreement which is of the New Intercreditor Agreement.
pari passu, subject to the terms of the
Existing Intercreditor Agreement.
</TABLE>
58
<PAGE> 76
<TABLE>
<CAPTION>
OLD COLLATERALIZED NOTE INDENTURE NEW COLLATERALIZED NOTE INDENTURE
- ------------------------------------------------- -------------------------------------------
<S> <C> <C>
9. Section 418 -- Capital Expenditures. The Huntway may borrow funds to build a 92,000
Company and its subsidiaries are permitted barrel asphalt tank, extend the storage
to make Consolidated Capital Expenditures capacity of two existing asphalt storage
in the amount of $1,250,000 during 1995 and tanks by a combined 18,000-19,000 barrels,
each year thereafter. and build three 3,500 barrel polymer
asphalt tanks plus associated hardware at
Benicia in 1996 and 1997. Collateral for
the financing of these new permitted
capital expenditures will be only the new
assets themselves. The equipment financing
to build the three 3,500 barrel polymer
asphalt tanks plus associated hardware will
be repaid by December 31, 1996. Any amounts
not repaid by December 31, 1996 on the
92,000 barrel asphalt tank, or the three
asphalt extensions or any other component
of the planned 1996 capital expenditures of
$4,150,000 will be deposited in a separate
account at Bankers Trust to be withdrawn in
1997 only for the purpose of paying off any
remaining amounts due on these 1996 capital
projects. The New Collateralized Note
Indenture also permits Huntway to incur
other capital expenditures in an amount not
to exceed $1,250,000 each year.
10. Section 415(b) -- Huntway required to Covenant Deleted.
maintain no more than $3.5 million in
Consolidated Net Working Capital.
11. Section 422 -- Huntway to maintain Covenant Deleted.
liquidity reserve.
12. Section 406 -- Limitation on Indebtedness. Revised to permit Huntway to (a) obtain
unsecured loan in 1996 not to exceed
$2,000,000, provided loan is repaid on or
before December 31, 1996; and (b) obtain
loan for capital expenditures permitted as
described in item 7 above.
13. Section 410 -- Limitation on Liens Huntway will be permitted to secure a new
letter of credit facility (replacing the
New Letter of Credit Agreement) with
current assets and other assets agreed to
by Requisite Holders.
</TABLE>
Description of the Old Subordinated Indenture and Old Subordinated Notes
Set forth below are summaries of the material terms of the Old Subordinated
Indenture and Old Subordinated Notes. All parties-in-interest are referred to
the Old Subordinated Note Indenture and Old Subordinated Notes for a complete
statement of those provisions. The statements made under this caption relating
to the Old Subordinated Note Indenture are summaries and do not purport to be
complete. Such summaries make use of certain terms defined in the Old
Subordinated Note Indenture and are qualified in their entirety by express
reference thereto.
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Certain Definitions
In general, except as set forth below, the definitions used in the Old
Subordinated Note Indenture are substantially similar to those set forth in the
Old Collateralized Note Indenture. Reference is made to the summary of the
definitions in the Old Collateralized Note Indenture set forth above. Further
reference is made to the Old Subordinated Note Indenture for a full definition
of all such terms as well as any other terms for which no definition is provided
herein.
Set forth below is a summary of certain defined terms used in the Old
Subordinated Note Indenture that differ from terms used in the Old
Collateralized Note Indenture or are not included in the Old Collateralized Note
Indenture, modified where appropriate to use terms defined elsewhere in this
Consent Solicitation Statement.
"Senior Debt" means all Indebtedness and other obligations specified below
whether outstanding on the date of the Old Subordinated Note Indenture or
thereafter created, incurred or assumed by the Company:
(a) the principal of, and interest on, all unreimbursed drawings under
letters of credit issued or amended (or deemed issued or amended), and
other extensions of credit, under the Old Letter of Credit Agreement and
all commitment, commission, facility and other fees payable under the
Old Letter of Credit Agreement and all expenses, reimbursements,
indemnities and other amounts payable by the Company under the Old
Letter of Credit Agreement;
(b) the principal of, and interest on, the Priority Notes and the Senior
Notes issued pursuant to the Old Collateralized Note Indenture;
(c) all interest accrued or accruing on Indebtedness under the Old Letter
of Credit Agreement and the Old Collateralized Note Indenture or other
Indebtedness permitted under the Old Subordinated Note Indenture after
the commencement of any insolvency, bankruptcy or receivership case or
proceeding in accordance with and at the contract rate (including,
without limitation, any rate applicable upon default) specified in the
agreement or instrument creating, evidencing or governing any such
Indebtedness, whether or not, pursuant to applicable law or otherwise,
the claim for such interest is allowed as a claim in such case or
proceeding; and
(d) any refundings, refinancings, renewals or extensions of any
indebtedness or other obligation described in clause (a) or (b) above.
"Senior Debt" does not include: (a) any Indebtedness which by the express
terms of the agreement or instrument creating, evidencing or governing the same
is pari passu with or subordinate in right of payment to the Securities; (b) any
amounts or other obligations under or relating to any operating lease; (c) any
accounts payable or other obligations owing to trade creditors created or
assumed by the Company in connection with the obtaining of materials or
services; (d) any liability for federal, state, local or other taxes, or other
governmental charges or claims of whatever nature, owed or owing by the Company;
(e) any Indebtedness to a Subsidiary or any Affiliate of the Company; (f) the
Old Junior Subordinated Debentures or any amounts due thereunder; and (g) any
Indebtedness or other obligations (i) owing, directly or indirectly, to any
Person under or in respect of any employee benefit plan, or (ii) owing, directly
or indirectly, to employees.
"Senior Lender" or Senior Lenders" means one or more of the holders of the
Senior Debt and includes the respective Representatives of such holders.
"Senior Notes" means the Old Collateralized Notes.
"Specified Senior Debt" means (a) Senior Debt at any time arising under the
Old Letter of Credit Agreement or (b) any Senior Debt at any time arising under
the Old Collateralized Note Indenture. For purposes of this definition, a
refinancing of any Specified Senior Debt is treated as Specified Senior Debt
only if it ranks or would rank pari passu with the Indebtedness refinanced.
"Tax Exempt Bond Interest Rate" means the weighted average interest rate or
rates on the Sunbelt Bonds for the applicable Interest Accrual Period.
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"Triggering Event" means the earlier to occur of (a) December 31, 2000 and
(b) the repayment in full of the principal of and interest (including Secondary
Securities with respect thereto) on the Priority Notes and the Senior Notes.
Principal and Interest
The Old Subordinated Note Indenture provided for the issuance of two
classes of securities: Old Subordinated Notes (Other) due December 31, 2008 in
an maximum principal amount of $49,135,724.16 (plus Secondary Securities issued
in respect thereof) and Old Subordinated Notes (Sunbelt IDB) due December 31,
2008 in an maximum principal amount of $9,099,726. The initial Interest Rate
(prior to default) on the Old Subordinated Notes (Sunbelt IDB) is equal to 4%
per annum less the Tax Exempt Bond Interest Rate (as supplied to the Trustee by
the Company at least five Business Days prior to each Interest Payment Date),
but is not to be less than 1.75% per annum. The initial Interest Rate (prior to
default) on the Subordinated Notes (Other) is 4% per annum. The 4% interest
rates referred to above were subject to increase to 12.25% per annum upon the
Triggering Event. The interest rates are subject to increase upon default.
The Old Subordinated Note Indenture provided for the payment of interest
that accrued on the Old Subordinated Notes before December 31, 1993 through the
issuance of Secondary Securities of the same class with a principal amount equal
to the accrued but unpaid interest. The principal amount of the Secondary
Securities was to be reduced by the amount CDSA exceeded $3,500,000 as of
December 31, 1993. Such Secondary Securities are governed by the Old
Subordinated Note Indenture and are identical in all respects to the Old
Subordinated Notes (Other) or Old Subordinated Notes (Sunbelt IDB), as the case
may be, initially issued under the Old Subordinated Note Indenture (except with
respect to the issuance date and aggregate principal amount). Interest accrued
on each Old Subordinated Note after December 31, 1993 is due and payable on each
Interest Payment Date until payment in full of such Old Collateralized Note. The
Company was also required to issue Secondary Securities in payment of interest
until payment in full of the Priority Notes and is permitted to issue Secondary
Securities in payment of interest on the Old Subordinated Notes if the Company
has paid the Required Amount of Debt Service to Holder in a given year (or
specified percentages thereof with respect to any quarterly period) before the
Triggering Event, subject to payments of interest made from CDSA pursuant to
Section 307(c) of the Old Subordinated Note Indenture being made in cash.
Commencing March 31, 1994, the principal was payable in installments, with
$250,000 payable in the first and fourth calendar quarters and $750,000 payable
in the second and third calendar quarters through December 31, 2000.
In addition to the principal payments described in the preceding paragraph,
the principal amount of the Old Subordinated Notes (Other) and Secondary
Securities issued with respect thereto, and Secondary Securities issued with
respect to Old Subordinated Notes (Sunbelt IDB), is payable quarterly in amounts
contemplated by Section 307(c) (described below); provided that upon the
occurrence of a Triggering Event in no event will the aggregate cash interest
and principal payments on the Old Subordinated Notes for each calendar year
thereafter be less than $5,000,000 (or in the year in which the Triggering Event
occurs, an amount equal to $5,000,000 less the amounts paid with respect to
principal of, and interest on, the Senior Notes in such year). Unless there has
been an event of default under the Old Letter of Credit Agreement, no principal
amount of the Old Subordinated Notes (Sunbelt IDB) will be payable until there
has been a drawing under the IDB Letter of Credit issued under the Old Letter of
Credit Agreement and, thereafter, principal is payable in accordance with the
terms of the Old Subordinated Notes (Other) issued in exchange for Subordinated
Notes (Sunbelt IDB). If there has been an event of default under the Old Letter
of Credit Agreement and to the extent that the obligations under the Old Letter
of Credit Agreement are accelerated, the principal amount of the Old
Subordinated Notes (Sunbelt IDB) will be automatically converted into Old
Subordinated Notes (Other).
Upon the occurrence of a Triggering Event, the unpaid principal balance of
the Old Subordinated Notes (Other), including Secondary Securities issued with
respect thereto and Secondary Securities with respect to
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Old Subordinated Notes (Sunbelt IDB), will be repaid in quarterly installments
on March 31, June 30, September 30 and December 31 of each year (commencing with
the first such date following the Triggering Event) in amounts equal to a
percentage of the annual principal amount payable for such year as follows:
12.5% for the quarter ended March 31, 37.5% for the quarter ended June 30, 37.5%
for the quarter ended September 30 and 12.5% for the quarter ended December 31.
The annual principal amount payable with respect to each Old Subordinated Note
(Other) and to each Secondary Security issued in payment of interest thereon and
on the Old Subordinated Notes (Sunbelt IDB) will be calculated by equally
amortizing the aggregate principal amount of such Securities from the date of
the Triggering Event through December 31, 2008. Such amounts will be set forth
on a schedule prepared by the Company and delivered to each Holder and the
Trustee within five Business Days of a Triggering Event. The Company will
deliver such schedule, along with a certificate from the independent public
accountants for the Company verifying that the schedule has been prepared in
accordance with this Section, to the Trustee. If any Holder disagrees with such
calculation, by notice to the Trustee and the Company, within 10 days of
receipt, the Holder may request a recalculation by another nationally recognized
independent accounting firm (unaffiliated with either the Holder or the Company)
selected by the Trustee whose determination will be final and binding on the
Holders and the Company. The Company will not pay any principal payments with
respect to the Old Subordinated Notes until the accrued interest (including
Secondary Securities issued with respect thereto) on and principal amount of the
Priority Notes have been paid in full. To the extent that Old Subordinated Notes
(Other) are issued after a Triggering Event, or deemed to be issued, in exchange
for Old Subordinated Notes (Sunbelt IDB), the schedule and amounts of principal
of such Old Subordinated Notes (Other) to be repaid will be ratably determined
as set forth above from the date of issuance.
The Old Subordinated Note Indenture requires the Company to apply 100% of
CDSA (except that with respect to each of the first three quarters of each year,
only 75% of CDSA) that is not required to be applied to the Liquidity Reserve
established under the Old Subordinated Note Indenture ratably within each class
of the outstanding Priority Notes, Old Collateralized Notes and Old Subordinated
Notes in the following priorities: first to pay interest on the Priority Notes;
second to pay principal of the Priority Notes; third to pay interest on the Old
Collateralized Notes; fourth to pay principal on the Old Collateralized Notes to
the extent of scheduled principal payments; fifth to pay interest on the Old
Subordinated Notes (Sunbelt IDB); sixth to pay interest on the Old Subordinated
Notes (Other) (including Secondary Securities issued with respect thereto) and
accrued but unpaid principal of an interest on the Old Subordinated Note
(Sunbelt IDB) Secondary Securities; seventh to pay scheduled principal payments
(as defined in the Old Subordinated Note Indenture) of the Old Subordinated
Notes; eighth to principal of the Old Collateralized Notes applied to scheduled
principal payments in inverse order of maturity. After the end of each calendar
quarter, the Company is required to calculate the amount of CDSA and pay a
portion of the CDSA into a bank account maintained with the Collateral Agent.
Certain portions of the CDSA that are not required to be applied to the
Liquidity Reserve or to be applied against the notes issued under the Old
Indentures may be released to the Company.
Redemption
Subject to the subordination provisions in the Old Subordinated Note
Indenture, each Old Subordinated Note is subject to redemption upon not less
than 30 nor more than 60 days' notice by first-class mail, at any time, as a
whole or in part, at the election of the Company, at Redemption Prices equal to
100% of par, together in the case of any such redemption with accrued interest
thereon to the Redemption Date (excluding interest evidenced by Secondary
Securities).
In the case of any redemption of Old Subordinated Notes, interest
installments whose Stated Maturity is on or prior to the Redemption Date will be
payable to the Holders of such Old Collateralized Notes or one or more
Predecessor Securities, of record at the close of business on the relevant
Regular Record Date referred to on the face of such security. Old Subordinated
Notes (or portions thereof) for whose redemption and payment provision is made
in accordance with the Old Subordinated Note Indenture cease to bear interest
from and after the date fixed for redemption.
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Covenants and Other Provisions
In general, the Old Subordinated Note Indenture contains covenants that are
substantially similar to those in the Old Collateralized Note Indenture, except
as set forth below.
Limitation on Issuance of Other Subordinated Indebtedness
Section 425 of the Old Subordinated Note Indenture provides that the
Company will not incur or suffer to exist any Indebtedness, other than the Old
Subordinated Notes and the Old Junior Subordinated Debentures, that is
subordinate in right of payment to any Senior Debt unless such Indebtedness is
also subordinate in right of payment to the Old Subordinated Notes pursuant to
provisions substantially similar to those contained in Article Ten of the Old
Subordinated Note Indenture.
Subordination
Indebtedness evidenced by the Old Subordinated Notes (including principal
and interest) is subordinated in right of payment to the prior payment in full
of all Senior Indebtedness.
If any default in the payment when due (whether by lapse of time,
acceleration or otherwise) of any Senior Debt shall at any time occur (a
"Payment Default"), then at all times thereafter until such default shall have
been cured or waived by or on behalf of the Senior Lenders that hold such Senior
Debt, the Company is prohibited from directly or indirectly making any payment
or Distribution of Assets with respect to the Old Subordinated Notes.
The Company is prohibited from directly or indirectly making any payment or
Distribution of Assets with respect to the Old Subordinated Notes during the
period from the date a notice (a "Deferral Notice") is given to the Company from
a Representative of the holders of Specified Senior Debt to the effect that
there exists any event of default (other than a Payment Default) under such
Specified Senior Debt pursuant to which such Specified Senior Debt may be
accelerated (a "Non-Payment Default"), until the earliest of (a) the date on
which such Non-Payment Default is cured (if capable of being cured) or otherwise
ceases to exist; (b) the date on which application of this provision described
in this paragraph is waived in writing by the Senior Lenders holding such
Specified Senior Debt in accordance with the terms of the document pursuant to
which it was issued; and (c) the 180th day after receipt by the Company of such
Deferral Notice. The Company is not prohibited from the making of any such
payment for more than 180 days after a Deferral Notice shall have been given
unless the Specified Senior Debt in respect of which such Nonpayment Default
exists has been declared due and payable in its entirety, in which case no such
payment may be made until such acceleration has been rescinded or annulled. Not
more than one Deferral Notice may be given within a period of 360 consecutive
days; provided, however, that (i) no event of default with respect to such
Specified Senior Debt which existed or was continuing on the date of any
Deferral Notice may be made the basis for the giving of a subsequent Deferral
Notice unless all events of default shall have been cured or waived after such
date and (ii) if the Company or the Trustee receives any such Deferral Notice, a
similar notice relating to or arising out of the same default or facts giving
rise to such default (whether or not such default is on the same issue of
Specified Senior Debt) will not be effective for purposes of the provisions
described in this paragraph.
In the event of any insolvency, bankruptcy or receivership case or
proceeding or any dissolution, winding up, liquidation, reorganization or other
similar proceedings relative to the Company, any of its Subsidiaries, its
property or its operations (whether voluntary or involuntary and whether in
bankruptcy, insolvency or receivership proceedings or otherwise) or upon an
assignment for the benefit of creditors, or any other marshalling of the assets
of the Company, then all Senior Debt will first be paid in full in cash, or
payment provided for in cash, before the Holders of Old Subordinated Notes shall
be entitled to receive or retain any payment or Distribution of Assets with
respect to such note. In any such proceedings, any payment or Distribution of
Assets to which the Holders would be entitled if the Old Subordinated Notes were
not subordinated to the Senior Debt shall be paid by the Company or by the
Trustee or agent or other person making such payment or distribution, or by the
Holders of the Old Subordinated Notes if received by such Holders, directly to
the Senior Lenders (pro rata) to the extent necessary to make payment in full in
cash of all Senior Debt and, in the case of Senior Debt in respect of letters of
credit not yet drawn upon, to be fully
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secured by cash collateral, after giving effect to any concurrent payment or
distribution to or for the benefit of the Senior Lenders.
Events of Default
The Old Subordinated Debenture Indenture provides for substantially the
same events of default as those provided for in the Old Collateralized Note
Indenture.
Remedies
The remedies available to the holders of the Old Subordinated Notes under
the Old Subordinated Note Indenture are substantially similar to those in the
Old Collateralized Note Indenture.
Description of the Old Junior Subordinated Debenture Indenture and Old Junior
Subordinated Notes
Set forth below are summaries of certain material provisions of the Old
Junior Subordinated Debenture Indenture and Old Junior Subordinated Notes. All
parties-in-interest are referred to the Old Junior Subordinated Debenture
Indenture and Old Junior Subordinated Notes for a complete statement of those
provisions. The statements made under this caption relating to the Old Junior
Subordinated Debenture Indenture are summaries and do not purport to be
complete. Such summaries make use of certain terms defined in the Old Junior
Subordinated Debenture Indenture and are qualified in their entirety by express
reference thereto.
Certain Definitions
Set forth below is a summary of certain defined terms used in Old Junior
Subordinated Debenture Indenture, modified where appropriate to use terms
defined elsewhere in this Consent Solicitation Statement. Except as set forth
below, defined terms used in the Old Junior Subordinated Debenture Indenture
generally have substantially the same meanings as those set forth in the Old
Collateralized Note Indenture. Reference is made to the summary of the
definitions in the Old Collateralized Note Indenture set forth above. Further
reference is made to the Old Junior Subordinated Debenture Indenture for a full
definition of all such terms as well as any other terms for which no definition
is provided herein.
"Requisite Holders" means the Holders of a majority of the Aggregate
Outstanding Amount of the Old Junior Subordinated Notes.
"Restricted Junior Payment" means any distribution, direct or indirect,
whether in cash or other property on account of (i) the units of ownership in
the Company or any other partnership interest in the Company or dividend,
distribution or similar payment, redemption, purchase, retirement or other
acquisition for value, direct or indirect, of any units of ownership in the
Company or any other partnership interest in the Company and (ii) warrants,
options or other rights to acquire units of ownership in the Company in order to
retire, or to obtain the surrender of, such securities; provided, however,
Restricted Junior Payment does not include any redemption, purchase, retirement
or other acquisition for value by the Company of the Warrants.
"Senior Indebtedness" means (i) all unreimbursed drawings with respect to
letters of credit issued or amended (or deemed issued or amended) under the Old
Letter of Credit Agreement, interest accrued or accruing thereon both before and
after the date of filing a petition in any bankruptcy, insolvency, arrangement,
reorganization or receivership proceedings, whether or not allowed as a claim in
such case or proceeding (in accordance with and at the contract rate), any
commitment, commission, facility and other fees payable under the Old Letter of
Credit Agreement and any other amounts due under the Old Letter of Credit
Agreement, whether direct or indirect, absolute or contingent, secured or
unsecured, due or to become due, now existing or hereafter arising, (including,
without limitation, amounts for which Bankers Trust (or any successor lender
under the Old Letter of Credit Agreement) is entitled to reimbursement pursuant
to the Old Letter of Credit Agreement in respect of letters of credit or
otherwise) (and including any post-petition loans after the filing of a petition
in bankruptcy); (ii) the principal of the Senior Securities, interest accrued or
accruing thereon both before and after the date of filing a petition in
bankruptcy, insolvency, arrangement,
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reorganization or receivership proceedings, whether or not allowed as a claim in
such case or proceeding (in accordance with and at the contract rate) and any
and all other amounts due under the Senior Securities and the Old Collateralized
Note Indenture and the Old Subordinated Note Indenture, whether direct or
indirect, absolute or contingent, secured or unsecured, due or to become due,
now existing or hereafter arising (including, without limitation, amounts for
which the holders of the Senior Securities or the trustees under the Old
Collateralized Note Indenture and the Old Subordinated Note Indenture are
entitled to reimbursement under the terms of the Senior Securities or such
indentures); (iii) any refundings, renewals or extensions of any Indebtedness or
other obligation described in clauses (i) and (ii) above provided that the term
of any such refunding, renewal or extension shall in no event expire after
December 31, 2020; and (iv) all expenses, indemnifications and attorneys' fees
for which the Company is now or hereafter becomes liable to pay to any holder of
Senior Indebtedness.
"Senior Securities" means the Priority Notes, the Old Collateralized Notes
and the Old Subordinated Notes.
"Specified Senior Debt" means (a) any Senior Indebtedness at any time
arising under the Old Letter of Credit Agreement, (b) any Senior Indebtedness at
any time arising under the Old Collateralized Note Indenture and (c) any Senior
Indebtedness at any time arising under the Old Subordinated Note Indenture. For
purposes of this definition, a refinancing of any Specified Senior Debt shall be
treated as Specified Senior Debt only if it ranks or would rank pari passu with
the Indebtedness refinanced.
"Subordinated Indebtedness" means all Indebtedness of the Company or its
Subsidiaries to the Holders of the Old Junior Subordinated Notes now or
hereafter existing (whether created directly or acquired by assignment or
otherwise), including, but not limited to, all Indebtedness of the Company
pursuant to the Old Junior Subordinated Debenture Indenture and the Old Junior
Subordinated Notes, and interest thereon and other amounts payable in respect
thereof.
Principal and Interest
The Old Junior Subordinated Debenture Indenture limits the aggregate
original principal amount of Old Junior Subordinated Notes to $7,000,000, except
for the issuance of Secondary Securities in the payment of accrued interest. The
Old Junior Subordinated Notes mature on December 31, 2020, and bear interest
prior to default, at a rate of 4% per annum until the payment in full of the
principal amount of and all accrued interest on the Senior Securities, at which
time the interest rate increases to 12% per annum.
Generally, interest on each Old Junior Subordinated Note is paid solely
through the issuance of additional Old Junior Subordinated Notes ("Secondary
Securities") until the Senior Securities are paid in full. Thereafter, interest
is periodically in cash on each Interest Payment Date.
After the Senior Securities are paid in full, the principal of the Old
Junior Subordinated Notes, including Secondary Securities, is payable in
installments as follows: (i) for each of the first three quarters of each year,
an amount equal to 37.5% of CDSA for each such quarter and (ii) after the end of
each year, an amount equal to the excess of (x) 50% of CDSA generated by the
Company after the final payment of the principal of and interest on the Senior
Securities over (y) the amount of CDSA previously paid to the Holders during
such year as described in clause (i) of this sentence.
Covenants and Other Provisions
The Old Junior Subordinated Debenture Indenture contains covenants and
other provisions pertaining to, among other things, (i) the maintenance of
Huntway's office or agency, (ii) the holding of certain payments in trust, (iii)
compliance with laws and the maintenance of Huntway's existence, (iv) the
payment of taxes, (v) certain limitations on restrictions affecting
subsidiaries, (vi) financial statements and other reports, (vii) inspection
rights, (viii) the maintenance of properties and insurance, (ix) the waiver of
stay or usury laws, (x) limitations on certain loans and advances, (xi) certain
fundamental changes, (xii) certain contingent obligations and (xiii) the conduct
of business. Some of the material covenants and other provisions are set forth
below.
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Limitation on Indebtedness
Section 406 of the Old Junior Subordinated Debenture Indenture provides
that, after the Company has paid in full the principal of and all accrued
interest on the Senior Securities, the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except: (a) the Company may become and remain
liable with respect to the Old Letter of Credit Agreement; (b) Sunbelt may
remain liable with respect to the Sunbelt Bonds so long as it continues to own
the property described in Exhibit A to the Old Collateralized Note Indenture as
the Pinal Property; (c) the Company and its Subsidiaries may become and remain
liable with respect to the Old Junior Subordinated Notes; (d) the Company and
its Subsidiaries may become and remain liable with respect to intercompany loans
and advances among the Company and its wholly-owned Subsidiaries, between the
Company and Sunbelt, in an aggregate amount not to exceed $100,000 and all
intercompany loans and advances between the Company and any Subsidiary reflected
on the balance sheet of the Company dated March 31, 1993; (e) the Company and
its Subsidiaries may become and remain liable with respect to additional letters
of credit issued to support crude oil purchases and exchanges; (f) the Company
and its Subsidiaries may become and remain liable with respect to hedging
agreements relating to the price of crude oil in an amount not to exceed
$1,500,000; and (g) in addition to Indebtedness permitted by clauses (a) through
(f) above, the Company and its Subsidiaries may become and remain liable with
respect to Indebtedness in an amount not to exceed $500,000 in the aggregate at
any one time.
Limitation on Liens
Section 410 of the Old Junior Subordinated Debenture Indenture provides
that, after the Company has paid in full the principal of and all accrued
interest on the Senior Securities, the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or permit
to exist any Lien on or with respect to any of its properties or assets or the
properties or assets of any of its Subsidiaries, respectively, whether now owned
or hereafter acquired, or any income or profits therefrom, except: (a) Permitted
Encumbrances; (b) Liens securing obligations under the Old Collateralized Note
Indenture; (c) Liens securing obligations under the Old Subordinated Note
Indenture; (d) Liens securing obligations under the Old Letter of Credit
Agreement; (e) Liens on cash collateral securing letters of credit permitted by
Section 406(e) of the Old Junior Subordinated Debenture Indenture [restrictions
on Indebtedness]; and (f) Liens which have previously been consented to by the
holders of Specified Senior Debt. Neither the Company nor any of its
Subsidiaries will enter into any agreement prohibiting the creation or
assumption of any Lien upon any of their properties or assets, whether now owned
or hereafter acquired, to secure payment of the Old Junior Subordinated Notes
other than pursuant to the Old Collateralized Note Indenture and the Old
Subordinated Note Indenture.
Financial Covenants
Section 415 of the Old Junior Subordinated Debenture Indenture provides
that, after the Company has paid in full the principal of and all accrued
interest on the Senior Securities, the Company will not permit (i) Consolidated
EBITDA as of the last day of each quarter for the four consecutive quarter
period ended on such day to be less than $3,000,000 or (ii) Consolidated Net
Working Capital to exceed $3,500,000 at any time.
Limitation on Consolidated Capital Expenditures
Section 418 of the Old Junior Subordinated Debenture Indenture provides
that, after the Company has paid in full the principal of and all accrued
interest on the Senior Securities, the Company will not, and will not permit any
of its Subsidiaries to, make in the aggregate, Consolidated Capital Expenditures
in excess of $1,400,000 during 1993, $1,588,000 during 1994 and $1,250,000
during 1995 and each year thereafter. With respect to the capital expenditure
limitations set forth above with respect to 1995 and each year thereafter, the
holders of the Old Junior Subordinated Notes, will discuss with the Company any
necessary increases to the permitted level of capital expenditures as a result
of remedial actions required by regulation or law.
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Contingent Obligations
Section 420 of the Old Junior Subordinated Debenture Indenture provides
that, after the Company has paid in full the principal of and all accrued
interest on the Senior Securities, the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or become or be liable
with respect to any Contingent Obligation, except: (a) guarantees resulting from
endorsement of negotiable instruments for collection in the ordinary course of
business; (b) Contingent Obligations in an aggregate amount not in excess of
$100,000 outstanding at any one time; (c) that certain Equipment Lease Guaranty
executed by the Company in favor of GECC Leasing in an amount not to exceed
$860,000; (d) additional letters of credit issued to support crude oil purchases
and exchanges; (e) hedging agreements relating to the price of crude oil in an
amount not to exceed $1,500,000; (f) the Company's guarantee of letters of
credit issued on behalf of Sunbelt under the Letter of Credit Facility and other
obligations solely as a result of the Company being the general partner of
Sunbelt; and (g) obligations arising under the Old Letter of Credit Agreement.
Limitation on Restricted Junior Payments
Section 407 of the Old Junior Subordinated Debenture Indenture provides
that, after the Company has paid in full the principal of and all accrued
interest on the Senior Securities, the Company and its Subsidiaries will not,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment prior to the payment in full of the principal of and
interest on the Old Junior Subordinated Notes; provided that the Company may
issue Common Units upon exercise of the Warrants.
Transactions with Partners and Affiliates
Section 414 of the Old Junior Subordinated Debenture Indenture provides
that, after the Company has paid in full the principal of and all accrued
interest on the Senior Securities, the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, enter into or permit to exist
any transaction with any holder of 5% or more of the total partnership interests
in the Company, or with an Affiliate of the Company or of any such holder, on
terms that are less favorable to the Company or that Subsidiary, as the case may
be, than those which might be obtained at the time from Persons who are not such
a holder or Affiliate.
Grant of Lien to Secure Obligations
Section 422 of the Old Junior Subordinated Debenture Indenture provides
that, upon the payment in full of the principal of and all accrued interest on
the Senior Securities, the Company and Sunbelt will grant to the Trustee for the
benefit of the Holders of the Old Junior Subordinated Notes a Lien on
substantially all of their assets and to do all acts necessary or desirable to
perfect such Lien.
Supplemental Indentures
The provisions in the Old Junior Subordinated Debenture Indenture regarding
the amendment thereof and of the Old Junior Subordinated Notes are substantially
the same as those set forth in the Old Collateralized Note Indenture, except
that the Old Junior Subordinated Debenture Indenture also provides that it
cannot be modified without the consent of the holder of each Old Junior
Subordinated Note affected thereby in an manner materially adverse to the
holders of the Priority Notes or the Old Collateralized Notes.
Subordination
Indebtedness evidenced by the Old Junior Subordinated Notes (including
principal and interest) is subordinated in right of payment to the prior payment
in full of all Senior Indebtedness. The Old Junior Subordinated Debenture
Indenture provides that no direct or indirect payment on account of the Old
Junior Subordinated Notes shall be made nor shall any assets of the Company be
applied to the payment, purchase or other acquisition, retirement of the Old
Junior Subordinated Notes until the Specified Senior Debt is paid in full.
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Events of Default
The Events of Default under the Old Junior Subordinated Debenture Indenture
are substantially similar to those in the Old Collateralized Note Indenture.
Remedies
(a) If an Event of Default shall have occurred and be continuing, and the
Old Junior Subordinated Notes have been declared due and payable with
the prior written consent of the holders of a majority of the Senior
Securities or if the Specified Senior Debt has been indefeasibly paid in
full (other than any indemnification obligation for which a claim has
not been made; provided that any such event shall not release the
Company from its indemnification obligation which shall survive such
event), all letters of credit issued under the Old Letter of Credit
Agreement have indefeasibly expired with no claim or demand pending
thereon and the commitment to issue letters of credit under the Old
Letter of Credit Agreement shall have terminated or expired and such
declaration and its consequences have not been rescinded and annulled,
the Trustee may do one or more of the following:
(i) institute proceedings for the collection of all amounts then
payable on the Securities or under the Old Junior Subordinated
Debenture Indenture, whether by declaration or otherwise, enforce
any judgment obtained, and if the Lien contemplated by Section 422
is then in effect, collect from the Trust Estate monies adjudged
due;
(ii) if the Lien contemplated by Section 422 is then in effect, sell
all or a portion of the Trust Estate or rights or interests
therein, at one or more public or private sales called and
conducted in any manner permitted by law;
(iii) if the Lien contemplated by Section 422 is then in effect,
institute Proceedings from time to time for the complete or partial
foreclosure of the Lien the Old Junior Subordinated Debenture
Indenture with respect to the Trust Estate;
(iv) if the Lien contemplated by Section 422 is then in effect, exercise
any remedies of a secured party under the UCC and, subject to the
UCC, take any other appropriate action to protect and enforce the
rights and remedies of the Trustee or the Holders of the Old Junior
Subordinated Notes under the Old Junior Subordinated Debenture
Indenture; or
(v) if the Lien contemplated by Section 422 is then in effect, exercise
any remedies available to it under the collateral documents
evidencing such Lien;
provided, however, that if the Lien contemplated by Section 422 is then in
effect, the Trustee may not sell or otherwise liquidate the Trust Estate
following an Event of Default, unless either (i) the Requisite Holders consent
thereto, or (ii) the proceeds of such sale or liquidation distributable to the
Holders are sufficient to discharge in full the amounts then due and unpaid upon
the Old Junior Subordinated Notes for principal and interest and the amount
needed to satisfy senior liens and to pay the costs of such sale or liquidation
and the Requisite Holders agree with such determination.
(b) If an Event of Default arising from a breach of warranty or certain
covenants occurs, and the holders of the Senior Securities give their
prior written consent to the taking of such action, the Trustee may, and
at the request of the Requisite Holders shall, institute proceedings
solely to compel performance of the covenant or agreement or to cure the
representation or warranty, the breach of which gave rise to the Event
of Default under such Section; the Trustee may enforce any equitable
decree or order arising from such Proceeding.
(c) Upon the occurrence and during the continuance of an Event of Default,
the interest rate payable with respect to the outstanding principal
amount of the Old Junior Subordinated Notes, and interest payments
thereon not paid when due, shall be increased to a rate which is 5% per
annum in excess of the rate of interest otherwise payable with respect
to Old Junior Subordinated Notes.
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If the Old Junior Subordinated Debenture Indenture becomes subject to the
Trust Indenture Act, then no Holder of any Old Junior Subordinated Notes shall
have any right to institute any Proceeding, judicial or otherwise, with respect
to that Indenture, or for the appointment of a receiver or trustee, or for any
other remedy hereunder, unless
(i) the holders of the Specified Senior Debt, if any, have given their
prior written consent to the taking of such action; provided,
however, no such consent shall be required with respect to the
institution of any suit in equity which only seeks injunctive
relief as a remedy;
(ii) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(iii) the Requisite Holders shall have made written request to the
Trustee to institute Proceedings in respect of such Event of
Default in its own name as Trustee thereunder;
(iv) such Holder or Holders have offered to the Trustee an indemnity
satisfactory to the Trustee against the costs, expenses and
liabilities to be incurred in compliance with such request;
(v) the Trustee for 30 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding;
and
(vi) no direction inconsistent with such written request has been given
to the Trustee during such 30-day period by the Requisite Holders;
it being understood and intended that no one or more Holders will have any right
in any manner whatsoever by virtue of, or by availing of, any provision of the
Old Junior Subordinated Debenture Indenture to affect, disturb or prejudice the
rights of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under that Indenture.
Description of the New Junior Subordinated Debenture Indenture
Set forth below are summaries of certain material provisions of the New
Junior Subordinated Debenture Indenture. The New Junior Subordinated Debenture
Indenture will amend and restate the Old Junior Subordinated Debenture Indenture
and except where noted below, the New Junior Subordinated Debenture Indenture is
substantially similar to the Old Junior Subordinated Debenture Indenture, to
which reference is made. Moreover, because the summaries set forth below do not
purport to be complete, all parties-in-interest are referred to the New Junior
Subordinated Debenture Indenture for a complete statement of those provisions.
Such summaries make use of certain terms defined in the New Junior Subordinated
Debenture Indenture and are qualified in their entirety by express reference
thereto.
Certain Definitions
Set forth below is a summary of certain defined terms used in the New
Junior Subordinated Debenture Indenture, modified where appropriate to use terms
defined elsewhere in this Consent Solicitation Statement. Except as set forth
below, defined terms used in the New Junior Subordinated Debenture Indenture
generally have substantially the same meanings as in the Old Junior Subordinated
Debenture Indenture. Reference is made to the Old Junior Subordinated Debenture
Indenture and the New Junior Subordinated Debenture Indenture for the full
definition of all such terms, as well as any other terms used herein or in the
summaries for which no definition is provided.
"Senior Securities" means the New Senior Notes (Other) and the New Senior
Notes (Sunbelt IDB).
"Unit Valuation Date" means (i) with respect to the first Interest Payment
Date following the Closing Date, a date selected by the Company that is not less
than days before and not more than days before such Interest
Payment Date; and (ii) with respect to each Interest Payment Date thereafter,
December 1, 1996 and each twelve month anniversary thereof.
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Principal and Interest
The New Junior Subordinated Debenture Indenture provides for the issuance
of New Junior Subordinated Notes in the aggregate original principal amount of
$2,070,000. The New Junior Subordinated Notes are due December 31, 2005, and
bear interest prior to default, from the later of January 1, 1996 or the most
recent date through which interest has been paid thereon at a rate of 12% per
annum.
Interest on the New Junior Subordinated Notes is paid on each Interest
Payment Date. Until the New Collateralized Notes are paid in full, interest is
not paid in cash but is instead paid through the issuance of Common Units with
an aggregate fair market value (based on the trading price of Common Units)
measured on the Unit Valuation Date immediately preceding the Interest Payment
Date. After the New Collateralized Notes are paid in full, interest is paid in
cash.
Subject to the subordination provisions in the New Junior Subordinated
Debenture Indenture, the principal of the New Junior Subordinated Notes is
payable on December 31, 2005.
Covenants and Other Provisions
In general, the New Junior Subordinated Debenture Indenture contains
covenants and other provisions that are substantially similar to those in the
Old Junior Subordinated Debenture Indenture, except as set forth below.
Limitation on Indebtedness
Section 406 of the New Junior Subordinated Debenture Indenture (limitation
on indebtedness) is substantially the same as the corresponding covenant in the
Old Junior Subordinated Debenture Indenture with the following changes: (1) the
Company may become and remain liable with respect to the New Letter of Credit
Agreement; (2) the Company may become and remain liable with respect to
Indebtedness the proceeds of which are used solely to pay for permitted capital
expenditures; (3) the Company may become and remain liable with respect to
unsecured Indebtedness in an aggregate principal amount not to exceed
$2,000,000; provided that all such Indebtedness is repaid in full by December
31, 1996; and (4) after (a) the cancellation or expiration of all commitments to
issue, renew or extend letters of credit under the New Letter of Credit Facility
(other than with respect to the IDB Letter of Credit), (b) the cancellation or
termination of all letters of credit issued under the New Letter of Credit
Agreement (other than the IDB Letter of Credit) and (c) the payment in full of
all amounts owed under or in respect of all letters of credit issued under the
New Letter of Credit Agreement (other than the IDB Letter of Credit), the
Company may become and remain liable with respect to the Replacement Letter of
Credit Agreement.
Limitation on Liens
Section 410 of the New Junior Subordinated Debenture Indenture (limitation
on liens) imposes the same restrictions as the corresponding covenant in the Old
Junior Subordinated Debenture Indenture except that the New Junior Subordinated
Debenture Indenture also permits the following liens: (a) Liens securing
obligations under the New Letter of Credit Agreement; (b) Liens on cash
collateral in an aggregate amount not exceeding $2,000,000 at any one time
securing letters of credit permitted by Section 406(e); (c) Liens on assets
acquired with the proceeds of Indebtedness permitted under Section 406(c) to
secure the payment of such Indebtedness; (d) if the Company is permitted to
become liable with respect to the Replacement Letter of Credit Agreement, Liens
securing obligations under the Replacement Letter of Credit Agreement; and (e)
Liens which have previously been consented to by the Requisite Holders.
Limitation on Consolidated Capital Expenditures
Section 418 of the New Junior Subordinated Debenture Indenture becomes
operative after the Company has paid in full the principal and interest on the
Senior Securities. This section provides that the Company will not, and will not
permit any of its Subsidiaries to make, in the aggregate, Consolidated Capital
Expenditures other than (a) Consolidated Capital Expenditures in an aggregate
amount not in excess of $4,150,000 used to
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build a 92,000 barrel asphalt tank located in Benicia, California, to expand the
storage capacity of two existing asphalt storage tanks located in Benicia,
California, by a combined amount of approximately 19,000 barrels and to build
two 5,000 barrel polymer asphalt tanks and associated hardware at Benicia,
California in 1996 and 1997, and (b) other Consolidated Capital Expenditures in
an amount not in excess of $1,250,000 during each calendar year. With respect to
the capital expenditure limitations set forth above, the Holders of the New
Junior Subordinated Notes will discuss with the Company any necessary increases
to the permitted level of capital expenditures as a result of presently
unanticipated remedial actions required by regulation or law.
Limitation on Fundamental Changes
Section 419 of the New Junior Subordinated Debenture Indenture generally
imposes the same restrictions of fundamental changes involving the Company and
its Subsidiaries as set forth in the Old Junior Subordinated Debenture Indenture
except that the New Junior Subordinated Debenture Indenture permits the Company
to incorporate or otherwise take actions which will result in the Company being
treated as a corporation for federal income tax purposes on certain terms and
conditions set forth therein.
Supplemental Indentures with Consent of Holders
The provisions in the New Junior Subordinated Debenture Indenture regarding
execution of supplemental indentures are substantially the same as those in the
Old Junior Subordinated Debenture Indenture, except that the provisions in the
Old Junior Subordinated Debenture Indenture regarding amendment of provisions
relating to the application of CDSA to principal and interest on the notes have
been deleted.
Events of Default
The New Junior Subordinated Debenture Indenture provides for substantially
the same events of default as those provided for in the Old Junior Subordinated
Debenture Indenture, except that the New Junior Subordinated Debenture Indenture
provides that the General Partner may transfer its general partner interest in
the Company to a corporation or a limited partnership formed and owned by the
Company's senior management if such transfer will not result in the loss of
limited liability for the Company's limited partners, cause the Company to be
treated as a corporation for federal income tax purposes or cause adverse tax
consequences to the Holders of the New Junior Subordinated Notes.
Remedies
The remedies available to the holders of the New Junior Subordinated Notes
under the Junior Subordinated Debenture Indenture are substantially similar to
those in the Old Junior Subordinated Debenture Indenture.
Summary
The following is a comparison of certain material provisions of the Old
Junior Subordinated Debenture Indenture and corresponding changes (or deletions,
if applicable) in the New Junior Subordinated Debenture Indenture.
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<TABLE>
<CAPTION>
OLD JUNIOR SUBORDINATED NEW JUNIOR SUBORDINATED
DEBENTURE INDENTURE DEBENTURE INDENTURE
----------------------------------------- -----------------------------------------
<S> <C> <C>
1. Original Principal amount: $7,000,000 $2,070,000
plus Secondary Securities
2. Maturity Date: December 31, 2020 December 31, 2005
3. Payment: Interest accrued at 4% per annum Interest accrued at 12% per annum paid
paid through issuance of Secondary through issuance of Common Units until
Securities until payment in full of the payment in full of New Senior Notes.
Senior Securities. Thereafter, principal Thereafter, interest payable in cash
and interest are payable in cash with accruing at 12% per annum.
interest accruing at 12% per annum.
4. Ranking: Indebtedness evidenced by the The New Junior Notes are subordinated to
Old Junior Subordinated Notes is all Senior Indebtedness (as defined in
subordinated to all Senior Indebtedness the New Collateralized Note Indenture).
(as defined in the Old Junior Senior Indebtedness is defined as all
Subordinated Note Indenture). Senior obligations and indebtedness of Huntway
Indebtedness is defined as (i) all under the New Letter of Credit Agreement
unreimbursed drawings with respect to and New Collateralized Note Indenture.
letters of credit issued or amended under
and other amounts accruing under the
Existing Letter of Credit Agreement; and
(ii) principal, interest and other
amounts owing under the Old
Collateralized Note Indenture and Old
Subordinated Note Indenture.
5. Limitation on Indebtedness: Includes authority to incur debt for
certain capital expenditures, unsecured
indebtedness not to exceed $2,000,000,
and renewals of letters of credit;
includes authority to enter into
Replacement Letter of Credit Agreement.
6. Limitations on Liens: Includes (a) limiting liens (i) on cash
collateral not to exceed $2,000,000, (ii)
on assets acquired with proceeds of
Indebtedness to secure payment of such
Indebtedness and (b) authorizing Huntway
to grant liens in connection with certain
replacement letters of credit.
7. Limitation on Consolidated Expenditures: $4,150,000 to make certain improvements
Limits such expenditures to $1,400,000 in and $1,250,000 for other expenditures in
1993, $1,588,000 in 1994 and $1,250,000 each calendar year.
thereafter.
8. Events of Default Permits Huntway to transfer its general
partner interest as long as such
transfer, inter alia, will not result in
an adverse tax consequence for the
holders of Securities.
9. Supplemental Indentures: Eliminates references to CDSA.
</TABLE>
The Existing Guarantees and Existing Intercreditor Agreement
Each of Sunbelt, the General Partner and the Special Managing Partner
executed guarantees of Huntway's obligations under the Old Collateralized Note
Indenture, the Old Subordinated Note Indenture and the Old Letter of Credit
Agreement. To secure their obligations under the guarantees to which they are a
party, the General Partner and the Special Managing Partner pledged their
general partner interests in Huntway.
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The Senior Lenders (or their predecessors in interest) and Bankers Trust,
as issuer of letters of credit under the Old Letter of Credit Agreement and
United States National Trust Company, as Collateral Agent, entered into the
Existing Intercreditor Agreement, pursuant to which such parties agreed to
appoint a collateral agent, provide for the duties and responsibilities therefor
and the applicable priorities in and to the collateral securing their loans to
Huntway and set forth their agreements with respect to the decision making
process with respect to the exercise of remedies under the Old Collateralized
Note Indenture, the Old Subordinated Note Indenture, the Old Letter of Credit
Agreement and the Collateral Documents referred to above. Pursuant to the
Existing Intercreditor Agreement, each of the Senior Lenders agreed not to take
any action whatsoever to enforce any rights against the collateral securing
Huntway's obligations to the Senior Lenders without the support of at least
66 2/3% of the aggregate outstanding principal amount of the Old Priority Notes
and the Old Collateralized Notes. Senior lenders holding in excess of 86% of the
aggregate amount of the Old Collateralized Notes have agreed not to take any
action to enforce any rights against the collateral securing Huntway's
obligations to the Senior Lenders pending confirmation of the Prepackaged Plan.
The Old Priority Notes have been paid in full. The Existing Intercreditor
Agreement provides, among other things, for the priority of obligations owed
under the Old Letter of Credit Agreement over obligations owed under the Old
Collateralized Note Indenture and the Old Junior Subordinated Note Indenture.
The New Guaranties and New Intercreditor Agreement
The Prepackaged Plan provides that each of Sunbelt, the General Partner and
the Special Managing Partner will execute new guaranties of Huntway's
indebtedness under the New Collateralized Note Indenture and the New Letter of
Credit Agreement. To secure their obligations under such new guaranties to which
they are a party, Huntway, Sunbelt, the General Partner and the Special Managing
Partner will modify their existing pledge and security agreements to provide
that these agreements secure such parties' respective obligations under the new
guaranties. These new guaranties, pledges and security agreements will be on
terms and conditions substantially similar to those contained in the existing
guaranties, and pledges and security agreements to which such entities are
party.
The Prepackaged Plan provides that each of Huntway, the holders of New
Senior Notes, Bankers Trust, as letter of credit bank under the New Letter of
Credit Agreement and the Collateral Agent will enter into the New Intercreditor
Agreement. The New Intercreditor Agreement will provide that the collateral
pledged by Huntway, the guaranties by Huntway's affiliates described above and
the collateral securing such guaranties will be applied first to payment of
obligations under the New Letter of Credit Agreement and thereafter to
obligations under the New Collateralized Note Indenture. Pursuant to the New
Intercreditor Agreement, the collateral agent will generally agree to take
instructions from Senior Lenders holding at least 66 2/3% of the aggregate
outstanding principal amount of the New Collateralized Notes. In the event the
New Letter of Credit Agreement is replaced by a Replacement Letter of Credit
facility, the obligations owed by Huntway under such Replacement Letter of
Credit facility will be secured by Huntway's current assets and other assets
constituting collateral that the requisite senior lenders agree shall constitute
collateral for the Replacement Letter of Credit facility. The bank issuing
letters of credit thereunder will have the right to direct the Collateral Agent
to take actions with respect to the collateral securing the Replacement Letter
of Credit facility.
The Old Letter of Credit Agreement and New Letter of Credit Agreement
The Old Letter of Credit Agreement provides for a commitment to issue
letters of credit in an aggregate stated amount not to exceed $17.5 million,
allocated as follows: (a) $1.5 million is available for hedging activities, (b)
$14.5 million is available for the purchase of crude and crude products, and (c)
$1.5 million is available for lease obligations. The commissions are 2% on the
face amount of any outstanding letters of credit issued up to an aggregate of
$14,500,000 and 3% on the face amount of letters of credit outstanding in excess
of $14,500,000.
Pursuant to the Prepackaged Plan, the New Letter of Credit Agreement will
provide for a commitment by Bankers Trust to issue letters of credit (including
letters of credit outstanding on the Effective Date) in an amount not to exceed
$17.5 million. Such commitment will expire on , 1997.
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The Unitholders Agreement
In connection with the Prepackaged Plan, Huntway and the entities receiving
Common Units on account of Class 2 Claims, Class 5 Claims and Class 6 Equity
Interests will enter into a Unitholders Agreement. Under the Unitholders
Agreement, Huntway will agree to issue to Holders of Common Units issued on
account of such Claims and Equity Interests, such amount of Common Units as is
necessary to prevent dilution to the Common Units so issued from time to time by
the issuance of Interest Units to the Junior Lenders as accrued interest on the
New Junior Notes. The Unitholders Agreement also provides that the Unitholders
party thereto shall not sell, transfer, assign or convey any Common Unit or
interest therein for a period of 180 days following the Effective Date.
The Support Agreement
The Junior Lenders, the General Partner, the Special Managing Partner,
Bankers Trust, Mass Mutual, First Plaza and Oppenheimer entered into the Support
Agreement. Pursuant to the Support Agreement, if, on or after the later of (i)
the three-month anniversary of the Effective Date or (ii) January 1, 1997,
holders of a majority of the outstanding principal of New Senior Notes deliver
to the General Partner a written proposal that Huntway convert, merge or
reorganize itself into corporate form, the General Partners agreed to submit a
proposal, in form and substance reasonably satisfactory to the parties to the
Support Agreement, to the record holders of Common Units, for approval of such
conversion, merger or reorganization in accordance with the Second Amended and
Restated Agreement of Limited Partnership and applicable law and regulation. If
such holders of the New Senior Notes so deliver such a written proposal, the
Senior Lenders and Junior Lenders party to the Support Agreement agreed, in
their capacity as Unitholders, and the General Partner and Special Managing
Partner agreed, to support and vote for such proposal; provided that the
Effective Date has occurred.
Under the Support Agreement, the Senior Lenders and Junior Lenders party to
the Support Agreement also agreed, in their capacity as Unitholders, and the
General Partner and Special Managing Partner also agreed, to support and vote
for a proposal as described above (provided that the Effective Date has
occurred), if on or after the later of (i) the three-month anniversary of the
Effective Date or (ii) January 1, 1997, the General Partner submits to the
holders of Common Units such a written proposal.
The Support Agreement also provides that if Huntway converts, merges or
reorganizes itself into corporate form, at the request of any Senior Lender or
Junior Lender party to the Support Agreement, Huntway will, at its own expense,
register the securities received by such Senior Lender or Junior Lender in
connection with such conversion, merger or reorganization.
Huntway anticipates that holders of a majority of the outstanding principal
of New Senior Notes will deliver to the General Partner a written proposal that
Huntway convert, merge or reorganize itself into corporate form in accordance
with the Support Agreement. In such event, Huntway will submit for Unitholder
approval, such written proposal in accordance with the Second Amended and
Restated Agreement of Limited Partnership and applicable law and regulation.
Huntway has no assurances that the Unitholders will approve such proposal.
LIQUIDATION ANALYSIS
General
If the Prepackaged Plan is not confirmed, and the Prepackaged Chapter 11
Case is converted to a case under chapter 7 of the Bankruptcy Code, a trustee
would be elected to liquidate Huntway's assets. The proceeds of the liquidation
would be distributed to the respective holders of Allowed Claims against Huntway
in accordance with the priorities established by the Bankruptcy Code. The
chapter 7 trustee is entitled to a percentage fee for his/her services which is
based upon the total amount of funds disbursed to parties in interest. Pursuant
to section 326 of the Bankruptcy Code, the trustee is entitled to up to a 25%
fee of the first $5,000 disbursed, up to a 10% of the amounts disbursed between
$5,000 and $50,000, up to a 5% of the amount between $50,000 and $1 million, and
reasonable compensation not to exceed 3% of the amount
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<PAGE> 92
disbursed in excess of $1 million. A 3% fee is assumed for this discussion. The
trustee is also authorized to retain professionals to liquidate the chapter 7
estate, including accountants and attorneys.
Under chapter 7, a secured creditor whose Claim is fully secured would be
entitled to full payment, including, without limitation, interest, from the
proceeds of the sale of its collateral. Unless its Claim is nonrecourse, a
secured creditor whose collateral is insufficient to pay its Claim in full would
be entitled to assert an unsecured Claim for its deficiency. Claims entitled to
priority under the Bankruptcy Code would be paid in full before any distribution
to general unsecured creditors, including, without limitation, the chapter 7
trustee's fee and the amounts due to the professionals retained by the chapter 7
trustee. Funds, if any, remaining after payment of secured Claims and priority
Claims would be distributed pro-rata to general unsecured creditors. If
subordination agreements were to be enforced, senior unsecured Claims would be
paid in full before any distribution would be made to subordinated creditors.
Huntway believes that liquidation under chapter 7 would result in a
substantial diminution of the value of the Estate because of (i) additional
administrative expenses involved in the appointment of trustees and attorneys,
accountants and other professionals to assist such trustees; (ii) additional
expenses and Claims, some of which would be entitled to priority, that would
arise by reason of the liquidation and from the rejection of leases and other
executory contracts in connection with a cessation of Huntway's operations; and
(iii) failure to realize the greater going-concern value of Huntway's assets.
The Liquidation Analysis
Huntway's management prepared the following chapter 7 liquidation analysis
("Liquidation Analysis") to assist holders of Claims and Equity Interests to
reach their determination as to whether to accept or reject the Prepackaged
Plan. The Liquidation Analysis indicates the estimated values which may be
obtained by classes of Claims and classes of Equity Interests if Huntway's
assets are sold, pursuant to a chapter 7 liquidation, as an alternative to the
continued operation of Huntway's businesses. The Liquidation Analysis set forth
below (the "Liquidation Analysis") is provided solely to disclose the effects of
a hypothetical liquidation of Huntway under chapter 7 of the Bankruptcy Code,
subject to the assumptions set forth below.
The Liquidation Analysis is based upon Huntway's unaudited balance sheet as
of March 31, 1996 and the property, plant and equipment liquidation analysis was
prepared by Purvin & Gertz, Inc., an internationally known refinery appraiser.
The liquidation values for the refineries were determined by using the
comparable sales method, comparing the value of Huntway's refineries in an idle
mode with sales of other refineries sold in an idle mode in California in 1992
and 1994. Huntway is not aware of any events subsequent to such date which would
materially impact the Liquidation Analysis. Ultimately, to the extent that
confirmation of the Prepackaged Plan requires the establishment of amounts in
such a liquidation under chapter 7, for the value of Huntway, funds available to
pay claims, and the value of notes and Common Units to be distributed under the
Prepackaged Plan, the Bankruptcy Court will rule on those matters. Section
1129(a)(7)(A)(ii) of the Bankruptcy Code states that the Bankruptcy Court shall
confirm a plan of reorganization only if certain requirements are met, including
a requirement that each Holder of an Impaired Claim or Equity Interest receive
or retain at least the amount of value such Holder would receive if Huntway were
liquidated under chapter 7 of the Bankruptcy Code.
Huntway believes, based on the assumptions set forth herein, that the value
of the distributions to the members of each Class of Impaired Claims and Equity
Interests under the Prepackaged Plan will be greater than the distribution such
Creditors and Equity Holders would receive in a liquidation under chapter 7. The
Liquidation Analysis was materially completed on or about May 10, 1996. Huntway
is not aware of any events subsequent to such date which would materially impact
such Liquidation Analysis although Huntway has updated the Liquidation Analysis
to June 30, 1996 to reflect changes in levels of cash, accounts receivable,
inventory and other assets. All capitalized terms not defined in the Liquidation
Analysis have the same meaning ascribed to them in the Consent Solicitation
Statement.
Based on the assumptions set forth therein, the Liquidation Analysis
estimates that the liquidation of Huntway's assets would result in proceeds of
$17,530,122 in the aggregate (consisting of $2,735,151 in cash,
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$5,471,301 on account of the liquidation of accounts receivable, $6,325,586 on
account of the liquidation of inventory, $2,700,000 on account of the
liquidation of property, plant and equipment, $223,164 on account of the
liquidation of miscellaneous other assets of Huntway and $75,000 of interest
income accrued during the liquidation process). The liquidation analysis also
estimates that the costs associated with a chapter 7 liquidation of Huntway's
assets would be approximately $7,423,655 (consisting of $6,000,000 incurred as
operating costs in connection with the cessation of business, $523,655 in fees
to a chapter 7 trustee and $900,000 in fees and expenses to such trustee's
professionals). Under the absolute priority rule described above, after payment
of these costs, which would be afforded administrative expense priority,
$10,106,527 in proceeds would be available to the creditors of Huntway.
Huntway's senior secured lenders, the holders of claims in excess of $86 million
with a priority senior to all other claims, would be entitled to the remaining
proceeds, and no distribution would be available to any other creditors
(including the Old Junior Subordinated Debt) or any equity security holders
(including the Common Units, Warrants or Unit Options).
76
<PAGE> 94
STATEMENT OF ASSETS AND LIQUIDATION PROCEEDS (NOTE 1):
JUNE 30, 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ESTIMATED
BOOK VALUE AS OF ESTIMATED LIQUIDATION
NOTE MARCH 31, 1996 RECOVERY VALUE
REFERENCE (UNAUDITED) NEAREST % (UNAUDITED)
--------- ---------------- --------- -----------
<S> <C> <C> <C> <C>
Cash.......................................... $ 2,735,131 100% $ 2,735,131
Accounts Receivable........................... 2 6,079,223 90% 5,471,301
Inventories (adding back LIFO Reserve of
$1,822,888)................................. 3 7,809,366 81% 6,325,586
Prepaid Expenses.............................. 4 929,105 0% --
Property, Plant and Equipment, Net
(including assets held for disposition)..... 5 59,279,392 5% 2,700,000
Other Assets.................................. 6 1,078,229 21% 223,164
Goodwill...................................... 7 1,787,184 0% --
------------ ------------
Total Assets............................. $ 79,697,630 22% 17,455,182
============
Other Proceeds -- Interest Income............. 8 75,000
Less Costs Associated with Liquidation:....... 9
Going Out of Business ("GOB") Operating
Costs.................................... (6,000,000)
Trustee Fee................................. 523,655
Chapter 7 Professional Fees................. (900,000)
------------
Net Estimated Liquidation Proceeds Available
for Distribution............................ $10,106,527
============
</TABLE>
The accompanying notes are an integral part of this Liquidation Analysis
77
<PAGE> 95
Calculation of Net Proceeds Available to Holders of Claims under Prepackaged
Plan and in a Liquidation Under a Hypothetical Chapter 7
<TABLE>
<S> <C>
Gross Proceeds from Liquidation................................................ $15,917,273
Other Cash Available for Distribution.......................................... $ 75,000
Gross Value for Distribution................................................... $15,992,273
</TABLE>
<TABLE>
<CAPTION>
PREPACKAGED PLAN CHAPTER 7 LIQUIDATION
------------------------------------------------- ------------------------
CLAIM % %
AMOUNTS DISTRIBUTION RECOVERY DISTRIBUTION RECOVERY
----------- ----------------------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Less: Administrative Expenses..... 100,000 ( ) 100.00 (7,423,655) 100.00
Less: Class 2 Senior Lender
Claims.......................... $92,753,448 $23,500,000 25.34* (10,106,527) 10.90
plus new Common Units
representing 25% of
Common Units
Outstanding as of
Effective Date
Less: Other Priority Tax Claims... 800,000 (612,179) 100.00 0.00 0.00
Less: Class 1 Priority Claims..... 313,575 (313,575) 100.00 0.00 0.00
Less: Class 3 Other Secured
Claims.......................... 74,800 (74,800) 100.00 0.00 0.00
Less: Class 4 Unsecured Claims.... 2,308,344 2,308,344 100.00 0.00 0.00
Less: Class 5 Old Junior
Subordinated Notes.............. 7,816,552 $2,070,000 plus new 26.48* 0.00 0.00
Common Units
representing 4.4% of
Common Units
outstanding as of
Effective Date
Less: Class 6 Equity Interests --
Warrants........................ -- New Common Units --* 0.00 0.00
representing 25% of
Common Units
outstanding as of
Effective Date
Less: Class 7 Equity Interests --
Common Units.................... -- Retain Common Units on ** 0.00 0.00
diluted basis
Less: Class 8 Equity Interests --
Unit Options.................... -- A like number of new ** 0.00 0.00
Unit Options with a
reduced exercise price
Less: Class 9 Equity Interests --
Danesh Options.................. -- Retain options on a ** 0.00 0.00
diluted basis
Less: Class 10 Equity Interests --
General Partner Interests....... -- Retain interests ** 0.00 0.00
</TABLE>
- ------------------
* Does not take into account value of new Common Units issued to Holders on the
Effective Date, which is not determinable.
** The value of such retained interest is not determinable.
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<PAGE> 96
NOTES TO CHAPTER 7 LIQUIDATION ANALYSIS
Note 1 -- Major Assumptions
Section 1129(a)(7)(A)(ii) of the Bankruptcy Code states that the Bankruptcy
Court shall confirm a plan of reorganization only if certain requirements are
met. One of these requirements is that each Holder of an Impaired Claim or
Equity Interest must receive or retain at least the amount of value such Holder
would receive if Huntway were liquidated under chapter 7 of the Bankruptcy Code.
The following presents the assumptions utilized in preparing the
Liquidation Analysis, assuming a chapter 7 liquidation in which a court
appointed trustee would liquidate the assets of Huntway's Estate.
Underlying the Liquidation Analysis are a number of estimates and
assumptions that are inherently subject to significant economic and competitive
uncertainties and contingencies beyond the control of Huntway and its
management. The Liquidation Analysis is also based upon assumptions with regard
to liquidation decisions that are subject to change. As such, the Liquidation
Analysis is speculative in nature. Accordingly, there can be no assurance that
the values reflected in the Liquidation Analysis would be realized if Huntway
was, in fact, to undergo such a liquidation. Actual results could materially
vary from those contained herein.
(a) The Liquidation Analysis reflects estimates of the proceeds Huntway
would receive if it was liquidated in accordance with chapter 7 of the
Bankruptcy Code. The Liquidation Analysis is based on Huntway's
unaudited consolidated balance sheet as of June 30, 1996. Huntway
continues to operate its businesses and, accordingly, events occur
which could impact the recovery proceeds and Claims to be satisfied. As
a result, this Liquidation Analysis is subject to change dependent upon
these factors.
(b) The chapter 7 liquidation period is assumed to be nine months following
the discontinuance of operations ("Liquidation Period"). This would
allow for the collection of receivables, selling of assets, and the
winding down of daily operations. The estimated liquidation proceeds
are applied to Creditors' Claims pursuant to sections 724(b) and 726(a)
of the Bankruptcy Code. For purposes of this Liquidation Analysis, the
Liquidation Period is assumed to begin June 30, 1996. Huntway is not
aware of any events subsequent to June 30, 1996 which would materially
impact the Liquidation Analysis were the Liquidation Period to begin on
a later date.
(c) The Liquidation Analysis is based on analyses performed by Huntway's
management and personnel, review of appraisals and other relevant
information.
Note 2 -- Accounts Receivable
Accounts receivable consists primarily of sales to customers of liquid
asphalt and other light-end products such as naphtha, kerosene distillate and
gas oil as well as other miscellaneous receivables. The recovery of accounts
receivable is based on Huntway's estimate of collection given such factors as
the aging and historical collection patterns of the receivables, the time and
effort necessary to make inquiries, and the research and rebill of disputed
items to resolve the accounts. Generally, it is anticipated that the recovery of
receivables will be successful in line with experience generally prevalent in
the petroleum and refinery industries.
The estimated recovery represents estimated gross proceeds. Personnel and
other expenses to collect the accounts receivable are reflected in "Costs
Associated with Liquidation" (see Note 9 below).
Note 3 -- Inventories
The Liquidation Analysis assumes that Huntway will dispose of asphalt and
light-end inventory by refining all crude on hand to finished liquid asphalt and
other light-end products. The estimated recovery shown is based on internal
estimates of management and represents gross proceeds. Costs that will be
incurred during this liquidation sale are reflected in "Costs Associated with
Liquidation" (See note 9 below).
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<PAGE> 97
Huntway believes that inventory (both crude and finished product) would
retain a relatively high value in a liquidation as such products can normally be
sold relatively quickly albeit at prices slightly below market. Some portion of
the barrel (from 5% to 10%), known as the heel or bottom of the barrel, retains
a lower value as historically it can be of lower quality and is difficult to
capture. Accordingly, an estimated recovery value of 81% was considered
reasonable.
Note 4 -- Prepaid Expenses
Prepaid expenses consist primarily of prepaid insurance, prepaid repair and
maintenance (called turnaround costs) and other prepaid expenses including
prepaid sports tickets, prepaid Los Angeles city taxes and prepaid dues to
industry organizations.
Note 5 -- Property, Plant and Equipment
Property, plant and equipment includes owned refinery equipment, buildings,
land, licenses and permits, vehicles, computer equipment and furniture, fixtures
and equipment and leasehold improvements.
Property, plant and equipment is assumed sold under liquidation and
accordingly, not sold as a going concern. Property, plant and equipment
liquidation value of $2,700,000 is allocated $1,500,000 to the Benicia facility,
$700,000 to the Sunbelt facility and $500,000 to the Wilmington facility. The
net book value of the property, plant and equipment at such facilities as of
June 30, 1996 was $39,325,547 (Benicia), $1,167,692 (Sunbelt), $18,606,568
(Wilmington).
The liquidation value of $2,700,000 (of 5% of property, plant and
equipment) was established based on the expertise of Purvin & Gertz, Inc. an
internationally recognized expert in the valuation of refineries. The estimate
of liquidation value was primarily based on a comparable sales analysis of
similarly configured refineries in California based on a historical analysis of
sales over the past five years. Excess capacity exists in the asphalt business;
accordingly, it was determined that the refineries would be sold idle in a
liquidation. Accordingly, based on historical precedent and Purvin & Gertz'
opinion, a very small liquidation value would be obtained on the sale of the
idle Wilmington and Benicia refineries.
Note 6 -- Other Assets
Other assets at June 30, 1996 are recorded at a net book value of
$1,078,229 and consist of the following:
<TABLE>
<CAPTION>
RECOVERY
BOOK VALUE AT NEAREST ESTIMATED LIQUIDATION
JUNE 30, 1996 % VALUE
-------------- -------- ---------------------
<S> <C> <C> <C>
Computer Software.................................... $ 108,162 0% 0
Deposits and Other Intangible Assets................. 881,477 21% 185,793
Manuals and Plans.................................... 17,219 0% 0
Other Receivables.................................... 71,371 0% 37,371
---------- ---------
$1,078,229 $ 223,164
========== =========
</TABLE>
The $185,793 is estimated liquidation value related to anticipated receipts
of certain deposits.
Note 7 -- Goodwill
Goodwill of $1,787,184 relates to the California refineries and is assumed
to have no estimated liquidation value.
Note 8 -- Interest Income
It is assumed that approximately $75,000 in interest income will be earned
during the nine-month liquidation period.
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<PAGE> 98
Note 9 -- Cost Associated with Liquidation
"Going Out of Business Operating Costs" assumes cash processing costs (60%
of the total) through the nine month liquidation period and selling, general and
administrative expenses (40% of the total) including payroll and operating costs
associated with various administrative functions, payroll costs associated with
terminating all employees, including employee retention bonuses, vacation and
payroll taxes.
Payroll and operating costs during the liquidation period are based on the
assumption that certain administrative functions will continue until duties are
completed. Other functions will be either eliminated or substantially downsized
inherently upon commencement of the liquidation period.
The "chapter 7 professional fees" estimates all professional fees to be
incurred through liquidation. As stated, the chapter 7 trustee's statutory fee
is assumed at 3% of total disbursements.
CONFIRMATION OF THE PREPACKAGED PLAN
Described below are certain considerations under the Bankruptcy Code which
will be evaluated by the Bankruptcy Court in connection with confirmation of the
Prepackaged Plan.
Requirements for the Confirmation of the Plan
If sufficient acceptances of the Prepackaged Plan are received, Huntway
will request that the Bankruptcy Court hold a confirmation hearing as soon as
practicable, upon such notice to parties-in-interest as is required by the
Bankruptcy Code and the Bankruptcy Court. Parties-in-interest, including all
Holders of Impaired Claims and Equity Interests, will receive notice of the date
and time fixed by the Bankruptcy Court for the confirmation hearing. The
Bankruptcy Court will also establish procedures for the filing and service of
objections to confirmation of the Prepackaged Plan.
Huntway expects to request that the Bankruptcy Court authorize Huntway (i)
pursuant to the applicable rules of the Federal Rules of Bankruptcy Procedure,
to give no less than 25 days' notice by mail of the time for filing objections
to confirmation of the Prepackaged Plan and the time and place of the
confirmation hearing; (ii) at the sole option of Huntway or as otherwise ordered
by the Bankruptcy Court, to publish such notice at least once in a national
publication such as The Wall Street Journal; and (iii) to require that all
objections to the confirmation of the Prepackaged Plan be served on counsel to
Huntway no later than five (5) Business Days prior to the date of the
confirmation hearing, within the time period and in such a manner as required by
the Bankruptcy Court.
For the Prepackaged Plan to be confirmed, the Bankruptcy Code requires that
the Bankruptcy Court determine that the Prepackaged Plan complies with the
requirements of Section 1129 of the Bankruptcy Code. The Bankruptcy Code
requires for confirmation, among other things, that (i) the Prepackaged Plan be
accepted by the requisite votes of impaired Creditors and Equity Holders, except
to the extent that confirmation despite dissent is available under Section
1129(b) of the Bankruptcy Code; (ii) the Prepackaged Plan be feasible (that is,
confirmation of the Prepackaged Plan is not likely to be followed by
liquidation, or the need for further reorganization of Huntway) (see
"Feasibility of the Plan"); (iii) the Prepackaged Plan meet the requirements of
subsection 1129(a)(7) of the Bankruptcy Code, which requires that with respect
to each Impaired Class, each Holder of a Claim or Equity Interest either (a)
accepts the Prepackaged Plan or (b) receives or retains at least as much
pursuant to the Prepackaged Plan as such Holder would receive in a liquidation
of Huntway under chapter 7 of the Bankruptcy Code (see "Best Interests Test");
and (iv) that Huntway and the Prepackaged Plan are otherwise in compliance with
applicable provisions of the Bankruptcy Code. See "Risk Factors." Although
Huntway believes that the Prepackaged Plan will meet all such tests, as well as
the other requirements of Section 1129, there can be no assurance that the
Bankruptcy Court will reach the same conclusion.
Additionally, the Federal Rules of Bankruptcy Procedure require the
Bankruptcy Court to determine whether an unreasonably short period of time was
provided to the Holders of Claims and Equity Interests to consider the
Disclosure Statement and Prepackaged Plan before voting to accept or reject the
Prepackaged Plan. Under Rule 3018(b) of the Federal Rules of Bankruptcy
Procedure, if the Bankruptcy Court finds that
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<PAGE> 99
an unreasonably short time period was prescribed for creditors and equity
security holders to accept or reject the Prepackaged Plan or that the
Prepackaged Plan was not transmitted to substantially all of Huntway's creditors
and equity security holders of the same class, a Holder of a Claim or Equity
Interest who has accepted or rejected the Prepackaged Plan before the
commencement of the Prepackaged Chapter 11 Case shall not be deemed to have
accepted or rejected the Prepackaged Plan.
Acceptances
Classes 2, 5, 6, 7, 8 and 10 are impaired under the Prepackaged Plan and,
therefore, must accept the Prepackaged Plan in order for it to be confirmed
without application of Section 1129(b) of the Bankruptcy Code. The requirements
for acceptance of these Classes are as described above. See "Summary of
Prepackaged Plan."
Feasibility of the Plan
The Bankruptcy Code requires that in order for the Prepackaged Plan to be
confirmed by the Bankruptcy Court, it must be demonstrated that confirmation of
the Prepackaged Plan is not likely to be followed by the liquidation or the need
for further financial reorganization of Huntway. Huntway has analyzed its
ability to meet its obligations under the Prepackaged Plan and believes that it
will be able to perform its obligations under the Prepackaged Plan and continue
to operate its businesses without the need for further financial
reorganizations. As part of its analysis, Huntway has prepared financial
projections of, among other things, its financial performance (assuming the
transactions contemplated by the Prepackaged Plan are consummated) for the
3-year period ending fiscal 2000. These projections are set forth in Appendix D
hereto. The significant assumptions on which they are based include (i)
increased public and private sector product sales resulting from continued
improvement in the California market, (ii) continuation of the trend toward
higher quality, higher margin products such as polymer-modified asphalt, (iii)
growth in higher margin sales to Mexican customers resulting from NAFTA, (iv)
cash processing costs will not increase beyond the rate of inflation. See
"PROJECTED FINANCIAL INFORMATION" in Appendix D.
Huntway has prepared the financial projections on the basis of certain
assumptions which Huntway believes to be reasonable in the circumstances.
However, the assumptions, on which these projections are based are subject to
significant uncertainties which are beyond Huntway's control and, inevitably,
some assumptions may not materialize and unanticipated events and circumstances
beyond Huntway's control may affect the actual financial results.
ACCORDINGLY, HUNTWAY MAKES NO REPRESENTATION AS TO THE ACCURACY OF THE
PROJECTIONS OR ITS ABILITY TO ACHIEVE PROJECTED RESULTS. THE ACTUAL RESULTS
ACHIEVED MAY VARY FROM THE PROJECTED RESULTS AND THE VARIATIONS MAY BE MATERIAL.
IT IS URGED THAT ALL OF THE ASSUMPTIONS AND OTHER CAVEATS REGARDING THE
PROJECTIONS SET FORTH IN THIS CONSENT SOLICITATION STATEMENT BE EXAMINED
CAREFULLY IN EVALUATING THE PREPACKAGED PLAN.
Huntway has forecast a positive net worth and cash flow through and
including December 31, 2000. The forecasts were prepared in connection with the
Prepackaged Plan and supports the feasibility of the Prepackaged Plan (subject
to the limitations and conditions set forth in the narrative). See "Financial
Projections."
Best Interests Test
Even if the Prepackaged Plan is accepted by each Class of Impaired
Creditors and Equity Holders, confirmation of the Prepackaged Plan requires that
each Impaired Creditor and Equity Holder either (a) accepts the Prepackaged Plan
or (b) receives or retains under the Prepackaged Plan property of a value, as of
the Effective Date of the Prepackaged Plan, that is not less than the value such
entity would receive or retain if Huntway were liquidated under chapter 7 of the
Bankruptcy Code.
82
<PAGE> 100
To determine the value that Impaired Creditors and Equity Holders would
receive if Huntway were liquidated, the Bankruptcy Court must determine the
dollar amount that would be generated from the liquidation of Huntway's assets
and properties in the context of a chapter 7 liquidation case. The cash amount
which would be available for satisfaction of Administrative Expenses, Priority
Tax Claims, other Claims and Equity Interests in Huntway would consist of the
proceeds resulting from the disposition of the assets of Huntway, augmented by
the Cash held by Huntway at the time of the commencement of the chapter 7 case.
Any such Cash amount then would be reduced by the amount of any Senior Lender
Claims and the Other Secured Claims to the extent of the value of their
respective collateral, the costs and expenses of the liquidation (including
without limitation, taxes arising therefrom), and such additional Administrative
Expenses, Priority Tax Claims and other Claims that may result from the
termination of Huntway's business and the use of chapter 7 for the purposes of
liquidation.
Huntway's costs of liquidation under chapter 7 would include the fees
payable to a trustee in bankruptcy, as well as those which might be payable to
attorneys and other professionals that such a trustee may engage, plus any
unpaid expenses incurred by Huntway during a chapter 11 case and Allowed in the
chapter 7 case, such as compensation for attorneys, financial advisors,
appraisers, accountants and other professionals, and costs and expenses of
members of any Official Committee and any other such appointed committee. In
addition, Claims would arise by reason of the breach or rejection of obligations
incurred and executory contracts entered into by Huntway during the pendency of
a chapter 11 case.
The foregoing types of claims, costs, expenses and fees and such other
claims which may arise in a liquidation case or result from a pending chapter 11
case would be paid in full from the liquidation proceeds before the balance of
those proceeds would be made available to pay Other Priority Claims and
Unsecured Claims arising prior to the Prepackaged Chapter 11 Case.
To determine if the Prepackaged Plan is in the best interests of each
Impaired Creditor and Equity Holder, the present value of the distributions from
the proceeds of the liquidation of Huntway's assets and properties, after
subtracting the amounts attributable to the foregoing Claims, are then compared
with the value of the property offered to such Impaired Creditors and Equity
Holders under the Prepackaged Plan.
In applying the "best interests test," it is possible that Claims and
Equity Interests in a chapter 7 case may not be classified according to the
seniority of such Claims and Equity Interests as provided in the Prepackaged
Plan. In the absence of a contrary determination by the Bankruptcy Court, all
prepetition Unsecured Claims would be treated as one Class for purposes of
determining the potential distribution of the liquidation proceeds resulting
from Huntway's chapter 7 case. The distributions from the liquidation proceeds
would be calculated ratably according to the amount of the Claim held by each
Creditor in the same Class. Therefore, Creditors who claim to be third-party
beneficiaries of any contractual subordination provisions might be required to
seek to enforce such contractual subordination provisions in the Bankruptcy
Court or otherwise. Section 510 of the Bankruptcy Code specifies that such
contractual subordination provisions are enforceable in a chapter 7 liquidation
case. Huntway believes that the most likely outcome of liquidation proceedings
under chapter 7 would be the application of the rule of absolute priority of
distributions. Under that rule, no junior Creditor receives any distribution
until all senior Creditors are paid the full amount of their Allowed Claims and
no Equity Holder receives any distribution until all Creditors are paid the full
amount of their Allowed Claims (which would likely mean no distribution to the
Equity Holders).
After consideration of the effects that a chapter 7 liquidation would have
on the ultimate proceeds available for distribution to Creditors and Holders of
Equity Interests, including (i) the increased costs and expenses of a
liquidation under a chapter 7 case arising from fees payable to a trustee in
bankruptcy and professional advisors to such trustee, (ii) the potential failure
to realize the full going concern value of Huntway's assets and the probable
erosion in value of assets in a chapter 7 case due to the expeditious
liquidation that would likely occur under chapter 7 and the "forced sale"
atmosphere that would likely prevail, and (iii) the additional expenses and
Claims, some of which would be entitled to priority, which would be generated
during the liquidation and from the rejection of leases and other executory
contracts in connection with a cessation of Huntway's operations, Huntway has
determined that confirmation of the Prepackaged Plan will provide each Creditor
and Equity Holder with a recovery that is greater than it would receive pursuant
to
83
<PAGE> 101
liquidation of Huntway under chapter 7 of the Bankruptcy Code. For a comparison
of treatment under the Prepackaged Plan to a chapter 7 liquidation, see
"Liquidation Analysis." Consequently, Huntway has determined that confirmation
of the Prepackaged Plan, rather than chapter 7 liquidation, is in the "best
interests" of Holders of Claims and Equity Interests.
Moreover, Huntway believes that the value of any distributions in a chapter
7 case would be less than the value of distributions under the Prepackaged Plan
because such distributions in a chapter 7 case may not occur for a substantial
period of time thereby reducing the present value of such distributions. In this
regard, it is possible that distribution of the proceeds of the liquidation
could be delayed for a year or more after the completion of such liquidation in
order to resolve the Claims and prepare for distributions. In the event
litigation were necessary to resolve Claims asserted in the chapter 7 case, the
delay could be further prolonged and assets available for distribution could be
substantially reduced. See "Liquidation Analysis."
Based on the assumptions set forth in the Liquidation Analysis, Huntway
believes that confirmation of the Prepackaged Plan would result in distributions
to Holders of Claims and Equity Interests with a value in excess of
distributions to such Holders upon the application of the rule of absolute
priority of distributions in a chapter 7 liquidation (as described above).
Under the Prepackaged Plan, Holders of Class 1 Claims, Class 3 Claims and
Class 5 Claims are unimpaired and would be paid in full in accordance with the
terms of their Claims. The Liquidation Analysis set forth above estimates that
Holders of Claims in these Classes would receive no distributions on account of
their claims after application of gross liquidation proceeds (estimated at
$17,530,182) to Administrative Expenses ($7,423,655) and to Class 2 Claims
($10,106,527) in a chapter 7 liquidation.
Holders of Class 2 Claims will receive New Senior Notes in the aggregate
principal amount of $23,500,000, together with Common Units equal to 25% of
Huntway's equity securities issued and outstanding on the Effective Date,
pursuant to the Prepackaged Plan. Without giving any value to the Common Units
so issued to the Holders, such distribution represents an approximate 27.8%
recovery. In the chapter 7 liquidation scenario, such Holders would receive an
estimated $10,106,527 in cash upon the ultimate distribution of liquidation
proceeds -- an approximate 9.77% recovery.
In addition, the Prepackaged Plan provides for Holders of Class 5 Claims,
Class 6 Equity Interests, Class 7 Equity Interests, Class 8 Equity Interests,
Class 9 Equity Interests and Class 10 Equity Interests each to receive and/or
retain property in the form of New Junior Notes or equity in Reorganized
Huntway. Although the precise value of such property is not currently
ascertainable, it is equal to or exceeds the value of property Holders of Claims
and Equity Interests in such Classes are estimated by Huntway to receive in a
chapter 7 liquidation, because as set forth in the Liquidation Analysis, such
Holders would not receive any distribution of property in the chapter 7
liquidation scenario.
SUMMARY OF OTHER PROVISIONS OF THE PLAN AND RELATED MATTERS
Waiver of Subordination
The distributions under the Prepackaged Plan take into account the relative
priority of the Claims in each Class in connection with any contractual
subordination provisions relating thereto. Accordingly, all distributions under
the Prepackaged Plan (including the distributions to the Holders of Class 5
Claims) will not be subject to levy, garnishment, attachment or other legal
process by reason of claimed contractual subordination rights (including rights
arising under the Old Indentures and the Existing Intercreditor Agreement). On
the Effective Date, all Creditors will be deemed to have waived any and all
contractual subordination rights under which they may have had under the terms
of the Old Subordinated Note Indenture, the Old Junior Subordinated Debenture
Indenture and the Existing Intercreditor Agreement with respect to such
distribution, and the Confirmation Order will permanently enjoin, effective as
of the Effective Date, all Holders of Senior Indebtedness (as defined in each of
the Old Collateralized Note Indenture and the Old Subordinated Note Indenture,
from enforcing or attempting to enforce any such rights which existed prior to
the entry of the Confirmation Order under the terms of the Old Subordinated Note
Indenture, the Old Junior Subordinated Debenture Indenture) and the Existing
Intercreditor Agreement against any party with respect to distributions
84
<PAGE> 102
under the Prepackaged Plan. Notwithstanding anything else herein, the
subordination provisions of the New Junior Subordinated Debenture Indenture will
be fully enforceable and nothing in the Prepackaged Plan or herein shall effect
the enforceability thereof.
Amendment to Amended and Restated Partnership Agreement
The Partnership Agreement will be amended as of the Effective Date by an
amendment to the Partnership Agreement to provide that (i) the members of the
Operating Committee will at all times be satisfactory to the Senior Lenders (so
long as the Senior Lenders hold at least 25% of the outstanding Common Units),
provided that the current members of the Operating Committee will be deemed
satisfactory to the Senior Lenders, and (ii) Huntway will be prohibited from
issuing non-voting Units, to any extent required under Section 1123(a)(6) of the
Bankruptcy Code. Additional amendments to the Partnership Agreement are intended
to clarify certain ambiguities pertaining to the tax treatment of the
transactions contemplated by the Prepackaged Plan by explicitly setting forth
the manner in which Huntway will make certain allocations of income and loss
arising from such transactions. In general, Huntway believes that the
allocations required by the amendments would result even without such proposed
amendments. For a detailed discussion of these tax considerations, see "Certain
Federal Income Tax Considerations" below. The amendment to Huntway's Partnership
Agreement as proposed pursuant to the Prepackaged Plan is set forth in its
entirety in Appendix E.
Disputed Claims
Unless otherwise ordered by the Bankruptcy Court, Huntway shall have the
sole and exclusive right to object to the allowance of any Claim or interest
asserted against Huntway on or before 60 days after the Effective Date.
Management
On the Effective Date, management of Reorganized Huntway will be the
responsibility of the General Partner and the Operating Committee, which
thereafter shall have the responsibility for the management, control and
operation of Reorganized Huntway in accordance with the Second Amended and
Restated Agreement of Limited Partnership. On the Effective Date, the members of
the Operating Committee shall be: Juan Y. Forster, Justin S. Huscher, Samuel M.
Mencoff and Raymond M. O'Keefe. On the Effective Date, the initial officers of
Reorganized Huntway shall consist of the individuals who are current officers of
Huntway as of the Petition Date. All such officers shall be deemed elected
pursuant to the Confirmation Order.
Surrender and Cancellation of Instruments
On the Effective Date (i) the Old Collateralized Notes, the Old
Subordinated Notes and the Old Junior Subordinated Notes shall be canceled and
(ii) the obligations of Huntway under the Old Collateralized Note Indenture, the
Old Subordinated Note Indenture and the Old Junior Subordinated Debenture
Indenture shall be discharged except to the extent provided in the New
Indentures. The Old Collateralized Note Indenture and the Old Junior
Subordinated Debenture Indenture shall be amended, restated or superseded on the
Effective Date. The Old Subordinated Note Indenture shall be terminated on the
Effective Date.
Unclaimed Distributions
Except as otherwise provided in the Prepackaged Plan, any distribution of
property under the Prepackaged Plan which is unclaimed after five (5) years
following the Effective Date shall be forfeited and transferred to Reorganized
Huntway together with all interest earned thereon and shall be the property of
Reorganized Huntway.
Modification of the Prepackaged Plan
Subject to any consent required under the Consensual Restructuring
Agreement, Huntway reserves the right, in accordance with the Bankruptcy Code,
to amend or modify the Prepackaged Plan prior to the entry of
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the Confirmation Order. After the entry of the Confirmation Order, Huntway or
Reorganized Huntway, as the case may be, may upon order of the Bankruptcy Court,
amend or modify the Prepackaged Plan in accordance with Section 1127(b) of the
Bankruptcy Code, or remedy any defect or omission or reconcile any inconsistency
in the Prepackaged Plan in such manner as may be necessary to carry out the
purpose and intent of the Prepackaged Plan.
Withdrawal of the Plan
Subject to any consent required under the Consensual Restructuring
Agreement, Huntway reserves the right, at any time prior to the entry of the
Confirmation Order, to revoke and withdraw the Prepackaged Plan. If Huntway
revokes or withdraws the Prepackaged Plan, or if entry of the Confirmation Order
does not occur, then, at the option of Huntway, the Prepackaged Plan shall be
deemed null and void. In that event, nothing contained in the Prepackaged Plan
shall be deemed to constitute a waiver or release of any Claims by or against
Huntway or any other person, or to prejudice in any manner the rights of Huntway
or any other person in any further proceedings involving Huntway.
Consummation and Effectiveness
The Prepackaged Plan will be consummated on the Effective Date or as soon
thereafter as is practicable. The Effective Date of the Prepackaged Plan will be
selected by Huntway, and will be no later than 30 Business Days after the date
on which the conditions specified in the Prepackaged Plan have been satisfied or
waived. Confirmation of the Prepackaged Plan is conditioned upon (i) the
Confirmation Order having approved in all respects all of the provisions, terms
and conditions of the Prepackaged Plan and (ii) the Confirmation Order being in
form and substance satisfactory to Huntway. Consummation of the Prepackaged Plan
is conditioned upon (i) the Confirmation Order having become a Final Order and
(ii) the acceptance, execution and effectiveness of the Post-Restructuring
Credit Agreement by all necessary parties. Huntway (with the consent of the
Holders of two-thirds of the Senior Lender Claims) may waive any of the
conditions to effectiveness of the Prepackaged Plan and/or to Consummation
thereof (other than entry of the Confirmation Order) at any time, without
notice, without leave or order of the Bankruptcy Court, and without any formal
action other than proceeding to confirm and/or consummate the Prepackaged Plan.
EFFECTS OF CONFIRMATION
Discharge
The rights afforded in the Prepackaged Plan and the treatment of all Claims
and Equity Interests therein shall be in exchange for and in complete
satisfaction, discharge, and release of Claims and Equity Interests of any
nature whatsoever, including any interest accrued on such Claims from and after
the Petition Date, against the Estate, Huntway or any of its assets or
properties. Except as otherwise provided in the Prepackaged Plan and related
agreements: (i) the Prepackaged Plan shall bind all Holders of Claims and Equity
Interests, whether or not they have accepted the Prepackaged Plan, (ii) on the
Effective Date, all such Claims against, and the Equity Interests in, Huntway
shall be satisfied, discharged, and released in full, and Huntway's liability in
respect thereof shall be replaced by the liabilities and obligations created
under the Prepackaged Plan and related agreements, including, without
limitation, any liability of a kind specified under Section 502(g) of the
Bankruptcy Code, and (iii) all persons shall be precluded from asserting against
reorganized Huntway, its successors, or its assets or properties any other or
further Claims or Equity Interests based upon documents, instruments or any act
or omission, transaction, or other activity of any kind or nature that occurred
prior to the Confirmation Date.
Huntway Incentive Option Plan
The Prepackaged Plan provides that consummation of the Prepackaged Plan
constitutes the requisite Unitholder approval of the Huntway Incentive Option
Plan and the issuance to management personnel of Unit Options to purchase up to
4,000,000 Common Units, including (1) 1,022,000 Unit Options issued to Holders
of Class 8 Equity Interests, (2) 1,793,850 additional Unit Options to be issued
on the Effective Date to
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members of Huntway's management, and (3) such additional Unit Options to be
issued from time to time as are necessary to prevent dilution to the Holders of
Unit Options caused by the issuance from time to time of Common Units as accrued
interest on the New Junior Notes and the issuance of Common Units to Holders of
Class 2 Claims and Class 6 Equity Interests as anti-dilution protection granted
to such Holders, in each case as a material term of the implementation of the
Prepackaged Plan. The Unit Options referred to in clause (2) above shall have an
exercise price of $.50 per Common Unit, an expiration date of December 31, 2005
and will vest on August 22, 1998. The Options referred to in clause (3) above
shall have an exercise price equal to the market price for Common Units on the
date of issuance thereof, will have a term of 10 years, and will vest on August
22, 1998.
Exculpation
Neither Huntway, Reorganized Huntway, nor any of their respective partners,
officers, directors, employees, affiliates, professionals or agents shall have
or incur any liability to any Holder of a Claim or Equity Interest for any
liability of Huntway or Reorganized Huntway, except as set forth in the New
Collateralized Note Indenture, the New Collateral Documents, the New Guaranties,
the New Senior Notes, the New Junior Notes, the New Junior Subordinated
Debenture Indenture or the Unitholders Agreement, or for any act or omission in
connection with, or arising out of, the pursuit of confirmation of the
Prepackaged Plan, the Consummation of the Prepackaged Plan, the administration
of the Prepackaged Plan or the property to be distributed under the Prepackaged
Plan.
Rights of Action
Any rights or causes of action under any theory of law, including, without
limitation, under the Bankruptcy Code, accruing to Huntway shall remain assets
of the Estate of Reorganized Huntway. Reorganized Huntway may pursue or refrain
from pursuing those rights of action, as appropriate, in accordance with what is
in the best interests, and for the benefit, of Reorganized Huntway.
Revesting
On the Effective Date, Reorganized Huntway will be vested with all of the
property of the Estate free and clear of all Claims and Equity Interests of
Creditors and Equity Holders, except as provided by the Prepackaged Plan.
Retention of Jurisdiction
Notwithstanding entry of the Confirmation Order or the Effective Date
having occurred, or a bankruptcy court order having been entered closing the
Prepackaged Chapter 11 Case, the Bankruptcy Court will retain jurisdiction of
all matters arising out of, and related to the Prepackaged Chapter 11 Case and
the Prepackaged Plan pursuant to, and for the purposes of, Sections 105(a) and
1142 of the Bankruptcy Code and for, among other things, the following purposes:
(i) to hear and determine pending applications for the assumption or rejection
of executory contracts or unexpired leases, if any are pending, and the
allowance of Claims resulting therefrom, (ii) to determine any and all pending
adversary proceedings, applications, and contested matters, (iii) to ensure that
distributions to Holders of Allowed Administrative Expenses, Allowed Claims, and
Allowed Equity Interests are accomplished as provided herein, (iv) to hear and
determine any objections to Administrative Expenses, to proofs of Claims or
Equity Interests filed, both before and after the Confirmation Date, including
any objections to the classification of any Claim or Equity Interest, and to
allow or disallow any Disputed Claim, in whole or in part, (v) to enter and
implement such orders as may be appropriate in the event the Confirmation Order
is for any reason stayed, revoked, modified, or vacated, (vi) to issue orders in
aid of execution of the Prepackaged Plan, to the extent authorized by Section
1142 of the Bankruptcy Code, (vii) to consider any modifications of the
Prepackaged Plan, to cure any defect or omission, or reconcile any inconsistency
in any order of the Bankruptcy Court, including, without limitation, the
Confirmation Order, (viii) to hear and determine all applications for
compensation and reimbursement of expenses of professionals under Sections 330,
331, and 503(b) of the Bankruptcy Code for services rendered and expenses
incurred prior to the date of the Confirmation Order, (ix) to hear and determine
disputes arising in connection with the
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interpretation, implementation, or enforcement of the Prepackaged Plan, (x) to
recover all assets of Huntway and property of the Estate, wherever located, (xi)
to hear and determine matters concerning state, local, and federal taxes in
accordance with Sections 345, 505, and 1145 of the Bankruptcy Code, (xii) to
hear any other matter not inconsistent with the Bankruptcy Code, and (xiii) to
enter a Final Decree closing the Prepackaged Chapter 11 Case.
Term of Injunctions or Stays
Unless otherwise provided, all injunctions or stays provided for in the
Prepackaged Chapter 11 Cases pursuant to Sections 105 or 362 of the Bankruptcy
Code or otherwise in effect on the Confirmation Date shall remain in full force
and effect until the Effective Date.
VOTING PROCEDURES
General
Huntway, upon the terms and subject to the conditions set forth herein and
in the Prepackaged Plan, is soliciting an acceptance of the Prepackaged Plan
from each Holder that was a Beneficial Interest Holder as of the Record Date of
(i) the Old Notes, (ii) the Warrants, (iii) the Common Units, (iv) the Existing
Unit Options and (v) the General Partner Interests. This Consent Solicitation
Statement, together with the accompanying forms of Ballot and Master Ballot,
pre-addressed postage-paid envelope and other Solicitation Materials, are being
furnished to (i) registered Holders of Old Collateralized Notes (i.e., Holders
whose respective names (or the names of whose nominees) appear as of the Record
Date on the security holder lists maintained by the trustee under the Old
Collateralized Note Indenture or, if applicable, who are listed as participants
in a clearing agency's security position listing), (ii) registered Holders of
Old Subordinated Notes (i.e., Holders whose respective names (or the names of
whose nominees) appear as of the Record Date on the security holder lists
maintained by the trustee under the Old Subordinated Note Indenture, or, if
applicable, who are listed as participants in a clearing agency's security
position listing), (iii) registered Holders of Old Junior Subordinated Notes
(i.e., Holders whose respective names (or the names of whose nominees) appear as
of the Record Date on the security holder lists maintained by the trustee under
the Old Junior Subordinated Debenture Indenture, or, if applicable, who are
listed as participants in a clearing agency's security listing), (iv) record
Holders of Warrants (i.e., Holders whose respective names (or the names of whose
nominees) appear as of the Record Date on Huntway's list of Warrant Holders),
(v) record Holders of Common Units (i.e., Holders whose respective names (or the
names of whose nominees) appear as of the Record Date on Huntway's Common Unit
lists or, if applicable, who are listed as participants in a clearing agency's
security position listing), (vi) Holders of interests arising under Existing
Unit Options (i.e., Holders whose respective names appear as of the Record Date
in Huntway's list of Existing Unit Options Holders) and (vii) Holders of General
Partner Interests (i.e., Holders whose respective names appear as of the Record
Date in Huntway's list of Holders of General Partner Interests). Registered or
record Holders may include brokerage firms, commercial banks, trust companies or
other nominees. If such persons or entities do not hold for their own account,
they should promptly provide copies of this Consent Solicitation Statement and
the appropriate Solicitation Materials to their customers and to Beneficial
Interest Holders for whose account they hold. A Beneficial Interest Holder is a
Holder of a beneficial interest in a Claim or Equity Interest which entitles
such Holder to rights or benefits of ownership even though such Holder may not
be the Holder of record at the Record Date. Securities owned beneficially would
include not only notes held by such Beneficial Interest Holder for its own
benefit in its own name, but would also include securities held by others for
such Beneficial Interest Holder's benefit, such as securities held by banks or
other custodians, brokers (whether in such Beneficial Interest Holder's name,
the nominee's name or "street name"), executors, administrators or trustees,
guardians, attorneys-in-fact, officers of a corporation, general partners of a
partnership or other persons acting in a fiduciary or representative capacity.
Any Beneficial Interest Holder who has not received a Ballot should contact his,
her or its brokerage firm, nominee or the Information Agent at each of the
addresses or phone numbers listed on the back cover.
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Record Date
Consistent with the provisions of Rule 3018 of the Bankruptcy Rules,
Huntway has fixed 5:00 p.m., Los Angeles time, on September 16, 1996 (the
"Record Date") as the time and date for determining which Holders of Claims and
Equity Interests are eligible to vote on the Prepackaged Plan.
Expiration Date; Extensions; Amendments
THE SOLICITATION PURSUANT TO THIS CONSENT SOLICITATION STATEMENT WILL
EXPIRE ON OCTOBER , 1996. TO BE COUNTED, BALLOTS AND, WHERE APPROPRIATE,
MASTER BALLOTS MUST BE RECEIVED BY THE SOLICITATION AGENT NO LATER THAN 5:00
P.M., LOS ANGELES TIME, ON OCTOBER , 1996 (THE "EXPIRATION DATE"), UNLESS
HUNTWAY, IN ITS SOLE DISCRETION, EXTENDS THE PERIOD DURING WHICH BALLOTS AND
MASTER BALLOTS WILL BE ACCEPTED BY HUNTWAY, IN WHICH CASE THE TERM "EXPIRATION
DATE" FOR SUCH SOLICITATION SHALL MEAN THE LAST TIME AND DATE TO WHICH SUCH
SOLICITATION IS EXTENDED.
Except to the extent Huntway so determines or as permitted by the
Bankruptcy Court, Ballots and Master Ballots received after the Expiration Date
will not be accepted or counted by Huntway in connection with Huntway's request
for confirmation of the Prepackaged Plan. Additionally, unless the Bankruptcy
Court subsequently determines that Ballots and Master Ballots may be revoked,
such Ballots and Master Ballots will remain in full force and effect until the
Bankruptcy Court determines whether such Ballots and Master Ballots are deemed
to constitute acceptances or rejections of the Prepackaged Plan.
Huntway expressly reserves the right, at any time or from time to time, to
extend the period during which the Solicitation is open. During any extension of
the Solicitation, all Ballots and Master Ballots previously given will remain
subject to all the terms and conditions of the Solicitation, including the
revocation rights specified herein. To extend the Expiration Date, Huntway will
notify the Solicitation Agent of any extension by oral or written notice and
will make a public announcement thereof, each at any time prior to 9:00 a.m.,
Los Angeles time, on the next business day after the previously scheduled
Expiration Date. Without limiting the means by which Huntway may choose to make
any public announcement, Huntway will not have any obligation, unless otherwise
required by law, to publish, advertise or otherwise communicate any such public
announcement other than by issuing a news release through the Reuters News
Service and the Dow Jones News Service. There can be no assurance that Huntway
will exercise its right to extend the Solicitation period for the receipt of
Ballots and Master Ballots.
Huntway expressly reserves the right to amend, at any time and from time to
time, the terms of the Solicitation or the Prepackaged Plan (subject to
compliance with the requirements of section 1127 of the Bankruptcy Code and any
consent required of the Senior Lenders). If Huntway makes a material change in
the terms of the Prepackaged Plan as it relates to a particular Class, Huntway
will disseminate additional solicitation materials to that Class and will extend
the applicable deadlines, if necessary, under any applicable law, for that
particular Class.
Persons Entitled to Vote
The following Classes of Claims and Equity Interests are impaired under the
Prepackaged Plan and all Holders of Claims or Equity Interests in such Classes
as of the Record Date are entitled to vote to accept or
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<PAGE> 107
reject the Prepackaged Plan on the above terms and subject to the conditions set
forth herein and in the Prepackaged Plan:
<TABLE>
<CAPTION>
<S> <C>
Class 2A-- Senior Lender Claims of Bankers Trust
Class 2B-- Senior Lender Claims (other than Class 2A Claims) to the extent Secured
Class 2C-- Unsecured portion of Senior Lender Claims (other than Class 2A Claims)
Class 5 -- Junior Lender Claims
Class 6 -- Equity Interests of Holders of Warrants
Class 7 -- Equity Interests of Holders of Common Units
Class 8 -- Equity Interests of Holders of Existing Unit Options
Class 10 -- General Partner Interests
</TABLE>
To be entitled to vote to accept or reject the Prepackaged Plan, a Holder
of a Senior Lender Claim, Junior Lender Claim, Warrant, Common Unit, Unit Option
or General Partner Interest must be the Beneficial Interest Holder of such
security or other Claims at the close of business on the Record Date, whether
such Claims or Equity Interests are held of record on the Record Date in such
Holder's name or in the name of such Holder's broker, dealer, commercial bank,
trust company or other nominee. For purposes of determining whether the
requisite number of acceptances is received to approve the Prepackaged Plan,
only votes which are cast at the direction of Beneficial Interest Holders in
accordance with the procedures set forth herein may be counted, and only the
votes of Holders of Allowed Claims or Equity Interests will be counted.
As described below, Huntway is soliciting both Ballots and Master Ballots.
Ballots are to be used by Beneficial Interest Holders whether such Beneficial
Interest Holders are also record Holders or hold through record Holders. Master
Ballots are to be used by record Holders of Common Units for the account of one
or more Beneficial Interest Holders. A record Holder which holds Common Units on
behalf of one or more Beneficial Interest Holders should collect completed
Ballots from such Beneficial Interest Holders and should complete a Master
Ballot reflecting the votes of such Beneficial Interest Holders, as indicated on
their respective Ballots.
Holders of Senior Lender Claims, Junior Lender Claims, Warrants, Common
Units, Existing Unit Options and General Partner Interests are requested to
complete an appropriate Ballot and, where appropriate, Master Ballot, for the
Claims and Equity Interests held by such Holders in accordance with the
instructions set forth thereon and the procedures set forth below and in the
Prepackaged Plan.
Instructions for Beneficial Interest Holders
Securities Held in Street Name
Any Beneficial Interest Holder holding Old Collateralized Notes, Old
Subordinated Notes, Old Junior Subordinated Notes, Warrants, Common Units or
Existing Unit Options in "street name" through a brokerage firm, bank, trust
company, or other nominee can vote on the Prepackaged Plan through such nominee
by following these instructions:
1. Provide all the applicable information on the Ballot in accordance
with the instructions set forth thereon, including (where applicable) the
principal amount of each issue of Old Notes held in such account and/or through
such nominee. Holders of Equity Interests should provide all applicable
information, including the nature of their Equity Interests and the number of
such Equity Interests owned or held directly or beneficially.
2. Indicate acceptance or rejection of the prepackaged Plan by checking
either the box entitled "Accepts the Plan" or "Rejects the Plan" set forth on
the Ballot.
3. Sign the Ballot.
4. Return the Ballot to the nominee as promptly as possible so that the
nominee may complete and submit a Master Ballot prior to the Expiration Date. If
no pre-addressed envelope was enclosed, contact the Information Agent for
instructions.
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Securities Held In Own Name
Any Beneficial Interest Holder holding Claims or Equity Interests in its
own name can vote on the Prepackaged Plan by completing and signing the enclosed
Ballot as described above and returning it directly to the Solicitation Agent
(using the enclosed pre-addressed envelope). For purposes of voting to accept or
reject the Prepackaged Plan, the Beneficial Interest Holders of Old Notes or
Equity Interests are the "record holders" of such Claims or Equity Interests, as
the case may be, represented by such notes or Equity Interests.
Instructions For Brokerage Firms, Banks, and Other Nominees
A brokerage firm which is the registered or record Holder of Old Notes or
Equity Interests for a Beneficial Interest Holder can vote on behalf of such
Beneficial Interest Holder by (i) distributing a copy of this Consent
Solicitation Statement, all appropriate Ballots and the other Solicitation
Materials to such Beneficial Interest Holder for execution, (ii) collecting all
such completed and executed Ballots, and (iii) completing a Master Ballot
compiling the votes and other information from the Ballots collected, and (iv)
transmitting such Master Ballot to the Solicitation Agent on or before the
Expiration Date. A proxy intermediary acting on behalf of a brokerage firm or
bank may follow the procedures outlined in the preceding sentence to vote on
behalf of a Beneficial Interest Holder.
Each broker firm, bank, or other nominee which submits a Master Ballot must
retain all Ballots submitted to it by Beneficial Interests Holders for
disclosure to the Bankruptcy Court, if so ordered.
Any Ballot submitted to a brokerage firm, proxy intermediary or other
nominee will not be counted until such nominee properly completes and delivers
to the Solicitation Agent a corresponding Master Ballot that reflects such
Beneficial Interest Holder's vote.
THE NAMES OF ALL BROKER-DEALERS OR OTHER INTERMEDIARIES OR PERSONS WHO HOLD
OLD NOTES OR EQUITY INTERESTS FOR A BENEFICIAL INTEREST HOLDER SHOULD BE
INDICATED ON THE BALLOTS. AUTHORIZED SIGNATORIES SHOULD SUBMIT SEPARATE BALLOTS
FOR EACH BENEFICIAL INTEREST HOLDER FOR WHOM THEY ARE VOTING.
Securities Clearing Agencies
Huntway expects that each of Depository Trust Company, Midwest Securities
Transfer Trust Company and Philadelphia Depository Trust Corporation, as the
nominee Holder(s) of Old Notes and/or Equity Interests, will arrange for its
respective participants to vote on the Prepackaged Plan.
Huntway will pay all reasonable and customary costs, fees and expenses
relating to the Solicitation, including without limitation, mailing and handling
costs of brokers, dealers, commercial banks, trustees and other nominees. Other
than as described in the Prepackaged Plan, Huntway will not pay any inventive or
acceptance fees in connection with the Solicitation.
Execution of Ballots by Representatives
If a Ballot is signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations, or others acting in a fiduciary or
representative capacity, such persons should indicate such capacity when signing
in accordance with the procedures set forth under "Certifications" below and,
unless otherwise determined by Huntway, must submit proper evidence satisfactory
to Huntway of authority to so act on behalf of a Beneficial Interest Holder.
Disputed Claims
In the event Huntway disputes a Claim or a Claim or Equity Interest is
designated under section 1126(e) of the Bankruptcy Code, any vote to accept or
reject the Prepackaged Plan cast with respect to such Claim or Equity Interest
will not be counted for purposes of determining whether the Prepackaged Plan has
been accepted or rejected, unless the Bankruptcy Court orders otherwise.
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Certifications
For purposes of determining whether the requisite number of acceptances is
received to approve the Prepackaged Plan, only votes which are cast by or at the
direction of Beneficial Interest Holders of Allowed Senior Lender Claims,
Allowed Junior Lender Claims and/or Allowed Equity Interests may be counted. By
executing and returning a Ballot, a person or entity (i) will certify to the
Bankruptcy Court and Huntway that either (a) such person or entity is the
Beneficial Interest Holder of the Allowed Senior Lender Claims, Allowed Junior
Lender Claims or Allowed Equity Interests being voted or (b) such person or
entity is an authorized signatory for a person or an entity who or which is a
Beneficial Interest Holder of the Allowed Senior Lender Claims, Allowed Junior
Lender Claims or Allowed Equity Interests being voted and, in either case, that
such person or entity has full power and authority to vote to accept or to
reject the Prepackaged Plan, (ii) will certify to the Bankruptcy Court and
Huntway that such person or entity (or in the case of an authorized signatory,
the Beneficial Interest Holder) has received a copy of this Consent Solicitation
Statement and the Solicitation Materials and will acknowledge that the
Solicitation is being made pursuant to the terms and conditions set forth
therein, (iii) will certify to the record Holder (if other than the Beneficial
Interest Holder), the Bankruptcy Court and Huntway that such person or entity,
if a Holder of an Allowed Claim, has cast the same vote on every Ballot for a
single Class of Claims completed by such person or entity and (iv) with regard
to Ballots submitted with respect to Claims (but without regard to Ballots
submitted with respect to Equity Interests) will certify to the record Holder,
the Bankruptcy Court and Huntway (or in the case of an authorized signatory,
such authorized signatory) that either (a) such person or entity has not
submitted any other Ballots for such Class of Claims held in other brokerage or
similar accounts or other registered names or (b) such person or entity has
disclosed on each Ballot completed by such person or entity the existence of
Claims in the same Class held in other brokerage or similar accounts, or other
registered names and the submission of other Ballots for such Claims.
A brokerage firm or other nominee which is a registered Holder will
prepare, execute and deliver a Master Ballot to the Solicitation Agent to
reflect the votes of the Beneficial Interest Holders it represents. By executing
and returning a Master Ballot, such nominee (i) will certify to the Bankruptcy
Court and Huntway that (a) such nominee has received a copy of this Consent
Solicitation Statement, the Ballot and other Solicitation Materials and has
delivered the same to the Beneficial Interest Holders listed thereon by such
nominee, (b) such nominee has received a completed and signed Ballot from each
such Beneficial Interest Holder, (c) such nominee is the registered Holder of
the Claims or Equity Interests being voted, (d) such nominee has been authorized
by each such Beneficial Interest Holder to vote on the Prepackaged Plan, (e)
with regard to Ballots submitted with respect to Claims (but without regard to
Ballots submitted with respect to Equity Interests) the Beneficial Interest
Holder has certified to such nominee that such Beneficial Interest Holder has
not submitted any other Ballots for such Class of Claims that the Beneficial
Interest Holder has certified to such nominee that such Beneficial Interest
Holder has cast the same vote for such Class of Claims, and such nominee has
disclosed such other Ballots and (f) that such nominee has received a duly
completed and executed Ballot from each of the Beneficial Interest Holders
included on the Master Ballot, with the exception of any defects or
incompletions described on the Master Ballot, and (ii) will agree to maintain
Ballots returned by Beneficial Interest Holders for disclosure to the Bankruptcy
Court, if so ordered.
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Ballots
A separate form of Ballot and, where applicable, Master Ballot, is to be
used for each Class of Impaired Claims and Equity Interests. The Ballots are
color-coded as follows:
<TABLE>
<CAPTION>
BALLOT COLOR
------------
<S> <C> <C>
Class 2: Senior Lender Claims (all subclasses)............................. White
Class 5: Junior Lender Claims.............................................. Yellow
Class 6: Equity Interests of Holders of Warrants........................... Blue
Class 7: Equity Interests of Holders of Common Units....................... Green
Class 8: Equity Interests of Holders of Existing Unit Options.............. Red
Class 10: General Partner Interests......................................... Purple
</TABLE>
Holders of Claims and Equity Interests should take care to use the correct
Ballot(s) or Master Ballot(s) in voting on the Prepackaged Plan. See "Incomplete
Ballots." If any Ballots or Master Ballots are damaged or lost, or if a Holder
has any questions concerning the Voting Instructions, it may contact the
Information Agent at each of the addresses or phone numbers listed on the back
cover.
Voting Multiple Claims and Equity Interests
A Holder may receive multiple Ballots for a single Class of Claims or
Equity Interests, especially if such Holder holds multiple issues of Old Notes
or holds Equity Interests in multiple accounts or registered in multiple names.
Holders may not cast conflicting votes on multiple Ballots for a single Class of
Claims. Each Holder's votes either to accept or to reject the Prepackaged Plan
will be counted only once for each applicable Class of Claims in determining
whether the requisite number of Holders of such Claims have voted to accept the
Prepackaged Plan. By executing a Ballot, a Holder certifies, among other things,
that such Holder has disclosed any bifurcation of Beneficial ownership of Old
Notes and that such Holder has cast the same vote on any multiple Ballots for
holdings in a single Class of Claims.
Incomplete Ballots
It is important that all Impaired Creditors and all Equity Holders vote to
accept or reject the Prepackaged Plan, because under the Bankruptcy Code, for
purposes of determining whether the requisite acceptances have been received by
an Impaired Class of Claims or Equity Interests, the vote will be tabulated
based on the ratio of accepting Holders of Allowed Claims and/or Equity
Interests to all voting Holders of Allowed Claims and/or Equity Interests.
Therefore, it is possible that the Prepackaged Plan could be approved by any
Impaired Class of Claims with the affirmative vote of significantly less than
two-thirds in amount and one-half in number of the entire Class of Claims, or by
any Impaired Class of Equity Interests with the affirmative vote of
significantly less than two-thirds in amount of the entire Class of Equity
Interests. Failure by a Holder of an Impaired Claim or an Impaired Equity
Interest to submit a properly executed Ballot or Master Ballot (as appropriate)
or to indicate acceptance or rejection of the Prepackaged Plan in accordance
with the instructions set forth thereon and the procedures set forth herein
shall be deemed to constitute an abstention by such Holder with respect to a
vote regarding the Prepackaged Plan. Abstentions as a result of failing to
submit a properly executed Ballot or Master Ballot (when appropriate) or failing
to indicate a vote either for acceptance or rejection of the Prepackaged Plan
will not be counted as votes for or against the Prepackaged Plan. Huntway, in
its sole discretion, may waive any defect in any Ballot or Master Ballot at any
time, either before or after the close of voting, and without notice.
EXCEPT AS OTHERWISE ORDERED BY THE BANKRUPTCY COURT, BALLOTS OR WHERE
APPROPRIATE, MASTER BALLOTS, WHICH ARE EITHER (I) NOT SUBMITTED TO THE
SOLICITATION AGENT, (II) SUBMITTED TO THE SOLICITATION AGENT WITHOUT PROPER
EXECUTION, OR (III) EXECUTED AND SUBMITTED TO THE SOLICITATION AGENT WITHOUT
PROPERLY INDICATING ACCEPTANCE OR REJECTION OF THE PREPACKAGED PLAN WILL
CONSTITUTE AN ABSTENTION WITH RESPECT TO A VOTE ON THE PREPACKAGED PLAN UNDER
SECTION 1126(B) OF THE BANKRUPTCY CODE FOR PURPOSES OF
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CONFIRMATION OF THE PREPACKAGED PLANS, UNLESS SUCH DEFECTS OR IRREGULARITIES ARE
WAIVED PURSUANT TO THESE VOTING INSTRUCTIONS.
Agreements Upon Furnishing Ballots
The delivery of a Ballot or Master Ballot indicating a vote to accept the
Prepackaged Plan by a Holder of Claims or Equity Interests pursuant to the
procedures set forth above will constitute an agreement between such Holder and
Huntway to accept (i) all the terms of, and conditions to, this Solicitation,
and (ii) all the terms of the Prepackaged Plan. The submission of a Ballot will
also constitute a request that such Holder (or in the case of an authorized
signatory, the Beneficiary Interest Holder) be treated as the record Holder of
the Old Notes or the Equity Interests, as the case may be, for purposes of
voting on the Prepackaged Plan.
Method of Delivery of Ballots
The method of delivery of Ballots and Master Ballots to be delivered to the
Solicitation Agent is at the election and risk of each Holder of Claims and/or
Equity Interests. Except as otherwise provided herein, such delivery will be
deemed made only when actually received by the Solicitation Agent. Instead of
effecting delivery by mail, it is recommended that such Holders use an overnight
or hand delivery service or telecopy promptly followed by overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. No Ballots or Master Ballots should be sent to Huntway or
Huntway's financial or legal advisors.
Withdrawal of Ballots; Revocation
Any Holder of Old Notes or Equity Interests who has delivered a valid
Ballot or Master Ballot, as appropriate, voting on the Prepackaged Plan may
withdraw such vote by delivery of a written notice of withdrawal to the
Solicitation Agent at any time prior to the earlier of (i) the commencement by
Huntway of the Prepackaged Chapter 11 Case or (ii) the Expiration Date.
Thereafter, Ballots or Master Ballots may be revoked only with the approval of
the Bankruptcy Court. Votes cast pursuant to a Master Ballot may be withdrawn or
modified on an individual Beneficial Interest Holder basis. In the case where
more than one timely, properly completed Ballot or Master Ballot relating to a
particular Class of Claims or Equity Interests held by a particular Beneficial
Interest Holders is received, only the Ballot or Master Ballot which bears the
latest date will be counted for purposes of determining the vote.
A notice of withdrawal, to be valid, must (i) contain the description of
the Claim or Equity Interest to which it relates and the aggregate principal
amount or number of Interests, as the case may be, represented by such Claim or
Equity Interest, (ii) be signed by the holder of such Claim or Equity Interest
in the same manner as the original Ballot or Master Ballot, (iii) contain a
certification that the withdrawing party is the Beneficial Interest Holder (or
is the valid nominee thereof) of the Claim and/or Equity Interest and possesses
the right to withdraw the vote sought to be withdrawn and (iv) be received by
the Solicitation Agent in a timely manner as described above. Prior to the
filing of the Prepackaged Plan, Huntway intends to consult with the Solicitation
Agent to determine whether any withdrawals of Ballots or Master Ballots were
received. As indicated below under "Waivers of Defects, Irregularities, Etc.,"
Huntway expressly reserves the absolute right to contest the validity of any
such withdrawals of Ballots or Master Ballots.
Unless otherwise determined by Huntway or directed by the Bankruptcy Court,
a purported notice of withdrawal of a Ballot or Master Ballot which is not
received in a timely manner by the Solicitation Agent will not be effective to
withdraw a previously furnished Ballot or Master Ballot.
Waivers of Defects, Irregularities, Etc.
Unless otherwise directed by the Bankruptcy Court, all questions as to the
validity, form, eligibility (including time of receipt), acceptance and
revocation or withdrawal of Ballots or Master Ballots will be determined by
Huntway in its sole discretion, which determination shall be final and binding.
Huntway reserves the absolute right to reject any and all Ballots or Master
Ballots not in proper form, the acceptance of which would, in the opinion of
Huntway or its counsel, not be in accordance with the provision of the
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Bankruptcy Code. Huntway further reserves the right to waive any defects or
irregularities or conditions of delivery as to any particular Ballot or Master
Ballot unless otherwise directed by the Bankruptcy Court. Huntway's
interpretation of the terms and conditions of the Prepackaged Restructuring
(including the Ballot or Master Ballot and these respective Voting Instructions
thereto), unless otherwise directed by the Bankruptcy Court, shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with deliveries of Ballots or Master Ballots must be cured within
such time as Huntway (or the Bankruptcy Court) determines. Neither Huntway nor
any other person or entity will be under any duty to provide notification of
defects or irregularities with respect to deliveries of Ballots or Master
Ballots nor will any of them incur any liabilities for failure to provide such
notification. Unless otherwise directed by the Bankruptcy Court, delivery of
such Ballots or Master Ballots will not be deemed to have been made until such
irregularities have been cured or waived. Ballots or Master Ballots previously
furnished, and as to which any irregularities have not theretofore been cured or
waived, will not be counted.
FIRST DAY MOTIONS
Huntway intends to seek approval from the Bankruptcy Court for the First
Day Motions, among others, which are intended to permit Huntway to operate
during the Prepackaged Chapter 11 Case with a minimum of disruption and
inconvenience to its business and Creditors who are not impaired by the
Prepackaged Plan. There can be no assurance that any or all of the following
First Day Motions will be granted.
Cash Collateral
Virtually all of the Cash located in Huntway's various bank accounts is
collateral subject to security interests (the "Cash Collateral") held by the
Senior Lenders. Huntway will seek the entry of an order authorizing the use by
Huntway of the Cash Collateral. Senior Lenders holding approximately 86% of the
Senior Lender Claims have indicated to Huntway that they will consent to
Huntway's use of the Cash Collateral on terms and conditions satisfactory to the
Senior Lenders.
Prepetition Unsecured Trade Claims
Huntway will seek the entry of an order authorizing it to pay undisputed
prepetition trade Claims and certain other Class 4 Claims in the normal course
of business as if the Prepackaged Chapter 11 Case had not been filed. This
motion should assist Huntway in maintaining normal business relationships with
its suppliers during the pendency of the Prepackaged Chapter 11 Case.
Prepetition Employee Claims and Existing Benefit Programs
Like the motion to pay prepetition trade Claims, this motion seeks approval
to pay and honor Huntway's prepetition obligations to its employees in the
ordinary course of business. This motion should enable Huntway to maintain its
excellent relationships with its employees.
Cash Management System
Pursuant to this motion, Huntway will seek authorization to use its current
cash management system and bank accounts.
Investment Strategy
In order to mitigate commodity price risks, Huntway will seek an order
authorizing it to continue to use its hedging program for California heavy crude
oil to reduce their exposure to crude oil price changes. For road paving
projects in California, the California Department of Transportation pegged the
asphalt prices that it is willing to pay directly to California crude oil
postings. Together, these two programs have partially insulated approximately
6,600 barrels per day of Huntway's throughput from future volatility in crude
prices. Huntway will seek an order authorizing it to continue its other program
for short-term investment of cash in high grade secure instruments. Huntway's
investment policy is to invest cash only in certificates of deposit, time
deposits
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and money market accounts having short-term maturities and otherwise in
commercial paper with final maturities of three months or less from the date of
instrument.
Capital Expenditures
Pursuant to this motion, Huntway will seek permission to make capital
expenditures during the Chapter 11 Case without further order of the Bankruptcy
Court in accordance with a budget to be agreed upon with the Senior Lenders.
These expenditures will be funded from cash flow and short term borrowings.
Postpetition Letter of Credit Facility
Huntway will seek permission to enter into the postpetition letter of
credit facility in the amount of $17,500,000 (including letters of credit
outstanding under the Old Letter of Credit Agreement).
Extension of Section 362
Pursuant to this motion, Huntway will seek to bring within the protection
of Section 362's automatic stay certain non-debtor partnerships which play an
active role in managing the affairs of Huntway.
Disclosure Statement and Prepackaged Plan
This motion seeks approval of the Consent Solicitation Statement pursuant
to Sections 1125 and 1126 of the Bankruptcy Code and confirmation of the
Prepackaged Plan pursuant to Section 1129 of the Bankruptcy Code.
Claims Bar Date
Pursuant to this motion, Huntway will seek to establish a deadline for
filing proofs of Claims and Equity Interests against its bankruptcy Estate.
Miscellaneous Procedural and Administrative Motions
These motions will seek approval of non-substantive procedures to be
employed in the Bankruptcy Court governing this chapter 11 case. The motions
also seek to employ bankruptcy counsel to Huntway.
Agreements with Andre Danesh
Andre Danesh acquired from Phoenix Home Life Mutual Insurance Company the
Warrant to purchase 546,059 Common Units issued by the Company on June 22, 1993.
On March 13, 1996, Mr. Danesh and the Company entered into an agreement,
pursuant to which the Company agreed to pay Mr. Danesh a finder's fee of 600,000
Common Units upon consummation of the Prepackaged Plan and issue an Option for
the purchase of an additional 546,059 Common Units on terms and subject to the
conditions set forth in such agreement. Such agreement also provided that Mr.
Danesh surrender the Warrant that he had acquired for cancellation. In
accordance with the agreement of March 13, 1996, Mr. Danesh has surrendered, and
the Company has canceled, such Warrant. Mr. Danesh and the Company also entered
into an agreement dated July 23, 1996, pursuant to which Mr. Danesh agreed (i)
that the anti-dilution protection set for in the Danesh Option does not apply to
the transactions (including issuances of Common Units) contemplated by the
Prepackaged Plan or the Consensual Restructuring Agreement; (ii) not to transfer
the 600,000 Common Units issued as a finder's fee for 180 days following the
Effective Date; and (iii) to be bound by the provisions of the Agreement of
Understanding. In addition, Mr. Danesh and the Company entered into a letter
agreement dated September 20, 1996, pursuant to which the parties agreed that
Mr. Danesh's finder's fee would be paid in the form of an option to purchase
600,000 Common Units on terms and conditions substantially identical to those
set forth in the option to purchase of 546,059 Common Units referred to above.
The September 20, 1996 letter agreement also provides that Mr. Danesh agreed
that his retention of the option to purchase 546,059 Common Units in connection
with a restructuring on terms and conditions substantially similar to the
restructuring
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contemplated by the Consensual Restructuring Agreement will satisfy all of the
Company's obligations to Mr. Danesh in respect of the option to purchase 546,059
Common Units.
Restructuring Advisor
In connection with the restructuring contemplated by the Consensual
Restructuring Agreement and the Prepackaged Plan, Huntway retained Jefferies &
Company, Inc. as its exclusive financial advisor and placement agent
("Jefferies"). Pursuant to a letter agreement dated February 8, 1995, Huntway
agreed to pay Jefferies a non-refundable retainer fee of $100,000. Upon the
successful consummation of the transactions contemplated by the Consensual
Restructuring Agreement or the Prepackaged Plan, such retainer will be credited
to Huntway towards the additional fees Huntway agreed to pay Jefferies. Upon
consummation of the restructuring. Huntway agreed to pay Jefferies in cash on
the Effective Date, fees equal to 3% of the aggregate principal amount of debt
issued (excluding any of the debt proposed to be issued to the Junior Lenders.
In addition, Huntway agreed to pay Jefferies in cash on the Effective Date, fees
equal to .5% of the aggregate principal amount of existing debt exchanged
(excluding any existing debt exchanged by the Junior Lenders. Finally, Huntway
(i) agreed to pay Jefferies promptly as billed, all reasonable documented
out-of-pocket expenses incurred by Jefferies in connection with the services
rendered thereby; and (ii) agreed to indemnify Jefferies and related persons and
entities from and against liabilities and claims incurred by such parties as a
result of Huntway's actions or omissions or such parties' actions or omission in
connection with the services rendered on behalf of Huntway. On October 23, 1995,
Huntway and Jefferies entered into a letter agreement, which amended the
February 8, 1995 engagement letter. Such amendment provides that the aggregate
fees payable by Huntway to Jefferies are $250,000, $50,000 of which has already
been paid and the remaining $200,000 of which is payable in cash upon the
consummation of the proposed restructuring.
Certain Federal Income Tax Considerations
The implementation of the Prepackaged Plan may have significant federal
income tax consequences for Holders of Common Units, Class 2 Claims, Class 5
Claims and Class 6 Equity Interests. Holders of Common Units, Class 2 Claims,
Class 5 Claims and Class 6 Equity Interests should be aware that many of these
tax consequences are unclear under existing law and, as a result, alternative
tax results are possible. As a result, there is a significant risk that the
Internal Revenue Service ("IRS") may disagree with one or more of the positions
taken by Huntway with respect to the consequences of the Prepackaged Plan. No
ruling has been or will be requested from the IRS relating to the tax treatment
of the Holders of Common Units, Class 2 Claims, Class 5 Claims and Class 6
Equity Interests nor has Huntway received an opinion of counsel with respect to
such tax treatment.
The following discussion was prepared based on the advice of counsel and is
based upon provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations, administrative rulings and judicial decisions now in
effect, all of which are subject to change (possibly with retroactive effect) or
different interpretations. The discussion does not address issues that turn on
special circumstances related to particular Holders and does not address any
consequences under the alternative minimum tax. In addition, the discussion does
not address any consequences under state, local or foreign law.
DUE TO THE UNCERTAINTY ABOUT THE TAX CONSEQUENCES OF THE PREPACKAGED PLAN
TO HOLDERS OF COMMON UNITS, CLASS 2 CLAIMS, CLASS 5 CLAIMS AND CLASS 6 EQUITY
INTERESTS, ALL HOLDERS OF COMMON UNITS, CLASS 2 CLAIMS, CLASS 5 CLAIMS OR CLASS
6 EQUITY INTERESTS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PREPACKAGED PLAN.
Risk of Cancellation of Indebtedness Income
Pursuant to the Prepackaged Plan, Holders of Class 2 Claims will exchange
Old Collateralized Notes and Old Subordinated Notes for New Senior Notes and
Common Units. Holders of Class 5 Claims will exchange Old Junior Subordinated
Notes for New Junior Notes and Common Units. Holders of Class 6 Equity Interests
will exchange their Warrants for Common Units. The foregoing exchanges by
Holders of Class 2
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Claims, Holders of Class 5 Claims and Holders of Class 6 Equity Interests will
be referred to as the "Exchange." The Exchange will reduce the amount of
Huntway's outstanding indebtedness. Huntway estimates that the adjusted issue
price of the Old Collateralized Notes, Old Subordinated Notes and Old Junior
Subordinated Notes will exceed the issue price of the New Senior Notes, New
Junior Notes and the fair market value of the Common Units issued in the
Exchange for such Old Notes by approximately $64.3 million.
Generally, a debtor realizes cancellation of indebtedness income ("CODI")
for federal income tax purposes when its debt is canceled in exchange for an
amount less than the adjusted issue price of the debt. However, under a
judicially created exception and subject to certain statutory limitations, a
corporate debtor generally did not recognize CODI to the extent that the debtor
issued stock of the debtor to creditors in exchange for a reduction in its debt
(the "stock-for-debt exception"). The stock-for-debt exception to the
recognition of CODI was eliminated by the Omnibus Budget Reconciliation Act of
1993 (the "1993 Act") for corporate debtors; however, the legislative history of
the 1993 Act indicated that Congress, in repealing the stock-for-debt exception
to CODI for corporations, intended no implication as to whether a more general
equity-for-debt exception to CODI exists for debtors that, like Huntway, are not
corporations.
The reasoning of the judicial decisions that created the stock-for-debt
exception to CODI for corporations should apply with equal force to a
partnership such as Huntway. Thus, there are good arguments that there is an
equity-for-debt exception to the recognition of CODI by a partnership where a
partnership issues partnership equity in exchange for its debt. As a result,
because Huntway will issue Common Units in the Exchange, Huntway does not intend
to report the recognition of CODI for federal income tax purposes as a result of
the Exchange. However, the law in this area is unclear and there is no judicial
or administrative precedent applying an equity-for-debt exception to the
recognition of CODI by a partnership. Thus, the IRS may disagree with Huntway's
position and assert that there is no partnership-equity-for-debt exception to
the recognition of CODI.
Huntway will take the position that (A) Holders of Class 2 Claims (i)
exchange Old Collateralized Notes and Old Subordinated Notes with an adjusted
issue price equal to the issue price of the New Senior Notes for New Senior
Notes and (ii) exchange the balance of their Old Collateralized Notes and Old
Subordinated Notes for Common Units and (B) Holders of Class 5 Claims (i)
exchange Old Junior Subordinated Notes with an adjusted issue price equal to the
issue price of the New Junior Notes for New Junior Notes and (ii) exchange the
balance of their Old Junior Subordinated Notes for Common Units. This allocation
of consideration issued in the Exchange is consistent with the Treasury
regulations and IRS published rulings under the stock-for-debt exception.
However, the law regarding such allocation in the partnership context is
unclear. If the IRS were to successfully reallocate consideration received in
the Exchange in a different manner, so that a greater amount of Old
Collateralized Notes and Old Subordinated Notes were considered exchanged for
New Senior Notes or so that a greater amount of Old Junior Subordinated Notes
were considered exchanged for New Junior Notes, CODI would result even if a
partnership-equity-for-debt exception exists.
Consequences if CODI Recognized.
If, notwithstanding the foregoing, the Exchange results in the recognition
of CODI by Huntway, the federal income tax consequences to the Holders of Common
Units will depend upon (i) whether the CODI is considered "qualifying income"
under Code sec.7704(d) and (ii) how the CODI is allocated among the Holders of
Common Units.
As a publicly traded partnership ("PTP"), Huntway is treated as a
partnership for federal income tax purposes only if 90 percent or more of its
gross income for each taxable year consists of "qualifying income." "Qualifying
income" includes, among other items, "income and gains derived from the
exploration, development, mining or production, processing, refining,
transportation (including pipelines transporting gas, oil, or products thereof),
or the marketing of any mineral or natural resource (including fertilizer,
geothermal energy, and timber)." Huntway takes the position that its income from
refining operations constitutes income
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from the "processing, refining, transportation ... or marketing" of a mineral or
natural resource and that, as a result, more than 90 percent of its gross income
is "qualifying income."
There is no precedent addressing whether CODI is "qualifying income" for
purposes of Code sec.7704(d). In particular, it is unclear whether CODI
constitutes income from the "processing, refining, transportation ... or
marketing" of a mineral or natural resource. However, because the debt was
incurred in connection with its business (i.e., in connection with acquiring
Huntway's assets and/or conducting its operations) and Huntway's business
consists of the "processing, refining, transportation ... or marketing" of a
mineral or natural resource, there is a good argument that any CODI should take
its character under Code sec.7704(d) from the character of Huntway's business
and should therefore be "qualifying income." The IRS has taken a similar
position in connection with the treatment of CODI for purposes of the passive
loss rules (i.e., that the treatment of CODI is determined by the activity to
which the underlying loans relate).
Congress specifically provided for the treatment of CODI in certain similar
contexts. Code 108(e)(9) provides that CODI is ignored for purposes of Code
sec.856(c)(2) in determining whether a corporation meets certain income tests in
order to qualify as a real estate investment trust. No similar provision of the
Code addresses the effect of CODI on a publicly traded partnership. There is a
risk that the IRS might attempt to argue that the lack of such a provision
dealing with CODI and publicly traded partnerships implies that CODI is not
"qualifying income" under Code sec.7704(d).
Based on the foregoing, if the IRS asserts on audit that Huntway recognized
CODI on the Exchange, Huntway intends to take the position that any CODI is
treated as "qualifying income" for purposes of Code sec.7704(d). The IRS may
disagree with this position.
CODI, if any, is "Qualifying Income". If CODI is "qualifying income" and
Huntway continues to be treated as a partnership for federal income tax
purposes, any CODI would be recognized by Huntway and allocated to the Holders
of Common Units of Huntway as described below.
Huntway intends to allocate any CODI recognized by Huntway to the General
Partner and the Special Managing Partner and not to (i) the Holders of Common
Units who are limited partners or (ii) the Holders of Class 2 Claims, Class 5
Claims or Class 6 Equity Interests who become Holders of Common Units as a
result of the Exchange. Because the debt exchanged for Common Units in the
Exchange is recourse debt allocated to Huntway's general partners under Code
sec.752 and because Huntway will write down the capital account carrying value
of its assets prior to the Exchange, there are good arguments that allocation of
any CODI to its general partners is consistent with Code sec.704(b)'s
requirement that allocations have substantial economic effect. The Second
Amended and Restated Agreement of Limited Partnership will provide that any CODI
is allocated to Huntway's general partners.
There can be no assurances that the IRS will agree with the allocation of
CODI entirely to Huntway's general partners. Applicable law is unclear on this
issue. Thus, there is a risk that the IRS will take the position that any CODI
recognized by Huntway is allocated to all Holders of Common Units prior to the
Exchange, including Holders of Common Units who are limited partners. There is
also a risk that the IRS could seek to allocate a portion of any CODI recognized
by Huntway to Holders of Class 2 Claims, Class 5 Claims and Class 6 Equity
Interests who become Holders of Common Units as a result of the Exchange.
Finally, there is a risk that the IRS could accept the allocation of CODI, if
any, to Huntway's general partners and seek to reallocate Huntway's tax losses
from prior years in a similar manner to the allocation of CODI, i.e., reducing
the portion of such prior losses allocated to Huntway's Holders of Common Units
that are limited partners and increasing the portion of such prior losses
allocated to Huntway's general partners.
The Amendment to the Amended and Restated Partnership Agreement provides
that income and loss (including CODI, if any) will be allocated between the
current Holders of Common Units and Holders of Class 2 Claims, Class 5 Claims
and Class 6 Equity Interests who will receive Common Units in the Exchange based
on an interim closing of the books as of the close of business on the date of
Consummation of the Prepackaged Plan, with the result that any CODI should be
allocated to the existing Holders of Common Units and not to the Holders of
Class 2 Claims, Class 5 Claims and Class 6 Equity Interests. Such an allocation
should eliminate any allocation of CODI to the Holders of Class 2 Claims and
Class 6 Equity
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Interests who become Holders of Common Units as a result of the Exchange if the
IRS challenges Huntway's allocation of CODI to its general partners. The IRS may
disagree with such an approach or may adopt regulations providing for a
different result.
If Huntway is required to recognize CODI as a result of the Exchange,
Huntway estimates that the aggregate amount of CODI would be approximately $64.3
million, based on an assumed value per Common Unit issued of $.75 (the
approximate current market value of the Common Units). If the CODI is allocated
to all existing Holders of Common Units (and not solely to Huntway's general
partners), each Common Unit would be allocated approximately $5.50 of CODI,
based on the 11,556,250 Common Units outstanding as of June 30, 1996.
Any Holder of Common Units to whom CODI is allocated will generally be
required to include such CODI in taxable income as ordinary income and will be
entitled to increase its tax basis for such Common Units by an amount equal to
the CODI so included. A Holder of Common Units may exclude all or a portion of
such CODI from taxable income (i) if the Holder is in bankruptcy (in which case
all of the CODI may be excluded) or (ii) if the Holder is insolvent (in which
case an amount of CODI equal to the amount of the Holder's insolvency may be
excluded from income). To the extent that a Holder excludes CODI from income, it
will generally be required to reduce its tax attributes (e.g., its net operating
losses, tax basis in depreciable assets, etc.) under Code 108(b) by an amount
equal to the CODI excluded (including tax attributes unrelated to its investment
in Huntway). There is a risk that a Holder of Common Units who excludes CODI
from taxable income may not be entitled to increase its basis in its Common
Units by the amount of the excluded CODI. Several courts have held (in some
cases under prior law) that a partner may not increase the tax basis of the
partner's partnership interest by the amount of any CODI recognized by the
partnership that is excluded from taxable income by the partner under the
insolvency exception.
It is possible that a Holder of Common Units would be entitled to exclude a
portion of any such CODI as arising from "qualifying real property indebtedness"
under Code sec.108(c) if (i) the Holder files a special election with the IRS
with his tax return which includes such CODI and (ii) to the extent that the
Holder has tax basis in depreciable real estate (which basis is reduced by the
amount of the excluded CODI). Real estate for this purpose would include (i)
Common Units in Huntway, to the extent that Huntway holds real property, (ii)
any other partnership interests to the extent that the partnership owns real
property, and (iii) any other real property held by such Holder. Because Huntway
will not report recognition of any CODI, it is not anticipated that Holders of
Common Units will make such election and it is unclear whether such an election
could be made later if the IRS were to assert on audit that Huntway had
recognized CODI.
CODI, if any, is not "Qualifying Income". If CODI is recognized on the
Exchange and determined not to be "qualifying income" within the meaning of Code
sec.7704(d), it is anticipated that the CODI would constitute more than 10
percent of Huntway's gross income and Huntway would generally cease to be
treated as a partnership for federal income tax purposes as of January 1, 1996.
The IRS has authority to treat certain failures to meet the 90 percent
"qualifying income" test as inadvertent under Code sec.7704(e). It is unclear
whether the IRS would regard a failure attributable to CODI as inadvertent, and
whether, if it did, the IRS would attach unfavorable conditions (such as the
payment of tax as if Huntway were a corporation for a period of time) to any
agreement to treat the failure as inadvertent.
Assuming that the failure was not treated as inadvertent, Huntway would
generally be treated as having transferred all of its assets, subject to its
liabilities, to a newly formed corporation ("Newco") on January 1, 1996, the
first day of the taxable year in which the CODI was realized. Huntway would be
treated as having then distributed the stock of Newco in a complete liquidation
of Huntway.
Huntway would generally recognize no gain or loss on the deemed transfer of
assets to Newco, except that it would recognize gain under Code sec.357(c) to
the extent that the liabilities of Huntway to which the assets are subject
exceeds the tax basis of such assets. As of January 1, 1996, Huntway estimates
that its liabilities exceed the tax basis of its assets by approximately $36
million. Although the law is not clear, Huntway intends to allocate any such
gain to the General Partners. There can be no assurances that the IRS will agree
with such an allocation.
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In connection with such a deemed conversion of Huntway into Newco, a Holder
of Common Units would generally be treated as receiving a distribution of cash
from Huntway in an amount equal to the Holder's share of the liabilities of
Huntway, if any, and a distribution of Newco stock. To the extent that the
deemed cash distribution exceeds the Holder's basis in its Common Units, the
Holder would be treated as having taxable gain from the disposition of the
Holder's partnership interest. Given that all of Huntway's debt is recourse debt
and hence is treated as allocated to Huntway's general partners for federal
income tax purposes, it is not expected that Holders of Common Units who are
limited partners would be treated as receiving any material deemed distribution
of cash. The Holder would receive a basis in the stock of Newco equal to the
Holder's basis in the Common Units, plus the amount of any capital gain
recognized under the prior sentence, minus the amount of cash deemed
distributed.
The Holder's holding period for the Newco stock received in the
distribution will include Huntway's holding period in the Newco stock. Thus, the
Holder's holding period in Newco stock deemed received by Huntway for Huntway
assets that are capital assets or Code sec.1231 assets will include Huntway's
holding period in the assets deemed contributed by Huntway to Newco. The
Holder's holding period in Newco stock deemed received by Huntway for Huntway
assets contributed by Huntway to Newco that are neither capital assets nor Code
sec.1231 assets will begin on January 2, 1996, the day after the deemed
contribution. Thus, a Holder will have more than one holding period in the Newco
stock deemed received.
After the deemed conversion of Huntway to Newco, the former Holders of
Common Units would cease to receive income and loss allocations from Huntway.
Instead, Newco would be subject to tax as a corporation on its income and loss
at federal tax rates which currently are as high as 35%. In addition, any
distributions from Newco would generally be taxed as dividends to the extent of
Newco's accumulated or current earnings and profits.
Finally, under this scenario, Newco would be the party treated as
recognizing the CODI arising from the Exchange. Because Newco would be in
bankruptcy when the CODI would otherwise be recognized for federal income tax
purposes, Newco will not recognize taxable income, but will instead be required
to reduce its tax attributes (which will primarily result in a reduction of the
tax basis of Newco's assets). Newco's tax basis in the assets received from
Huntway in the deemed contribution would be reduced by the amount of the
excluded CODI, but not to an amount less than Newco's remaining debt.
Accordingly, Newco would have a lower level of depreciation and amortization
deductions to offset future taxable income than is currently the case.
Certain Other Consequences of the Exchange to Holders of Class 2 Claims, Class 5
Claims and Class 6 Claims
Holders of Class 2 Claims and Class 5 Claims
The federal income tax consequences of the Exchange to the Holders of Class
2 Claims and Class 5 Claims are not clear and may depend on positions taken by
Huntway with respect to the application of a partnership-equity-for-debt
exception to the recognition of CODI and the allocation of consideration
received in the Exchange. Except where otherwise noted, the following discussion
assumes that a partnership-equity-for-debt exception to the recognition of CODI
exists and applies to the Exchange. This discussion does not apply to any
exchange of the Increasing Rate Subordinated Note (Sunbelt IDB) Due 2008 issued
to Bankers Trust on June 22, 1993 for New Senior Notes (Sunbelt IDB) issued
under the Prepackaged Plan.
In general (1) to the extent that Old Notes are exchanged for New Notes,
the Exchange should result in the recognition of taxable gain or loss by the
Holder under Code sec.1001, since the New Notes received in the Exchange will
differ materially in kind and extent from the Old Notes given up, and (2) to the
extent that the Old Notes are exchanged for Common Units, the Exchange will
likely not result in the recognition of taxable gain or loss, but rather should
be treated as a contribution to Huntway under Code sec.721. There can be no
assurance that the IRS will agree with either of these positions.
As noted above, Huntway will take the position that Holders of Class 2
Claims and Class 5 Claims will exchange Old Notes with an adjusted issue price
equal to the issue price of the New Notes for New Notes and
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(ii) exchange the balance of their Old Notes for Common Units. This position is
consistent with the regulations under the repealed stock-for-debt exception.
This allocation, if respected by the IRS and applied to Holders of Class 2 and
Class 5 Claims, has the effect of increasing the portion of the Old Notes
exchanged for Common Units in a transaction in which gain or loss should not be
recognized and reducing the portion of the Old Notes exchanged for New Notes in
an exchange that will result in the recognition of taxable gain or loss.
Depending on the Holders' basis in their Old Notes, this allocation may cause
Holders of Class 2 and Class 5 Claims to recognize a gain on the Exchange or
limit their ability to claim a tax loss on the Exchange. If a
partnership-equity-for-debt exception to the recognition of CODI does not exist,
or if the allocation is not applied to Holders of Class 2 Claims and Class 5
Claims notwithstanding that such an exception exists, a Holder may be entitled
to allocate the consideration received in the Exchange in a different, and --
depending on the Holder's circumstances -- potentially more favorable manner.
If a Holder of Class 2 or Class 5 Claims has not recognized as taxable
income any accrued but unpaid interest on the Old Notes or any accrued original
issue discount ("OID") with respect to the Old Notes, there is a risk that a
portion of the consideration received in the Exchange will be treated as paid in
respect of such accrued interest or OID (rather than in exchange for an Old
Note) and treated as ordinary income to such Holder.
Under Code sec.108(e)(7)(E), Holders of Class 2 and Class 5 Claims who have
claimed a bad debt deduction with respect to the Old Notes or who have claimed a
loss on the Exchange of Old Notes for Common Units, may be required to treat
gain, if any, on a subsequent disposition of the Common Units as ordinary income
up to the amount of such loss or deduction. The IRS has not issued regulations
implementing Code sec.108(e)(7)(E).
The federal income tax consequences of the receipt by Holders of the Class
2 Claims of certain contractual rights to antidilution protection are not clear.
However, the receipt of such rights may be treated as a taxable receipt of
property, in which case such Holders may be taxed on part or all of the value of
such rights.
The federal income tax treatment of Holders of Class 2 Claims who receive
additional Common Units in respect of their contractual antidilution protection
is not clear. However, the receipt of part or all of such Common Units may be
taxable. In the event that the receipt of part or all of such Common Units is
treated as being taxable, the recipient of such Common Units would generally
have ordinary income in an amount equal to the fair market value of the portion
of the Common Units the receipt of which is taxable and would receive a tax
basis in such portion of the Common Units equal to their fair market value.
Original Issue Discount Rules
Interest will not be paid in cash and instead will accrue on the New Senior
Notes issued in the Exchange through December 31, 1996. As a result, stated
interest payable on the New Senior Notes will constitute OID and will be taken
into account by Holders of the New Senior Notes as it accrues on a
constant-yield-to-maturity method, regardless of when it is paid and regardless
of the Holder's method of accounting. Because the stated yield on the New Senior
Notes is expected to be in excess of the applicable federal rate, it is not
anticipated that any portion of the stated principal of the New Senior Notes
will be recharacterized as OID. This discussion does not apply to any New Senior
Notes (Sunbelt IDB) issued under the Prepackaged Plan.
Holders of Class 6 Equity Interests
The federal income tax consequences to the Holders of Class 6 Equity
Interests resulting from the exchange of their Warrants for Common Units are not
clear.
Huntway intends to take the position that the exchange of a Warrant for
Common Units is a contribution of property to Huntway in exchange for a
partnership interest. If this characterization is upheld, a Holder of a Class 6
Equity Interest would not recognize gain or loss on such exchange under Code
sec.721 and such Holder would receive a tax basis in the Common Units received
equal to the tax basis of the Warrants deemed contributed to Huntway.
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There can be no assurance that the IRS will agree with this position. There
is a risk that the exchange of Warrants for Common Units is a taxable exchange
under Code sec.1001. In that case, a Holder of a Class 6 Equity Interest would
recognize gain on the exchange in an amount equal to the excess, if any, of the
fair market value of the Common Units received over the tax basis of such
Warrant Holder in its Warrants. A Holder of a Class 6 Equity Interest would
recognize loss on the exchange in an amount equal to the excess, if any, of the
tax basis of such Warrants over the fair market value of the Common Units
received. In each case, the Holder should receive a tax basis in the Common
Units equal to the fair market value of such Units.
There is a risk that the IRS will take the position that the Common Units
issued to Holders of Class 6 Equity Interests are not issued in exchange for the
Class 6 Equity Interests. Thus, the IRS might treat the Common Units as issued
in respect of the Old Collateralized Notes and the Old Subordinated Notes, with
consequences as described above. Alternatively, there is a risk that the IRS may
treat the Common Units issued to Holders of Class 6 Equity interests as issued
in exchange for the agreement of such Holders to support the Plan. In such case,
the fair market value of the Common Units so received may be treated as ordinary
income.
The federal income tax consequences of the receipt by Holders of the Class
6 Equity Interests of certain contractual rights to antidilution protection are
not clear. However, the receipt of such rights may be treated as a taxable
receipt of property, in which case such Holders may be taxed on part or all of
the value of such rights.
The federal income tax treatment of Holders of Class 6 Equity Interests who
receive additional Common Units in respect of their contractual antidilution
protection is not clear. However, the receipt of part or all of such Common
Units may be taxable. In the event that the receipt of part or all of such
Common Units is treated as being taxable, the recipient of such Common Units
would generally have ordinary income in an amount equal to the fair market value
of the portion of the Common Units the receipt of which is taxable and would
receive a tax basis in such portion of the Common Units equal to their fair
market value.
Allocations of Income, Gain, Expense and Loss
The following discussion assumes that Huntway continues to be treated as a
partnership for federal income tax purposes after the Exchange. See the
discussion above for a description of the risk that the Exchange could result in
Huntway being treated as a corporation for federal income tax purposes.
As one consequence of the admission of Holders of Class 2 Claims, Class 5
Claims and Class 6 Equity Interests as Holders of Common Units, current Holders
of Common Units will receive allocations of a smaller fraction of the income,
gain, expense and loss of Huntway than is currently the case.
In addition, in connection with the admission of Holders of Class 2 Claims,
Class 5 Claims and Class 6 Equity Interests as Holders of Common Units, Huntway
will revalue partnership property for capital account purposes (but not for tax
purposes) to its current fair market value as provided in the regulations under
Code sec.704(b). Pursuant to such revaluation, it is anticipated that the value
of partnership assets will be written down to an amount equal, in aggregate, to
the amount of Partnership debt remaining after the Exchange plus the fair market
value of the Common Units outstanding after the Exchange. This reduction will be
treated as a loss and will be allocated to the partners' capital accounts
accordingly, resulting in a reduction in the capital accounts of the Holders of
Common Units prior to the Exchange. In particular, it is anticipated that after
the revaluation of Huntway's property, the capital accounts of Holders of the
Common Units who are Limited Partners will be reduced to the fair market value
of such Holders' Units. The general partners' capital accounts are expected to
be negative after taking into account their share of the loss on revaluing
Huntway's property. However, it is anticipated that the general partners'
capital accounts will then be increased to the fair market value of such
Holders' Units by their share of the positive adjustments to capital accounts
attributable to the reduction of debt in the Exchange.
Huntway intends to allocate all depreciation deductions that are not
attributable to partner non-recourse debt or contributed property, as discussed
below, to all Holders of Common Units pro rata according to the number of Common
Units held. The law relating to such allocations is unclear and there is a risk
that the IRS
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may disagree with such an allocation. In particular, under Code sec.704(c), the
IRS may argue that a disproportionate amount of such depreciation should be
allocated (i) to Huntway's general partners (resulting in less depreciation
allocable to other Holders of Common Units, increasing the income or reducing
the loss allocated to such other Holders) or (ii) to the Holders of Common Units
prior to the Exchange (resulting in less depreciation for Common Units issued in
the Exchange, increasing the income or reducing the loss allocated to such
units).
There is a risk that if special allocations are required under Code
sec.704(c), Common Units held by different Holders could have different tax
characteristics to a potential purchaser of Common Units. However, Huntway
intends to make allocations to purchasers of Common Units in connection with
Huntway's Code sec.754 election in such a manner as to cause all Common Units to
be fungible from a tax perspective to a potential purchaser. There can be no
guarantee that the IRS will accept such allocations.
It is anticipated that the New Notes issued in the Exchange will be
nonrecourse debt. Such nonrecourse debt will be held by Holders of Class 2
Claims and Class 5 Claims who are or will become partners of Huntway in the
Exchange. Accordingly, all or a substantial portion of such debt may be "partner
nonrecourse debt" within the meaning of the regulations under Code sec.704(b).
As such, over the life of Huntway, certain depreciation and other deductions in
an amount up to the amount of the partner nonrecourse debt will be specially
allocated to the Holders of Class 2 Claims and Class 5 Claims holding such debt.
Any amounts so allocated will be subject to subsequent recapture on the
occurrence of certain events including the repayment of such partner nonrecourse
debt.
The reduction of Huntway's liabilities and the conversion of the remaining
liabilities from recourse to nonrecourse liabilities will trigger a deemed
distribution of cash to Huntway's general partners. To the extent that this
deemed distribution exceeds the general partners' tax basis in their Common
Units, the general partners will recognize gain and Huntway will be entitled to
increase the tax basis in its assets by an equal amount. Any depreciation
resulting from such increase will be shared pro rata among all Holders of Common
Units.
SECURITIES LAW CONSIDERATIONS
The offerings of securities to the Senior Lenders and to the Junior Lenders
pursuant to the Consensual Restructuring Agreement and the Prepackaged Plan were
or will be made without registration under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance on the exemptions provided in
Section 3(a)(9) of the Securities Act for certain exchanges of securities with
existing security holders and in Section 4(2) of the Securities Act for
transactions not involving any public offering.
HUNTWAY AND SUNBELT
Business and Properties of Huntway and Sunbelt
Huntway
Huntway was founded in 1979 as a California limited partnership and became
a Delaware limited partnership in 1988. The General Partner owns a 0.9% general
partner interest in Huntway. The General Partner and Special Managing Partner
are under common ownership. The Common Units are traded on the NYSE under the
symbol HWY'.
Huntway owns and operates two asphalt refineries located in Wilmington and
Benicia, California, serving the California region for over 15 years. The
refineries process primarily California crude oils to produce liquid asphalt for
use in road construction and repair, as well as other refined petroleum
light-end products such as gas oil, naphtha, kerosene distillate, and bunker
fuels. The refineries supply liquid asphalt to hot mix asphalt producers,
material supply companies, contractors and government agencies principally for
use in road paving in California, and to a lesser extent Arizona, Nevada, Utah,
Oregon and Mexico.
The Wilmington refinery and its related facilities are located on a
seven-acre site under a lease expiring on December 31, 2003. This ground lease
covers three contiguous parcels: (a) land owned by and leased
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directly from Industrial Asphalt on which Huntway's tank farm is located; (b)
land owned by the Southern Pacific Railroad leased to Industrial Asphalt for a
term ending June 1, 2032 on which the processing facility is located; and (c)
two strip parcels bordering the facility owned by Southern Pacific and leased to
Industrial Asphalt under a lease cancelable upon 30 days notice which are used
for access to the refinery. In addition, the ground lease grants Huntway a
non-exclusive license in Industrial Asphalt's rights of access to the properties
under an agreement with Southern Pacific. Huntway has the right to (i) purchase
from Industrial Asphalt an undivided interest in the land under the tank farm at
fair market value and (ii) assume the two Southern Pacific leases from
Industrial Alphalt. Wilmington has 108,00 barrels of crude oil storage on site.
Huntway also owns refined product tankage for storage of liquid asphalt and
other refined products which Huntway's management believes is adequate for its
needs. This Wilmington refinery has a refining capacity of 6,000 bpd.
The Benicia refinery is located adjacent to the Carquinez Strait, near the
San Francisco Bay. The refinery and related facilities are located on nineteen
acres of land owned by Huntway. Crude oil tankage at Benicia totals 216,000
barrels, while refined product tankage for storage of liquid asphalt and light
oils totals 326,000 barrels. To enhance Benicia's ability to receive crude oil
by water and to ship finished products by ship and barge, in 1984 Huntway leased
dock and loading facilities for a term expiring February 2031. The dock
facilities are connected to the refinery by two two-mile pipelines. The Benicia
refinery has a refining capacity of 9,000 bpd.
Huntway generates income principally through maintaining the margins
between prices for its refined products and the cost of crude oil. Most
competing refineries typically produce liquid asphalt as a residual by-product
from the refining of higher cost and high quality, light crude oil into products
such as gasoline. In contrast, Huntway's California refineries were designed
specifically for the production of liquid asphalt from lower cost, lower
quality, heavy crude oil produced in California.
Sunbelt
Sunbelt owns a refinery in Coolidge, Arizona located on a thirty-seven acre
parcel leased from the City of Mesa under a lease expiring on April 12, 2008
(with options to renew for up to an additional twenty years). The refinery,
which was built in 1989 but did not become fully operational until 1991, has a
capacity of 8,500 bpd and, in addition to the products made by the other
refineries, produced jet and diesel fuel. The Sunbelt refinery also has the
capacity to store 100,000 barrels of crude oil and 195,000 barrels of liquid
asphalt and other refined products.
The Sunbelt refinery was shut down in August 1993 due to poor margins at
the facility and a limitation on working capital availability. The refinery will
remain closed until such time that there is a significant improvement in market
conditions, a processing arrangement is established, or the refinery is sold.
Management currently intends to reopen the refinery as a terminal if and when
the market conditions sufficiently improve.
Products and Markets
Market Area
Huntway markets liquid asphalt primarily in California and, to a lesser
extent, in Nevada, Utah, Arizona, Oregon and Mexico. The Wilmington refinery
serves the Southern Market. The Benicia refinery serves most of the Northern
Market.
Liquid Asphalt
Liquid asphalt is Huntway's principal product and accounted for
approximately 54% of its revenues in 1995 and 1994. The principal uses of liquid
asphalt are in road paving and, to a lesser extent, in the manufacture of
roofing products. About 82% of Huntway's liquid asphalt sales consist of paving
grade liquid asphalt. The remaining 18% of Huntway's liquid asphalt is sold for
use in the production of roofing products such as tar paper and roofing
shingles, as a component of fuel oil sales and other specialty products.
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Paving grade liquid asphalt is sold by Huntway to hot mix asphalt
producers, material supply companies, contractors and government agencies. These
customers, in turn, mix liquid asphalt with sand and gravel to produce "hot mix
asphalt" which is used for road paving.
Demand for liquid asphalt is generally lowest in the first quarter of the
calendar year, slightly higher in the second and fourth quarters and
significantly higher in the third calendar quarter. In particular, liquid
asphalt sales in the Northern Market are somewhat more seasonal than sales in
the Southern Market (including Arizona) due to the rain and cold weather usually
experienced in the Northern Market during the winter months, which affects road
paving activities.
Gas Oil
Gas oil accounted for about 27% of Huntway's revenues during 1995 and 29%
during 1994. This product is used either as a blending stock to make marine
diesel fuel or bunker fuel or by other refiners as a feedstock for the
production of gasoline and other light petroleum products.
Kerosene Distillate and Naphtha
Kerosene distillate is primarily sold to customers to be used as a refinery
feedstock or diesel blendstock. Huntway also produces a gasoline range naphtha
which is sold to other refiners for blending or production of finished gasoline
products. Sales of kerosene distillate and naphtha accounted for approximately
18% and 19% of revenues in 1995 and 1994, respectively.
Jet Fuel
Jet fuel, formerly produced at the Sunbelt refinery, was sold to the
Defense Fuels Supply Command -- a branch of the U.S. Government -- and was used
as a military aviation fuel. Due to the closure of the Sunbelt refinery, Huntway
did not sell jet fuel in 1994 or 1995 and it accounted for less than 10% of
revenues in 1993.
Diesel Fuel
Diesel fuel, formerly produced at the Sunbelt refinery, was sold to
distributors as well as end users for use as a motor vehicle fuel. Sales of
diesel fuel accounted for less than 10% of revenues in 1993. With the closure of
the Sunbelt refinery, Huntway is no longer producing diesel fuel and sold none
in 1994 or 1995.
Bunker Fuel Blend Stock
This product is blended with lower viscosity blend stock to make finished
marine fuels used as a fuel by ocean going ships and barges and is sold
primarily to ship bunkering companies. Huntway did not sell bunker fuel in 1994
but sold a record amount in 1995. It accounted for less than 1% of revenues in
1993.
Crude Oil Supply
Huntway's California refineries require approximately 15,000 bpd of crude
oil when operating at their rated capacities. Total refinery crude oil
processing capacity in California is approximately 1.9 million bpd according to
the 1995 Refining Survey published by the Oil & Gas Journal. Refinery capacity
for the West Coast of the United States, including Hawaii, is 2.9 million bpd.
These refineries generally run an average of 90% of their capacity. California
refineries are supplied primarily by onshore and offshore California production
and by crude oil transported from Alaska with some imports from South America,
Mexico, the Far East and Persian Gulf. Current production of crude oil in
California and Alaska alone totals approximately 2.5 million bpd. Legislation
has been passed to allow for the export of Alaskan North Slope Crude oil.
Management does not believe that this will significantly affect Huntway's
ability to obtain crude oil nor will it have a material effect on Huntway's cost
of crude oil.
Huntway's California refineries are located near substantial crude oil
reserves. A significant portion of this crude oil is heavy, high sulfur crude
oil, which is well-suited for liquid asphalt production due to the higher
percentage yield of liquid asphalt per barrel.
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The Arizona refinery is located adjacent to the All-American Pipeline, a
common carrier pipeline which transports crude oil from California to Texas.
Huntway coordinates its purchases of crude oil to meet the supply needs of
all of its existing refineries. Huntway purchases a substantial portion of its
crude oil requirements under contracts with a variety of crude oil producers for
terms varying from 30 days to 90 days. In addition, Huntway supplements its
contract purchases with purchases of crude oil on the "spot" market.
Huntway's Business Strategy
Introduction
Huntway's business strategy is to maximize refining margins by (i)
increasing market share in the midst of consolidation in the industry, (ii)
increasing sales to growing markets such as Nevada, Oregon, Arizona and Mexico,
(iii) producing more higher margin asphalt products, (iv) maintaining strict
cost controls, and (v) capitalizing on its expertise in the asphalt industry.
See "PROPOSAL 1--Risk Factors" for a discussion of various risk factors relating
to Huntway's business, including competition and factors affecting demand for
asphalt such as government funding and adverse weather conditions.
Increasing Market Share
As a result of increased federal regulation of the asphalt industry and the
pursuit of greater production of higher margin light-end products by larger
refineries, Huntway believes that it can increase its market share. Due to its
low-cost structure and ability to service its customers quickly and efficiently,
Huntway is positioned to take advantage of this consolidation. By already
maintaining sales and customer bases in these existing markets, Huntway believes
that it can more easily obtain access to customers in need of secure asphalt
supplies.
To achieve better access to customers, Huntway intends to better prepare
itself for increased demand and production in the future by making capital
investments necessary to increase storage capacity at the California refineries.
The Company believes that the demand for polymer-based asphalts will continue to
grow in California as it has in neighboring states. Polymer-based asphalts use
recycled materials and produce a product that lasts longer than conventional
asphalt. Accordingly, the Company has expended approximately $1.8 million in
1996 to build three new 3,500 barrel polymer asphalt storage facilities
including associated hardware at its Northern California refinery.
In addition, as the Company has historically sold out of asphalt at the end
of each summer season at its Northern California refinery, it plans on
constructing a new 80,000 conventional asphalt storage facility in 1997 in order
to increase potential sales activity. This project is estimated to cost
approximately $800,000.
Because no principal or interest payments were required in 1996 under the
Company's agreements with its senior lenders, the Company was available to
finance these projects in 1996. This ability to finance the above described
expenditures was not available in prior years due to excess debt levels and debt
service requirements.
Increasing Sales to Growing Markets
The Company has historically sold asphalt into Nevada, Arizona and Oregon.
Growth in the population of these states translates into increased construction
activity which usually results in increased road construction. Huntway believes
that sales may grow within markets such as neighboring states and Mexico.
The passage of NAFTA and the Company's relationship with a major supplier
of paving asphalt in Mexico resulted in significant sales of asphalt to Mexico
in 1994. Sales to Mexico declined in 1995 and remained depressed through the
first half of 1996 due to the devaluation of the Mexican peso. The Company
believes that demand for imported asphalt will increase in future years as the
Mexican economy improves and the Mexican peso stabilizes. The Company is
confident it will be able to meet this increased demand when it occurs as
additional capital expenditures will not be required. However, a significant
rise in crude prices may
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result in the Company having inadequate letter of credit availability to
collateralize required crude expenditures and result in the Company experiencing
difficulty in meeting increased demand for crude oil. Accordingly, growth within
the Mexican market is uncertain due to Mexico's recent recession and the
devaluation of the Mexican peso.
Producing More Higher Margin Asphalt Products
As the trend towards use of higher quality asphalt continues, Huntway has
the opportunity to provide more of its specialized asphalt products to a larger
customer base. By offering polymer-modified asphalt, a specialized product,
Huntway enables its customers to increase the longevity of their end product,
limit their overall investment in maintenance and improve product quality.
Huntway believes that a key to its future profitability will be in the
development and sale of higher margin asphalt by further capitalizing on its
reputation for making specialized asphalt products. Consistent with this
objective, Huntway has already become a leader in producing modified asphalt and
specialized cutback asphalt for use in asphalt paving and roofing applications.
Huntway's long-term objective is to reduce the percentage of commodity asphalt
products that it produces and increase its sales of higher margin products.
Huntway considers itself a market leader in specialty asphalt production, with
sales of polymer-modified and other specialized asphalt having grown by over 11
fold from 1992 to 1994.
Maintaining Strict Cost Controls
Huntway believes cost control is an important element of its operations.
Huntway operates its refineries from a single management unit in order to
maximize operating effectiveness and minimize supervisory costs. The refinery
managers, to whom the executive officers have delegated broad operating
authority consistent with Huntway's strategic plan and operating and capital
budgets, manage each of the units. The refinery managers, with over 20 years of
experience on average, are responsible for the day-to-day operation of the
refineries, including setting office policy and procedures and managing refinery
operations. Although the executive officers make all final investing, budgeting,
planning, accounting, engineering, pricing, contracting, purchasing and staffing
level decisions, the refinery managers contribute significantly to all such
activities. In addition, each of the executive officers and the general managers
review the monthly financial statements, which compare each of Huntway's sales
and expense items to the applicable amounts for the prior month, same month of
the prior year and budget for the month, as well as Huntway's year-to-date
performance versus the same period for the prior year and the budget.
Huntway is continually reevaluating all of its operations to reduce costs,
improve profitability and to provide a sound basis for future operations. In the
past, this evaluation resulted in the decision to temporarily suspend operations
at the Sunbelt refinery and to reduce corporate overhead and fixed costs by
reducing insurance, property, tax and health care costs, wage increases, bonuses
and eliminating company cars.
Capitalizing on Expertise to Enhance Margins
In the 15 years that Huntway has been a leading producer of asphalt, its
management has developed solid ties with not only the state and local
governments and private businesses that it serves, but the local communities in
which these buyers operate as well. Huntway believes that it has among the most
experienced people in the industry with strong relationships with its customers
and has an outstanding reputation for quality products. Huntway is always
seeking to assist its customers in developing more durable and cost-effective
products that keep pace with technological improvements and seeks to grow its
business by capitalizing on its reputation for quality products, engineering
expertise and technical knowledge.
Huntway is the only asphalt marketer in its geographic area to specialize
and concentrate on such development and technology. The Company has signed a
licensing agreement with Polyphalt, Inc. of Toronto, Canada to supply Huntway
with technology to improve the performance and durability of its asphalt
products. This technology to improve the performance and durability of its
asphalt products will be financed primarily through a cost savings formula in
which Huntway will share its cost savings with Polyphalt. Huntway has full
laboratory facilities at each of its refineries to assist customers in
developing new and specialized products.
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Unlike its competitors, these internal facilities and its licensing agreement
afford Huntway expertise at reasonable cost.
Environmental Matters
Huntway's refinery activities involve the transportation, storage, handling
and processing of crude oil and petroleum products which contain substances
regulated under various federal and state environmental laws and regulations.
Huntway is also subject to federal, state and local laws and regulations
relating to air emissions and disposal of wastewater and hazardous waste, as
well as other environmental laws and regulations, including those governing the
handling, treatment, release and cleanup of hazardous materials and wastes.
Huntway has from time to time expended significant resources, both
financial and management, to comply with environmental regulations and
permitting requirements and anticipates that it will continue to be required to
expend financial and management resources for this purpose in the future.
Stringent new environmental regulations have been adopted recently which will
require most refiners in Huntway's market area to expend substantial sums in
order to comply. However, these regulations principally impact refiners which
produce motor vehicle fuels which Huntway does not produce. Compliance with such
regulations and requirements has not had a material adverse effect on the
assets, financial position or results of operations of Huntway. Huntway
estimates that its environmentally-related remediation expenditures in 1996 will
total approximately $150,000 with such expenditures totalling $65,000 in 1995
and $60,000 in 1994. Environmentally-related remediation expenditures in 1994
and 1995 were less than anticipated due to permitting delays resulting from
regulatory agencies. This anticipated increase in costs in 1996 is primarily
associated with the closure of a hazardous waste surface impoundment at its
Wilmington refinery including remediation costs associated with removing
approximately 20 to 30 drums improperly buried at the Wilmington refinery site
prior to its construction.
Employees
Huntway currently has 71 full-time and 12 part-time employees. Huntway's
employees are not represented by a union, and management believes that labor
relations have been excellent.
Management and Operating Committee
Operating Committee
The General Partner, rather than a board of directors, manages the Huntway
Group's business and affairs. Similarly, the General Partner is itself a
partnership and its business and affairs are managed by its general partner,
Reprise Holdings, Inc. ("Reprise"), rather than a board of directors. However,
Reprise, as sole general partner of the General Partner, has established an
operating committee to consult with Reprise with respect to the management of
the General Partner and the Huntway Group, and has elected the following
individuals as members of the Operating Committee:
Juan Y. Forster has been principally employed as the President and Chief
Executive Officer of Huntway since 1979 and has been an industry executive since
1964. Prior to 1979, Mr. Forster served as a vice president at Douglas Oil
Company and Conoco from 1964 to 1979.
Samuel M. Mencoff has been principally employed as a Vice President of
Madison Dearborn Partners, Inc. since January 1993. Prior to January 1993, Mr.
Mencoff served as Vice President of FCCC. Mr. Mencoff is the sole director,
President and Treasurer of Reprise and is a general partner of MDP.
Justin S. Huscher has been principally employed as a Vice President of
Madison Dearborn Partners, Inc. since January 1993. Prior to January 1993, Mr.
Huscher served as Senior Investment Manager of First Chicago Investment
Corporation, an affiliate of FCCC. Mr. Huscher is Vice President and Secretary
of Reprise and is a general partner of MDP.
109
<PAGE> 127
Raymond M. O'Keefe has been principally employed for the past three years
as President and Chief Executive Officer of Rokmanage, Inc., a management
services firm. For that period and more than the last five years, Mr. O'Keefe
has been employed as President and Chief Executive Officer of A.J. Land Company
and Harvard Gold Mining Company.
Executive Management
Huntway's executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ---------------------------- ---- --------------------------------------------------------
<S> <C> <C>
Juan Y. Forster............. 60 President & Chief Executive Officer
Lucian A. Nawrocki.......... 50 Executive Vice President of Asphalt Marketing
Warren J. Nelson............ 46 Executive Vice President and Chief Financial Officer
Terrance L. Stringer........ 54 Executive Vice President of Supply and Planning
</TABLE>
Lucian A. Nawrocki has been employed as the Executive Vice President of
Asphalt Marketing since 1993. From 1982 to 1993 he served as Manager of Asphalt
Sales at the Wilmington Refinery.
Warren J. Nelson has been principally employed as the Executive Vice
President and Chief Financial Officer of Huntway since 1993. From 1990-1992, he
served as Executive Vice President and Chief Financial Officer of Everest &
Jennings International Ltd. In 1990, he served as Acting Chief Financial
Officer, Controller and Chief Accounting Officer of Smith International, Inc.,
and from 1988-1989 he served as Controller and Chief Accounting Officer of Smith
International, Inc.
Terrance L. Stringer has been principally employed as the Executive Vice
President of Supply and Planning since 1992. From 1988 to 1991, he served as
Vice President, Supply and Marketing with Golden West Refining and prior to that
served as corporate officer and in a variety of management positions with TOSCO
Corporation for nine years, after spending nine years with Standard Oil of
California and Chevron Corporation.
OPERATING COMMITTEE COMPENSATION
The Company does not pay any salaried employee of the Company additional
compensation for service on the Operating Committee, and does not the Company
pay any fee for participation on, or as a result of, attending Operating
Committee meetings for those members of the Operating Committee who are not
salaried employees of the Company. The Committee does reimburse Operating
Committee members for out-of-pocket costs associated with attending Operating
Committee meetings (such as travel costs, food and lodging).
MEETINGS OF THE OPERATING COMMITTEE
During the calendar year 1995, the Operating Committee held four meetings.
In 1995, the Audit Committee met one time and the Compensation and Benefits
Committee did not meet. No other sub-committees of the Operating Committee exist
other than the Audit and Compensation and Benefits Committees.
AUDIT COMMITTEE
The Operating Committee maintains a standing Audit Committee. The purpose
and objective of the Audit Committee is to provide assistance and advice to the
Audit Committee in connection with the Company's accounting, auditing and
reporting practices and to facilitate communication between the Operating
Committee and the Independent auditors of the Company. The Audit Committee meets
periodically with management and external auditors and reviews the Company's
accounting policies and internal controls. The Audit Committee recommends the
firm of independent accountants retained by the Company.
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<PAGE> 128
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Mencoff, O'Keefe and Forster are members of the Compensation and
Benefits Committee. During 1995, neither Mr. Mencoff or Mr. O'Keefe were
officers or employees of the Company, or any of its subsidiaries, nor did any of
them have any relationship with the Company requiring disclosure by the Company
under Item 404 of Regulation S-K. From 1987 through the present, Mr. Forster has
been President and Chief Executive Officer of the Company.
Executive Compensation
CASH COMPENSATION
The following summary compensation table shows certain compensation
information for the Chief Executive Officer and the four other most-highly
compensated officers. The information includes the dollar value of base
salaries, bonus awards and long-term incentive plan payments, the number of
stock options granted and certain other compensation paid during the fiscal
years ended December 31, 1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
--------------------------------------- COMPENSATION
OTHER ------------
SALARY BONUS ANNUAL OPTIONS
NAME AND PRINCIPAL POSITION YEAR $ $ COMPENSATION(1) GRANTS(2)
- --------------------------------------- ---- -------- ------- --------------- ------------
<S> <C> <C> <C> <C> <C>
J. Y. Forster.......................... 1995 $260,474 $ -- $18,500 100,000
President and Chief Executive Officer 1994 256,000 -- -- --
1993 252,000 40,000 -- 75,000
L. A. Nawrocki......................... 1995 135,000 -- -- 75,000
Executive Vice President Asphalt 1994 129,000 -- -- --
Marketing 1993 110,000 35,000 -- 25,000
W. J. Nelson........................... 1995 155,000 -- 18,500 100,000
Executive Vice President and Chief 1994 155,000(3) -- -- --
Financial Officer 1993 111,000 35,000 -- 125,000
T. L. Stringer......................... 1995 162,000 -- 18,500 75,000
Executive Vice President Supply and 1994 159,000 -- -- --
Planning 1993 143,000 35,000 -- 50,000
W. G. Darnell.......................... 1995 110,000 -- -- 50,000
Vice President and General Manager -- 1994 104,000 -- -- --
Benicia 1993 95,000 25,000 -- 20,000
</TABLE>
- ---------------
(1) All amounts shown represent increased monthly compensation of $1,850
beginning March 1995 for Mr. Forster, Mr. Nelson and Mr. Stringer in lieu
of receiving Company-paid automobiles. Company-paid automobiles were
provided for Forster, Nelson and Stringer in 1993, 1994 and through
February 1995 and are still currently being provided to Mr. Nawrocki and
Mr. Darnell as they were in 1993, 1994 and 1995.
(2) The 1993 grants vested on March 7, 1996. 1995 grants will vest on August 22,
1998.
(3) Nelson began employment at Huntway on March 8, 1993.
111
<PAGE> 129
The following table sets forth the option grants made to the named
executive officers of Huntway during the last fiscal year. There were no other
long term incentive plan grants made during 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(2)
OPTIONS IN FISCAL PRICE EXPIRATION -------------------
NAME GRANTED(1) YEAR $ PER UNIT DATE 5% 10%
- --------------------------------- ---------- ----------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
J. Y. Forster.................... 100,000 17% $ 0.625 08/22/05 $100,400 $196,900
President and Chief Executive
Officer
L. A. Nawrocki................... 75,000 13% 0.625 08/22/05 75,300 147,700
Executive Vice
President -- Asphalt Marketing
W. J. Nelson..................... 100,000 17% 0.625 08/22/05 100,400 196,900
Exe78cutive Vice President and
Chief Financial Officer
T. L. Stringer................... 75,000 13% 0.625 08/22/05 75,300 147,700
Executive Vice
President -- Supply and
Planning
W. G. Darnell.................... 50,000 8% 0.625 08/22/05 50,200 98,400
Vice President and General
Manager -- Benicia
Total.................. 400,000 68% $401,600 $787,600
======= == ======== ========
</TABLE>
- ---------------
(1) Non-qualified options granted at 100% of full market value at date of grant.
Options are exercisable three years from date of grant or August 22, 1998.
In the event of any change of control of the Company, as defined, then each
option will immediately become full exercisable as of the date of the
change of control.
(2) 5% compounded growth results in final unit price of $1.63 and 10% compounded
growth results in final unit price of $2.59.
112
<PAGE> 130
The following table sets forth the aggregate options exercised in the last
fiscal year and fiscal year end option values for the named executive officers.
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
SHARES UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT FISCAL
ACQUIRED OPTIONS AT FISCAL YEAR END YEAR END(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE EXERCISED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ---------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Y. Forster.................. -0- -0- 78,750 100,000 -0- -0-
President and Chief Executive
Officer
L. A. Nawrocki................. -0- -0- 27,500 75,000 -0- -0-
Executive Vice President --
Asphalt Marketing
W. J. Nelson................... -0- -0- 125,000 100,000 -0- -0-
Executive Vice President and
Chief Financial Officer
T.L. Stringer.................. -0- -0- 50,000 75,000 -0- -0-
Executive Vice President --
Supply and Planning
W. G. Darnell.................. -0- -0- 20,000 50,000 -0- -0-
Vice President and General
Manager -- Benicia
--- --- ------- ------- --- ---
Total................ -0- -0- 301,250 400,000 -0- -0-
=== === ======= ======= === ===
</TABLE>
- ---------------
(1) Based on the closing price of $.437 of the common units on the New York
Stock Exchange on December 31, 1995.
Financial Projections
In connection with the Prepackaged Plan, Huntway prepared the Projections
through December 31, 2000 based upon the successful implementation of that
restructuring, a copy of which is set forth in Appendix E hereto.
The estimates and assumptions underlying the Projections are inherently
uncertain and, though considered reasonable by Huntway, are subject to
significant business, economic and competitive uncertainties, most of which are
beyond the control of Huntway. See "RISK FACTORS." There can be no assurance
that the Projections will be realized and actual results may vary materially
from those shown. The Projections were not prepared with a view to public
disclosure or with a view toward compliance with the published guidelines of the
American Institute of Certified Public Accountants regarding projections or
forecasts. The independent auditors of Huntway have not examined, reviewed,
compiled or performed any procedures with respect to such projections. Inclusion
of the Projections herein should not be regarded as a representation by Huntway
or by any other entity or person that the projected results will be achieved and
none of such other entities or persons assumes any responsibility for the
accuracy of such information. Huntway does not intend to update or otherwise
revise the Projections to reflect circumstances existing after the date hereof
or to reflect the occurrence of unanticipated events, even in the event that the
assumptions underlying the projections are shown to be in error, except as
required by applicable law prior to the Consummation of the Prepackaged Plan.
Accounting Treatment
The accounting treatment for the Prepackaged Restructuring will follow the
provisions of the American Institute of Certified Public Accountants Statement
of Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" (SOP 90-7). The Company believes that it will not meet the
criteria set forth in SOP 90-7 for "fresh-start reporting" upon emergence from
the Prepackaged Chapter 11 Case because Huntway believes it fails to satisfy at
least one of the two conditions set forth in paragraph 36 of
113
<PAGE> 131
SOP 90-7. The management decisions of Huntway are made by the General Partner.
The General Partner's role will not change as a result of the issuance of Common
Units under the Prepackaged Plan.
THE GENERAL PARTNER HAS APPROVED AND RECOMMENDS TO ALL BENEFICIAL INTEREST
HOLDERS TO VOTE THE BALLOT TO ACCEPT PROPOSAL 1.
PROPOSAL 2
APPROVAL OF THE ISSUANCE OF COMMON UNITS UPON CONSUMMATION OF AN OUT-OF-COURT
RESTRUCTURING ON TERMS SUBSTANTIALLY SIMILAR TO THE CONSENSUAL RESTRUCTURING
AGREEMENT
BACKGROUND AND REASONS FOR SEEKING APPROVAL TO ISSUE ADDITIONAL COMMON UNITS
There are currently 11,556,250 Common Units outstanding and listed for
trading on the New York Stock Exchange ("NYSE"). Section 4.4 of the Partnership
Agreement grants the General Partner the authority to cause the Company to issue
additional Common Units. However, Section 312.03 of the NYSE Rules requires
Unitholder approval of the issuance of Common Units as a condition to the
listing of such securities where the number of Common Units to be issued (in a
transaction other than a public offering) is equal to or in excess of 20% of the
number of previously outstanding Common Units.
As more fully described in Proposal 1 of this Consent Solicitation
Statement, the Prepackaged Plan contemplates the issuance of up to 13,786,404
Common Units to the Holders of the Company's current outstanding Warrants and
indebtedness and the issuance of options to acquire an aggregate of
approximately 2,800,000 Common Units to members of the Company's management. See
Proposal 1 -- "Classification and Treatment of Claims and Equity Interests." The
terms of the Consensual Restructuring Agreement similarly provide for the
issuance of up to 13,786,404 Common Units to the Company's lenders and Warrant
Holders and the issuance of options to acquire an aggregate of approximately
2,800,000 Common Units to members of the Company's management. The dilutive
effect of such issuances on the Company's current Unitholders will be
substantially the same whether such additional Common Units and Options are
issued pursuant to the Prepackaged Plan or pursuant to the Consensual
Restructuring Agreement or a similar restructuring agreement. Each of the
Prepackaged Plan and the Consensual Restructuring Agreement provide for an
aggregate distribution of newly-issued Common Units equal to 54.4% of the equity
of the reorganized Company upon consummation of the restructuring contemplated
by the Prepackaged Plan, excluding options to acquire Common Units to be issued
to the Company's management. With respect to such issuances, the only difference
between the Prepackaged Plan and the Consensual Restructuring Agreement is the
class of persons to whom Common Units representing 50% of the fully diluted
equity of the reorganized Company are distributed. The terms of the Prepackaged
Plan provide that 25% of Common Units are to be distributed pro rata among the
Holders of the Warrants and 25% are to be distributed to the Holders of Class 2
Claims, while the Consensual Restructuring Agreement contemplates that all 50%
of such Common Units are to be distributed to the Senior Lenders. The Warrants
were originally issued to the then existing Senior Lenders pursuant to the
General Restructuring Agreement dated June 22, 1993 between Huntway, the General
Partner, the Special Managing Partner, the then existing Senior Lenders and the
Junior Lenders.
This Proposal 2 seeks Unitholder approval, in accordance with the NYSE
Rules, of the issuance of up to 13,786,404 Common Units (and the issuance of up
to approximately 2,800,000 Common Units upon exercise of options granted to
Company management) to be issued in connection with consummation of the
Consensual Restructuring Agreement or another out-of-court restructuring on
substantially similar terms. This Proposal 2 is not contingent on acceptance and
confirmation of the Prepackaged Plan described in Proposal 1 of this Consent
Solicitation Statement. Similarly, the confirmation and consummation of the
Prepackaged Plan is not contingent on Unitholder approval of the issuance of
additional Common Units sought by this Proposal 2. However, consummation of the
out-of-court restructuring on the terms (or on substantially similar terms) as
set forth in the Consensual Restructuring Agreement is contingent on Unitholder
approval of this Proposal 2.
114
<PAGE> 132
The offering of Common Units to the Senior Lenders pursuant to the
Consensual Restructuring Agreement was made without registration under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance on the
exemptions provided in Section 3(a)(9) of the Securities Act for certain
exchanges of securities with existing securityholders and in Section 4(2) of the
Securities Act for transactions not involving any public offering.
EFFECTS OF ISSUANCE
The issuance of up to 13,786,404 Common Units (and the issuance of up to
approximately 2,800,000 Common Units upon exercise of options granted to Company
management) pursuant to the Consensual Restructuring Agreement (or other
out-of-court restructuring agreement) will be dilutive to current Holders of
Common Units and have certain other effects on the Company's results of
operations. See HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS; see MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCING CONDITION; see
THE SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA; see THE CONDENSED PRO FORMA
FINANCIAL INFORMATION.
REQUIRED VOTE
The affirmative vote of the Holders of a majority of the combined voting
power of all of the outstanding Common Units is required to approve Proposal 2.
THE GENERAL PARTNER HAS APPROVED AND RECOMMENDS TO THE UNITHOLDERS THAT
THEY CONSENT TO THIS PROPOSAL 2.
PROPOSAL 3
ADOPTION OF THE HUNTWAY INCENTIVE OPTION PLAN
BACKGROUND AND PURPOSE OF THE HUNTWAY INCENTIVE OPTION PLAN
Proposal 3 seeks Unitholder approval of the Huntway Incentive Option Plan
which provides for the issuance of up to 4,000,000 Unit Options to eligible
employees of the Company. The Huntway Incentive Option Plan is not subject to
the Employee Retirement Income Security Act of 1974, as amended, and is not
qualified under Section 401(a) of the Code.
Each of the Prepackaged Plan and the Consensual Restructuring Agreement
provides for the issuance to the Company's management of Unit Options upon
consummation of the related debt restructuring. In each case, such issuance
would be pursuant to the Huntway Incentive Option Plan if approved. However,
failure to obtain the requisite Unitholder approval of the Huntway Incentive
Option Plan will not prevent the issuance of Unit Options in accordance with the
Prepackaged Plan or the Consensual Restructuring Agreement or other
restructuring agreement (as the case may be). Unitholder approval of the Huntway
Incentive Option Plan is being sought (i) to enable the Unit Options granted
under the Huntway Incentive Option Plan pursuant to the Prepackaged Plan to be
qualified under Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), which rule exempts certain qualified
transactions from the short-swing matching and recovery provisions of Section
16(b) of the Exchange Act, and (ii) to comply with NYSE Rule 312, which requires
Unitholder approval of most plans or arrangements pursuant to which Common Units
may be issued to management of the Company as a condition to the listing of such
Common Units for trading on the NYSE.
Consistent with the foregoing, upon consummation of either the Prepackaged
Plan or the Consensual Restructuring Agreement (or any other out-of-court
restructuring agreement on substantially identical terms to the foregoing), the
Company currently estimates that options to purchase an aggregate of 2,815,850
Common Units will be issued to approximately 20 members of the Company's
existing management employees. Of such total options, options to purchase an
aggregate of 1,022,000 Common Units will be issued in replacement of the
outstanding unit options to purchase the same number of Common Units currently
held
115
<PAGE> 133
by such persons (which outstanding options will be canceled upon consummation of
the debt restructuring). The newly-issued replacement options will have the same
terms as the outstanding unit options, except that the newly-issued replacement
options will all vest on August 22, 1998 and will have an exercise price of
$0.50 per Common Unit (reduced from the $1.00 and $0.625 exercise prices per
Common Unit for the outstanding unit options). Of such total options, options to
purchase an aggregate of 1,793,850 Common Units will be issued with an exercise
price of $0.50 per Common Unit, will have a term of 10 years and will vest on
August 22, 1998. The issuance of such Unit Options will result in the Company's
management holding, upon consummation of the debt restructuring, Unit Options
which in the aggregate represent 10% of the fully diluted equity of the
restructured Company. The terms of the Prepackaged Plan and the Consensual
Restructuring Agreement also provide that the management employees to whom such
Unit Options are issued are also entitled to receive additional options from
time to time in the future, as necessary to prevent dilution to the
fully-diluted equity ownership represented by such Unit Options through the
issuance by the Company of Common Units to Holders of the Company's outstanding
indebtedness, whether as payment of interest on such indebtedness or as
anti-dilution protection granted to such debt holders.
The Huntway Incentive Option Plan was adopted with the goal of providing
meaningful incentive compensation to the Company's management in order to
attract and retain high quality individuals in the Company's management.
Salaries of management have been essentially flat since 1993, and members of
management have received no bonuses since 1993. In connection with the debt
restructuring and the negotiation of the Consensual Restructuring Agreement, the
Company's senior lenders requested that appropriate incentive compensation
arrangements be established for the Company's management and that the interest
in the fully diluted equity represented by outstanding options not be diminished
by the equity issuances pursuant to the terms of the Consensual Restructuring
Agreement and the Prepackaged Plan. As part of the negotiations among the
Company and its senior and junior lenders regarding the terms of the debt
restructuring, it was determined that interest on the New Junior Notes would be
payable only through the issuance of Common Units, and that any such issuances
of Common Units should not be dilative to the equity interests of the senior
lenders (including the equity interests received pursuant to the Prepackaged
Plan by the holders of Warrants, which were initially issued to the Company's
senior lenders), the junior lenders or management. Thus, the terms of the
Prepackaged Plan provide for the issuance in the future of additional Unit
Options to members of management, as described above. The exercise price of each
such option shall be the market price of the Common Units used to determine the
number of Common Units to be issued in payment of interest on the New Junior
Notes, and such Unit Options will therefore cause dilution to the interests of
other Common Unit holders at such time to any extent greater than the dilution
caused by the issuance of options at market value or the sale of Common Units
for the prevailing market price. Upon consummation of the Prepackaged Plan,
options to purchase approximately 1,184,150 Common Units will be available for
future grants under the Huntway Incentive Option Plan, including any such grants
made to prevent dilution as described above.
The additional Unit Options to be issued to members of management pursuant
to this anti-dilution protection will have a term of ten years and will have an
exercise price equal to the market price per Common Unit used to determine the
number of Common Units to be issued in payment of accrued interest on the New
Junior Notes.
The following table sets forth the aggregate numbers of Unit Options
anticipated to be granted to the officers of the Company upon consummation of
the Prepackaged Plan or the Consensual Restructuring Agreement.
116
<PAGE> 134
<TABLE>
<CAPTION>
NAME POSITION NUMBER OF UNIT OPTIONS
- ----------------------------------- ----------------------------------- ----------------------
<S> <C> <C>
Juan Y. Forster.................... President and Chief Executive
Officer 563,750
Lucian A. Nawrocki................. Executive Vice President, Asphalt
Sales 272,500
Warren J. Nelson................... Executive Vice President and Chief
Financial Officer 615,000
Terrance L. Stringer............... Executive Vice President 295,000
William G. Darnell................. Vice President & General
Manager/Benicia 192,500
</TABLE>
Approval of the Huntway Incentive Option Plan is not contingent on
acceptance and confirmation of the Prepackaged Plan as described in Proposal 1
of this Consent Solicitation Statement. Conversely, approval of the Huntway
Incentive Option Plan pursuant to this Proposal 3 is not a prerequisite to
either confirmation and consummation of the Prepackaged Plan or consummation of
the Consensual Restructuring Agreement (or similar out-of-court restructuring
agreement). Therefore, non-approval by Unitholders of the Huntway Incentive
Option Plan will have little or no immediate impact on their investment.
The following summary of the material terms of the proposed equity
incentive plan is qualified in its entirety by reference to the Huntway
Incentive Option Plan attached hereto as Appendix C.
TERM
The Huntway Incentive Option Plan will terminate on December 31, 2006
unless sooner terminated by the General Partner in accordance with the
Partnership Agreement. Termination of the Huntway Incentive Option Plan will not
affect grants made prior to termination, but no grants will be made after
termination.
ADMINISTRATION
The Huntway Incentive Option Plan will be administered by the Operating
Committee or by a committee of the Operating Committee (the "Option Committee")
composed of two or more persons who meet the eligibility conditions provided in
Rule 16b-3(b)(3) promulgated under the Exchange Act. Members of the Option
Committee are appointed by the General Partner and serve until their earlier
removal or resignation.
Subject to the terms of the Huntway Incentive Option Plan, the Option
Committee has authority to (i) select employees to participate in the Huntway
Incentive Option Plan, (ii) determine the form and substance of grants and the
conditions and restrictions, if any, subject to which grants will be made and
become payable under the Huntway Incentive Option Plan, (iii) interpret the
Huntway Incentive Option Plan, (iv) adopt, amend or rescind such rules and
regulations for carrying out the Huntway Incentive Option Plan, and (v) correct
any defect or omission or reconcile any inconsistency in the Plan or in any
right granted thereunder to the extent the Option Committee deems desirable to
carry out the Plan or any right granted thereunder into effect.
ELIGIBILITY
Officers and key employees of the Company and its subsidiaries selected by
the Option Committee may participate in the Huntway Incentive Option Plan.
Selection for participation with respect to one form of award under the Huntway
Incentive Option Plan does not automatically result in selection for
participation with respect to other forms of awards under the Huntway Incentive
Option Plan. The Option Committee is responsible for determining which employees
may participate in the Huntway Incentive Option Plan.
SECURITIES SUBJECT TO THE HUNTWAY INCENTIVE OPTION PLAN
The Huntway Incentive Option Plan will permit awards relating to up to
4,000,000 Common Units. The Common Units to be delivered under the Huntway
Incentive Option Plan may consist, in whole or in part, of authorized but
unissued Common Units not reserved for any other purpose. If any grant made
pursuant to the Huntway Incentive Option Plan terminates, expires or lapses for
any reason, any Common Units subject to such grant shall be made available for
grant. In the event of any changes in the Common Units or the capitalization of
the Company, such as splits or similar events described in the Huntway Incentive
Option Plan, the Option Committee may make appropriate adjustments in the number
of Common Units subject to
117
<PAGE> 135
grants theretofore made to participants, in the exercise price per Common Unit
of Unit Options theretofore granted to participants and in the number and kinds
of units which may be distributed under the Huntway Incentive Option Plan.
EFFECT OF TERMINATION OF EMPLOYMENT OR CHANGE IN CONTROL ON GRANTS
The rights of participants with respect to grants under the Huntway
Incentive Option Plan following termination of employment for any reason or a
"change in control" of the Company (as defined in the Huntway Incentive Option
Plan) shall be in accordance with the terms of the Huntway Incentive Option Plan
and rules established by the Committee.
UNIT OPTIONS
The Huntway Incentive Option Plan authorizes grants of Unit Options to
participants from time to time as determined by the Option Committee. The Option
Committee shall specify whether or not any Unit Option granted pursuant to the
Huntway Incentive Option Plan is intended to be an incentive option as described
in Section 422 of the Code. Options granted thereunder that are not incentive
options are referred to as nonqualified options. All Unit Options granted
pursuant to the Huntway Incentive Option Plan shall have an exercise price that
is not less than the fair market value of the Common Unit at the time any such
Unit Option is granted and none may be exercised more than 10 years from the
date of grant. The Option Committee may establish dates on which installment
portions of any Unit Option may be exercised during its terms. Payment for
Common Units received upon exercise of an Unit Option granted pursuant to the
Huntway Incentive Option Plan may be made in cash or, in the discretion of the
Option Committee, in Common Units, in a combination of Common Units and cash, by
delivery or the optionee's promissory note or in such other manner as determined
by the Option Committee.
Employees participating in the Huntway Incentive Option Plan will not pay
any brokerage or similar commissions in connection with the exercise of options
granted thereunder. Any right to purchase Common Units under the Huntway
Incentive Option Plan may not be transferred and any such rights may be
exercised during the lifetime of the person to whom they were granted only by
such person and after death, by his or her legal representative.
AMENDMENT, TERMINATION AND ADJUSTMENT
The Huntway Incentive Option Plan may be amended or terminated by the
General Partner at any time. The Huntway Incentive Option Plan provides that in
the event of a reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or other event causing
a change in Huntway's capitalization, appropriate changes in the number or type
of Common Units authorized by the Plan may be made by the Option Committee to
prevent dilution or enlargement of rights.
NO EMPLOYMENT RIGHTS
The Huntway Incentive Option Plan does not confer upon any employee the
right to continued employment by Huntway, and the Huntway Incentive Option Plan
does not affect Huntway's right to terminate the employment of, or performance
of services by, any participant at any time and for any reason.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a brief summary of certain
federal income tax consequences of the acquisition and exercise of the Unit
Options and ownership of Common Units received upon exercise of the Unit
Options. The Code provisions relating to such tax consequences are subject to
varying interpretations. Such provisions and such interpretations are subject to
change at any time and such a change could be retroactive and affect the
validity of the following discussion. Moreover, the tax treatment of individual
unit option holders may depend upon their specific situations; Huntway executive
officers should in particular note that it is possible that the tax treatment
for them may differ from the tax treatment described herein under the
circumstances identified under "Short Swing Profit Liability Considerations"
below.
118
<PAGE> 136
Holders of Existing Unit Options are urged to consult with, and must rely
upon, their own tax advisors with respect to the tax consequences (including
those under foreign, federal, state and local tax laws) associated with the
acquisition, disposition or exercise of an Existing Unit Option and the
ownership and disposition of Common Units received upon exercise of a Unit
Option.
The following discussion does not address foreign, state or local tax
consequences and assumes that the option holder is a United States citizen and a
United States resident. The following discussion also assumes that the exercise
price to acquire Common Units according to the terms of the Unit Options will be
paid solely in cash.
GRANT OF UNIT OPTIONS
A Holder of an Existing Unit Option will not recognize taxable income, and
Huntway will not be entitled to a deduction, as the result of the grant of a
Unit Option.
EXERCISE OF OPTIONS
If a Holder of a Unit Option exercises a Unit Option, then in the year of
such exercise the option holder will recognize ordinary income equal to the
amount of the excess, if any, of (a) the fair market value, determined as of the
date of the exercise of the option and without regard to any restriction, of the
Common Units acquired by such exercise over (b) the exercise price paid to
acquire the Common Units. A Holder of a Unit Option will not be entitled to
deduct the amount of the exercise price paid to acquire Common Units.
Huntway should be entitled to a deduction equal to the amount of ordinary
income recognized by the Holder of the Unit Option as a consequence of the
exercise of such Option, provided that Huntway complies with applicable
reporting requirements.
There are at least two alternative approaches under which the IRS might
argue that the exercise of a Unit Option by a Holder thereof should result in a
simultaneous recognition of income to Huntway, but there is substantial
uncertainty about whether such income recognition could be required and about
the amount (if any) of such income which would be recognized. Under the first
approach (a) Huntway would recognize income, which would probably be part
ordinary income and part capital gain, in an amount equal to the excess of the
value (measured at the time of exercise) of the Common Units received by the
Holder of the Unit Option upon exercise of such Option over the portion of
Huntway's aggregate tax basis in all of its properties allocable to such Common
Units and (b) Huntway should be able to increase its basis in partnership assets
by the amount of such income recognized. Under the second approach, Huntway's
recognized income would equal the entire value (measured at the time of
exercise) of the Common Units received by the Holder of the Unit Option upon
exercise of such Option, on the ground that Huntway has no tax basis in its own
Common Units. The collateral effects of the second approach (including the
effect on the tax basis of partnership assets) are not clear. Whether exercise
of a Unit Option causes a net increase or decrease in Huntway's taxable income
depends upon whether the deduction resulting from such exercise (as described in
the preceding paragraph) exceeds any income recognized by reason of such
exercise (as described in this paragraph).
TAX CONSEQUENCES OF ANTI-DILUTION PROTECTION
The federal income tax consequences of the receipt by Holders of Class 8
Equity Interests of certain contractual rights to antidilution protection are
not clear. However, the receipt of such rights may be treated as a taxable
receipt of property, in which case such Holders may be taxed on part or all of
the value of such rights.
TAX CONSEQUENCES OF OWNERSHIP OF COMMON UNITS
When a Holder of a Unit Option exercises a Unit Option, such Holder will be
treated as the owner of, and a partner with respect to, the Common Units. The
Holder's initial tax basis for the Common Units will equal the sum of (a) the
exercise price paid to acquire the Common Units plus (b) the amount of any
ordinary
119
<PAGE> 137
income recognized by the Holder as a consequence of the exercise. The Unit
Option holder's holding period for the Common Units will start on the day after
the exercise of the Unit Option.
SHORT SWING PROFIT LIABILITY CONSIDERATIONS
Huntway's chairman, president, principal financial officer, principal
accounting officer, any vice president in charge of a principal business unit,
division or function (such as sales, administration or finance) and any other
individual who performs similar policy making functions are subject to reporting
requirements imposed by Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act"). In addition, such an individual (herein called an "executive
officer") may be required by Section 16(b) of the Exchange Act to forfeit "short
swing profits" if such individual purchases and sells within six months Huntway
equity securities (including Common Units or options to acquire Common Units) in
transactions that are not exempt from the matching provisions of Section 16(b).
An executive officer may incur tax treatment somewhat different from that
described above and accordingly should consult a tax advisor about the manner in
which the tax treatment described above may be impacted by virtue of being an
executive officer. In particular, an executive officer should consider whether
to file an election under Section 83(b) of the Code within 30 days of the
exercise of any Unit Option.
SECURITIES LAW RESTRICTIONS
Each right to obtain Common Units upon exercise of Unit Options granted
pursuant to the Huntway Incentive Option Plan is subject to the condition that
if the Option Committee determines that the listing, registration or
qualification of Common Units upon any securities exchange or under any federal
or state securities or other law or regulation, or that the consent or approval
of any governmental regulatory body, is necessary or desirable as a condition
to, or in connection with, the granting of such Unit Option or the issuance or
purchase of Common Units thereunder, then no such Unit Option may be exercised
in whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free from any conditions not
acceptable to the Option Committee, and the Holder of such Unit Option will
supply Huntway with such certificates, representations and information as
Huntway requests and shall otherwise cooperate with Huntway in obtaining such
listing, registration, qualification, consent or approval.
REQUIRED VOTE
The affirmative vote of the Holders of a majority of the combined voting
power of all of the outstanding Common Units is required to approve Proposal 3.
The General Partner has determined that it is in the best interests of the
Company to establish an equity incentive plan which would be utilized in
connection with consummation of either the Prepackaged Plan or the Consensual
Restructuring Agreement or in the future to provide for equity based incentive
compensation to employees of the Company.
THE GENERAL PARTNER HAS APPROVED AND RECOMMENDS TO THE UNITHOLDERS THAT
THEY CONSENT TO PROPOSAL 3.
120
<PAGE> 138
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER UNIT AND PER BARREL DATA)
The following historical selected financial data as of and for each of the
years in the five-year period ended December 31, 1995, are derived from the
financial statements of Huntway Partners, L.P., which have been audited by
Deloitte & Touche LLP, independent auditors, which financial statements and
reports thereon (except for 1991 and 1992 and as to the balance sheet, 1993) are
included elsewhere in this Consent Solicitation Statement. The selected
financial data as of and for the six month periods ended June 30, 1996 and 1995
are derived from the unaudited financial statements of Huntway Partners, L.P.
and (except as to the balance sheet as of June 30, 1995) are also included
elsewhere in this Consent Solicitation Statement. All of the selected
information should be read in conjunction with the financial statements and
notes thereto.
<TABLE>
<CAPTION>
HUNTWAY PARTNERS, L.P.
-------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
--------------------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues.................... $116,615 $105,463 $102,678 $ 79,139 $ 83,069 $ 33,339 $ 43,308
Materials, Processing,
Selling and Administrative
Cost and Expenses......... 101,888 106,577 94,249 (d) 74,803 80,462 (f) 35,290 40,624
Interest Expense............ 8,706 8,632 7,280 4,984 5,177 2,555 2,605
Plant Closure and Write
Down...................... -- -- 16,013 (c) -- 9,492 -- --
Depreciation and
Amortization.............. 2,999 4,567 3,806 (e) 2,356 2,399 1,168 1,047
-------- -------- -------- -------- -------- -------- -------
Net Income (Loss)........... $ 3,022 $(14,313) $(18,670)(c)(d)(e) $ (3,004) $(14,461) $ (5,674) $ (968)
======== ======== ======== ======== ======== ======== =======
Net Income (Loss) Per
Unit(a)................... $ 0.26 $ (1.24) $ (1.60) $ (0.26) $ (1.24) $ (0.49) $ (0.08)
======== ======== ======== ======== ======== ======== =======
Barrels Sold................ 6,113 5,825 5,466 4,584 4,400 1,887 2,044
Revenues Per Barrel......... $ 19.08 $ 18.11 $ 18.78 $ 17.26 $ 18.88 $ 17.67 $ 21.19
======== ======== ======== ======== ======== ======== =======
BALANCE SHEET DATA
Working Capital............. $(19,981)(b) $(83,482)(b) $ 2,289 (b) $ 2,725 (b) $(91,796)(b) $ (2,530)(h) $(93,276)(h)
Total Assets................ 110,891 (b) 107,232 (b) 90,745 (b) 85,796 (b) 74,383 (b) 85,151 78,037
Long-term Obligations....... 51,667 742 89,570 91,312 -- 90,833 350
Partners' Capital........... 19,934 (b) 5,621 (b) (13,049)(b)(c)(d) (16,053)(b) (30,524)(b) (21,727) (31,482)
Cash Distributions.......... -- (g) -- (g) -- (g) -- (g) -- (g) -- (g) -- (g)
</TABLE>
- ---------------
(a) Assumes that 11,556,250 units were outstanding in 1991 through 1995. The
allocation to the general partners of their interest in net income (loss)
has been deducted before computing net income (loss) per unit.
(b) After the cumulative LIFO reserve of $641, $1,220, $36, $1,203 and $1,170 in
1991, 1992, 1993, 1994 and 1995, respectively -- see Note 2 to the
Consolidated Financial Statements included in Appendix F. Working Capital
includes Current Portion of Long-term Obligations of ($78,299) and ($94,445)
at December 31, 1992 and 1995, respectively.
(c) Non-recurring charges recorded in June 1993 relating to the Sunbelt refinery
which was shut down in August 1993.
(d) Includes $2,078 of non-recurring charges relating to professional fees
incurred relating to the restructuring of indebtedness completed in 1993.
(e) Includes $778 of non-recurring charges relating to amortization of loan
acquisition costs.
(f) Write down of Sunbelt refinery assets to reflect expected operation as a
crude or product terminal in the future rather than as a petroleum refinery.
(g) Cash distributions to holders of units were suspended effective November
1990 due to Huntway's operating and working capital needs, coupled with its
bank principal and corporate expenditure requirements.
(h) After the cumulative LIFO reserve of $1,821 and $1,660 in the quarter ended
June 30, 1995 and June 30, 1996, respectively. Working capital includes
current portion of long-term obligations of $(94,345) at June 30, 1996.
121
<PAGE> 139
CONDENSED PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited condensed pro forma financial statements of the
Company are derived from the historical financial statements of the Company and
give effect to the transactions contemplated by the Prepackaged Plan and the
Consensual Restructuring Agreement as if such transactions had occurred in (i)
the case of the pro forma condensed statements of operations for the year ended
December 31, 1995, as of January 1, 1995, (ii) the case of the pro forma
condensed statement of operations for the six months ended June 30, 1996, as of
January 1, 1995 and (iii) the case of the pro forma condensed balance sheet as
of June 30, 1996.
HUNTWAY PARTNERS L.P.
PRO FORMA CONDENSED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash.................................................... $ 2,735 $ -- $ 2,735
Accounts Receivable..................................... 6,079 -- 6,079
Inventories............................................. 6,150 -- 6,150
Prepaid Expenses........................................ 929 -- 929
-------- -------- -------
Total Current Assets................................. 15,893 -- 15,893
-------- -------- -------
PROPERTY -- Net........................................... 59,279 -- 59,279
OTHER ASSETS.............................................. 1,078 604(a) 1,682
GOODWILL.................................................. 1,787 -- 1,787
-------- -------- -------
TOTAL ASSETS.............................................. $ 78,037 $ 604 $78,641
======== ======== =======
CURRENT LIABILITIES:
Accounts Payable........................................ $ 8,815 $ 1,000(b) $ 9,815
Current Portion of Long-Term Obligations................ 94,345 (94,345)(c) 0
Reserve for Plant Closure............................... 155 -- 155
Accrued Interest........................................ 3,669 (3,640)(c) 29
Other Accrued Liabilities............................... 2,185 -- 2,185
-------- -------- -------
Total Current Liabilities............................ 109,169 (96,985) 12,184
-------- -------- -------
LONG-TERM OBLIGATIONS..................................... 350 25,570(d) 25,920
PARTNERS' CAPITAL:
General Partners........................................ (315) 724 409
Limited Partners........................................ (31,167) 70,591 39,424
-------- -------- -------
Total Partner's Capital (Deficiency)................. (31,482) 71,315(e) 39,833
-------- -------- -------
TOTAL LIABILITIES AND PARTNERS' CAPITAL................... $ 78,037 $ 604 $78,641
======== ======== =======
</TABLE>
See Note to Pro Forma Condensed Balance Sheet
122
<PAGE> 140
NOTE TO PRO FORMA CONDENSED BALANCE SHEET
The pro forma condensed balance sheet as of June 30, 1996 related to the
historical condensed balance sheet as of June 30, 1996 reflect the following pro
forma adjustments:
(a) To reflect the accrual of deferred compensation related to the
issuance of unit options with a strike price of $.50 and the
application of costs incurred against capital contribution.
(b) An increase in accounts payable of $1,000,000 to reflect costs to be
incurred in connection with the restructuring.
(c) A reduction in current portion of long-term debt and accrued
interest of $97,985,000 in the aggregate to reflect the retirement of
the existing notes payable and related obligations.
(d) An increase in long-term obligations of $25,570,000 to reflect the
issuance of new secured notes payable. The new senior secured debt
will total $23,500,000 and will accrue interest at 12% effective
January 1, 1996. The new senior secured debt will mature on December
31, 2005 and will amortize ratably over years three through ten of
the agreement. No cash interest will be paid in 1996 unless cash net
of required capital expenditures in 1996 exceeds $6,000,000. Cash in
excess of $6,000,000 at December 31, 1996 net of funding capital
expenditures (cost to exceed $4,150,000) will be paid to the lenders
on January 15, 1997. Such payment will replace, dollar-for-dollar,
required debt amortization in year three of the agreement. In 1997,
the Partnership is obligated to pay cash interest and debt
amortization based on 50% of excess cash flow as defined.
Accordingly, assuming Huntway did not make any payments to its
lenders on January 15, 1997, nor paid any excess cash flow as defined
to its lenders in 1997, minimum future maturities for the next five
years would be as follows:
<TABLE>
<S> <C>
1996........................................................ $ --
1997........................................................ --
1998........................................................ 3,290
1999........................................................ 3,290
2000........................................................ 3,290
------
Total....................................................... $9,870
======
</TABLE>
The $2,070,000 junior secured note also matures on December 31, 2005.
However, the junior note has no minimum principal payment provision under its
terms and no principal payments can be made on the note until the senior note is
paid in full. Interest is paid at 12% in the form of interest units. Such
interest units will be paid annually no later than March 31 of the subsequent
year. In determining the amount of units earned each year, annual interest
expense on the junior note will be divided by the average unit price of Huntway
during the preceding year to be determined on the basis of the average closing
price each trading day during the preceding year. These issuances of units will
not be dilutive to the holders of units issued to creditors and warrant holders
and unit options issued to management under the plan.
(e) An increase in Partners' Capital of $71,315,000 reflecting the
ordinary gain on the extinguishment of debt of $62,045,000 as well as
the contribution to capital of $9,240,000 relating to the issuance of
13,786,000 new limited partnership common units at an estimated value
of $.75 each (based on the current market Value of the units) net of
an estimated $1,100,000 in associated costs.
123
<PAGE> 141
SCHEDULE OF ADJUSTMENTS
<TABLE>
<S> <C>
Capital Contribution........................................ $10,340,000
Cost Associated with Capital Contribution................... (1,100,000)
Extinguishment of Debt...................................... 62,075,000
-----------
Total Capital Adjustments................................... $71,315,000
==========
</TABLE>
124
<PAGE> 142
PRO FORMA CONDENSED STATEMENT
OF PARTNERS CAPITAL (DEFICIENCY)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
BALANCE BEFORE RESTRUCTURING.............................. $ (31,482) $ -- $ (31,482)
EXTRAORDINARY GAIN ON EXTINGUISHMENT
OF DEBT.............................................. -- 62,075(a) 62,075
CAPITAL CONTRIBUTIONS..................................... -- 9,240(b) 9,240
-------- ------- --------
BALANCE AFTER RESTRUCTURING............................... $ (31,482) $71,315 $ 39,833
======== ======= ========
</TABLE>
- ---------------
(a) Reflects an increase in partners' capital relating to the extraordinary
gain on the extinguishment of debt of $62,075,000.
(b) Reflects the issuance of 13,786,000 new limited partnership common units at
an estimated value of $.75 each less estimated associated costs of
$1,100,000.
125
<PAGE> 143
HUNTWAY PARTNERS L.P.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
---------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
SALES.................................................. $ 83,069 $ -- $ 83,069
--------- -------- ---------
COSTS AND EXPENSES:
Material and Processing Costs........................ 76,643 -- 76,643
Selling and Administration Expenses.................. 3,819 330(a) 4,149
Plant Closure and Write Down......................... 9,492 -- 9,492
Interest Expense..................................... 5,117 (1,750)(b) 3,367
Depreciation and Amortization........................ 2,399 -- 2,399
--------- -------- ---------
Total Costs and Expenses............................... 97,530 $ (1,420) 96,050
--------- -------- ---------
NET INCOME (LOSS)...................................... $ (14,461) $ (1,420) $ (12,981)
========= ======== =========
NET INCOME (LOSS) PER UNIT............................. $ (1.24) $ (0.51)
========= =========
LIMITED PARTNER EQUIVALENT UNITS OUTSTANDING........... 11,673 25,599
========= =========
</TABLE>
- ---------------
(a) Increase in selling and administrative expenses to amortize deferred
compensation expense relating to the issuance of stock options at $.50 a
unit.
(b) Adjustment to reflect pro forma interest reduction resulting from the
reduction of debt from $93,280,000 to $25,570,000 at 12% effective January
1, 1995 and to reflect the amortization of estimated debt issuance costs of
$400,000 over a ten-year period. In regard to pro forma interest expense,
no assumptions were made as to any pro forma debt payments made in 1995 to
the extent of "50% of excess cash, as defined" or the assumed tax-exempt
interest rate and resulting effective interest rate on the new senior and
junior notes. The interest rate will be fixed at the time of issuance.
Finally, it is the intention of the Company to write off any issuance costs
associated with the new debt at the time of consummation of the
transaction.
126
<PAGE> 144
HUNTWAY PARTNERS L.P.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1996
---------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
SALES................................................... $ 43,308 $ -- $43,308
-------- -------
COSTS AND EXPENSES:
Material and Processing Costs......................... 38,834 -- 38,834
Selling and Administration Expenses................... 1,790 130(a) 1,920
Interest Expense...................................... 2,605 (639)(b) 1,966
Depreciation and Amortization......................... 1,047 -- 1,047
-------- ----- -------
Total Costs and Expenses................................ 44,276 (509) 43,367
-------- ----- -------
NET INCOME (LOSS)....................................... $ (968) (509) $ (59)
======== ===== =======
NET INCOME (LOSS) PER UNIT.............................. $ 0.08 $ --
======== =======
LIMITED PARTNER EQUIVALENT UNITS OUTSTANDING............ 11,673 25,599
======== =======
</TABLE>
- ---------------
(a) Reflects an increase in selling and administrative expenses to amortize
deferred compensation expense for the six months ended June 30, 1996
relating to the issuance of stock options at $.50 a unit.
(b) Reflects a pro forma interest expense adjustment to reflect reduction in
secured debt to $25,570,000 at 12% as of January 1, 1995. Also includes
amortization of debt issuance costs of $400,000 over a ten-year period
beginning January 1, 1996, or $20,000 for the six month period ended June
30, 1996. In regard to pro forma interest expense, no assumptions were made
as to any pro forma debt payments made in 1995 to the extent of "50% of
excess cash, as defined" or the assumed tax-exempt interest rate and
resulting effective interest rate on the new senior and junior notes. The
interest rate will be fixed at the time of issuance. Finally, it is the
intention of the Company to write off any issuance costs associated with the
new debt at the time of consummation of the transaction.
127
<PAGE> 145
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion should be read in conjunction with the financial
Company's historical consolidated statements included in Appendix F to the
Consent Solicitation Statement.
Results of Operations
Huntway is principally engaged in the processing and sale of liquid asphalt
products, as well as the production of other refined petroleum products such as
gas oil, naphtha, kerosene distillate, diesel fuel, jet fuel and bunker fuel.
Huntway's ability to generate income depends principally upon the margins
between the prices for its refined petroleum products and the cost of crude oil,
as well as upon demand for liquid asphalt, which affects both price and sales
volume.
Historically, refined petroleum product prices (including prices for liquid
asphalt, although to a lesser degree than Huntway's other refined petroleum
products) generally fluctuate with crude oil price levels. Accordingly, there
has not been a relationship between total revenues and income due to the
volatile commodity character of crude oil prices.
Accordingly, income before interest, depreciation and amortization provides
the most meaningful basis for comparing historical results of operations
discussed below.
A number of uncertainties exist that may affect Huntway's future operations
including the possibility of further increases in crude costs that may not be
able to be passed on to customers in the form of higher prices. Additionally,
crude costs could rise to such an extent that Huntway may not have sufficient
letter of credit availability to purchase all the crude it needs to sustain
operations to capacity, especially during the summer season. If this occurred,
Huntway would be forced to reduce crude purchases which could adversely impact
results of operations. The Company's primary product is liquid asphalt. Most of
Huntway's competitors produce liquid asphalt as a by-product and are of much
greater size and have much larger financial resources than the Company.
Accordingly, the Company has in the past, and may have in the future, difficulty
raising prices in the face of increasing crude costs.
The average interest rate and weighted average debt amount outstanding
during each period discussed below is as follows:
<TABLE>
<CAPTION>
AVERAGE
INTEREST WEIGHTED AVERAGE
RATE DEBT OUTSTANDING
-------- -----------------
<S> <C> <C>
1993......................................................... 7.12% $89,176,813
1994......................................................... 5.07% 93,786,797
1995......................................................... 5.04% 94,636,007
Six months ended June 30, 1996............................... 5.20% 94,657,210
</TABLE>
Six Months Ended June 30, 1996 Compared with the Six Months Ended June 30, 1995
The 1996 first half net loss was $968,000, or $.08 per unit, versus a 1995
first half net loss of $5,674,000, or $.49 per unit.
The improvement in results between quarters of $4,706,000 is principally
attributable to significantly reduced rainfall in the first half of 1996 versus
the first half of 1995. The first half of 1995 was characterized by unseasonably
high rainfall which severely curtailed paving asphalt sales and forced the sale
of significant amounts of low-margin fuel oil in order to maintain cash flow.
Accordingly, sales of paving and other asphalts increased by 146,000 barrels, or
18%, to 955,000 barrels in the first half of 1996 from 809,000 barrels in the
first half of 1995. Fuel oil sales fell in the current period by 209,000 barrels
to 58,000 barrels from 267,000 barrels in the comparable period of 1995.
Overall, sales of asphalt-based products decreased by 63,000 barrels,
128
<PAGE> 146
or 6%. Additionally, as previously discussed, light product margins were
substantially improved in the second quarter of 1996.
The following table sets forth the effects of changes in price and volume
on sales and material and processing costs on the six months ended June 30, 1996
as compared to the six months ended June 30, 1995:
<TABLE>
<CAPTION>
MATERIAL AND BARRELS
SALES PROCESSING NET SOLD
------- ------------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Six months ended June 30, 1995................... $33,339 $ 33,366 $ (27) 1,887
Effect of changes in price..................... 7,195 2,692 4,503
Effect of changes in volume.................... 2,774 2,776 (2) 157
------- ------- ------ -----
Six months ended June 30, 1996................... $43,308 $ 38,834 $4,474 2,044
======= ======= ====== =====
</TABLE>
As reflected in the table, the net margin between sales and material and
processing costs improved from a negative $.01 per barrel for the first half of
1995 to $2.19 per barrel for the first half of 1996. This improvement in net
margin of $4,501,000 is primarily attributable to the Partnership's increased
sales of higher margin products due to improved weather conditions in the first
half of 1996 as compared to the first half of 1995 as discussed above. Sales
prices averaged $21.19 per barrel for the first half of 1996 as compared to
$17.67 per barrel for the comparable quarter of 1995, an increase of $3.52, or
20%. This increase in pricing was partially offset by increased material and
processing costs which averaged $19.00 and $17.68 for the six months ended June
30, 1996 and 1995, respectively, an increase of $1.32, or 7%.
Selling, general and administrative costs decreased $134,000 compared to
the first half of 1995 primarily as a result of the recovery of a previously
written-off accounts receivable.
Depreciation and amortization fell to $1,047,000 in the first half of 1996
versus $1,168,000 in the comparable period of 1995 primarily as a result of
reduced depreciation of the Sunbelt refinery subsequent to its write down in
1995. Interest expense was generally consistent with the prior year. Interest
expense in the first half does not reflect the impact of the reduced debt level
contemplated in the proposed financial restructuring described in Note 2,
"Financial Arrangements". Had the restructuring been completed at the beginning
of 1996, first half interest expense would have been $1,782,000 versus
$2,605,000 incurred in the first half of 1996, a difference of $823,000, or $.07
per unit.
Because of the foregoing, as well as other factors affecting the
Partnership's operating results, past financial performance should not be
considered to be a reliable indicator of future performance and investors should
not use historical trends to anticipate results or trends in future periods.
1995 Compared with 1994
Net loss for the year ended December 31, 1995 was $14,462,000, or $1.24 per
unit, compared with a net loss of $3,004,000, or $.26 per unit in 1994.
The increase in the net loss of $11,458,000 is due a $9,492,000, or $.77
per unit write down of the company's Sunbelt refinery in Arizona. As the company
has determined that it is unlikely that Sunbelt will be operated as a full blown
refinery in the future it has reduced the carrying value of the refinery in
accordance with FASB 121, "Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be disposed of". Excluding the Sunbelt write down
the increase in the loss of $1,966,000 is reflective of the impact of rising
crude prices, increased competition and unusually heavy rainfall in the first
half of the year. Through the first six months of 1995, the net loss exceeded
1994 by $3,641,000.
In effect, Huntway experienced two completely distinct six month periods in
1995. The first half of 1995 was very depressed characterized by unusually high
levels of rainfall which depressed asphalt sales, rising crude prices and
increased competition. In the second half of 1995, crude prices fell as demand
for crude declined as major refineries on the West Coast conducted major repair
efforts. In addition, in the last six months of the year, the weather in
California was dry which is conducive to asphalt sales, competition declined
and, as expected, demand for asphalt was strong due in part to the backlog which
had developed in the first half of the year as a result of the wet weather.
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Asphalt is not usually laid in rainy weather. Accordingly, through the
first half of 1995 sales of paving asphalt was down 19% versus the same period a
year ago. During this same period, crude prices rose an average of 29% in
response to rising crude prices and increased demand for California heavy crude
as refineries have begun to use more of this crude in their refinery process.
This increased demand for heavy California crudes has been driven by the lower
price of California crudes. Refineries have begun to realize that these crudes
can be used in their refinery processes resulting in better margins between
crude and finished product prices.
The high levels of rainfall reduced asphalt demand which meant that asphalt
prices could not be raised in response to rising crude costs. Moreover, West
Coast refinery margins continued weak reaching near ten-year lows in the first
half of the year due to rising crude costs and excess light-end inventories.
This, in turn, caused margins for Huntway s light-end products to decline.
In the second half of 1995, Huntway's operating performance improved.
During this period, several large California refineries reduced production due
to refinery problems. This decreased crude demand which lowered crude prices and
increased light-end prices due to a lower level of finished product being
refined.
This increase in finished light-end prices due to reduced supply caused
Huntways light-end prices to increase. In addition, in the second half of 1995
world crude prices fell due to increased production throughout the world and
relatively flat demand. Meanwhile, asphalt prices and margins increased in
California in the second half of 1995 due to the combination of reduced
competition coupled with dry, warm weather throughout California during the last
six months of the year. Also, crude prices declined as discussed above and
demand for asphalt increased due to the backlog created from the heavy rainfall
in the first half of the year.
The following table sets forth the effects of change in price and volume on
sales and crude and processing costs on the year ended December 31, 1995 as
compared to the year ended December 31, 1994:
<TABLE>
<CAPTION>
MATERIALS
AND NET BARRELS
SALES PROCESSING MARGIN SOLD
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Year Ended December 31,
1994........................ $79,139,000 $70,621,000 $ 8,518,000 4,584,000
Effect of Changes in Price.... 7,107,000 8,624,000 (1,517,000) --
Effect of Changes in Volume... (3,177,000) (2,835,000) (342,000) (184,000)
----------- ----------- -----------
Year Ended December 31,
1995........................ $83,069,000 $76,410,000 $ 6,659,000 $4,400,000
=========== =========== ===========
</TABLE>
As reflected in the table above, the net margin fell $1,859,000, or 21%,
between periods. Volume in terms of barrels sold fell 4% versus 1994 while
material and processing costs rose 8% between periods. In 1995, average product
prices were $18.88 a barrel versus $17.26 in 1994. Materials and processing
costs averaged $15.41 a barrel in 1994 and $17.42 a barrel in 1995.
The decrease in Huntway's net margin was caused by the poor first half
performance as discussed earlier. Overall, for the year, revenues increased
$3,930,000, or 4%, reflective of higher product prices, however, material and
processing costs rose at an even higher 8%. This increase was due to rising
crude oil prices on the world market due to a myriad of market factors coupled
with increased demand for California heavy crude as refineries are increasingly
using this crude in their refinery process.
Asphalt sales to Mexico declined 64% in 1995 versus the prior year due to
the impact of the decline in the Mexican peso relative to the U.S. dollar in
late 1994 and through 1995. The decline in the peso relative to the dollar makes
Huntway's refined petroleum products more expensive in Mexico. The Partnership
cannot determine whether the peso will rise or fall relative to the dollar in
1996, however, if the peso remains at current levels relative to the dollar, it
is reasonable to conclude that export sales to Mexico in 1996 may remain
depressed.
As discussed earlier, based on the Company's review of refinery assets it
was determined that it is unlikely that the Sunbelt refinery will be operated in
the future as a full blown refinery. This decision is primarily based on its
belief that it may have great difficulty in selling its light-end products at a
profit if the refinery were fully operational. The company may, however, operate
the refinery as an asphalt terminal in the future.
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Accordingly, the company has determined that in accordance with FASB 121 an
impairment loss should be recognized and has recorded a $9,492,000 loss in the
current results of operations for the year ended December 31, 1995.
Processing costs in 1995 approximated 1994 on a per-barrel basis but was
below prior year on an aggregate basis due to the 4% decline in barrels sold
primarily due to the unusually wet weather experienced in the first half of the
year which reduced sales levels.
Selling, general and administrative expenses fell $363,000 in 1995 to
$3,819,000 from 4,182,000 in 1994, or a decline of 9%. This decline resulted
from a reduction in bonus expense of $278,000 and a reduction in insurance
expense of $49,000. No management bonuses were paid in 1994 or 1995. Insurance
expense continued to decline in 1995 due to efforts to contain costs.
Interest expense increased $193,000, or 4%, from $4,984,000 in 1994 to
$5,177,000 in 1995 due to higher debt levels.
Depreciation and amortization approximated the prior year totaling
$2,399,000 in 1995 versus $2,356,000 in 1994.
1994 Compared with 1993
Net loss for the year ended December 31, 1994 was $3,004,000, or $.26 per
unit, compared with a net loss of $18,670,000, or $1.60 per unit, during 1993.
The decrease in the net loss is principally attributable to costs related
to the closure and revaluation of the Sunbelt refinery in 1993. In 1993, the
Partnership wrote down the carrying value of the Sunbelt refinery and related
assets to their estimated fair values by recording a provision of $16,013,000
including a provision for net estimated closure and maintenance costs during the
shut-down period. Additionally, net operating losses at Sunbelt in 1993 were
$630,000. Absent these charges, the Partnership would have incurred a loss of
$2,027,000 in 1993 versus a loss of $3,003,000 in 1994. The decrease in
California results between years is primarily due to reduced operating margin
partially offset by lower selling, general and administrative and lower interest
and depreciation and amortization expense as explained below.
The following table sets forth the effects of changes in price and volume
on sales and crude oil processing costs on the year ended December 31, 1994 as
compared to the year ended December 31, 1993:
<TABLE>
<CAPTION>
MATERIALS
AND NET BARRELS
SALES PROCESSING MARGIN SOLD
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Year Ended December 31,
1993....................... $102,678,000 $86,365,000 $16,313,000 5,414,000
Less Sunbelt Contribution.... (18,522,000) (19,152,000) 630,000 (979,000)
------------ ----------- ----------- ----------
Subtotal................... 84,156,000 67,213,000 16,943,000 4,435,000
Effect of Changes in Price... (4,467,000) 3,847,000 (8,314,000) --
Effect of Changes in
Volume..................... (550,000) (439,000) (111,000) (29,000)
------------ ----------- ----------- ----------
Year Ended December 31,
1994....................... $ 79,139,000 $70,621,000 $ 8,518,000 4,406,000
============ =========== =========== ==========
</TABLE>
As reflected in the table above, the net margin fell $8,425,000, or 50%,
between periods. Volume in terms of barrels sold fell less than 1% versus 1993
while crude and processing costs rose 3% versus prior year. However, product
prices fell 9% between periods. In 1993, average product prices were $18.59 a
barrel versus $17.11 in 1994. Meanwhile, materials and processing costs averaged
$14.76 a barrel in 1993 versus $15.18 a barrel in 1994.
Huntway's 1994 operating results (and specifically asphalt prices) were
adversely impacted by the January 17, 1994 earthquake in Southern California.
The earthquake reduced demand for asphalt in Southern California due to lack of
funding and a lack of equipment and personnel. Transportation dollars (both
State and Federal) were diverted from conventional asphalt road repair work to
concrete, steel and engineering expenditures which are all necessary to repair
freeways and bridges. In addition, road construction equipment and CALTRANS
personnel were diverted to earthquake repair projects. This lack of demand for
asphalt
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caused lower asphalt prices in Southern California. In Northern California,
additional competition beginning in the summer of 1994 caused asphalt prices to
decline in the second half of the year.
Huntway's other refined petroleum products such as gas oil, naphtha and
kerosene distillate also fell in price in 1994. The fall in price for these
products reflect a number of factors including weak worldwide wholesale refinery
margins as well as the effects of excess diesel and gasoline inventories on the
West Coast of the United States coupled with the impact of clean fuel
requirements mandated to begin January 1, 1995. Cleaner, reformulated fuels were
mandated by the Environmental Protection Agency (EPA) and the California Air
Resources Board. The production of the clean fuels in 1994 for sale in 1995
caused inventories to increase on the West Coast as demand remained flat and
production increased. Inventories of fuels that did not meet clean fuel
specifications and that could not be sold at retail effective January 1, 1995
were sold at reduced prices which, in turn, caused Huntway's light oil prices to
decline.
Major U.S. and European refineries experienced weak wholesale margins in
1994 due to a myriad of market factors (most notably, excess supply due to
excess production); but for many of these refineries, their proprietary retail
outlets were achieving strong margins which tended to mitigate their weak
wholesale margins. Huntway does not operate any retail outlets and, accordingly,
its margins for its other refined petroleum products were hurt by weak wholesale
refinery margins.
Despite the fact that average crude and processing costs in 1994
approximated 1993, crude costs rose throughout 1994 due to the January 1994
earthquake which destroyed one of the two pipelines which carried the heavy,
lower-priced crude that Huntway purchases for its Southern California refinery.
As a result, crude oil that could be delivered into the Los Angeles area was
able to command higher premiums which also contributed to higher relative posted
prices for all California crude oil.
Selling, general and administrative expenses fell sharply in 1994 to
$4,182,000 versus $7,884,000 in 1993, or a decline of 47%. This decline was
primarily the result of a decline in professional fees to $514,000 in 1994 from
$2,800,000 in 1993, which included $2,278,000 of fees relating to the 1993 debt
restructuring and related matters. In addition, insurance expenses were reduced
due to efforts installed to reduce costs and bad debt expense was reduced due to
better collection experience.
Interest expense declined $2,296,000, or 32%, due to the restructuring of
the Partnerships indebtedness in 1993. The impact of the 1993 restructuring was
to decrease interest expense by approximately $3,000,000 on an annual basis.
Depreciation and amortization declined $1,450,000, or 38% due to write down
of certain Sunbelt-related assets in 1993 as well as write off in 1993 of
previously recorded loan origination fees.
Outlook and Factors That Affect Future Results
A number of uncertainties exist that may affect Huntway's future operations
including the possibility of further increases in crude costs that may not be
able to be passed on to customers in the form of higher prices. Additionally,
crude costs could rise to such an extent that Huntway may not have sufficient
letter of credit availability to purchase all the crude it needs to sustain
operations to capacity, especially during the summer season. If this occurred,
Huntway would be forced to prepay for crude oil or reduce crude purchases,
either of which could adversely impact results of operations. The Partnership's
primary product is liquid asphalt. Several of Huntway's competitors produce
liquid asphalt as a by-product and are of much greater size and have much larger
financial resources than the Partnership. Accordingly, the Partnership has in
the past, and may in the future, have difficulty raising prices in the face of
increasing crude costs. As for several of Huntway's competitors, the margins
they receive on asphalt is not as important to their operations as asphalt
margins are to Huntway.
Crude costs per barrel increased in 1995 as compared to 1994 on a
per-barrel basis due to the combination of increased demand for California
crudes as more refineries outside California use these crudes in their refinery
process due to net lower costs and the general world crude oil trend of heavy
crude oil being valued closer to lighter grades of crude oil. Additionally,
Huntway purchased more expensive crudes in 1995 than 1994 in order to produce
certain specialty asphalt products. In addition, world crude prices as measured
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by W.T.I. increased $1.77 a barrel between years due to a myriad of market
factors including O.P.E.C.'s desire to increase crude prices.
Crude costs increased in 1994 due to the effects of the January 17, 1994
Northridge earthquake and the curtailment of permits to tanker offshore
California production to market. The earthquake destroyed one of the two primary
pipelines bringing crude to the Wilmington refinery. It is estimated that 50,000
barrels per day of Los Angeles basin bound crude was curtailed as a result of
the earthquake. Additionally, tankering permits expired for over 20,000 barrels
per day of crude oil which was being tankered by marine vessel to Southern
California. In July 1995, the remaining primary pipeline carrying crude to the
Los Angeles basin completed the expansion of its capacity by 30,000 barrels a
day. A new pipeline to supply over 100,000 barrels per day of crude oil to Los
Angeles basin is currently under consideration and may be in place by 1997 or
1998. Both of Huntway's California refineries are vulnerable to disruption in
operations and reduced operating results due to the possibility of additional
earthquakes in California.
Legislation was passed in 1995 to lift the ban on the export of ANS crude
oil which could cause crude oil prices for all West Coast refiners to increase.
Although the Company does not purchase a significant amount of ANS crude oil,
prices of crude oil it does purchase could increase and such an increase would
reduce the Company's margins and decrease profitability if product prices do not
increase to offset such increased cost.
Huntway's export business is vulnerable to fluctuation in the Mexican Peso
as the vast majority of its export business is to Mexican end users. Huntway's
export sales to Mexico declined in 1995 versus 1994 primarily due to the impact
of the fall in the Mexican peso relative to the dollar and the general economic
problems in Mexico.
Huntway's asphalt sales are very dependent on public funding primarily at
the state level. Long-term disruptions or declines in the level of public
funding would adversely impact operating results.
In June 1990, voters in the state of California passed a measure which
increased state gasoline taxes from 9 cents per gallon to 14 cents per gallon
effective August 1, 1990, and by an additional 1 cent per gallon on each January
1 thereafter through 1994. The additional sales available to the state are now
estimated to be approximately $14 billion over the decade. However, in June
1994, California voters rejected a measure that would have provided an
additional $2 billion to pay for damage to freeways and bridges resulting from
the January 17, 1994 earthquake. Accordingly, state funding for earthquake
repair projects was achieved by utilizing funds from the existing California
transportation budget. Local governmental units, such as cities, counties and
townships, provide additional funding for road and highway projects through
various taxes and bond issues. On March 26, 1996, the California electorate
approved the $2.0 billion Seismic Retrofit Proposition. Passage of Proposition
will result in a net increase in, construction of new and repair of existing
asphalt road projects in the state over that which would have occurred if
Proposition 192 had not been approved as the Proposition raises $2 billion of
new money to be used to seismic retrofit California's bridges, highways and
overpasses.
Uncertainty also exists due to the weather, as cold, wet weather is not
conductive to asphalt road construction and repair. Accordingly, late 1994 and
first half 1995 results were adversely impacted by the unusually heavy rainfall
during this period. Second half 1995 results were positively impacted due to the
backlog of road work that was created due to the first half rains and due to the
unusually dry, warm weather experienced in California during the second half of
the year.
The Company is subject to Federal, state and local laws, regulations and
ordinances that govern activities or operations that might have adverse
environmental effects, and that impose liability for the costs of cleaning up,
and certain damages resulting from, sites of past spills, disposals, or other
releases of hazardous substances. Although Management believes that the
Company's operations procedures and safety precautions are enforced stringently,
there can be no assurance that environmental problems will not occur in the
future.
As a result of the factors described above, the outlook for the balance of
the year is uncertain, as results will depend to a large extent on crude prices
and public funding availability. The Partnership remains optimistic about export
growth potential and growth in the sale of higher margin polymer based asphalt
products. However, growth in these areas are also influenced by funding
uncertainties. Recent heavy rainfall in
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California has damaged asphalt roads throughout the State which will eventually
lead to increased repair activity. Additionally, projected population growth in
California and an improving economy bodes well for future public and private
road construction activity.
Because of the foregoing, as well as other factors affecting the
Partnerships operating results, past financial performance should not be
considered to be a reliable indicator of future performance and investors should
not use historical trends to anticipate results or trends in future periods.
Capital Resources And Liquidity
The primary factors that affect the Partnership's cash requirements and
liquidity position are fluctuations in the selling prices of our refined
products caused by local market supply and demand factors, including public and
private demand for road construction and improvement as well as demand for
diesel fuel and gasoline, as well as fluctuations in the cost of crude oil which
is impacted by a myriad of market factors, both foreign and domestic. In
addition, capital expenditure requirements, including costs to maintain
compliance with environmental regulations as well as debt service requirements,
also impact the Partnership's cash needs.
Cash declined $1,680,000 to $4,304,000 at December 31, 1995 from $5,984,000
at December 31, 1994. Capital expenditures totaled $447,000 in 1995 versus
$669,000 in 1994. Principal payments on debt totaled $628,000 in 1995 versus
$4,478,000 in 1994. Principal payments plus cash interest payments totaled
$2,936,000 in 1995 versus $5,552,000 in 1994. Over the three year period 1992 to
1995, cash and cash equivalents increased by $4,160,000.
In the first six months of 1996, operating activities provided $496,000 in
cash. The period's net loss of $968,000 was offset by non-cash items of
$1,047,000. Seasonal increases in accounts receivable and inventory of
$4,042,000 were financed by a similar seasonal increase in accounts payable of
$2,233,000. Prepaid expenses increased by $253,000 primarily due to turnaround
costs. Accrued interest increased by $2,252,000 as interest continues to accrue
under the existing debt agreement until the proposed debt restructuring is
completed as described below. In comparison, during the first half of 1995,
operating activities consumed $2,877,000 in cash primarily resulting from the
period's net loss of $5,674,000 offset by non-cash items of $2,860,000. Seasonal
increase in accounts receivable and inventories of $3,595,000 were financed by
similar seasonal increases in accounts payable and accrued liabilities which
increased by $3,608,000.
Net cash used by operating activities in 1995 totaled $435,000. The net
loss in 1995 of $14,461,000 was partially offset by the write down of the
refinery assets at Sunbelt of $9,492,000 as discussed earlier and by
depreciation and amortization of $2,399,000. Cash flow was generated in 1995
from accrued but unpaid interest on existing debt of $1,177,000 and accrued, but
unpaid interest recorded as PIK (payment in kind) notes in 1995 of $1,692,000.
Increased accounts receivable used cash flow of $2,310,000 as improved demand
and excellent weather contributed to fourth quarter 1995 revenues exceeding the
prior year by $3,303,000. Cash flow of $686,000 was generated from decreases in
inventory as increased sales levels in the fourth quarter of 1995 reduced
inventory. In addition, cash flow of $73,000 was generated from reductions in
prepaid expenses due to lower insurance costs and reduced turnaround expenses as
less repair work was conducted on the refineries in 1995 versus prior years due
to timing. Cash flow of $598,000 was also generated from increases in accounts
payable due to increased crude costs relative to the prior year. Other accrued
liabilities increased, providing cash of $297,000 due to accrual of potential
cleanup expenses relating to the buried drums discovered in May 1995 at the
Wilmington refinery. Finally, cash flow of $78,000 was used due to reductions in
the Sunbelt closure reserve which provided for maintenance costs during the
shut-down period.
In 1994, net cash provided by operating activities totaled $3,386,000 and
included the net loss of $3,004,000 net of depreciation and amortization of
$2,356,000. In 1994, cash flow of $3,899,000 was generated from conversion to
debt of accrued interest to debt. Cash flow of $1,644,000 was also generated
from reductions in accounts receivable due to reduced sales levels stemming from
the unusually high levels of rainfall during the fourth quarter of 1994. Asphalt
is not usually sold in wet, cold weather. Cash of $927,000 was generated due to
increased accounts payable due to higher crude costs in late 1994. Decreases in
inventory also contributed $132,000 to cash flow in 1994. Cash of $275,000 was
used in 1994 due to increases in prepaid expenses caused by higher turnaround
costs and the timing of insurance expenditures. December accrued
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liabilities used cash of $1,261,000 due to payments made against property tax
accruals. Finally, the Sunbelt closure reserve declined $1,032,000 in 1994 to
provide for closure and maintenance costs during the shut-down period.
Operating cash flow determinants in 1993 include the net loss of
$18,670,000 inclusive of non-cash charges of $13,413,000 relating to the write
down of the Sunbelt refinery assets as well as depreciation and amortization of
$3,806,000. Additionally, new debt of $6,538,000 was recorded due to conversion
of accrued interest. Other components of cash flow from operating activities,
which totaled $2,726,000 in 1993, include decreases in inventory of $3,184,000
and decreases in accounts receivable of $3,634,000 primarily due to the shutdown
of the Partnership's Sunbelt refinery; increases in accrued liabilities of
$852,000 primarily relating to provisions for property taxes, decreases in
accounts payable of $6,352,000 relating to the shutdown of the Arizona refinery
and decreases of $4,193,000 in accounts payable relating to Huntway as
$3,871,000 of overdue crude obligations were paid off with new borrowings in
early 1993.
Investing activities consumed $1,965,000 during the first six months of
1996 primarily for refinery equipment including new polymer facilities and
tankage for the Benicia refinery. During the first half of 1995, investing
activities consumed $297,000 primarily for refinery equipment and deposits.
Investing activities in 1993, 1994 and 1995 have primarily related to
expenditures for required environmental compliance. Investing activities in 1995
totaled $617,000 and were less than anticipated as certain expenditures
scheduled for 1995 were postponed due to discovery of several buried drums at
the Wilmington refinery. This discovery has postponed until 1996 the completion
of a waste water treatment facility at the Wilmington refinery. However, delays
resulting from discovery of the buried drums could postpone completion of the
waste water facility into 1997.
The Partnership currently anticipates that in 1996 its capital expenditures
will total approximately $4,000,000. These expenditures are anticipated to be
used for plant expansion and to maintain compliance with environmental
regulations. Capital expenditures in 1996 will be financed through a combination
of cash on hand, operating cash flow and short-term borrowings. Cash flows of
$170,000 was spent in 1995 on professional fees relating primarily to the debt
restructuring and has been recorded in other assets.
Financing activities consumed $100,000 in the first six months of 1996
pursuant to a 1993 settlement with the State of Arizona. In the first half of
1995, financing activities consumer $242,000 primarily for reduction in the
capital lease obligation.
Cash flow from financing activities used $628,000 in cash in 1995. These
payments represented payments made on March 31, 1995 and September 30, 1995
under the debt agreement with its lenders as well as capital lease payments made
in 1995 on refinery equipment. This lease obligation was paid in full in 1995.
Cash flow from financing activities used $4,478,000 in cash in 1994 as the
Partnership paid its scheduled indebtedness under its restructuring agreement
with its lenders. In 1993, cash flow from financing activities provided
$6,031,000 in cash. These borrowings were necessary as a result of reduced sales
prices and reduced volume in late 1992 and early 1993 and were used to finance
operations as well as to reduce accounts payable obligations.
As a result of the negative impact of the January 1994 earthquake on 1994
and 1995 results, the increased levels of rainfall in late 1994 and early 1995
which adversely impacted operating results in the fourth quarter of 1994 and the
final half of 1995 and the excessive levels of debt and required terminal debt
service that currently exists, the Company believed it imperative that debt be
restructured through a reduction of debt levels and required annual debt
service. Accordingly in late 1995 the Company began discussions with its lenders
and in April 1996 announced that it had reached an agreement with the holders of
86% of its senior debt and its junior noteholder to reduce total indebtedness by
approximately $70 million as well as reducing annual interest expense by
approximately $1.7 million. Additionally the agreement provided for no required
debt service costs between October 1995 and March 31, 1997 which allows the
Company to increase its levels of cash. Finally the new agreement provides that
required annual debt service beginning in 1997 would be paid on the basis of 1/6
the first quarter, 1/6 the second quarter, 1/3 the third quarter and 1/3 the
fourth quarter, which more closely reflects the seasonality of the Company's
business. Consummation of the debt restructuring would significantly improve the
Company's financial position and liquidity.
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The debt restructuring will reduce total indebtedness from $95.5 million at
December 31, 1995 to $25.6 million effective January 1, 1996. Under the
agreement, the new debt will carry an interest rate of 12%. The new debt will
mature ten years from date of closing, or December 31, 2005, and will amortize
ratably over years three through ten of the agreement. No cash interest will be
paid in 1996 unless cash at December 31, 1996 exceeds $6,000,000. Cash in excess
of $6,000,000 at December 31, 1996 net of funding capital expenditures (not to
exceed $4,150,000) will be paid to the lenders on January 15, 1997. Such payment
will replace, dollar for dollar, required debt amortization in year three of the
agreement. In 1997, the Partnership is obligated to pay cash interest and debt
amortization based on 50% of excess cash flow as defined. The agreement also
specifies that Huntway can borrow up to an additional $4.2 million in 1996 for
plan expansion, working capital and to finance inventory growth. Such short-term
borrowings must be fully repaid by December 31, 1996. The Partnership is
currently in the process of seeking to obtain this financing.
The Partnership will issue approximately 13.8 million new units to its
lenders, including approximately 1.1 million to its junior noteholders as part
of this transaction. The Partnership currently has approximately 11.6 million
units outstanding. Additionally, the Partnership will retire approximately 3.9
million warrants previously distributed to its lenders. After the transaction,
approximately 1.1 million of new options will be outstanding at a price of $.50
a unit. The agreement also specifies that management will be issued options to
acquire units representing 10% of the fully-diluted equity of the Partnership
(inclusive of options already issued) at an exercise price of $.50 per unit.
The Partnership has been unable to obtain the unanimous approval of its
senior lenders to the consensual restructuring plan, and has determined to seek
to implement the plan without unanimous approval through the filing of a
"prepackaged" plan of reorganization under the U.S. Bankruptcy Code. In that
regard, the senior lenders who have agreed to the consensual restructuring plan
have said that they will vote for a prepackaged plan of reorganization that
would implement the terms of the consensual restructuring plan, subject to
compliance with required solicitation procedures. The prepackaged plan provides
for the continuing and timely payment in full of all of the Partnership's
obligations to suppliers, other creditors (including all trade creditors) and
employees.
The Prepackaged Plan will require substantial resources, both in terms of
professional fees and management time, and could create additional uncertainty,
which effects would adversely affect operating results.
The Partnership's current debt agreement provides for a $17,500,000 letter
of credit facility (LC). The facility provides for crude purchases, hedging and
other activities. Fees for this facility are 2% on the face amount of any letter
of credit issued up to an aggregate of $14,500,000 and 3% on the face amount of
any letter of credit issued above that amount.
The Partnership believes its current level of letter of credit facilities
are sufficient to guarantee requirements for crude oil purchases,
collateralization of other obligations and for hedging activities at current
crude price levels. However, due to the volatility in the price of crude oil,
there can be no assurance that these facilities are adequate. If crude oil
prices continue to increase, the Partnership would be required to reduce its
crude oil purchases which would adversely impact profitability.
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HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITORS' REPORT
Operating Committee and Partners
Huntway Partners, L.P.
(A Limited Partnership)
We have audited the accompanying consolidated balance sheets of Huntway
Partners, L.P. (a limited partnership) and subsidiary as of December 31, 1995
and 1994 and the related consolidated statements of operations, partners'
capital (deficiency) and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the management of the Partnership. Our responsibility is to express an opinion
on these financial statements 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 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 Huntway Partners,
L.P. and its subsidiary as of December 31, 1995 and 1994 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Woodland Hills, California
February 7, 1996 (April 4, 1996
as to Note 1)
137
<PAGE> 155
HUNTWAY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C> <C>
NOTES 1995 1994
------- ------- -------
Current Assets:
Cash......................................................... $ 4,304 $ 5,984
Accounts Receivable.......................................... 2, 3 4,820 2,485
Inventories.................................................. 2, 3 3,320 4,044
Prepaid Expenses............................................. 676 749
------- -------
Total Current Assets........................................... 13,120 13,262
Property - Net................................................. 2, 3, 5 58,677 69,857
Other Assets -- Net............................................ 2 780 805
Goodwill....................................................... 2 1,816 1,872
------- -------
Total.......................................................... $74,393 $85,796
======= =======
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
Current Liabilities:
Accounts Payable........................................... $ 6,582 $ 5,984
Current Portion of Long-term Obligations................... 3, 4 94,445 2,418
Reserve for Plant Closure.................................. 5 164 242
Accrued Interest........................................... 1,417 241
Other Accrued Liabilities.................................. 2 1,949 1,652
-------
-
--------
Total Current Liabilities.................................... 104,557 10,537
Long-term Debt............................................... 3 90,862
Other Long-term Obligations.................................. 4 350 450
Commitments & Contingencies.................................. 4, 7, 8
-------
-
--------
Partners' Capital
(Deficiency):.............................................. 3, 6, 9
General Partners........................................... (305) (160)
Limited Partners........................................... (30,209) (15,893)
-------
-
--------
Total Partners' Capital (Deficiency)......................... (30,514) (16,053)
-------
-
--------
Total........................................................ $ 74,393 $ 85,796
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
138
<PAGE> 156
HUNTWAY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<TABLE>
<CAPTION>
NOTES 1995 1994 1993
----- -------- -------- --------
<S> <C> <C> <C> <C>
Sales............................................. 10 $ 83,069 $ 79,139 $102,678
-------- -------- --------
Costs & Expenses:
Material & Processing Costs..................... 2 76,643 70,621 86,365
Selling and Administration Expenses............. 3,819 4,182 7,884
Plant Closure and Write Down.................... 5 9,492 -- 16,013
Interest Expense................................ 3 5,177 4,984 7,280
Depreciation and Amortization................... 2 2,399 2,356 3,806
-------- -------- --------
Total Costs and Expenses.......................... 97,530 82,143 121,348
-------- -------- --------
Net Income (Loss)................................. 2 (14,461) (3,004) (18,670)
======== ======== ========
Net Income (Loss) Per Unit........................ 2, 6 $ (1.24) $ (0.26) $ (1.60)
======== ======== ========
</TABLE>
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTALS
-------- -------- --------
<S> <C> <C> <C>
Balance at December 31, 1992................................. -- 5,621 5,621
Net Loss for the Year Ended December 31, 1993................ (130) (18,540) (18,670)
----- -------- --------
Balance at December 31, 1993................................. (130) (12,919) (13,049)
Net Loss for the Year Ended December 31, 1994................ (30) (2,974) (3,004)
Balance at December 31, 1994................................. (160) (15,893) (16,053)
----- -------- --------
Net Loss for the Year Ended December 31, 1995................ (145) (14,316) (14,461)
----- -------- --------
Balance at December 31, 1995................................. $ (305) $(30,209) $(30,514)
===== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
139
<PAGE> 157
HUNTWAY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- --------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss)......................................... $(14,461) $(3,004) $(18,670)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operations:
Amortization of Loan Fees.............................. -- -- 1,026
Other Depreciation and Amortization.................... 2,399 2,356 2,780
Interest Expense Paid by the Issuance of............... 1,693 3,899 6,538
Notes Plant Closure and Write Down..................... 9,492 -- 13,413
Changes in Operating Assets and Liabilities:
Decrease (Increase) in Accts. Receivable............... (2,335) 1,644 3,634
Decrease in Inventories................................ 711 132 3,184
Decrease (Increase) in Prepaid Expenses................ 73 (275) 1,207
(Decrease) in Deferred Revenues........................ -- -- (1,967)
Change in Reserve for Plant Closure.................... (78) (1,032) 1,274
Increase (Decrease) in Accounts Payable................ 598 927 (10,545)
Increase (Decrease) in Accrued Liabilities............. 1,473 (1,261) 852
-------- ------- --------
Net Cash Provided By (Used By) Operating Activities......... (435) 3,386 2,726
-------- ------- --------
Cash Flows From Investing Activities:
Additions to Property..................................... (447) (745) (1,000)
Additions to Other Assets................................. (170) 76 (156)
-------- ------- --------
Net Cash Used By Investing Activities....................... (617) (669) (1,156)
-------- ------- --------
Cash Flows From Financing Activities:
Proceeds of Bank Notes Payable............................ -- -- 5,872
Proceeds of Other Notes Payable........................... -- -- 571
Repayments of Long-term Obligations....................... (628) (4,478) (412)
-------- ------- --------
Net Cash Provided by (Used by) Financing Activities......... (628) (4,478) 6,031
-------- ------- --------
Net Increase (Decrease) In Cash............................. (1,680) (1,761) 7,601
Cash Balance Beginning of Year.............................. 5,984 7,745 144
-------- ------- --------
Cash Balance End of Year.................................... $ 4,304 $ 5,984 $ 7,745
======== ======= ========
Supplemental Disclosures:
Interest Paid During the Period........................... $ 2,308 $ 1,074 $ 1,127
======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
140
<PAGE> 158
HUNTWAY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
On October 3, 1995, Huntway Partners, L.P. made a $1,250,000 payment to its
existing lenders. On December 4, 1995, the Partnership announced that it did not
make its scheduled $1,000,000 debt payment due November 30, 1995 and was,
therefore, in default under its indenture. At that time, the Partnership was
verbally informed by substantially all of its senior lenders that they did not
intend to pursue their remedies under the current indenture due to nonpayment
while discussions regarding the potential restructuring of the Partnership s
indebtedness was continuing. Discussions regarding the debt restructuring have
continued from October 1995 through the present. The Partnership also stated
that it would not be making any further payments under the current indenture
which also provided for a $1,250,000 payment on December 31, 1995 and for a
$5,000,000 payment in 1996 paid quarterly under a defined formula. As a result,
at December 31, 1995, substantially all of the Partnership's outstanding
indebtedness was classified as current.
As described below, the Partnership has reached an agreement in principle
with four of its five senior lenders representing 86% of its senior debt to
restructure its indebtedness over a ten-year period. The Partnership has also
reached agreement with the holders of its junior subordinated debt on the
restructuring plan described below.
On April 15, 1996, the Partnership announced that it had reached an
agreement in principle to restructure its indebtedness with its current lenders.
The agreement which is subject to final documentation and unitholder approval
will reduce total indebtedness from $95.5 million at December 31, 1995 to $25.6
million effective January 1, 1996. Under the agreement, the new debt will carry
an interest rate of 12%. The new debt will mature on December 31, 2005, and will
amortize ratably over years three through ten of the agreement. No cash interest
will be paid in 1996 unless cash net of required capital expenditures in 1996
exceeds $6,000,000. Cash in excess of $6,000,000 at December 31, 1996 net of
funding capital expenditures (not to exceed $4,150,000) will be paid to the
lenders on January 15, 1997. Such payment will replace, dollar for dollar,
required debt amortization in year three of the agreement. In 1997, the
Partnership is obligated to pay cash interest and debt amortization based on 50%
of excess cash flow as defined. The agreement also specifies that Huntway can
borrow up to an additional $4.2 million in 1996 for plan expansion, working
capital and to finance inventory growth. Such short-term borrowings must be
fully funded by December 31, 1996. The Partnership has been seeking to obtain
this financing.
The Partnership will issue approximately 13.8 million new units to its
lenders, including approximately 1.1 million to its junior noteholders as part
of this transaction. The Partnership currently has approximately 11.6 million
units outstanding. Additionally, the Partnership will retire approximately 3.9
million warrants previously distributed to its lenders. After the transaction,
approximately 1.1 million in new options will be outstanding at a price of $.50
a unit. The agreement also specifies that management will be issued options to
acquire units representing 10% of the fully-diluted equity of the Partnership
(inclusive of options already issued) at an exercise price of $.50 per unit.
The Partnership has been seeking to negotiate with its other senior lender
(representing 14% of the senior debt) to secure its agreement to the
restructuring plan reached with the other senior lenders. Presently, the
Partnership has been unable to secure this lenders approval of the restructuring
plan. The Partnership has pursued and continues to pursue the agreement of this
remaining senior lender to the consensual restructuring plan.
However, if the Partnership is unable to obtain the unanimous approval of
its senior lenders to the consensual restructuring plan, it will consider all
alternatives available to achieve the goals of the current plan, which will
include seeking to implement the plan without unanimous approval through the
filing of a "prepackaged" plan of reorganization under the U.S. Bankruptcy Code.
In that regard, the senior lenders who have agreed to the consensual
restructuring plan have said that they will vote for a prepackaged plan of
reorganization that would implement the terms of the consensual restructuring
plan, subject to compliance
141
<PAGE> 159
HUNTWAY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
with required solicitation procedures. Any such prepackaged plan will provide
for the continuing and timely payment in full of all of the Partnership's
obligations to suppliers, other creditors (including all trade creditors) and
employees.
If the Partnership is forced to file a prepackaged plan of reorganization,
it will seek the court's approval to implement terms of the consensual
restructuring plan without unanimous senior lender approval. Under applicable
bankruptcy law, a plan of reorganization must be approved by the affirmative
vote of 2/3 in dollar amount and 1/2 in value of each class of security holders
which is impaired under the plan. The senior debt and the common units will be
the only classes of the Partnership's securities that will be impaired under the
prepackaged plan. As described above, senior lenders representing 86% in dollar
amount and 75% in number have said they would vote for the plan. Management of
the Partnership believes that the terms of the prepackaged plan are favorable to
the Partnership's existing common unit holders and expects that common unit
holders will also approve the prepackaged plan, if required.
At December 31, 1995, the cash position of the Partnership was $4.3
million. In the opinion of management, assuming completion of the debt
restructuring (which provides for no principal and interest payments on
indebtedness during 1996), cash on hand, together with anticipated cash flow in
1996, will be sufficient to meet Huntway's liquidity obligations for the next 12
to 24 months.
NOTE 2. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General. Huntway Partners is engaged primarily in the operation of a 6,000
barrel-per-day oil refinery located in Southern California, a 9,000
barrel-per-day oil refinery located in Northern California and an 8,500
barrel-per-day refinery in Arizona (see Note 5, Plant Closure), which produce
and sell refined petroleum products. Huntway Partners has adopted a calendar
year fiscal period.
The Partnership is subject to various environmental laws and regulations of
the United States and the states of California and Arizona. As is the case with
other companies engaged in similar industries, the Partnership faces exposure
from potential claims and lawsuits involving environmental matters. These
matters may involve alleged soil and water contamination and air pollution. The
Partnership's policy is to accrue environmental and clean-up costs when it is
probable that a liability has been incurred and the amount of the liability is
reasonably estimable.
Total limited partnership units outstanding at December 31, 1995, 1994 and
1993 were 11,556,250. In addition, 3,886,816 warrants to purchase limited
partnership units at $.875 per unit through December 31, 2008 were issued as
part of the Partnership's June 23, 1993 restructuring.
Principles of Consolidation. The consolidated financial statements include
the accounts of Huntway Partners and its subsidiary, Sunbelt Refining Company,
L.P. ("Sunbelt"). All significant inter-company items have been eliminated in
consolidation.
Exchange Transactions. In connection with its refinery activities, the
Partnership engages from time to time in exchange transactions common to the
industry where crude oil or refined product is exchanged with other unrelated
entities for similar commodities. The accounting of such exchanges is based on
the recorded value of the commodities relinquished. There were no exchange
balances at December 31, 1995. Net exchange balances included in accounts
receivable at December 31, 1994 were comprised of receivables of $3,403, offset
by payables of $28,332. The gain or loss from such transactions has not been
significant to Huntway Partners' consolidated financial statements.
Environmental Costs. The Partnership expenses or capitalizes costs
associated with environmental clean-up and other repairs and maintenance at its
refineries in accordance with Emerging Issues Task Force Topic 90-8 and exhibits
thereto.
142
<PAGE> 160
HUNTWAY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Turnaround Costs. Cost of turnarounds, which consist of complete shutdown
and inspection of a refinery unit for repair and maintenance, are deferred and
amortized over the estimated period of benefit which generally ranges from two
to five years.
Income Taxes. No provision has been made for income taxes in the
accompanying consolidated financial statements. The taxable income or loss of
the Partnership is allocated to each partner in accordance with the provisions
of the Partnership agreement.
The taxable income or loss allocated to the partners in any one year may
vary from the amount of income or loss reported for financial statement
purposes, due to differences between the time that certain income and expense
items are recognized and the time when they are reported for financial statement
purposes.
The partnership agreement provides generally that income, loss and cash
distributions be allocated 1 percent to the general partner and 99 percent to
the limited partners. In turn, each partner's tax status will determine the
appropriate income tax for that partner's allocated share of Huntway Partners'
taxable income or loss.
Inventories. Crude oil and finished product inventories are stated at cost
determined by the last-in, first-out method (LIFO) , which is not in excess of
market.
Management believes the LIFO method of accounting for inventories is
preferable because it more closely matches revenues and expenses and reflects
the prevailing practice in the petroleum industry.
The effect of LIFO was to decrease the net loss and net loss per limited
partners in 1995 by approximately $33,000 and less than 1/2 cent and to increase
the net loss and net loss per limited partner unit in 1994 by approximately
$1,167,000 and 10 cents. In 1993, the effect of LIFO was to decrease the net
loss and net loss per limited partner unit by approximately by $1,184,000 and 10
cents.
Inventories at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Finished Products................................. $2,295,000 $2,792,000
Crude Oil and Supplies............................ 2,195,000 2,455,000
----------
4,490,000 5,247,000
Less LIFO Reserve................................. (1,170,000) (1,203,000)
----------
Total............................................. $3,320,000 $4,044,000
==========
</TABLE>
Property and Depreciation. Property is stated at cost and depreciated using
the straight-line method over the estimated useful lives of the assets.
Facilities which are temporarily closed are retained in the property accounts as
idle facilities and are depreciated.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results would differ from these estimates.
As discussed in Note 5, the Partnership has written down its investment in the
Sunbelt Refinery based upon the best estimate of the outlook for the asphalt and
light-end market in Arizona.
143
<PAGE> 161
HUNTWAY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Property at December 31, 1995 and 1994 consisted of:
<TABLE>
<CAPTION>
DEPRECIABLE
LIFE 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Land............................... $ 2,176,000 $ 2,176,000
Buildings.......................... 40 yrs. 887,000 810,000
Refineries and Related Equipment... 40 yrs. 66,730,000 66,510,000
Other.............................. 5 - 10 yrs. 999,000 1,032,000
Construction in Progress........... 444,000 261,000
Idle Facilities, Less Accumulated
Depreciation of $0 and $1,938,000
as of December 31, 1995 and 1994,
respectively (See Note 5)........ 1,227,000 11,041,000
------------ ------------
72,463,000 81,830,000
Less Accumulated Depreciation and
Amortization..................... (13,786,000) (11,973,000)
------------ ------------
Property - Net..................... $ 58,677,000 $ 69,857,000
============ ============
</TABLE>
Other Assets. Other assets are stated at cost and amortized, where
appropriate, using various methods over the useful lives of the assets.
Other assets at December 31, 1995 and 1994 consisted of:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Computer Software................................... $ 604,000 $ 564,000
Deposits............................................ 442,000 361,000
Other............................................... 483,000 434,000
---------- ----------
1,529,000 1,359,000
Less Accumulated Amortization....................... (749,000) (554,000)
---------- ----------
Other Assets - Net.................................. $ 780,000 $ 805,000
========== ==========
</TABLE>
Goodwill. Goodwill is stated at cost and amortized using the straight-line
method over a period of 40 years and relate to the Partnership s California
refineries. Huntway Partners refineries are designed to produce asphalt and
unfinished light-end products, and accordingly, are not prone to obsolescence to
the same degree as more sophisticated refineries. The Partnership continually
evaluates the existence of goodwill impairment on the basis of whether the
goodwill is fully recoverable from projected, undiscounted net cash flows of the
two refineries. The related accumulated amortization at December 31, 1995 and
1994 was $471,000 and $415,000, respectively.
Interest Capitalization. Huntway Partners and Sunbelt capitalize interest
incurred in connection with the construction of refinery facilities. No interest
was capitalized in 1995, 1994, or 1993.
Deferred Revenues. Deferred revenues are recorded as cash is collected on
sales agreements which provide for future delivery of refined products. Revenues
are recognized as the refined products are delivered.
Other Accrued Liabilities. Included in other accrued liabilities are
accrued property taxes of $611,000 and $497,000 at December 31, 1995 and 1994,
respectively.
Reclassifications. Certain items in the prior years financial statements
have been reclassified to conform to the 1994 presentation.
144
<PAGE> 162
HUNTWAY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. FINANCING ARRANGEMENTS
In 1995, the Partnership made payments to its lenders of $1,750,000. In
1995, a minimum of $4,000,000 was due to be paid to the senior lenders.
On December 4, 1995, the Partnership announced that it did not make its
scheduled $1,000,000 debt payment due November 30, 1995 and was in default under
its current indenture. The Partnership also announced at that time that it would
not be making any further payments under its current indenture. As a result, at
December 31, 1995, substantially all of the Partnership's outstanding
indebtedness was classified as current.
On October 3, 1995, the Partnership made a $1,250,000 payment to its
lenders and at that time was verbally informed by substantially all of its
senior lenders that they did not intend to pursue remedies under the current
indenture due to nonpayment while discussions regarding the potential
restructuring of the Partnership's debt were continuing.
On April 15, 1996, the Partnership announced that it had reached agreement
with four of its five senior lenders representing 86% of its senior debt to
restructure its indebtedness over a ten-year period.
The agreement specifies, among other things, that total debt will be
reduced from $95.5 million to $25.6 million effective January 1, 1996. The new
debt will carry an interest rate of 12%.
The agreement also specifies that no cash interest will be paid in 1996
unless cash net of required capital expenditures in 1996 exceeds $6,000,000.
Cash in excess of $6,000,000 at December 31, 1996 net of funding capital
expenditures (not to exceed $4,150,000) will be paid to the lenders on January
15, 1997. Such payment will replace, dollar for dollar, required debt
amortization in year three and of the agreement. In 1997,the Partnership is
obligated to pay cash interest and debt amortization based on 50% of excess cash
flow as defined. The agreement also specifies that Huntway can borrow up to an
additional $4.2 million in 1996 for plant expansion, working capital and to
finance inventory growth. Such short-term borrowings must be fully funded by
December 31, 1996. The Partnership is seeking to obtain this financing.
The Partnership is seeking to obtain the approval of its remaining senior
lender to the restructuring agreement. However, if the Partnership is unable to
obtain unanimous approval of the agreement, it will consider all alternatives
available including the filing of a "prepackaged" plan of reorganization under
the U.S. Bankruptcy Code.
The agreement provides for a $17,500,000 letter of credit facility through
December 31, 2000. This facility provides for crude purchase, hedging and other
activities. Fees for this facility are 2% on the face amount of any letter of
credit issued up to an aggregate of $14,500,000 and 3% on any letter of credit
issued above that amount.
145
<PAGE> 163
HUNTWAY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Partnership's debt as of December 31, 1995 and December 31, 1994
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
8% Senior Secured Notes due December 31, 2000..................... $ 24,904,000 $ 24,680,000
Subordinated Secured Notes due December 31, 2008 Bearing Interest
at 4% Per Annum Until the Earliest of December 31, 2000 or the
Retirement of the 8% Senior Secured Notes and Thereafter at
12 1/4% Per Annum............................................... 53,254,000 52,205,000
Junior Subordinated Secured Debentures due December 31, 2020 and
Bearing Interest at 4% Per Annum until the Retirement of the
Senior Secured Notes and Thereafter at 12% Per Annum............ 7,587,000 7,437,000
Series 1988 Variable Rate Demand Industrial Development Bonds due
September 1, 2008, Interest Payable Monthly at Rates Determined
Weekly Based on Market Rates for Comparable Interest (5.75% and
3.5% at December 31, 1995 and 1994, respectively) and
Collateralized by a Standby Letter of Credit Issued by a Bank... 8,600,000 8,600,000
Capital Lease Obligations......................................... -- 358,000
------------ ------------
Total............................................................. 94,345,000 93,280,000
Less Amount Classified as Current................................. (94,345,000) 2,418,000
------------ ------------
Net Long-Term Debt................................................ $ -- $ 90,862,000
============ ============
</TABLE>
All of the Partnership's assets serve as collateral for these issues.
NOTE 4. CONTINGENCIES
On May 19, 1995, during testing pursuant to the closure of a waste water
treatment pond, the Partnership discovered that several drums of hazardous
materials had been improperly disposed of at the site of the Wilmington
refinery. Subsequent geophysical testing to date indicates that approximately 20
to 30 of such drums had been improperly disposed of at the site. The materials
had been stored in drums and disposed of under the waste water treatment pond
apparently at the time of its construction. Although the Partnership believes
that it has claims against the former owners and operators of the site, as well
as the entities involved in the construction of the pond and various insurance
carriers which should substantially mitigate the ultimate costs, the Partnership
has accrued $294,000 as of December 31, 1995 for remediation of the
contamination. Management does not believe, based upon the information known at
this time, that the remediation effort will have a material adverse effect on
the Partnership's results of operations, financial position or net cash flows.
The Partnership and its subsidiary, Sunbelt Refining Company, L.P., were
charged by the State of Arizona with violations of certain environmental
regulations and provisions of the Arizona refinery's installation permit.
Sunbelt acknowledged that it had certain environmental compliance problems in
the past, but believed that none of these resulted in any harm to public health
or to the environment. While Huntway and Sunbelt have consistently denied that
any criminal activity occurred, the parties agreed on December 21, 1993 to
settle both the State's civil and criminal charges. As part of the settlement,
Sunbelt has agreed to pay a penalty of $700,000 over a period of seven years
without interest and to undertake certain environmental improvements at the
Arizona refinery. Huntway has instituted new programs and procedures to ensure
that it is operating in compliance with all environmental laws and regulations.
As of December 31, 1995 $450,000 remains to be paid. Of this amount, $100,000
was paid in January of 1996 and is included in current portion of long-term
debt.
The Partnership is party to a number of additional lawsuits and other
proceedings arising out of the ordinary course of its business. While the
results of such lawsuits and proceedings cannot be predicted with certainty,
management does not expect that the ultimate liability, if any, will have a
material adverse effect on the consolidated financial position, results of
operations or net cash flows of the Partnership.
146
<PAGE> 164
HUNTWAY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. PLANT CLOSURE
In August 1993, the Partnership suspended operations at its Sunbelt
refinery located in Coolidge, Arizona. The primary factors involved in this
decision were poor margins at the facility, limited working capital availability
and, to a lesser extent, the impact of an environmental lawsuit and
investigation filed by the State of Arizona which was settled in 1993.
Accordingly, at June 30, 1993, the Partnership wrote down the carrying
value of the refinery and related assets to their then estimated fair values.
The provision for plant closure consisted of the following:
<TABLE>
<S> <C>
Provision for Closure and Maintenance Costs During the Shut-down
Period Beginning July 1, 1993................................. $ 2,600,000
Write Off of Intangible Assets Associated with Ongoing Refining
Operations.................................................... 4,037,000
Write Down of Refining Assets to Estimated Fair Value........... 9,376,000
-----------
Total................................................. $16,013,000
===========
</TABLE>
Subsequently, through December 31, 1995, approximately $2,436,000 of
closure and maintenance costs have been charged against the reserve.
At December 31, 1995, pursuant to an evaluation of the operating potential
of the facility, the plant was further written down by $9,492,000 to $1,227,000.
This write down considered, among other things, the outlook for the asphalt
market in Arizona, the regulatory environment impacting both the plant
operations as well as the formulation requirements of diesel and jet fuel in the
markets the plant would serve, as well as the ability of the Partnership to
market those products. This evaluation indicated and it is the opinion of
management that the likelihood of operation as a petroleum refinery in the
future is remote, but that the facility may be operated effectively as a crude
or products terminal and storage facility at some time in the future.
NOTE 6. EARNINGS PER UNIT AND ALLOCATION OF INCOME AND LOSS
Earnings per unit is calculated based upon the weighted average number of
limited partner equivalent units outstanding. Limited partner equivalent units
for the year ended December 31, 1995 and 1994 is calculated by adding to the
11,556,250 actual limited partnership units outstanding 116,730 additional units
representing the general partners overall 1% interest.
For the year ended December 31, 1995, 1994, and 1993, the effect of
outstanding options and warrants is anti-dilutive and, accordingly, has been
excluded from the calculation.
Generally, partnership income and loss is allocated 1% to the general
partners and 99% to the limited partners. In 1993 and 1992, because the general
partners combined general and limited capital accounts had been fully depleted,
100% of the losses were allocated to the limited partners until their capital
accounts had also been reduced to zero. Thereafter, losses were allocated 1% to
the general partners and 99% to the limited partners. The Partnership
reclassified in 1993 to general partners capital $979,000 of equity attributable
to the general partners limited partnership interest previously classified as
limited partners capital.
NOTE 7. LEASE COMMITMENTS
The Partnership has entered into certain ground leases for its refinery
facilities. Such leases range from five to 41 years in duration. All such leases
are classified as operating leases.
147
<PAGE> 165
HUNTWAY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Future minimum annual rental payments required under operating leases,
which have non-cancelable lease terms in excess of one year, as of December 31,
1995 are:
<TABLE>
<S> <C>
1996............................. $ 300,000
1997............................. 300,000
1998............................. 300,000
1999............................. 300,000
2000 and Beyond.................. 1,003,000
----------
Total.................. $2,213,000
==========
</TABLE>
The Partnership also leases a deep water terminal facility in Benicia,
California. Under terms of the lease agreement, the Partnership pay minimum
annual lease payments of approximately $539,000 through the year 2031, subject
to an escalation clause. This lease is cancelable upon one year's notice and
accounted for as an operating lease.
Rental expense for all operating leases (some of which have terms of less
than a year) was $1,022,000, $1,259,000, and $1,524,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
NOTE 8. PROFIT SHARING AND TAX DEFERRED SAVINGS (401K) PLAN AND PENSION PLAN
Huntway Partners has a profit sharing and tax deferred savings (401K) plan
and a defined contribution pension plan. The Partnership' contributions to the
plans generally vest to participants on the basis of length of employment.
Beginning in 1994, the Partnership matches up to 2% of participants pre-tax
contributions to the tax deferred savings (401K) plan.
Profit sharing contributions by the Partnership will be made from profits
in an amount up to 10 percent of the aggregate base compensation of all
participants in the plan, not to exceed the Partnership' current net income. No
contributions were made to the plan during the last three years.
In addition, a minimum pension contribution equal to 4% (5% prior to
December 31, 1994) of participants' base compensation must be made each year
regardless of current profits or losses.
The amount of the Partnership contributions to the plans charged to income
for the years ended December 31, 1995, 1994 and 1993 were $214,000, $205,000 and
$281,000, respectively.
NOTE 9. UNIT OPTION PLAN
The Partnership maintains a 1989 Salaried Employee Partnership Unit Option
Plan (the "Plan") adopted by the Operating Committee. The Plan is administered
by a sub-committee (the "sub-committee") of the Operating Committee. The Plan
authorizes the Partnership to grant to salaried officers and employees of the
Partnership non qualified options to purchase Partnership Units. The Partnership
has reserved 1,022,000 Partnership Units to be issued pursuant to the exercise
of options granted under the Plan. The Plan will terminate on March 6, 1999. No
person serving on the Operating Committee or the Plan Committee who is not an
employee of Huntway is eligible to participate in the Plan.
On September 15, 1993, the sub-committee repriced 39,600 options previously
issued at prices from $3.50 per unit to $6.00 per unit to an exercise price of
$1 per unit. Under the repricing agreement, 79,200 previously issued options
were converted to 39,600 options (or 50%) at a new exercise price of $1 per
unit. Additionally, 25,000 previously issued options were canceled. These newly
priced options vest 50% on the second anniversary of the option grant date and
50% on the third anniversary of the option grant date, except in the case of (i)
the optionees' death or disability; (ii) retirement in the event the employee
has three years of service with the Partnership; or (iii) change in control of
the Managing General Partner.
148
<PAGE> 166
HUNTWAY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The sub-committee granted 400,000 new options on October 15, 1993 at an
exercise price of $1 per unit. These options were granted to salaried officers
and employees of the Partnership.
These options generally do not vest until the third anniversary of the
option grant date, except in the case of (i) the optionees' death or disability;
(ii) retirement in the event the employee has three years of service with the
Partnership; or (iii) change in control of the Managing General Partner. All
options granted or repriced were at prices not less than fair market value at
dates of grant.
During 1995, 6,850 previously issued options terminated. The sub-committee
granted 589,250 new options on August 22, 1995 at an exercise price of $.625 per
unit.
The number of options outstanding and exercisable as of December 31, 1995
and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
--------- -------
<S> <C> <C>
Stock Options Outstanding at January 1 at $1 per unit............ 439,600 439,600
Granted at $.625 per unit........................................ 589,250 --
Exercised........................................................ -- --
Forfeited at $1 per unit......................................... (6,850) --
--------- -------
Stock Options Outstanding at December 31......................... 1,022,000 439,600
========= =======
Exerciseable at $1 per unit...................................... 103,133 84,258
========= =======
</TABLE>
All exerciseable options have a strike price of $1 a unit. No options were
exercised in 1995, 1994 or 1993.
As more fully explained in Note 1, the Partnership has reached an agreement
with a majority of its senior lenders and with its junior note holders to
restructure its debt. The agreement specifies that management will be issued
options for 10% of the Partnership on a fully-diluted basis (inclusive of
options already issued) at a strike price of $.50 a unit.
NOTE 10. SIGNIFICANT CUSTOMERS
One customer accounted for approximately 17.1% in 1995, 16% of revenues in
1994 and 14% in 1993.
149
<PAGE> 167
HUNTWAY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash............................................................ $ 2,735 $ 4,304
Accounts Receivable............................................. 6,079 4,820
Inventories..................................................... 6,150 3,320
Prepaid Expenses................................................ 929 676
--------- --------
Total Current Assets......................................... 15,893 13,120
--------- --------
PROPERTY - Net.................................................... 59,279 58,677
OTHER ASSETS...................................................... 1,078 780
GOODWILL.......................................................... 1,787 1,816
--------- --------
TOTAL ASSETS...................................................... $ 78,037 $ 74,393
========= ========
CURRENT LIABILITIES:
Accounts Payable................................................ $ 8,815 $ 6,582
Current Portion of Long-Term Obligations........................ 94,345 94,445
Reserve for Plant Closure....................................... 155 164
Accrued Interest................................................ 3,669 1,417
Other Accrued Liabilities....................................... 2,185 1,949
--------- --------
Total Current Liabilities.................................... 109,169 104,557
--------- --------
LONG-TERM OBLIGATIONS............................................. 350 350
PARTNERS' CAPITAL:
General Partners................................................ (315) (305)
Limited Partners................................................ (31,167) (30,209)
--------- --------
Total Partners' Capital (Deficiency)......................... (31,482) (30,514)
--------- --------
TOTAL LIABILITIES AND PARTNERS' CAPITAL........................... $ 78,037 $ 74,393
========= ========
</TABLE>
150
<PAGE> 168
HUNTWAY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1996 1995
UNAUDITED UNAUDITED
---------- ----------
<S> <C> <C>
SALES................................................................ $ 43,308 $ 33,339
------- -------
COSTS AND EXPENSES:
Material and Processing Costs...................................... 38,834 33,366
Selling and Administration Expenses................................ 1,790 1,924
Interest Expense................................................... 2,605 2,555
Depreciation and Amortization...................................... 1,047 1,168
------- -------
Total Costs and Expenses............................................. 44,276 39,013
------- -------
NET LOSS............................................................. $ (968) $ (5,674)
======= =======
NET LOSS PER UNIT.................................................... $ 0.08 $ 0.49
======= =======
LIMITED PARTNER EQUIVALENT UNITS OUTSTANDING......................... 11,673 11,673
======= =======
</TABLE>
151
<PAGE> 169
HUNTWAY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1995
SIX MONTHS ----------
ENDED
JUNE 30, (UNAUDITED)
1996
----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss............................................................. (968) (5,674)
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating
Activities:
Interest Expense Paid by the Issuance of Notes.................... 0 1,692
Depreciation and Amortization..................................... 1,047 1,168
Changes in Operating Assets and Liabilities:
Increase in Accounts Receivable................................. (1,259) (2,558)
Increase in Inventories......................................... (2,783) (1,037)
Increase in Prepaid Expenses.................................... (253) (48)
Decrease in Reserves for Plant Closure.......................... (9) (28)
Increase in Accounts Payable.................................... 2,233 3,418
Increase in Accrued Liabilities................................. 2,488 190
------- -------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES....................... 496 (2,877)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property................................................ (1,570) (150)
Additions to Other Assets............................................ (395) (147)
------- -------
NET CASH USED BY INVESTING ACTIVITIES.................................. (1,965) (297)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Long-term Obligations................................... (100) (242)
------- -------
NET CASH USED BY FINANCING ACTIVITIES.................................. (100) (242)
------- -------
NET DECREASE IN CASH................................................... (1,569) (3,416)
CASH BALANCE -- BEGINNING OF PERIOD.................................... 4,304 5,984
------- -------
CASH BALANCE -- END OF PERIOD.......................................... 2,735 2,568
======= =======
INTEREST PAID IN CASH DURING THE PERIOD................................ 353 887
======= =======
</TABLE>
152
<PAGE> 170
HUNTWAY PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements of Huntway
Partners, L.P. and subsidiary as of June 30, 1996 and for the six month periods
ended June 30, 1996 and 1995 are unaudited, but in the opinion of management,
such condensed consolidated financial statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such financial statements in accordance with generally accepted
accounting principles. The results of operations for an interim period are not
necessarily indicative of results for a full year. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto contained in the Partnership's annual
report for the year ended December 31, 1995.
Crude oil and finished product inventories are stated at cost determined by
the last-in, first-out method, which is not in excess of market. For the first
half of 1996 and 1995, the effect of LIFO was to increase the net loss by
$490,000 and $618,000, respectively.
Inventories at June 30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Finished Products........................................ $ 4,379 $ 2,295
Crude Oil and Supplies................................... 3,431 2,195
------- -------
7,810 4,490
Less LIFO Reserve........................................ (1,660) (1,170)
------- -------
Total.................................................... $ 6,150 $ 3,320
======= =======
</TABLE>
2. FINANCIAL ARRANGEMENTS
On December 4, 1995, the Partnership announced that it did not make its
scheduled $1,000,000 debt payment due November 30, 1995 and was, therefore, in
default under its indenture. At that time, the Partnership was verbally informed
by substantially all of its senior lenders that they did not intend to pursue
their remedies under the current indenture due to nonpayment while discussions
regarding the potential restructuring of the Partnership's indebtedness was
continuing. The Partnership stated that it would not be making any further
payments under the current indenture which provided for payment of $5,000,000 in
1996 paid quarterly under a defined formula. As a result, at December 31, 1995
and March 31, 1996, substantially all of the Partnership's outstanding
indebtedness was classified as current. These discussions culminated in the
April 15, 1996 announcement as described below regarding the potential
restructuring of the Partnership's indebtedness. The amount of contractual
interest not paid at June 30, 1996 was $2,173,000.
On April 15, 1996, the Partnership announced that it had reached agreement
with four of its five senior lenders, representing 86% of its senior debt, to
restructure its indebtedness over a ten-year period.
The agreement specifies, among other things, that total debt will be
reduced from $95.5 million to $25.6 million effective January 1, 1996. The new
debt will carry an interest rate of 12%.
The agreement also specifies that no cash interest will be paid in 1996
unless cash at December 31, 1996 exceeds $6,000,000. Cash in excess of
$6,000,000 at December 31, 1996, net of funding capital expenditures (not to
exceed $4,150,000), will be paid to the lenders on January 15, 1997. Such
payment will replace, dollar for dollar, required debt amortization in year
three and of the agreement. In 1997, the Partnership is obligated to pay cash
interest and debt amortization based on 50% of excess cash flow as defined.
153
<PAGE> 171
HUNTWAY PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
3. CONTINGENCIES
On May 19, 1995, during testing pursuant to the closure of a waste water
treatment pond, the Partnership discovered that several drums of hazardous
materials had been improperly disposed of at the site of the Wilmington
refinery. Subsequent geophysical testing to date indicates that approximately 20
to 30 of such drums had been improperly disposed of at the site. The materials
had been stored in drums and disposed of under the waste water treatment pond
apparently at the time of its construction.
The Partnership is party to a number of lawsuits and other proceedings
arising out of the ordinary course of its business. While the results of such
lawsuits and proceedings cannot be predicted with certainty, management does not
expect that the ultimate liability, if any, will have a material adverse effect
on the consolidated financial position or results of operations of the
Partnership.
154
<PAGE> 172
BENEFICIAL OWNERSHIP OF COMMON UNITS
The following tables set forth information regarding the number of Common
Units owned as of June 30, 1996 by each person known by Huntway to be the
beneficial owner of more than five percent of all Common Units outstanding.
Except as indicated below, to the knowledge of Huntway, each of the persons
named in the table has sole voting and investment power with respect to the
Common Units set forth opposite his or its name.
<TABLE>
<CAPTION>
BENEFICIAL OWNER UNITS INTEREST
- ------------------------------------------------------------------- -------- -----
<S> <C> <C>
Common Units:
First Capital Corporation of Chicago............................... 3,640,121(1) 31.5%
One First National Plaza
Chicago, IL 60670
Bankers Trust Company.............................................. 1,975,522(2) 14.6%
280 Park Avenue
New York, NY 10017
Massachusetts Mutual Life Insurance Company........................ 1,092,156(2) 8.6%
1295 State Street
Springfield, MA 01111
Mr. Andre Danesh................................................... 1,460,959(3) 11.2%
Allied Financial Corp.
1583 Beacon Street
Brookline, MA 02146
Goldman, Sachs Group, L.P. and Goldman, Sachs & Co................. 513,000(4) 4.3%
85 Broad Street
New York, NY 10904
Reprise Holdings, Inc. ............................................ 653,286 5.7%
One First National Plaza
Chicago, IL 60670
All Officers and Operating Committee Members as a Group (12 1,810,927(5)(6) 15.7%
Persons).........................................................
</TABLE>
- ------------------
1) Includes 653,286 Common Units held by Reprise Holdings, Inc. First Capital
Corporation of Chicago and Madison Dearborn Partners III own all of the
outstanding common stock of Reprise Holdings, Inc., First Capital
Corporation of Chicago and Madison Dearborn Partners III disclaim beneficial
ownership of Common Units beneficially owned by Reprise Holdings, Inc.
2) All reported beneficial ownership of Common Units represents warrants to
purchase Common Units at an exercise price of $.875 per Common Unit issued
to Huntway's Senior Lenders under the June 23, 1993 restructuring agreement.
See Note 3 to the Consolidated Financial Statements. Pursuant to the
Prepackaged Plan, these warrants will be cancelled and the holders thereof
will receive 25% of the Common Units outstanding immediately following
Consummation.
3) Includes 378,300 Common Units held by Mr. Danesh; 243,700 Common Units held
by Allied Financial Corporation's Profit Sharing Plan, of which Mr. Danesh
is the trustee; 159,900 Common Units held by E & S Investments, of which Mr.
Danesh is the general manager; and 133,000 Common Units held by Allied
Financial Investments, of which Mr. Danesh is a general partner. Also
includes 546,059 Common Units issuable upon the exercise of an option issued
by Huntway to Mr. Danesh. The exercise price provided for in such option is
$.50 per Common Unit. Does not include option to purchase 600,000 Common
Units which Huntway has agreed to issue to Mr. Danesh in the event the
restructuring is consummated. The exercise price provided for in such option
will be $.50 per Common Unit.
4) Based on the Schedule 13D dated June 10, 1996 filed on behalf of Goldman,
Sachs Group, L.P. and Goldman Sachs & Co.
5) Includes 62,500 and 341,958 Common Units held by Madison Dearborn Partners
VI and Madison Dearborn Partners III, respectively. Samuel M. Mencoff and
Justin S. Huscher, members of the Operating Committee, serve as general
partners of such entities but disclaim beneficial ownership of Common Units
held by such entities. Also includes 653,286 Common Units held by Reprise
Holdings, Inc. Mr. Mencoff is the President ad sole director of Reprise
Holdings, Inc. See also Note 1 above. Mr. Mencoff disclaims beneficial
ownership of the Common Units held by Reprise Holding, Inc.
6) Includes options to acquire 103,133 Common Units exercisable at $1 a unit.
155
<PAGE> 173
CONSENT SOLICITATION
The costs of this consent solicitation will be paid by the Company.
Generally, consents will be solicited by mail of by facsimile, although officers
and other employees of the Company may request the return of consents by
telephone, telegram, facsimile or in person.
By the Order of the General Partner
Warren J. Nelson
Executive Vice President
156
<PAGE> 174
APPENDIX A
PREPACKAGED PLAN OF REORGANIZATION
<PAGE> 175
IMPORTANT: A BANKRUPTCY CASE HAS NOT BEEN COMMENCED
AS OF THE DATE OF THE DISTRIBUTION OF THIS DOCUMENT.
UNITED STATES BANKRUPTCY COURT
DISTRICT OF
<TABLE>
<S> <C>
- -----------------------------------
IN RE:
HUNTWAY PARTNERS, L.P. CHAPTER 11
DEBTOR. CASE NO.
- -----------------------------------
</TABLE>
PREPACKAGED PLAN OF REORGANIZATION OF HUNTWAY PARTNERS, L.P.
UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
Huntway Partners, L.P., a Delaware limited partnership, proposes the
following Chapter 11 Prepackaged Plan pursuant to subsection 1121(a) of Title 11
of the United States Code:
I.
DEFINITIONS
A. GENERAL PROVISIONS.
Unless the context otherwise requires, the following terms shall have the
following meanings when used in capitalized form in the Prepackaged Plan. Such
meanings shall be equally applicable to both the singular and plural forms of
such terms. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to the Prepackaged Plan as a whole and not any particular
section, subsection, or clause contained in the Prepackaged Plan, unless the
context requires otherwise. Whenever from the context it appears appropriate,
each term stated in either the singular or the plural includes the singular and
the plural, and pronouns stated in the masculine, feminine or neuter gender
include the masculine, feminine and the neuter gender. Any term used in
capitalized form in the Prepackaged Plan that is not defined herein but that is
used in the Bankruptcy Code or the Bankruptcy Rules shall have the meaning
assigned to such term in the Bankruptcy Code or the Bankruptcy Rules, as the
case may be.
B. DEFINED TERMS
1. ADMINISTRATIVE EXPENSE means any cost or expense of administration of
the Prepackaged Chapter 11 Case under subsections 503(b) and 507(a)(1) of the
Bankruptcy Code, including, without limitation, any actual and necessary
expenses of preserving the Estate of Huntway, any actual and necessary expenses
of operating the business of Huntway, all compensation or reimbursement of
expenses to the extent approved by the Bankruptcy Court under Section 330 or
Section 503 of the Bankruptcy Code, including the fees and expenses incurred
during the Prepackaged Chapter 11 Case by the trustees serving under the Old
Collateralized Note Indenture, the Old Subordinated Note Indenture and the Old
Junior Subordinated Note Indenture and any fees or charges assessed against the
Estate of Huntway under Section 1930, Chapter 123 of Title 28 of the United
States Code.
2. AGREEMENT OF UNDERSTANDING means the Amended and Restated Agreement of
Understanding dated as of July 15, 1996 among Huntway, Sunbelt, the Senior
Lenders, the Junior Lenders, the General Partner, the Special Managing Partner
and the other parties thereto, as such agreement may be amended from time to
time.
3. ALLOWED means with respect to any Claim, such claim, to the extent (i)
proof or application for allowance of which was timely and properly filed or, if
no proof of claim or application for allowance was
A-1
<PAGE> 176
properly filed, which has been or hereafter is listed by the Debtor on its
Schedules, as liquidated in amount and not disputed or contingent, and, in
either case, as to which no objection to the allowance thereof has been
interposed on or before any applicable period of limitation fixed by the
Bankruptcy Code, the Bankruptcy Rules, or the Bankruptcy Court, or as to which
any objection has been determined by a Final Order of the Bankruptcy Court to
the extent such objection is determined in favor of the respective Holder or as
to which any such objection has been settled by the parties thereto or (ii) such
Claim is allowed pursuant to the Prepackaged Plan. Notwithstanding the
foregoing, except for claimants under rejected executory contracts and unexpired
leases who must file proofs of claim, Holders of Class 3 Claims and Class 4
Claims will be treated as if the Prepackaged Chapter 11 Case had not been filed
(except as otherwise provided herein), and the determination of whether any
Class 3 Claim or Class 4 Claim will be paid and/or the amount of any Class 3
Claim or Class 4 Claim (which, subject to Bankruptcy Court approval, shall not
be listed on the Schedules, and as to which no proof of Claim need be filed)
will be determined, resolved or adjudicated as if the Prepackaged Chapter 11
Case had not been commenced. Allowed means, with respect to Equity Interests,
such Equity Interests that are listed on Huntway's transfer ledgers.
4. BALLOTS means the ballots accompanying the Disclosure Statement, the
Prepackaged Plan and the other Solicitation Materials upon which Impaired
Creditors and Equity Holders shall have indicated their acceptance or rejection
of the Prepackaged Plan in accordance with the Prepackaged Plan and the Voting
Instructions.
5. BANKERS TRUST means Bankers Trust Company, a New York banking
corporation.
6. BANKRUPTCY CODE means Title I of the Bankruptcy Reform Act of 1978, as
amended from time to time, set forth in Sections 101 et seq. of Title 11 of the
United States Code and applicable portions of Titles 18 and 28 of the United
States Code, as amended from time to time.
7. BANKRUPTCY COURT means the United States District Court having
jurisdiction over the Prepackaged Chapter 11 Case and, to the extent of any
reference made pursuant to Section 157 of Title 28 of the United States Code,
the unit of such District Court constituted pursuant to Section 151 of Title 28
of the United States Code.
8. BANKRUPTCY RULES means the Federal Rules of Bankruptcy Procedure, as
amended from time to time, as applicable to the Prepackaged Chapter 11 Case,
promulgated under 28 U.S.C. sec. 2075 and the general and local rules, if any,
of the Bankruptcy Court.
9. BOARD means the Board of Directors of Reprise Holdings, Inc., the sole
general partner of the General Partner.
10. BUSINESS DAY means any day on which commercial banks are required to be
open for business in New York, New York.
11. CASH means cash and cash equivalents.
12. CLAIM means: (a) any right to payment from Huntway whether or not such
right is reduced to judgment, liquidated, unliquidated, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (b)
any right to an equitable remedy for breach of performance if such performance
gives rise to a right of payment from Huntway whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured.
13. CLASS means a category of Holders of Claims or Equity Interests as set
forth in Section II of the Prepackaged Plan.
14. CLASS 2 CLAIM means a Class 2A Claim, a Class 2B Claim or a Class 2C
Claim.
15. COMMITTEE means a statutory official committee of unsecured creditors
appointed in the Prepackaged Chapter 11 Case pursuant to Section 1102 of the
Bankruptcy Code, if any.
16. COMMON UNITS means the common limited partnership units of Huntway, of
which 11,556,250 units were issued and outstanding as of June 30, 1996 prior to
the Effective Date, and the 25,342,654 common
A-2
<PAGE> 177
limited partnership units of Reorganized Huntway which will be issued and
outstanding on the Effective Date of the Prepackaged Plan.
17. CONFIRMATION DATE means the date on which the Confirmation Order is
entered within the meaning of Bankruptcy Rules 5003 and 9021.
18. CONFIRMATION ORDER means the order of the Bankruptcy Court confirming
the Prepackaged Plan in accordance with the provisions of Chapter 11 of the
Bankruptcy Code.
19. CONSUMMATION means the occurrence of the Effective Date.
20. CREDITOR means any Holder of a Claim.
21. DANESH OPTIONS means the options issued by Huntway to Andre Danesh
pursuant to the Option Agreement dated March 13, 1996.
22. DEBTOR means Huntway, as debtor and debtor-in-possession in the
Prepackaged Chapter 11 Case.
23. DIP LC AGREEMENT means the Postpetition Letter of Credit Agreement
dated as of , 1996, between Huntway and Bankers Trust, as the
Postpetition Letter of Credit Bank.
24. DISCLOSURE STATEMENT means the written Consent Solicitation and
Disclosure Statement dated , 1996 (and all Exhibits and
Schedules annexed thereto or referred to therein) that describes, among other
things, the Prepackaged Plan, as it may have been amended or supplemented from
time to time, that is prepared and distributed in accordance with Section 1125
or 1126(b), as applicable, and Section 1145 of the Bankruptcy Code and
Bankruptcy Rule 3018(b).
25. DISPUTED means with respect to a Claim, any Claim or portion thereof
(other than a Class 2 Claim, Class 3 Claim (other than claimants under rejected
executory contracts and unexpired leases), Class 4 Claim (other than claimants
under rejected executory contracts and unexpired leases), or a Class 5 Claim):
(i) listed on the Schedules as unliquidated, disputed or contingent; or (ii) as
to which the Debtor or any other party in interest has interposed an objection
or request for estimation in accordance with the Bankruptcy Code and the
Bankruptcy Rules, which objection or request for estimation has not been
withdrawn or determined by a Final Order.
26. EFFECTIVE DATE means the date selected by Huntway which shall be no
later than the thirtieth (30th) Business Day after the date on which all of the
conditions specified in both Section VII.A. and VII.B. of the Prepackaged Plan
have been (i) satisfied or (ii) waived pursuant to Section VII.C.
27. EQUITY INTEREST means any equity interest in Huntway represented by the
General Partner Interests, the Common Units, the Danesh Options, the Warrants
and the Existing Unit Options.
28. ESTATE means the estate of the Debtor created by Section 541 of the
Bankruptcy Code upon the commencement of the Prepackaged Chapter 11 Case.
29. EXISTING INTERCREDITOR AGREEMENT means that certain Intercreditor and
Collateral Trust Agreement dated as of June 22, 1993, by and among Bankers
Trust, as LOC Bank, the financial institutions named therein and United States
Trust Company of New York, as Collateral Agent.
30. EXISTING OPTION PLAN means the Partnership's option plan entitled "1989
Salaried Employee Partnership Unit Option Plan."
31. EXISTING UNIT OPTIONS means the options to purchase Common Units of
Huntway granted and outstanding under the Existing Option Plan.
32. EXPIRATION DATE means 5:00 p.m., Los Angeles, California time on
, 1996, unless Huntway, in its sole discretion, extends
the period during which Ballots and Master Ballots will be accepted by Huntway,
in which case Expiration Date shall mean the last time and date to which the
solicitation of Ballots and Master Ballots is extended.
33. FINAL DECREE means the decree contemplated under Bankruptcy Rule 3022.
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34. FINAL ORDER means an order of the Bankruptcy Court:
(i) as to which the time to appeal, petition for certiorari, or motion
for reargument, rehearing or new trial has expired and as to which no
appeal, petition for certiorari, or other proceedings for reargument,
rehearing or new trial shall then be pending, or
(ii) as to which any right to appeal, petition for certiorari, reargue,
rehear or retry shall have been waived in writing in form and substance
satisfactory to the Debtor, or
(iii) in the event that an appeal, writ of certiorari, or reargument or
rehearing or new trial has been sought, as to which (x) such order of
the Bankruptcy Court shall have been affirmed by the highest court to
which such order was appealed, (y) certiorari has been denied as to such
order, or (z) reargument or rehearing or new trial from such order shall
have been denied, and in each case, the time to take any further appeal,
petition for certiorari or move for reargument, rehearing or new trial
shall have expired.
35. GENERAL PARTNER means Huntway Managing Partner, L.P., a Delaware
limited partnership and Huntway's managing general partner.
36. GENERAL PARTNER INTEREST means the general partner interests in Huntway
held by the General Partner and the Special Managing Partner.
37. HOLDER means any entity holding an Equity Interest or Claim, and with
respect to a vote on the Prepackaged Plan, means the holder of the beneficial
interest in such Claim or Equity Interest as of the Record Date or any
authorized signatory who has completed and executed a Ballot or on whose behalf
a Master Ballot has been completed and executed in accordance with the Voting
Instructions.
38. HUNTWAY means Huntway Partners, L.P., a Delaware limited partnership.
39. IMPAIRED CLAIM means a Claim classified in an Impaired Class.
40. IMPAIRED CLASS means a Class that is impaired within the meaning of
Section 1124 of the Bankruptcy Code.
41. INFORMATION AGENT means MacKenzie Partners, Inc.
42. JUNIOR LENDER CLAIMS means the claims against Huntway held by the
Junior Lenders under the Old Junior Subordinated Notes and Old Junior
Subordinated Debenture Indenture.
43. JUNIOR LENDERS means First Chicago Equity Corporation (f/k/a First
Capital Corporation of Chicago) and Madison Dearborn Partners III, L.P.
44. MASTER BALLOT means the master ballots accompanying the Disclosure
Statement, Prepackaged Plan and the other Solicitation Materials upon which
nominees for Holders of the beneficial interest of any Impaired Class of Claims
or any Impaired Class of Equity Interests shall have indicated the acceptance or
rejection of the Prepackaged Plan, in accordance with the Prepackaged Plan and
the Voting Instructions.
45. NEW COLLATERAL DOCUMENTS means the Amended and Restated Collateral
Documents (as that term is defined in the New Intercreditor Agreement) dated as
of the Effective Date, pursuant to which each of Reorganized Huntway, Sunbelt,
the General Partner and the Special Managing Partner grants or pledges a
security interest in its real and personal property or General Partner
Interests, as the case may be, to secure their respective obligations under the
New Collateralized Note Indenture, the New Senior Notes, the Post-Restructuring
Letter of Credit Agreement and the New Guaranties.
46. NEW COLLATERALIZED NOTE INDENTURE means an Indenture among Reorganized
Huntway, Sunbelt, and IBJ Schroder Bank & Trust Company, as Trustee, respecting
the New Senior Notes issued by Reorganized Huntway pursuant to the Prepackaged
Plan. The New Collateralized Note Indenture shall be substantially as described
in the Disclosure Statement and substantially in the form of Exhibit to the
Prepackaged Plan Supplement.
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47. NEW GUARANTIES means the Amended and Restated Guaranties (as such term
is defined in the New Intercreditor Agreement) dated as of the Effective Date,
pursuant to which each of Sunbelt, the General Partner and the Special Managing
Partner guaranty the payment of Reorganized Huntway's obligations under the New
Collateralized Note Indenture, the New Senior Notes and the Post-Restructuring
Letter of Credit Agreement.
48. NEW INTERCREDITOR AGREEMENT means that certain Amended and Restated
Intercreditor and Collateral Trust Agreement dated as of the Effective Date by
and among Reorganized Huntway, Bankers Trust, as LOC Bank, the Parties receiving
New Senior Notes, and United States Trust Company of New York, as Collateral
Agent, substantially in the form of Exhibit to the Prepackaged Plan
Supplement.
49. NEW JUNIOR NOTES means Reorganized Huntway's Junior Subordinated Notes
Due 2005, in the original aggregate principal amount of $2,070,000, to be issued
in accordance with the provisions of the Prepackaged Plan and governed by the
New Junior Subordinated Debenture Indenture. Each New Junior Note shall be
substantially in the form attached as Exhibit to the New Junior Subordinated
Debenture Indenture.
50. NEW JUNIOR SUBORDINATED DEBENTURE INDENTURE means an Indenture among
Reorganized Huntway, Sunbelt and IBJ Schroder Bank & Trust Company, as Trustee,
respecting the New Junior Notes issued by Reorganized Huntway pursuant to the
Prepackaged Plan. The New Junior Subordinated Debenture Indenture shall be
substantially as described in the Disclosure Statement and shall be
substantially in the form of Exhibit to the Prepackaged Plan Supplement.
51. NEW SENIOR NOTES means the New Senior Notes (Other) and the New Senior
Notes (Sunbelt IDB).
52. NEW SENIOR NOTES (OTHER) means Reorganized Huntway's 12% Senior Secured
Notes (Other) due 2005 in the original aggregate principal amount of
$14,400,000, to be issued in accordance with the provisions of the Prepackaged
Plan and governed by the terms of the New Collateralized Note Indenture. Each
New Senior Note (Other) shall be substantially in the form attached as Exhibit C
to the New Collateralized Note Indenture.
53. NEW SENIOR NOTES (SUNBELT IDB) means Reorganized Huntway's 12% Senior
Secured Notes (Sunbelt IDB) due 2005 in the original aggregate principal amount
of $9,100,000, to be issued in accordance with the provisions of the Prepackaged
Plan and governed by the terms of the New Collateralized Note Indenture. Each
New Senior Note (Sunbelt IDB) shall be substantially in the form attached as
Exhibit B to the New Collateralized Note Indenture.
54. NEW UNIT OPTION PLAN means the 1996 Huntway Partners, L.P. Employee
Incentive Option Plan proposed to be implemented by Huntway.
55. OLD COLLATERALIZED NOTE INDENTURE means the Collateralized Note
Indenture, dated as of June 23, 1993, as amended, among Huntway, Sunbelt and
Fleet National Bank of Massachusetts, formerly known as Shawmut Bank, N.A., as
trustee.
56. OLD COLLATERALIZED NOTES means the 8% Senior Secured Notes Due 2000,
issued under the Old Collateralized Note Indenture, together with all interest
earned thereon, including Secondary Securities issued with respect thereto.
57. OLD JUNIOR SUBORDINATED DEBENTURE INDENTURE means the Junior
Subordinated Debenture Indenture dated as of June 23, 1993, as amended, among
Huntway, Sunbelt and IBJ Schroder Bank & Trust Company, as trustee.
58. OLD JUNIOR SUBORDINATED NOTES means the Increasing Rate Junior
Subordinated Debentures Due 2020 issued under the Old Junior Subordinated Note
Indenture, together with all interest earned thereon, including Secondary
Securities issued with respect thereto.
59. OLD LETTER OF CREDIT AGREEMENT means the Letter of Credit and
Reimbursement Agreement dated as of June 22, 1993 by and among Bankers Trust,
Huntway and Sunbelt.
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60. OLD SUBORDINATED NOTE INDENTURE means the Subordinated Note Indenture
dated as of June 23, 1993 among Huntway, Sunbelt and Fleet Bank National
Association, a national banking association, formerly known as Shawmut Bank
Connecticut National Association, as trustee.
61. OLD SUBORDINATED NOTES means the Increasing Rate Subordinated Notes Due
2008 issued under the Old Subordinated Note Indenture, together with all
interest earned thereon, including Secondary Securities issued with respect
thereto.
62. OPERATING COMMITTEE means the Special Operating Committee of the
Huntway Division of Reprise Holding, Inc., a Texas corporation.
63. OTHER PRIORITY CLAIMS means any Claims accorded a priority and right of
payment under subsection 507(a) of the Bankruptcy Code, other than a Priority
Tax Claim or an Administrative Expense.
64. OTHER SECURED CLAIM means any Secured Claim that is not a Senior Lender
Claim.
65. PETITION DATE means the date on which the Debtor's petition for relief
commencing the Prepackaged Chapter 11 Case is filed.
66. POST-RESTRUCTURING LETTER OF CREDIT AGREEMENT means either (i) a Letter
of Credit Agreement to be entered into on the Effective Date between Bankers
Trust and Reorganized Huntway or (ii) the Old Letter of Credit Agreement as
amended by a First Amendment to Letter of Credit and Reimbursement Agreement to
be entered into on the Effective Date by Bankers Trust, Reorganized Huntway, and
Sunbelt.
67. PREPACKAGED CHAPTER 11 CASE means the case under Chapter 11 of the
Bankruptcy Code, commenced by the Debtor in the Bankruptcy Court, and styled "In
re: Huntway Partners, L.P."
68. PREPACKAGED PLAN means this Chapter 11 Prepackaged Plan of
Reorganization, either in its present form or as it may be altered, amended,
modified or supplemented from time to time in accordance with the Prepackaged
Plan, the Bankruptcy Code and the Bankruptcy Rules with the prior consent of the
Senior Lenders as prescribed by, and to the extent required by, the Agreement of
Understanding.
69. PREPACKAGED PLAN SUPPLEMENT means the documents specified in Section
I.C. hereof.
70. PRIORITY TAX CLAIM means a Claim of a governmental unit of the kind
specified in subsection 507(a)(8) of the Bankruptcy Code.
71. PROFESSIONAL FEE CLAIM means those fees and expenses claimed by
professionals retained through a Bankruptcy Court order, pursuant to Sections
330 and 331 of the Bankruptcy Code, and unpaid as of the Confirmation Date.
72. RECORD DATE means the close of business on June 30, 1996.
73. REORGANIZED HUNTWAY means Huntway or any successor thereto, by merger,
consolidation or otherwise, on and after the Effective Date.
74. SCHEDULES means the schedules of assets and liabilities, schedules of
executory contracts, and the statement of financial affairs to be filed by the
Debtor to the extent required by Section 521 of the Bankruptcy Code, the
Official Bankruptcy Forms, the Bankruptcy Rules and the Bankruptcy Court.
75. SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP means the
Amended and Restated Agreement of Limited Partnership of Reorganized Huntway, as
amended as described in Section V.F. of the Prepackaged Plan, which shall be
substantially in the form set forth as Appendix A to the Disclosure Statement,
and which Agreement, as so amended, is in compliance with Section 1123(a)(6) of
the Bankruptcy Code.
76. SECURED CLAIM means a Claim against Huntway held by any entity,
including a judgment lien creditor of Huntway, to the extent of the value of any
interest in property of the Estate securing such Claim.
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77. SENIOR LENDER CLAIMS means the Claims of the Senior Lenders arising
under the Old Collateralized Note Indenture, the Old Subordinated Note
Indenture, the Old Collateralized Notes and the Old Subordinated Notes.
78. SENIOR LENDERS means collectively Bankers Trust, Massachusetts Mutual
Life Insurance Company, Ryback Management Corporation, Oppenheimer & Co., Inc.,
for itself and as agent, and Mellon Bank, N.A., as Trustee for First Plaza Group
Trust, as directed by Contrarian Capital Advisors, L.L.C., in each case, or
their respective permitted successors, assigns and transferees.
79. SOLICITATION MATERIALS means the Disclosure Statement, including the
appendices thereto, the forms of Ballots and Master Ballots and the Voting
Instructions.
80. SPECIAL MANAGING PARTNER means Huntway Holdings, L.P., a Delaware
limited partnership and Huntway's special managing general partner.
81. SUNBELT means Sunbelt Refining Company, L.P., a Delaware limited
partnership.
82. UNITHOLDERS AGREEMENT means the Unitholders Agreement dated as of the
Effective Date by and among Reorganized Huntway and the Holders of Allowed Class
2 Claims, Allowed Class 5 Claims and Allowed Class 6 Equity Interests, which
provides for, inter alia, the issuance of additional units after the Effective
Date to the Holders of Allowed Class 2 Claims and Allowed Class 6 Equity
Interests and restricts the trading in all Common Units issued to Holders of
Allowed Class 2 Claims, Allowed Class 5 Claims and Allowed Class 6 Equity
Interests, as more fully described in the Disclosure Statement.
83. UNIT OPTIONS mean the options to purchase Common Units of Reorganized
Huntway granted under the New Unit Option Plan.
84. UNIMPAIRED means a Claim in a Class that is not impaired within the
meaning of Section 1124 of the Bankruptcy Code.
85. UNIMPAIRED CLASS means a Class that is not impaired within the meaning
of Section 1124 of the Bankruptcy Code.
86. UNSECURED CLAIM means any Claim that is not an Other Secured Claim, a
Senior Lender Claim, a Junior Lender Claim, an Administrative Expense, a
Priority Tax Claim or an Other Priority Claim.
87. VOTING AGENT means MacKenzie Partners, Inc.
88. VOTING INSTRUCTIONS means the instructions for voting on the
Prepackaged Plan contained in the section of the Disclosure Statement entitled
"VOTING PROCEDURES" and in the Ballots and the Master Ballots.
89. WARRANTS means the Warrants issued by Huntway on June 22, 1993 and any
replacement thereof, to the extent such Warrants have not been surrendered and
canceled prior to the Petition Date.
C. PREPACKAGED PLAN SUPPLEMENT.
The form of each of the New Collateralized Note Indenture, the New Junior
Subordinated Debenture Indenture, the Post-Restructuring Letter of Credit
Agreement, the Intercreditor Agreement, the Unitholders Agreement and the Second
Amended and Restated Agreement of Limited Partnership are contained in the
Prepackaged Plan Supplement filed with the Bankruptcy Court, a copy of which is
available from the Information Agent upon request.
D. EXHIBITS.
All Exhibits to the Prepackaged Plan and the Plan Supplement are hereby
incorporated into and made a part of this Prepackaged Plan as if set forth in
full herein.
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II.
CLASSIFICATION AND TREATMENT OF CLAIMS
AND EQUITY INTERESTS
A. SUMMARY.
The categories of Claims and Equity Interests listed below classify Claims
and Equity Interests of Huntway for all purposes, including voting, confirmation
and distribution pursuant to the Prepackaged Plan.
<TABLE>
<CAPTION>
CLASS STATUS
- ---------------------------------------------------------- ---------------------------------
<S> <C>
Class 1: Other Priority Claims Unimpaired--Not Entitled to Vote
Class 2: Senior Lender Claims Impaired--Entitled to Vote
Class 3: Other Secured Claims Unimpaired--Not Entitled to Vote
Class 4: Unsecured Claims Unimpaired--Not Entitled to Vote
Class 5: Junior Lender Claims Impaired--Entitled to Vote
Class 6: Equity Interests of Holders of Warrants Impaired--Entitled to Vote
Class 7: Equity Interests of Holders of Common Units Impaired--Entitled to Vote
Class 8: Equity Interests of Holders of Existing Unit Impaired--Entitled to Vote
Options
Class 9: Equity Interests of Holders of Danesh Options Unimpaired--Not Entitled to Vote
Class 10: Equity Interests of the General Partner and the Impaired--Entitled to Vote
Special Managing Partner
</TABLE>
B. ADMINISTRATIVE EXPENSES.
Huntway shall pay each Professional Fee Claim, to the extent approved by
the Bankruptcy Court, and each other Allowed Administrative Expense in full, in
Cash, on the later of the Effective Date or the date such Administrative Expense
becomes Allowed, except to the extent that the Holder of an Allowed
Administrative Expense agrees to a different treatment; provided, however, that
Allowed Administrative Expenses representing obligations incurred in the
ordinary course of business or assumed pursuant to an order of the Bankruptcy
Court by the Debtor shall be paid in full or be performed by Huntway in the
ordinary course of business in accordance with the terms and conditions of the
particular transaction and any agreements and instruments relating thereto.
C. PRIORITY TAX CLAIMS.
Huntway shall pay each Allowed Priority Tax Claim in full, in Cash, on the
Effective Date or as soon thereafter as is practicable, except to the extent
that the Holder of an Allowed Priority Tax Claim agrees to a different
treatment; provided, however, at Huntway's option, Huntway may pay Allowed
Priority Tax Claims plus interest accrued thereon (at amounts and a rate to be
agreed upon between Huntway and the Holder of the Claim, or in the absence of
such agreement, as determined by the Bankruptcy Court) over a period not
exceeding six (6) years after the date of assessment of the Claims, as provided
in subsection 1129(a)(9)(C) of the Bankruptcy Code.
D. CLASSIFICATION AND TREATMENT.
CLASS 1: OTHER PRIORITY CLAIMS
1. CLASSIFICATION: Class 1 consists of all Other Priority Claims against
Huntway.
2. TREATMENT: Huntway shall pay all Allowed Claims in Class 1 in full, in
Cash, on the Effective Date or as soon thereafter as is practicable, except to
the extent the Holder of an Allowed Claim in Class 1 agrees to a different
treatment; provided, however, that Allowed Class 1 Claims representing
obligations incurred in the ordinary course of business, shall be paid in full
or performed by Huntway in the ordinary course of business in accordance with
the terms and conditions of the particular transaction and any agreements and
instruments
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relating thereto. Class 1 is not Impaired, and the Holders of Claims in Class 1
are not entitled to vote to accept or to reject the Prepackaged Plan.
CLASS 2: SENIOR LENDER CLAIMS.
1. CLASSIFICATION: Class 2A consists of all of the Senior Lender Claims
of Bankers Trust. Class 2B consists of all Senior Lender Claims to the extent
such Claims are Secured Claims (other than the Claims of Bankers Trust). Class
2C consists of the Senior Lender Claims to the extent such Claims are not
Secured Claims (other than the Claims of Bankers Trust).
2. TREATMENT: On the Effective Date, the Allowed Senior Lender Claims
shall continue as obligations of Reorganized Huntway as provided and modified
under the terms and conditions of the New Collateralized Note Indenture, the New
Senior Notes (Other) and the New Senior Notes (Sunbelt IDB) and Reorganized
Huntway's obligations with respect to the Senior Lenders shall be as provided
thereunder. The Holder of Class 2A Claims shall receive on the Effective Date
(a) $9,100,000 in New Senior Notes (Sunbelt IDB), (b) $2,844,345 in New Senior
Notes (Other) and (c) 3,220,227 Common Units, representing approximately 12.71%
of the Common Units issued and outstanding on the Effective Date, (d)
reimbursement of all fees and expenses of its counsel incurred in connection
with the Old Collateralized Note Indenture, the Old Subordinated Note Indenture,
the Prepackaged Chapter 11 Case, the Prepackaged Plan, and the transactions
contemplated thereby, and (e) unless such Holder elects not to provide the
release set forth in subsection V.I(ii), the release set forth in Section
V.I(i). Each Holder of Class 2B and Class 2C Claims shall receive on the
Effective Date (a) its pro rata share of $11,555,656 in New Senior Notes
(Other), (b) its pro rata share of 3,115,436 Common Units, representing
approximately 12.29% of the Common Units issued and outstanding on the Effective
Date and (c) the release set forth in Section V.I(i), unless such Holder elects
not to provide the release set forth in subsection V.I(ii). The Holders of Class
2A, 2B and Class 2C Claims will also receive such number of additional Common
Units from time to time as are sufficient to prevent dilution caused by the
issuance from time to time to Holders of (a) Class 5 Claims of Common Units as
payment of accrued interest on the New Junior Notes and (b) Class 8 Equity
Interests of additional Unit Options (or equivalent rights to receive Common
Units) and Class 6 Equity Interests and Class 5 Claims of additional Common
Units, in each case issued to prevent dilution to such Holders. The rights of
the Holders of New Senior Notes will be subject to the New Intercreditor
Agreement. The rights of the Holders of Common Units issued in respect of Class
2 Claims will be subject to the Unitholders Agreement. Class 2A, Class 2B and
Class 2C are Impaired and the Holders of Allowed Class 2A Claims, 2B Claims and
2C Claims are entitled to vote on the Prepackaged Plan. With respect to each of
Class 2A, 2B and 2C, approval of the Prepackaged Plan by Holders of at least
two-thirds in dollar amount and more than one-half in number of Allowed Claims
in such Class with respect to which votes are received is required to confirm
the Prepackaged Plan.
3. ALLOWANCE OF CLAIMS: The Claims of the Senior Lenders under the Old
Collateralized Note Indenture and the Old Subordinated Note Indenture, including
interest (at the rates set forth therein), fees, costs and expenses provided
thereunder, including postpetition interest, fees, costs and expenses pursuant
to Section 506(b) of the Bankruptcy Code constitute Allowed Claims. Confirmation
of the Prepackaged Plan shall constitute a finding that the Allowed Senior
Lender Claims and the liens securing such claims are fully valid, binding,
enforceable, unavoidable obligations and, with respect to the liens, are
properly and timely perfected.
CLASS 3: OTHER SECURED CLAIMS.
1. CLASSIFICATION: Class 3 consists of Other Secured Claims against
Huntway.
2. TREATMENT: Class 3 is Unimpaired and the Holders of Claims in Class 3
are not entitled to vote to accept or reject the Prepackaged Plan. The legal,
equitable and contractual rights of the Holders of Class 3 Claims are unaltered
by the Prepackaged Plan and on the Effective Date, and subject to the
requirements of Section 1124(2) of the Bankruptcy Code, the legal, equitable and
contractual rights of the Holders of Class 3 Claims shall be reinstated in full,
in accordance with the terms of the prepetition agreements, rights, or
obligations of Huntway respecting such Class 3 Claims; provided, however, that
the maturity date or dates
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of all Class 3 Claims shall be reinstated to the date or dates which existed
prior to the date of any acceleration of such Class 3 Claims, subject to legal
and equitable rights of the parties with respect to such Claims as they existed
immediately prior to the filing of the Prepackaged Plan as if the Prepackaged
Chapter 11 Case had not been filed. Huntway will make payments required by
Section 1124(2) of the Bankruptcy Code to Holders of Class 3 Claims on the
Effective Date and will cure any defaults of such Class 3 Claims to the extent
required by Section 1124(2)(A) of the Bankruptcy Code, and any defaults of such
Class 3 Claims which existed immediately prior to the filing of the Prepackaged
Chapter 11 Case shall be deemed cured upon the Effective Date. Subject to the
foregoing, and except for claimants under rejected executory contracts and
unexpired leases, who must file proofs of claim, Holders of Class 3 Claims will
be treated as if the Prepackaged Chapter 11 Case had not been filed (except as
otherwise provided herein), and the determination of whether any Class 3 Claim
will be paid and/or the amount of any Class 3 Claim (which, subject to
Bankruptcy Court approval, shall not be listed on the Schedules, and as to which
no proof of claim need be filed) will be determined, resolved or adjudicated as
if the Prepackaged Chapter 11 Case had not been commenced. Notwithstanding the
foregoing, Holders of Class 3 Claims under rejected executory contracts and
unexpired leases must file proofs of claim, and will be subject to the
provisions of the Bankruptcy Code.
3. RESERVATION OF RIGHTS: Nothing in the Prepackaged Plan, the
Confirmation Order or any order in aid of confirmation of the Prepackaged Plan,
shall constitute, or be deemed to constitute, a waiver or release of any claim,
cause of action, right of setoff, or other legal or equitable defense which
Huntway had immediately prior to the commencement of the Prepackaged Chapter 11
Case, against or with respect to any Class 3 Claim. During the pendency of the
Prepackaged Chapter 11 Case and upon confirmation thereof Huntway shall have,
retain, reserve and be entitled to assert all such claims, causes of action,
rights of setoff and other legal or equitable rights respecting any Class 3
Claim which it had immediately prior to the commencement of the Prepackaged
Chapter 11 Case to the same extent as if the Prepackaged Chapter 11 Case had not
been commenced. No Class 3 Claim shall be deemed Allowed or not Allowed by
virtue of the Prepackaged Plan or confirmation of the Prepackaged Plan.
CLASS 4: UNSECURED CLAIMS.
1. CLASSIFICATION: Class 4 consists of Unsecured Claims against Huntway.
2. TREATMENT: Class 4 is Unimpaired and the Holders of Claims in Class 4
are not entitled to vote to accept or to reject the Prepackaged Plan. The legal,
equitable and contractual rights of the holders of Class 4 Claims are unaltered
by the Prepackaged Plan and on the Effective Date, and subject to the
requirements of Section 1124(2) of the Bankruptcy Code, the legal, equitable and
contractual rights of the Holders of Class 4 Claims shall be reinstated in full,
in accordance with the terms of prepetition agreements, rights or obligations of
Huntway respecting such Class 4 Claims; provided, however, that the maturity
date or dates of all Class 4 Claims shall be reinstated to the date or dates
which existed prior to the date of any acceleration of such Class 4 Claims,
subject to the legal and equitable rights of the parties with respect to such
Class 4 Claims as they existed immediately prior to the filing of the
Prepackaged Plan. Huntway will make payments required by Section 1124(2) of the
Bankruptcy Code, together with any interest from the Petition Date required to
be paid to maintain the Unimpaired status of Class 4, to Holders of Class 4
Claims on the Effective Date and will cure any defaults of such Class 4 Claims
to the extent required by Section 1124(2)(A) of the Bankruptcy Code, and any
defaults of such Class 4 Claims which existed immediately prior to the filing of
the Prepackaged Chapter 11 Case shall be deemed cured upon the Effective Date.
Subject to the foregoing, and except for claimants under rejected executory
contracts and unexpired leases, who must file proofs of claim, Holders of Class
4 Claims will be treated as if the Prepackaged Chapter 11 Case had not been
filed (except as otherwise provided herein), and the determination of whether
any Class 4 Claim will be paid and/or the amount of any Class 4 Claim (which,
subject to Bankruptcy Court approval, shall not be listed on the Schedules, and
as to which no proof of claim need be filed) will be determined, resolved or
adjudicated as if the Prepackaged Chapter 11 Case had not been commenced.
Notwithstanding the foregoing, Holders of Class 4 Claims under rejected
executory contracts and unexpired leases must file proofs of claim, and will be
subject to the provisions of the Bankruptcy Code.
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3. RESERVATION OF RIGHTS: Nothing in the Prepackaged Plan, shall
constitute, or be deemed to constitute, a waiver or release of any claim, cause
of action, right of setoff, or other legal or equitable defense which Huntway
had immediately prior to the commencement of the Prepackaged Chapter 11 Case,
against or with respect to any Class 4 Claim. During the pendency of the
Prepackaged Chapter 11 Case and upon confirmation thereof Huntway shall have,
retain, reserve and be entitled to assert all such claims, causes of action,
rights of setoff and other legal or equitable defenses which it had immediately
prior to the commencement of the Prepackaged Chapter 11 Case fully as if the
Prepackaged Chapter 11 Case had not been commenced. No Class 4 Claim shall be
deemed Allowed or not Allowed by virtue of the Prepackaged Plan or confirmation
of the Prepackaged Plan.
CLASS 5: JUNIOR LENDER CLAIMS.
1. CLASSIFICATION: Class 5 consists of all Junior Lender Claims.
2. TREATMENT: On the Effective Date, a Holder of an Allowed Class 5 Claim
shall receive, in full and final satisfaction of such Holder's Allowed Class 5
Claim, its pro rata share of (a) $2,070,000 principal of New Junior Notes; and
(b) 1,115,077 Common Units, representing 4.4% of Reorganized Huntway's Common
Units issued and outstanding on the Effective Date. The Holders of Class 5
Claims will also receive such number of additional Common Units from time to
time as are sufficient to prevent dilution caused by the issuance from time to
time to Holders of (a) Class 5 Claims of Common Units as payment of accrued
interest on the New Junior Notes and (b) Class 8 Equity Interests of additional
Unit Options (or equivalent rights to receive Common Units) and Class 2 and
Class 6 Equity Interests of additional Common Units, in each case issued to
prevent dilution to such Holders. The rights of the Holders of Common Units
issued in respect of Class 5 Claims will be subject to the Unitholders
Agreement. Class 5 is Impaired. Holders of Class 5 Claims are entitled to vote
on the Prepackaged Plan. Approval of the Prepackaged Plan by Holders of at least
two-thirds in dollar amount and more than one-half in number of Allowed Class 5
Claims with respect to which votes are received is required to confirm the
Prepackaged Plan.
3. ALLOWED CLAIMS: The Claims of the Junior Lenders under the Old Junior
Subordinated Debenture Indenture constitute Allowed Claims. Confirmation of the
Prepackaged Plan shall constitute a finding that the Allowed Class 5 Claims are
fully valid.
CLASS 6: WARRANTS
1. CLASSIFICATION: CLASS 6 CONSISTS OF ALL WARRANTS.
2. TREATMENT: On the Effective Date, a Holder of an Allowed Class 6
Equity Interest shall receive such Holder's pro rata share of 6,335,663 of
Reorganized Huntway's Common Units, representing approximately 25% of
Reorganized Huntway's Common Units issued and outstanding on the Effective Date.
The Holders of Class 6 Equity Interests will also receive such number of
additional Common Units from time to time as are sufficient to prevent dilution
caused by the issuance from time to time to Holders of (a) Class 5 Claims of
Common Units as payment of accrued interest on the New Junior Notes and (b)
Class 8 Equity Interests of additional Unit Options (or equivalent rights to
receive additional Common Units) and Class 2 and 5 Claims of additional Common
Units, in each case issued to prevent dilution to such Holders. The rights of
the Holders of Common Units issued in respect of Class 6 Equity Interests will
be subject to the Unitholders Agreement. Class 6 is Impaired. Approval of the
Prepackaged Plan by Holders of at least two-thirds in amount of Allowed Class 6
Equity Interests with respect to which votes are received is required to confirm
the Prepackaged Plan.
CLASS 7: COMMON UNITS
1. CLASSIFICATION: Class 7 consists of the Common Units.
2. TREATMENT: On the Effective Date, a Holder of an Allowed Equity
Interest in Class 7 shall retain its Common Units. Class 7 is Impaired. Approval
of the Prepackaged Plan by Holders of at least two-thirds in amount of Allowed
Class 7 Equity Interests with respect to which votes are received is required to
confirm the Prepackaged Plan.
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CLASS 8: EXISTING UNIT OPTIONS UNDER THE EXISTING OPTION PLAN
1. CLASSIFICATION: Class 8 consists of the Existing Unit Options issued
under the Existing Option Plan.
2. TREATMENT: On the Effective Date, a Holder of an Allowed Equity
Interest in Class 8 shall be issued such Holder's pro rata share of 1,022,000
Unit Options under the New Unit Option Plan, which Unit Options will have terms
and conditions in all natural respects the same as the Existing Unit Options,
except that they shall have an exercise price of $.50 per Common Unit. Holders
of Class 8 Equity Interests will also receive additional Unit Options for the
purchase of Common Units from time to time sufficient to prevent dilution caused
by the issuance from time to time to Holders of (a) Class 5 Claims of Common
Units as payment of accrued interest on the New Junior Notes and (b) Class 2
Claims, Class 5 Claims and Class 6 Equity Interests of Common Units issued to
prevent dilution to such Holders. On the Effective Date, the Existing Option
Plan shall be terminated and of no further force and effect. To the extent that
any anti-dilution provisions in the Existing Option Plan may be interpreted to
be triggered by consummation, confirmation of the Prepackaged Plan eliminates:
(i) the rights of Holders of Allowed Equity Interests evidenced by Existing Unit
Options issued under the Existing Option Plan to receive any additional Common
Units or to receive any other type of security pursuant to such anti-dilution
provisions; and (ii) the authority (whether mandatory or discretionary) of any
committee under the Existing Option Plan or the Board to make adjustments under
the Existing Option Plan on account of the transaction implemented by the
Prepackaged Plan. Class 8 is Impaired. Approval of the Prepackaged Plan by
Holders of at least two-thirds in amount of Allowed Class 8 Equity Interests
with respect to which votes are received is required to confirm the Prepackaged
Plan.
CLASS 9: DANESH OPTIONS
1. CLASSIFICATION: Class 9 consists of Danesh Options.
2. TREATMENT: On the Effective Date, a Holder of an Allowed Equity
Interest in Class 9 shall retain its Danesh Options. The Holder of all Danesh
Options has agreed to the treatment of such Options under the Prepackaged Plan.
Therefore, Class 9 is Unimpaired and the Holders of Equity Interests in Class 9
are not entitled to vote to accept or reject the Prepackaged Plan. The legal,
equitable and contractual rights of the Holder of Class 9 Equity Interests, as
agreed to by the Holder thereof, are unaltered by the Prepackaged Plan.
CLASS 10: GENERAL PARTNER INTERESTS
1. CLASSIFICATION: Class 10 consists of the General Partner Interests.
2. TREATMENT: On the Effective Date, the General Partner and the Special
Managing Partner shall retain their respective General Partner Interests subject
to the New Guaranty and the other New Collateral Documents to be executed by the
General Partner and the Special Managing Partner as of the Effective Date. Class
10 is Impaired. Approval of the Prepackaged Plan by Holders of at least
two-thirds in amount of Allowed Class 10 Equity Interests with respect to which
votes are received is required to confirm the Prepackaged Plan.
III.
ACCEPTANCE OR REJECTION OF THE PREPACKAGED PLAN
A. VOTING BY IMPAIRED CLASSES.
Each Holder of a Claim in Class 2 or Class 5 and each Holder of an Equity
Interest in Class 6, Class 7, Class 8 or Class 10, in each case as of the Record
Date, is entitled to vote either to accept or to reject the Prepackaged Plan.
Only those votes cast by Holders of Allowed Claims and/or Allowed Equity
Interests shall be counted in determining whether acceptances have been received
sufficient in number and amount to confirm the Prepackaged Plan. Each Claim or
Equity Interest, as applicable, in each of Class 2, Class 5, Class 6, Class 7,
Class 8, Class 9 or Class 10 shall be deemed to be "Allowed" for purposes of
voting on the Prepackaged Plan unless, prior to the confirmation hearing, the
Debtor has filed an objection to any such Claim or Equity Interest with the
Bankruptcy Court.
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Unless the Bankruptcy Court subsequently determines that Ballots and Master
Ballots may be revoked, such Ballots and Master Ballots will remain in full
force and effect until the Bankruptcy Court determines whether such Ballots and
Master Ballots are deemed to constitute acceptances or rejections of the
Prepackaged Plan.
For each Holder of a Class 2 Claim who consents to the Prepackaged Plan and
does not withhold releases in accordance with Section V.I(ii), the Prepackaged
Plan (i) shall release and discharge such Holder and such Holder's parents,
subsidiaries, affiliates, partners, directors, officers, attorneys, financial
advisors, agents and employees past and present from claims of the Huntway
Releasors (as defined in Section V.I(i)) to the extent set forth in subsection
V.I(i) below, and (ii) shall release and discharge the Huntway Releasors and
each Huntway Releasor's directors, officers, attorneys, financial advisors,
agents and employees past and present from claims of such Holders to the extent
set forth in subsection V.I(ii).
B. ACCEPTANCE BY IMPAIRED CLASSES.
Class 2A, Class 2B, Class 2C and Class 5 shall have accepted the
Prepackaged Plan if (i) the Holders (other than any Holder designated under
subsection 1126(e) of the Bankruptcy Code) of at least two-thirds in dollar
amount of the Allowed Claims actually voting in each such Class have voted to
accept the Prepackaged Plan and (ii) the Holders (other than any Holder
designated under subsection 1126(e) of the Bankruptcy Code) of more than
one-half in number of the Allowed Claims actually voting in each such Class have
voted to accept the Prepackaged Plan. An Impaired Class of Equity Interests
shall have accepted the Prepackaged Plan if the Holders (other than any Holder
designated under subsection 1126(e) of the Bankruptcy Code) of at least
two-thirds in amount of Allowed Equity Interests actually voting in such Class
have voted to accept the Prepackaged Plan.
C. PRESUMED ACCEPTANCE OF PREPACKAGED PLAN.
Class 1, Class 3, Class 4 and Class 9 are Unimpaired under the Prepackaged
Plan, and, therefore, are conclusively presumed to have accepted the Prepackaged
Plan.
IV.
PROVISIONS FOR TREATMENT OF PROFESSIONAL FEES AND
DISPUTED, CONTINGENT AND UNLIQUIDATED CLAIMS
A. RESOLUTION OF DISPUTED CLAIMS.
Unless otherwise ordered by the Bankruptcy Court after notice and a
hearing, Huntway shall have the exclusive right to make and file objections to
Claims (other than Class 2 Claims and Class 5 Claims), and shall serve a copy of
each objection upon the Holder of the Disputed Claim to which the objection is
made, as well as counsel for any Committee.
Notwithstanding the foregoing, except as otherwise ordered by the Court,
except for claimants under rejected executory contracts and unexpired leases,
who must file proofs of claim and who will be subject to the provisions of the
Bankruptcy Code, Holders of Class 3 Claims and Class 4 Claims need not and
should not file proofs of claim with the Bankruptcy Court.
Nothing in the Prepackaged Plan, the Confirmation Order or any order in aid
of confirmation of the Prepackaged Plan, shall constitute, or be deemed to
constitute, a waiver or release of any claim, cause of action, right of setoff,
or other legal or equitable defense which Huntway had immediately prior to the
commencement of the Prepackaged Chapter 11 Case, against or with respect to any
Claim in Class 3 or Class 4. During the pendency of the Prepackaged Chapter 11
Case and upon confirmation thereof, the Debtor shall have, retain, reserve and
be entitled to assert all such claims, causes of action, rights of setoff and
other legal or equitable defenses which it had immediately prior to the
commencement of the Prepackaged Chapter 11 Case fully as if the Prepackaged
Chapter 11 Case had not been commenced; and all of Huntway's
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legal and equitable rights respecting any Claim in Class 3 and Class 4 may be
asserted after the Confirmation Date to the same extent as if the Prepackaged
Chapter 11 Case had not been commenced.
V.
IMPLEMENTATION OF THE PREPACKAGED PLAN
A. ISSUANCE OF NEW SENIOR NOTES, NEW JUNIOR NOTES, COMMON UNITS AND UNIT
OPTIONS.
The issuance of the New Senior Notes, New Junior Notes, Common Units and
Unit Options by Reorganized Huntway is hereby authorized as follows or to the
extent required by the provisions of the Prepackaged Plan:
1. New Senior Notes which shall be issued on the Effective Date in an
aggregate principal amount of $23,500,000 and distributed pursuant
to the Prepackaged Plan.
2. New Junior Notes, which shall be issued on the Effective Date in
an aggregate principal amount of $2,070,000 and distributed
pursuant to the Prepackaged Plan.
3. Approximately 1,115,077 Common Units, which shall be issued on the
Effective Date to Holder of Class 5 Claims.
4. Approximately 6,335,663 Common Units, which shall be issued on the
Effective Date to Holders of Class 2 Claims which Units shall be
deliverable upon surrender and cancellation of the Old
Collateralized Notes and Old Subordinated Notes and execution of
the New Intercreditor Agreement and Unitholders Agreement.
5. Approximately 6,335,664 Common Units, which shall be issued on the
Effective Date to Holders of Class 6 Equity Interests which units
shall be deliverable upon surrender and cancellation of the
Warrants and execution of the Unitholders Agreement.
6. Unit Options exercisable for up to 4,000,000 Common Units,
2,820,850 of which Unit Options shall be issued, and distributed
pursuant to, the Prepackaged Plan on the Effective Date.
B. RESTATEMENT OF OLD INDENTURES.
On the Effective Date (i) the Old Collateralized Notes, the Old
Subordinated Notes and the Old Junior Subordinated Notes shall be canceled, (ii)
the Old Collateralized Note Indenture shall be amended, restated and superseded
in its entirety by the New Collateralized Note Indenture, (iii) the Old Junior
Subordinated Debenture Indenture shall be amended, restated and superseded in
its entirety by the New Junior Subordinated Debenture Indenture, (iv) the
obligations of the Debtor under the Old Subordinated Note Indenture shall be
discharged, and (v) except to the extent that such obligations are continued
under the New Collateralized Note Indenture and the New Junior Subordinated
Debenture Indenture, the obligations of the Debtor under the Old Collateralized
Note Indenture and the Old Junior Subordinated Debenture Indenture shall be
discharged. The Old Subordinated Note Indenture shall terminate on the Effective
Date and Huntway shall pay on the Effective Date to the trustee thereunder any
and all amounts due to the trustee.
C. WAIVER OF SUBORDINATION.
The distributions under the Prepackaged Plan take into account the relative
priority of the Claims in each Class in connection with any contractual
subordination provisions or other intercreditor agreements relating thereto.
Accordingly, all distributions under the Prepackaged Plan (including, without
limitation, the distributions to the Holders of Class 5 Claims) shall not be
subject to levy, garnishment, attachment or other legal process by reason of
claimed contractual subordination rights (including, without limitation, rights
arising under the Old Subordinated Note Indenture, the Old Junior Subordinated
Debenture Indenture and the Existing Intercreditor Agreement). On the Effective
Date, all Creditors shall be deemed to have waived
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any and all contractual subordination rights which they may have had under the
terms of the Old Subordinated Note Indenture and the Old Junior Subordinated
Debenture Indenture with respect to such distribution, and the Confirmation
Order shall permanently enjoin, effective as of the Effective Date, all Holders
of Senior Indebtedness (as defined in each of the Old Collateralized Note
Indenture and the Old Subordinated Note Indenture) from enforcing or attempting
to enforce any such rights which existed prior to the entry of the Confirmation
Order under the terms of the Old Subordinated Note Indenture, the Old Junior
Subordinated Debenture Indenture and the Existing Intercreditor Agreement
against any party with respect to distributions under the Prepackaged Plan.
Notwithstanding anything else herein, the subordination provisions of the New
Junior Subordinated Debenture Indenture shall be fully enforceable and nothing
in the Prepackaged Plan or herein shall effect the enforceability thereof.
D. EXECUTION OF OTHER NEW DOCUMENTS.
On the Effective Date (i) Reorganized Huntway shall enter into the New
Collateral Documents to which it is a party with United States Trust Company of
New York, as Collateral Agent, (ii) Sunbelt, the General Partner and the Special
Managing Partner shall enter into the New Guaranties and the New Collateral
Documents to which they are a party with United States Trust Company of New
York, as Collateral Agent, (iii) Reorganized Huntway, Sunbelt, Bankers Trust, as
LOC Bank, the parties receiving New Senior Notes, and United States Trust
Company of New York, as Collateral Agent shall enter into the New Intercreditor
Agreement, (iv) Bankers Trust, as LOC Bank, Reorganized Huntway and Sunbelt
shall enter into the Post-Restructuring Letter of Credit Agreement and (v) the
Holders of the Allowed Class 2 Claims, Allowed Class 5 Claims and Allowed Class
6 Equity Interests and Reorganized Huntway shall execute the Unitholders
Agreement.
E. EXECUTION OF UNITHOLDERS AGREEMENT.
No distribution of property shall be made to or on behalf of any Holder of
an Allowed Class 2 Claim, an Allowed Class 5 Claim or an Allowed Class 6 Equity
Interest unless such Holder executes the documents required under this Section
V. to be executed by such Holder. No Holder of an Allowed Class 10 Equity
Interest shall be entitled to retain such Equity Interest unless such Holder
executes the documents required under this Section V. to be executed by such
Holder. Any Holder that fails to execute the documents required to be executed
by such Holder under this Section V. within 30 days after the Effective Date
shall be deemed to have forfeited all rights, Claims, Equity Interests and other
interests in Huntway and Reorganized Huntway and shall not participate in any
distributions hereunder and all property in respect of such forfeited
distribution, including interest accrued thereon, shall revert to Reorganized
Huntway.
F. SURRENDER OF OLD NOTES AND WARRANTS.
Holders of Allowed Senior Lender Claims shall surrender their Old
Collateralized Notes and Old Subordinated Notes to Reorganized Huntway and
Reorganized Huntway shall distribute or shall cause to be distributed to the
Holders thereof the appropriate distribution of property hereunder. Holders of
Allowed Junior Lender Claims shall surrender their Old Junior Subordinated Notes
to Reorganized Huntway and Reorganized Huntway shall distribute or shall cause
to be distributed to the Holders thereof the appropriate distribution of
property hereunder. Holders of Allowed Class 6 Equity Interests shall surrender
their Warrants to Reorganized Huntway and Reorganized Huntway shall distribute
or shall cause to be distributed to the Holders thereof the appropriate
distribution of property hereunder. No distribution of property hereunder shall
be made to or on behalf of any such Holders unless and until such Old Notes or
Warrants are received by Huntway or the unavailability of such Old Note or
Warrant is reasonably established to the satisfaction of Reorganized Huntway.
Any Holder that fails (i) to surrender or cause to be surrendered such Old Note
or Warrant within five (5) years after the Effective Date or (ii) to execute and
deliver an affidavit of loss and indemnity reasonably satisfactory to Huntway
and, in the event that Huntway requests, fails to furnish a bond in form and
substance (including, without limitation, with respect to amount) reasonably
satisfactory to Huntway within five (5) years after the Effective Date, shall be
deemed to have forfeited all rights, Claims, Equity Interests and any other
interests and shall not participate in any distributions hereunder and all
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property in respect of such forfeited distribution, including interest accrued
thereon, shall revert to Reorganized Huntway.
G. AGREEMENT OF LIMITED PARTNERSHIP.
The Agreement of Limited Partnership of Reorganized Huntway shall be
amended by the Second Amended and Restated Agreement of Limited Partnership as
of the Effective Date. The Amendment to the Amended and Restated Agreement of
Limited Partnership shall be filed with the Secretary of State of Delaware.
Huntway's Amended and Restated Agreement of Limited Partnership as proposed to
be amended pursuant to the Prepackaged Plan is set forth in its entirety in
Appendix C to the Disclosure Statement.
H. MANAGEMENT OF THE DEBTOR.
On the Effective Date, the operation of Reorganized Huntway shall continue
to be the general responsibility of the General Partner, the Board and the
Operating Committee, which shall, thereafter, have the responsibility for the
management, control and operation of Reorganized Huntway as set forth in the
Second Amended and Restated Agreement of Limited Partnership. The members of the
Operating Committee upon the Effective Date shall be: Juan V. Forster, Justin S.
Husher, Samuel M. Mencoff and Raymond M. O'Keefe. The officers of Reorganized
Huntway upon the Effective Date shall consist of the individuals who are
officers of Huntway as of the Petition Date. All such officers shall be deemed
elected pursuant to the Confirmation Order.
I. RELEASE OF CONSENTING SENIOR LENDERS.
(i) Huntway, Reorganized Huntway (in each case whether as debtor,
debtor-in-possession or on behalf of its creditors) and all persons
and entities asserting claims or who may assert claims derivatively or
otherwise through or on behalf of them, and their respective
predecessors, successors and assigns, and the respective parents,
subsidiaries, affiliates and partners of the foregoing entities
(collectively, the "Huntway Releasors") hereby fully, absolutely and
forever release and discharge each of the Senior Lenders (other than
any Senior Lender who has elected not to provide the release set forth
in subparagraph I (ii) below) and the parents, subsidiaries, partners,
directors, officers, attorneys, financial advisors, agents and
employees past and present, of such Senior Lenders and the foregoing
entities from any and all manner of liabilities, accounts, reckonings,
obligations, liens, suits, proceedings, controversies, debts, dues,
counterclaims, cross claims, setoffs, demands and causes of action of
whatever kind or nature, in law, equity or otherwise (including,
without limitation, any causes of action under sections 502, 510, 544,
545, 547, 548, 549 or 550 of the Bankruptcy Code), whether now known
or unknown and whether suspected or unsuspected, anticipated and
unanticipated, and whether or not concealed or hidden, which now exist
or heretofore have existed, which any Huntway Releasor or Huntway
Releasors may now hold or has at any time heretofore owned or held,
which are based upon or arise out of or in connection with any matter,
cause or thing related to the Old Collateralized Notes, the Old
Collateralized Note Indenture, the Old Subordinated Note Indenture,
the Old Subordinated Notes, the Agreement of Understanding, the Old
Letter of Credit Agreement, any transaction or agreement arising from
or related thereto or entered into in connection therewith or
otherwise relating to Huntway, whether existing at any time prior to
the Effective Date or whether such matter, cause or thing was done,
omitted or suffered to be done or omitted at any time prior to the
Effective Date.
(ii) Each Senior Lender (other than any Senior Lender who elects not
to provide a release in accordance with the Voting Instructions and
the Solicitation Materials), on behalf of itself and all persons and
entities asserting claims or who may assert claims derivatively or
otherwise through or on behalf of it and its respective predecessors,
successors and assigns, and the respective parents, subsidiaries,
affiliates and partners of the foregoing entities (collectively, the
"Senior Lender Releasors") hereby fully, absolutely and forever
release and discharge (except as set forth in subparagraph I (iii)
below) each of the Huntway Releasors and the parents, subsidiaries,
partners, directors, officers, attorneys, financial advisors, agents
and employees, past and present, of the
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Huntway Releasors from any and all manner of claims, demands, actions,
costs, expenses, damages, liabilities, accounts, reckonings,
obligations, liens, suits, proceedings, controversies, debts, dues,
counterclaims, cross claims, setoffs, demands and causes of action of
whatever kind or nature, in law, equity or otherwise, whether now known
or unknown and whether suspected or unsuspected, anticipated and
unanticipated, and whether or not concealed or hidden, which now exist
or heretofore have existed, which such Senior Lender Releasor or Senior
Lender Releasors may now hold or has at any time heretofore owned or
held, which are based upon or arise out of or in connection with any
matter, cause or thing related to the Old Collateralized Notes, the Old
Collateralized Note Indenture, the Old Subordinated Notes, the Old
Subordinated Note Indenture, the Agreement of Understanding, the Old
Letter of Credit Agreement or any transaction or agreement arising from
or related thereto or entered into in connection therewith, whether
existing at any time prior to the Effective Date or whether such matter,
cause or thing was done, omitted or suffered to be done or omitted at
any time prior to the Effective Date.
(iii) Nothing in this Section V shall release any claim, right or cause of
action held by the Senior Lenders based upon or arising out of the
Prepackaged Plan or based upon or arising out of or in connection with
the documents or instruments to be issued to or on behalf of the Senior
Lenders pursuant to the Prepackaged Plan (including, but not limited to,
the New Collateralized Note Indenture, the New Senior Notes, the New
Intercreditor Agreement, the New Collateral Documents, the New
Guaranties, the Common Units, the Unitholders Agreement, the Post-
Restructuring Letter of Credit Agreement) or the documents securing the
Senior Lender Claims and the Claims of Bankers Trust.
J. METHOD OF DISTRIBUTION UNDER THE PREPACKAGED PLAN.
1. IN GENERAL. All Cash distributions shall be made by the Debtor or
Reorganized Huntway from available Cash. Except as otherwise set forth herein,
the Debtor or Reorganized Huntway shall make all distributions of Cash and
property pursuant to the Prepackaged Plan on the later of the Effective Date or
on the date a Claim becomes Allowed or as soon thereafter as is practicable.
2. MANNER OF PAYMENT UNDER THE PREPACKAGED PLAN. Any payment of Cash made
by the Debtor or Reorganized Huntway pursuant to the Prepackaged Plan may be
made either by check drawn on a domestic bank, by wire transfer, or by automated
clearing house transfer from a domestic bank, at the option of the Debtor or
Reorganized Huntway, as the case may be.
3. DISTRIBUTION OF NEW SENIOR NOTES AND NEW JUNIOR NOTES. Distributions
of New Senior Notes and New Junior Notes to be made in respect of the Claims in
Classes 2 and 5 shall be made directly to the respective indenture trustee under
the New Collateralized Note Indenture and the New Junior Subordinated Debenture
Indenture, respectively. Such indenture trustees shall distribute the property
to be received to the record holders of the Old Collateralized Notes and Old
Junior Subordinated Notes, as the case may be, as soon after receipt as is
practicable and permissible.
4. DISTRIBUTION OF OPTION TO ANDRE DANESH. Distribution of the option to
purchase 600,000 Common Units to Andre Danesh as a finder's fee shall be made as
soon as practicable on or after the Effective Date.
5. MANNER OF DISTRIBUTION OF OTHER PROPERTY. Any distribution under the
Prepackaged Plan of property other than Cash shall be made by Reorganized
Huntway or its designee in accordance with the terms of the Prepackaged Plan.
6. SETOFFS. The Debtor may, but it shall not be required to, set off
against any Claim (i) the payments and/or distribution of other property to be
made pursuant to the Prepackaged Plan in respect of such Claim and (ii) any
claims of any nature whatsoever the Debtor may have against the Holder of a
Claim, but neither the failure to do so nor the allowance of any Claim hereunder
shall constitute a waiver or release by the Debtor of any such claim the Debtor
may have against such Holder.
7. DISTRIBUTION OF UNCLAIMED PROPERTY. Except as otherwise provided in
the Prepackaged Plan, any distribution of property (Cash or otherwise) under the
Prepackaged Plan which is unclaimed after five
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(5) years following the Effective Date shall be forfeited and transferred to
Reorganized Huntway together with all interest earned thereon and shall be the
property of Reorganized Huntway.
8. SATURDAY, SUNDAY OR LEGAL HOLIDAY. If any payment or act under the
Prepackaged Plan is required to be made or performed on a date that is not a
Business Day, then the making of such payment or the performance of such act may
be completed on the next succeeding Business Day, but shall be deemed to have
been completed as of the required date.
K. REVESTING OF ASSETS.
The property of the Estate of the Debtor shall revest in Reorganized
Huntway on the Effective Date. Reorganized Huntway may operate its business, and
may use, acquire, transfer and dispose of all of its property, including without
limitation all property formerly part of the Estate, free of any restrictions of
the Bankruptcy Code. As of the Effective Date, all property of the Debtor shall
be free and clear of all Claims and interests of the Holders of Claims and
Holders of Equity Interests, except for the liens of the Senior Lenders and
Bankers Trust pursuant to the New Collateralized Indenture, the Collateral
Documents (as defined in the New Intercreditor Agreement), the
Post-Restructuring Letter of Credit Agreement and except as otherwise
specifically provided in the Prepackaged Plan.
L. PARTNERSHIP ACTION.
Upon entry of the Confirmation Order by the Clerk of the Bankruptcy Court,
the execution by the Debtor or Reorganized Huntway of the Second Amended and
Restated Agreement of Limited Partnership shall be authorized and approved in
all respects. On the Effective Date, the New Senior Notes, the New Junior Notes
and the additional Common Units and the Unit Options shall be issued, the
appointment and deemed election of Operating Committee members and officers, and
the other matters provided under the Prepackaged Plan involving the partnership
structure of the Debtor or Reorganized Huntway, or partnership action by the
Debtor or Reorganized Huntway, shall be deemed to have occurred and the New Unit
Option Plan shall be deemed approved (including approval of the issuance of (1)
1,022,000 Unit Options issued to Holders of Class 8 Equity Interests, (2)
1,793,850 additional Unit Options to be issued on the Effective Date to members
of Huntway's management, and (3) such additional Unit Options to be issued from
time to time as are necessary to prevent dilution to the Holders of Unit Options
caused by the issuance from time to time of Common Units as accrued interest on
the New Junior Notes and the issuance of Common Units to Holders of Class 2
Claims and Class 6 Equity Interests as anti-dilution protection granted to such
Holders) and shall be in effect from and after the Effective Date pursuant to
Section 405 of the Delaware Revised Uniform Limited Partnership Act, as amended
through the date hereof, without any requirement of further action by the
partners of the Debtor or Reorganized Huntway.
M. FRACTIONAL NOTES.
The New Senior Notes and New Junior Notes will be available only in
registered form, without coupons. The New Senior Notes and New Junior Notes will
be issued in denominations of $100 and integral multiples thereof. Each Holder
otherwise entitled to an amount of New Senior Notes and New Junior Notes that is
not an integral multiple of $100 will receive Cash in lieu of such fractional
additional amount, promptly after the Effective Date, but in no event later than
sixty (60) Business Days following the later of the Effective Date and receipt
by Huntway of the surrendered Old Collateralized Note or Old Junior Subordinated
Note, as the case may be, subject to the provisions of Section V.
N. FRACTIONAL UNITS.
No fractional shares of Common Units will be issued upon exchange of Old
Collateralized Notes or Old Junior Subordinated Notes. Common Units will be
issued to Holders of Old Collateralized Notes and Old Junior Subordinated Notes
in whole Unit amounts (rounded to the nearest whole Unit when and as necessary).
No separate payment will be made with respect to any fractional Common Unit.
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O. DE MINIMIS DISTRIBUTIONS.
No Cash payment of less than five dollars ($5.00) shall be made by the
Debtor in respect of any Allowed Claim unless a request therefor is made in
writing to the Debtor.
VI.
EXECUTORY CONTRACTS, UNEXPIRED LEASES AND OTHER MATTERS
A. EXECUTORY CONTRACTS AND UNEXPIRED LEASES. All executory contracts and
unexpired leases that exist between the Debtor and any person are hereby
specifically assumed under the Prepackaged Plan, effective as of the Effective
Date, except for any executory contracts and unexpired leases which (i) are
specifically rejected by the Debtor with the approval of the Bankruptcy Court,
at or as of the Effective Date, (ii) are the subject of a motion to reject
pending on the Effective Date or (iii) are identified on a list to be filed with
the Bankruptcy Court on or before the Confirmation Date, as to be rejected.
Entry of the Confirmation Order by the Clerk of the Bankruptcy Court shall
constitute approval of such assumptions pursuant to subsection 365(a) of the
Bankruptcy Code. Claims created by the rejection of executory contracts or
unexpired leases and claims asserted to exist pursuant to Section 365(b)(1)(A)
or Section 365(b)(1)(B) of the Bankruptcy Code with respect to assumed executory
contracts must be filed with the Bankruptcy Court no later than twenty (20) days
after (i) in the case of assumption, the Effective Date and (ii) in the case of
rejection, the later of a Final Order authorizing such rejection or the
Effective Date. Any Claims not filed within such time will be forever barred
from assertion against the Debtor, its Estate, Reorganized Huntway and its
property. Unless otherwise ordered by the Bankruptcy Court, all Claims arising
from the rejection of executory contracts and unexpired leases shall be resolved
in the Bankruptcy Court and shall be paid in full, in Cash, on the later of (i)
the Effective Date or as soon thereafter as is practicable, and (ii) 30 days
after such Claim is Allowed in the amount ordered by the Bankruptcy Court. No
adequate assurance of future performance of any executory contract or unexpired
leases shall be required pursuant to Section 365(b)(1)(C) of the Bankruptcy
Code, other than Reorganized Huntway's promise to perform under the executory
contracts, unless otherwise ordered by the Bankruptcy Court.
B. INDEMNIFICATION OBLIGATIONS. For purposes of the Prepackaged Plan, the
obligations of the Debtor as of the Petition Date to indemnify its present, and
any individuals or entities who formerly were, partners, members of the
Operating Committee or officers, respectively, against any obligations pursuant
to the Amended and Restated Agreement of Limited Partnership of the Debtor,
applicable state law or specific agreement, or any combination of the foregoing
shall survive confirmation of the Prepackaged Plan, remain unaffected thereby,
be assumed and not be discharged, irrespective of whether indemnification is
owed in connection with an event occurring before, on, or after the Petition
Date.
The Debtor shall fully indemnify any person or entity by reason of the fact
that he, she or it is or was a partner, member of the Operating Committee,
officer, employee or agent of the Debtor, or is or was serving at the request of
the Debtor as a member of the Operating Committee or director, officer, employee
or agent of another corporation, partnership, joint venture or other enterprise,
against any liabilities, actions, suits, damages, fines, judgments or expenses
(including reasonable attorneys' fees), arising during the course of, or
otherwise in connection with or any way related to, the preparation and
consummation of the Prepackaged Plan and the transactions contemplated thereby.
C. COMPENSATION AND BENEFIT PROGRAMS. All employment and severance
policies, and all compensation and benefit plans, contracts, agreements,
policies, undertakings and programs of the Debtor including, without limitation,
all savings plans, retirement plans, key employee retention plans, health care
plans, disability plans, severance benefit plans, incentive plans, and life,
accidental death and disbursement insurance plans are treated as executory
contracts under the Prepackaged Plan and are hereby assumed as of the Effective
Date pursuant to subsection 365(a) of the Bankruptcy Code and Section VI.A. of
the Prepackaged Plan. Notwithstanding the foregoing, the Existing Option Plan
shall not be treated pursuant to this subsection, but rather pursuant to Section
II.D. Class 8. On and after the Effective Date, pursuant to Section 1129(a)(13)
of the Bankruptcy Code, the Debtor will continue to pay all retiree benefits, as
that term is
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defined in Section 1114 of the Bankruptcy Code, at the level established
pursuant to subsection (e)(1) or (g) of Section 1114 at any time prior to
confirmation of the Prepackaged Plan, for the duration of the period the Debtor
has obligated itself to provide such benefits.
VII.
CONDITIONS PRECEDENT
A. CONDITIONS PRECEDENT TO CONFIRMATION.
1. It is a condition to confirmation of the Prepackaged Plan that the
Confirmation Order shall approve of all respects of the provisions, terms and
conditions of the Prepackaged Plan; and
2. It is a condition to confirmation of the Prepackaged Plan that the
Confirmation Order is satisfactory to Huntway in form and substance.
B. CONDITIONS PRECEDENT TO CONSUMMATION.
1. It is a condition to Consummation that the Confirmation Order shall
have become a Final Order.
2. It is a condition to Consummation that the Post-Restructuring Letter
of Credit Agreement shall have been executed by the parties thereto.
3. It is a condition to Consummation that the New Guaranties and the New
Collateral Documents have been executed by the parties thereto.
C. WAIVER OF CONDITIONS. The Debtor, with the consent of the Holders of a
majority of the Senior Lender Claims, may waive any of the conditions to
Consummation of the Prepackaged Plan set forth in Section VII.B. (other than
VII.B.1) of the Prepackaged Plan at any time, without notice, without leave or
order of the Bankruptcy Court, and without any formal action other than
proceeding to confirm and/or consummate the Prepackaged Plan.
VIII.
RETENTION OF JURISDICTION
Notwithstanding entry of the Confirmation Order or the Effective Date
having occurred, or a Final Decree having been entered closing the Prepackaged
Chapter 11 Case, the Bankruptcy Court shall, except to the extent it orders
otherwise, have exclusive jurisdiction of all matters arising out of, and
related to the Prepackaged Chapter 11 Case and the Prepackaged Plan pursuant to,
and for the purposes of, Sections 105(a) and 1142 of the Bankruptcy Code and
for, among other things, the following purposes:
A. To hear and determine pending applications for the assumption or
rejection of executory contracts or unexpired leases, if any are pending, and
the allowance of Claims resulting therefrom;
B. To determine any and all pending adversary proceedings, applications,
and contested matters, including without limitation, proceedings relating to
general and limited partners, directors, officers, and employees;
C. To ensure that distributions to Holders of Allowed Administrative
Expenses, Allowed Claims, and Allowed Equity Interests are accomplished as
provided herein;
D. To hear and determine any objections to Administrative Expenses, to
proofs of claims or to Claims and Equity Interests filed, and/or asserted both
before and after the Confirmation Date, including any objections to the
classification of any Claim or Equity Interest, and to allow or disallow any
Disputed Claim, in whole or in part;
E. To enter and implement such orders as may be appropriate in the event
the Confirmation Order is for any reason stayed, revoked, modified, or vacated;
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F. To issue such orders in aid of execution of the Prepackaged Plan as may
be necessary and appropriate to the extent authorized by Section 105 and 1142 of
the Bankruptcy Code;
G. To consider any modifications of the Prepackaged Plan, to cure any
defect or omission, or reconcile any inconsistency in any order of the
Bankruptcy Court, including, without limitation, the Confirmation Order;
H. To hear and determine all applications for compensation and
reimbursement of expenses of professionals under Sections 330, 331, and 503(b)
of the Bankruptcy Code for services rendered and expenses incurred prior to the
Confirmation Date;
I. To hear and determine disputes arising in connection with the
interpretation, implementation, or enforcement of the Prepackaged Plan;
J. To recover all assets of the Debtor and property of the Estate,
wherever located;
K. To hear and determine matters concerning state, local, and federal
taxes in accordance with Sections 345, 505, and 1146 of the Bankruptcy Code;
L. To hear any other matter not inconsistent with the Bankruptcy Code, the
Prepackaged Plan and the Confirmation Order; and
M. To enter a Final Decree closing the Prepackaged Chapter 11 Case.
IX.
MISCELLANEOUS PROVISIONS
A. POST-CONSUMMATION EFFECTIVENESS OF EVIDENCES OF CLAIMS. Old
Collateralized Notes, Old Subordinated Notes and Old Junior Subordinated Notes
shall, effective upon the Effective Date, represent only the right to
participate in the distributions contemplated by the Prepackaged Plan.
B. TERM OF INJUNCTIONS OR STAYS. Without in any way limiting the effect
of Section 524 or 1141, of the Bankruptcy Code, unless otherwise provided, all
injunctions or stays provided for in the Prepackaged Chapter 11 Case pursuant to
Section 105 or 362 of the Bankruptcy Code or otherwise in effect on the
Confirmation Date shall remain in full force and effect until the Effective
Date; and, unless otherwise provided, shall expire on the Effective Date.
C. MODIFICATION OF PREPACKAGED PLAN. The Debtor reserves the right, in
accordance with the Bankruptcy Code and with the prior consent of the Senior
Lenders as prescribed by, and to the extent required by, the Agreement of
Understanding, to amend or modify the Prepackaged Plan prior to the entry of the
Confirmation Order. After the entry of the Confirmation Order, the Debtor or
Reorganized Huntway, as the case may be, may, upon order of the Bankruptcy
Court, amend or modify the Prepackaged Plan, in accordance with Section 1127(b)
of the Bankruptcy Code and with the prior consent of the Requisite Holders (as
such term is defined in the New Collateralized Note Indenture), or remedy and
defect or omission or reconcile any inconsistency in the Prepackaged Plan in
such manner as may be necessary to carry out the purpose and intent of the
Prepackaged Plan.
D. WITHDRAWAL OF PREPACKAGED PLAN. Subject to any consent required under
the Agreement of Understanding, the Debtor reserves the right, at any time prior
to the entry of the Confirmation Order, to revoke and withdraw the Prepackaged
Plan. If the Debtor so revokes or withdraws the Prepackaged Plan, or if entry of
the Confirmation Order does not occur, then, at the option of the Debtor, the
Prepackaged Plan shall be deemed null and void. In that event, nothing contained
in the Prepackaged Plan shall be deemed to constitute a waiver or release of any
Claims by or against the Debtor or any other person, or to prejudice in any
manner the rights of the Debtor or any other person in any further proceedings
involving the Debtor.
E. AMENDMENT AND RESTATEMENT OF SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP. Subject to the provisions of the Second Amended and
Restated Agreement of Limited Partnership of Huntway and the provisions of the
Revised Uniform Limited Partnership Act, the power to amend, alter or
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repeal such Second Amended and Restated Agreement of Limited Partnership and to
adopt a new Agreement of Limited Partnership may be exercised by the General
Partner, the Special Managing Partner and/or the Unitholders of Reorganized
Huntway.
F. PAYMENT OF STATUTORY FEES. All fees payable pursuant to Section 1930
of Title 28 of the United States Code, as determined by the Bankruptcy Court at
the hearing pursuant to Section 1128 of the Bankruptcy Code, shall be paid on or
before the Effective Date.
G. DISCHARGE OF DEBTOR. The rights afforded in the Prepackaged Plan and
the treatment of all Claims and Equity Interests therein shall be in exchange
for and in complete satisfaction, discharge and release of Claims and Equity
Interests of any nature whatsoever, including any accrued interest thereon and
fees, charges, or other costs relating thereto, against the Estate, the Debtor,
Reorganized Huntway or any of their assets or properties. Except as otherwise
provided herein (i) the Prepackaged Plan shall bind all Holders of Claims and
Equity Interests; (ii) on the Effective Date, all such Claims against, and
Equity Interests in, the Debtor shall be satisfied, discharged, and released in
full, and the Debtor's liability in respect thereof shall be extinguished
completely, including without limitation, any liability of a kind specified
under Section 502(g) of the Bankruptcy Code; and (iii) all persons shall be
precluded from asserting against Reorganized Huntway, its successors, or its
assets or properties any other or further Claims or Equity Interests based upon
any documents, instruments or any act or omission, transaction, or other
activity of any kind or nature that occurred prior to the Confirmation Date.
Notwithstanding the foregoing, (i) Holders of Class 3 Claims and Class 4 Claims
will be treated as if the Prepackaged Chapter 11 Case had not been filed (except
as otherwise provided herein), and the determination of whether any Class 3
Claim or Class 4 Claim will be paid and/or the amount of any Class 3 Claim or
Class 4 Claim (which, subject to Bankruptcy Court approval, shall not be listed
on the Schedules, and as to which no proof of Claim need be filed) will be
determined, resolved or adjudicated as if the Prepackaged Chapter 11 Case had
not been commenced and (ii) confirmation of the Prepackaged Plan will not
operate to discharge the Claims or liens of the Senior Lenders and Bankers
Trust, which Claims and liens shall continue in full force, as provided under
and modified by the New Collateralized Note Indenture, the Post-Restructuring
Letter of Credit Agreement and the Collateral Documents (as such term is defined
in the New Intercreditor Agreement), and the liens securing the Senior Lender
Claims and the claims under the Post-Restructuring Letter of Credit Agreement
shall continue in the property of Reorganized Huntway in full force and with the
same priority.
H. EXCULPATION. Neither Reorganized Huntway, its partners, the parties to
the Agreement of Understanding, nor any of their respective officers, directors,
employees, attorneys or agents shall have or incur any liability to any Holder
of a Claim or Equity Interest for any liability of Huntway or Reorganized
Huntway, except as set forth in the New Collateralized Indenture, the
Post-Restructuring Letter of Credit Agreement, the New Collateral Documents, the
New Guaranties, the New Senior Notes, the New Junior Notes and the New Junior
Subordinated Debenture Indenture; or for any act or omission in connection with,
or arising out of, the pursuit of confirmation of the Prepackaged Plan, the
consummation of the Prepackaged Plan, the administration of the Prepackaged Plan
or the property to be distributed under the Prepackaged Plan, and in all
respects, shall be entitled to rely upon the advice of counsel with respect to
their duties and responsibilities under the Prepackaged Plan.
I. RIGHTS OF ACTION. Any rights or causes of action under any theory of
law, including, without limitation, under the Bankruptcy Code accruing to the
Debtor law. remain assets of the Estate of Reorganized Huntway. Reorganized
Huntway may, in it sole discretion, pursue or may refrain from pursuing those
rights or causes of action, as appropriate, in accordance with what is in the
best interests, and for the benefit, of Reorganized Huntway. Nothing in this
Section IX.I, however, shall preserve any rights or causes of action that are
released under Section V.I(i).
J. COMMITTEES. The appointment of all statutory committees shall
terminate on the Effective Date.
K. FAILURE OF BANKRUPTCY COURT TO EXERCISE JURISDICTION. If the
Bankruptcy Court abstains from exercising or declines to exercise jurisdiction,
or is otherwise without jurisdiction over any matter arising out of the
Prepackaged Chapter 11 Case, including any of the matters set forth in the
Prepackaged Plan, the
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Prepackaged Plan shall not prohibit or limit the exercise of jurisdiction by any
other court of competent jurisdiction with respect to such matter.
L. GOVERNING LAW. Unless a rule of law or procedure is supplied by
federal law (including the Bankruptcy Code and Bankruptcy Rules) or an
agreement, document or instrument provides otherwise, the internal laws of the
State of New York shall govern the construction and implementation of the
Prepackaged Plan and any agreement, documents and instruments executed in
connection with the Prepackaged Plan, without regard to the conflict of laws
provisions in the State of New York; provided, however, that all matters of
partnership or corporate governance shall be governed by the laws of the State
of Delaware.
M. HEADINGS. The headings used in the Prepackaged Plan are inserted for
convenience only and neither constitute a portion of the Prepackaged Plan nor in
any manner shall affect the provisions of the Prepackaged Plan.
N. TAX WITHHOLDING. Huntway and Reorganized Huntway shall withhold any
and all taxes required to be withheld by such entities under applicable law.
O. SUCCESSORS AND ASSIGNS. The rights, benefits and obligations of any
person or entity named or referred to in the Prepackaged Plan will be binding
upon, and will inure to the benefit of, the heir, executor, administrator,
successor or assign of such person or entity.
Dated: , 1996
HUNTWAY PARTNERS, L.P.
By: Huntway Managing Partner, L.P.,
its Managing General Partner
By: The Huntway Division of Reprise
Holdings, Inc.
its Sole General Partner
By:
Name:
Title:
By: Huntway Holdings, L.P.,
its Special General Partner
By: The Huntway Division of Reprise
Holdings, Inc.,
its sole General Partner
By:
Name:
Title:
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APPENDIX B
CONSENSUAL RESTRUCTURING AGREEMENT
<PAGE> 199
AMENDED AND RESTATED AGREEMENT OF UNDERSTANDING
This AMENDED AND RESTATED AGREEMENT OF UNDERSTANDING (this "Agreement") is
made and entered into as of July 15, 1996 by and among Huntway Partners, L.P., a
Delaware limited partnership (the "Company"), Sunbelt Refining Company, L.P., a
Delaware limited partnership ("Sunbelt"), Huntway Managing Partner, L.P.
("HMP"), Huntway Holdings, L.P. ("Holdings"), each of Bankers Trust Company
("Bankers Trust"), Massachusetts Mutual Life Insurance Company ("Mass Mutual"),
Mellon Bank, N.A., as trustee for First Plaza Group Trust as directed by
Contrarian Capital Advisors, L.C.C. and Oppenheimer & Co., Inc. for itself as
agent for certain affiliates (individually, a "Senior Lender" and collectively,
the "Senior Lenders") and each of Madison Dearborn Partners III, an Illinois
general partnership and First Capital Corporation of Chicago (individually a
"Junior Lender" and collectively, the "Junior Lenders"). Capitalized terms used
herein but not otherwise defined herein shall have the meanings given such terms
in the General Restructuring Agreement dated as of June 22, 1993 (the
"Restructuring Agreement") among the Company, Bankers Trust, Mass Mutual, Crown
Life Insurance Company, Century Life of America, Century Life Insurance Company,
Phoenix Home Life Mutual Insurance Company, the Junior Lenders, Sunbelt, HMP and
Holdings. The Senior Lenders and the Junior Lenders are collectively referred to
herein as the "Lenders." The Company, the Lenders, Sunbelt, HMP and Holdings are
collectively referred to herein as the "Parties" and individually as a "Party".
RECITALS
WHEREAS, the Lenders are the holders of all of the New Securities, except
such New Securities as are owned or held by Ryback Management Corporation
("Ryback"), on behalf of itself and its nominee(s);
WHEREAS, the Company and Sunbelt are obligated to the Lenders under the
Restructuring Documents, including, without limitation, obligations with respect
to the Collateralized Notes, the Subordinated Notes and the Junior Subordinated
Notes (any and all such obligations collectively are referred to herein as the
"Existing Obligations");
WHEREAS, the Company is in default under certain covenants and provisions
of the Restructuring Documents;
WHEREAS, the Company and the Lenders have consented to a restructuring of
the Existing Obligations in accordance with the terms and provisions set forth
in the Term Sheet attached hereto as Exhibit A (the "Consensual Term Sheet");
WHEREAS, the out-of-court restructuring of the Existing Obligations
contemplated by the Consensual Term Sheet requires, among other things, the
consent of Ryback, and Ryback has not given such consent;
WHEREAS, as an alternative to the restructuring of the Existing Obligations
pursuant to the Consensual Term Sheet, the Company and Lenders have negotiated
the principal terms and provisions of a prepackaged plan of reorganization (the
"Plan"), which are set forth in the Term Sheet attached hereto as Exhibit B (the
"Plan Term Sheet");
WHEREAS, the Company believes that it is in the best interest of the
Company and its creditors for the Company to seek relief under chapter 11 of
Title 11 of the U.S. Code (the "Bankruptcy Code") and, concurrently therewith,
file a proposed plan of reorganization incorporating the terms of the Plan Term
Sheet unless Ryback consents to the terms of the Consensual Term Sheet;
WHEREAS, the parties hereto have heretofore entered into that certain
Agreement of Understanding dated as of March 11, 1996 (the "Existing Agreement")
pursuant to which the parties set forth their agreement regarding the
preparation and delivery by the Company of consent solicitation materials and a
plan of reorganization incorporating the terms set forth in the Plan Term Sheet;
WHEREAS, the parties hereto desire to amend Agreement in it entirety in
order to (i) revise the schedule set forth therein for the preparation,
delivery, review and filing of the consent solicitation material
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and the plan of reorganization, (ii) revise certain terms of the Plan Term Sheet
and (iii) make certain other changes as set forth herein;
NOW, THEREFORE, in consideration of the premises and the terms and
conditions herein contained, the adequacy and sufficiency of which are hereby
acknowledged, the Parties hereby amend and restate the Existing Agreement as
follows:
1. Preparation of the Plan and other Materials. Promptly upon execution
of this Agreement, the Company shall instruct its counsel to prepare the
following: (a) a petition (the "Petition") for relief under chapter 11
of the Bankruptcy Code; (b) a plan of reorganization incorporating the
terms and provisions of the Plan Term Sheet (the "Plan"); (c) all
schedules, motions, pleadings and other papers necessary or useful in
connection with the filing of the Petition; and (d) a disclosure and
solicitation statement describing the Company and the Plan and seeking
the consent of each class of impaired claims and interests identified in
the Plan Term Sheet (the "Disclosure and Solicitation Statement"). The
Company's counsel shall coordinate with counsel for the Lenders in the
preparation of such documents.
2. Timetable for Plan, Disclosure and Solicitation and Filing. The
Company shall use its reasonable best efforts to submit the Disclosure
and Solicitation Statement to the Securities and Exchange Commission for
review on or before July 22, 1996. The Company shall use its reasonable
best efforts to obtain the approval of the Disclosure and Solicitation
Statement by the Securities and Exchange Commission on or before
September 2, 1996 (the date of such approval being referred to herein as
the "SEC Approval Date"). Not later than three business days after the
SEC Approval Date, the Company shall distribute the Disclosure and
Solicitation Statement to all known members of each class of impaired
claims or interests identified in the Plan Term Sheet and shall solicit
the consent of each such class of claims and interests in compliance
with Bankruptcy Code Section 1126(b) and Bankruptcy Rule 3018. The
solicitation period shall remain open for 30 calendar days. If each such
class of impaired claims or interests votes to accept the Plan in
accordance with Bankruptcy Code Section 1126 and Bankruptcy Rule 3018,
the Company shall file the Petition and the Plan not more than two
business days after the close of the solicitation period (the date on
which the Petition is filed being referred to herein as the "Petition
Date"). The Company shall use its reasonable best efforts to notice a
hearing to approve the compliance of the solicitation of consents to the
Plan with Bankruptcy Code Section 1126, which hearing shall convene not
more than 45 days after the Petition Date and shall conclude not more
than 48 days after the Petition Date. The Company shall use its
reasonable best efforts to notice a hearing on confirmation of the Plan,
which hearing shall convene not more than 45 days after the Petition
Date and shall conclude not more than 48 days after the Petition Date.
3. Support of the Plan. Each Party will use its reasonable best efforts
to obtain confirmation of the Plan in accordance with the Bankruptcy
Code and the timetable set forth in Section 2. Each Party will take all
necessary and appropriate actions to achieve confirmation including
recommending to the holders of impaired claims and interests that the
Plan be confirmed. No Party shall (a) object to confirmation of the Plan
or otherwise commence any proceeding to oppose or alter the Plan or any
other reorganization documents containing terms and conditions
consistent with those contained in the Plan Term Sheet (the "Plan
Documents"), (b) vote for, consent to, support or participate in the
formulation of any other plan of reorganization or liquidation proposed
or filed or to be proposed or filed in any chapter 11 or chapter 7 case
commenced in respect of the Company, (c) directly or indirectly seek,
solicit, support or encourage any other plan, proposal or offer of
dissolution, winding up, liquidation, reorganization, merger or
restructuring of the Company or any of its subsidiaries that could
reasonably be expected to prevent, delay or impede the successful
restructuring of the Company as contemplated by the Plan Term Sheet, (d)
object to the Disclosure and Solicitation Statement or the compliance of
the solicitation of consents to the plan with Bankruptcy Code Section
1126 or (e) take any other action that is inconsistent with, or that
would delay confirmation of the Plan; provided, however, that no Party
shall be barred from (x) objecting to the compliance with Bankruptcy
Code Section 1126 of the solicitation of the
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consent by such Party to the Plan if the Disclosure and Solicitation
Statement received by such Party contains a material misstatement or
omission or (y) taking any action with respect to any matter which
action is not inconsistent with the Plan Term Sheet.
4. Acknowledgment. This Agreement is not and shall not be deemed to be
a solicitation for consents to the Plan. The Lenders' acceptances of the
Plan will not be solicited until the Lenders have received the
Disclosure and Solicitation Statement.
5. Termination of Lenders' Obligations. Each Lender may terminate its
obligations hereunder and rescind any vote on the Plan by such Lender
(which vote shall be null and void and have no further force and effect)
by giving written notice thereof to the Parties if the Plan provides or
is modified to provide for a materially adverse distribution to such
Lender than the distribution for such Lender described in the Plan Term
Sheet. Senior Lenders (including at least one Senior Lender other than
Bankers Trust Company) holding a majority of the Restructured
Obligations may terminate the Senior Lenders' obligations hereunder and
rescind any vote on the Plan by the Lenders (which votes shall be null
and void and have no further force and effect) by giving written notice
thereof to the Parties if any of the following occur: (a) the Plan or
the Plan Documents provide or are modified to provide or the Company
moves to modify the Plan to provide for distributions to holders of
claims or interests that differ in any material respect from the
distributions to such holders described in the Plan Term Sheet without
the consent in writing by each of the Parties that is adversely affected
thereby, it being understood that any improvement in the distribution to
any Party under the Plan shall be deemed to be materially adverse to all
Parties; (b) the Company violates any covenant in Section 1 or Section 2
(it being understood that certain obligations in Section 2 require only
the Company's best reasonable efforts); (c) the Company fails to obtain
consent of each impaired class of claims or interests on or before
October 16, 1996 or the Company fails to file the Petition and the Plan
on or before October 18, 1996 or the Plan fails to be confirmed on or
before December 2, 1996; (d) after the filing of the Plan the Company
submits a second plan of reorganization that does not incorporate the
terms and provisions of the Plan Term Sheet or moves to withdraw the
Plan; or (e) the Company, the Lenders and Ryback execute the Consensual
Term Sheet on or before the earlier of August 30, 1996 and the Petition
Date.
6. Agreement not a Waiver. Nothing in this Agreement constitutes a
modification or waiver of any of the Lenders' rights under the
Restructuring Documents, at law or otherwise.
7. Representations and Warranties. Each Lender represents and warrants
to the other Parties that (a) such Lender is the legal and beneficial
owner of the New Securities set forth opposite the name of such Lender
on Schedule I annexed hereto, and (b) such Lender has sole voting and
dispositive power with respect to the New Securities issued to such
Lender and has full power and authority to enter into this Agreement and
perform its obligations hereunder, and has not entered into any
participation or other agreement with any person with respect to any of
the New Securities held by such Lender or otherwise granted any person
any authority over the voting or disposition of such New Securities
(other than any such participation or other agreement that does not in
any way limit or restrict the undersigned Lender's ability to satisfy
its obligation hereunder with respect to all of the New Securities held
by such Lender). Each Party represents and warrants to the other Parties
that this Agreement is the legally valid and binding agreement of such
Party, enforceable against such Party in accordance with its terms.
8. Miscellaneous.
(a) This Agreement, together with the Exhibits hereto, constitute the
complete agreement of the Parties with respect to the subject
matters referred to herein and supersede all prior or
contemporaneous negotiations, promises, covenants, agreements or
representations of every nature whatsoever with respect thereto,
all of which have become merged and finally integrated into this
Agreement. This Agreement cannot be amended, modified or
supplemented except by an instrument in writing executed by the
Parties.
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(b) The Company agrees, at its cost and expense, to execute and
deliver, or to cause to be executed and delivered, all such
instruments and to take all such action as the Lenders may
reasonably request in order to effectuate the intent and purposes
of, and to carry out the terms of this Agreement. The Lenders
agree, at the cost and expense of the Company, to execute and
deliver, or to cause to be executed and delivered, all such
instruments and to take all such action as the Company may
reasonably request in order to effectuate the intent and purposes
of, and to carry out the terms of this Agreement.
(c) It is acknowledged and agreed by the Parties that money damages
would not be a sufficient remedy for any breach of this Agreement
by any Party and each non-breaching Party shall be entitled to
specific performance and injunctive or other equitable relief as a
remedy of such breach, and each Party agrees to waive any
requirement for the securing or posting of a bond in connection
with such remedy.
(d) Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
(e) This Agreement shall become effective upon the execution and
delivery of counterparts hereof by each of the parties listed on
the signature pages hereof. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective
successors and assigns. The terms and provisions of this Agreement
shall be binding upon and inure to the benefit of any assignee or
transferee of the New Securities, and in the event of such transfer
or assignment, the rights, obligations and privileges herein
conferred upon the Lenders shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and
conditions hereof. Each Lender agrees not to transfer, assign or
participate any interest in or control or authority over all or any
part of the New Securities in any manner without the express
written assumption by such transferee of the transferors'
obligations hereunder. If the transferor has cast a ballot or
ballots in favor of the Plan prior to such transfer, the transferee
shall simultaneously with such transfer, assignment or
participation execute and deliver to the Company an affirmation of
such of the ballots as have been previously been delivered by such
transferor or a new ballot by such transferee in favor of the Plan.
The rights and obligations of the Company, Sunbelt, HMP and
Holdings hereunder cannot be assigned without the written consent
of all Lenders.
(f) This Agreement may be executed in counterparts, each of which when
so executed shall be an original, but all such counterparts shall
together constitute but one and the same instrument. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS
PROVISIONS THEREOF.
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IN WITNESS WHEREOF, the due execution hereof by the respective duly
authorized general partner or officer of the undersigned as of the date first
written above.
HUNTWAY PARTNERS, L.P.
By: HUNTWAY MANAGING PARTNERS, L.P.,
its Managing General Partner
By: The Huntway Division of Reprise
Holdings, Inc.,
its sole General Partner
By:
Name:
Title:
By: HUNTWAY HOLDINGS, L.P.,
its Special General Partner
By: The Huntway Division of Reprise
Holdings, Inc.,
its sole General Partner
By:
Name:
Title:
SUNBELT REFINING COMPANY, L.P.
By: HUNTWAY PARTNERS, L.P.,
its sole General Partner
By: HUNTWAY MANAGING PARTNER, L.P.,
its Managing General Partner
By: The Huntway Division of Reprise
Holdings, Inc.,
its sole General Partner
By:
Name:
Title:
By: HUNTWAY HOLDINGS, L.P.,
its Special General Partner
By: The Huntway Division of Reprise
Holdings, Inc.,
its sole General Partner
By:
Name:
Title:
BANKERS TRUST COMPANY
By:
Name:
Title:
B-5
<PAGE> 204
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
MADISON DEARBORN PARTNERS III
By:
-----------------------------------
Name:
Title:
HUNTWAY MANAGING PARTNER, L.P.,
By: The Huntway Division of Reprise
Holdings, Inc.,
its sole General Partner
By:
---------------------------------
Name:
Title:
HUNTWAY HOLDINGS, L.P.,
By: The Huntway Division of Reprise
Holdings, Inc.,
its sole General Partner
By:
---------------------------------
Name:
Title:
FIRST CAPITAL CORPORATION OF CHICAGO
By:
-----------------------------------
Name:
Title:
MELLON BANK, N.A.,
AS TRUSTEE FOR FIRST PLAZA GROUP
TRUST,
AS DIRECTED BY CONTRARIAN CAPITAL
ADVISORS, L.L.C.
By:
-----------------------------------
Name:
Title:
OPPENHEIMER & CO, INC.,
FOR ITSELF AND AS AGENT FOR CERTAIN
AFFILIATED ENTITIES.
By:
-----------------------------------
Name:
Title:
B-6
<PAGE> 205
SCHEDULE I
SECURITIES HOLDINGS
<TABLE>
<CAPTION>
ORIGINAL
PRINCIPAL PIK
NEW SECURITIES HOLDER(S) AMOUNT SECURITIES
- ----------------------------------- ------------------------- ------------- ------------
<S> <C> <C> <C>
Senior Notes ($22,170,000.00 Bankers $11,268,345.90 $1,139,714.11
original plus $2,242,339.91 Massachusetts Mutual 6,229,548.30 630,075.09
PIK)............................. Ryback 3,114,663.30 315,026.33
Oppenheimer & Co., Inc. 778,721.25 78,762.19
First Plaza Group Trust 778,721.25 78,762.19
Subordinated Notes (Other) Bankers $20,499,772.33 $1,717,853.78
($49,135,724.16 Massachusetts Mutual 16,363,369.37 1,371,228.69
plus $4,117,508.62 PIK).......... Ryback 8,181,795.54 685,623.63
Oppenheimer & Co., Inc. 2,045,393.46 171,401.26
First Plaza Group Trust 2,045,393.46 171,401.26
Subordinated Note (Sunbelt IDB) Bankers $ 9,099,726.00
$9,099,726.00....................
Junior Subordinated Debentures FCCC $ 6,300,000.00 $ 665,244.01
($7,000,000.00 original plus MDP 700,000.00 73,916.00
$739,160.01 PIK).................
Warrants 3,340,757................. Bankers 1,975,552
Massachusetts Mutual 1,092,156
Oppenheimer & Co., Inc. 136,524
First Plaza Group Trust 136,525
</TABLE>
B-7
<PAGE> 206
EXHIBIT A
HUNTWAY PARTNERS, L.P.
25129 THE OLD ROAD
SUITE 322
NEWHALL, CA 91381
January 8, 1996
Bankers Trust Company
Massachusetts Mutual Life Insurance Company
Crown Life Insurance Company
Century Life of America
Century Life Insurance Company
Ryback Management Corporation
Madison Dearborn Partners III
First Capital Corporation of Chicago
Re: Restructuring of Obligations under Collateralized Note Indenture,
Subordinated Note Indenture and Junior Subordinated Debenture
Indenture, each dated as of June 22, 1993 (collectively, the
"Indentures").
This term sheet, when fully executed by the parties hereto, shall
constitute the agreement in principle by such parties to restructure the
obligations (including any warrants) of Huntway Partners, L.P. (the "Company")
and Sunbelt Refining Company, L.P. to the addressees listed above in accordance
with the following terms and conditions:
1. Senior Notes Holders of obligations under the Collateralized Note
Indenture and the Subordinated Note Indenture (the
"Existing Lenders") will convert their debt into
$23,500,000 of Senior Secured Notes (the "Senior Secured
Notes") to be comprised of $14,400,000 of funded debt
and $9,100,000 of a Bankers Trust Industrial Development
Bond Letter of Credit (the "IDB L/C"). Funded debt to be
allocated pro rata to existing lenders after giving
effect to the retention by Bankers Trust of the IDB L/C.
The Company will replace the existing $17,500,000 letter
of credit facility (the "Crude L/C") with a new letter
of credit facility (the "New Crude L/C") within one year
from the date of closing.
2. Interest Rate 12% per year, payable 1/6 first quarter, 1/6 second
quarter, 1/3 third quarter and 1/3 fourth quarter. All
interest payments due in 1996 will be payable in-kind
with additional Senior Secured Notes with the first cash
interest payment on the Senior Secured Notes due March
31, 1997. Interest on the IDB L/C portion of the debt to
be paid at 12% less costs relating to the Pinal County
Notes.
3. Maturity Ten (10) years from date of closing.
4. Option Redemption The Senior Secured Notes will be redeemable at the
Company's option in whole or in part, upon not less that
30 nor more that 60 days notice, at the redemption
prices (expressed as percentages of aggregate principal
amount) set forth below plus accrued and unpaid interest
thereon to the applicable date
B-8
<PAGE> 207
of redemption, if redeemed during the 12 month period
beginning on the periods indicated below:
Callable at declining premium according to the following
schedule:
Year 1 112
Year 2 109.6
Year 3 107.2
Year 4 104.8
Year 5 102.4
Year 6 Par
5. Mandatory
Redemption A. The Company will pay lenders all cash in excess of
$6,000,000 on December 31, 1996 by January 15, 1997.
Such cash balance will be net of funding required for
1996 capital expenditure projects including equipment
outlined in point 7, Equipment Financing. Such
capital expenditures in total will not exceed
$4,150,000. Any payment made to lenders on January
15, 1997 will reduce required 1998 sinking fund
described in point C below.
B. Beginning in 1997, based on fiscal 1997 cash flow,
the Company will pay to the lenders 50% of excess
CDSA (as defined under the present indenture) using
the same procedures for payment as addressed under
the current Indentures. In the event the Company
converts to corporate status, the CDSA definition
shall be changed to reflect CDSA net of corporate
income taxes.
C. Commencing in year 3, the company shall make annual
sinking fund payments on the Senior Secured Notes in
the amount of $2,937,500, with 40% of such amount to
be paid on or before September 30 and 60% of such
amount to be paid on or before December 31 of each
applicable year. The sinking fund payments in years 3
through 10 shall be increased by an amount necessary
to fully amortize any outstanding paid-in-kind Senior
Secured Notes over that eight-year period.
6. Collateral Collateral for the IDB L/C and the Senior Secured Notes
will remain as it currently is in the existing loan and
security documents. Existing lenders will allow all
current assets to collateralize the New Crude LC when
that facility is obtained.
7. Equipment Financing Existing lenders will allow the Company to borrow funds
to build a 92,000 barrel asphalt tank, extend the
storage capacity of two existing asphalt storage tanks
by a combined 18,000-19,000 barrels, and build two 5,000
barrel polymer asphalt tanks plus associated hardware at
Benicia in 1996 and 1997. Collateral for the financing
of these new capital expenditures will be only these new
assets themselves.
The equipment financing to build the two 5,000 barrel
polymer asphalt tanks plus associated hardware will be
repaid by December 31, 1996. Any amounts not repaid by
December 31, 1996 on the 92,000 barrel asphalt tank, or
the two asphalt extensions or any other component of the
planned 1996 capital expenditures of $4,150,000 will be
deposited in a separate account at Bankers Trust to be
withdrawn in 1997 only for the purpose of paying off any
remaining amounts due on these 1996 capital projects.
8. Existing Junior
Subordinated Note The existing Junior Subordinated Notes will be exchanged
for New Subordinated Notes (the "New Subordinated
Notes") in a principal amount of $2,070,000. The New
Subordinated Notes will mature 10 years from the date of
closing. No principal payments or prepayments will be
made on the New Subordinated Notes until the Senior
Secured Notes are paid in full. The New
B-9
<PAGE> 208
Subordinated Notes will pay interest at a rate of 12%
only in units valued at the then current market price
(mechanics to be discussed). Any units issued under this
provision will not be dilutive to equity as described
under number 10, Equity, below.
9. Covenants The Company will incorporate as much of the current
indenture as possible except that financial covenant
415b will be eliminated, covenant 422 (Liquidity
reserve) will be eliminated and the Company and its
lenders will agree on an appropriate covenant 418
(capital expenditure) for future years.
Lenders will allow an unsecured loan in 1996 not to
exceed $2,000,000. Such loan must be repaid in full by
December 31, 1996.
10. Equity 50% of the equity of the reorganized Huntway on a
fully-diluted basis. The equity to consist of units at
no cost (or shares if the Company converts to corporate
status). Existing warrants held by existing lenders to
be retired.
The New Subordinated Noteholders to receive 4.4% of the
equity of the reorganized Huntway on a fully-diluted
basis.
Operating Management of the Company to own 10%
(including the 1,022,000 options already issued) of the
equity of the reorganized Huntway on a fully-diluted
basis. The holders of the Senior Secured Notes shall not
sell or otherwise transfer the equity securities issued
to them at closing for 180 days following the closing;
provided that the holders of the New Subordinated Notes,
the Company's management and Andre Danesh (with respect
only to his 600,000 unit finder's fee) shall have agreed
not to sell or otherwise transfer their equity
securities in the Company for such 180-day period;
provided further that on or before the expiration of the
180-day period, the equity securities issued at the
closing contemplated hereby shall be registered.
11. Tax Matters All aspects of the tax consequences of the exchange
offer, including the tax treatment relating to the
cancellation of indebtedness and the issuance of the
Senior Secured Notes and the limited partnership
interests, as such consequences relate to both the
Company and the Existing Lenders (both as to the old
debt converted and the new debt and equity received)
shall be satisfactory to the Company and the Existing
Lenders. The limited partnership agreement amendments
and the allocations and capital account balances made in
connection with the consummation of the exchange offer
shall also be satisfactory to the Existing Lenders. The
parties agree that the Company may convert to corporate
status following the closing subject to the Existing
Lenders' prior written consent.
12. Information and
Other
Rights The Limited Partnership Agreement shall be amended as to
provide the limited partners (subject to the execution
of appropriate confidentiality agreements) with rights
to information concerning the Company and its operations
requested by the holders of at least 25% of the limited
partnership interests and to be consulted as to certain
matters specified in the Restructuring Documents. In
addition, the members of the Operating Committee shall
be satisfactory to the Existing Lenders (so long as the
Existing Lenders hold at least 25% of the limited
partnership interests); it being understood that the
current members of the Operating Committee (who are
identified on Exhibit A hereto) are hereby deemed
satisfactory to the Existing Lenders. The parties hereto
further agree to permit Huntway Managing Partner, L.P.,
following the closing, to transfer its general
partnership interests in the Company to an entity to be
formed by the Company's management and will consent to
such transfer, provided that
B-10
<PAGE> 209
such transfer would not result in the loss of limited
liability of any limited partner, cause the Company to
be treated as a corporation for federal income tax
purposes or otherwise cause adverse tax consequences to
the Existing Lenders.
13. Mutual Release In consideration of the consummation of the transactions
contemplated hereby, the parties hereto and their
respective partners and other affiliates shall receive
at closing a full release of all pre-closing
obligations, liabilities, agreements and claims relating
to the Company and its partners and other affiliates.
The parties to this Term Sheet agree to use their good faith efforts to
consummate the transactions contemplated hereby. This Term Sheet is subject to
the preparation and execution of definitive documentation satisfactory to the
Existing Lenders, the holders of the Junior Subordinated Notes and the Company,
containing terms and conditions consistent with the terms and conditions set
forth above (the "Restructuring Documents"). This Term Sheet is intended merely
as an outline of certain of the material terms of such Restructuring Documents.
It does not include descriptions of all of the terms, conditions and other
provisions that are to be contained in the definitive documentation relating to
the debt and equity securities and instruments described herein and it is not
intended to limit the scope of discussion and negotiation of any matters not
inconsistent with the specific matters set forth herein.
* * * * *
B-11
<PAGE> 210
IN WITNESS WHEREOF, the due execution hereof by the respective duly
authorized officer of the undersigned as of the date first written above.
HUNTWAY PARTNERS, L.P.
By: HUNTWAY MANAGING PARTNERS, L.P.,
its Managing General Partner
By: The Huntway Division of
Reprise Holdings, Inc.,
its sole General Partner
By:
--------------------------
Name:
Title:
By: HUNTWAY HOLDINGS, L.P.,
its Special General Partner
By: The Huntway Division of Reprise
Holdings, Inc.,
its sole General Partner
By:
----------------------------
Name:
Title:
B-12
<PAGE> 211
IN WITNESS WHEREOF, the due execution hereof by the respective duly
authorized officer of the undersigned as of the date first written above.
SUNBELT PARTNERS, L.P.
By: HUNTWAY PARTNERS, L.P.,
its sole General Partner
By: HUNTWAY MANAGING PARTNER, L.P.
its Managing General Partner
By: The Huntway Division of Reprise
Holdings, Inc.,
its sole General Partner
By:
------------------------------
Name:
Title:
By: HUNTWAY HOLDINGS, L.P.,
its Special General Partner
By: The Huntway Division of Reprise
Holdings, Inc.,
its sole General Partner
By:
------------------------------
Name:
Title:
BANKERS TRUST COMPANY
By:
---------------------------------------
Name:
Title:
B-13
<PAGE> 212
IN WITNESS WHEREOF, the due execution hereof by the respective duly
authorized officer of the undersigned as of the date first written above.
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
CROWN LIFE INSURANCE COMPANY
By:
-----------------------------------
Name:
Title:
CENTURY LIFE OF AMERICA
By:
-----------------------------------
Name:
Title:
CENTURY LIFE INSURANCE COMPANY
By: Century Investment Management Co.
By:
-----------------------------------
Name:
Title:
B-14
<PAGE> 213
IN WITNESS WHEREOF, the due execution hereof by the respective duly
authorized officer of the undersigned as of the date first written above.
RYBACK MANAGEMENT CORPORATION,
ON BEHALF OF ITSELF AND ITS
NOMINEE(S).
By:
-----------------------------------
Name:
Title:
MADISON DEARBORN PARTNERS III
By:
-----------------------------------
Name:
Title:
FIRST CAPITAL CORPORATION OF CHICAGO
By:
-----------------------------------
Name:
Title:
B-15
<PAGE> 214
IN WITNESS WHEREOF, the due execution hereof by the respective duly
authorized officer of the undersigned as of the date first written above.
MELLON BANK, N.A.,
AS TRUSTEE FOR FIRST PLAZA GROUP
TRUST, AS DIRECTED BY CONTRARIAN
CAPITAL ADVISORS, L.L.C.
By:
-----------------------------------
Name:
Title:
OPENHEIMER & CO., INC.,
FOR ITSELF AND AS AGENT FOR CERTAIN
AFFILIATED ENTITIES
By:
-----------------------------------
Name:
Title:
B-16
<PAGE> 215
EXHIBIT A
HUNTWAY PARTNERS, L.P.
CURRENT OPERATING COMMITTEE MEMBERS
JUAN Y. FORSTER
SAMUEL M. MENCOFF
JUSTIN S. HUSCHER
RAYMOND M. O'KEEFE
B-17
<PAGE> 216
EXHIBIT B
HUNTWAY PARTNERS, L.P.
TERM SHEET FOR
PREPACKAGED PLAN OF REORGANIZATION
Classification and Treatment of Claims
and Equity Interests Under the Prepackaged Plan:
ADMINISTRATIVE EXPENSES: Allowed administrative expenses under section 503(b)
and 507(a)(1) of the Bankruptcy Code are to be paid in full, in cash, on the
dates of the Effective Date or the date on which such administrative expenses
become allowed, except to the extent the holder agrees to a different treatment;
provided, however, that obligations incurred in the ordinary cause of business
shall be paid in full or be performed by Huntway in the ordinary course of
business according to the terms of the obligations.
PRIORITY TAX CLAIMS: Allowed Priority Tax Claims (claims of governmental units
entitled to priority under Section 507(a)(8) of the Bankruptcy Code) are to be
paid in full, in cash, on the effective date or as soon thereafter as
practicable; provided, however, that at Huntway's option, Huntway may pay such
allowed claims plus interest over a period not exceeding six years after date of
assessment thereof.
CLASS 1 -- OTHER PRIORITY CLAIMS: Class 1 consists of claims which are entitled
to a priority under 507(a) of the Bankruptcy Code (other than Administrative
Expenses or Priority Tax Claims), for example unsecured claims for accrued
employee compensation and benefits (not to exceed $4,000 per employee). Allowed
Class 1 claims will be paid in full, in cash, or on the effective date or as
soon thereafter as practicable, except to the extent that the claimholder in
such class agrees to a different treatment; provided, however, that Other
Priority Claims representing obligations incurred in the ordinary course of
business shall be paid in full or be performed by Huntway in the ordinary course
of business according to the terms of the obligations. Claims in Class 1 are
unimpaired and holders of such claims are deemed to have accepted the
Prepackaged Plan.
CLASS 2 -- SENIOR LENDERS: Class 2 consists of all of the Claims of the Senior
Lenders arising under the Collateralized Note Indenture and Subordinated Note
Indenture, including interest, fees, costs and expenses provided thereunder,
including post-petition interest, fees, costs and expenses pursuant to Section
506(b) of the Bankruptcy Code (the "Senior Lenders Claims"). On the effective
date, allowed Class 2 Senior Lender claims will be continuing obligations of
Huntway as amended and modified under the Post-Restructuring Indenture
containing principal terms and conditions set forth on Exhibit A annexed hereto
(the "Consensual Term Sheet"). Class 2 Claims shall be separated into three
subclasses. Class 2A Claims shall consist of all of the Senior Lenders Claims of
Bankers Trust Company (including with respect to the Subordinated Notes). Class
2A will also receive reimbursement for the fees and expenses of its counsel
incurred in connection with the restructuring and the Plan. Class 2B Claims
shall consist of all of the Senior Lender Claims (other than those of Bankers
Trust Company), to the extent such Claims are allowed secured claims.
Class 2C Claims shall consist of the unsecured portion of all Senior Lender
Claims (i.e., the allowed amount of such claims that exceeds the value of the
collateral securing Huntway's obligations therefor) other than those of Bankers
Trust Company. The holder of Class 2A claims shall receive $9,100,000 in
unfunded Senior Secured Notes in respect of the IDB L/C, $2,844,344 in funded
Senior Secured Notes described in Section 1 of the Consensual Term Sheet and
3,220,227 Common Units. The holders of Class 2B and Class 2C claims will receive
their pro rata share of $11,555,656 in funded Senior Secured Notes described in
Section 1 of the Consensual Term Sheet and 3,115,437 Common Units. Claims in
Classes 2A, 2B and 2C are each impaired by the Prepackaged Plan and holders of
claims in such classes are entitled to vote on the Prepackaged Plan in
accordance with the Prepackaged Plan and the Voting Instructions contained
therein (the "Voting Instructions").
CLASS 3 -- OTHER SECURED CLAIMS: Class 3 consists of secured claims, other than
Senior Lender Claims, against Huntway (the "Other Secured Claims") held by an
entity, including a creditor holding a judgment with respect to which a lien has
been perfected against Huntway, to the extent of the value, pursuant to
B-18
<PAGE> 217
subsection 506(a) of the Bankruptcy Code, of any interest in property of the
estate securing such allowed claim. The legal, equitable and contractual rights
of the holders of Class 3 claims are unaltered by the Prepackaged Plan and on
the effective date, and subject to the requirements of Section 1124(2) of the
Bankruptcy Code, the legal, equitable and contractual rights of the holders of
Class 3 claims shall be reinstated in full, in accordance with the terms of the
prepetition agreements, rights or obligations of Huntway respecting such Class 3
claims; provided however, that the maturity date or dates of all Other Secured
Claims shall be reinstated to the date or dates which existed prior to the date
of any acceleration of such Class 3 claims, subject to the legal and equitable
rights of the parties with respect to such claims as they existed immediately
prior to the filing of the Prepackaged Plan. Class 3 is unimpaired and the
holders of claims in Class 3 are not entitled to vote to accept or reject the
Prepackaged Plan. No Class 3 claim shall be deemed allowed or not allowed by
virtue of the Prepackaged Plan or confirmation of the Prepackaged Plan. Claims
in Class 3 are unimpaired and holders of such Claims are deemed to have accepted
the Prepackaged Plan.
CLASS 4 -- UNSECURED CLAIMS: Class 4 consists of all claims that are not
Administrative Expenses, Priority Tax Claims, Other Priority Claims (Class 1),
Senior Lender Claims (Class 2), Other Secured Claims (Class 3) or Claims of
Holders of Junior Subordinated Notes (Class 5). Unsecured Claims ordinarily
consist of trade claims, claims for breach of contract and damage claims.
Huntway intends to seek the approval of the Bankruptcy Court, as soon as is
practicable after commencement of the Prepackaged Chapter 11 Case, to pay all
trade claims and certain undisputed Class 4 Claims in the ordinary course of
business. The legal, equitable and contractual rights of the holders of Class 4
Claims are unaltered by the Prepackaged Plan and on the effective date, and
subject to the requirements of Section 1124(2) of the Bankruptcy Code, the
legal, equitable and contractual rights of the holders of Class 4 claims shall
be reinstated in full in accordance with the terms of the prepetition
agreements, rights or obligations of Huntway respecting such Class 4 claims;
provided, however that the maturity date or dates of all Unsecured claims shall
be reinstated to the date or dates which existed prior to the date of any
acceleration of such Class 4 claims, subject to the legal and equitable rights
of the parties with respect to such Class 4 claims as they existed immediately
prior to the filing of the Prepackaged Plan. No Class 4 claim shall be deemed
allowed or not allowed by virtue of the Prepackaged Plan or confirmation of the
Prepackaged Plan. Claims in Class 4 are unimpaired and holders of such Claims
are deemed to have accepted the Prepackaged Plan.
CLASS 5 -- CLAIMS OF HOLDERS OF JUNIOR SUBORDINATED NOTES: Class 5 consists of
all claims of holders of each of the Junior Subordinated Notes. The outstanding
aggregate principal amount of the Junior Subordinated Notes was $7,586,668 as of
December 31, 1995. On the effective date or as soon thereafter as is
practicable, a holder of an allowed claim evidenced by a Junior Subordinated
Note shall receive, in full and final satisfaction of such holder's Allowed
Class 5 claim its pro rated portion of (a) $2,070,000 principal of new Junior
Subordinated Notes with terms and conditions described in Section 8 of the
Consensual Term Sheet, except that interest on the New Junior Notes will be paid
in cash after payment in full of the New Senior Notes; and (b) 4.4% of Huntway's
post-reorganization partnership units on a fully-diluted basis, subject to the
exercise of the post-reorganization options issued to Huntway employees in
accordance with the Prepackaged Plan. On the effective date, all Junior
Subordinated Notes will be canceled, and the obligations of Huntway represented
by such instruments will be completely discharged. Upon receipt by Huntway of a
holder's Junior Subordinated Notes, such holder will receive the consideration
provided for in the Prepackaged Plan. Claims in Class 5 are impaired under the
Prepackaged Plan and holders of allowed Class 5 claims are entitled to vote on
the Prepackaged Plan in accordance with the Prepackaged Plan and the Voting
Instructions.
CLASS 6 -- EQUITY INTERESTS OF HOLDERS OF WARRANTS: Class 6 consists of all
equity interests of holders of Warrants for the purchase of Huntway's
partnership units. The Prepackaged Plan provides that each holder of an allowed
equity interest in Class 6 will receive on the effective date such holder's pro
rata share of 25% of the Huntway Partnership units on a fully-diluted basis,
subject to the exercise of the post-reorganization options issued to Huntway
employees in accordance with the Prepackaged Plan. Equity interests in Class 6
are impaired and holders of allowed Class 6 equity interests are entitled to
vote on the Prepackaged Plan in accordance with the Prepackaged Plan and the
Voting Instructions.
CLASS 7 -- EQUITY INTERESTS OF HOLDERS OF PARTNERSHIP UNITS: Class 7 consists of
all Equity Interests of holders of Partnership Units. The Prepackaged Plan
provides that each holder of an allowed equity interest in Class 7
B-19
<PAGE> 218
will retain such holder's units from and after the effective date. However, as a
result of the issuance to holders of Class 5 Claims of approximately 1,115,077
additional units and of the issuance to holders of Class 2 Claims and Class 6
Equity Interests of 12,671,327 additional units in the aggregate deliverable as
of the effective date, the ownership interest in Huntway represented by holders
of these units outstanding immediately prior to the effective date will be
reduced to approximately 45.6 percent, based on units outstanding as of the date
of filing of the Prepackaged Plan. Equity interests in Class 7 are impaired and
holders of allowed Class 7 equity interests are entitled to vote on the
Prepackaged Plan in accordance with the Prepackaged Plan and the Voting
Instructions.
CLASS 8 -- EQUITY INTERESTS OF HOLDERS OF UNIT OPTIONS: Class 8 consists of all
equity interests of holders of Unit Options. The Prepackaged Plan provides that
each holder of an allowed Equity Interest in Class 8 will receive an equal
amount of Unit Options from and after the effective date on terms and conditions
set forth in the Prepackaged Plan. In addition, in connection with the
consummation of the Prepackaged Plan, Huntway will implement a management
incentive option plan, pursuant to which Huntway will agree to grant such number
of options, which when added to the Unit Options issued to Huntway employees
pursuant to the Prepackaged Plan, will result in Huntway employees' ownership
immediately after the effective date of 10% of the post-reorganization units on
a fully-diluted basis assuming the exercise of all outstanding options. However,
as a result of the issuance to Holders of Class 5 Claims of approximately
1,115,077 additional units and of the issuance to the holders of Class 2 Claims
and Class 6 Equity Interests of 12,671,327 additional units in the aggregate,
the ownership interest in Huntway that would be represented by units receivable
upon exercise of the Unit Options would be reduced. Equity interests in Class 8
are impaired and holders of allowed Class 8 equity Interests are entitled to
vote on the Prepackaged Plan in accordance with the Prepackaged Plan and the
Voting Instructions.
CLASS 9 -- EQUITY INTEREST OF HOLDERS OF DANESH OPTIONS: Class 9 consists of all
equity interests of holders of Danesh Options. The Danesh Options consist of
options to purchase 546,059 common units of Huntway. The Prepackaged Plan
provides that the holder of the Danesh Option will retain such option from and
after the effective date. The legal, equitable and contractual rights of the
holder of Class 9 equity interests are unaltered by the Prepackaged Plan. Equity
interests in Class 9 are unimpaired and the holders of such equity interests are
deemed to have accepted the Prepackaged Plan.
CLASS 10 -- EQUITY INTEREST OF HOLDERS OF GENERAL PARTNERSHIP INTERESTS: Class
10 consists of all equity interests of holders of general partnership interests
in Huntway. The Prepackaged Plan provides that the holders of such partnership
interests shall retain their interests in Huntway after the Effective Date
provided that the holders of such interests execute new guaranty and security
documents securing the obligations of Huntway under the New Senior Notes. Equity
interests in Class 10 are impaired under the Prepackaged Plan and holders of
allowed Class 10 equity interests are entitled to vote on the Prepackaged Plan
in accordance with the Prepackaged Plan and the Voting Instructions.
EXECUTORY CONTRACTS, UNEXPIRED LEASES AND OTHER OBLIGATIONS
Executory Contracts and Unexpired Leases
The Prepackaged Plan provides that all executory contracts and unexpired
leases that exist between Huntway and any person will be assumed. Entry of the
Confirmation Order by the Clerk of the Bankruptcy Court will constitute approval
of such assumptions pursuant to subsection 365(a) of the Bankruptcy Code. No
adequate assurance of future performance (other than promise to perform under
the executory contracts and unexpired leases) shall be required pursuant to
Section 365(b)(1)(C) of the Bankruptcy Code, unless otherwise ordered by the
Bankruptcy Court.
Employment and Compensation Agreements, Plans and Policies
The Prepackaged Plan provides that all employment and severance agreements
and policies, and all employee compensation and benefit plans, contracts,
agreements, policies, undertakings and programs of Huntway, including, without
limitation, savings plans, key employee retention plans, retirement plans,
health care plans, disability plans, severance benefit plans, incentive plans,
and life and accidental death and
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dismemberment insurance plans are, except as otherwise provided herein, treated
as executory contracts under the Prepackaged Plan and are assumed by Huntway for
all purposes.
Retiree Benefits
On and after the effective date, pursuant to Section 1129(a)(13) of the
Bankruptcy Code, Huntway will continue to pay all retiree benefits, as that term
is defined in Section 1114 of the Bankruptcy Code, at the level established
pursuant to subsection (e)(1)(B) or (g) of Section 1114, at any time prior to
confirmation of the Prepackaged Plan, for the duration of the period Huntway has
obligated itself to provide such benefits.
Collective Bargaining Agreements
Pursuant to Section 1113 of the Bankruptcy Code Huntway will continue to
honor its obligations under its collective bargaining agreements after the
Prepackaged Case is commenced. The Prepackaged Plan will not affect or modify
Huntway's obligations under those agreements.
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APPENDIX C
1996 HUNTWAY EMPLOYEE INCENTIVE OPTION PLAN
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HUNTWAY PARTNERS, L.P.
1996 HUNTWAY EMPLOYEE INCENTIVE OPTION PLAN
ARTICLE 1
IDENTIFICATION OF THIS PLAN
1.1 Title. This plan shall be known as the 1996 Huntway Employee Incentive
Option Plan (as amended, supplemented or restated from time to time, the
"Plan"). This Plan is maintained by Huntway Partners, L.P., a Delaware limited
partnership (the "Company"), and any of its subsidiaries that may adopt this
Plan from time to time in accordance with the procedures set forth in Section
10.2 hereof with the Company's consent (each such adopting subsidiary shall be
referred to herein as a "Covered Entity").
1.2 Purpose. The Company recognizes the valuable services which have been
provided to the Company by its employees and is desirous of encouraging its
employees to increase their equity ownership in the Company. This Plan sets
forth a method by which the Company may issue to key employees options ("Unit
Options") to purchase the Company's common partnership units ("Common Units").
The purpose of this Plan is (i) to promote the Company's growth and development
to the mutual benefit of both the employees and the Company and (ii) to provide
an incentive which the Company may use to induce able persons to enter into or
remain in the employment of the Company or any Covered Entity.
1.3 Effective Date. This Plan was initially approved by the operating
committee (the "Operating Committee") of Huntway Managing Partner, L.P., a
Delaware limited partnership and the managing general partner of the Company
(the "Managing General Partner"). This Plan shall become effective immediately
upon its approval by the Unitholders and no Unit Option granted under this Plan
shall become exercisable until such time.
1.4 Defined Terms. Certain capitalized terms used herein and not otherwise
defined herein shall have the meanings given to such terms in Section 10.3
hereof.
ARTICLE 2
ADMINISTRATION OF THIS PLAN
2.1 Plan Committee's Powers. This Plan shall be administered by the
Operating Committee or by a committee (the "Plan Committee") composed of persons
appointed by the Operating Committee in accordance with Section 2.2. The Plan
Committee shall have full power and authority to:
(a) prescribe, amend and rescind rules and procedures governing the
administration of this Plan, including, without limitation, any rules or
regulations which may be necessary, advisable or desirable to govern the
participation of officers and other persons subject to Section 16(b) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
this Plan in order to exempt transactions under this Plan from Section
16(b) of the Exchange Act pursuant to Rule 16b-3 under the Exchange Act;
(b) to interpret the provisions of this Plan and to establish and
interpret rules and procedures with respect to this Plan;
(c) to determine the requirements imposed by or rights of any person under
this Plan and the rules and procedures established by the Plan Committee
relating to such rights;
(d) to determine the eligibility of employees to participate in this Plan
in accordance with the standards set forth in Article 3 and Section 4.3
hereof; and
(e) to delegate certain of the duties of the Plan Committee to one or more
agents to facilitate the purchase and transfer of Unit Options and to
otherwise assist in the administration of this Plan.
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Each action of the Plan Committee which is within the scope of the authority
delegated to the Plan Committee by the Operating Committee shall be binding on
all persons.
2.2 Plan Committee Membership. The Operating Committee shall have the
power to determine the number of members which the Plan Committee shall have and
to change the number of membership positions on the Plan Committee from time to
time, provided that the Plan Committee shall not have fewer than three members.
The Operating Committee shall appoint all members of the Plan Committee. The
Operating Committee may from time to time appoint members to the Plan Committee
in substitution for, or in addition to, members previously appointed and may
fill vacancies, however caused, on the Plan Committee. Any member of the Plan
Committee may be removed from the Plan Committee by the Operating Committee at
any time without cause. No person may be appointed to the Plan Committee who is
not a member of the Operating Committee at the time of such appointment or who
shall not meet the requirements set forth in Rule 16b-3(b)(3) under the Exchange
Act to qualify as a "Non-Employee Director" at the time of such appointment. A
person's membership on the Plan Committee shall automatically cease when such
person ceases to be a member of the Operating Committee or ceases to meet the
requirements set forth in Rule 16b-3(b)(3) under the Exchange Act to qualify as
a "Non-Employee Director".
2.3 Committee Procedures. The Plan Committee shall hold its meetings at
such times and places as it may determine. The Plan Committee may make such
rules and regulations for the conduct of its business as it shall deem
advisable. Unless the Operating Committee shall expressly decide to the
contrary, a majority of the members of the Plan Committee shall constitute a
quorum and any action taken by a majority of the Plan Committee members at a
meeting at which a quorum of Plan Committee members shall be present shall be
deemed an act of the Plan Committee. All actions taken by the Plan Committee (or
the Operating Committee) under this Plan shall be conclusive and binding on all
persons interested in this Plan.
2.4 Indemnification. No member of the Plan Committee shall be liable, in
the absence of bad faith, for any act or omission with respect to his or her
service on the Plan Committee relating to this Plan. Service on the Plan
Committee shall constitute service as a director of the general partner of the
Managing General Partner, and members of the Plan Committee shall be Indemnities
(as defined in the Amended and Restated Agreement of Limited Partnership of the
Company), so that the members of the Plan Committee shall be entitled to
indemnification and reimbursement as directors of the general partner of the
Managing General Partner for any action or any failure to act in connection with
service on the Plan Committee to the full extent at any time provided for or
permitted by the Certificate of Incorporation or By-Laws of the general partner
of the Managing General Partner, by the Amended and Restated Agreement of
Limited Partnership or By-Laws of the Company, or by the agreement of limited
partnership or bylaws of the Managing General Partner or any Covered Entity or
by any insurance policy or other agreement intended for the benefit of any
director of the general partner of the Managing General Partner or by any
applicable law.
ARTICLE 3
PERSONS ELIGIBLE TO RECEIVE OPTIONS
A person shall be eligible to be granted a Unit Option under this Plan only
if on the Granting Date for such Unit Option or at some time between the
Granting Date of such Unit Option and the exercise of such Unit Option, such
person is a key employee. In addition, Unit Options may be granted from time to
time under this Plan to persons who receive Initial Option Grants, in such
amounts as the Plan Committee determines are necessary to prevent dilution to
the equity interests in the Company represented by the Initial Option Grants
which would otherwise occur on the issuance of certain Common Units as interest
(or as anti-dilution protection) to lenders of the Company on or after the date
of the Initial Option Grants. A key employee is a person who meets the following
standards: (a) such person is employed either by the Company, the Managing
General Partner, the Special General Partner, or a Covered Entity, (b) such
person has managerial, supervisory or similar responsibilities, and (c) such
person is not covered by any collective bargaining agreement binding on such
person's employer. A member of the Operating Committee who is not also such an
employee of the Company, the Managing General Partner, the Special General
Partner, or a Covered Entity shall not be eligible to receive Unit Options under
this Plan. Unit Options may not be
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granted to any person under this Plan at a time when such person is serving as a
member of the Plan Committee.
ARTICLE 4
OPTIONS
4.1 Power to Grant Options. The Plan Committee shall have the right and
the power to grant at any time to any key employee a Unit Option, subject to the
terms and conditions of this Plan as may be established by the Plan Committee on
or prior to the Granting Date for such Unit Option.
4.2 Purchase Price. The exercise price of each Unit Option shall be
determined by the Plan Committee; provided that the exercise price shall not be
less than 50% of the per Common Unit market value on the Granting Date for such
Unit Option, subject to Article 8.
4.3 Option Terms. The Plan Committee shall have the power to determine the
key employees (and other persons specified in Article 3) to whom Unit Options
may be granted under this Plan, the number of Common Units to be subject to each
Unit Option granted under this Plan, the number of Unit Options to be awarded to
each key employee (or other person specified in Article 3) and the time at which
each Unit Option under this Plan shall be granted. Except as otherwise expressly
provided in this Plan, the Plan Committee shall also have the power to
determine, at the time of the grant of each Unit Option, all terms and
conditions governing the rights and obligations of the holder with respect to
such Unit Option, including but not limited to: (i) the exercise price per
Common Unit or the method by which the exercise price per Common Unit shall be
determined; (ii) the length of the period during which the Unit Option may be
exercised and any limitations on the number of Common Units purchasable with the
Unit Option at any given time during such period; (iii) the times at which the
Unit Option may be exercised; (iv) any conditions precedent to be satisfied
before the Unit Option may be exercised; (v) any restrictions on resale of any
Common Units purchased upon exercise of the Unit Option; and (vi) whether the
Company will retain a right to repurchase Common Units sold upon exercise of
such Unit Option and if so, the terms governing such repurchase right.
ARTICLE 5
TERMS APPLICABLE TO ALL OPTIONS GRANTED UNDER THIS PLAN
5.1 Plan Provisions Control Unit Option Items. The terms of this Plan
shall govern all Unit Options granted under this Plan, and in no event shall the
Plan Committee have the power to grant any Unit Option under this Plan which is
contrary to any of the provisions of this Plan. In the event any provision of
any Unit Option granted under this Plan shall conflict with any term in this
Plan as constituted on the Granting Date (as defined in Section 5.2) of such
Unit Option, the term in this Plan as constituted on the Granting Date of such
Unit Option shall control. Except as provided in Article 8 and Section 6.6 of
this Plan, the terms of any Unit Option granted under this Plan may not be
changed after the Granting Date of such Unit Option so as to adversely affect
the holder of a Unit Option, without the express approval of the option holder.
5.2 Granting Date. A Unit Option shall be deemed to have been granted
under this Plan on the date (herein called the "Granting Date") designated by
the Plan Committee at the time it shall approve such Unit Option as the Granting
Date of such Unit Option; provided that the Plan Committee may not designate a
Granting Date with respect to any Unit Option which shall be earlier than the
date on which the granting of such Unit Option shall have been approved by the
Plan Committee.
5.3 Option Agreement. No person shall have any rights under any Unit
Option granted under this Plan unless and until the Company and the person to
whom such Unit Option shall have been granted shall have executed and delivered
an agreement expressly granting the Unit Option to such person and containing
provisions setting forth the terms of the Unit Option.
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5.4 Ten Year Maximum Term. No Unit Option may be granted under this Plan
which may be exercised more than ten years after the Granting Date of such Unit
Option.
5.5 Modification of Option per Grant. Each Unit Option granted under this
Plan may be modified after the date of its grant by express agreement between
the Company and its holder provided that any such Change (i) shall not be
inconsistent with the terms of this Plan and (ii) shall be approved by the Plan
Committee.
5.6 Limitations on Transfer. No Unit Option granted under this Plan shall
be transferable otherwise than by will or the laws of descent and distribution,
and any Unit Option granted under this Plan may be exercised during the lifetime
of the person to whom the Unit Option shall initially have been granted only by
such person or by such person's guardian or legal representative.
5.7 Taxes. The Company shall be entitled, if the Operating Committee or
the Plan Committee deems it necessary or desirable, to withhold for secure
payment from the Unit Option holder in lieu of withholding) the amount of any
withholding or other tax due from the Company with respect to any amount payable
and/or Common Units issuable under such holder's Unit Option, and the Company
may defer such payment or issuance unless indemnified to its satisfaction
against any liability for any such tax.
5.8 No Right to Employment Conferred. Nothing in this Plan or (in the
absence of any express provision to the contrary) in any Unit Option granted
pursuant to this Plan, shall confer on any person any right to continue in the
employment of the Company or any subsidiary or interfere in any way with the
right of the Company, the Managing General Partner, the Special General Partner,
or any Covered Entity to terminate such person's employment at any time.
ARTICLE 6
PROVISIONS GOVERNING UNIT OPTION EXERCISE
6.1 Normal Unit Option Term. Except as otherwise provided in Section 6.3
or Section 6.5, the right to exercise any Unit Option granted under this Plan
shall terminate at whichever of the following times shall earlier occur: (i) the
date which shall occur three months after the employment termination date of the
holder of the Unit Option, or (ii) the expiration date of the Unit Option.
6.2 Acceleration of Exercise Time. The Plan Committee in its sole
discretion shall have the right (but shall not in any case be obligated) to
permit the purchase of Common Units under any Unit Option prior to the time such
Common Units shall be purchasable under the terms of the agreement granting such
Unit Option.
6.3 Extension of Exercise Time. The Plan Committee in its sole discretion
shall have the right (but shall not in any case be obligated) to permit any Unit
Option granted under this Plan to be exercised more than three months after the
employment termination of the holder of such Unit Option, provided that the Plan
Committee shall not have the right to permit exercise of any Unit Option after
its expiration date.
6.4 Exercise Procedures. Each Unit Option granted pursuant to this Plan
shall be exercised by written notice to the Company. A Unit Option holder shall
not have any rights with respect to Common Units issuable under any Unit Option
granted pursuant to this Plan or be deemed to be a limited partner in the
Company by reason of such Unit Option until the exercise of that Unit Option
with respect to those Common Units. The purchase price of Common Units purchased
upon the exercise of a Unit Option granted pursuant to this Plan shall be paid
in full by the Unit Option holder simultaneously with the delivery of such
notice and may be, in the sole discretion of the Plan Committee, payable (i) in
cash (including check, bank draft or money order), (ii) by delivery of Common
Units to the Company (valued at the per Common Unit market value on the date of
exercise), (iii) by delivery of the Unit Option holder's promissory note, or
(iv) by delivery of any combination of the foregoing. The cash paid to the
Company upon the exercise of any Unit Option granted under this Plan shall be
added to the general funds of the Company and be used for any proper business
purpose.
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6.5 Termination of Employment. Any Unit Option shall be exercisable only
during the holder's employment by the Company or a Covered Entity, except that
in the Plan Committee's sole discretion a Unit Option may be exercisable for a
period of up to one year after retirement, disability or death while an employee
of the Company or a Covered Entity, and up to three months after the termination
of such employment for any other reason. A Unit Option may be exercised after
the termination of a holder's employment with the Company or a Covered Entity
(i) only to the extent the holder was entitled to do so on the date of
termination (except that the Plan Committee in its sole discretion may include
in any option agreement an acceleration of the Unit Option covered thereby in
the event of the holder's death, disability or retirement), and (ii) only to the
extent that the Unit Option would not have expired had the holder continued to
be employed by the Company or a Covered Entity (except that the Plan Committee,
in its sole discretion, may permit a Unit Option to be exercisable within one
year after a holder's retirement, death or disability where the holder died or
became totally disabled, as determined by the Plan Committee in its sole
discretion, prior to its expiration). The Plan Committee, in its sole
discretion, may determine that an authorized leave of absence shall be deemed to
satisfy this Plan's employment requirements.
6.6 Listing, Registration and Compliance with Laws and Regulations.
(a) Each Unit Option shall be subject to the requirement that if at any
time the Plan Committee shall determine, in its sole discretion, that
the listing, registration, or qualification of the Common Units subject
to each Unit Option upon any securities exchange or under any state or
federal securities or other law or regulation, or the consent or
approval of any governmental regulatory body, is necessary or desirable
as a condition to or in connection with the granting of such Unit Option
or the issue or purchase of Common Units thereunder, no such Unit Option
may be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Plan Committee, and the
holder of such Unit Option will supply the Company with such
certificates, representations, and information as the Company shall
request and shall otherwise cooperate with the Company in obtaining such
listing, registration, qualification, consent or approval. In the case
of officers and other persons subject to Section 16(b) of the Exchange
Act, the Plan Committee may at any time impose any limitations upon the
exercise of a Unit Option which, in the Plan Committee's sole
discretion, are necessary or desirable in order to comply with Section
16(b) and the rules and regulations thereunder. If the Company as part
of an offering of securities or otherwise, finds it desirable because of
federal or state regulatory requirements to reduce the period during
which any Unit Option may be exercised, the Plan Committee may, in its
sole discretion and without the holder's consent, so reduce such period
on not less than 60 days written notice to the holder thereof.
(b) Notwithstanding the terms of this Section 6.6, no holder of any Unit
Option shall have the right to require the Company to register, list or
qualify said Unit Option or any of the Common Units underlying such Unit
Option.
(c) In the event Common Units are publicly traded at the time any holder
exercises any Unit Option covered hereby, the Company may, in the sole
discretion of the Plan Committee, purchase publicly traded Common Units
in the open market and deliver such Common Units to such holder upon
exercise of his or her Unit Option.
ARTICLE 7
COMMON UNITS SUBJECT TO THIS PLAN
Except as otherwise provided in Article 8, the Unit Options granted under
this Plan shall be limited so that at any particular time the sum of (i) all
Common Units which shall have been purchased at or prior to the particular time
upon the exercise of Unit Options granted at any time under the Plan, plus (ii)
all Unit Options which may be purchased after the particular time under Unit
Options granted under this Plan shall never exceed 4,000,000 Common Units. The
Common Units sold by the Company under this Plan may be either unissued Common
Units or treasury Common Units.
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ARTICLE 8
ADJUSTMENTS TO REFLECT CAPITAL CHANGES
8.1 Stock Splits. The number of Common Units subject to outstanding Unit
Options, the number of Common Units which subsequently become available for
purchase under any vesting provisions in Unit Options outstanding under this
Plan, the exercise price for which Common Units may be purchased upon the
exercise of outstanding Unit Options, and the number of Common Units available
for Unit Options subsequently granted under this Plan shall be appropriately
adjusted to reflect any change in the Common Units analogous to a stock
dividend, stock split, consolidation or other reclassification.
8.2 Changes in Capitalization. In the event of any reorganization,
recapitalization, reclassification, merger, consolidation or sale of all or
substantially all of the Company's assets followed by liquidation or other
transaction which is effected in such a way that holders of Common Units are
entitled to receive securities or other assets with respect to or in exchange
for Common Units (a "Capital Change"), the Plan Committee shall make appropriate
changes to assure that each outstanding Unit Option thereafter represents the
right to acquire, in lieu of or in addition to the Common Units subject to such
Unit Option, such securities or assets which the holder of such Unit Option
would have received if all Common Units subject to such Unit Option had been
owned by such holder at the record date for such Capital Change by reason of
such ownership. The Plan Committee shall have the right to make such changes in
the kind of securities or other property available for Unit Options granted
under this Plan as the Plan Committee deems appropriate to reflect such Capital
Change. Unless the Plan Committee shall otherwise determine, a cash distribution
of the Company's Common Units shall not constitute a Capital Change for purposes
of this Plan.
8.3 Final Determinations. The determination of the Plan Committee as to
the nature of the adjustment to be made in response to any event contemplated by
this Article 8 shall be binding upon all persons concerned.
ARTICLE 9
AMENDMENT AND TERMINATION OF THIS PLAN
9.1 Amendment. Except as provided in the following sentence, subject to
the provisions of Rule 16b-3 under the Exchange Act, the Operating Committee
shall have complete power and authority to amend this Plan at any time and in
any respect, and no approval by the Unitholders or by any other person,
committee or other entity of any kind shall be required to make effective any
amendment approved by the Operating Committee. Notwithstanding the foregoing
sentence, the Operating Committee shall not do any of the following without the
affirmative approval of the Unitholders: (i) increase the maximum number of
Common Units available for Unit Options granted under this Plan except as
provided in Article 8; or (ii) lower the minimum purchase price permitted by
this Plan for any Unit Option granted under this Plan; or (iii) amend the
requirements of this Plan as to the class of persons eligible to receive Unit
Options. No termination or amendment of this Plan may, without the consent of
the individual to whom any Unit Option shall have been granted under this Plan,
adversely affect the rights of such individual under such Unit Option.
9.2 Termination. The Operating Committee shall have the right and the
power to terminate this Plan at any time. If this Plan is not earlier
terminated, this Plan shall terminate on June 30, 2006. No Unit Options shall be
granted under this Plan after termination of this Plan, but the termination of
this Plan shall not have any other effect and any Unit Option outstanding at the
time of the termination of this Plan may be exercised after termination of this
Plan at any time prior to the expiration date of such Unit Option to the same
extent such Unit Option would have been exercisable had this Plan not
terminated.
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ARTICLE 10
MISCELLANEOUS
10.1 Limitation on Sale of Unit Options. No Unit Options shall be granted
under this Plan to any employee residing or employed in any jurisdiction where
the grant of such Unit Options is not permitted under applicable law.
10.2 Adoption by Subsidiaries. Any Subsidiary of the Company may adopt
this Plan on behalf of its employees either unilaterally or by collective
bargaining by filing with the Company (i) a certified copy of a resolution of
the Board (or other appropriate authorization satisfactory to the Secretary of
the Company) of such Subsidiary providing for such Subsidiary's adoption of this
Plan and (ii) a certified copy of a resolution of the Operating Committee
consenting to such adoption.
10.3 Definitions. The following terms have the meaning indicated in this
Section 10 whenever such terms are used in this Plan:
Company -- The term "Company" as applied as of any given time means Huntway
Partners, L.P. except that if prior to the given time any corporation or other
entity shall have acquired (directly or by means of a subsidiary) all or a
substantial part of the assets of the "Company" (as herein defined), and shall
have agreed to assume the obligations of the "Company" under this Plan, then
such corporation or other entity shall be deemed to be the "Company" at the
given time.
Employment Termination Date -- The term "employment termination date" as
applied to the holder of any Unit Option means the first date on which such Unit
Option holder shall not be employed by either the Company, the Managing General
Partner, the Special General Partner, or any other subsidiary nor any reason
(including but not limited to voluntary termination of employment, involuntary
termination of employment, retirement, disability or death). The Plan Committee
may specify in the original terms of any Unit Option or if not so specified,
shall determine whether an authorized leave of absence or absence on military or
government service or absence for any other reason shall constitute a
termination of employment for the purposes of this Plan.
Exercise Price -- The term "exercise price" as applied to any Unit Option
means the price at which Common Units may be purchased upon exercise of such
Unit Option established as prescribed in this Plan.
Expiration Date -- The term "expiration date" as applied to any Unit Option
means the date specified in the option agreement between the Company and the
holder as the expiration date of such Unit Option. If no expiration date shall
be specified in the option agreement relating to any Unit Option, then the
expiration date of such Unit Option shall be the day prior to the tenth
anniversary of the Granting Date of such Unit Option.
Holder -- The term "holder" means the person to whom a Unit Option was
originally granted, any person to whom a Unit Option is transferred pursuant to
a will or by the laws of intestacy, or a guardian or personal representative of
any of the foregoing.
Initial Option Grants -- The term "Initial Option Grants" means the grants
of Unit Options to acquire approximately 2,815,000 Common Units expected to be
made to approximately 25 key employees of the Company during 1996 in connection
with the consummation of a restructuring by the Company of substantially all of
its indebtedness.
Managing General Partner -- The term "Managing General Partner" means
Huntway Managing Partner, L.P. provided that if Huntway Managing Partner, L.P.
shall ever be replaced as the Company's Managing General Partner then the term
"Managing General Partner" as applied as of any time after such replacement
means the corporation authorized to act as the Managing General Partner at that
time.
Per Common Unit Market Value -- The term "per Common Unit market value" on
any given date shall be the fair market value of one Common on the given date
determined in such manner as shall be prescribed by the Plan Committee, provided
that in the absence of any specific instructions from the Plan Committee to the
contrary, the "per Common Unit market value" on any given date shall be equal to
the last per Common Unit sales price reported for the Common Units for the given
date in the Wall Street Journal (if sales for the
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Common Units shall be reported for the given date in the Wall Street Journal) or
(if no sales of the Common Units shall be reported for the given date in the
Wall Street Journal) for the first date prior to the given date for which sales
of the Common Units shall be reported in the Wall Street Journal. If the Common
Units are not publicly traded at the time of repurchase of the Common Units, the
participant and the Plan Committee will use best efforts to promptly agree upon
the fair value of such Option Units. If such agreement is not reached within a
reasonable period of time, fair value will be determined by a written appraisal
performed by a nationally recognized investment banking firm, which
determination will be binding on the participant and the Partnership. The
participant and the Company shall each bear one half of the fees and expenses
incurred in connection with obtaining such appraisal.
"Special General Partner" means Huntway Holdings, Inc., a Delaware limited
partnership provided that if Huntway Holdings, L.P. shall ever be replaced as
the Company's Special General Partner, then the term "Special General Partner"
as applied at any time after such replacement means the corporation authorized
to act as such Special General Partner.
"Securities Act" at any given time shall consist of: (i) the Securities Act
of 1933 as constituted at such time; (ii) any other law or laws promulgated
prior to such time by the United States Government which are in effect at such
time and which regulate or govern any matters at any time regulated or governed
by the Securities Act of 1933; (iii) all regulations, rules, registration forms
and other governmental pronouncements issued under the laws specified in clauses
(i) and (ii) of this sentence which are in effect at such time; and (iv) all
interpretations by any governmental agency or authority of the items specified
in clause (i), (ii) or (iii) of this sentence which are in effect at such time.
Whenever any provision of this Plan requires that any action be taken in
compliance with any provision of the Securities Act, such provision shall be
deemed to require compliance with the Securities Act as constituted at the time
such action takes place.
"Subsidiary" means any corporation designated by the Operating Committee,
in its sole discretion, of which the Company owns or controls, directly or
indirectly, not less than 50% of the total combined voting power of all classes
of stock and which constitutes a "subsidiary" of the Company, within the meaning
of the Code Section 424(f).
Unitholder -- The term "Unitholder" when used in relationship to the
Company means a person who owns Common Units.
10.4 Headings. Section headings used in this Plan are for convenience
only, do not constitute a part of this Plan and shall not be deemed to limit,
characterize or affect in any way any provision of this Plan. All provisions in
this Plan shall be construed as if no headings had been used in this Plan.
10.5 Severability. Whenever possible, each provision in this Plan shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Plan is held to be prohibited by or invalid under
applicable law, then (i) such provision shall be deemed amended to accomplish
the objectives of the provision as originally written to the fullest extent
permitted by law and (ii) all other provisions of this Plan shall remain in full
force and effect.
10.6 No Strict Construction. No rule of strict construction shall be
applied against the Company, the Managing General Partner, the Plan Committee or
any other person in the interpretation of any term of this Plan or any rule or
procedure established by the Committee.
10.7 Governing Law. ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS PLAN SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF
THE STATE OF DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE.
10.8 Committee's Interpretations Conclusive. The Plan Committee shall
have full power and authority to interpret the terms of this Plan, the terms of
Unit Options granted under this Plan, and the rules and procedures established
by the Plan Committee. Any determination made by the Plan Committee as to the
meaning of or requirements imposed by or rights of any persons under this Plan,
any Unit Option granted under this Plan, or any rule or procedure established by
the Plan Committee shall be binding upon all persons concerned.
C-8
<PAGE> 229
APPENDIX D
PROJECTED FINANCIAL INFORMATION
<PAGE> 230
PROJECTED FINANCIAL INFORMATION
The information included in this Appendix J represents the Company's
projections at March 31, 1996, of certain Company financial and operating data
for the year ended December 31, 1996 and the years ending December 31, 1997
through 2000, assuming a reduction of existing debt to $25.6 million in
accordance with the terms of the Consensual Restructuring Agreement with
substantially all of the Company's senior lenders and the Prepackaged Plan (the
"Projections"). The Projections and the assumptions underlying the Projections
have been prepared and reviewed by the Company's Management, but were not
prepared with a view toward compliance with published guidelines of the American
Institute of Certified Public Accountants or generally accepted accounting
principles. The significant accounting policies used in the Projections are
consistent with the significant accounting policies of the Company. In addition,
the Company's independent accountants have neither examined, reviewed, nor
complied the Projections and, accordingly, do not express an opinion or any
other form of assurance with respect to the Projections. The Projections should
be read together with the information contained in Appendix F (Historical
Consolidated Financial Statements), Appendix G (Management's Discussion and
Analysis of Financial Condition and Results of Operations) and Appendix H
(Selected Historical Consolidated Financial Data).
The Projections are based upon a number of assumptions and estimates that,
while presented with numerical specificity and considered reasonable by the
Company, are inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are beyond the
control of the Company, and based upon assumptions with respect to future
business decisions which are subject to change. The degree of uncertainty
inherent in the Projections increases significantly with each year covered by
the Projections. Accordingly, the Projections are only an estimate, and actual
results will vary from the Projections, and these variations may be material.
Consequently, the inclusion of the Projections herein should not be regarded as
a representation by the Company, the Company's advisors or any other person that
the projected results will be achieved. Projections are necessarily speculative
in nature, and some of the assumptions in the Projections inevitably will not
materialize and unanticipated events may occur that affect the Company's
results.
The Projections assume the success of the Company's business strategy of
purchasing the lowest cost crude oil and converting it to higher margin
specialty asphalt products as well as commodity asphalt and light-end products.
The success of the strategy is subject to uncertainties and contingencies beyond
the Company's control, and no assurance can be given that the strategy will be
effective or that the anticipated benefits from the strategy will be realized
during the years for which the Projections have been prepared. The assumptions
described herein are those that the Company believes are significant to the
Projections; however, not all assumptions used in preparing the Projections are
set forth herein. The Company does not intend to update or otherwise revise the
Projections to reflect circumstances existing after March 31, 1996 or to reflect
the occurrence of unanticipated events, even in the event that any or all of the
underlying assumptions are shown to be in error. Further, the Company does not
intend to update or revise the Projections to reflect changes in general
economic or industry conditions. The Company's future financial statements filed
with the Securities and Exchange Commission shall be deemed to supersede the
Projections.
D-1
<PAGE> 231
PROJECTED FINANCIAL DATA:
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
------------------------------------------------------
1996 1997 1998 1999 2000
------ ------ ------ ------ ------
(DOLLARS AND BARRELS IN MILLIONS, EXCEPT PER BARREL
DATA)
<S> <C> <C> <C> <C> <C>
Operating Data:
Sales..................................... $ 94.1 $ 99.8 $101.6 $104.9 $108.2
Crude oil and processing costs............ 83.5 87.8 88.8 90.6 92.4
------ ------ ------ ------ ------
Operating margin (1).................... 10.6 12.0 12.8 14.3 15.8
Selling and administrative expenses....... 4.3 4.3 4.3 4.3 4.3
Net sales from resold products............ (0.1) (0.1) (0.1) (0.1) (0.1)
------ ------ ------ ------ ------
EBIDA (2)............................... 6.4 7.8 8.6 10.1 11.6
Interest expense, net (3)................. 3.4 3.3 3.0 2.2 1.5
Depreciation and amortization............. 2.2 2.2 2.2 2.2 2.2
------ ------ ------ ------ ------
Net income (loss)....................... $ 0.8 $ 2.3 $ 3.4 $ 5.7 $ 7.9
====== ====== ====== ====== ======
Other Data:
Barrels sold.............................. 4.8bbls. 5.0bbls. 5.0bbls. 5.1bbls. 5.1bbls.
Capital expenditures...................... $ 3.0 $ 2.5 $ 1.2 $ 1.3 $ 1.3
Free cash flow (4)........................ 3.4 5.3 7.4 8.8 10.3
Cash interest expense (5)................. 0.8 3.3 3.0 2.2 1.5
EBIDA margin (6).......................... 6.7% 7.8% 8.5% 9.7% 10.7%
Free cash flow margin (7)................. 3.6 5.3 7.3 8.5 9.5
EBIDA to cash interest expense (9)........ 8.0x 2.4x 2.9x 4.6x 7.7x
Free cash flow to cash interest expense... 4.3 1.6 2.5 4.0 6.9
Total debt to EBIDA....................... 4.2x 3.2x 2.4x 1.4x 0.5x
Total debt to free cash flow.............. 7.9 4.7 2.7 1.6 0.5
Per Barrel Data:
Sales..................................... $19.67 $20.01 $20.35 $20.76 $21.22
Asphalt gross margin (8).................. 4.65 5.00 5.25 5.75 6.25
Light-end product gross margin (8)........ 5.25 5.50 5.75 6.00 6.25
Operating margin (1)...................... 2.20 2.41 2.56 2.84 3.10
EBIDA (2)................................. 1.32 1.57 1.73 2.01 2.27
Free cash flow (4)........................ 0.71 1.07 1.49 1.75 2.01
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------
1996 1997 1998 1999 2000
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................. $ 6.0 $ 6.0 $ 6.0 $ 6.0 $ 6.0
Property and equipment, net............... 59.5 59.4 57.9 57.0 56.1
Total assets.............................. 76.1 76.0 75.0 74.1 73.2
Total debt................................ 26.8 24.8 20.4 14.2 5.4
Partners' capital......................... 38.1 40.4 43.8 49.5 57.4
</TABLE>
- ---------------
(1) Operating margin is defined as sales less crude oil and processing costs.
(2) EBIDA represents earnings before interest, depreciation and amortization.
(3) Interest expense, net, is defined as total interest expense less interest
income.
(4) Free cash flow is defined as EBIDA less capital expenditures.
(5) Cash interest expense is defined as total interest expense less non-cash
interest expense.
(6) EBIDA margin is defined as EBIDA divided by sales.
D-2
<PAGE> 232
(7) Free cash flow margin is defined as free cash flow divided by sales.
(8) Gross margin is defined as sales less crude oil costs.
(9) EBIDA and free cash flow for the projected year ended December 31, 1996
through 2000 divided by cash interest expense for the projected year ended
December 31, 1996 through 2000.
ASSUMPTIONS UNDERLYING THE PROJECTIONS
Sales and Gross Margins. Sales are projected to increase from $94.1
million, or $19.67 per barrel, for the year ended December 31, 1996 to $108.2
million, or $21.22 per barrel, in the year 2000. During the same period,
operating margins are anticipated to grow from $10.6 million, or $2.20 per
barrel, to $15.8 million, or $3.10 per barrel. This operating growth is based
upon (i) increased public and private sector product sales primarily as a result
of continued improvement in the California economy, (ii) growth in market share
commensurate with reduced compensation, (iii) a trend favoring higher quality,
higher margin products such as polymer-modified asphalt, and (iv) growth in
higher margin sales to Mexico due in part to the effects of the North American
Free Trade Agreement.
Management believes that they will benefit from increased public and
private sector product sales primarily as a result of continued improvement in
the California market. Economic growth is anticipated to fuel additional public
sector funding for road construction and repair, and accordingly benefit asphalt
sales. Improvements in the economy are anticipated to increase state and Federal
funding in 1996 through 2000. In addition, an expected inflow of up to $15.0
million of Federal funds to help repair damage caused by recent flooding and the
introduction of new vehicle taxes in the next few years are expected to increase
overall state funding for road construction and maintenance. This increase in
funding is evidenced by the March 26, 1996 approval of Proposition 192 by the
California electorate. Proposition 192 was a $2.0 billion bond measure to fund
seismic retrofit work throughout the state. Passage of the bond will free up
funds in the existing transportation budget that were previously earmarked for
seismic retrofit projects. As 85.0% of liquid asphalt sales are typically funded
by the government, increased funding from the Federal Aid Highway Program, which
provides funding to the states for urban and rural highway systems, is expected
to benefit asphalt sales. National studies reflect a $13 billion shortfall in
highway funding and a $212 billion backlog of road projects not currently
funded. In addition, greater private sector demand for asphalt is anticipated to
evidence itself primarily in the form of increased housing starts and new
commercial construction as the economy continues to improve.
The Projections also assume growth in market share commensurate with
reduced competition. Management anticipates that the total number of barrels
sold will increase from 4.8 million in 1996 to 5.1 million in the year 2000.
Management assumes that this increase will be driven largely by clean fuels
requirements that necessitate substantial capital expenditures to ensure
compliance for many of the Company's competitors. Depending on the size of the
refinery, these expenditures typically range from $100 million to $1 billion and
generally results in additional coking capacity and less asphalt yield. As a
result, may of the Company's competitors are incentivized to provide higher
margin petrochemical products as opposed to asphalt. As Chevron exited the
California asphalt market in December 1993, Management expects a substantial
reduction in Shell's asphalt production once its coker is fully operational in
1996. Currently, Shell provides 15,000 barrels per day, or approximately 60% of
all asphalt to the Northern California region. In addition, it should be noted
that it is unlikely that new asphalt refineries will be built in California as
permits are difficult to obtain. Existing refineries can produce asphalt but
without clean fuel production, they cannot produce asphalt profitably as
existing refineries have greater operating costs and are not designed to produce
asphalt and have to run more expensive crude oils. In addition, Management
anticipates that SHRP specifications will reduce competition for many road
projects.
Management expects the trend towards higher quality, higher margin
products, such as polymer-modified asphalt, to continue. The Company's sales of
polymer-modified asphalt has grown by over 11 fold over the past three years and
SHRP requirements will mandate more polymer-based asphalt sales in California.
As demonstrated by nearby states, such as Nevada, Colorado and Wyoming, in which
at least 75% of all state asphalt purchases are polymer-based, demand has grown
largely due to their longevity and durability.
D-3
<PAGE> 233
Huntway is expected to be a major recipient of such an increase due to its
ability to produce polymer-modified asphalt at the Benicia Refinery. In
addition, after a scheduled capital investment of $0.5 million at Wilmington in
1997, the Company believes that it will be able to supply polymer-modified
asphalt to the Southern Market in 1998 and beyond. Any increase in demand for
polymer-modified asphalt is likely to improve the Company's profitability
because polymer-modified asphalt can currently be sold at approximately two to
three times regular asphalt margins. In addition, in April 1995, the Company
signed a seven-year licensing agreement with Polyphalt Commercial Corporation
("Polyphalt"), a Toronto-based company. Polyphalt has developed a proprietary
technology that will lower Huntway's polymer costs as well as develop new
products using crumb rubber and polyethelenes. These new products involve
recycled tires and plastics.
As a result of the passage of the North American Free Trade Agreement, the
Company has good prospects for both near-term and long-term market growth in
Mexico, especially in Baja, California. This growth should continue well into
the next decade as Mexico continues to emphasize expansion of their
infrastructure. Sales to Mexico increased 235% from 80,000 barrels in 1993, to
268,000 barrels in 1994, representing approximately 25% of total asphalt sales
volume sold from the Wilmington Refinery. Sales volume fell to 95,000 barrels in
1995 due to currency fluctuations between the Mexican peso and U.S. dollar. The
Company supplies asphalt to a subsidiary of a multinational corporation that has
been operating in Mexico for over 60 years and is paid in U.S. dollars. In
addition, despite recent fluctuations between the U.S. dollar and the Mexican
peso, prospective estimated annual volumes continue to exceed 75,000 tons, or
approximately 420,000 barrels, per year. Huntway estimates that it will satisfy
30,000 to 50,000 tons per year of that demand and that the majority of these
sales will be shipped by barge.
The following table sets forth the Company's sales by product for the
projected period:
<TABLE>
<CAPTION>
PROJECTED YEAR ENDING DECEMBER 31,
------------------------------------------------
1996 1997 1998 1999 2000
----- ----- ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
PRODUCT:
AR grade asphalt.............................. $34.6 $35.2 $ 32.5 $ 30.9 $ 29.3
Cutback asphalt............................... 4.1 4.4 4.2 4.3 4.3
Light-end products............................ 45.8 48.5 49.4 50.6 51.8
Polymer-modified asphalt and other............ 9.6 11.7 15.5 19.1 22.8
----- ----- ----- ------ ------
Total sales................................. $94.1 $99.8 $101.6 $104.9 $108.2
----- ----- ----- ------ ------
</TABLE>
Management believes it has made conservative assumptions regarding
operating growth in light of the Company's historical performance during periods
of strong demand. Gross margins have been as high as $21.9 million and $27.4
million in 1991 and 1993, respectively. The Projections reflect the sales of
existing company products and do not include additional specialty asphalt
products that the Company intends to develop over the next few years. Although
Management anticipates that asphalt sales to Mexico will increase substantially
over the next few years, the Projections reflect only modest sales to Mexico.
Furthermore, the Projections reflect only a limited margin contribution from the
Company's hedging arrangements, reflect consistent oil supply due to completion
of expansion of a pipeline in Los Angeles last year and due to a planned new
pipeline into Los Angeles in 1997 or 1988. Finally, the Projection does not
assume resumed tankering of crude oil in the future.
The Projections assume that asphalt and light-end gross margins improve in
large part due to stable crude oil prices. Management believes crude oil
supplies will remain available over the next five years and beyond. Although
Alaska North Slope production is expected to decline, the impact of this
reduction is likely to be greater for refineries in the Gulf Coast as opposed to
the West Coast where production is expected to be more than sufficient. In
addition, Management believes that eventually Iraq will resume exports of up to
3.0 million barrels per day to the world markets. As discussed above, the
pipeline disrupted from the earthquake was repaired in 1995 and a new pipeline
to Southern California is expected to be operational in 1997 or 1998. The net
effect of these two actions should increase supply by over 100,000 barrels per
day.
D-4
<PAGE> 234
Operating Margins. Cash processing costs per barrel are anticipated to
remain flat or fall as sales improve. The Projections assume that (i) Huntway
does not have extensive environmental expenditures in the future, (ii) cash
processing costs increase with the rate of inflation, and (iii) gross margin
should exceed inflation with growth in polymer-modified and higher margins
blends. In addition, less competition, projected growth in California demand,
and potential from increased Mexican sales are anticipated to increase
production and reduce cash processing costs per barrel.
Selling and Administrative Expenses. The Company projects that selling and
administrative expenses will remain relatively flat as the Company will continue
its aggressive cost cutting programs. For instance, insurance expenses, property
taxes, investor relations fees and health costs have all been substantially
reduced and are not scheduled to be increased over the next five years. In
addition, professional fees have already been substantially reduced and
potential exists for further reductions in insurance costs. In the future,
Management will continue its aggressive approach to cost reduction.
Net Sales From Resold Products. As demand dictates, the Company typically
purchases asphalt products for resale. The Company intends to generate
approximately $0.1 million of net cash flow per year from 1996 to 2000 through
the sale of third party asphalt products.
Interest Expense, Net. The projected coverages assume an interest rate of
12.00% on the Senior Secured Notes. Excess cash is assumed to earn interest
income at a rate of 4.0%. The letter of credit facility is assumed to cost an
average of $0.3 million per year.
Capital Expenditures. The refineries are generally not capital intensive
and forecast capital expenditures is believed to be conservative. In 1996 and
1997, the Company intends to construct a water treatment facility at Wilmington
and increase capacity and storage facilities for polymer-based asphalt and
storage facilities for conventional asphalt. These Projections assume the
Company invests $0.4 million in capital expenditures in 1997 for a rail site and
tankage hook-up so that the Arizona refinery can operate as a terminal and
generate positive cash flow in 1998, 1999 and 2000.
Working Capital. Accounts receivable and inventory are forecast to remain
constant as a percentage of revenues. Accounts payable have been adjusted to
reflect the full utilization of payment periods. As a result, working capital
needs are anticipated to be negligible from end of year to year. Cash at any
yearend in excess of $6.0 million is assumed to be used to retire debt at
December 31.
D-5
<PAGE> 235
APPENDIX E
AMENDMENT TO PARTNERSHIP AGREEMENT
<PAGE> 236
AMENDMENT TO AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
OF
HUNTWAY PARTNERS, L.P.
THIS AMENDMENT (this "Amendment"), is made as of , 1996, by
and among Huntway Managing Partner, L.P., a Delaware limited partnership, as
Managing General Partner (the "Managing General Partner"), Huntway Holdings,
L.P., a Delaware limited partnership, as Special General Partner (the "Special
General Partner"), and all Persons who are Limited Partners of Huntway Partners,
L.P., a Delaware limited partnership (the "Partnership") as of such date,
together with the Persons who become Partners as provided in the Agreement.
The Managing General Partner, the Special General Partner and the Limited
Partners are parties to an Amended and Restated Agreement of Limited Partnership
dated as of November 9, 1988 (the "Agreement"). Capitalized terms used herein
but not otherwise defined herein shall have the meanings given to such terms in
the Agreement.
The Partnership has filed the Prepackaged Plan of Reorganization of Huntway
Partner, L.P. under Chapter 11 of the United States Bankruptcy Code (as amended
and modified, the "Prepackaged Plan"). The parties hereby agree as follows:
1. PROHIBITION ON ISSUANCE OF NONVOTING UNITS. The Agreement is hereby
amended by inserting the following Section 4.4(e):
"(e) Notwithstanding anything to the contrary contained in this
Agreement, as of the effective date of the Prepackaged Plan, in
accordance with 11 U.S.C. sec.1123(a)(6), the Managing General
Partner is not authorized to cause the Partnership to issue (and
the Partnership shall be prohibited from issuing) nonvoting
Units."
2. OPERATING COMMITTEE. The Agreement is hereby amended by inserting the
following sentence at the end of Section 6.14:
"So long as the holders of the New Senior Notes on the
effective date of the Prepackaged Plan hold at least 25% of the
then outstanding Common Units, the members of the Operating
Committee will at all times be satisfactory to such holders of
the New Senior Notes; provided that the members of the Operating
Committee on the date hereof are deemed satisfactory to such
holders."
3. THE EXCHANGE. The Agreement is hereby amended by inserting the
following Article 20:
ARTICLE 20
EXCHANGE PURSUANT TO THE PREPACKAGED PLAN
20.1 Definitions. The following definitions shall be applied for all
purposes to the terms used in this Agreement:
"Exchange" shall mean the transactions contemplated by the Prepackaged Plan
pursuant to which (i) holders of the Partnership's Old Collateralized Notes and
Old Subordinated Notes exchanged such notes for New Senior Notes and Common
Units; (ii) holders of the Partnership's Old Junior Subordinated Notes exchanged
such notes for New Junior Notes and Common Units; and (iii) holders of the
Partnership's Warrants exchanged such Warrants for Common Units.
"New Junior Notes" shall mean the Junior Subordinated Notes Due 2005 in the
original aggregate principal amount of $2,070,000 to be issued in accordance
with the Prepackaged Plan.
E-1
<PAGE> 237
"New Senior Notes" shall mean (a) the 12% Senior Secured Notes (Other) due
2005 in the original aggregate principal amount of $14,400,000 to be issued in
accordance with the Prepackaged Plan; and (b) the 12% Senior Secured Note
(Sunbelt IDB) due 2005 in the original principal amount of $9,100,000 to be
issued in accordance with the Prepackaged Plan.
"Old Collateralized Notes" shall mean the 8% Senior Secured Notes Due 2000
issued by the Partnership on June 22, 1993, together with all securities of the
same class issued by the Partnership from time to time in payment of accrued
interest thereon, and any and all notes issued in replacement therefor.
"Old Junior Subordinated Notes" shall mean the Increasing Rate Junior
Subordinated Debentures Due 2020 issued by the Partnership on June 22, 1993,
together with all securities of the same class issued by the Partnership from
time to time in payment of accrued interest thereon.
"Old Subordinated Notes" shall mean the Increasing Rate Subordinated Notes
Due 2008 issued by the Partnership on June 22, 1993, together with all
securities of the same class issued by the Partnership from time to time in
payment of accrued interest thereon, and any and all notes issued in replacement
therefor.
"Prepackaged Plan" shall mean the Partnership's Prepackaged Plan of
Reorganization filed on , 1996 with the United States Bankruptcy Court for
the District of Delaware.
"Warrants" shall mean the outstanding Warrants for the purchase of Common
Units issued by the Partnership on June 22, 1993, and any and all Warrants
issued in replacement therefor.
20.2 Consequences of the Exchange. Notwithstanding anything to the contrary
contained in Articles 1 through 19 of this Agreement, inclusive:
(a) Immediately prior to the Exchange, the Capital Accounts of all
Partners will be adjusted in accordance with the provisions of Treasury
Regulation Section 1.704-1(b)(2)(iv) to reflect Unrealized Gain or
Unrealized Loss with respect to Partnership property as if such
Unrealized Gain or Unrealized Loss had been recognized on a sale of such
property for its fair market value and allocated to the Capital Accounts
of the Partners under Section 5.1. For this purpose, the fair market
value of the Partnership's property in aggregate shall be deemed to be
equal to the amount of the Partnership's debt remaining after the
Exchange plus the value of its outstanding Units based on the trading
price of such Units. The Managing General Partner shall allocate such
aggregate fair market value among all of the Partnership's assets.
(b) An amount equal to the excess of the Partnership's indebtedness prior
to the Exchange over the sum of (i) the Partnership's indebtedness after
the Exchange and (ii) the fair market value of Units (based on the
trading price of such Units) issued to the holders of Old Collateralized
Notes and the Warrants pursuant to the Exchange shall be credited to the
Capital Accounts of the Partners immediately prior to the Exchange (but
after the adjustments described in Section 20.2(a)).
(c) Following the allocations in Sections 20.2(a) and 20.2(b), the Capital
Accounts of the Partners immediately after the Exchange shall on a
per-Unit basis be equal to the fair market value of the Units (based on
the trading price of such Units).
(d) The Partnership shall allocate income, gain, loss and expense for
federal income tax purposes for the taxable year in which the Exchange
occurs to Partners who are Partners before the Exchange and Partners who
are Partners after the Exchange based on closing its books as of the end
of the date on which the Exchange occurs. The General Partner shall be
entitled to adopt reasonable conventions in connection with such
allocation as provided by Section 5.2(f) of this Agreement; provided
however, that all items of income, gain, loss or deduction resulting
from the Exchange (including cancellation of indebtedness income, if
any) shall be allocated to the period ending on the date of the Exchange
and thus to the Partners who are Partners before the Exchange.
E-2
<PAGE> 238
(e) In the event that, in connection with the Exchange, the Partnership is
deemed to recognize any cancellation of indebtedness income for federal
income tax purposes with respect to recourse indebtedness of the
Partnership, such income shall be allocated to the General Partners.
(f) To the extent that the Partnership is deemed to recognize any gain
under Code Section 357(c) for federal income tax purposes with respect
to recourse indebtedness of the Partnership, such gain shall be
allocated to the General Partners.
(g) Except to the extent that depreciation and amortization deductions
with respect to Partnership property constitute partner nonrecourse
deductions within the meaning of Treasury Regulations Section
1.704-2(i)(2) or items attributable to Contributed Property within the
meaning of Section 5.2(b)(i)(1) (other than any notes or indebtedness
contributed to the Partnership in the Exchange), such deductions shall
be allocated to Partners in the same manner and the same proportions for
tax purposes as for purposes of determining Capital Accounts pursuant to
Section 5.1. In particular, no special allocations shall be made to
eliminate any Book-Tax Disparity resulting from the adjustments set
forth in Section 20.2(a) or the Exchange.
(h) Any partner nonrecourse deductions as defined in Treasury Regulations
sec.1.704-2(i)(2) will be allocated as provided in Treasury Regulations
sec.1.704-2.
(i) This Article 20 cannot be amended in any way that is adverse to any
holder of Common Units issued in the Exchange without the prior written
consent of the holders of 66 2/3% of such Common Units on the effective
date of the Prepackaged Plan.
4. SECTION 5.2. Section 5.2 of the Agreement is hereby deemed to be
amended to the extent necessary to be consistent with the substance and
intention of Section 20.2(g).
5. EFFECTIVENESS. This Amendment shall be effective as of the effective
date of the Prepackaged Plan. This Amendment may be executed in one or more
counterparts each of which shall be deemed an original and all of which shall
together constitute one and the same Amendment. Except as modified by this
Amendment, the Agreement is hereby ratified and affirmed in all respects.
E-3
<PAGE> 239
IN WITNESS WHEREOF, the parties have caused this Amendment to be signed as
of the date first written above.
MANAGING GENERAL PARTNER:
HUNTWAY MANAGING PARTNER, L.P.
By Reprise Holdings, Inc.
Its General Partner
By
----------------------------------
Its
---------------------------------
SPECIAL GENERAL PARTNER:
HUNTWAY HOLDINGS, L.P.
By Reprise Holdings, Inc.
Its General Partner
By
----------------------------------
Its
---------------------------------
LIMITED PARTNERS:
All Limited Partners now and hereafter
admitted as limited partners of the
Partnership, pursuant to Powers of
Attorney now and hereafter executed in
favor of, and delivered to, the
Managing General Partner.
By Huntway Managing Partner, L.P.
By Reprise Holdings, Inc.
Its General Partner
By
----------------------------------
Its
---------------------------------
E-4
<PAGE> 240
[Form of Front of Consent Card]
CONSENT TO ACTION OF UNITHOLDERS WITHOUT A MEETING
REVOCABLE CONSENT SOLICITED ON BEHALF OF
HUNTWAY PARTNERS, L.P.
The undersigned, a holder of common partnership units ("Common
Units") of Huntway Partners, L.P. ("Huntway"), acting with respect to
all of the common partnership units of Huntway held by the undersigned
on _____ __, 1996 (the "Record Date"), hereby consents, withholds
consent or abstains as specified on the reverse side with respect to
the taking of actions without a meeting pursuant to Section
302(c) of the Delaware Revised Uniform Limited Partnership Act. All
capitalized terms used but not defined herein shall have the meanings C
ascribed to such terms in the Consent Solicitation Statement furnished
herewith to holders of certain securities of Huntway. O
FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED N
TO BE A VOTE TO ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF
A VOTE AGAINST THE ACTIONS DESCRIBED ON THE REVERSE SIDE OF THIS CARD. S
E
Holders of Common Units wishing to approve any or all of the
actions set forth herein should mark the appropriate "Consent" box on N
the reverse side of this consent card. Those opposing any such action
should register their position by marking the appropriate "Withhold T
Consent" or "Abstain" box on the reverse side of this consent card or
by not returning this consent card. Unless you otherwise indicate on
this consent card, this consent card will be voted as set forth on the
reverse side with respect to all shares of all class of Common Stock
held by the undersigned on the Record Date. By executing this card the
undersigned hereby revokes any and all prior consents and hereby
affirms that, as of the Record Date, the undersigned had the power to
deliver a consent for the number of shares represented by this Consent.
SIGNED BUT UNMARKED CARDS WILL BE DEEMED TO GIVE CONSENT TO EACH
OF THE ACTIONS SET FORTH ON THE REVERSE SIDE OF THIS CARD.
Acceptance of the "prepackaged" plan of reorganization of
Huntway is conditioned upon receiving the consent of the beneficial
owners of 66-2/3% of the outstanding Common Units ("Common Units")
submitting this Consent Card. Approval of the issuance, in accordance
with the New York Stock Exchange listing rules, of Common limits and
warrants to purchase Common Units in connection with an out-of-court
restructuring on terms substantially similar to those set forth in the
"prepackaged" plan of reorganization of Huntway will require the
consent of the holders of a majority of the outstanding Common Units.
Approval of the 1996 Huntway Employee Incentive Option Plan will
require the consent of the holders of a majority of the outstanding
Common Units. Unless previously revoked, this consent will be
effective when and if delivered along with consents representing the
percentages of units indicated in the three immediately preceding
sentences to Huntway.
PLEASE SIGN AND DATE ON REVERSE SIDE
<PAGE> 241
[Form of Reverse of Consent Card]
PLEASE MARK
/X/ VOTES AS IN THIS
EXAMPLE
FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A
VOTE TO ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST
THE CORPORATE ACTIONS DESCRIBED BELOW.
<TABLE>
<S><C>
HUNTWAY MANAGING PARTNER, L.P., THE GENERAL PARTNER OF HUNTWAY, RECOMMENDS UNITHOLDERS CONSENT TO PROPOSALS 1, 2, AND 3 BELOW.
1. ACCEPTANCE OF HUNTWAY'S "PREPACKAGED" Withhold
PLAN OF REORGANIZATION. Consent Consent Abstain
/ / / / / /
2. APPROVAL, IN ACCORDANCE WITH NEW YORK STOCK
EXCHANGE LISTING RULES, OF THE ISSUANCE OF COMMON
UNITS AND WARRANTS IN CONNECTION WITH AN OUT OF COURT
RESTRUCTURING ON TERMS SUBSTANTIALLY SIMILAR TO THE Withhold
PROPOSED "PREPACKAGED" PLAN OF REORGANIZATION. Consent Consent Abstain
/ / / / / /
3. APPROVAL OF THE 1996 HUNTWAY EMPLOYEE INCENTIVE Withhold
OPTION PLAN. Consent Consent Abstain
/ / / / / /
When units are held by joint tenants, both must sign. When signing as
attorney-in-fact, executor, administrator, trustee, guardian, corporate officer or
partner, please give full title as such. If a corporation, please sign in
corporate name by President or other authorized officer. If a partnership, please
sign in partnership name by authorized person.
Signature_________________________Signature, if held jointly__________________________ Title____________________ Date______________
IN ORDER FOR THIS CONSENT CARD TO VE VALID, IT MUST BE DATED. PLEASE DATE AND SIGN THIS CARD EXACTLY AS YOUR NAME APPEARS
HEREON, AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
</TABLE>
<PAGE> 242
[KIRKLAND & ELLIS LETTERHEAD]
September 20, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Huntway Partners, L.P. (File No. 1-10091)
Ladies and Gentlemen:
On behalf of Huntway Partners, L.P., a Delaware limited partnership (the
"Company"), enclosed for filing with the Securities and Exchange Commission (the
"Commission"), pursuant to Rule 14a-6 under the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), are revised copies, marked to show
changes from an earlier version of the Company's Letter to Unitholders, Consent
Solicitation and Disclosure Statement and Form of Consent Card relating to a
solicitation of consents from the holders of the Company's Common Units, in
each case in preliminary form, and a copy of the cover page set
forth in Schedule 14A relating thereto.
The filing fee in the amount of $125 has been previously paid.
<PAGE> 243
If you have any questions or comments regarding this filing, please
contact the undersigned at (312) 861-2035, or Wendy Chronister of our firm at
(312) 861-2441.
Sincerely,
/s/ Alan G. Berkshire
Alan G. Berkshire
AGB:epf
Enclosures
cc: Roger Schwall
Andrew Gerber
Jeanne Sizoo-Bennett
Warren J. Nelson
