UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended July 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file numbers 1-11331
333-06693
Ferrellgas Partners, L.P.
Ferrellgas Partners Finance Corp.
(Exact name of registrants as specified in their charters)
Delaware 43-1698480
Delaware 43-1742520
---------------------------- ------------------------------
(State or other jurisdictions of (I.R.S. Employer Identification Nos.)
incorporation or organization)
One Liberty Plaza, Liberty, Missouri 64068
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (816) 792-1600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Units New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value as of October 12, 1998, of the registrant's Common
Units held by nonaffiliates of the registrant, based on the reported closing
price of such units on the New York Stock Exchange on such date, was
approximately $266,005,660.
At October 12, 1998, Ferrellgas Partners, L.P. had units outstanding as follows:
14,699,678 Common Units
16,593,721 Subordinated Units
Documents Incorporated by Reference: None
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FERRELLGAS PARTNERS, L.P.
FERRELLGAS PARTNERS FINANCE CORP.
1998 FORM 10-K ANNUAL REPORT
Table of Contents
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Page
PART I
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ITEM 1. BUSINESS.......................................................................................1
ITEM 2. PROPERTIES.....................................................................................8
ITEM 3. LEGAL PROCEEDINGS..............................................................................9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................9
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS AND
RELATED UNITHOLDER MATTERS.....................................................................9
ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA..............................................10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................................11
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................................................18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE...........................................................18
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS...........................................18
ITEM 11. EXECUTIVE COMPENSATION........................................................................20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................................................................23
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K...........................................................................26
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PART I
ITEM 1. BUSINESS.
Business of Ferrellgas Partners, L.P.
Ferrellgas Partners, L.P. (the "Master Limited Partnership" or the "MLP"),
is a Delaware limited partnership which was formed on April 19, 1994. The MLP's
Common Units are listed on the New York Stock Exchange. The MLP's activities are
conducted through its subsidiary Ferrellgas, L.P. (the "Operating Partnership"
or the "OLP"). The MLP, with a 97% limited partner interest, is the sole limited
partner of the Operating Partnership. The MLP and the Operating Partnership are
together referred to herein as the "Partnership". The Operating Partnership
accounts for nearly all of the MLP's consolidated assets, sales and operating
earnings. The MLP's consolidated net earnings also reflect interest expense
related to $160 million of 9 3/8% Senior Secured Notes issued by the MLP in
April 1996.
Business of Ferrellgas, L.P.
The Operating Partnership, a Delaware limited partnership, was formed on
April 22, 1994, to acquire, own and operate the propane business and assets of
Ferrellgas, Inc. (the "Company", "Ferrellgas", and "General Partner"). The
Company has retained a 1% general partner interest in the MLP and also holds a
1.0101% general partner interest in the Operating Partnership, representing a 2%
general partner interest in the Partnership on a combined basis. As General
Partner of the Partnership, the Company performs all management functions
required for the Partnership.
General
The Partnership is engaged in the sale, distribution, marketing and trading
of propane and other natural gas liquids. The discussion that follows focuses on
the Partnership's retail operations and its other operations, which consist
primarily of propane and natural gas liquids trading operations, chemical
feedstocks marketing and wholesale propane marketing, all of which were conveyed
to the Partnership on July 5, 1994. All historical references prior to July 5,
1994 relate to the operations as conducted by the Company.
The Partnership believes that it is the second largest retail marketer of
propane in the United States (as measured by gallons sold), serving more than
800,000 residential, industrial/commercial and agricultural customers in 45
states and the District of Columbia through approximately 566 retail outlets
with 298 satellite locations in 38 states (some outlets serve interstate
markets). Based upon information contained in industry publications for calendar
year 1997, the Partnership believes that its retail operations account for
approximately 8% of the retail propane purchased in the United States as
measured by gallons sold. For the Partnership's fiscal years ended July 31,
1998, 1997 and 1996, annual retail propane sales volumes were 660 million, 694
million, and 650 million gallons, respectively. The retail propane business of
the Partnership consists principally of transporting propane purchased in the
contract and spot markets, primarily from major oil companies, to its retail
distribution outlets and then to tanks located on its customers' premises, as
well as to portable propane cylinders.
The Partnership also believes that it is a leading natural gas liquids
trading company. Annual propane and natural gas liquids trading, chemical
feedstocks and wholesale propane sales volumes were approximately 1.0 billion,
1.2 billion and 1.7 billion gallons during the fiscal years ended July 31, 1998,
1997 and 1996, respectively.
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Retail Operations
Formation and History
Ferrell Companies, Inc. ("Ferrell"), the parent of Ferrellgas, was founded
in 1939 as a single retail propane outlet in Atchison, Kansas and was
incorporated in 1954. Ferrell was previously owned primarily by James E. Ferrell
and his family but was sold in July 1998 to the Ferrell Companies, Inc. Employee
Stock Ownership Trust ("ESOT"). Ferrellgas was formed in 1984 to operate the
retail propane business previously conducted by Ferrell. In July 1994, the
propane business and assets of Ferrellgas were contributed to the
Partnership in connection with the Partnership's initial public offering of
Common Units.
The Company's initial growth largely resulted from small acquisitions in
the rural areas of eastern Kansas, northern and central Missouri, Iowa, Western
Illinois, Southern Minnesota, South Dakota and Texas. In July 1984, the Company
acquired propane operations with annual retail sales volumes of approximately 33
million gallons and in December 1986, the Company acquired propane operations
with annual retail sales volumes of approximately 395 million gallons. These two
major acquisitions and many other smaller acquisitions significantly expanded
and diversified the Company's geographic coverage. Since 1986, Ferrellgas has
acquired more than 100 smaller independent propane retailers, the largest of
which were Skelgas Propane, Inc. ("Skelgas") acquired in May 1996 and Vision
Energy Resources, Inc. ("Vision") acquired in November 1994. For the fiscal
years ended July 31, 1998 to 1994, the Partnership (or its predecessor) invested
approximately $13.0 million, $38.8 million, $108.8 million, $70.1 million, and
$3.4 million, respectively, to acquire operations with annual retail sales of
approximately 4.4 million, 20.5 million, 111.8 million, 70.0 million, and 2.9
million gallons of propane, respectively. Primarily as a result of this
acquisition strategy, retail propane gallons sold by the Partnership (or its
predecessor) increased from 68 million in fiscal 1986 to 660 million in fiscal
1998. The propane industry is relatively fragmented, with the ten largest retail
distributors possessing approximately 33% of the total retail propane market and
much of the industry consisting of more than 5,000 local or regional
distributors. The Partnership believes the fragmented nature of the propane
industry provides significant opportunities for growth through acquisitions.
Business Strategy
The goal of the Partnership is to be the leading retail propane company in
the United States. The Partnership believes that it has obtained a competitive
advantage by promoting an entrepreneurial culture that empowers its employees to
be responsive to individual customer needs. In addition, the Partnership
believes this culture is supported and enhanced by the recent transfer of
ownership of Ferrell to the ESOT for the sole benefit of the Company's
employees. The Partnership's business strategy is to continue its historical
focus on residential and commercial retail propane operations. The Partnership
anticipates that its future growth will be achieved primarily through the
acquisition of smaller retail propane operations throughout the United States
and to a lesser extent through the expansion of its existing customer base by
increased competitiveness and investment in internal growth opportunities.
The Partnership intends to concentrate its acquisition activities in
geographical areas in close proximity to the Partnership's existing operations
and to acquire propane retailers that can be efficiently combined with such
existing operations to provide an attractive return on investment after taking
into account the efficiencies which may result from such combination. However,
the Partnership will also pursue acquisitions which broaden its geographic
coverage. The Partnership's goal in any acquisition will be to improve the
operations and profitability of these smaller companies by integrating them into
the Partnership's established supply network. The Partnership regularly
evaluates a number of propane distribution companies which may be candidates for
acquisition. The Partnership believes that there are numerous local retail
propane distribution companies that are possible candidates for acquisition and
that its geographic diversity of operations helps to create many attractive
acquisition opportunities. The Partnership intends to fund acquisitions through
internal cash flow, external borrowings or the issuance of additional Common
Units. The Partnership's ability to accomplish these goals will be subject to
the continued availability of acquisition candidates at prices attractive to the
Partnership. There is no assurance the Partnership will be successful in
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sustaining the recent level of acquisitions or that any acquisitions that are
made will prove beneficial to the Partnership.
In addition to growth through acquisitions, the Partnership believes
that it may also achieve growth within its existing propane operations. As a
result of its experience in responding to competition and in implementing more
efficient operating standards, the Partnership believes that it has positioned
itself to be more successful in direct competition for customers. The
Partnership currently has marketing programs underway which focus specific
resources toward this effort.
Marketing
Natural gas liquids are derived from petroleum products and are sold in
compressed or liquefied form. Propane, the predominant type of natural gas
liquid, is typically extracted from natural gas or separated during crude oil
refining. Although propane is gaseous at normal pressures, it is compressed into
liquid form at relatively low pressures for storage and transportation. Propane
is a clean-burning energy source, recognized for its transportability and ease
of use relative to alternative forms of stand alone energy sources.
In the residential and commercial markets, propane is primarily used for
space heating, water heating and cooking. In the agricultural market propane is
primarily used for crop drying, space heating, irrigation and weed control. In
addition, propane is used for certain industrial applications, including use as
engine fuel, which is burned in internal combustion engines that power vehicles
and forklifts and as a heating or energy source in manufacturing and drying
processes.
The retail propane marketing business generally involves large numbers of
small volume deliveries averaging approximately 200 gallons each. The market
areas are generally rural but also include suburban areas for industrial
applications where natural gas service is not available.
The Partnership utilizes marketing programs targeting both new and existing
customers by emphasizing its efficiency in delivering propane to customers as
well as its training and safety programs. The Partnership sells propane
primarily to four specific markets: residential, industrial/commercial,
agricultural and other (principally to other propane retailers and as engine
fuel). During the fiscal year ended July 31, 1998, sales to residential
customers accounted for 56% of retail gross profit, sales to industrial and
other commercial customers accounted for 31% of retail gross profit, and sales
to agricultural and other customers accounted for 13% of retail gross profit.
Residential sales have a greater profit margin, more stable customer base and
tend to be less sensitive to price changes than the other markets served by the
Partnership. No single customer of the Partnership accounts for 10% or more of
the Partnership's consolidated revenues.
Profits in the retail propane business are primarily based on margins, the
cents-per-gallon difference between the purchase price and the sales price of
propane. The Partnership generally purchases propane in the contract and spot
markets, primarily from major oil companies, on a short-term basis; therefore,
its supply costs fluctuate with market price fluctuations. Should wholesale
propane prices decline in the future, the Partnership's margins on its retail
propane distribution business should increase in the short-term, because retail
prices tend to change less rapidly than wholesale prices. Should the wholesale
cost of propane increase, for similar reasons retail margins and profitability
would likely be reduced, at least for the short-term, until retail prices can be
increased. Retail propane customers typically lease their storage tanks from
their propane distributors. Approximately 70% of the Partnership's customers
lease their tank from the Partnership. The lease terms and, in some states,
certain fire safety regulations, restrict the filling of a leased tank solely to
the propane supplier that owns the tank. The cost and inconvenience of switching
tanks minimizes a customers tendency to switch suppliers of propane on the basis
of minor variations in price.
The retail market for propane is seasonal because it is used primarily for
heating in residential and commercial buildings. Consequently, sales and
operating profits are concentrated in the second and third fiscal quarters
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(November through April). To the extent necessary, the Partnership will reserve
cash inflows from the second and third quarters for distribution in the first
and fourth fiscal quarters. In addition, sales volume traditionally fluctuates
from year to year in response to variations in weather, prices and other
factors, although the Partnership believes that the broad geographic
distribution of its operations helps to minimize exposure to regional weather or
economic patterns. Long-term, historic weather data from the National Climatic
Data Center indicates that the average annual temperatures have remained
relatively constant over the last 30 years with fluctuations occurring on a
year-to-year basis only. During times of colder-than-normal winter weather, the
Company has been able to take advantage of its large, efficient distribution
network to help avoid supply disruptions such as those experienced by some of
its competitors, thereby broadening its long-term customer base.
Supply and Distribution
The Partnership purchases propane primarily from major domestic oil
companies. Supplies of propane from these sources have traditionally been
readily available, although no assurance can be given that supplies of propane
will be readily available in the future. As a result of (i) the Partnership's
ability to buy large volumes of propane and (ii) the Partnership's large
distribution system and underground storage capacity, the Partnership believes
it is in a position to achieve product cost savings and avoid shortages during
periods of tight supply to an extent not generally available to other retail
propane distributors. The Partnership is not dependent upon any single supplier
or group of suppliers, the loss of which would have a material adverse effect on
the Partnership. For the year ended July 31, 1998, no supplier provided more
than 10% of the Partnership's total propane purchases. A portion of the
Partnership's propane inventory is purchased under supply contracts which
typically have a one year term and a fluctuating price relating to spot market
prices. Certain of the Partnership's contracts specify certain minimum and
maximum amounts of propane to be purchased thereunder. The Partnership may
purchase and store inventories of propane in order to help insure uninterrupted
deliverability during periods of extreme demand. The Partnership owns three
underground storage facilities with an aggregate capacity of approximately 184
million gallons. Currently, approximately 148 million gallons of this capacity
is leased to third parties. The remaining space is available for the
Partnership's use.
Propane is generally transported from natural gas processing plants and
refineries, pipeline terminals and storage facilities to retail distribution
outlets and wholesale customers by railroad tank cars leased by the Partnership
and highway transport trucks owned or leased by the Partnership. The Partnership
operates a fleet of transport trucks to transport propane from refineries,
natural gas processing plants or pipeline terminals to its retail distribution
outlets. Common carrier transport trucks may be used during the peak delivery
season in the winter months or to provide service in areas where economic
considerations favor common carrier use. Propane is then transported from the
Partnership's retail distribution outlets to customers by its fleet of 1,596
bulk delivery trucks, which are fitted generally with 2,000 to 3,000 gallon
propane tanks. Propane storage tanks located on the customers' premises are then
filled from the delivery truck. Propane is also delivered to customers in
portable cylinders.
Industry and Competition
Industry
Based upon industry publications, propane accounts for approximately 3% to
4% of household energy consumption in the United States, an average level which
has remained relatively constant for the past two decades. Propane competes
primarily with natural gas, electricity and fuel oil as an energy source
principally on the basis of price, availability and portability. Propane serves
as an alternative to natural gas in rural and suburban areas where natural gas
is unavailable or portability of product is required. Propane is generally more
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expensive than natural gas on an equivalent BTU basis in locations served by
natural gas, although propane is often sold in such areas as a standby fuel for
use during peak demands and during interruption in natural gas service. The
expansion of natural gas into traditional propane markets has historically been
inhibited by the capital costs required to expand distribution and pipeline
systems. Although the extension of natural gas pipelines tends to displace
propane distribution in the neighborhoods affected, the Partnership believes
that new opportunities for propane sales arise as more geographically remote
neighborhoods are developed. Propane is generally less expensive to use than
electricity for space heating, water heating and cooking and competes
effectively with electricity in those parts of the country where propane is
cheaper than electricity on an equivalent BTU basis. Although propane is similar
to fuel oil in application, market demand and price, propane and fuel oil have
generally developed their own distinct geographic markets. Because residential
furnaces and appliances that burn propane will not operate on fuel oil, a
conversion from one fuel to the other requires the installation of new
equipment. The Partnership's residential retail propane customers, therefore,
will have an incentive to switch to fuel oil only if fuel oil becomes
significantly less expensive than propane. Likewise, the Partnership may be
unable to expand its customer base in areas where fuel oil is widely used,
particularly the Northeast, unless propane becomes significantly less expensive
than fuel oil. Alternatively, many industrial customers who use propane as a
heating fuel have the capacity to switch to other fuels, such as fuel oil, on
the basis of availability or minor variations in price. The Partnership believes
that propane generally is becoming increasingly favored over fuel oil and other
alternative sources of fuel as an environmentally preferred energy source.
Competition
In addition to competing with marketers of other fuels, the Partnership
competes with other companies engaged in the retail propane distribution
business. Competition within the propane distribution industry stems from two
types of participants: the larger multi-state marketers, and the smaller, local
independent marketers. Based upon industry publications, the Partnership
believes that the ten largest multi-state retail marketers of propane, including
the Partnership, account for approximately 33% of the total retail sales of
propane in the United States. Based upon information contained in industry
publications for calendar year 1997, the Partnership also believes no single
marketer has a greater than 10% share of the total market in the United States
and that the Partnership is the second largest retail marketer of propane in the
United States, with a market share of approximately 8% as measured by volume of
national retail propane sales.
Most of the Partnership's retail distribution outlets compete with three or
more marketers or distributors. The principal factors influencing competition
among propane marketers are price and service. The Partnership competes with
other retail marketers primarily on the basis of reliability of service and
responsiveness to customer needs, safety and price. Each retail distribution
outlet operates in its own competitive environment because retail marketers
locate in close proximity to customers to lower the cost of providing service.
The typical retail distribution outlet has an effective marketing radius of
approximately 25 miles.
Other Operations
The other operations of the Partnership consist principally of: (1)
trading, (2) chemical feedstocks marketing and (3) wholesale propane marketing.
The Partnership, through its natural gas liquids trading operations and
wholesale marketing, has become one of the leading independent traders of
propane and natural gas liquids in the United States. The Partnership owns no
properties that are material to these operations. These operations may utilize
available space in the Partnership's underground storage facilities in the
furtherance of these businesses. Because the Partnership possesses a large
distribution system, underground storage capacity and the ability to buy large
volumes of propane, the Partnership believes that it is in a position to achieve
product cost savings and avoid shortages during periods of tight supply to an
extent not generally available to other retail propane distributors.
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Trading
The Partnership's traders are engaged in trading propane and other natural
gas liquids for the Partnership's account and for supplying the Partnership's
retail and wholesale propane operations. The Partnership primarily trades
products purchased from its over 125 suppliers; however, it also conducts
transactions on the New York Mercantile Exchange. Trading activity is conducted
primarily to generate a profit independent of the retail and wholesale
operations, but is also conducted to insure the availability of propane during
periods of short supply. Propane represents over 60% of the Partnership's total
trading volume, with the remainder consisting principally of various other
natural gas liquids. The Partnership attempts to minimize trading risk through
the enforcement of its trading policies, which include total inventory limits
and loss limits, and attempts to minimize credit risk through credit checks and
application of its credit policies. However, there can be no assurance that
historical experience or the existence of such policies will prevent trading
losses in the future. For the Partnership's fiscal years ended July 31, 1998,
1997 and 1996 net revenues of $7.5 million, $5.5 million, and $7.3 million,
respectively, were derived from trading activities.
Chemical Feedstocks Marketing
The Partnership is also involved in the marketing of refinery and
petrochemical feedstocks. Petroleum by-products are purchased from refineries
and sold to petrochemical plants. The Partnership leases 314 tank cars to
facilitate product delivery. Revenues of $15.3 million, $29.8 million and $44.4
million were derived from such activities for the Partnership's fiscal years
ended July 31, 1998, 1997 and 1996, respectively.
Wholesale Marketing
The Partnership engages in the wholesale distribution of propane to other
retail propane distributors. During the fiscal years ended July 31, 1998, 1997
and 1996, the Partnership sold 136 million, 123 million and 104 million gallons,
respectively, of propane to wholesale customers and had revenues attributable to
such sales of $49.9 million, $57.5 million and $42.6 million, respectively.
Employees
The Partnership has no employees and is managed by the General Partner
pursuant to the Partnership Agreement. At July 31, 1998, the General Partner had
3,494 full-time employees and 831 temporary and part-time employees. At July 31,
1998, the General Partner's full-time employees were employed in the following
areas:
Retail Locations 2,933
Transportation and Storage 248
Corporate Offices (Liberty, MO & Houston, TX) 313
==========
Total 3,494
==========
Approximately one percent of the General Partner's employees are
represented by five local labor unions, which are all affiliated with the
International Brotherhood of Teamsters. The General Partner has not experienced
any significant work stoppages or other labor problems.
The Partnership's supply, trading, chemical feedstocks marketing,
distribution scheduling and product accounting functions are operated primarily
out of the Partnership's offices located in Houston, by a total full-time
corporate staff of 68 people.
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Governmental Regulation; Environmental and Safety Matters
From August 1971 until January 1981, the United States Department of Energy
regulated the price and allocation of propane. The Partnership is no longer
subject to any similar regulation.
Propane is not a hazardous substance within the meaning of federal and
state environmental laws. In connection with all acquisitions of retail propane
businesses that involve the purchase of real estate, the Partnership conducts a
due diligence investigation to attempt to determine whether any substance other
than propane has been sold from or stored on any such real estate prior to its
purchase. Such due diligence includes questioning the sellers, obtaining
representations and warranties concerning the sellers' compliance with
environmental laws and visual inspections of the properties, whereby employees
of the General Partner look for evidence of hazardous substances or the
existence of underground storage tanks.
With respect to the transportation of propane by truck, the Partnership is
subject to regulations promulgated under the Federal Motor Carrier Safety Act.
These regulations cover the transportation of hazardous materials and are
administered by the United States Department of Transportation ("DOT"). National
Fire Protection Association Pamphlet No. 58, which establishes a set of rules
and procedures governing the safe handling of propane, or comparable
regulations, have been adopted as the industry standard in a majority of the
states in which the Partnership operates.
The Partnership complies in all material respects with all material
governmental regulations and industry standards applicable to environmental and
safety matters, except that the Partnership was not in compliance with Final
Rule for Continued Operation of the Present Propane Trucks published August 18,
1997 (the "Final Interim Rule") on emergency shut off valves on bobtail
vehicles. The DOT has taken the position that all existing emergency shut off
devices used on propane cargo vessels fail to comply with the existing Emergency
Discharge Control Regulation 49CFR 178.337-11. Accordingly, the DOT has issued a
Final Interim Rule that requires all transporters of propane to implement
revised procedures to ensure immediate activation of the emergency shut off
device in the event of a catastrophic failure of a cargo vehicle's discharge
system. As a result of actions filed by five of the principal multi-state
propane marketers (including the Partnership), the United States District Court
for the Western District of Missouri issued a preliminary injunction against the
DOT in February, 1998, staying and postponing certain provisions of the Final
Interim Rule. As a result of the preliminary injunction, the Partnership is now
in full compliance with the court modified Final Interim Rule for bobtails and
transport vehicles. The Partnership is working with both the DOT and outside
experts to develop a system for bobtail vehicles that complies with the existing
Emergency Discharge Control Regulations as well as the provisions of the Final
Interim Rule. In June 1998, the DOT established a formal Regulation Negotiation
Committee to address these issues and the Partnership was granted a seat on this
committee. At this time, the Partnership cannot determine whether enforcement of
the Final Interim Rule will be permanently enjoined, or the ultimate long-term
cost of compliance with the Final Interim Rule to the Partnership or the propane
industry in general.
Service Marks and Trademarks
The Partnership markets retail propane under the "Ferrellgas" tradename and
uses the tradename "Ferrell North America" for its wholesale operations. In
addition, the Partnership has a trademark on the name "FerrellMeter," its
patented gas leak detection device. The Company contributed all of its rights,
title and interest in such tradenames and trademark in the continental United
States to the Partnership. The General Partner will have an option to purchase
such tradenames and trademark from the Partnership for a nominal value if the
General Partner is removed as general partner of the Partnership other than for
cause. If the General Partner ceases to serve as the general partner of the
Partnership for any other reason, it will have the option to purchase such
tradenames and trademark from the Partnership for fair market value.
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Business of Ferrellgas Partners Finance Corp.
Ferrellgas Partners Finance Corp. (the "Finance Corp") a Delaware corporation
was formed on March 28, 1996, and is a wholly-owned subsidiary of the MLP. The
Finance Corp has nominal assets and does not conduct any operations, but serves
as a co-obligor for securities issued by the MLP. Certain institutional
investors that might otherwise be limited in their ability to invest in
securities issued by the MLP by reasons of the legal investment laws of their
states of organization or their charter documents, may be able to invest in the
MLP's securities because the Finance Corp is a co-obligor. Accordingly, a
discussion of the results of operations, liquidity and capital resources of the
Finance Corp is not presented. See the Finance Corp's notes to the financial
statements for a discussion of the securities with respect to which the Finance
Corp is serving as a co-obligor.
ITEM 2. PROPERTIES.
The Partnership owns or leases the following transportation equipment which
is utilized primarily in retail operations, except for railroad tank cars, which
are used primarily by chemical feedstocks operations.
Owned Leased Total
Truck tractors ........................ 92 69 161
Transport trailers..................... 263 14 277
Bulk delivery trucks................... 814 782 1,596
Pickup and service trucks.............. 995 491 1,486
Railroad tank cars..................... - 314 314
The transport trailers have an average capacity of approximately 9,000
gallons. The bulk delivery trucks are generally fitted with 2,000 to 3,000
gallon propane tanks. Each railroad tank car has a capacity of approximately
30,000 gallons.
A typical retail distribution outlet is located on one to three acres of
land and includes a small office, a workshop, bulk storage capacity of 18,000
gallons to 60,000 gallons and a small inventory of stationary customer storage
tanks and portable propane cylinders that the Partnership provides to its retail
customers for propane storage. The Partnership owns the land and buildings of
approximately 50% of its retail outlets and leases the remaining facilities on
terms customary in the industry and in the applicable local markets.
Approximately 697,000 propane tanks are owned by the Partnership, most of
which are located on customer property and leased to those customers. The
Partnership also owns approximately 626,000 portable propane cylinders, most of
which are leased to industrial and commercial customers for use in manufacturing
and processing needs, including forklift operations, and to residential
customers for home heating and cooking, and to local dealers who purchase
propane from the Partnership for resale.
The Partnership owns underground storage facilities at Hutchinson, Kansas;
Adamana, Arizona; and Moab, Utah. At July 31, 1998, the capacity of these
facilities was approximatly 88 million gallons, 88 million gallons and 8 million
gallons, respectively (an aggregate of approximately 184 million gallons).
Currently, approximately 148 million gallons of this capacity is leased to third
parties. The remaining space is available for the Partnership's use.
The Partnership owns the land and two buildings (50,245 square feet of
office space) comprising its corporate headquarters in Liberty, Missouri, and
leases 27,696 square feet of office space in Houston, Texas, where its trading,
chemical feedstocks marketing and wholesale marketing operations are primarily
located.
The Partnership believes that it has satisfactory title to or valid rights
to use all of its material properties and, although some of such properties are
subject to liabilities and leases and, in certain cases, liens for taxes not yet
currently due and payable and immaterial encumbrances, easements and
restrictions, the Partnership does not believe that any such burdens will
materially interfere with the continued use of such properties in its business,
taken as a whole. In addition, the Partnership believes that it has, or is in
8
<PAGE>
the process of obtaining, all required material approvals, authorizations,
orders, licenses, permits, franchises and consents of, and has obtained or made
all required material registrations, qualifications and filings with, the
various state and local governmental and regulatory authorities which relate to
ownership of the Partnership's properties or the operations of its business.
ITEM 3. LEGAL PROCEEDINGS.
Propane is a flammable, combustible gas. Serious personal injury and
property damage can occur in connection with its transportation, storage or use.
The Partnership, in the ordinary course of business, is threatened with or is
named as a defendant in various lawsuits which, among other items, seek actual
and punitive damages for product liability, personal injury and property damage.
The Partnership maintains liability insurance policies with insurers in such
amounts and with such coverages and deductibles as it believes is reasonable and
prudent. However, there can be no assurance that such insurance will be adequate
to protect the Partnership from material expenses related to such personal
injury or property damage or that such levels of insurance will continue to be
available in the future at economical prices. It is not possible to determine
the ultimate disposition of these matters discussed above; however, management
is of the opinion that there are no known claims or known contingent claims that
are likely to have a material adverse effect on the results of operations or
financial condition of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the security holders of the
Partnership during the fiscal year ended July 31, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S UNITS AND RELATED UNITHOLDER MATTERS.
The Common Units, representing common limited partner interests in the
Partnership, are listed and traded on the New York Stock Exchange ("NYSE") under
the symbol FGP. The Common Units began trading on June 28, 1994, at an initial
public offering price of $21.00 per Common Unit. As of October 12, 1998, there
were 745 registered Common Unitholders of record. The following table sets forth
the high and low sales prices for the Common Units on the NYSE and the cash
distributions declared per Common Unit for the periods indicated.
<TABLE>
<CAPTION>
Common Unit Price Range Distributions
-------------------------------------------
High Low Declared per Unit
--------------------- --------------------- ---------------------
1997 1998 1997 1998 1997 1998
---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $23.50 $24.25 $22.50 $22.63 $0.50 $0.50
Second Quarter 22.88 23.25 20.75 22.00 0.50 0.50
Third Quarter 23.00 22.63 21.13 20.25 0.50 0.50
Fourth Quarter 23.00 21.94 21.25 20.25 0.50 0.50
</TABLE>
The Partnership also has issued Subordinated Units, all of which are held
by Ferrell, for which there is no established public trading market.
9
<PAGE>
The Partnership makes quarterly cash distributions of its Available Cash,
as defined by the MLP's Partnership Agreement. Available Cash is generally
defined as consolidated cash receipts less consolidated cash disbursements and
changes in cash reserves established by the General Partner for future
requirements.
The Partnership is not subject to federal income taxes. Instead,
Unitholders are required to report their allocable share of the Partnership's
income, gains, losses, deductions and credits, regardless of whether the
Partnership makes distributions.
ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.
The following table presents selected consolidated historical and pro forma
financial data of the Partnership and Predecessor.
(in thousands, except per unit data)
<TABLE>
<CAPTION>
Ferrellgas Partners L.P. (Predecessor)
--------------------------------------------------------------------------------- -------------
Pro Forma Historical Historical
Eleven
Historical Year Ended Inception Months Ended
to
Year Ended July 31, July 31, July 31, June 30,
------------------------------------------------------
1998 1997 1996 1995 1994 (1) 1994 1994
------------- ------------ ------------- ------------- ------------- ------------ -------------
Income Statement Data:
<S> <C> <C> <C> <C> <C> <C>
Total revenues $ 667,353 $ 804,298 $ 653,640 $ 596,436 $ 526,556 $ 24,566 $ 501,990
Depreciation and 45,009 43,789 37,024 32,014 28,835 2,383 26,452
amortization
ESOP compensation charge 350
Operating income (loss) 52,760 68,819 62,506 55,927 68,631 (2,391) 71,522
Interest expense 49,129 45,769 37,983 31,993 28,130 2,662 53,693
Earnings (loss) from 4,943 23,218 24,312 23,820 39,909 (5,026) 12,337
continuing operations
Earnings from continuing 0.16 0.74 0.77 0.76 1.29
operations per unit
Cash distributions 2.00 2.00 2.00 1.65
declared per unit (3)
Balance Sheet Data (at end of period):
Working capital $ (443) $ 18,111 $ 15,294 $ 28,928 $ 34,948 $ 34,948 $ 91,912
Total assets 621,223 657,076 654,295 578,596 477,193 477,193 592,664
Pay to (rec from) parent and (4,050)
affiliates
Long-term debt 507,222 487,334 439,112 338,188 267,062 267,062 476,441
Stockholder's equity 22,829
Partners' Capital:
Common Unitholders $ 27,985 $ 52,863 $ 71,323 $ 84,489 $ 84,532 $ 84,532
Subordinated Unitholders 19,908 50,337 71,302 91,824 99,483 99,483
General Partner (2) (58,976) (58,417) (58,016) (57,676) (62,622) (62,622)
Operating Data:
Retail propane sales 659,932 693,995 650,214 575,935 564,224 23,915 540,309
volumes (in gallons)
Capital expenditures
(4):
Maintenance $ 10,569 $ 10,137 $ 6,657 $ 8,625 $ 5,688 $ 911 $ 4,777
Growth 10,060 6,055 6,654 11,097 4,032 983 3,049
Acquisition 13,003 38,780 108,803 70,069 3,429 878 2,551
------------- ------------ ------------- ------------- ------------- ------------ -------------
Total $ 33,632 $ 54,972 $ 122,114 $ 89,791 $ 13,149 $ 2,772 $ 10,377
============= ============ ============= ============= ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
Supplemental Data:
Earnings (loss) before depreciation, amortization,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
interest and taxes (5) $ 98,119 $ 112,608 $ 99,530 $ 87,941 $ 97,466 $ (8) $ 97,974
</TABLE>
(1) The pro forma year ended July 31, 1994 includes the eleven months ended
June 30, 1994 and historical financial data of the Partnership for the
period from inception, July 5, 1994, to July 31, 1994 (adjusted principally
for the pro forma effect on interest expense resulting from the early
retirement of debt net of additional borrowings).
10
<PAGE>
(2) Pursuant to the MLP's Partnership Agreement, the net loss from continuing
operations of $5,026,000 was allocated 100% to the General Partner from
inception of the Partnership to the last day of the taxable year ending
July 31, 1994. An amount equal to 99% of this net loss was reallocated to
the limited partners in the taxable year ending July 31, 1995 based on
their ownership percentage. In addition, the retirement of debt assumed by
the Partnership resulted in an extraordinary loss of approximately
$60,062,000 resulting from debt prepayment premiums, consent fees and the
write-off of unamortized discount and financing costs. In accordance with
the Partnership Agreement, this extraordinary loss was allocated 100% to
the General Partner and was not reallocated to the limited partners in the
next taxable year.
(3) No cash distributions were declared by the Partnership from inception
to July 31, 1994. The $0.65 distribution made at the end of the 1995 first
quarter included $0.50 for the first quarter 1995 and $0.15 for the inception
period.
(4) The Partnership's capital expenditures fall generally into three
categories: (i) maintenance capital expenditures, which include
expenditures for repair and replacement of property, plant and equipment;
(ii) growth capital expenditures, which include expenditures for purchases
of new propane tanks and other equipment to facilitate expansion of the
Partnership's customer base and operating capacity; and (iii) acquisition
capital expenditures, which include expenditures related to the
acquisitions of retail propane operations. Acquisition capital expenditures
represent total cost of acquisition less working capital acquired.
(5) EBITDA is calculated as operating income (loss) plus depreciation and
amortization and an ESOP related non-cash compensation charge. EBITDA is
not intended to represent cash flow and does not represent the measure of
cash available for distribution. EBITDA is a non-GAAP measure, but provides
additional information for evaluating the Partnership's ability to make the
Minimum Quarterly Distribution. In addition, EBITDA is not intended as an
alternative to earnings (loss) from continuing operations or net earnings
(loss).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following is a discussion of the historical financial condition and
results of operations for Ferrellgas Partners, L.P. and its subsidiaries and
should be read in conjunction with the historical consolidated financial
statements and accompanying notes thereto included elsewhere in this Form 10-K.
Forward-looking statements
Statements included in this report that are not historical facts, including
statements concerning the Partnership's belief that the OLP will have sufficient
funds to meet its obligations to enable it to distribute to the MLP sufficient
funds to permit the MLP to meet its obligations with respect to the MLP Senior
Secured Notes issued in April 1996, and to enable it to distribute the Minimum
Quarterly Distribution ($0.50 per Unit) on all Common Units and Subordinated
Units, are forward-looking statements.
Such statements are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed in or implied by the
statements. The risks and uncertainties include but are not limited to the
following and their effect on the Partnership's operations: a) the effect of
weather conditions on demand for propane, b) price and availability of propane
supplies, c) the availability of capacity to transport propane to market areas,
d) competition from other energy sources and within the propane industry, e)
operating risks incidental to transporting, storing, and distributing propane,
f) changes in interest rates g) governmental legislation and regulations, h)
energy efficiency and technology trends i) Year 2000 compliance and j) other
factors that are discussed in the Partnership's filings with the Securities and
Exchange Commission.
11
<PAGE>
Year 2000 Compliance
Many computer systems and applications in use throughout the world today
may not be able to appropriately interpret dates beginning in the year 2000
("Year 2000" issue). As a result, this problem could have adverse consequences
on the operations of companies and the integrity of information processing.
The Partnership began the process in 1997 of identifying and correcting its
computer systems and applications that were exposed to the Year 2000 issue. The
Partnership initially focused on the systems and applications that were
considered critical to its operations and services for supplying propane to its
customers and to its ability to account for those business services accurately.
These critical areas include the retail propane accounting and operations
system, financial accounting and reporting system, local area network and
electronic mail systems. The Partnership expects that these critical areas will
be Year 2000 compliant by December 31, 1999.
The Partnership has also taken steps to identify other non-critical
applications that may have exposure to the Year 2000 issue. It has established a
test lab for the independent testing of these applications to ensure Year 2000
compatibility. To date, no material Year 2000 issues have been identified as a
result of this testing.
The Partnership conducts business with several hundred outside suppliers.
While no single supplier is considered material to the Partnership, a combined
number could constitute a material amount to the Partnership. The Partnership is
currently reviewing their largest suppliers to obtain appropriate assurances
that they are, or will be, Year 2000 compliant. If compliance by the
Partnership's suppliers is not achieved in a timely manner, it is unknown what
effect, if any, the Year 2000 issue could have on the Partnership's operations.
The Partnership has evaluated its Year 2000 issues and does not expect that
the total cost of related modifications and conversions will have a material
effect on its financial position, results of operations or cash flows. Such
costs are being expensed as incurred. To date, the Partnership has currently
incurred approximately $100,000 to identify and correct its Year 2000 issues.
This expense has been primarily related to its critical systems and
applications. It is estimated that the Partnership will incur an additional
$300,000 to $500,000 during the next fiscal year to identify and correct its
Year 2000 issues. The Partnership does not anticipate significant purchases of
computer software or hardware as a result of its Year 2000 issue and does not
believe that the correction of its Year 2000 issues will delay or eliminate
other scheduled computer upgrades and replacements.
General
The Partnership is engaged in the sale, distribution, marketing and trading
of propane and other natural gas liquids. The Partnership's revenue is derived
primarily from the retail propane marketing business. The Partnership believes
that it is the second largest retail marketer of propane in the United States,
based on gallons sold, serving more than 800,000 residential,
industrial/commercial and agricultural customers in 45 states and the District
of Columbia through approximately 566 retail outlets and 298 satellite
locations. Annual retail propane sales volumes were 660 million, 694 million,
and 650 million gallons for the fiscal years ended July 31, 1998, 1997, and
1996, respectively.
The retail propane business of the Partnership consists principally of
transporting propane purchased in the contract and spot markets, primarily from
major oil companies, to its retail distribution outlets and then to tanks
located on the customers' premises, as well as to portable propane cylinders. In
the residential and commercial markets, propane is primarily used for space
heating, water heating and cooking. In the agricultural market, propane is
primarily used for crop drying, space heating, irrigation and weed control. In
addition, propane is used for certain industrial applications, including use as
an engine fuel, which is burned in internal combustion engines that power
vehicles and forklifts and as a heating or energy source in manufacturing and
drying processes.
12
<PAGE>
The Partnership is also engaged in the trading of propane and other natural
gas liquids, chemical feedstocks marketing and wholesale propane marketing.
Through its natural gas liquids trading operations and wholesale marketing, the
Partnership is one of the leading independent traders of propane and natural gas
liquids in the United States.
The Partnership's traders are engaged in trading propane and other natural
gas liquids for the Partnership's account and for supplying the Partnership's
retail and wholesale propane operations. The Partnership primarily trades
products purchased from its over 125 suppliers, however, it also conducts
transactions on the New York Mercantile Exchange. Trading activity is conducted
primarily to generate a profit independent of the retail and wholesale
operations, but is also conducted to insure the availability of propane during
periods of short supply. Propane represents over 60% of the Partnership's total
trading volume, with the remainder consisting principally of various other
natural gas liquids. For the Partnership's fiscal years ended July 31, 1998,
1997 and 1996, net revenues from trading activities were $7.5 million, $5.5
million and $7.3 million, respectively.
Selected Quarterly Financial Data
(in thousands, except per unit data)
Due to the seasonality of the retail propane business, first and fourth
quarter revenues, gross profit and net earnings are consistently less than the
comparable second and third quarter results. Other factors affecting the results
of operations include competitive conditions, demand for product, variations in
the weather and fluctuations in propane prices.
The following presents the Partnership's selected quarterly financial data for
the two years ended July 31, 1998.
Fiscal year ended July 31, 1998
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
---------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues $153,205 $248,811 $175,167 $90,170
Gross profit 66,589 117,932 89,449 50,783
Net earnings (loss) (13,311) 32,759 10,775 (25,280)
Net earnings (loss) per
limited partner unit (0.42) 1.04 0.34 (0.80)
</TABLE>
<TABLE>
<CAPTION>
Fiscal year ended July 31, 1997
First Quarter Second Quarter Third Quarter Fourth Quarter
----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenues $167,860 $347,056 $192,873 $96,509
Gross profit 66,288 138,258 82,844 46,780
Net earnings (loss) (10,790) 49,430 7,685 (23,107)
Net earnings (loss) per
limited partner unit (0.34) 1.57 0.24 (0.73)
</TABLE>
Results of Operations
Fiscal Year Ended July 31, 1998 versus Fiscal Year Ended July 31, 1997
Total Revenues. Total revenues decreased 17.0% to $667,353,000 as compared
to $804,298,000 in the prior year, primarily due to a decrease in sales price
per gallon as a result of the unusually higher wholesale cost of propane
experienced in the previous year, the effects of the warmer weather, and a
13
<PAGE>
decrease in revenues from other operations (net trading operations, wholesale
propane marketing and chemical feedstocks marketing), partially offset by
acquisitions of propane businesses.
A less volatile propane market during fiscal 1998 caused a significant
decrease in the cost of product, which in turn caused a decrease in sales price
per gallon as compared to fiscal 1997. Retail volumes decreased by 4.9% or
34,063,000 gallons, primarily due to the decrease in volumes related to the
unusually warm winter during fiscal 1998, attributable in large part to the El
Nino weather phenomenon. The winter of fiscal 1998 was reported as the second
warmest winter in recorded history. For the year, temperatures were 8% warmer
than normal and 4% warmer than the same period last year as reported by the
American Gas Association. The warmer than normal temperatures were also
compounded by other El Nino related weather factors such as reduced wind chill,
humidity, snow and cloud cover, all of which contributed to a lower demand for
propane and a decrease in earnings for the Partnership.
The 29.7% decrease in revenues from other operations to $73,123,000 is due
to a decrease in wholesale sales price per gallon and a decrease in chemical
feedstocks marketing revenues. Wholesale marketing sales price per gallon
decreased primarily due to the decrease in the cost of product compared to last
year. Chemical feedstocks volumes decreased as a result of decreased marketing
demand from petrochemical companies.
Gross Profit. Gross profit decreased 2.8% to $324,753,000 as compared to
$334,170,000 during fiscal 1997, primarily due to a decrease in retail sales
gross margin dollars, partially offset by an increase from trading profits.
Retail operations results decreased primarily due to decreased volumes
attributed to the warmer weather, partially offset by the impact of increased
retail margins and the increase in volumes attributed to acquisitions.
Operating Expenses. Operating expenses increased slightly to $199,010,000
in fiscal 1998 as compared to $198,298,000 in fiscal 1997. This year's operating
expenses were impacted by decreased variable expenses, resulting from reduced
gallon deliveries due to the warmer weather, offset by increased expenses
associated with acquisitions.
Vehicle and Tank Lease Expense. Vehicle and tank lease expense increased by
$2,694,000 due to the utilization of operating lease financing to fund fleet
upgrades and replacements.
Interest Expense. Interest expense increased 7.3% over the prior year due
primarily to increased borrowings for the financing of acquisitions, partially
offset by a slight decrease in the average interest rate paid by the Partnership
on its variable rate borrowings.
Fiscal Year Ended July 31, 1997 versus Fiscal Year Ended July 31, 1996
Total Revenues. Total revenues increased 23.0% to $804,298,000 as compared
to $653,640,000 in the prior year, primarily due to increased sales price per
retail gallon, increased retail propane volumes, and to a lesser extent an
increase in revenues from other operations (net trading operations, wholesale
propane marketing and chemical feedstocks marketing).
A volatile propane market during the first half of fiscal 1997 caused a
significant increase in the cost of product which in turn caused an increase in
sales price per gallon. Retail volumes increased by 6.7% or 44 million gallons,
primarily due to the increase in volumes related to acquisitions partially
offset by the effect of warmer weather during fiscal 1997 as compared to fiscal
1996 and by customer conservation efforts. Fiscal 1997 winter temperatures, as
reported by the American Gas Association, were 6% warmer than the prior year and
4% warmer than normal.
The 10.2% increase in revenues from other operations to $103,971,000 was
due to an increase in wholesale marketing volumes and sales price per gallon,
partially offset by a decrease in chemical feedstocks marketing revenues.
Wholesale marketing volumes increased primarily due to the effect of
acquisitions, while prices increased as a result of increased cost of product.
Chemical feedstocks volumes decreased as a result of decreased availability of
14
<PAGE>
product from refineries and decreased demand from petrochemical companies.
Unrealized gains and losses on options, forwards, and futures contracts were not
significant at July 31, 1997 and 1996, respectively.
Gross Profit. Gross profit increased 12.4% to $334,170,000 as compared to
$297,326,000 in the 1996 fiscal year, primarily due to an increase in retail
sales gross margin, partially offset by a decrease in gross profits from other
operations. Retail operations results increased primarily due to the increase in
volumes attributed to acquisitions and an increase in retail margins, partially
offset by the effect of warmer weather and customer conservation efforts.
Wholesale marketing and chemical feedstocks was comprised of low margin sales,
therefore, the net increase in revenues did not significantly affect gross
profit.
Operating Expenses. Operating expenses increased 10.5% to $198,298,000 as
compared to $179,462,000 in the prior year primarily due to acquisition related
increases in personnel costs, plant and office expenses, and vehicle and other
expenses, partially offset by favorable general liability claims experience.
Depreciation and Amortization. Depreciation and amortization expense
increased 18.3% to $43,789,000 as compared to $37,024,000 for the prior year due
primarily to acquisitions of propane businesses.
Interest Expense. Interest expense increased 20.5% over the prior year.
This increase was primarily the result of the MLP's issuance of $160,000,000 of
9 3/8% Senior Secured Notes in April 1996, the proceeds of which were primarily
used to fund acquisitions made in fiscal 1996, partially offset by an overall
decrease in interest rates on borrowings during the year.
Liquidity and Capital Resources
The ability of the MLP to satisfy its obligations is dependent upon future
performance, which will be subject to prevailing economic, financial, business
and weather conditions and other factors, many of which are beyond its control.
For the fiscal year ending July 31, 1999, the General Partner believes that the
OLP will have sufficient funds to meet its obligations and enable it to
distribute to the MLP sufficient funds to permit the MLP to meet its obligations
with respect to the $160,000,000 senior secured notes issued in April 1996 ("MLP
Senior Secured Notes").
The MLP Senior Secured Notes, the $350,000,000 OLP senior notes ("New
Senior Notes") and the amended and restated OLP credit facility ("New Credit
Facility") agreements contain several financial tests which restrict the
Partnership's ability to pay distributions, incur indebtedness and engage in
certain other business transactions (See Financing Activities below). These
tests, in general, are based on the ratio of the MLP's and OLP's consolidated
cash flow to fixed charges, primarily interest expense. Because the Partnership
is more highly leveraged at the MLP than at the OLP, the tests related to the
MLP Senior Secured Notes are more sensitive to fluctuations in consolidated cash
flows and fixed charges. The most sensitive of the MLP related tests restricts
the Partnership's ability to make certain Restricted Payments which includes,
but is not limited to, the payment of the Minimum Quarterly Distribution ("MQD")
to unitholders.
Although the MLP's financial performance during fiscal 1998 was adversely
impacted by the El Nino weather pattern and associated unseasonably warmer
temperatures, the Partnership believes it will continue to meet the MLP Senior
Secured Notes Restricted Payment test during fiscal 1999, in addition to meeting
the other financial tests in the MLP Senior Secured Notes, New Senior Notes and
New Credit Facility. However, if the Partnership were to encounter any
unexpected downturns in business operations, it could result in the Partnership
not meeting certain financial tests in future quarters, including but not
limited to, the MLP Senior Secured Notes Restricted Payment test. Depending on
the circumstances, the Partnership would pursue alternatives to permit the
continued payment of MQD to its Common Unitholders. No assurances can be given,
however, that such alternatives will be successful with respect to any given
quarter.
15
<PAGE>
On August 1, 1999, the subordination period will end and the Subordinated
Units will convert to Common Units, provided that certain remaining financial
tests, which are related to making the MQD on all Common and Subordinated Units,
are satisfied for each of the three consecutive four quarter periods ending on
July 31, 1999. The Partnership met such financial tests for the four quarter
periods ended July 31, 1997 and July 31, 1998, respectively. There can be no
assurance that the Partnership will meet the remaining financial tests in the
subsequent four quarter period and that the Subordinated Units will convert to
Common Units on August 1, 1999.
Future maintenance and working capital needs of the Partnership are
expected to be provided by cash generated from future operations, existing cash
balances and the working capital borrowing facility. In order to fund expansive
capital projects and future acquisitions, the OLP may borrow on existing bank
lines, the MLP or OLP may issue additional debt or the MLP may issue additional
Common Units. Toward this purpose the MLP maintains a shelf registration
statement with the Securities and Exchange Commission for 1,800,322 Common Units
representing limited partner interests in the MLP. The Common Units may be
issued from time to time by the MLP in connection with the OLP's acquisition of
other businesses, properties or securities in business combination transactions.
Operating Activities. Cash provided by operating activities was $74,337,000
for the year ended July 31, 1998, compared to $75,087,000 in the prior year.
This small decrease was primarily due to the decreased inventory and increased
accounts payable partially offset by decreased net income as compared to July
31, 1997. These results were caused primarily by a decrease in propane prices,
the decrease in volumes held in inventory and reduced retail volume activity as
compared to those experienced during fiscal 1997.
Investing Activities. The Partnership made total acquisition capital
expenditures of $12,670,000 (including ($333,000) of working capital)
during fiscal 1998. This amount was funded by $9,839,000 cash payments,
$2,000,000 in Common Units and $831,000 in other costs and consideration.
During the year ended July 31, 1998, the Partnership made growth and
maintenance capital expenditures of $20,629,000 primarily for the following
purposes: 1) additions to Partnership-owned customer tanks and cylinders, 2)
relocating and upgrading district plant facilities, 3) upgrading computer
equipment and software and 4) vehicle lease buyouts. Capital requirements for
repair and maintenance of property, plant and equipment are relatively low since
technological change is limited and the useful lives of propane tanks and
cylinders, the Partnership's principal physical assets, are generally long. The
Partnership maintains its vehicle and transportation equipment fleet by leasing
light and medium duty trucks and tractors. The Partnership believes vehicle
leasing is a cost effective method for meeting the Partnership's transportation
equipment needs. The Partnership continues to seek expansion of its operations
through strategic acquisitions of smaller retail propane operations located
throughout the United States. These acquisitions will be funded through internal
cash flow, external borrowings or the issuance of additional Partnership
interests. The Partnership does not have any material commitments of funds for
capital expenditures other than to support the current level of operations. In
fiscal 1999, the Partnership does not expect a significant increase in growth
and maintenance capital expenditures as compared to fiscal 1998 levels.
Financing Activities. On August 4, 1998, the OLP issued $350,000,000 of new
privately placed unsecured senior notes ("New Senior Notes") and entered into a
$145,000,000 revolving credit facility ("New Credit Facility") with its existing
banks. The proceeds of the New Senior Notes, which include five series with
maturities ranging from year 2005 through 2013 at an average fixed interest rate
of 7.16%, were used to redeem $200,000,000 of OLP fixed rate Senior Notes
("Senior Notes") issued in July 1994, including a 5% call premium, and to repay
outstanding indebtedness under the existing OLP revolving credit facility
("Credit Facility"). As a result of these financings, the Partnership expects to
realize a decrease in interest expense during fiscal 1999. See Note E to the
audited financial statements included elsewhere in this report for additional
information regarding the New Senior Notes and the New Credit Facility.
On July 17, 1998, all of the outstanding common stock of Ferrell was
purchased by a newly established ESOT. As a result of this change in control in
the ownership of Ferrell and indirectly in the General Partner, the MLP,
16
<PAGE>
pursuant to the MLP Senior Secured Note Indenture, was required to offer to
purchase the outstanding notes at a price of 101% of the principal amount
thereof. See Note E to the audited financial statements included elsewhere in
this report for additional details regarding the offer to purchase the MLP
Senior Secured Notes.
During the fiscal year ended July 31, 1998, the Partnership borrowed
$20,458,000 under its $255,000,000 Credit Facility to fund expected seasonal
working capital needs, business acquisitions, and capital expenditures. In
addition, letters of credit outstanding, used primarily to secure obligations
under certain insurance arrangements, totaled $29,056,000. Giving affect to the
issuance of the New Senior Notes and the New Credit Facility completed August 4,
1998, the OLP would have had $96,944,000 million available for general
corporate, acquisition and working capital purposes under the New Credit
Facility at July 31, 1998. The Partnership typically has significant cash needs
during the first quarter due to expected low revenues, increasing inventories
and the Partnership's cash distribution paid in mid-September.
On April 26, 1996, the MLP issued the MLP Senior Secured Notes. These notes
will be redeemable at the option of the Partnership, in whole or in part, at any
time on or after June 15, 2001. Interest is payable semi-annually in arrears on
June 15 and December 15.
To offset the variable rate characteristic of the revolving credit facility
borrowings, the OLP has entered into interest rate collar agreements, expiring
between October 1998 and December 2001 with two major banks, that effectively
limit interest rates on a certain notional amount between 4.9% and 6.5% under
the current pricing arrangement. At July 31, 1998, the total notional principal
amount of these agreements was $100,000,000.
During the year ended July 31, 1998, the Partnership paid cash
distributions of $2.00 per limited partner unit. These distributions covered the
period from May 1, 1997 to April 30, 1998. On August 19, 1998, the Partnership
declared its fourth-quarter cash distribution of $0.50 per limited partner unit,
which was paid September 14, 1998. The Partnership's annualized distribution is
presently $2.00 per limited partner unit.
The MLP Senior Secured Notes, New Senior Notes and New Credit Facility
contain various restrictive covenants applicable to the MLP, the Operating
Partnership and its subsidiaries, the most restrictive relating to additional
indebtedness, sale and disposition of assets, and transactions with affiliates.
The MLP and the Operating Partnership are in compliance with all requirements,
tests, limitations and covenants related to the MLP Senior Secured Notes, the
New Senior Notes and New Credit Facility. The New Senior Notes and the New
Credit Facility agreements have similar restrictive covenants to the Senior
Notes and Credit Facility agreements that were replaced.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The market risk inherent in the Partnership's market risk sensitive
instruments and positions is the potential loss arising from adverse changes in
commodity prices. Additionally, the Partnership seeks to mitigate its interest
rate risk exposure on variable rate debt by entering into interest rate collar
agreements. After giving effect to the refinancing of the debt that occurred in
August 1998, the Partnership had redeemed nearly all of the variable rate debt
outstanding at July 31, 1998. Moreover, as of the date of this Form 10-K, the
Partnership had only $25,000,000 notional amount of interest rate collar
agreements effectively outstanding. Thus, assuming a material change in the
variable interest rate to the Partnership, the interest rate risk related to the
variable rate debt and the associated interest rate collar agreements is not
material to the financial statements.
The Partnership's trading activities utilize certain types of energy
commodity forward contracts and swaps traded on the over-the-counter financial
markets and futures traded on the New York Mercantile Exchange ("NYMEX" or
"Exchange") to anticipate market movements, manage and hedge its exposure to the
volatility of floating commodity prices and to protect its inventory positions.
The Partnership's non-trading activities utilize certain over-the-counter energy
commodity options to limit overall price risk and to hedge its exposure to
inventory price movements.
17
<PAGE>
Market risks associated with energy commodities are monitored daily for
compliance with the Partnership's trading policy. This policy includes specific
dollar exposure limits, limits on the term of various contracts and volume
limits for various energy commodities. The Partnership also utilizes loss limits
and daily review of open positions to manage exposures to changing market
prices.
Market and Credit Risk. NYMEX traded futures are guaranteed by the Exchange
and have nominal credit risk. The Partnership is exposed to credit risk
associated with futures, swaps and option transactions in the event of
nonperformance by counterparties. For each counterparty, the Partnership
analyzes the financial condition prior to entering into an agreement,
establishes credit limits and monitors the appropriateness of each limit. The
change in market value of Exchange-traded futures contracts requires daily cash
settlement in margin accounts with brokers. Forwards and most other
over-the-counter instruments are generally settled at the expiration of the
contract term.
Sensitivity Analysis. The Partnership has prepared a sensitivity analysis
to estimate the exposure to market risk of its energy commodity positions.
Forward contracts, futures, swaps and options were analyzed assuming a
hypothetical 10% change in forward prices for the delivery month for all energy
commodities. The potential loss in future earnings from these positions from a
10% adverse movement in market prices of the underlying energy commodities is
estimated at $2,707,000 as of July 31, 1998. Actual results may differ.
Further discussion of the risk management activities and accounting for
derivative commodity contracts is contained in the accompanying notes to the
consolidated financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Partnership's Consolidated Financial Statements and the Reports of
Certified Public Accountants thereon and the Supplementary Financial Information
listed on the accompanying Index to Financial Statements and Financial Statement
Schedules are hereby incorporated by reference. See Item 7 for Selected
Quarterly Financial Data.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS.
Partnership Management
The General Partner manages and operates the activities of the Partnership,
and the General Partner anticipates that its activities will be limited to such
management and operation. Unitholders do not directly or indirectly participate
in the management or operation of the Partnership. The General Partner owes a
fiduciary duty to the Unitholders.
The General Partner has appointed persons who are neither officers nor
employees of the General Partner or any affiliate of the General Partner to
serve on a committee of the Partnership (the "Audit Committee") with the
authority to review, at the request of the General Partner, specific matters as
to which the General Partner believes there may be a conflict of interest in
order to determine if the resolution of such conflict proposed by the General
Partner is fair and reasonable to the Partnership. The Audit Committee will only
review matters relating to conflicts of interest at the request of the General
Partner, and the General Partner has sole discretion to determine which matters,
if any, to submit to the Audit Committee. Any matters approved by the Audit
Committee will be conclusively deemed to be fair and reasonable to the
Partnership, approved by all partners of the Partnership and not a breach by the
General Partner of any duties it may owe the Partnership or the Unitholders.
18
<PAGE>
The Partnership does not directly employ any of the persons responsible for
managing or operating the Partnership. At July 31, 1998, 3,494 full-time and 831
temporary and part-time individuals were employed by the General Partner.
Directors and Executive Officers of the General Partner
The following table sets forth certain information with respect to the
directors and executive officers of the General Partner at August 31, 1998. Each
of the persons named below is elected to their respective office or offices
annually. Only Mr. Ferrell and Mr. Sheldon have entered into employment
agreements with the General Partner. See Employment Agreements.
Director
Name Age Since Position
James E. Ferrell 59 1984 Chairman of the Board and a
Director of the General
Partner
Danley K. Sheldon 40 1998 Chief Executive Officer,
President and a Director
of the General Partner
Patrick J. Chesterman 48 Executive Vice President
James M. Hake 38 Senior Vice President,
Acquisitions
Kenneth G. Atchley 35 Vice President, Chief
Operating Officer-Western
U.S.
Boyd H. McGathey 39 Vice President, Chief
Operating Officer-Eastern
U.S.
Kevin T. Kelly 33 Vice President, Chief
Financial Officer and
Treasurer
A. Andrew Levison 42 1994 Director of the General
Partner
Elizabeth T. Solberg 59 1998 Director of the General
Partner
James E. Ferrell--Mr. Ferrell has been with Ferrell or its predecessors and
its affiliates in various executive capacities since 1965. He served as Chief
Executive Officer until August 1998 and as President until October 1996.
Danley K. Sheldon--Mr. Sheldon was named Chief Executive Officer in August
1998 and was named a director of the Company in July 1998. He has been President
of the Company since October 1996 and was Chief Financial Officer of the Company
from January 1994 until May 1998. He served as Treasurer from 1989 until 1998
and joined the Company in 1986.
Patrick J. Chesterman--Mr. Chesterman was named Executive Vice President in
April 1998 after having served as Senior Vice President, Supply since September
1997. After joining the Company in June, 1994, he had one-year assignments as
Vice President-Retail Operations, Director of Human Resources and Director of
Field Support. Prior to joining the Company, Mr. Chesterman was Director of
Fuels Policy and Operations for the U.S. Air Force.
James M. Hake--Mr. Hake was named Senior Vice President, Acquisitions in
August 1998. He had been Vice President, Acquisitions of the Company since
October, 1994. He joined the Company in 1986.
Kenneth G. Atchley--Mr. Atchley was named Vice President, Chief Operating
Officer-Western U.S. in August 1998. He served as Regional Vice President since
May 1996. After joining the Company in 1985, he held District Manager and Area
Manager positions.
19
<PAGE>
Boyd H. McGathey--Mr. McGathey was named Vice President, Chief Operating
Officer-Eastern U.S. in August 1998. He served as Regional Vice President since
February 1997. After joining the Company in 1989, he held District Manager and
Area Manager positions.
Kevin T. Kelly--Mr. Kelly was named Chief Financial Officer and Treasurer
in May 1998 and August 1998, respectively. After joining the Company in June
1996, he served as Director of Finance and Corporate Controller until May 1998.
Prior to joining the Company, Mr. Kelly was Manager of Project Acquisitions with
UtiliCorp United, Inc.
A. Andrew Levison---Mr. Levison was elected a director of the Company in
September 1994. Mr. Levison has been a Managing Director of Donaldson, Lufkin &
Jenrette Securities Corporation since 1989.
Elizabeth T. Solberg---Ms. Solberg was elected a director of the Company in
July 1998. Ms. Solberg is Executive Vice President and Senior Partner of
Fleishman-Hillard, Inc. and has been with the firm since 1976. She has been a
member of the board of directors of Kansas City Life Insurance Company since
1997.
Compensation of the General Partner
The General Partner receives no management fee or similar compensation in
connection with its management of the Partnership and receives no remuneration
other than:
(i) distributions in respect to its 2% general partner interest, on a
combined basis, in the Partnership and the Operating Partnership; and
(ii) reimbursement for all direct and indirect costs and expenses incurred on
behalf of the Partnership, all selling, general and administrative expenses
incurred by the General Partner for or on behalf of the Partnership and all
other expenses necessary or appropriate to the conduct of the business of, and
allocable to, the Partnership. The selling, general and administrative expenses
reimbursed include specific employee benefits and incentive plans for the
benefit of the executive officers and employees of the General Partner.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth the compensation for the past three years of
the Company's Chief Executive Officer ("CEO") and the Company's four most highly
compensated executive officers other than the Chief Executive Officer ("named
executive officers"), who were serving as executive officers at the end of the
1998 fiscal year.
20
<PAGE>
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------
Annual Compensation Awards Pay-outs
------------------------- --------------- ---------------
Stock Long-Term
Options/ Incentive All Other
Name and Salary Bonus SARs Payouts Compensation
Principal Position Year ($) ($) (#) ($) ($)
- --------------------------------- ------ ------------ ------------ --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
James E. Ferrell 1998 465,000 --- --- --- 37,067 (1)
- ---------------------------------
Chairman and Chief Executive 1997 480,000 --- --- --- 32,126
Officer 1996 480,000 --- --- --- 16,801
Danley K. Sheldon 1998 225,000 50,000 --- --- 20,104 (1)
- ---------------------------------
President and Treasurer 1997 218,221 --- 30,000 --- 15,440
1996 177,500 100,000 --- --- 13,972
Patrick J. Chesterman 1998 161,500 25,000 --- --- 15,530 (1)
- ---------------------------------
Exec. Vice President 1997 132,917 --- 20,000 --- 9,087
James A. Hake 1998 120,000 85,000 --- --- 15,887 (1)
- ---------------------------------
Vice President, Acquisitions 1997 120,000 90,000 15,000 --- 13,592
1996 120,000 85,000 --- --- 9,962
Kevin T. Kelly 1998 99,014 50,000 --- --- 9,376 (1)
- ---------------------------------
Vice President, Chief
Financial Officer
</TABLE>
(1) Includes for Mr. Ferrell contributions of $20,059 to the employee's 401(k)
and profit sharing plans and compensation of $17,008 resulting from the
payment of life insurance premiums. Includes for Mr. Sheldon contributions
of $20,104 to the employee's 401(k) and profit sharing plans. Includes for
Mr. Chesterman contributions of $14,584 to the employee 401(k) and profit
sharing plans and compensation of $946 resulting from the payment of life
insurance premiums. Includes for Mr. Hake contributions of $15,161 to the
employee's 401(k) and profit sharing plans and compensation of $726
resulting from the payment of life insurance premiums. Includes for Mr.
Kelly contributions of $9,376 to the employee's 401(k) and profit sharing
plans.
Unit Options
On October 14, 1994, the General Partner adopted the Ferrellgas, Inc. Unit
Option Plan (the "Unit Option Plan") pursuant to which key employees are granted
options to purchase the MLP's Subordinated Units. The purpose of the Unit Option
Plan is to encourage certain employees of the General Partner to develop a
proprietary interest in the growth and performance of the Partnership, to
generate an increased incentive to contribute to the Partnership's future
success and prosperity, thus enhancing the value of the Partnership for the
benefit of its Unitholders, and to enhance the ability of the General Partner to
attract and retain key individuals who are essential to progress, growth and
profitability of the Partnership.
The Unit Options are exercisable beginning after July 31, 1999, assuming
the subordination period has lapsed, at prices ranging from $16.80 to $21.67 per
unit, which is an estimate of the fair market value of the Subordinated Units at
the time of the grant. The options vest immediately or over a one to five year
period, and expire on the tenth anniversary of the date of the grant. Upon
conversion of the Subordinated Units held by the General Partner and its
affiliates, outstanding Subordinated Unit Options will convert to Common Unit
Options.
There were no grants of unit options during the 1998 fiscal year to the CEO
and named executive officers.
The following table lists information on the CEO and named executive
officers' exercised/unexercised unit options for the fiscal year ended July 31,
1998.
21
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FY AND FY-END OPTION SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities
Underlying
Unexercised Value of Unexercised
Options/SARs In-The-Money Options/SARs
at FY-End (#) at FY-End ($)
---------------------- -----------------------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---------------------------- --------------- ------------- ---------------------- ------------------------------
James E. Ferrell - - - -
<S> <C> <C> <C> <C>
Danley K. Sheldon 0 0 0/100,000 0/305,800
Patrick J. Chesterman 0 0 0/30,000 0/32,680
James M. Hake 0 0 0/51,000 0/156,975
Kevin T. Kelly 0 0 0/10,000 0/6,850
</TABLE>
Employee Stock Ownership Plan
On July 17, 1998, pursuant to the Ferrell Companies, Inc. Employee
Stock Ownership Plan, a newly formed employee stock ownership trust purchased
all of the outstanding common stock of Ferrell. The purpose of the ESOP is to
provide employees of the General Partner an opportunity for ownership in Ferrell
and indirectly in the Partnership. Ferrell is expected to make future
contributions to the ESOP which will cause a portion of the shares of Ferrell
owned by the ESOP to be allocated to employees' accounts over time.
Incentive Compensation Plan
On July 17, 1998, a nonqualified stock option plan was establish by
Ferrell to allow upper middle and senior level managers of the General Partner
to participate in the equity growth of Ferrell and, indirectly in the equity
growth of the Partnership. The shares underlying the stock options are common
shares of Ferrell. No options under this plan had been granted as of July 31,
1998.
Profit Sharing Plan
The Ferrell Profit Sharing and 401(k) Investment Plan is a qualified
defined contribution plan (the "Profit Sharing Plan"). All full-time employees
of Ferrell or any of its direct or indirect wholly owned subsidiaries with at
least one year of service are eligible to participate in the Profit Sharing
Plan. In regards to the profit sharing portion, the Board of Directors of
Ferrell determines the amount of the annual contribution to the Profit Sharing
Plan, which is purely discretionary. This decision is based on the operating
results of Ferrell for the previous fiscal year and anticipated future cash
needs of the General Partner and Ferrell. The contributions are allocated to the
Profit Sharing Plan participants based on each participant's wages or salary as
compared to the total of all participants' wages and salaries.
Historically, the annual contribution to the Profit Sharing Plan has been
1% to 7% of each participant's annual wage or salary. With the establishment of
the ESOP in July 1998, the Company decided to suspended future contributions to
the profit sharing plan beginning with fiscal year 1998. The Profit Sharing Plan
also has a cash-or-deferred, or 401(k), feature allowing all full-time employees
to specify a portion of their pre-tax and/or after-tax compensation to be
contributed to the Profit Sharing Plan.
Supplemental Savings Plan
The Ferrell Supplemental Savings Plan was established October 1, 1994 in
order to provide certain management or highly compensated employees with
supplemental retirement income which is approximately equal in amount to the
retirement income that would have been provided to members of the select group
22
<PAGE>
of employees under the terms of the 401(k) feature of the Profit Sharing Plan
based on such members' deferral elections thereunder, but which could not be
provided under the 401(k) feature of the Profit Sharing Plan due to the
application of certain IRS rules and regulations.
Employment Agreements
On July 17, 1998, Mr. James E. Ferrell, as Chairman of the Board of the
General Partner, entered into a five year employment agreement with automatic
one year renewals. He will receive an annual salary of $120,000 and a bonus
based on the annual increase in the equity value of Ferrell. In addition to his
compensation, Mr. Ferrell participates in the Company's various employee benefit
plans, with the exception of the employee stock ownership plan and the
nonqualified stock option plan of Ferrell.
Also on July 17, 1998, Mr. Danley K. Sheldon, Chief Executive Officer of
the General Partner, entered into an eight year employment agreement, with
automatic one year renewals. He will receive an annual salary of $340,000 and an
annual bonus based on the earnings of the Partnership.
Pursuant to the terms of both employment agreements, in the event of either
a termination without cause or resignation for cause, Mr. Ferrell and Mr.
Sheldon are entitled to a cash amount equal to three times the greater of 125%
of their current base salary or the average compensation paid for the prior
three fiscal years. If a change of control of Ferrell or the General Partner
occurs, Mr. Ferrell and Mr. Sheldon will receive a cash termination benefit
equal to three times the greater of 125% of their current base salary or the
average three year compensation paid.
Mr. Ferrell's agreement contains a non-compete provision for the period of
time equal to the greater of five years or the time in which certain outstanding
debt of Ferrell is paid in full. The non-compete provision provides that he
shall not directly or indirectly own, manage, control, or engage in any business
with any person whose business is substantially similar to the business of the
Company.
Mr. Sheldon's agreement also contains a non-compete provision for a
period of two years following his termination of employment. The non-compete
provision provides that he shall not directly or indirectly own, manage,
control, or engage in any business with any person whose business is
substantially similar to the business of the Company.
Compensation of Directors
The General Partner does not pay any additional remuneration to its
employees for serving as directors. Directors who are not employees of the
General Partner receive a fee per meeting of $500, plus reimbursement for
out-of-pocket expenses.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information as of July 31, 1998,
regarding the beneficial ownership of the Common and Subordinated Units of the
MLP by certain beneficial owners, all directors and named executive officers of
the General Partner and the Partnership, each of the named executive officers,
and all directors and executive officers of the General Partner as a group. The
General Partner knows of no other person beneficially owning more than 5% of the
Common Units.
23
<PAGE>
Ferrellgas Partners, L.P.
<TABLE>
<CAPTION>
Title of Class Name and Address of Beneficial Units (1) Percentage of
Owner Beneficially Class
Owned
- ------------------------ --------------------------------------------------- ----------------
<S> <C> <C> <C>
Common Units ESOT 1,210,162 (2) 8.2
Goldman, Sachs & Co. 1,635,717 (3) 11.1
The Goldman Sachs Group 1,635,717 (3) 11.1
Danley K. Sheldon 1,000 *
Patrick J. Chesterman 200 *
James M. Hake 400 *
Kenneth G. Atchley 2,000 *
Elizabeth T. Solberg 200 *
A. Andrew Levison 15,000 *
*
All Directors and Officers as a 18,800 *
Group
Subordinated Units ESOT 16,593,721 (2) 100.0
* Less than 1%
</TABLE>
(1) Beneficial ownership for the purposes of the foregoing table is defined by
Rule 13d-3 under the Securities Exchange Act of 1934. Under that rule, a
person is generally considered to be the beneficial owner of a security if
he has or shares the power to vote or direct the voting thereof ("Voting
Power") or to dispose or direct the disposition thereof ("Investment
Power") or has the right to acquire either of those powers within sixty
(60) days.
(2) The address for LaSalle National Bank, the trustee for the Ferrell
Companies, Inc. Employee Stock Ownership Trust ("ESOT") is 125 S. LaSalle
Street, 17th Floor, Chicago, Illinois, 60603
Includes 1,210,162 Common Units and 16,593,721 Subordinated Units owned by
Ferrell which is 100% owned by the ESOT.
(3) The address for both Goldman Sachs Group, L.P. and Goldman, Sachs & Co.
is 85 Broad Street, New York, New York, 10004.
Goldman, Sachs & Co., a broker/dealer, and its parent Goldman Sachs Group,
L.P. are deemed to have shared voting power and shared dispositive power
over 1,635,717 Common Units owned by their customers.
Compliance With Section 16(a) of the Securities and Exchange Act
Section 16(a) of the Securities and Exchange Act of 1934 requires the
General Partner's officers and directors, and persons who own more than 10% of a
registered class of the Partnership's equity securities, to file reports of
beneficial ownership and changes in beneficial ownership with the Securities and
Exchange Commission ("SEC"). Officers, directors and greater than 10%
unitholders are required by SEC regulation to furnish the General Partner with
copies of all Section 16(a) forms.
Based solely on its review of the copies of such forms received by the
General Partner, or written representations from certain reporting persons that
no Form 5's were required for those persons, the General Partner believes that
during fiscal year 1998 all filing requirements applicable to its officers,
directors, and greater than 10% beneficial owners were met in a timely manner.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Set forth below is a discussion of certain relationships and related
transactions among affiliates of the Partnership.
24
<PAGE>
The Partnership has no employees and is managed and controlled by the
General Partner. Pursuant to the Partnership Agreement, the General Partner is
entitled to reimbursement for all direct and indirect expenses incurred or
payments it makes on behalf of the Partnership, and all other necessary or
appropriate expenses allocable to the Partnership or otherwise reasonably
incurred by the General Partner in connection with operating the Partnership's
business. These costs, which totaled $129,808,000 and $128,033,000 for the years
ended July 31, 1998 and 1997, respectively, include compensation and benefits
paid to officers and employees of the General Partner, and general and
administrative costs. In addition, the conveyance of the net assets of the
Company to the Partnership included the assumption of specific liabilities
related to employee benefit and incentive plans for the benefit of the officers
and employees of the General Partner. The conveyance of the net assets of the
Company to the Partnership is described in Note A of the Ferrellgas Partners,
L.P. notes to the consolidated financial statements.
Ferrell, the parent of the General Partner, and its other wholly-owned
subsidiaries engage in various investment activities including, but not limited
to, commodity investments and the trading thereof. The Partnership from time to
time acts as an agent on behalf of Ferrell to purchase and market natural gas
liquids and enter into certain trading activities. The Partnership charges all
direct and indirect expenses incurred in performing this agent role to Ferrell.
During the years ended July 31, 1998 and 1997, the Partnership, as Ferrell's
agent, performed the following services: a) purchased 1,089,929 barrels of
propane during 1997 b) marketed and sold 469,820 and 619,929 barrels, in 1998
and 1997, respectively, and c) entered into certain hedging arrangements during
1997. The Partnership charged Ferrell $66,467 and $73,078, in 1998 and 1997,
respectively, for its direct and indirect expenses. Of the 469,820 barrels of
propane sold in fiscal year 1998, all of these barrels were sold to and used by
the Partnership at the applicable market prices (an aggregate of $7,405,200). Of
the 619,929 barrels of propane sold in fiscal year 1997, 534,929 barrels were
sold to and used by the Partnership at the applicable market prices (an
aggregate of $13,128,765). In addition, during fiscal 1998, the Partnership sold
to Ferrell certain physical and derivative crude oil commodity contracts
totaling 4,120,000 aggregate barrels at a price of $2,548,927. The Partnership
believes these transactions were under terms that were no less favorable to the
Partnership than those arranged with other parties.
A. Andrew Levison, a director of the General Partner is a Managing Director
of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"). DLJ acted as an
underwriter with regard to the private placement of $160,000,000 senior
subordinated notes issued in April 1996 and was paid fees of $4,000,000 in
fiscal 1996.
See Note L to the financial statements in Item 14 for discussion of
transactions involving acquisitions related to the General Partner and the
Partnership.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) 1. Financial Statements.
See "Index to Financial Statements" set forth on page F-1.
2. Financial Statement Schedules.
See "Index to Financial Statement Schedules" set forth on page
S-1.
3. Exhibits.
See "Index to Exhibits" set forth on page E-1.
25
<PAGE>
(b) Reports on Form 8-K.
The Partnership filed one Form 8-K during the quarter ended July 31, 1998.
Form 8-K dated July 31, 1998, reporting that on July 17, 1998, the
Ferrell Companies, Inc. Employee Stock Ownership Trust acquired all of
the outstanding capital stock of Ferrell Companies, Inc., a Kansas
corporation, from trusts affiliated with Mr. James E. Ferrell. The
ESOT purchased the stock of Ferrell using funds provided primarily by
a private placement of $160,000,000 of debt and $40,000,000 of seller
financed notes. By acquiring such stock, the ESOT became the
beneficial owner through Ferrell of all of the outstanding capital
stock of Ferrellgas, Inc., a Delaware corporation that is the general
partner of both Ferrellgas Partners, L.P. and the Partnership's
operating subsidiary, Ferrellgas, L.P. The ESOT's indirect control of
the General Partner gives the ESOT control of the Partnership and the
Operating Partnership.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FERRELLGAS PARTNERS, L.P.
By Ferrellgas, Inc. (General Partner)
By /s/ Danley K. Sheldon
Danley K. Sheldon
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Danley K. Sheldon President, Chief Executive Officer 10/29/98
Danley K. Sheldon and Director (Principal Executive
Officer)
/s/ James E. Ferrell Chairman of the Board 10/29/98
James E. Ferrell
/s/ A. Andrew Levison Director 10/29/98
A. Andrew Levison
/s/ Elizabeth T. Solberg Director 10/29/98
Elizabeth T. Solberg
/s/ Kevin T. Kelly Vice President and Chief 10/29/98
Kevin T. Kelly Financial Officer (Principal
Financial and Accounting Officer)
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FERRELLGAS PARTNERS FINANCE CORP.
By /s/ Danley K. Sheldon
Danley K. Sheldon
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Danley K. Sheldon Chairman of the Board, 10/29/98
Danley K. Sheldon Chief Executive Officer and
Sole Director (Principal
Executive Officer)
/s/ Kevin T. Kelly Chief Financial Officer 10/29/98
Kevin T. Kelly (Principal Financial and
Accounting Officer)
</TABLE>
<PAGE>
INDEX TO EXHIBITS
The exhibits listed on the accompanying Exhibit Index are filed as part
of this report. Exhibits required by Item 601 of Regulation S-K which are not
listed are not applicable.
Exhibit
Number Description
(1) 2.1 Agreement for Purchase and Sale of Stock dated March
23, 1996, between Superior
Propane, Inc. and Ferrellgas, Inc.
(3) 3.1 Agreement of Limited Partnership of Ferrellgas
Partners, L.P.
(4) 3.2 Articles of Incorporation for Ferrellgas Partners
Finance Corp.
(5) 3.3 Bylaws of Ferrellgas Partners Finance Corp.
(6) 4.1 Indenture dated as of July 5, 1994, among Ferrellgas,
L.P., Ferrellgas Finance Corp.
and Norwest Bank Minnesota, National Association, as
Trustee, relating to $200,000,000
10% Series A Fixed Rate Senior Notes due 2001 and
$50,000,000 Series B Floating Rate
Senior Notes due 2001.
(7) 4.2 Indenture dated as of April 26, 1996, among Ferrellgas
Partners, L.P., Ferrellgas
Partners Finance Corp., Ferrellgas, L.P. as guarantor,
and Amercan Bank National
Association, as Trustee, relating to $160,000,000
9 3/8% Senior Secured Notes due 2006.
(8) 4.3 Registration Rights Agreement dated as of April,
26, 1996, among Ferrellgas Partners,
L.P., Ferrellgas Partners Finance Corp., Ferrellgas,
L.P., Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman, Sachs & Co.
4.4 Ferrellgas, L.P., Note Purchase Agreement Dated as of
July 1, 1998 Re: $109,000,000 6.99% Senior Notes,
Series A, due August 1, 2005 $37,000,000 7.08% Senior
Notes, Series B, due August 1, 2006 $52,000,000 7.12%
Senior Notes, Series C, due August 1, 2008 $82,000,000
7.24% Senior Notes, Series D, due August 1, 2010
$70,000,000 7.42% Senior Notes, Series E, due August 1,
2013
(9) 10.1 Agreement dated as of April 1, 1994, between BP
Exploration & Oil, Inc. and Ferrellgas,
L.P. dba Ferrell North America
(10)# 10.2 Ferrell Companies, Inc. Supplemental Savings Plan.
(11)# 10.3 Ferrellgas, Inc. Unit Option Plan.
(12) 10.4 Contribution,Conveyance and Assumption Agreement dated
as of November 1, 1994, among
the Partnership, the Operating Partnership and
Ferrellgas, Inc.
(13) 10.5 First Amendment to Contribution, Conveyance and
Assumption Agreement between
Ferrellgas, the Partnership and the Operating
Partnership.
(14) 10.6 Second Amendment to Contribution, Conveyance and
Assumption Agreement between
Ferrellgas, the Partnership and the Operating
Partnership.
E-1
<PAGE>
(15) 10.7 Purchase Agreement dated as of April 23, 1996,
between Ferrellgas Partners, L.P.,
Ferrellgas Partners Finance Corp., Ferrellgas,
Inc., Ferrellgas, L.P., Donaldson,
Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co.
(16) 10.8 Amended and Restated Agreement of Limited Partnership
of Ferrellgas, L.P. dated as of
April 23, 1996.
(17) 10.9 Pledge and Security Agreement dated as of April
26, 1996, among Ferrellgas Partners, L.P., Ferrellgas,
Inc., and American Bank National Association, as
collateral agent.
(18) 10.10 First Amended and Restated Credit Agreement dated as of
July 31, 1996, among Ferrellgas,
L.P., Stratton Insurance Company, Inc., Ferrellgas,
Inc., Bank of America National
Trust and Savings Association, as agent, and the other
financial institutions party thereto.
10.11 Second Amended and Restated Credit Agreement dated as
of July 2, 1998, among Ferrellgas, L.P., Ferrellgas,
Inc., Bank of America National Trust and Savings
Association, as administrative agent, and the other
financial institutions party thereto.
10.12# Ferrell Companies, Inc. 1998 Incentive Compensation
Plan
10.13# Employment agreement between James E. Ferrell and
Ferrellgas, Inc. dated July 31, 1998
10.14# Employment agreement between Danley K. Sheldon and
Ferrellgas, Inc. dated July 31, 1998
21.1 List of subsidiaries.
23.1 Consent of Deloitte & Touche, LLP Certified Public
Accountants.
27.1 Financial Data Schedule - Ferrellgas Partners, L.P.
(filed in electronic format only).
27.2 Financial Data Schedule - Ferrellgas Partners Finance
Corp. (filed in electronic format only)
# Management contracts or compensatory plans.
(1) Incorporated by reference to the same numbered Exhibit to
Registrant's Current Report on Form 8-K filed on May 6, 1996.
(3) Incorporated by reference to the same numbered Exhibit to the
Registrant's Current Report on Form 8-K filed August 15, 1994.
(4) Incorporated by reference to Exhibit same numbered Exhibit to
Registrant's Quarterly Report on Form 10-Q filed on June 13,
1997.
(5) Incorporated by reference to Exhibit same numbered Exhibit to
Registrant's Quarterly Report on Form 10-Q filed on June 13,
1997.
(6) Incorporated by reference to Exhibit 10.2 to the Registrant's
Current Report on Form 8-K filed
August 15, 1994.
(7) Incorporated by reference to Exhibit 4.1 to Registrant's Current
Report on Form 8-K filed on May 6, 1996.
(8) Incorporated by reference to Exhibit 4.2 to Registrant's Current
Report on Form 8-K filed on May 6, 1996.
E-2
<PAGE>
(9) Incorporated by reference to the Exhibit 10.4 to Registrant's
Annual Report on Form 10-K filed
on October 20, 1994.
(10) Incorporated by reference to the Exhibit 10.7 to Registrant's
Annual Report on Form 10-K filed on October 17, 1995.
(11) Incorporated by reference to the Exhibit 10.8 to Registrant's
Registration Statement on Form S-1 File No. 33-55185 filed with
the Commission on November 14, 1994
(12) Incorporated by reference to the Exhibit 10.9 to Registrant's
Registration Statement on Form S-1
File No. 33-55185 filed with the Commission on November 14, 1994
(13) Incorporated by reference to Exhibit 10.8 to Registrant's Annual
Report on Form 10-K filed on
October 20, 1994.
(14) Incorporated by reference to the Exhibit 10.11 to Registrant's
Annual Report onForm 10-K filed on October 17, 1995.
(15) Incorporated by reference to Exhibit 10.1 to Registrant's
Current Report on Form 8-K filed on May 6, 1996.
(16) Incorporated by reference to Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q filed on June 12, 1996.
(17) Incorporated by reference to Exhibit 10.2 to Registrant's
Current Report on Form 8-K filed on May 6, 1996.
(18) Incorporated by reference to the Exhibit 10.11 to Registrant's
Annual Report on Form 10-K filed on October 18, 1996.
E-3
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Ferrellgas Partners, L.P. and Subsidiaries
<S> <C>
Independent Auditors' Report..........................................................................F-2
Consolidated Balance Sheets - July 31, 1998 and 1997..................................................F-3
Consolidated Statements of Earnings - Years ended July 31, 1998, 1997 and 1996........................F-4
Consolidated Statements of Partners' Capital - Years ended
July 31, 1998, 1997 and 1996.....................................................................F-5
Consolidated Statements of Cash Flows - Year ended July 31, 1998, 1997 and 1996.......................F-6
Notes to Consolidated Financial Statements............................................................F-7
Ferrellgas Partners Finance Corp.
Independent Auditors' Report.........................................................................F-19
Balance Sheets - July 31, 1998 and 1997..............................................................F-20
Statements of Earnings - Year ended July 31, 1998, 1997 and
From the Date of inception to July 31, 1996.....................................................F-21
Statements of Stockholder's Equity - Year ended July 31, 1998, 1997 and
From the Date of Inception to July 31, 1996.....................................................F-22
Statements of Cash Flows - Year ended July 31, 1998, 1997 and
From the Date of Inception to July 31,1996......................................................F-23
Notes to Financial Statements........................................................................F-24
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Ferrellgas Partners, L.P. and Subsidiaries
Liberty, Missouri
We have audited the accompanying consolidated balance sheets of Ferrellgas
Partners, L.P. and subsidiaries as of July 31, 1998 and 1997, and the related
consolidated statements of earnings, partners' capital and cash flows for the
years ended July 31, 1998, 1997 and 1996. These financial statements are the
responsibility of the Partnership's management. 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 that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Ferrellgas Partners, L.P. and
subsidiaries as of July 31, 1998 and 1997, and the results of their operations
and their cash flows for the years ended July 31, 1998, 1997 and 1996, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 24, 1998
F-2
<PAGE>
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
<TABLE>
<CAPTION>
July 31, July 31,
ASSETS 1998 1997
- ---------------------------------------------------------- ---------------- -----------------
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 16,961 $ 14,788
Accounts and notes receivable (net of
allowance for doubtful accounts of $1,381 and
$1,234 in 1998 and 1997, respectively) 50,097 61,835
Inventories 34,727 43,112
Prepaid expenses and other current assets 8,706 8,906
---------------- -----------------
Total Current Assets 110,491 128,641
Property, plant and equipment, net 395,855 405,736
Intangible assets, net 105,655 112,058
Other assets, net 9,222 10,641
---------------- -----------------
Total Assets $621,223 $657,076
================ =================
LIABILITIES AND PARTNERS' CAPITAL
- ----------------------------------------------------------
Current Liabilities:
Accounts payable $ 48,017 $ 39,322
Other current liabilities 41,767 49,422
Short-term borrowings 21,150 21,786
---------------- -----------------
Total Current Liabilities 110,934 110,530
Long-term debt 507,222 487,334
Other liabilities 12,640 12,354
Contingencies and commitments
Minority interest 1,510 2,075
Partners' Capital:
Common unitholders (14,699,678 and 14,612,580 units
outstanding in 1998 and 1997, respectively) 27,985 52,863
Subordinated unitholders (16,593,721 units outstanding
in 1998 and 1997, respectively) 19,908 50,337
General partner (58,976) (58,417)
---------------- -----------------
Total Partners' Capital (11,083) 44,783
---------------- -----------------
Total Liabilities and Partners' Capital $621,223 $657,076
================ =================
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per unit data)
<TABLE>
<CAPTION>
For the year ended July 31,
-------------------------------------------------------
1998 1997 1996
----------------- ----------------- -----------------
Revenues:
<S> <C> <C> <C>
Gas liquids and related product sales $622,423 $759,941 $612,593
Other 44,930 44,357 41,047
----------------- ----------------- -----------------
Total revenues 667,353 804,298 653,640
Cost of product sold (exclusive of
depreciation, shown separately below) 342,600 470,128 356,314
----------------- ----------------- -----------------
Gross profit 324,753 334,170 297,326
Operating expense 199,010 198,298 179,462
Depreciation and amortization expense 45,009 43,789 37,024
Employee stock ownership plan compensation charge 350 - -
General and administrative expense 17,497 15,831 13,221
Vehicle and tank lease expense 10,127 7,433 5,113
----------------- ----------------- -----------------
Operating income 52,760 68,819 62,506
Interest expense (49,129) (45,769) (37,983)
Interest income 1,695 2,002 1,666
Loss on disposal of assets (174) (1,439) (1,586)
----------------- ----------------- -----------------
Earnings before income taxes,
minority interest and extraordinary loss 5,152 23,613 24,603
Minority interest 209 395 291
----------------- ----------------- -----------------
Earnings before extraordinary loss 4,943 23,218 24,312
Extraordinary loss on early extinguishment of debt,
net of minority interest of $10 - - 965
----------------- ----------------- -----------------
Net earnings 4,943 23,218 23,347
General partner's interest in net earnings 49 232 233
----------------- ----------------- -----------------
Limited partners' interest in net earnings $ 4,894 $ 22,986 $ 23,114
================= ================= =================
Earnings per limited partner unit:
Earnings before extraordinary loss $ 0.16 $ 0.74 $ 0.77
Extraordinary loss 0.03
----------------- ----------------- -----------------
Net earnings $ 0.16 $ 0.74 $ 0.74
================= ================= =================
Earnings per limited partner unit-assuming dilution:
Earnings before extraordinary loss $ 0.16 $ 0.73 $ 0.77
Extraordinary loss 0.03
----------------- ----------------- -----------------
Net earnings $ 0.16 $ 0.73 $ 0.74
================= ================= =================
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(in thousands)
<TABLE>
<CAPTION>
Number of units
------------------------------
General Total partners'
Common Subordinated Common Subordinated partner capital
------------ ---------------- ----------- ---------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
August 1, 1995 14,398.9 16,593.7 $84,489 $91,824 $ (57,676) $118,637
Assets contributed in
connection with acquisitions - - 284 325 6 615
Common units issued in
connection with acquisitions 213.7 - 4,825 - 48 4,873
Quarterly distributions - - (29,047) (33,188) (628) (62,863)
Net earnings - - 10,773 12,341 233 23,347
------------ ---------------- ----------- ---------------- ------------ ---------------
July 31, 1996 14,612.6 16,593.7 71,324 71,302 (58,017) 84,609
Quarterly distributions - - (29,224) (33,188) (632) (63,044)
Net earnings - - 10,763 12,223 232 23,218
------------ ---------------- ----------- ---------------- ------------ ---------------
July 31, 1997 14,612.6 16,593.7 52,863 50,337 (58,417) 44,783
Common units issued in
connection with acquisitions 87.1 - 2,000 - 20 2,020
Contribution from general
partner in connnection with
ESOP compensation charge - - 23 320 4 347
Quarterly distributions - - (29,356) (33,188) (632) (63,176)
Net earnings - - 2,455 2,439 49 4,943
------------ ---------------- ----------- ---------------- ------------ ---------------
July 31, 1998 14,699.7 16,593.7 $27,985 $19,908 $ (58,976) $ (11,083)
============ ================ =========== ================ ============ ===============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the year ended July 31,
----------------------------------------------------
1998 1997 1996
---------------- ---------------- ----------------
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Net earnings $4,943 $23,218 $23,347
Reconciliation of net earnings to net
cash from operating activities:
Depreciation and amortization 45,009 43,789 37,024
Employee stock ownership plan compensation charge 350
Minority interest 209 395 291
Extraordinary loss - - 965
Other 5,236 6,056 4,478
Changes in operating assets and liabilities net of
effects from business acquisitions:
Accounts and notes receivable 9,313 6,685 (3,988)
Inventories 8,052 (906) 7,612
Prepaid expenses and other current assets 200 (3,221) 765
Accounts payable 8,695 (9,078) (10,576)
Accrued interest expense (157) (1,171) 1,270
Other current liabilities (7,799) 9,368 3,649
Other liabilities 286 (48) 259
---------------- ---------------- ----------------
Net cash provided by operating activities 74,337 75,087 65,096
---------------- ---------------- ----------------
Cash Flows From Investing Activities:
Business acquisitions (9,839) (36,114) (8,116)
Capital expenditures (20,629) (16,192) (13,011)
Cash from acquired company - - 9,620
Other 4,539 3,068 (1,587)
---------------- ---------------- ----------------
Net cash used in investing activities (25,929) (49,238) (13,094)
---------------- ---------------- ----------------
Cash Flows From Financing Activities:
Distributions (63,176) (63,044) (62,863)
Additions to long-term debt 21,094 45,463 222,268
Reductions of long-term debt (2,759) (2,640) (234,082)
Net additions (reductions) to short-term borrowings (636) (3,734) 5,520
Minority interest activity (798) (818) 1,002
Other 40 (58) 46
---------------- ---------------- ----------------
Net cash used in financing activities (46,235) (24,831) (68,109)
---------------- ---------------- ----------------
Increase (decrease) in cash and cash equivalents 2,173 1,018 (16,107)
Cash and cash equivalents - beginning of period 14,788 13,770 29,877
---------------- ---------------- ----------------
Cash and cash equivalents - end of period $16,961 $14,788 $13,770
---------------- ---------------- ----------------
Cash paid for interest $46,546 $44,516 $34,994
================ ================ ================
</TABLE>
See notes to consolidated financial statements
F-6
<PAGE>
FERRELLGAS PARTNERS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Partnership Organization and Formation
Ferrellgas Partners, L.P. (the "MLP") was formed April 19, 1994, and is a
publicly traded limited partnership, owning a 99% limited partner interest
in Ferrellgas, L.P. (the "Operating Partnership" or "OLP"). The MLP and the
OLP are both Delaware limited partnerships, and are collectively referred to
as the Partnership. Ferrellgas Partners, L.P. was formed to acquire and hold
a limited partner interest in the Operating Partnership. The Operating
Partnership was formed to acquire, own and operate the propane business and
assets of Ferrellgas, Inc. (the "Company" or "General Partner"), a
wholly-owned subsidiary of Ferrell Companies, Inc. ("Ferrell"). Ferrell has
a 56% limited partnership interest in Ferrellgas Partners, L.P. The Company
has retained a 1% general partner interest in Ferrellgas Partners, L.P. and
also holds a 1.0101% general partner interest in the Operating Partnership,
representing a 2% general partner interest in the Partnership on a combined
basis. As General Partner of the Partnership, the Company performs all
management functions required for the Partnership.
On July 17, 1998, 100% of the outstanding common stock of Ferrell was
purchased primarily from Mr. James E. Ferrell and his family by a newly
established leveraged employee stock ownership trust established pursuant to
the Ferrell Companies, Inc. Employee Stock Ownership Plan ("ESOP"). The
purpose of the ESOP is to provide employees of the Company an opportunity
for ownership in Ferrell and indirectly in the Partnership. As contributions
are made by Ferrell to the ESOP in the future, shares of Ferrell will be
allocated to employees' ESOP accounts.
B. Summary of Significant Accounting Policies
(1) Nature of operations: The Partnership is engaged primarily in the sale,
distribution, marketing and trading of propane and other natural gas liquids
throughout the United States. The retail market is seasonal because propane
is used primarily for heating in residential and commercial buildings. The
Partnership serves more than 800,000 residential, industrial/commercial and
agricultural customers.
(2) Accounting estimates: The preparation of financial statements in
conformity with generally accepted accounting principles ("GAAP") requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reported period. Actual results could
differ from these estimates. Significant estimates impacting the financial
statements include reserves that have been established for product liability
and other claims.
(3) Principles of consolidation: The accompanying consolidated financial
statements present the consolidated financial position, results of
operations and cash flows of the Partnership and its wholly-owned
subsidiary, Ferrellgas Partners Finance Corp. The Company's 1.0101% General
Partner interest in Ferrellgas, L.P. is accounted for as a minority
interest. All material intercompany profits, transactions and balances have
been eliminated.
F-7
<PAGE>
(4) Cash and cash equivalents: For purposes of the Consolidated Statements
of Cash Flows, the Partnership considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
(5) Inventories: Inventories are stated at the lower of cost or market
using average cost and actual cost methods.
(6) Property, plant and equipment and intangible assets: Property, plant and
equipment is stated at cost less accumulated depreciation. Expenditures for
maintenance and routine repairs are expensed as incurred. Depreciation is
calculated using the straight-line method based on the estimated useful
lives of the assets ranging from two to thirty years. Intangible assets,
consisting primarily of customer location values and goodwill, are stated at
cost, net of amortization calculated using the straight-line method over
periods ranging from 5 to 40 years. Accumulated amortization of intangible
assets totaled $123,531,000 and $109,211,000 as of July 31, 1998 and 1997,
respectively. The Partnership, using its best estimates based on reasonable
and supportable assumptions and projections, reviews for impairment of
long-lived assets and certain identifiable intangibles to be held and used
whenever events or changes in circumstances indicate that the carrying
amount of its assets might not be recoverable and has concluded no financial
statement adjustment is required.
(7) Accounting for derivative commodity contracts: The Partnership enters
into commodity forward and futures purchase/sale agreements and commodity
options involving propane and related products which are used both for
trading and overall risk management purposes. To the extent such contracts
are entered into at fixed prices and thereby subject the Partnership to
market risk, the contracts are accounted for using the fair value method.
Under the fair value method, derivatives are carried on the balance sheet at
fair value with changes in that value recognized in earnings. The
Partnership classifies all earnings from derivative commodity contracts as
other revenue on the statement of earnings.
(8) Revenue Recognition: Sales are generally recognized by the Partnership
when product is delivered or shipped to its customers.
(9) Income taxes: The Partnership is a limited partnership. As a result, the
Partnership's earnings or loss for Federal income tax purposes is included
in the tax returns of the individual partners. Accordingly, no recognition
has been given to income taxes in the accompanying financial statements of
the Partnership. Net earnings for financial statement purposes may differ
significantly from taxable income reportable to unitholders as a result of
differences between the tax basis and financial reporting basis of assets
and liabilities and the taxable income allocation requirements under the
Partnership Agreement.
(10) Net earnings per limited partner unit: Net earnings (loss) per limited
partner unit is computed by dividing net earnings, after deducting the
General Partner's 1% interest, by the weighted average number of outstanding
Common Units, Subordinated Units and the dilutive effect (if any) of
Subordinated Unit options in accordance with Statement of Financial
Accounting Standard ("SFAS") No. 128, "Earnings Per Share". The only effect
of the application of SFAS No. 128 on the earnings per share was a decrease
of $0.01 per unit in fiscal year 1997 to net earnings per limited partner
unit. This decrease was due to including the effect of assuming the
conversion of 143,000 Unit Options in the denominator of the dilutive
per-unit computation.
F-8
<PAGE>
(11) Unit-based compensation: The Partnership accounts for its Unit Option
Plan under the provisions of Accounting Principles Board ("APB") No. 25,
"Accounting for Stock Issued to Employees," and makes the pro forma information
disclosures required under the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation."
(12) Adoption of new accounting standards: The Financial Standards
Accounting Board recently issued the following new accounting standards: SFAS
No. 130 "Reporting Comprehensive Income", SFAS No. 131 "Disclosures About
Segments of an Enterprise and Related Information", SFAS No. 132 "Employers'
Disclosures about Pensions and Other Postretirement Benefits" and SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities". SFAS Nos. 130,
131 and 132 are required to be adopted by the Partnership for the fiscal year
ended July 31, 1999. The adoption of SFAS Nos. 130 and 132 are not expected to
have a material effect on the Partnership's financial position or results of
operations. The Partnership is currently assessing the impact of SFAS No. 131 on
disclosure requirements for the next year. SFAS No. 133 is required to be
adopted by the Partnership for the fiscal year ended July 31, 2000. The
Partnership is currently assessing its impact on the Partnership's financial
position and results of operations.
C. Quarterly Distributions of Available Cash
The Partnership makes quarterly cash distributions of all of its "Available
Cash", generally defined as consolidated cash receipts less consolidated
cash disbursements and net changes in reserves established by the General
Partner for future requirements. These reserves are retained to provide for
the proper conduct of the Partnership business, or to provide funds for
distributions with respect to any one or more of the next four fiscal
quarters.
Distributions by the Partnership in an amount equal to 100% of its Available
Cash will generally be made 98% to the Common and Subordinated Unitholders
(the "Unitholders") and 2% to the General Partner, subject to the payment of
incentive distributions to the holders of Incentive Distribution Rights to
the extent that certain target levels of cash distributions are achieved. To
the extent there is sufficient Available Cash, the holders of Common Units
have the right to receive the "Minimum Quarterly Distribution" ($0.50 per
Unit), plus any "arrearages", prior to any distribution of Available Cash to
the holders of Subordinated Units. Common Units will not accrue arrearages
for any quarter after the "Subordination Period" (as defined below) and
Subordinated Units will not accrue any arrearages with respect to
distributions for any quarter.
In general, the Subordination Period will continue indefinitely until the
first day of any quarter beginning on or after August 1, 1999, in which (i)
distributions of Available Cash constituting Cash from Operations (as
defined in the Partnership Agreement) equal or exceed the Minimum Quarterly
Distribution on the Common Units and the Subordinated Units for each of the
three consecutive four quarter periods immediately preceding such date and
(ii) the Partnership has invested at least $50 million in acquisitions and
capital additions or improvements to increase the operating capacity of the
Partnership. Upon expiration of the Subordination Period, all remaining
Subordinated Units will convert to Common Units.
The Partnership makes distributions of all of its Available Cash within 45
days after the end of each fiscal quarter ending January, April, July and
October to holders of record on the applicable record date.
F-9
<PAGE>
<TABLE>
<CAPTION>
D. Supplemental Balance Sheet Information
Inventories consist of:
<S> <C> <C>
(in thousands) 1998 1997
-------------- --------------
Liquefied propane gas and related products $26,316 $35,351
Appliances, parts and supplies 8,411 7,761
-------------- --------------
$34,727 $43,112
============== ==============
</TABLE>
In addition to inventories on hand, the Partnership enters into
contracts to buy product for supply purposes. Nearly all such contracts
have terms of less than one year and most call for payment based on
market prices at the date of delivery. All fixed price contracts have
terms of less than one year. As of July 31, 1998, in addition to the
inventory on hand, the Partnership had committed to take delivery of
approximately 20,812,000 gallons at a fixed price for its estimated
future retail propane sales.
<TABLE>
<CAPTION>
Property, plant and equipment consist of:
<S> <C> <C>
(in thousands) 1998 1997
------------- --------------
Land and improvements $30,368 $29,849
Buildings and improvements 40,557 39,907
Vehicles 50,810 54,879
Furniture and fixtures 22,397 23,985
Bulk equipment and district facilities 66,150 59,876
Tanks and customer equipment 404,532 402,608
Other 5,969 3,870
------------- --------------
620,783 614,974
Less: accumulated depreciation 224,928 209,238
------------- --------------
$395,855 $405,736
============== =============
</TABLE>
Depreciation expense totaled $30,034,000, $29,960,000, and $25,101,000,
for the years ended July 31, 1998, 1997, and 1996, respectively.
<TABLE>
<CAPTION>
Other current liabilities consist of:
<S> <C> <C>
(in thousands) 1998 1997
-------------- -------------
Accrued insurance $4,563 $7,327
Accrued interest 12,914 13,071
Accrued payroll 8,635 8,161
Other 15,655 20,863
-------------- -------------
$41,767 $49,422
============== =============
</TABLE>
F-10
<PAGE>
<TABLE>
<CAPTION>
E. Long-Term Debt
Long-term debt consists of:
<S> <C> <C>
(in thousands) 1998 1997
------------- ------------
Senior Notes
Fixed rate, 10%, due 2001 (1) $200,000 $200,000
Fixed rate, 9.375%, due 2006 (2) 160,000 160,000
Credit Agreement
Term loan, 8.5% and 6.25%, due 2001 (3) 50,000 50,000
Revolving credit loans, 8.5% and 6.25%, due 1999 (3) 85,850 64,614
Notes payable, 6.7% and 6.4% weighted average interest rates,
respectively, due 1998 to 2007 (4) 13,558 14,567
------------- ------------
509,408 489,181
Less: current portion 2,186 1,847
------------- ------------
$507,222 $487,334
============= ============
</TABLE>
(1) The OLP fixed rate Senior Notes, issued in June 1994, are general
unsecured obligations of the OLP and rank on an equal basis in
right of payment with all senior indebtedness of the OLP and senior
to all subordinated indebtedness of the OLP. The Senior Notes were
redeemed at the option of the OLP on August 5, 1998 with a 5%
premium payable concurrent with the issuance of $350,000,000 of new
unsecured OLP Senior Notes ("New Senior Notes").
(2) The MLP fixed rate Senior Secured Notes, issued in April 1996, will be
redeemable at the option of the MLP, in whole or in part, at any time on or
after June 15, 2001. The notes are secured by the MLP's partnership interest in
the OLP. The Senior Secured Notes bear interest from the date of issuance,
payable semi-annually in arrears on June 15 and December 15 of each year. Due to
a change of control in the ownership of the General Partner on July 17, 1998 as
a result of the ESOP transaction described in Note A, the MLP was required,
pursuant to the MLP fixed rate Senior Secured Note Indenture, to offer to
purchase the outstanding MLP fixed rate Senior Secured Notes at a price of 101%
of the principal amount thereof plus accrued and unpaid interest. The offer to
purchase was made on July 27, 1998 and expired August 26, 1998. Upon the
expiration of the offer, the MLP accepted for purchase $65,000 of the notes
which were all of the notes tendered pursuant to the offer. The MLP assigned its
right to purchase the notes to a third party.
(3) At July 31, 1998, the unsecured $255,000,000 Credit Facility (the
"Credit Facility") consisted of a $50,000,000 term loan facility, a $185,000,000
revolving credit facility for general corporate, working capital and acquisition
purposes (of which $50,000,000 is available to support letters of credit) and a
$20,000,000 revolving working capital facility, which is subject to an annual
reduction in outstanding balances to zero for thirty consecutive days. On August
4, 1998, outstanding borrowings under the OLP Credit Facility were refinanced
with the issuance of New Senior Notes and the refinancing with existing lenders
of the existing OLP Credit Facility with a new $145,000,000 revolving credit
F-11
<PAGE>
facility ("New Credit Facility"). All borrowings under the Credit Facility bear
interest at either LIBOR plus an applicable margin varying from 0.425% to 1.375%
or the bank's base rate, depending on the nature of the borrowing. The bank's
base rate at July 31, 1998 and 1997 was 8.5% on both dates. To offset the
variable rate characteristic of the Credit Facility and the New Credit Facility,
the OLP entered into interest rate collar agreements, expiring between October
1998 and December 2001, with two major banks limiting the floating rate portion
of LIBOR-based loan interest rates on a notional amount of $100,000,000 to
between 4.9% and 6.5%.
(4) The notes payable are secured by approximately $3,729,000 and
$4,542,000 of property and equipment at July 31, 1998 and 1997, respectively.
On July 1, 1998, the OLP entered into an agreement for the issuance of $350
million of privately placed fixed rate senior notes ("New Senior Notes")
funded August 4, 1998 in five series with maturities ranging from year 2005
through 2013. The proceeds of the offering were used to redeem the OLP
fixed rate Senior Notes issued in June 1994, and to repay outstanding
indebtedness under the Credit Facility.
The OLP also entered into an agreement on July 2, 1998 with the lenders
under the existing Credit Facility for a New Credit Facility effective
August 4, 1998. The New Credit Facility provides for (i) a $40,000,000
unsecured working capital facility subject to an annual reduction in
borrowings to zero for thirty consecutive days, (ii) a $50,000,000
unsecured working capital and general corporate facility, including a
letter of credit facility, and (iii) a $55,000,000 unsecured general
corporate and acquisition facility. The New Credit Facility matures July 2,
2001.
At July 31, 1998 and 1997, $21,150,000 and $21,786,000, respectively, of
short-term borrowings were outstanding under the revolving line of credit
and letters of credit outstanding, used primarily to secure obligations
under certain insurance arrangements, totaled $29,056,000 and $24,102,000,
respectively.
The Senior Secured Notes, the Senior Notes and the Credit Facility
Agreement contain various restrictive covenants applicable to the MLP and
OLP and its subsidiaries, the most restrictive relating to additional
indebtedness, sale and disposition of assets, and transactions with
affiliates. In addition, the Partnership is prohibited from making cash
distributions of the Minimum Quarterly Distribution if a default or event
of default exists or would exist upon making such distribution, or if the
Partnership fails to meet certain coverage tests. The Partnership is in
compliance with all requirements, tests, limitations and covenants related
to the Senior Secured Note Indenture, the Senior Note Indenture and Credit
Facility agreement. The New Senior Notes and the New Credit Facility
agreements have similar restrictive covenants to the Senior Note Indenture
and Credit Facility agreement that were replaced.
Taking into account the effects of the New Senior Notes and New Credit
Facility, the annual principal payments on long-term debt for each of the
next five fiscal years are $2,186,000 in 1999, $2,269,000 in 2000,
$3,145,000 in 2001, $1,037,000 in 2002, and $1,114,000 in 2003.
During fiscal year 1996, the Partnership recognized an extraordinary loss
from the write-off of unamortized financing costs of approximately
$965,000, net of minority interest of $10,000, resulting from the early
extinguishment of $50,000,000 of its floating rate senior notes.
F-12
<PAGE>
F. Partners' Capital
Partners' capital consists of 14,699,678 Common Units representing a 46%
limited partner interest, 16,593,721 Subordinated Units representing a 53%
limited partner interest, and a 1% General Partner interest.
The Agreement of Limited Partnership of Ferrellgas Partners, L.P. (the
"Partnership Agreement") contains specific provisions for the allocation of
net earnings and loss to each of the partners for purposes of maintaining
the partner capital accounts.
On August 1, 1999, the Subordination Period will end and the Subordinated
Units will convert to Common Units, provided that certain remaining
financial tests, which are related to making the Minimum Quarterly
Distribution on all Units, are satisfied for each of the three consecutive
four quarter periods ending on July 31, 1999. During the Subordination
Period, the Partnership may issue up to 7,000,000 Common Units (excluding
Common Units issued in connection with conversion of Subordinated Units
into Common Units) or an equivalent number of securities ranking on a
parity with the Common Units, and an unlimited number of partnership
interests junior to the Common Units without a Unitholder vote. The
Partnership may also issue additional Common Units during the Subordination
Period in connection with acquisitions if certain cash flow criteria are
met. After the Subordination Period, the Partnership Agreement authorizes
the General Partner to cause the Partnership to issue an unlimited number
of additional general and limited partner interests and other equity
securities of the Partnership for such consideration and on such terms and
conditions as shall be established by the General Partner without the
approval of any Unitholders.
The Partnership maintains a shelf registration statement for Common Units
representing limited partner interests in the Partnership. The Common Units
may be issued from time to time by the Partnership in connection with the
Partnership's acquisition of other businesses, properties or securities in
business combination transactions.
G. Transactions with Related Parties
The Partnership has no employees and is managed and controlled by the
General Partner. Pursuant to the Partnership Agreement, the General Partner
is entitled to reimbursement for all direct and indirect expenses incurred
or payments it makes on behalf of the Partnership, and all other necessary
or appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by the General Partner in connection with operating the
Partnership's business. These costs, which totaled $129,808,000,
$128,033,000 and $109,637,000 for the years ended July 31, 1998, 1997 and
1996, respectively, include compensation and benefits paid to officers and
employees of the General Partner, and general and administrative costs.
Prior to the ESOP transaction completed on July 17, 1998, Ferrell, the
parent of the General Partner and its other wholly-owned subsidiaries,
engaged in various investment activities including, but not limited to,
commodity investments and the trading thereof. The Partnership from time to
time acted as an agent on behalf of Ferrell to purchase and market natural
gas liquids and enter into certain trading activities. The Partnership
charged all direct and indirect expenses incurred in performing this agent
role to Ferrell. During the years ended July 31, 1998 and 1997, the
Partnership, as Ferrell's agent, performed the following services: a)
purchased 1,089,929 barrels of propane during 1997 b) marketed and sold
469,820 and 619,929 barrels, in 1998 and 1997, respectively, and c) entered
into certain hedging arrangements during 1997. The Partnership charged
Ferrell $66,467 and $73,078, in 1998 and 1997, respectively, for its direct
and indirect expenses. Of the 469,820 barrels of propane sold in fiscal
year 1998, all of these barrels were sold to and used by the Partnership at
the applicable market prices (an aggregate of $7,405,200). Of the 619,929
F-13
<PAGE>
barrels of propane sold in fiscal year 1997, 534,929 barrels were sold to
and used by the Partnership at the applicable market prices (an aggregate
of $13,128,765). In addition, during fiscal 1998, the Partnership sold to
Ferrell certain physical and derivative crude oil commodity contracts
totaling 4,120,000 aggregate barrels at a price of $2,548,927. Management
believes these transactions were under terms that were no less favorable to
the Partnership than those arranged with other parties. Subsequent to the
close of the ESOP transaction, Ferrell divested of its wholly owned
subsidiaries that were engaged in these commodity and trading activities.
A. Andrew Levison, a director of the General Partner, is a Managing
Director of Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ").
DLJ acted as an underwriter with regard to the private placement of
$160,000,000 Senior Secured Notes issued in April 1996 and was paid fees of
$4,000,000 in 1996.
H. Contingencies and Commitments
The Partnership is threatened with or named as a defendant in various
lawsuits which, among other items, claim damages for product liability. It
is not possible to determine the ultimate disposition of these matters;
however, management is of the opinion that there are no known claims or
contingent claims that are likely to have a material adverse effect on the
results of operations or financial condition of the Partnership.
Certain property and equipment is leased under noncancellable operating
leases which require fixed monthly rental payments and which expire at
various dates through 2017. Rental expense under these leases totaled
$17,095,000, $13,169,000, and $12,054,000, for the years ended July 31,
1998, 1997 and 1996, respectively. Future minimum lease commitments for
such leases are $14,949,000 in 1999, $13,128,000 in 2000, $10,940,000 in
2001, $7,749,000 in 2002, $3,014,000 in 2003 and $533,000 thereafter.
I. Employee Benefits
The Partnership has no employees and is managed and controlled by the
General Partner. The Partnership assumes all liabilities, which include
specific liabilities related to the following employee benefit plans for
the benefit of the officers and employees of the General Partner.
On July 17, 1998, Ferrell formed an Employee Stock Ownership Plan ("ESOP").
Ferrell is expected to make future contributions to the Ferrell Companies,
Inc. Employee Stock Ownership Trust ("ESOT") which will cause a portion of
the shares of Ferrell owned by the ESOT to be allocated to employees'
accounts over time. The allocation of Ferrell shares to employee accounts
will cause a non-cash compensation charge to be incurred by Ferrell,
equivalent to the fair value of such shares allocated. The Partnership is
not obligated to fund or make contributions to the ESOT. Nevertheless, due
to the benefit received by the Company's employees from participating in
the ESOP, the non-cash compensation charge is also recorded by the
Partnership. The non-cash compensation charge recorded by the Partnership
for fiscal year 1998 was $350,000.
The General Partner and its parent Ferrell have a defined contribution
profit-sharing plan which covers substantially all employees with more than
one year of service. Contributions were made to the plan at the discretion
of Ferrell's Board of Directors. With the establishment of the ESOP in July
1998, the Company decided to suspend future contributions to the profit
sharing plan beginning with fiscal year 1998. The profit sharing plan,
F-14
<PAGE>
which qualifies under section 401(k) of the Internal Revenue Code, also
provides for matching contributions under a cash or deferred arrangement
based upon participant salaries and employee contributions to the plan.
These matching contributions are not affected by the establishment of the
ESOP. Contributions for the years ended July 31, 1997 and 1996,
respectively, were $3,000,000 and $1,160,000 under the profit sharing
provision and for the years ended July 31, 1998, 1997 and 1996,
respectively, were $1,693,000, $1,542,000 and $1,388,000 under the 401(k)
provision.
J. Unit Options
The Ferrellgas, Inc. Unit Option Plan (the "Unit Option Plan") currently
authorizes the issuance of options (the "Unit Options") covering up to
850,000 of the MLP's Subordinated Units to certain officers and employees
of the General Partner. The Unit Options are exercisable beginning after
July 31, 1999, assuming the Subordination Period has elapsed at exercise
prices ranging from $16.80 to $21.67 per unit, which is an estimate of the
fair market value of the Subordinated Units at the time of the grant. The
options vest immediately or over a one to five year period, and expire on
the tenth anniversary of the date of the grant. Upon conversion of the
Subordinated Units held by the General Partner and its affiliates,
outstanding Subordinated Unit Options granted will convert to the MLP's
Common Unit Options.
The Partnership accounts for stock-based compensation using the intrinsic
value method prescribed in APB No. 25 and related Interpretations.
Accordingly, no compensation cost has been recognized for the Unit Option
Plan. Had compensation cost for the Unit Option Plan been determined based
upon the fair value at the grant date for awards under these plans,
consistent with the methodology prescribed under SFAS No. 123, the
Partnership's net income and earnings per share would have been reduced by
approximately $40,000, $29,000, and $7,000, or less than $0.01 per unit for
the 1998, 1997 and 1996 fiscal years, respectively. The fair value of the
options granted during the 1998, 1997 and 1996 fiscal years was determined
using a binomial option valuation model with the following assumptions: a)
distribution amount of $0.50 per unit per quarter for 1998, 1997 and 1996,
b) average Common Unit price volatility of 16.2%, 16.9% and 16.9% was used
as an estimate of Subordinated Unit volatility for 1998, 1997 and 1996,
respectively, c) the risk-free interest rate used was 5.7%, 5.9% and 5.9%,
for 1998, 1997 and 1996, respectively and d) the expected life of the
option is 5 years for 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Number Weighted Average Weighted
of Exercise Price Average Fair
Units Value
------------ -------------------- ---------------
------------ -------------------- ---------------
<S> <C> <C> <C> <C>
Outstanding, July 31, 1995 701,500 $16.98
Granted 99,750 19.96 $0.34
Forfeited (132,825) 17.21
------------- -------------------- ---------------
Outstanding, July 31, 1996 668,425 17.38
Granted 216,500 20.23 0.52
Forfeited (157,325) 18.02
------------ -------------------- ---------------
Outstanding, July 31, 1997 727,600 18.09
Granted 118,500 19.47 0.47
Forfeited (64,100) 19.16
------------ -------------------- ---------------
Outstanding, July 31, 1998 782,000
------------ -------------------- ---------------
Options exercisable, July 31, 1998 0
------------ -------------------- ---------------
Options Outstanding at July 31, 1998
-------------------------------------------------
Range of option prices at end of year $16.80-$21.67
Weighted average remaining contractual life 7.8 years
</TABLE>
F-15
<PAGE>
K. Disclosures About Off Balance Sheet Risk and Fair Value of Financial
Instruments
The carrying amount of current financial instruments approximates fair
value because of the short maturity of the instruments. The estimated fair
value of the Partnership's long-term debt was $524,612,000 and $507,134,000
as of July 31, 1998 and 1997, respectively. The fair value is estimated
based on quoted market prices.
Interest Rate Collar Agreements. The Partnership has entered into various
interest rate collar agreements involving the exchange of fixed and
floating interest payment obligations without the exchange of the
underlying principal amounts. At July 31, 1998 and 1997, the total notional
principal amount of these agreements was $100,000,000 and $125,000,000,
respectively, and the fair value of these agreements was immaterial to the
financial position or results of operations of the Partnership. The
counterparties to these agreements are large financial institutions. The
interest rate collar agreements subject the Partnership to financial risk
that will vary during the life of these agreements in relation to market
interest rates. The mark to market adjustment applicable to the portion of
the notional amount in excess of variable rate indebtedness at July 31,
1998 was not material to the financial position or the results of
operations of the Partnership.
Option Commodity Contracts. The Partnership is a party to certain option
contracts, involving various liquefied petroleum products, for overall risk
management purposes in connection with its supply and trading activities.
Contracts are executed with private counterparties and to a lesser extent
on national mercantile exchanges. Open contract positions are summarized
below.
Forward, Futures and Swaps Commodity Contracts. The Partnership is a party
to certain forward, futures and swaps contracts for trading purposes. Net
gains from trading activities were $7,464,000, $5,476,000, $7,323,000, for
the years ended July 31, 1998, 1997, and 1996, respectively. Such contracts
permit settlement by delivery of the commodity. Open contract positions are
summarized below (assets are defined as purchases or long positions and
liabilities are sales or short positions).
<TABLE>
<CAPTION>
As of July 31
(In thousands, except price per gallon data)
Derivative Commodity Instruments Held for Derivative Commodity
Purposes Other than Trading Instruments Held for
(Options) Trading Purposes
(Forward, Futures and Swaps)
------------------------------------------- ---------------------------------------------------
1998 1997 1998 1997
-------------------- ------------------- ----------------------- -----------------------
Asset Liab. Asset Liab. Asset Liab. Asset Liab.
--------- ---------- -------- ---------- ----------- ----------- ----------- -----------
Volume
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(gallons) 3,927 (13,444) 14,406 (13,189) 568,949 (628,573) 165,739 (187,744)
Price ((cent)/gal) 31 49-18 38-35 50-35 35-23 35-24 40-32 43-33
Maturity 8/98- 8/98- 8/97- 9/97- 8/98- 8/98- 8/97- 8/97-
Dates 12/98 2/99 3/98 2/98 12/99 12/99 3/98 7/98
Contract
Amounts ($) 8,295 (19,757) 10,193 (13,164) 181,541 (201,497) 64,859 (75,578)
Fair Value ($) 7,901 (19,538) 10,244 (13,071) 186,696 (203,162) 62,925 (73,217)
Unrealized
gain (loss) ($) (394) 219 51 93 5,155 (1,665) (1,934) 2,361
</TABLE>
F-16
<PAGE>
Risks related to these contracts arise from the possible inability of the
counterparties to meet the terms of their contracts and changes in
underlying product prices. The Partnership attempts to minimize market risk
through the enforcement of its trading policies, which include total
inventory limits and loss limits, and attempts to minimize credit risk
through application of its credit policies.
L. Business Combinations
During the year ended July 31, 1998, the Partnership made acquisitions of
businesses valued at $12,670,000. This amount was funded by $9,839,000 cash
payments, $2,000,000 in common units and noncash transactions totaling
$831,000 in other consideration. All transactions have been accounted for
similar to purchase accounting and, accordingly, the results of operations
of all acquisitions have been included in the consolidated financial
statements from their dates of contribution. The pro forma effect of these
transactions was not material to the results of operations.
During the year ended July 31, 1997, the Company made acquisitions of
businesses valued at $40,200,000 (including working capital acquired of
$1,420,000). This amount was funded by $36,114,000 cash payments and
noncash transactions totaling $4,086,000 in other costs and consideration.
All transactions have been accounted for similar to purchase accounting
and, accordingly, the results of operations of all acquisitions have been
included in the consolidated financial statements from their dates of
contribution. The pro forma effect of these transactions was not material
to the results of operations.
On April 30, 1996, the General Partner consummated the purchase of all of
the stock of Skelgas Propane, Inc. ("Skelgas"), a subsidiary of Superior
Propane, Inc. of Toronto, Canada. The cash purchase price, after working capital
adjustments, was $89,404,000.
As of May 1, 1996, the General Partner (i) caused Skelgas and each of its
subsidiaries to be merged into the General Partner and (ii) transferred all
of the assets of Skelgas and its subsidiaries to the Operating Partnership.
In exchange, the Operating Partnership assumed substantially all of the
liabilities, whether known or unknown, associated with Skelgas and its
subsidiaries and their propane business (excluding income tax liabilities).
In consideration of the retention by the General Partner of certain income
tax liabilities, the Partnership issued 41,203 Common Units to the General
Partner. The liabilities assumed by the Operating Partnership included the
loan agreement under which the General Partner borrowed funds to pay the
purchase price for Skelgas. Immediately following the transfer of assets
and related transactions described above, the Operating Partnership repaid
the loan with cash and borrowings under the Operating Partnership's
existing acquisition bank credit line. The total assets contributed to the
Operating Partnership (at the General Partner's cost basis) have been
allocated as follows: (i) working capital of $17,168,000, (ii) property,
plant and equipment of $60,947,000 and (iii) and the balance to intangible
assets. In total, during the year ended July 31, 1996, the Partnership made
acquisitions and received contributions of businesses valued at
$128,165,000 (including working capital acquired of $19,362,000). This
amount was funded by $8,116,000 of cash payments and the following noncash
transactions: $108,120,000 debt assumed, $4,825,000 issuance of Partnership
units, and $7,104,000 other costs and consideration.
All transactions have been accounted for similar to purchase accounting and,
accordingly, the results of operations of all acquisitions have been
included in the consolidated financial statements from their dates of
contribution. The following pro forma financial information assumes the
Skelgas transaction
F-17
<PAGE>
occurred at the beginning of the period presented and also includes the pro
forma effects of the Partnership's issuance of the $160,000,000 of 9 3/8%
Senior Notes in April 1996 (as described in Note E):
(in thousands, except per unit amounts)
(unaudited) Pro Forma Year
Ended
July 31, 1996
-----------------
Total revenues $732,372
Income before extraordinary loss 21,734
Net earnings 20,769
Net earnings per limited partner unit $ 0.66
F-18
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ferrellgas Partners Finance Corp.
Liberty, Missouri
We have audited the accompanying balance sheets of Ferrellgas Partners Finance
Corp. (a wholly-owned subsidiary of Ferrellgas Partners, L.P.), as of July 31,
1998, and 1997, and the related statement of earnings, stockholder's equity and
cash flows for the years ended July 31, 1998, 1997 and the period from inception
(April 8, 1996) to July 31, 1996. These financial statements are the
responsibility of the Company's management. 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 that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Ferrellgas Partners Finance Corp. as of July
31, 1998 and 1997, and the results of its operations and its cash flows for the
years ended July 31, 1998, 1997 and the period from inception (April 8, 1996) to
July 31, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 24, 1998
F-19
<PAGE>
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly owned subsidiary of Ferrellgas Partners, L.P.)
BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, July 31,
ASSETS 1998 1997
----------------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Cash $1,000 $1,000
----------------- -----------------
Total Assets $1,000 $1,000
================= =================
STOCKHOLDER'S EQUITY
-----------------------------------------------------------------
Common stock, $1.00 par value; 2,000 shares
authorized; 1,000 shares issued and outstanding $1,000 $1,000
Additional paid in capital 548 327
Accumulated deficit (548) (327)
----------------- -----------------
Total Stockholder's Equity 1,000 1,000
----------------- -----------------
Total Liabilities and Stockholder's Equity $1,000 $1,000
================= =================
</TABLE>
See notes to financial statements
F-20
<PAGE>
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly owned subsidiary of Ferrellgas Partners, L.P.)
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
For the For the From
year ended year ended inception to
July 31, 1998 July 31, 1997 July 31, 1996
----------------- ----------------- --------------------
Revenues $ - $ - $ -
<S> <C> <C> <C>
General and administrative expense 221 285 42
----------------- ----------------- --------------------
Net loss $(221) $(285) $(42)
================= ================= ====================
</TABLE>
See notes to financial statements
F-21
<PAGE>
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly owned subsidiary of Ferrellgas Partners, L.P.)
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Total
Common stock Additional Accumulated stockholder's
-----------------------------
Shares Dollars paid in capital deficit equity
------------- ------------ ------------------------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
April 8, 1996 0 $ 0 $ 0 $ 0 $ 0
------------- ------------ ----------------- ----------------- ------------------
Capital contribution 1,000 1,000 42 - 1,042
Net loss - - - (42) (42)
------------- ------------ ----------------- ----------------- ------------------
July 31, 1996 1,000 1,000 42 (42) 1,000
Capital contribution - - 285 - 285
Net loss - - - (285) (285)
------------- ------------ ----------------- ----------------- ------------------
July 31, 1997 1,000 1,000 327 (327) 1,000
Capital contribution - - 221 - 221
Net loss - - - (221) (221)
------------- ------------ ----------------- ----------------- ------------------
July 31, 1998 1,000 $1,000 $548 $(548) $1,000
============= ============ ================= ================= ==================
</TABLE>
See notes to financial statements
F-22
<PAGE>
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly owned subsidiary of Ferrellgas Partners, L.P.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the From
year ended year ended inception to
July 31, 1998 July 31, 1997 July 31, 1996
----------------- ----------------- -----------------
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Net loss $(221) $(285) $(42)
----------------- ----------------- -----------------
Cash used by operating activities (221) (285) (42)
----------------- ----------------- -----------------
Cash Flows From Financing Activities:
Capital contribution 221 285 1,042
Net advance from affiliate 0 0 0
----------------- ----------------- -----------------
Cash provided by financing activities 221 285 1,042
----------------- ----------------- -----------------
Increase (decrease) in cash 0 0 1,000
Cash - beginning of period 1,000 1,000 0
----------------- ----------------- -----------------
Cash - end of period $1,000 $1,000 $1,000
================= ================= =================
</TABLE>
See notes to financial statements
F-23
<PAGE>
FERRELLGAS PARTNERS FINANCE CORP.
(a wholly-owned subsidiary of Ferrellgas Partners, L.P.)
NOTES TO FINANCIAL STATEMENTS
A. Formation
Ferrellgas Partners, Finance Corp. (the "Finance Corp."), a Delaware
corporation, was formed on March 28, 1996 and is a wholly-owned subsidiary of
Ferrellgas Partners, L.P. (the "Partnership").
The Partnership contributed $1,000 to the Finance Corp. on April 8, 1996
in exchange for 1,000 shares of common stock.
B. Commitment
On April 26, 1996, the Partnership issued $160,000,000 of 9 3/8% Senior
Secured Notes due 2006 (the "Senior Notes"). The Senior Notes will be
redeemable at the option of the Partnership, in whole or in part, at any
time on or after June 15, 2001. Interest is payable semi-annually in
arrears on June 15 and December 15 of each year. The Finance Corp.
serves as a co-obligor for the Senior Notes.
C. Income Taxes
Income taxes have been computed as though the Company files its own
income tax return. Deferred income taxes are provided as a result of
temporary differences between financial and tax reporting using the
asset/liability method. Deferred income taxes are recognized for the tax
consequences of temporary differences between the financial statement
carrying amounts and tax basis of existing assets and liabilities.
Due to the inability of the Company to utilize the deferred tax benefit
of $232 associated with the current year net operating loss carryforward
of $597, which expire at various dates through July 31, 2013, a
valuation allowance has been provided on the full amount of the deferred
tax asset. Accordingly, there is no net deferred tax benefit for the
year ended July 31, 1998 or the period ended July 31, 1997 and there is
no net deferred tax asset as of July 31, 1998 or July 31, 1997.
F-24
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
Page
Ferrellgas Partners, L.P. and Subsidiaries
Independent Auditors' Report on Schedules....................................S-2
Schedule I Parent Company Only Balance Sheets as
of July 31, 1998 and 1997, and Statements
of Earnings and Cash Flows for the Years
ended July 31, 1998, 1997, and 1996........................S-3
Schedule II Valuation and Qualifying Accounts for the
Years ended July 31, 1998, 1997 and 1996...................S-6
S-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Ferrellgas Partners, L.P. and Subsidiaries
Liberty, Missouri
We have audited the consolidated financial statements of Ferrellgas Partners,
L.P. (formerly Ferrellgas, Inc.), and subsidiaries as of July 31, 1998, and
1997, and for the years ended July 31, 1998, 1997, and 1996, and have issued our
report thereon dated September 24, 1998. Our audit also included the financial
statement schedules listed at Item 14(a)2. These financial statement schedules
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion based on our audit. In our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information therein set forth.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
September 24, 1998
S-2
<PAGE>
FERRELLGAS PARTNERS, L.P.
PARENT ONLY
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
ASSETS July 31, 1998 July 31, 1997
- ---------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Cash and cash equivalents $ 1 $ 1
Investment in Ferrellgas, L.P. 148,013 203,360
Other assets, net
2,778 3,298
----------------- -----------------
Total Assets $ 150,792 $ 206,659
================= =================
LIABILITIES AND PARTNERS' CAPITAL
- ----------------------------------------------------
Other current liabilities $ 1,875 $ 1,876
Long term debt 160,000 160,000
Partners' Capital
Common unitholders 27,985 52,863
Subordinated unitholders 19,908 50,337
General partner (58,976) (58,417)
----------------- -----------------
Total Partners' Capital (11,083) 44,783
----------------- -----------------
Total Liabilities and Partners' Capital $ 150,792 $ 206,659
================= =================
</TABLE>
S-3
<PAGE>
FERRELLGAS PARTNERS, L.P.
PARENT ONLY
STATEMENTS OF EARNINGS
(in thousands)
<TABLE>
<CAPTION>
For the Year Ended
---------------------------------------------------------
July 31, 1998 July 31, 1997 July 31, 1996
---------------- ----------------- ----------------
<S> <C> <C> <C>
Equity in earnings of Ferrellgas, L.P. $ 20,462 $ 38,673 $ 27,508
Operating expense 5 27 -
Interest expense 15,514 15,428 4,161
---------------- ----------------- ----------------
Net earnings $ 4,943 $ 23,218 $ 23,347
================ ================= ================
</TABLE>
S-4
<PAGE>
FERRELLGAS PARTNERS, L.P.
PARENT ONLY
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For the Year Ended
-----------------------------------------------------------
July 31, 1998 July 31, 1997 July 31, 1996
----------------- ----------------- ------------------
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Net earnings $ 4,943 $ 23,218 $ 23,347
Reconciliation of net earnings to
net cash from operating activities:
Amortization of capitalized financing costs 513 511 161
Equity in (earnings) loss of Ferrellgas, L.P. (20,671) (39,068) (27,508)
Other current assets 3 879 (4,854)
Distributions received from Ferrellgas, L.P. 78,176 80,085 62,863
Increase in other current liabilities (1) (2,980) 4,855
----------------- ----------------- ------------------
Net cash provided by operating activities 62,963 62,645 58,864
----------------- ----------------- ------------------
Cash Flows From Financing Activities:
Distributions to partners (63,176) (63,044) (62,863)
Additions to long-term debt - - 160,000
Contribution to subsidiary - - (156,000)
Net advance from affiliate 213 399 -
----------------- ----------------- ------------------
Net cash provided (used) by financing activities (62,963) (62,645) (58,863)
----------------- ----------------- ------------------
Increase in cash and cash equivalents - - 1
Cash and cash equivalents - beginning of period 1 1 -
----------------- ----------------- ------------------
Cash and cash equivalents - end of period $ 1 $ 1 $ 1
================= ================= ==================
</TABLE>
S-5
<PAGE>
FERRELLGAS PARTNERS, L.P. AND SUBSIDIARY
VALUATION AND QUALIFYING ACOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Deductions Balance
beginning cost/ Other (amounts at end
Description of period expenses Additions (A) charged-off) of period
- ---------------------------------------- -------------- -------------- -------------- --------------- ---------------
Year ended July 31, 1998
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $1,234 $3,003 $0 $2,856 $1,381
Accumulated amortization:
Intangible assets 109,211 14,320 0 0 123,531
Other assets 6,753 2,301 0 0 9,054
Year ended July 31, 1997
Allowance for doubtful accounts 1,169 2,604 0 2,539 1,234
Accumulated amortization:
Intangible assets 95,801 13,410 0 0 109,211
Other assets 4,647 2,106 0 0 6,753
Year ended July 31, 1996
Allowance for doubtful accounts 874 1,151 702 1,558 1,169
Accumulated amortization:
Intangible assets 81,995 11,620 2,946 760 95,801
Other assets 3,337 1,742 975 1,407 4,647
</TABLE>
(A) On April 30, 1996, the General Partner purchased all of the capital
stock of Skelgas, Inc. On May 1,1996 the General Partner contributed the assets
and substantially all of the liabilities associated with Skelgas, Inc. to the
Operating Partnership.The amounts reflected as "Other Additions" represent
valuation and qualifying accounts assumedby the Operating Partnership in
connection with the contribution by the General Partner.
S-6
FERRELLGAS, L.P.
----------------
NOTE PURCHASE AGREEMENT
----------------
DATED AS OF JULY 1, 1998
Re: $109,000,000 6.99% Senior Notes, Series A, due
August 1, 2005 $37,000,000 7.08% Senior Notes,
Series B, due August 1, 2006 $52,000,000 7.12%
Senior Notes, Series C, due August 1, 2008
$82,000,000 7.24% Senior Notes, Series D, due
August 1, 2010 $70,000,000 7.42% Senior Notes,
Series E, due August 1, 2013
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. AUTHORIZATION OF NOTES................................................................................1
SECTION 2. SALE AND PURCHASE OF NOTES............................................................................1
SECTION 3. CLOSING...............................................................................................2
SECTION 4. CONDITIONS TO CLOSING.................................................................................2
Section 4.1. Representations and Warranties....................................................................2
Section 4.2. Performance; No Default...........................................................................2
Section 4.3. Compliance Certificates...........................................................................3
Section 4.4. Opinions of Counsel...............................................................................3
Section 4.5. Purchase Permitted by Applicable Law, Etc.........................................................3
Section 4.6. Related Transactions..............................................................................4
Section 4.7. Payment of Special Counsel Fees...................................................................4
Section 4.8. Private Placement Numbers.........................................................................4
Section 4.9. Changes in Structure..............................................................................4
Section 4.10. Redemption of Senior Notes........................................................................4
Section 4.11. Rating............................................................................................4
Section 4.12. Proceedings and Documents.........................................................................4
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................4
Section 5.1. Organization; Power and Authority; Ownership......................................................4
Section 5.2. Authorization, Etc................................................................................5
Section 5.3. Disclosure........................................................................................5
Section 5.4. Organization and Ownership of Shares of Subsidiaries..............................................5
Section 5.5. Financial Statements..............................................................................6
Section 5.6. Compliance with Laws, Other Instruments, Etc......................................................6
Section 5.7. Governmental Authorizations, Etc..................................................................7
Section 5.8. Litigation; Observance of Agreements, Statutes and Orders.........................................7
Section 5.9. Taxes.............................................................................................7
Section 5.10. Title to Property; Leases.........................................................................7
Section 5.11. Licenses, Permits, Etc............................................................................8
Section 5.12. Compliance with ERISA.............................................................................8
Section 5.13. Private Offering by the Company...................................................................9
Section 5.14. Use of Proceeds; Margin Regulations...............................................................9
Section 5.15. Existing Indebtedness; Future Liens...............................................................9
Section 5.16. Foreign Assets Control Regulations, Etc..........................................................10
Section 5.17. Status under Certain Statutes....................................................................10
Section 5.18. Environmental Matters............................................................................10
SECTION 6. REPRESENTATIONS OF THE PURCHASER.....................................................................11
Section 6.1. Purchase for Investment..........................................................................11
Section 6.2. Source of Funds..................................................................................11
SECTION 7. INFORMATION AS TO COMPANY............................................................................12
Section 7.1. Financial and Business Information...............................................................12
Section 7.2. Officer's Certificate............................................................................15
Section 7.3. Inspection.......................................................................................15
Section 7.4. Change in Status of Subsidiaries.................................................................16
SECTION 8. PREPAYMENT OF THE NOTES..............................................................................16
Section 8.1. Prepayments......................................................................................16
Section 8.2. Optional Prepayments with Make-Whole Amount......................................................16
Section 8.3. Allocation of Partial Prepayments................................................................17
Section 8.4. Maturity; Surrender, Etc.........................................................................17
Section 8.5. Purchase of Notes................................................................................17
Section 8.6. Make-Whole Amount................................................................................17
SECTION 9. AFFIRMATIVE COVENANTS................................................................................19
Section 9.1. Compliance with Law..............................................................................19
Section 9.2. Insurance........................................................................................19
Section 9.3. Maintenance of Properties........................................................................19
Section 9.4. Payment of Taxes.................................................................................20
Section 9.5. Partnership Existence, Etc.......................................................................20
Section 9.6. Ranking..........................................................................................20
SECTION 10. NEGATIVE COVENANTS...................................................................................20
Section 10.1. Incurrence of Debt...............................................................................20
Section 10.2. Guaranty of MLP Notes............................................................................22
Section 10.3. Restricted Subsidiary Debt.......................................................................23
Section 10.4. Liens............................................................................................23
Section 10.5. Restricted Payments..............................................................................25
Section 10.6. Restrictions on Dividends of Subsidiaries, Etc...................................................26
Section 10.7. Mergers and Consolidations.......................................................................26
Section 10.8. Sale of Assets; Sale of Stock....................................................................27
Section 10.9. Nature of Business...............................................................................29
Section 10.10. Transactions with Affiliates.....................................................................29
Section 10.11. Certain Refinancings.............................................................................29
SECTION 11. EVENTS OF DEFAULT....................................................................................29
SECTION 12. REMEDIES ON DEFAULT, ETC.............................................................................32
Section 12.1. Acceleration.....................................................................................32
Section 12.2. Other Remedies...................................................................................32
Section 12.3. Rescission.......................................................................................32
Section 12.4. No Waivers or Election of Remedies, Expenses, Etc................................................33
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES........................................................33
Section 13.1. Registration of Notes............................................................................33
Section 13.2. Transfer and Exchange of Notes...................................................................33
Section 13.3. Replacement of Notes.............................................................................34
SECTION 14. PAYMENTS ON NOTES....................................................................................34
Section 14.1. Place of Payment.................................................................................34
Section 14.2. Home Office Payment..............................................................................34
SECTION 15. EXPENSES, ETC........................................................................................35
Section 15.1. Transaction Expenses.............................................................................35
Section 15.2. Survival.........................................................................................35
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.........................................36
SECTION 17. AMENDMENT AND WAIVER.................................................................................36
Section 17.1. Requirements.....................................................................................36
Section 17.2. Solicitation of Holders of Notes.................................................................36
Section 17.3. Binding Effect, Etc..............................................................................37
Section 17.4. Notes Held by Company, Etc.......................................................................37
SECTION 18. NOTICES..............................................................................................37
SECTION 19. REPRODUCTION OF DOCUMENTS............................................................................38
SECTION 20. CONFIDENTIAL INFORMATION.............................................................................38
SECTION 21. SUBSTITUTION OF PURCHASER............................................................................39
SECTION 22. MISCELLANEOUS........................................................................................39
Section 22.1. Successors and Assigns...........................................................................39
Section 22.2. Payments Due on Non-Business Days................................................................39
Section 22.3. Severability.....................................................................................40
Section 22.4. Construction.....................................................................................40
Section 22.5. Counterparts.....................................................................................40
Section 22.6. Governing Law....................................................................................40
Signatures......................................................................................................................40
</TABLE>
<PAGE>
SCHEDULE A -- INFORMATION RELATING TO PURCHASERS
SCHEDULE B -- DEFINED TERMS
SCHEDULE 5.1 -- Ownership of Company
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of
Subsidiary Equity Interest
SCHEDULE 5.5 -- Financial Statements
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.11 -- Patents, etc.
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Indebtedness and Liens
EXHIBIT 1-A -- Form of Series A Note
EXHIBIT 1-B -- Form of Series B Note
EXHIBIT 1-C -- Form of Series C Note
EXHIBIT 1-D -- Form of Series D Note
EXHIBIT 1-E -- Form of Series E Note
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the
Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the
Purchasers
EXHIBIT 10.1 -- Subordination Provisions Applicable to
Subordinated Debt
<PAGE>
FERRELLGAS, L.P.
One Liberty Plaza
Liberty, Missouri 64068
$109,000,000 6.99% Senior Notes, Series A, due August
1, 2005 $37,000,000 7.08% Senior Notes, Series B, due
August 1, 2006 $52,000,000 7.12% Senior Notes, Series
C, due August 1, 2008 $82,000,000 7.24% Senior Notes,
Series D, due August 1, 2010 $70,000,000 7.42% Senior
Notes, Series E, due August 1, 2013
Dated as of
July 1, 1998
TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
FERRELLGAS, L.P., a Delaware limited partnership (the "Company"),
agrees with the Purchasers listed in the attached Schedule A as follows:
SECTION 1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $350,000,000 aggregate
principal amount of its Senior Notes, comprised of $109,000,000 6.99% Senior
Notes, Series A, due August 1, 2005 (the "Series A Notes"), $37,000,000 7.08%
Senior Notes, Series B, due August 1, 2006 (the "Series B Notes"), $52,000,000
7.12% Senior Notes, Series C, due August 1, 2008 (the "Series C Notes"),
$82,000,000 7.24% Senior Notes, Series D, due August 1, 2010 (the "Series D
Notes"), and $70,000,000 7.42% Senior Notes, Series E, due August 1, 2013 (the
"Series E Notes") (said Series A Notes, Series B Notes, Series C Notes, Series D
Notes and Series E Notes being herein collectively called the "Notes", such term
to include any such notes issued in substitution therefor pursuant to Section 13
of this Agreement (as hereinafter defined)). The Series A, B, C, D and E Notes
shall be substantially in the respective forms set out in Exhibit 1, in each
case with such changes therefrom, if any, as may be approved by each Purchaser
and the Company. Certain capitalized terms used in this Agreement are defined in
Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.
SECTION 2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to each Purchaser and each Purchaser will purchase from the
Company, at the Closing provided for in Section 3, Notes in the principal amount
and of the series specified opposite such Purchaser's name in Schedule A at the
purchase price of 100% of the principal amount thereof. The obligations of each
Purchaser hereunder are several and not joint obligations and each Purchaser
shall have no obligation and no liability to any Person for the performance or
nonperformance by any other Purchaser hereunder.
SECTION 3. CLOSING.
The sale and purchase of the Notes to be purchased by each Purchaser
shall occur at the offices of Chapman and Cutler, 111 West Monroe Street,
Chicago, Illinois 60603 at 10:00 A.M. Chicago time, at a closing (the "Closing")
on such Business Day prior to August 15, 1998 as may be designated by at least
five Business Days' prior written notice to the Purchasers. At the Closing the
Company will deliver to each Purchaser the Notes of any such series to be
purchased by such Purchaser in the form of a single Note of each series to be
purchased by such Purchaser (or such greater number of Notes of any such series
in denominations of at least $100,000 as such Purchaser may request) dated the
date of the Closing and registered in such Purchaser's name (or in the name of
such Purchaser's nominee), against delivery by such Purchaser to the Company or
its order of immediately available funds in the amount of the purchase price
therefor by wire transfer of immediately available funds for the account of the
Company to Norwest Bank Minnesota, as cashiering agent, at such trust account
number as shall be designated by the Company in the notice of Closing referred
to above. If at the Closing the Company shall fail to tender such Notes to any
Purchaser as provided above in this Section 3, or any of the conditions
specified in Section 4 shall not have been fulfilled to any Purchaser's
satisfaction, such Purchaser shall, at such Purchaser's election, be relieved of
all further obligations under this Agreement, without thereby waiving any rights
such Purchaser may have by reason of such failure or such nonfulfillment.
SECTION 4. CONDITIONS TO CLOSING.
The obligation of each Purchaser to purchase and pay for the Notes to
be sold to such Purchaser at the Closing is subject to the fulfillment to such
Purchaser's satisfaction, prior to or at the Closing, of the following
conditions:
Section 4.1.Representations and Warranties. The representations and warranties
of the Company in this Agreement shall be correct when made and at the time of
the Closing.
Section 4.2.Performance; No Default. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by it prior to or at the Closing, and after
giving effect to the issue and sale of the Notes (and the application of the
proceeds thereof as contemplated by Schedule 5.14), no Default or Event of
Default shall have occurred and be continuing. Neither the Company nor any
Subsidiary shall have entered into any transaction since the date of the
Memorandum that would have been prohibited by Section 10 hereof had such Section
applied since such date.
Section 4.3.Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered
to such Purchaser an Officer's Certificate, dated the date of the
Closing, certifying that the conditions specified in Sections 4.1, 4.2
and 4.9 have been fulfilled.
(b) Secretary's Certificate. The General Partner shall have
delivered to such Purchaser a certificate certifying as to the
resolutions attached thereto and other proceedings relating to the
authorization, execution and delivery of the Notes and this Agreement.
(c) ERISA Certificate. If such Purchaser shall have made the
disclosures referred to in Section 6.2(b), (c) or (e), such Purchaser
shall have received the certificate from the Company described in the
last paragraph of Section 6.2 and such certificate shall state that (i)
the Company is neither a "party in interest" nor a "disqualified
person" (as defined in Section 4975(e)(2) of the Code), with respect to
any plan identified pursuant to Section 6.2(b) or (e) or (ii) with
respect to any plan, identified pursuant to Section 6.2(c), neither the
Company nor any "affiliate" (as defined in Section V(c) of the QPAM
Exemption) has, at such time or during the immediately preceding one
year, exercised the authority to appoint or terminate the QPAM as
manager of the assets of any plan identified in writing pursuant to
Section 6.2(c) or to negotiate the terms of said QPAM's management
agreement on behalf of any such identified plans.
Section 4.4.Opinions of Counsel. Such Purchaser shall have received opinions in
form and substance satisfactory to such Purchaser, dated the date of the Closing
(a) from Bryan Cave LLP, special counsel for the Company, covering the matters
set forth in Exhibit 4.4(a) and covering such other matters incident to the
transactions contemplated hereby as such Purchaser or such Purchaser's counsel
may reasonably request (and the Company hereby instructs its counsel to deliver
such opinion to such Purchaser) and (b) from Chapman and Cutler, the Purchasers'
special counsel in connection with such transactions, substantially in the form
set forth in Exhibit 4.4(b) and covering such other matters incident to such
transactions as such Purchaser may reasonably request.
Section 4.5.Purchase Permitted by Applicable Law, Etc. On the date of the
Closing each purchase of Notes shall (a) be permitted by the laws and
regulations of each jurisdiction to which each Purchaser is subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation (including, without limitation, Regulation T, U or X of the
Board of Governors of the Federal Reserve System) and (c) not subject any
Purchaser to any tax, penalty or liability under or pursuant to any applicable
law or regulation, which law or regulation was not in effect on the date hereof.
If requested by any Purchaser, such Purchaser shall have received an Officer's
Certificate certifying as to such matters of fact as such Purchaser may
reasonably specify to enable such Purchaser to determine whether such purchase
is so permitted.
Section 4.6.Related Transactions. The Company shall have consummated the sale of
the entire principal amount of the Notes scheduled to be sold on the Closing
Date pursuant to this Agreement.
Section 4.7.Payment of Special Counsel Fees. Without limiting the provisions of
Section 15.1, the Company shall have paid on or before the Closing the fees,
charges and disbursements of the Purchasers' special counsel referred to in
Section 4.4 to the extent reflected in a statement of such counsel rendered to
the Company at least one Business Day prior to the Closing.
Section 4.8.Private Placement Numbers. A Private Placement Number issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for each series of the Notes.
Section 4.9.Changes in Structure. The Company shall not have changed its
jurisdiction of organization or been a party to any merger or consolidation and
shall not have succeeded to all or any substantial part of the liabilities of
any other entity, at any time following the date of the most recent financial
statements referred to in Schedule 5.5.
Section 4.10.Redemption of Senior Notes. The Company shall have given notice of
redemption of the entire principal amount of the Senior Notes issued and
outstanding under the Indenture dated as of July 5, 1994 (the "Indenture")
between the Company, Ferrellgas Finance Corp. and Norwest Bank Minnesota,
National Association (the "Trustee") in accordance with the terms thereof, which
redemption shall be made on the first Business Day following the date of
Closing; and concurrently with the issuance and sale of the Notes hereunder, the
Company shall irrevocably deposit with the Trustee an amount sufficient for the
redemption of such Senior Notes on such Business Day.
Section 4.11.Rating. Prior to the date of Closing, the Notes shall have received
a rating of "BBB" or better from Fitch IBCA, Inc.
Section 4.12.Proceedings and Documents. All proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to such Purchaser and such
Purchaser's special counsel, and such Purchaser and such Purchaser's special
counsel shall have received all such counterpart originals or certified or other
copies of such documents as such Purchaser or such Purchaser's special counsel
may reasonably request.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
Section 5.1.Organization; Power and Authority; Ownership. The Company is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware, and is duly licensed or qualified as a
foreign partnership and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has the power and authority to own or hold under lease the properties it
purports to own or hold under lease, to transact the business it transacts and
proposes to transact, to execute and deliver this Agreement and the Notes and to
perform the provisions hereof and thereof. The name of each Person holding an
equity interest in the Company (including a description of the nature of such
interest) is set forth on Schedule 5.1.
Section 5.2.Authorization, Etc. This Agreement and the Notes have been duly
authorized by all necessary action on the part of the Company, and this
Agreement constitutes, and upon execution and delivery thereof each Note will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Section 5.3.Disclosure. The Company, through its agent, BancAmerica Robertson
Stephens, has delivered to each Purchaser a copy of a Private Placement
Memorandum, dated May, 1998 (the "Memorandum"), relating to the transactions
contemplated hereby. The Memorandum fairly describes, in all material respects,
the general nature of the business and principal properties of the Company and
its Restricted Subsidiaries. Except as disclosed in Schedule 5.3, this
Agreement, the Memorandum, the documents, certificates or other writings
delivered to each Purchaser by or on behalf of the Company in connection with
the transactions contemplated hereby and the financial statements listed in
Schedule 5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made. Except as disclosed in the Memorandum or as expressly described in
Schedule 5.3, or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed in Schedule 5.5, since
July 31, 1997, there has been no change in the financial condition, operations,
business, properties or prospects of the Company or any of its Restricted
Subsidiaries except changes that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. There is no fact known
to the Company that could reasonably be expected to have a Material Adverse
Effect that has not been set forth herein or in the Memorandum or in the other
documents, certificates and other writings delivered to each Purchaser by or on
behalf of the Company specifically for use in connection with the transactions
contemplated hereby.
Section 5.4.Organization and Ownership of Shares of Subsidiaries; Affiliates.
(a) Schedule 5.4 contains (except as noted therein) complete and correct lists
(i) of the Company's Subsidiaries, showing, as to each Subsidiary, its status
(whether a Restricted or Unrestricted Subsidiary), the correct name thereof, the
jurisdiction of its organization, and the percentage of shares of each class of
its capital stock or similar equity interests outstanding owned by the Company
and each other Subsidiary, (ii) of the Company's Affiliates, other than
Subsidiaries, and (iii) of the Company's directors and senior officers.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).
(c) Each Restricted Subsidiary identified in Schedule 5.4 is a
corporation or other legal entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, and is duly
qualified as a foreign corporation or other legal entity and is in good standing
in each jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Each such Restricted Subsidiary has the
corporate or other power and authority to own or hold under lease the properties
it purports to own or hold under lease and to transact the business it transacts
and proposes to transact.
(d) No Restricted Subsidiary is a party to, or otherwise subject to,
any legal restriction or any agreement (other than this Agreement, the
agreements listed on Schedule 5.4 and customary limitations imposed by corporate
law statutes) restricting the ability of such Restricted Subsidiary to pay
dividends out of profits or make any other similar distributions of profits to
the Company or any of its Restricted Subsidiaries that owns outstanding shares
of capital stock or similar equity interests of such Restricted Subsidiary.
Section 5.5.Financial Statements. The Company has delivered to each Purchaser
copies of the financial statements of the Company and its Restricted
Subsidiaries listed on Schedule 5.5. All of said financial statements (including
in each case the related schedules and notes) fairly present in all material
respects the consolidated financial position of the Company and its Restricted
Subsidiaries as of the respective dates specified in such financial statements
and the consolidated results of their operations and cash flows for the
respective periods so specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).
Section 5.6.Compliance with Laws, Other Instruments, Etc. The execution,
delivery and performance by the Company of this Agreement and the Notes will not
(a) contravene, result in any breach of, or constitute a default under, or
result in the creation of any Lien in respect of any property of the Company or
any Restricted Subsidiary under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, partnership agreement, corporate charter or
by-laws, or any other agreement or instrument to which the Company or any
Restricted Subsidiary is bound or by which the Company or any Restricted
Subsidiary or any of their respective properties may be bound or affected, (b)
conflict with or result in a breach of any of the terms, conditions or
provisions of any Material order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Restricted
Subsidiary or (c) violate any provision of any Material statute or other rule or
regulation of any Governmental Authority applicable to the Company or any
Restricted Subsidiary.
Section 5.7.Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Notes.
Section 5.8.Litigation; Observance of Agreements, Statutes and Orders. (a)
Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any Restricted Subsidiary or any property of the Company or any
Restricted Subsidiary in any court or before any arbitrator of any kind or
before or by any Governmental Authority that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Restricted Subsidiary is in default
under any term of any agreement or instrument to which it is a party or by which
it is bound, or any order, judgment, decree or ruling of any court, arbitrator
or Governmental Authority or is in violation of any applicable law, ordinance,
rule or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 5.9.Taxes. The Company and its Restricted Subsidiaries have filed all
tax returns that are required to have been filed in any jurisdiction, and have
paid all taxes shown to be due and payable on such returns and all other taxes
and assessments levied upon them or their properties, assets, income or
franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent, except for any taxes and assessments (a)
the amount of which is not individually or in the aggregate Material or (b) the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Company or a
Restricted Subsidiary, as the case may be, has established adequate reserves in
accordance with GAAP. The Company knows of no basis for any other tax or
assessment that could reasonably be expected to have a Material Adverse Effect.
The charges, accruals and reserves on the books of the Company and its
Restricted Subsidiaries in respect of Federal, state or other taxes for all
fiscal periods are adequate.
Section 5.10.Title to Property; Leases. The Company and its Restricted
Subsidiaries have good and sufficient title to their respective properties that
individually or in the aggregate are Material, including all such properties
reflected in the most recent audited balance sheet referred to in Section 5.5 or
purported to have been acquired by the Company or any Restricted Subsidiary
after said date (except as sold or otherwise disposed of in the ordinary course
of business), in each case free and clear of Liens that individually or in the
aggregate would have a Material Adverse Effect. All leases that individually or
in the aggregate are Material are valid and subsisting and are in full force and
effect in all material respects.
Section 5.11.Licenses, Permits, Etc. Except as disclosed in Schedule 5.11,
(a) the Company and its Restricted Subsidiaries own or
possess all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or rights
thereto, that individually or in the aggregate are Material, without
known conflict with the rights of others;
(b) to the best knowledge of the Company, no product of the
Company or any of its Restricted Subsidiaries infringes in any material
respect any license, permit, franchise, authorization, patent,
copyright, service mark, trademark, trade name or other right owned by
any other Person; and
(c) to the best knowledge of the Company, there is no
Material violation by any Person of any right of the Company or any of
its Restricted Subsidiaries with respect to any patent, copyright,
service mark, trademark, trade name or other right owned or used by the
Company or any of its Restricted Subsidiaries.
Section 5.12.Compliance with ERISA. (a) The Company and each ERISA Affiliate
have operated and administered each Plan in compliance with all applicable laws
except for such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to Title I
or IV of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in Section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such liabilities or
Liens as would not be individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "benefit liabilities" has the
meaning specified in Section 4001 of ERISA and the terms "current value" and
"present value" have the meanings specified in Section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Restricted Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the issuance and
sale of the Notes hereunder will not involve any transaction that is subject to
the prohibitions of Section 406 of ERISA or in connection with which a tax could
be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation
by the Company in the first sentence of this Section 5.12(e) is made in reliance
upon and subject to the accuracy of each Purchaser's representation in Section
6.2 as to the sources of the funds to be used to pay the purchase price of the
Notes to be purchased by such Purchaser.
Section 5.13.Private Offering by the Company. Neither the Company nor anyone
acting on its behalf has offered the Notes or any similar securities for sale
to, or solicited any offer to buy any of the same from, or otherwise approached
or negotiated in respect thereof with, any Person other than the Purchasers and
not more than 55 other institutional investors, each of which has been offered
the Notes at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject the
issuance or sale of the Notes to the registration requirements of Section 5 of
the Securities Act.
Section 5.14.Use of Proceeds; Margin Regulations. The Company will apply the
proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of the
proceeds from the sale of the Notes hereunder will be used, directly or
indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 221), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 0% of the value of the consolidated assets of the Company
and its Restricted Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 0% of the value of such
assets. As used in this Section, the terms "margin stock" and "purpose of buying
or carrying" shall have the meanings assigned to them in said Regulation U.
Section 5.15.Existing Indebtedness; Future Liens. (a) Schedule 5.15 sets forth a
complete and correct list of all outstanding Indebtedness of the Company and its
Restricted Subsidiaries as of June 30, 1998, since which date there has been no
Material change in the amounts, interest rates, sinking funds, installment
payments or maturities of the Indebtedness of the Company or its Restricted
Subsidiaries. Neither the Company nor any Restricted Subsidiary is in default
and no waiver of default is currently in effect, in the payment of any principal
or interest on any Indebtedness of the Company or such Restricted Subsidiary and
no event or condition exists with respect to any Indebtedness of the Company or
any Restricted Subsidiary that would permit (or that with notice or the lapse of
time, or both, would permit) one or more Persons to cause such Indebtedness to
become due and payable before its stated maturity or before its regularly
scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Restricted Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
Section 10.4.
Section 5.16.Foreign Assets Control Regulations, Etc. Neither the sale of the
Notes by the Company hereunder nor its use of the proceeds thereof will violate
the Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto.
Section 5.17.Status under Certain Statutes. Neither the Company nor any
Restricted Subsidiary is an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, or is subject
to regulation under the Public Utility Holding Company Act of 1935, as amended,
the ICC Termination Act of 1995, as amended, or the Federal Power Act, as
amended.
Section 5.18.Environmental Matters. Neither the Company nor any Restricted
Subsidiary has knowledge of any claim or has received any notice of any claim,
and no proceeding has been instituted raising any claim against the Company or
any of its Restricted Subsidiaries or any of their respective real properties
now or formerly owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of any Environmental Laws,
except, in each case, such as could not reasonably be expected to result in a
Material Adverse Effect. Except as otherwise disclosed to each Purchaser in
writing:
(a) neither the Company nor any Restricted Subsidiary has
knowledge of any facts which would give rise to any claim, public or
private, of violation of Environmental Laws or damage to the
environment emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of them or
to other assets or their use, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Restricted
Subsidiaries has stored any Hazardous Materials on real properties now
or formerly owned, leased or operated by any of them or has disposed of
any Hazardous Materials in a manner contrary to any Environmental Laws
in each case in any manner that could reasonably be expected to result
in a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Restricted Subsidiaries are in
compliance with applicable Environmental Laws, except where failure to
comply could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 6. REPRESENTATIONS OF THE PURCHASER.
Section 6.1.Purchase for Investment. Each Purchaser represents that (a) it is
purchasing the Notes for its own account or for one or more separate accounts
maintained by it or for the account of one or more pension or trust funds and
not with a view to the distribution thereof, provided that the disposition of
such Purchaser's or such pension or trust funds' property shall at all times be
within such Purchaser's or such pension or trust funds' control, and (b) it is
an "accredited investor" within the meaning of Rule 501 of Regulation D of the
Securities Act. Each Purchaser understands that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.
Section 6.2.Source of Funds. Each Purchaser represents that at least one of the
following statements is an accurate representation as to each source of funds (a
"Source") to be used by it to pay the purchase price of the Notes to be
purchased by it hereunder:
(a) the Source is an "insurance company general account"
within the meaning of Department of Labor Prohibited Transaction
Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee
benefit plan, treating as a single plan, all plans maintained by the
same employer or employee organization, with respect to which the
amount of the general account reserves and liabilities for all
contracts held by or on behalf of such plan, exceeds ten percent (10%)
of the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as set forth
in the NAIC Annual Statement for such Purchaser most recently filed
with such Purchaser's state of domicile; or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January 29,
1990), or (ii) a bank collective investment fund, within the meaning of
the PTE 91-38 (issued July 12, 1991) and, except as such Purchaser has
disclosed to the Company in writing pursuant to this paragraph (b), no
employee benefit plan or group of plans maintained by the same employer
or employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment
fund; or
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that
are included in such investment fund, when combined with the assets of
all other employee benefit plans established or maintained by the same
employer or by an affiliate (within the meaning of Section V(c)(1) of
the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions of Part I(c) and (g) of the
QPAM Exemption are satisfied, neither the QPAM nor a person controlling
or controlled by the QPAM (applying the definition of "control" in
Section V(e) of the QPAM Exemption) owns a 5% or more interest in the
Company and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this
paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (e);
(f) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA; or
(g) the Source is an insurance company separate account
maintained solely in connection with the fixed contractual obligations
of the insurance company under which the amounts payable, or credited,
to any employee benefit plan (or its related trust) and to any
participant or beneficiary of such plan (including any annuitant) are
not affected in any manner by the investment performance of the
separate account.
If any Purchaser or any subsequent transferee of the Notes indicates that such
Purchaser or such transferee is relying on any representation contained in
paragraph (b), (c) or (e) above, the Company shall deliver on the date of
Closing or on the date of transfer, as applicable, a certificate, which shall
state whether (i) it is a party in interest or a "disqualified person" (as
defined in Section 4975(e)(2) of the Code), with respect to any plan identified
pursuant to paragraphs (b) or (e) above, or (ii) with respect to any plan,
identified pursuant to paragraph (c) above, whether it or any "affiliate" (as
defined in Section V(c) of the QPAM Exemption) has at such time, and during the
immediately preceding one year, exercised the authority to appoint or terminate
said QPAM as manager of any plan identified in writing pursuant to paragraph (c)
above or to negotiate the terms of said QPAM's management agreement on behalf of
any such identified plan. As used in this Section 6.2, the terms "employee
benefit plan", "governmental plan", "party in interest" and "separate account"
shall have the respective meanings assigned to such terms in Section 3 of ERISA.
SECTION 7. INFORMATION AS TO COMPANY; STATUS OF SUBSIDIARIES.
Section 7.1.Financial and Business Information. The Company shall deliver to
each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements -- within 60 days after the end of
each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year),
duplicate copies of,
(i) an unaudited consolidated balance sheet
of the Company and its Restricted
Subsidiaries as at the end of such quarter, and
(ii) unaudited consolidated statements of income,
changes in partners' equity and cash flows of the Company and
its Restricted Subsidiaries, for such quarter and (in the case
of the second and third quarters) for the portion of the
fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from normal,
recurring year-end adjustments, provided that delivery within the time
period specified above of copies of the Company's Quarterly Report on
Form 10-Q prepared in compliance with the requirements therefor and
filed with the Securities and Exchange Commission shall be deemed to
satisfy the requirements of this Section 7.1(a);
(b) Annual Statements -- within 120 days after the end
of each fiscal year of the Company,
duplicate copies of,
(i) a consolidated balance sheet of the Company
and its Restricted Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes
in partners' equity and cash flows of the Company and its Restricted
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by
(A) an opinion thereon of independent certified
public accountants of recognized national standing, which
opinion shall state that such financial statements present
fairly, in all material respects, the financial position of
the companies being reported upon and their results of
operations and cash flows and have been prepared in conformity
with GAAP, and that the examination of such accountants in
connection with such financial statements has been made in
accordance with generally accepted auditing standards, and
that such audit provides a reasonable basis for such opinion
in the circumstances, and
(B) a certificate of such accountants stating that
they have reviewed this Agreement and stating further whether,
in making their audit, they have become aware of any condition
or event that then constitutes a Default or an Event of
Default, and, if they are aware that any such condition or
event then exists, specifying the nature and period of the
existence thereof (it being understood that such accountants
shall not be liable, directly or indirectly, for any failure
to obtain knowledge of any Default or Event of Default unless
such accountants should have obtained knowledge thereof in
making an audit in accordance with generally accepted auditing
standards or did not make such an audit),
provided that the delivery within the time period specified above of
the Company's Annual Report on Form 10-K for such fiscal year (together
with the Company's annual report to shareholders, if any, prepared
pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance
with the requirements therefor and filed with the Securities and
Exchange Commission, together with the accountant's certificate
described in clause (B) above, shall be deemed to satisfy the
requirements of this Section 7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming
available, one copy of each regular or periodic report, each
registration statement (without exhibits except as expressly requested
by such holder), and each prospectus and all amendments thereto filed
by the Company or any Restricted Subsidiary with the Securities and
Exchange Commission and of all press releases and other statements made
available generally by the Company or any Restricted Subsidiary to the
public concerning developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in
any event within five Business Days after a Responsible Officer
becoming aware of the existence of any Default or Event of Default or
that any Person has given any notice or taken any action with respect
to a claimed default hereunder or that any Person has given any notice
or taken any action with respect to a claimed default of the type
referred to in Section 11(f), a written notice specifying the nature
and period of existence thereof and what action the Company is taking
or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five
Business Days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and the
action, if any, that the Company or an ERISA Affiliate proposes to take
with respect thereto:
(i) with respect to any Plan, any reportable event,
as defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date hereof;
or
(ii) the taking by the PBGC of steps to institute, or
the threatening by the PBGC of the institution of, proceedings
under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material
Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in
any event within 30 days of receipt thereof, copies of any notice to
the Company or any Restricted Subsidiary from any Federal or state
Governmental Authority relating to any order, ruling, statute or other
law or regulation that could reasonably be expected to have a Material
Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or
any of its Restricted Subsidiaries or relating to the ability of the
Company to perform its obligations hereunder and under the Notes as
from time to time may be reasonably requested by any such holder of
Notes.
Section 7.2.Officer's Certificate. Each set of financial statements delivered to
a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be
accompanied by a certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including
detailed calculations) required in order to establish whether the
Company was in compliance with the requirements of Section 10.1 through
Section 10.8 hereof, inclusive, during the quarterly or annual period
covered by the statements then being furnished (including with respect
to each such Section, where applicable, the calculations of the maximum
or minimum amount, ratio or percentage, as the case may be, permissible
under the terms of such Sections, and the calculation of the amount,
ratio or percentage then in existence); and
(b) Event of Default -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and
conditions of the Company and its Restricted Subsidiaries from the
beginning of the quarterly or annual period covered by the statements
then being furnished to the date of the certificate and that such
review shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default
or, if any such condition or event existed or exists (including,
without limitation, any such event or condition resulting from the
failure of the Company or any Restricted Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence
thereof and what action the Company shall have taken or proposes to
take with respect thereto.
Section 7.3.Inspection. The Company shall permit the representatives of each
holder of Notes that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company,
to discuss the affairs, finances and accounts of the Company and its
Restricted Subsidiaries with the Company's officers, and (with the
consent of the Company, which consent will not be unreasonably
withheld) its independent public accountants, and (with the consent of
the Company, which consent will not be unreasonably withheld) to visit
the other offices and properties of the Company and each Restricted
Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then exists,
at the expense of the Company, to visit and inspect any of the offices
or properties of the Company or any Restricted Subsidiary, to examine
all their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective
officers and independent public accountants (and by this provision the
Company authorizes said accountants to discuss the affairs, finances
and accounts of the Company and its Restricted Subsidiaries), all at
such times and as often as may be requested.
Section 7.4.Change in Status of Subsidiaries. (a) So long as no Default or Event
of Default shall have occurred and be continuing, the Company may at any time
and from time to time, upon not less than 30 days' prior written notice given to
each Holder, designate a previously Restricted Subsidiary as an Unrestricted
Subsidiary or a previously Unrestricted Subsidiary (including a new Subsidiary
designated on the date of its formation or acquisition) which satisfies the
requirements of clauses (i), (ii) and (iii) of the definition of "Restricted
Subsidiary" as a Restricted Subsidiary, provided that immediately after such
designation and after giving effect thereto no Default or Event of Default shall
have occurred and be continuing, and provided further that after such
designation the status of such Subsidiary had not been changed more than twice.
(b) Any notice of designation pursuant to this Section 7.4 shall be
accompanied by a certificate signed by a Responsible Officer of the Company
stating that the provisions of this Section 7.4 have been complied with in
connection with such designation and setting forth the name of each other
Subsidiary (if any) which has or will become a Restricted Subsidiary or an
Unrestricted Subsidiary, as the case may be, as a result of such designation.
SECTION 8. PREPAYMENT OF THE NOTES.
Section 8.1.Prepayments. The entire outstanding principal amount of the Series A
Notes shall be due on August 1, 2005, the entire outstanding principal amount of
the Series B Notes shall be due on August 1, 2006, the entire outstanding
principal amount of the Series C Notes shall be due on August 1, 2008, the
entire outstanding principal amount of the Series D Notes shall be due on August
1, 2010, and the entire outstanding principal amount of the Series E Notes shall
be due on August 1, 2013. Except as set forth in Section 8.2, the Notes may not
be prepaid prior to maturity at the option of the Company.
Section 8.2.Optional Prepayments with Make-Whole Amount. The Company may, at its
option, upon notice as provided below, prepay at any time all, or from time to
time any part of, the Notes of any series, in an amount not less than $5,000,000
in the case of a partial prepayment of any series, at 100% of the principal
amount so prepaid, together with interest accrued thereon to the date of such
prepayment, plus the Make-Whole Amount determined for the prepayment date with
respect to such principal amount. The Company will give each holder of Notes of
any series being prepaid written notice of each optional prepayment under this
Section 8.2 not less than 30 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify such date, the
aggregate principal amount of the Notes of such series to be prepaid on such
date, the principal amount of each Note of such series held by such holder to be
prepaid (determined in accordance with Section 8.3), and the interest to be paid
on the prepayment date with respect to such principal amount being prepaid, and
shall be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment (calculated
as if the date of such notice were the date of the prepayment), setting forth
the details of such computation. Two Business Days prior to such prepayment, the
Company shall deliver to each holder of Notes a certificate of a Senior
Financial Officer specifying the calculation of such Make-Whole Amount as of the
specified prepayment date.
Section 8.3.Allocation of Partial Prepayments. In the case of each partial
prepayment of the Notes of any series, the principal amount of the Notes of such
series to be prepaid shall be allocated among all of the Notes of such series at
the time outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts thereof not theretofore called for prepayment.
Section 8.4.Maturity; Surrender, Etc. In the case of each prepayment of Notes of
any series pursuant to this Section 8, the principal amount of each Note of such
series to be prepaid shall mature and become due and payable on the date fixed
for such prepayment, together with interest on such principal amount accrued to
such date and the applicable Make-Whole Amount, if any. From and after such
date, unless the Company shall fail to pay such principal amount when so due and
payable, together with the interest and Make-Whole Amount, if any, as aforesaid,
interest on such principal amount shall cease to accrue. Any Note paid or
prepaid in full shall be surrendered to the Company and cancelled and shall not
be reissued, and no Note shall be issued in lieu of any prepaid principal amount
of any Note.
Section 8.5.Purchase of Notes. The Company will not and will not permit any
Affiliate to purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except upon the payment or prepayment
of the Notes in accordance with the terms of this Agreement, and the Notes. The
Company will promptly cancel all Notes acquired by it or any Affiliate pursuant
to any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.
Section 8.6.Make-Whole Amount. The term "Make-Whole Amount" means, with respect
to any Note, an amount equal to the excess, if any, of the Discounted Value of
the Remaining Scheduled Payments with respect to the Called Principal of such
Note over the amount of such Called Principal, provided that the Make-Whole
Amount may in no event be less than zero. For the purposes of determining the
Make-Whole Amount, the following terms have the following meanings:
"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2 or
has become or is declared to be immediately due and payable pursuant to
Section 12.1, as the context requires.
"Discounted Value" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of any Note, 0.50% over the yield to maturity implied by (i)
the yields reported, as of 10:00 A.M. (New York City time) on the
second Business Day preceding the Settlement Date with respect to such
Called Principal, on the display designated as "Page 500" on the
Telerate Access Service (or such other display as may replace Page 500
on the Telerate Access Service) for actively traded U.S. Treasury
securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or (ii) if such
yields are not reported as of such time or the yields reported as of
such time are not ascertainable, the Treasury Constant Maturity Series
Yields reported, for the latest day for which such yields have been so
reported as of the second Business Day preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity
equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield will be determined, if necessary,
by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b)
interpolating linearly between (1) the actively traded U.S. Treasury
security with the maturity closest to and greater than the Remaining
Average Life and (2) the actively traded U.S. Treasury security with
the maturity closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth year)
that will elapse between the Settlement Date with respect to such
Called Principal and the scheduled due date of such Remaining Scheduled
Payment.
"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called Principal
were made prior to its scheduled due date, provided that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2 or 12.1.
"Settlement Date" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.
SECTION 9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
Section 9.1.Compliance with Law. The Company will, and will cause each of its
Subsidiaries to, comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 9.2.Insurance. The Company will, and will cause each of its Restricted
Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated and consistent with the existing practice of the Company
and its Restricted Subsidiaries as of the date hereof.
Section 9.3.Maintenance of Properties. The Company will, and will cause each of
its Restricted Subsidiaries to, maintain and keep, or cause to be maintained and
kept, their respective properties in good repair, working order and condition
(other than ordinary wear and tear), so that the business carried on in
connection therewith may be properly conducted at all times, provided that this
Section shall not prevent the Company or any Restricted Subsidiary from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 9.4.Payment of Taxes. The Company will, and will cause each of its
Subsidiaries to, file all tax returns required to be filed in any jurisdiction
and to pay and discharge all taxes shown to be due and payable on such returns
and all other taxes, assessments, governmental charges, or levies imposed on
them or any of their properties, assets, income or franchises, to the extent
such taxes and assessments have become due and payable and before they have
become delinquent and all claims for which sums have become due and payable that
have or might become a Lien on properties or assets of the Company or any
Subsidiary, provided that neither the Company nor any Subsidiary need pay any
such tax or assessment or claims if (i) the amount, applicability or validity
thereof is contested by the Company or such Subsidiary on a timely basis in good
faith and in appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
the Company or such Subsidiary or (ii) the nonpayment of all such taxes and
assessments in the aggregate could not reasonably be expected to have a Material
Adverse Effect.
Section 9.5.Partnership Existence, Etc. The Company will at all times preserve
its existence and its status as a partnership and keep in full force and effect
its partnership existence and its status as a partnership not taxable as a
corporation for U.S. federal income tax purposes. Subject to Sections 10.7 and
10.8, the Company will at all times preserve and keep in full force and effect
the corporate or partnership existence, as the case may be, of each of its
Restricted Subsidiaries (unless merged into the Company or a Restricted
Subsidiary) and all rights and franchises of the Company and its Restricted
Subsidiaries unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such corporate or
partnership existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.
Section 9.6.Ranking. The Company will ensure that, at all times, all liabilities
of the Company under the Notes will rank in right of payment either pari passu
or senior to all other Debt of the Company except for Debt which is preferred as
a result of being secured as permitted by Section 10.4 (but then only to the
extent of such security).
SECTION 10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
Section 10.1.Incurrence of Debt. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume,
guarantee, or otherwise become directly or indirectly liable with respect to,
any Debt, other than:
(a) Debt evidenced by the Notes;
(b) Debt of the Company and its Restricted Subsidiaries
outstanding on the date of the Closing and disclosed in Schedule 5.15
(other than Debt of the Company under the Credit Agreement or under the
MLP Note Guaranty referred to in Section 10.2), and any extensions,
refundings, renewals and refinancings (collectively, a "Refinancing")
thereof, provided that (i) the principal amount of the Debt resulting
from such Refinancing shall not exceed the outstanding principal amount
of such Debt being Refinanced, together with any accrued interest and
premium with respect thereto and any and all costs and expenses related
to such Refinancing, (ii) the maturity date of the Debt resulting from
such Refinancing shall not be earlier than the maturity date of the
Debt being Refinanced, (iii) the average life to maturity of the Debt
resulting from such Refinancing shall not be less than the average life
to maturity of the Debt being Refinanced and (iv) no Default or Event
of Default exists at the time of such Refinancing;
(c) Debt of the Company and its Restricted Subsidiaries if on
the date the Company or such Restricted Subsidiary becomes liable with
respect to any such Debt and immediately after giving effect thereto
and the concurrent retirement of any other Debt:
(i) no Default or Event of Default exists; and
(ii) any such Debt of a Restricted Subsidiary
is permitted pursuant to Section 10.3; and
(iii) the ratio of Consolidated Cash Flow for the
period of four consecutive fiscal quarters ending on, or most
recently ended prior to, such date to Consolidated Interest
Expense is not less than 2.25 to 1; and
(iv) the ratio of Consolidated Debt to Consolidated
Cash Flow for the period of four consecutive fiscal quarters
ending on, or most recently ended prior to, such date is not
greater than 5.00 to 1;
(d) Debt of the Company and its Restricted Subsidiaries
incurred under a Working Capital Facility if, on the date the Company
or such Restricted Subsidiary becomes liable with respect to any such
Debt and immediately after giving effect thereto and the concurrent
retirement of any other such Debt, the Debt outstanding thereunder will
not exceed Consolidated Cash Flow for the period of four consecutive
fiscal quarters ending on, or most recently ended prior to, such date,
provided that there shall have been during the immediately preceding
four consecutive fiscal quarters a period of at least 30 consecutive
days on each of which the Company and its Restricted Subsidiaries would
have been permitted to (but did not) incur on such day under Section
10.1(c) (without reference to the condition stated in clause (i)
thereof) Debt in the amount of the average daily balance of Debt
outstanding under the Working Capital Facility for such 30-day period,
provided further that any such Debt of a Restricted Subsidiary is
permitted pursuant to Section 10.3;
(e) Subordinated Debt of the Company if on the date the
Company becomes liable with respect to any such Subordinated Debt and
immediately after giving effect thereto and the concurrent retirement
of any other Debt, the aggregate amount of all outstanding Subordinated
Debt of the Company shall not exceed $50,000,000;
(f) Debt of the Company and its Restricted Subsidiaries to a
seller of assets or shares purchased by the Company or any Restricted
Subsidiary if on the date the Company becomes liable with respect to
any such Debt and immediately after giving effect thereto and the
concurrent retirement of any other Debt, the aggregate amount of all
outstanding Debt of the Company to all such sellers of assets or shares
shall not exceed $60,000,000, provided that the agreement or instrument
pursuant to which such Debt is incurred (i) contains no financial
covenants more restrictive on the Company or its Restricted
Subsidiaries than those contained in this Agreement and (ii) contains
no events of default (other than in respect of payment of principal and
interest on such Debt and in respect of the accuracy of representations
and warranties made by the Company or its Restricted Subsidiaries
thereunder) which are capable of occurring prior to the occurrence of
any Event of Default, and provided, further, that any such Debt of a
Restricted Subsidiary is permitted pursuant to Section 10.3; and
(g) Debt of the Company under the "Facility B Commitments" or
the "Facility C Commitments" pursuant to the Credit Agreement if on the
date the Company becomes liable with respect to any such Debt and
immediately after giving effect thereto and the concurrent retirement
of any other Debt, the incurrence of such Debt would be permitted under
Section 10.1(c) and any Refinancing thereof, provided that (i) the
principal amount of the Debt resulting from such Refinancing shall not
exceed the outstanding principal amount of such Debt being Refinanced,
together with any accrued interest and premium with respect thereto and
any and all costs and expenses related to such Refinancing, (ii) the
maturity date of the Debt resulting from such Refinancing shall not be
earlier than the maturity date of the Debt being Refinanced, (iii) the
average life to maturity of the Debt resulting from such Refinancing
shall not be less than the average life to maturity of the Debt being
Refinanced, and (iv) the other terms applicable to the Debt resulting
from such Refinancing shall not be more onerous to the Company than the
terms applicable to the Debt being Refinanced, provided further that
the aggregate amount of all such Debt of the Company permitted by this
clause (g) shall not exceed $75,000,000.
For the purposes of this Section 10.1, any Person becoming a Restricted
Subsidiary after the date hereof shall be deemed, at the time it becomes a
Restricted Subsidiary, to have incurred all of its then outstanding Debt, and
any Person Refinancing any Debt shall be deemed to have incurred such Debt at
the time of such Refinancing.
Section 10.2.Guaranty of MLP Notes. The Company will not permit the Guaranty
executed in favor of the holders of the 9-3/8% Senior Secured Notes, due 2006
(the "MLP Senior Notes") issued by Ferrellgas Partners, L.P. (the "MLP Notes
Guaranty") to become effective pursuant to the terms thereof as long as any
obligations, indebtedness or otherwise, of the Company are outstanding under the
Notes. Accordingly, the earliest date that the Subsidiary Guaranty Effectiveness
Date (as defined in the Indenture pursuant to which the MLP Senior Notes were
issued) can occur is 91 days following the indefeasible discharge in full of all
of the obligations of the Company under the Notes and this Agreement.
Section 10.3.Restricted Subsidiary Debt. The Company will not at any time permit
any Restricted Subsidiary to, directly or indirectly, create, incur, assume,
guarantee, have outstanding, or otherwise become or remain directly or
indirectly liable with respect to, any Debt other than:
(a) Debt of a Restricted Subsidiary permitted pursuant to
Section 10.1(b);
(b) Debt of a Restricted Subsidiary to the Company or a
Wholly-Owned Restricted Subsidiary;
(c) secured Debt of a Restricted Subsidiary secured by Liens
permitted by Section 10.4(h), and any Refinancing thereof, provided
that (i) the principal amount of the Debt resulting from such
Refinancing shall not exceed the outstanding principal amount of such
Debt being Refinanced, together with any accrued interest and premium
with respect thereto and any and all costs and expenses related to such
Refinancing, (ii) the maturity date of the Debt resulting from such
Refinancing shall not be earlier than the maturity date of the Debt
being Refinanced, (iii) the average life to maturity of the Debt
resulting from such Refinancing shall not be less than the average life
to maturity of the Debt being Refinanced and (iv) no Default or Event
of Default exists at the time of such Refinancing;
(d) Debt of a Restricted Subsidiary in addition to that
otherwise permitted by the foregoing provisions of this Section 10.3,
provided that on the date the Restricted Subsidiary incurs or otherwise
becomes liable with respect to any such additional Debt and immediately
after giving effect thereto and the concurrent retirement of any other
Debt,
(i) no Default or Event of Default exists, and
(ii) Priority Debt does not exceed 12.5% of
Consolidated Assets.
For the purposes of this Section 10.3, any Person becoming a Restricted
Subsidiary after the date hereof shall be deemed, at the time it becomes a
Restricted Subsidiary, to have incurred all of its then outstanding Debt, and
any Person Refinancing any Debt shall be deemed to have incurred such Debt at
the time of such Refinancing. Also for purposes of this Section 10.3, the Debt
of any Restricted Subsidiary to any Wholly-Owned Restricted Subsidiary the
shares of which are sold by the Company pursuant to Section 10.8(c)(1)(B) shall
be deemed to have been incurred at the time of such sale.
Section 10.4.Liens. The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly create, incur, assume or
permit to exist (upon the happening of a contingency or otherwise) any Lien on
or with respect to any property or asset (including, without limitation, any
document or instrument in respect of goods or accounts receivable) of the
Company or any such Restricted Subsidiary, whether now owned or held or
hereafter acquired, or any income or profits therefrom, or assign or otherwise
convey any right to receive income or profits, except:
(a) Liens for property taxes, assessments or other
governmental charges which are not yet due and payable;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Liens, in each
case, incurred in the ordinary course of business for sums not yet due
and payable;
(c) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business (i) in connection with
workers' compensation, unemployment insurance and other types of social
security or retirement benefits, or (ii) to secure (or to obtain
letters of credit that secure) the performance of tenders, statutory
obligations, surety bonds, appeal bonds, bids, leases (other than
Capital Leases), performance bonds, purchase, construction or sales
contracts and other similar obligations, in each case not incurred or
made in connection with the borrowing of money, the obtaining of
advances or credit or the payment of the deferred purchase price of
property;
(d) any attachment or judgment Lien, unless the judgment it
secures shall not, within 60 days after the entry thereof, have been
discharged or execution thereof stayed pending appeal, or shall not
have been discharged within 60 days after the expiration of any such
stay;
(e) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or encumbrances,
in each case incidental to, and not interfering with, the ordinary
conduct of the business of the Company or any of its Restricted
Subsidiaries, provided that such Liens do not, in the aggregate,
materially detract from the value of such property or impair the use of
such property;
(f) Liens on property or assets of the Company or
any of its Restricted Subsidiaries securing Debt owing to the
Company or to a Wholly-Owned Restricted Subsidiary;
(g) Liens existing on the date of the Closing and
securing the Debt of the Company and its Restricted Subsidiaries shown
as having "Security" pledged on Schedule 5.15;
(h) any Lien created to secure all or any part of the
purchase price, or to secure Debt incurred or assumed to pay all or any
part of the purchase price or cost of construction, of property (or any
improvement thereon) acquired or constructed by the Company or a
Restricted Subsidiary after the date of the Closing, provided that
(i) any such Lien shall extend solely to the
item or items of such property (or improvement thereon) so acquired
or constructed,
(ii) the principal amount of the Debt secured by any
such Lien shall at no time exceed an amount equal to the
lesser of (A) the cost to the Company or such Restricted
Subsidiary of the property (or improvement thereon) so
acquired or constructed and (B) the Fair Market Value (as
determined in good faith by the board of directors of the
General Partner) of such property (or improvement thereon) at
the time of such acquisition or construction, and
(iii) any such Lien shall be created
contemporaneously with, or within 270 days
after, the acquisition or construction of such property;
(i) Liens on property or assets of any Restricted
Subsidiary securing Indebtedness owing
to the Company or to a Wholly-Owned Restricted Subsidiary;
(j) any Lien existing on property of a Person immediately
prior to its being consolidated with or merged into the Company or a
Restricted Subsidiary, or any Lien existing on any property acquired by
the Company or any Restricted Subsidiary at the time such property is
so acquired (whether or not the Debt secured thereby shall have been
assumed), provided that (i) no such Lien shall have been created or
assumed in contemplation of such consolidation or merger or such
acquisition of property, and (ii) each such Lien shall extend solely to
the item or items of property so acquired;
(k) Liens on personal property leased under leases (including
synthetic leases) entered into by the Company which are accounted for
as operating leases in accordance with GAAP;
(l) any Lien renewing, extending or refunding any Lien
permitted by paragraphs (g), (h) or (j) of this Section 10.4, provided
that (i) the principal amount of Debt secured by such Lien immediately
prior to such extension, renewal or refunding is not increased or the
maturity thereof reduced, (ii) such Lien is not extended to any other
property, and (iii) immediately after such extension, renewal or
refunding no Default or Event of Default would exist; and
(m) other Liens securing Debt not otherwise permitted by
paragraphs (a) through (l), provided that on the date any such Lien is
created, incurred or assumed and immediately after giving effect to the
incurrence of any related Debt and the concurrent retirement of any
other Debt, Priority Debt does not exceed 12.5% of Consolidated Assets.
For the purposes of this Section 10.4, any Person becoming a Restricted
Subsidiary after the date of this Agreement shall be deemed to have incurred all
of its then outstanding Liens at the time it becomes a Restricted Subsidiary,
and any Person Refinancing any Debt secured by any Lien shall be deemed to have
incurred such Lien at the time of such Refinancing.
Section 10.5.Restricted Payments.
(a) Limitation. The Company will not, and will not permit any of its
Restricted Subsidiaries to, at any time, declare or make, or incur any liability
to declare or make, any Restricted Payment provided that the Company may make
one Restricted Payment in each fiscal quarter if:
(i) the amount of such Restricted Payment would not
exceed the sum of
(A) Available Cash for the immediately preceding
fiscal quarter, plus
(B) the lesser of (1) the amount of any Available
Cash for the first 45 days of such fiscal quarter, and (2) the
excess of the aggregate amount of Debt that the Company could
have incurred under the Working Capital Facility pursuant to
Section 10.1(d) over the actual amount of loans outstanding
thereunder at the end of the immediately preceding fiscal
quarter;
(ii) the ratio of Consolidated Cash Flow for the period of
eight consecutive fiscal quarters ending on, or most recently ended
prior to, such time to Consolidated Interest Expense for such period is
greater than 2.0 to 1; and
(iii) no Default or Event of Default would exist;
provided, further, that the Company may declare or order, and make, pay or set
apart a Restricted Payment out of the Restricted Payment Reserve if at such time
(I) no Default or Event of Default exists, and (II) the ratio of Consolidated
Cash Flow for the period of eight consecutive fiscal quarters ending on, or most
recently ended prior to, such time to Consolidated Interest Expense for such
period is greater than 1.25 to 1. For purposes of this Section 10.5, "Restricted
Payment Reserve" means, as of the date of determination, the excess of the
cumulative amount, if any, of Restricted Payment Contributions generated each
prior fiscal year commencing with the fiscal year ended July 31, 1999 over the
cumulative amount of all Restricted Payments previously made from the Restricted
Payment Reserve, and "Restricted Payment Contribution" means an amount equal to
the excess of (x) Consolidated Cash Flow for a fiscal year, over (y) the sum of
(I) consolidated cash interest expense of the Company and its Restricted
Subsidiaries during such fiscal year, plus (II) Maintenance Capital Expenditures
incurred by the Company during such fiscal year, plus (III) the cumulative
amount of Restricted Payments made during such fiscal year.
(b) Time of Payment. The Company will not, nor will it permit any of
its Subsidiaries to, authorize a Restricted Payment that is not payable within
60 days of authorization.
Section 10.6.Restrictions on Dividends of Subsidiaries, Etc. The Company will
not, and will not permit any of its Restricted Subsidiaries to, enter into any
agreement which would restrict any Restricted Subsidiary's ability or right to
pay dividends to, or make advances to or Investments in, the Company or, if such
Restricted Subsidiary is not directly owned by the Company, the "parent"
Subsidiary of such Restricted Subsidiary.
Section 10.7.Mergers and Consolidations. The Company will not, and will not
permit any Restricted Subsidiary to, consolidate with or be a party to a merger
with any other Person or convey, transfer or lease substantially all of its
assets in a single transaction or series of transactions to any Person;
provided, however, that:
(a) any Restricted Subsidiary may merge or consolidate with
or into the Company or any Wholly-Owned Restricted Subsidiary so long
as in any merger or consolidation involving the Company, the Company
shall be the surviving or continuing corporation; and
(b) the Company may consolidate or merge with any other
Person if (i) the surviving entity is a solvent partnership or
corporation organized and existing under the laws of the United States
of America or any State thereof, (ii) the surviving entity expressly
assumes in writing the Company's obligations under the Notes and this
Agreement, (iii) at the time of such consolidation or merger, and after
giving effect thereto, no Default or Event of Default shall have
occurred and be continuing, and (iv) the surviving entity would be
permitted by the provisions of Section 10.1(c) hereof to incur at least
$1.00 of additional Debt owing to a Person other than a Restricted
Subsidiary of the surviving entity.
Section 10.8.Sale of Assets; Sale of Stock. (a) The Company will not, and will
not permit any Restricted Subsidiary to, sell, lease, transfer, abandon or
otherwise dispose of assets (except assets sold for fair market value (x) in the
ordinary course of business or (y) in a Sale and Leaseback Transaction within 90
days following the acquisition or construction thereof); provided that the
foregoing restrictions do not apply to:
(1) the sale, lease, transfer or other disposition of
assets of a Restricted Subsidiary to
the Company or a Wholly-Owned Restricted Subsidiary;
(2) the sale of assets for cash or other property to
a Person or Persons if all of the following conditions are met:
(i) such assets (valued at net book value at the
time of such sale) do not, together with all other assets of
the Company and its Restricted Subsidiaries previously
disposed of (valued at net book value at the time of such
disposition) (other than in the ordinary course of business or
in a Sale and Leaseback Transaction within 90 days following
the acquisition or construction thereof) during the same
fiscal year exceed 10% of Consolidated Assets (which
Consolidated Assets shall be determined as of the last day of
the fiscal year ending on, or most recently ended prior to,
such sale); and
(ii) in the opinion of the board of directors of the
General Partner, the sale is for Fair Market Value and is in
the best interests of the Company.
provided, however, that for purposes of the foregoing calculation,
there shall not be included any assets the proceeds of which were or
are applied within 180 days of the date of sale of such assets to
either (A) the acquisition of fixed assets useful and intended to be
used in the operation of the business of the Company and its Restricted
Subsidiaries within the limitations of Section 10.9 and having a Fair
Market Value (as determined in good faith by the board of directors of
the General Partner) at least equal to that of the assets so disposed
of, or (B) the prepayment at any applicable prepayment premium, of
Senior Debt selected by the Company of the Company or such Restricted
Subsidiary that sold such assets. It is understood and agreed by the
Company that any such proceeds paid and applied to the prepayment of
the Notes as hereinabove provided shall be prepaid as and to the extent
provided in Section 8.2.
(b) The Company will not permit any Restricted Subsidiary to issue or
sell any shares of stock of any class (including as "stock" for the purposes of
this Section 10.8, any warrants, rights or options to purchase or otherwise
acquire stock or other Securities exchangeable for or convertible into stock) of
such Restricted Subsidiary to any Person other than the Company or a
Wholly-Owned Restricted Subsidiary, except for the purpose of qualifying
directors, or except in satisfaction of the validly pre-existing preemptive
rights of minority stockholders in connection with the simultaneous issuance of
stock to the Company and/or a Restricted Subsidiary whereby the Company and/or
such Restricted Subsidiary maintain their same proportionate interest in such
Restricted Subsidiary.
(c) The Company will not sell, transfer or otherwise dispose of any
shares of stock of any Restricted Subsidiary (except to qualify directors) or
any Debt of any Restricted Subsidiary, and will not permit any Restricted
Subsidiary to sell, transfer or otherwise dispose of (except to the Company or a
Wholly-Owned Restricted Subsidiary) any shares of stock or any Debt of any other
Restricted Subsidiary, unless:
(1) either
(A) in the case of such a sale, transfer or
disposition of shares of stock or Debt, simultaneously with
such sale, transfer, or disposition, all shares of stock and
all Debt of such Restricted Subsidiary at the time owned by
the Company and by every other Restricted Subsidiary shall be
sold, transferred or disposed of as an entirety, and the
Restricted Subsidiary being disposed of shall not have any
continuing investment in the Company or any other Restricted
Subsidiary not being simultaneously disposed of; or
(B) in the case of such a sale, transfer or
disposition of shares of stock, at the time of such sale,
transfer or disposition and after giving effect thereto, (i)
no Default or Event of Default exists, and (ii) the minority
interests in the Restricted Subsidiary the shares of which are
being disposed of, after giving effect to such sale, transfer
or disposition, would not exceed 20%;
(2) said shares of stock and Debt are sold, transferred or
otherwise disposed of to a Person, for a cash consideration and on
terms reasonably deemed by the board of directors of the General
Partner to be adequate and satisfactory; and
(3) such sale or other disposition is permitted by
Section 10.8(a).
Section 10.9.Nature of Business. Neither the Company nor any Restricted
Subsidiary will engage in any business if, as a result thereof, the Company and
its Restricted Subsidiaries would not be principally and predominantly engaged
in the business of retail and wholesale propane sales and purchases of
inventory, operation of related propane distribution networks and storage
facilities and the acquisitions, operations and maintenance of such facilities.
Section 10.10.Transactions with Affiliates. The Company will not and will not
permit any Restricted Subsidiary to enter into directly or indirectly any
transaction or group of related transactions (including without limitation the
purchase, lease, sale or exchange of properties of any kind or the rendering of
any service) with any Affiliate, except in the ordinary course and pursuant to
the reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate.
Section 10.11.Certain Refinancings. Notwithstanding the provisions of Section
10.1 or 10.3, the Company will not, and will not permit any Restricted
Subsidiary to, incur any Debt for the purpose of refinancing the Debt of
Ferrellgas Partners, L.P., a Delaware limited partnership and the limited
partner of the Company, or any other entity owning an equity interest in the
Company, provided that the Company may incur Debt for the purpose of refinancing
the Debt of Ferrellgas Partners, L.P. so long as it is a limited partner in the
Company and so long as such incurrence is:
(a) otherwise permitted by the provisions of
Section 10.1; and
(b) after giving effect to the issuance of such Debt and the
concurrent issuance or retirement of any other Debt, no Default or
Event of Default exists and either:
(i) either Fitch IBCA, Inc. shall have assigned a
rating of at least BBB- to the Notes, or Standard & Poor's
Ratings Group, a division of McGraw Hill, shall have assigned
a rating of at least BBB- to the Notes or Moody's Investors
Service, Inc. shall have assigned a rating of at least Baa3 to
the Notes; or
(ii) (A) the ratio of Consolidated Cash Flow for the
period of four consecutive fiscal quarters ending on, or most
recently ended prior to, the date of issuance of such Debt to
Consolidated Interest Expense is not less than 2.75 to 1; and
(B) the ratio of Consolidated Debt to Consolidated Cash Flow
for the period of four consecutive fiscal quarters ending on,
or most recently ended prior to, such date is not greater than
4.50 to 1.
SECTION 11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any
interest on any Note for more than five
Business Days after the same becomes due and payable; or
(c) the Company defaults in the performance of or
compliance with any term contained in
Section 7.1(d) or Section 10; or
(d) the Company defaults in the performance of or compliance
with any term contained herein (other than those referred to in
paragraphs (a), (b) and (c) of this Section 11) and such default is not
remedied within 30 days after the earlier of (i) a Responsible Officer
obtaining actual knowledge of such default and (ii) the Company
receiving written notice of such default from any holder of a Note (any
such written notice to be identified as a "notice of default" and to
refer specifically to this paragraph (d) of Section 11); or
(e) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or incorrect
in any material respect on the date as of which made; or
(f) (i) the Company or any Restricted Subsidiary is in
default (as principal or as guarantor or other surety) in the payment
of any principal of or premium or make-whole amount or interest on any
Indebtedness that is outstanding in an aggregate principal amount of at
least $10,000,000 beyond any period of grace provided with respect
thereto, or (ii) the Company or any Restricted Subsidiary is in default
in the performance of or compliance with any term of any evidence of
any Indebtedness in an aggregate outstanding principal amount of at
least $10,000,000 or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence of
such default or condition such Indebtedness has become, or has been
declared (or one or more Persons are entitled to declare such
Indebtedness to be), due and payable before its stated maturity or
before its regularly scheduled dates of payment, or (iii) as a
consequence of the occurrence or continuation of any event or condition
(other than the passage of time or the right of the holder of
Indebtedness to convert such Indebtedness into equity interests), (x)
the Company or any Restricted Subsidiary has become obligated to
purchase or repay Indebtedness before its regular maturity or before
its regularly scheduled dates of payment in an aggregate outstanding
principal amount of at least $10,000,000, or (y) one or more Persons
have the right to require the Company or any Restricted Subsidiary so
to purchase or repay such Indebtedness; or
(g) the Company, the General Partner or any Restricted
Subsidiary (i) is generally not paying, or admits in writing its
inability to pay, its debts as they become due, (ii) files, or consents
by answer or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of any
jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes action for the purpose of
any of the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the
Company, the General Partner or any Subsidiary of the Company, a
custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property,
or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency law of
any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company, the General Partner or any Subsidiary of
the Company, or any such petition shall be filed against the Company,
the General Partner or any Subsidiary of the Company and such petition
shall not be dismissed or appointment discharged within 120 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $10,000,000 are rendered against one or more
of the Company and its Restricted Subsidiaries and which judgments are
not, within 60 days after entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within 60 days after the
expiration of such stay; or
(j) If (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is
sought or granted under Section 412 of the Code, (ii) a notice of
intent to terminate any Plan shall have been or is reasonably expected
to be filed with the PBGC or the PBGC shall have instituted proceedings
under Section 4042 of ERISA to terminate or appoint a trustee to
administer any Plan or the PBGC shall have notified the Company or any
ERISA Affiliate that a Plan may become a subject of any such
proceedings, (iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of Section 4001(a)(18) of ERISA) under
all Plans, determined in accordance with Title IV of ERISA, shall
exceed $10,000,000, (iv) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the
Code relating to employee benefit plans, (v) the Company or any ERISA
Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or
any Restricted Subsidiary establishes or amends any employee welfare
benefit plan that provides post-employment welfare benefits in a manner
that would increase the liability of the Company or any Restricted
Subsidiary thereunder; and any such event or events described in
clauses (i) through (vi) above, either individually or together with
any other such event or events, could reasonably be expected to have a
Material Adverse Effect.
As used in Section 11(j), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
SECTION 12. REMEDIES ON DEFAULT, ETC.
Section 12.1.Acceleration. (a) If an Event of Default with respect to the
Company or the General Partner described in paragraph (g) or (h) of Section 11
(other than an Event of Default described in clause (i) of paragraph (g) or
described in clause (vi) of paragraph (g) by virtue of the fact that such clause
encompasses clause (i) of paragraph (g)) has occurred, all the Notes then
outstanding shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 33-1/3% in principal amount of the Notes at the
time outstanding may at any time at its or their option, by notice or notices to
the Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.
Upon any Note's becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Note will forthwith mature and the
entire unpaid principal amount of such Note, plus (i) all accrued and unpaid
interest thereon and (ii) the Make-Whole Amount determined in respect of such
principal amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for) and that the provision for payment
of a Make-Whole Amount by the Company in the event that the Notes are prepaid or
are accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
Section 12.2.Other Remedies. If any Default or Event of Default has occurred and
is continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 12.1, the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
Section 12.3.Rescission. At any time after any Notes have been declared due and
payable pursuant to clause (b) or (c) of Section 12.1, the holders of not less
than 51% in principal amount of the Notes then outstanding, by written notice to
the Company, may rescind and annul any such declaration and its consequences if
(a) the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
Section 12.4.No Waivers or Election of Remedies, Expenses, Etc. No course of
dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company under Section 15, the Company will pay to the holder
of each Note on demand such further amount as shall be sufficient to cover all
costs and expenses of such holder incurred in any enforcement or collection
under this Section 12, including, without limitation, reasonable attorneys'
fees, expenses and disbursements.
SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
Section 13.1.Registration of Notes. The Company shall keep at its principal
executive office a register for the registration and registration of transfers
of Notes. The name and address of each holder of one or more Notes, each
transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes of each
series.
Section 13.2.Transfer and Exchange of Notes. Upon surrender of any Note at the
principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or its attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) of the same series in exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall be payable to such Person as such holder may request and shall be
substantially in the form of the series of Notes being surrendered as set forth
in Exhibit 1-A, 1-B, 1-C, 1-D or 1-E, as the case may be. Each such new Note
shall be dated and bear interest from the date to which interest shall have been
paid on the surrendered Note or dated the date of the surrendered Note if no
interest shall have been paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Notes. Notes shall not be transferred in denominations of
less than $100,000, provided that if necessary to enable the registration of
transfer by a holder of its entire holding of Notes, one Note may be in a
denomination of less than $100,000. Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be deemed to have
made the representation set forth in Section 6.2.
Section 13.3.Replacement of Notes. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such Note
is, or is a nominee for, an original Purchaser or another holder of a
Note with a minimum net worth of at least $50,000,000, such Person's
own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note of the same series as such lost, stolen, destroyed or mutilated Note, dated
and bearing interest from the date to which interest shall have been paid on
such lost, stolen, destroyed or mutilated Note or dated the date of such lost,
stolen, destroyed or mutilated Note if no interest shall have been paid thereon.
SECTION 14. PAYMENTS ON NOTES.
Section 14.1.Place of Payment. Subject to Section 14.2, payments of principal,
Make-Whole Amount, if any, and interest becoming due and payable on the Notes
shall be made in Liberty, Missouri at the principal office of the Company in
such jurisdiction. The Company may at any time, by notice to each holder of a
Note, change the place of payment of the Notes so long as such place of payment
shall be either the principal office of the Company in such jurisdiction or the
principal office of a bank or trust company in such jurisdiction.
Section 14.2.Home Office Payment. So long as any Purchaser or such Purchaser's
nominee shall be the holder of any Note, and notwithstanding anything contained
in Section 14.1 or in such Note to the contrary, the Company will pay all sums
becoming due on such Note for principal, Make-Whole Amount, if any, and interest
by the method and at the address specified for such purpose for such Purchaser
on Schedule A, or by such other method or at such other address as such
Purchaser shall have from time to time specified to the Company in writing for
such purpose, without the presentation or surrender of such Note or the making
of any notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, such Purchaser shall surrender such Note for cancellation, reasonably
promptly after any such request, to the Company at its principal executive
office or at the place of payment most recently designated by the Company
pursuant to Section 14.1. Prior to any sale or other disposition of any Note
held by any Purchaser or such Purchaser's nominee such Purchaser will, at its
election, either endorse thereon the amount of principal paid thereon and the
last date to which interest has been paid thereon or surrender such Note to the
Company in exchange for a new Note or Notes pursuant to Section 13.2. The
Company will afford the benefits of this Section 14.2 to any Institutional
Investor that is the direct or indirect transferee of any Note purchased by any
Purchaser under this Agreement and that has made the same agreement relating to
such Note as such Purchaser has made in this Section 14.2.
SECTION 15. EXPENSES, ETC.
Section 15.1.Transaction Expenses. Whether or not the transactions contemplated
hereby are consummated, the Company will pay all costs and expenses (including
reasonable attorneys' fees of a special counsel and, if reasonably required,
local or other counsel) incurred by each Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes (whether or not
such amendment, waiver or consent becomes effective), including, without
limitation: (a) the costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under this Agreement
or the Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or any Subsidiary or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save each Purchaser and each other holder
of a Note harmless from, all claims in respect of any fees, costs or expenses if
any, of brokers and finders (other than those retained by such Purchaser or
holder).
Section 15.2.Survival. The obligations of the Company under this Section 15 will
survive the payment or transfer of any Note, the enforcement, amendment or
waiver of any provision of this Agreement or the Notes, and the termination of
this Agreement.
SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by any Purchaser of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of such
Purchaser or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this Agreement. Subject to the preceding sentence, this Agreement
and the Notes embody the entire agreement and understanding between each
Purchaser and the Company and supersede all prior agreements and understandings
relating to the subject matter hereof.
SECTION 17. AMENDMENT AND WAIVER.
Section 17.1.Requirements. This Agreement and the Notes may be amended, and the
observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Company and the Required Holders, except that (a) no amendment or waiver of any
of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term
(as it is used therein), will be effective as to any Purchaser unless consented
to by such Purchaser in writing, and (b) no such amendment or waiver may,
without the written consent of the holder of each Note at the time outstanding
affected thereby, (i) subject to the provisions of Section 12 relating to
acceleration or rescission, change the amount or time of any prepayment or
payment of principal of, or reduce the rate or change the time of payment or
method of computation of interest or of the Make-Whole Amount on, the Notes,
(ii) change the percentage of the principal amount of the Notes the holders of
which are required to consent to any such amendment or waiver, or (iii) amend
any of Sections 8, 11(a), 11(b), 12, 17 or 20.
Section 17.2.Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes of any waiver or amendment of any of the terms and provisions hereof or of
the Notes unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each holder of Notes then
outstanding even if such holder did not consent to such waiver or amendment.
Section 17.3.Binding Effect, Etc. Any amendment or waiver consented to as
provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.
Section 17.4.Notes Held by Company, Etc. Solely for the purpose of determining
whether the holders of the requisite percentage of the aggregate principal
amount of Notes then outstanding approved or consented to any amendment, waiver
or consent to be given under this Agreement or the Notes, or have directed the
taking of any action provided herein or in the Notes to be taken upon the
direction of the holders of a specified percentage of the aggregate principal
amount of Notes then outstanding, Notes directly or indirectly owned by the
Company or any of its Affiliates shall be deemed not to be outstanding.
SECTION 18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telefacsimile if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(i) if to a Purchaser or such Purchaser's nominee, to such
Purchaser or such Purchaser's nominee at the address specified for such
communications for such Purchaser signature on Schedule A, or at such
other address as such Purchaser or such Purchaser's nominee shall have
specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder
at such address as such other holder shall have specified to the
Company in writing, or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of the Assistant
Treasurer, or at such other address as the Company shall have specified
to the holder of each Note in writing.
Notices under this Section 18 will be deemed given only when actually received.
SECTION 19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by each Purchaser at the Closing (except the
Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to each Purchaser, may be
reproduced by such Purchaser by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and such Purchaser
may destroy any original document so reproduced. The Company agrees and
stipulates that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such Purchaser in the
regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence. This
Section 19 shall not prohibit the Company or any other holder of Notes from
contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such
reproduction.
SECTION 20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information delivered to any Purchaser by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified in writing when received by
such Purchaser as being confidential information of the Company or such
Subsidiary, provided that such term does not include information that (a) was
publicly known or otherwise known to such Purchaser prior to the time of such
disclosure, (b) subsequently becomes publicly known through no act or omission
by such Purchaser or any Person acting on such Purchaser's behalf, (c) otherwise
becomes known to such Purchaser other than through disclosure by the Company or
any Subsidiary or (d) constitutes financial statements delivered to such
Purchaser under Section 7.1 that are otherwise publicly available. Each
Purchaser will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by such Purchaser in good faith to protect
confidential information of third parties delivered to such Purchaser, provided
that such Purchaser may deliver or disclose Confidential Information to (i) such
Purchaser's directors, trustees, officers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by such Purchaser's Notes), (ii)
such Purchaser's financial advisors and other professional advisors who agree to
hold confidential the Confidential Information substantially in accordance with
the terms of this Section 20, (iii) any other holder of any Note, (iv) any
Institutional Investor to which such Purchaser sells or offers to sell such Note
or any part thereof or any participation therein (if such Person has agreed in
writing prior to its receipt of such Confidential Information to be bound by the
provisions of this Section 20), (v) any Person from which such Purchaser offers
to purchase any security of the Company (if such Person has agreed in writing
prior to its receipt of such Confidential Information to be bound by the
provisions of this Section 20), (vi) any federal or state regulatory authority
having jurisdiction over such Purchaser, (vii) the National Association of
Insurance Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information about such
Purchaser's investment portfolio, or (viii) any other Person to which such
delivery or disclosure may be necessary or appropriate (w) to effect compliance
with any law, Rule, regulation or order applicable to such Purchaser, (x) in
response to any subpoena or other legal process, (y) in connection with any
litigation to which such Purchaser is a party or (z) if an Event of Default has
occurred and is continuing, to the extent such Purchaser may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under such
Purchaser's Notes and this Agreement. Each holder of a Note, by its acceptance
of a Note, will be deemed to have agreed to be bound by and to be entitled to
the benefits of this Section 20 as though it were a party to this Agreement. On
reasonable request by the Company in connection with the delivery to any holder
of a Note of information required to be delivered to such holder under this
Agreement or requested by such holder (other than a holder that is a party to
this Agreement or its nominee), such holder will enter into an agreement with
the Company embodying the provisions of this Section 20.
SECTION 21. SUBSTITUTION OF PURCHASER.
Each Purchaser shall have the right to substitute any one of such
Purchaser's Affiliates as the purchaser of the Notes that such Purchaser has
agreed to purchase hereunder, by written notice to the Company, which notice
shall be signed by both such Purchaser and such Purchaser's Affiliate, shall
contain such Affiliate's agreement to be bound by this Agreement and shall
contain a confirmation by such Affiliate of the accuracy with respect to it of
the representations set forth in Section 6. Upon receipt of such notice,
wherever the word "Purchaser" is used in this Agreement (other than in this
Section 21), such word shall be deemed to refer to such Affiliate in lieu of
such Purchaser. In the event that such Affiliate is so substituted as a
purchaser hereunder and such Affiliate thereafter transfers to such Purchaser
all of the Notes then held by such Affiliate, upon receipt by the Company of
notice of such transfer, wherever the word "Purchaser" is used in this Agreement
(other than in this Section 21), such word shall no longer be deemed to refer to
such Affiliate, but shall refer to such Purchaser, and such Purchaser shall have
all the rights of an original holder of the Notes under this Agreement.
SECTION 22. MISCELLANEOUS.
Section 22.1.Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so expressed or
not.
Section 22.2.Payments Due on Non-Business Days. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
Make-Whole Amount or interest on any Note that is due on a date other than a
Business Day shall be made on the next succeeding Business Day without including
the additional days elapsed in the computation of the interest payable on such
next succeeding Business Day.
Section 22.3.Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 22.4.Construction. Each covenant contained herein shall be construed
(absent express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance with
any other covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly by such
Person.
Section 22.5.Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
Section 22.6.Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of Illinois excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
* * * * *
The execution hereof by the Purchasers shall constitute a contract
among the Company and the Purchasers for the uses and purposes hereinabove set
forth. This Agreement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together only one
agreement.
Very truly yours,
FERRELLGAS, L.P.
By Ferrellgas, Inc., its general partner
By__________________________________________
Its_________________________________________
<PAGE>
SCHEDULE B
(to Note Purchase Agreement)
DEFINED TERMS
GENERAL PROVISIONS
Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, the same shall be done in accordance with GAAP, to the extent
applicable, except where such principles are inconsistent with the express
requirements of this Agreement.
DEFINITIONS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"Affiliate" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, (b) any Person beneficially owning or holding, directly or
indirectly, 10% or more of any class of voting or equity interests of such first
Person or any subsidiary of such first Person or any corporation of which such
first Person and the subsidiaries of such first Person beneficially own or hold,
in the aggregate, directly or indirectly, 10% or more of any class of voting or
equity interests, and (c) any officer or director of such first Person. As used
in this definition, "Control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. Unless the context otherwise clearly requires, any reference to an
"Affiliate" is a reference to an Affiliate (other than a Restricted Subsidiary)
of the Company.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged with or into the Company or
any Restricted Subsidiary, (b) the acquisition by the Company or any Restricted
Subsidiary of the assets of any Person (other than a Restricted Subsidiary)
which constitutes all or substantially all of the assets of such Person or (c)
the acquisition by the Company or any Restricted Subsidiary of any division or
line of business of any Person (other than a Restricted Subsidiary).
"Asset Sale" means any Transfer except:
(a) any
(i) Transfer from a Restricted Subsidiary
to the Company or a Wholly-Owned
Restricted Subsidiary;
(ii) Transfer from the Company to a Wholly-Owned
Restricted Subsidiary; and
(iii) Transfer from the Company to a Restricted
Subsidiary (other than a Wholly-Owned Restricted Subsidiary)
or from a Restricted Subsidiary to another Restricted
Subsidiary (other than a Wholly-Owned Restricted Subsidiary),
which in either case is for Fair Market Value,
so long as immediately before and immediately after the consummation of
any such Transfer and after giving effect thereto, no Default or Event
of Default exists; and
(b) any Transfer made in the ordinary course of business
and involving only property that is inventory held for sale.
"Available Cash" means with respect to any period and without
duplication:
(a) the sum of:
(i) all cash receipts of the Company during such
period from all sources (including, without limitation,
distributions of cash received by the Company from a
Subsidiary and borrowings made under the Working Capital
Facility); and
(ii) any reduction with respect to such period in a
cash reserve previously established pursuant to clause (b)
(ii) below (either by reversal or utilization) from the level
of such reserve at the end of the prior period;
(b) less the sum of:
(i) all cash disbursements of the Company during
such period including, without limitation, disbursements for
operating expenses, taxes, if any, debt service (including,
without limitation, the payment of principal, premium and
interest), redemption of Partnership Interests, capital
expenditures, contributions, if any, to a Subsidiary and cash
distributions to the General Partner and the Limited Partners
(but only to the extent that such cash distributions to the
General Partner and the Limited Partners exceed Available Cash
for the immediately preceding fiscal quarter); and
(ii) any cash reserves established with respect to
such period, and any increase with respect to such period in a
cash reserve previously established pursuant to this clause
(b) (ii) from the level of such reserve at the end of the
prior period, in such amounts as the General Partner
determines in its reasonable discretion to be necessary or
appropriate (A) to provide for the proper conduct of the
business of the Company (including, without limitation,
reserves for future capital expenditures or capital
contributions to a Subsidiary) or (B) to provide funds for
distributions to the General Partner and the Limited Partners
in respect of any one or more of the next four fiscal quarters
or (C) because the distribution of such amounts would be
prohibited by applicable law or by any loan agreement,
security agreement, mortgage, debt instrument or other
agreement or obligation to which the Company is a party or by
which it is bound or its assets are subject.
Notwithstanding the foregoing (x) disbursements (including, without limitation,
contributions to a Subsidiary or disbursements on behalf of a Subsidiary) made
or reserves established, increased or reduced after the end of any fiscal
quarter but on or before the date on which the Company makes its distribution of
Available Cash in respect of such fiscal quarter pursuant to Section 5.3(a)
shall be deemed to have been made, established, increased or reduced, for
purposes of determining Available Cash, with respect to such fiscal quarter if
the General Partner so determines and (y) "Available Cash" with respect to any
period shall not include any cash receipts or reductions in reserves or take
into account any disbursements made or reserves established after the
Liquidation Date.
For purposes of the definition of "Available Cash" the following terms
have the following meanings:
"Additional Limited Partner" means a Person admitted to the
Company as a Limited Partner pursuant to Section 11.6 of the
Partnership Agreement and who is shown as such on the books and records
of the Company,
"Departing Partner" means a former General Partner, from and
after the effective date of any withdrawal or removal of such former
General Partner pursuant to Section 12.1 or Section 12.2 of the
Partnership Agreement.
"Initial Limited Partner means Ferrellgas Partners, L.P., a
Delaware limited partnership.
"Limited Partner" means the Initial Limited Partner, the
General Partner pursuant to Section 4.2 of the Partnership Agreement,
each Substituted Limited Partner, if any, each Additional Limited
Partner and any Departing Partner upon the change of its status from
General Partner to Limited Partner pursuant to Section 12.3 of the
Partnership Agreement, but excluding any such Person from and after the
time it withdraws from the Company.
"Liquidation Date" means (a) in the case of an event giving
rise to the dissolution of the Company of the type described in clauses
(a) and (b) of the first sentence of Section 13.2 of the Partnership
Agreement, the date on which the applicable time period during which
the General Partner and the Limited Partners have the right to elect to
reconstitute the Company and continue its business has expired without
such an election being made, and (b) in the case of any other event
giving rise to the dissolution of the Company, the date on which such
event occurs.
"Partnership Agreement" means the Agreement of Limited Partnership of
Ferrellgas, L.P. dated as of July 5, 1995 among the General Partner and the
Initial Limited Partner.
"Partnership Interest" means the interest of the General Partner or a
Limited Partner in the Company.
"Substituted Limited Partner" means a Person who is admitted
as a Limited Partner to the Company pursuant to Section 11.3 of the
Partnership Agreement in place of and with all the rights of a Limited
Partner and who is shown as a Limited Partner on the books and records
of the Company.
"Business Day" means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in San Francisco, California, Chicago, Illinois or
Kansas City, Missouri are required or authorized to be closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Capital Lease Obligation" means, with respect to any Person and a
Capital Lease, the amount of the obligation of such Person as the lessee under
such Capital Lease which would, in accordance with GAAP, appear as a liability
on a balance sheet of such Person.
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Company" means Ferrellgas, L.P., Delaware limited partnership.
"Confidential Information" is defined in Section 20.
"Consolidated Assets" means, at any time, the total assets of the
Company and its Restricted Subsidiaries which would be shown as assets on a
consolidated balance sheet of the Company and its Restricted Subsidiaries as of
such time prepared in accordance with GAAP, after eliminating all amounts
properly attributable to minority interests, if any, in the stock and surplus of
Restricted Subsidiaries.
"Consolidated Cash Flow" means, in respect of any period, the excess,
if any, of (a) the sum of, without duplication, the amounts for such period,
taken as a single accounting period, of (i) Consolidated Net Income for such
period, plus (ii) to the extent deducted in the determination of Consolidated
Net Income for such period, after excluding amounts attributable to minority
interests in Subsidiaries and without duplication, (A) Consolidated Non-Cash
Charges, (B) Consolidated Interest Expense and (C) Consolidated Income Tax
Expense, over (b) any non-cash items increasing Consolidated Net Income for such
period to the extent that such items constitute reversals of Consolidated
Non-Cash Charges for a previous period and which were included in the
computation of Consolidated Cash Flow for such previous period pursuant to the
provisions of the preceding clause (a), provided that in calculating
Consolidated Cash Flow for any such period, (1) Consolidated Cash Flow shall be
calculated after giving effect on a pro forma basis for such period, in all
respects in accordance with GAAP, to any Asset Acquisitions (including, without
limitation any Asset Acquisition by the Company or any Restricted Subsidiary
giving rise to the need to determine Consolidated Cash Flow as a result of the
Company or one of its Restricted Subsidiaries (including any Person that becomes
a Restricted Subsidiary as result of any such Asset Acquisition) incurring,
assuming or otherwise becoming liable for any Debt) occurring during the period
commencing on the first day of such period to and including the date of such
determination, as if such Asset Acquisition occurred on the first day of such
period and (2) Consolidated Cash Flow attributable to any assets or property
subject to an Asset Sale by the Company or any Restricted Subsidiary on or prior
to the date of such determination shall be deemed to be zero for such period.
"Consolidated Debt" means, as of any date of determination, the total
of all Debt of the Company and its Restricted Subsidiaries outstanding on such
date, after eliminating all offsetting debits and credits between the Company
and its Restricted Subsidiaries and all other items required to be eliminated in
the course of the preparation of consolidated financial statements of the
Company and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Income Tax Expense" means, with respect to any period,
all provisions for Federal, state, local and foreign income taxes of the Company
and its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any period, the
sum (without duplication) of the following (in each case, eliminating all
offsetting debits and credits between the Company and its Restricted
Subsidiaries and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Company and its
Restricted Subsidiaries in accordance with GAAP): (a) all interest in respect of
Debt of the Company and its Restricted Subsidiaries whether earned or accrued
(including non-cash interest payments and imputed interest on Capital Lease
Obligations) deducted in determining Consolidated Net Income for such period,
and (b) all debt discount and expense amortized or required to be amortized in
the determination of Consolidated Net Income for such period, provided that for
purposes of making any computation pursuant to Section 10.1(c)(iii) and Section
10.11 (including any calculation of Consolidated Cash Flow relating thereto),
Consolidated Interest Expense shall be determined on a pro forma basis giving
effect to the incurrence of Debt (and the application of proceeds thereof) which
is the subject of such computation as if such Debt had been incurred (and the
proceeds thereof applied) on the first day of such period.
"Consolidated Net Income" means, with reference to any period, the net
income (or loss) of the Company and its Restricted Subsidiaries for such period
(taken as a cumulative whole), as determined in accordance with GAAP, after
eliminating all offsetting debits and credits between the Company and its
Restricted Subsidiaries and all other items required to be eliminated in the
course of the preparation of consolidated financial statements of the Company
and its Restricted Subsidiaries in accordance with GAAP, provided that there
shall be excluded:
(a) the income (or loss) of any Person accrued prior to the
date it becomes a Subsidiary or is merged into or consolidated with the
Company or a Subsidiary, and the income (or loss) of any Person,
substantially all of the assets of which have been acquired in any
manner, realized by such other Person prior to the date of acquisition,
(b) the income (or loss) of any Person (other than a
Subsidiary) in which the Company or any Subsidiary has an ownership
interest, except to the extent that any such income has been actually
received by the Company or such Subsidiary in the form of cash
dividends or similar cash distributions,
(c) the undistributed earnings of any Restricted Subsidiary
to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary is not at the time
permitted by the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary,
(d) any aggregate net gain or loss during such period arising
from the sale, conversion, exchange or other disposition of capital
assets (such term to include, without limitation, (i) all non-current
assets and, without duplication, and (ii) the following, whether or not
current: all fixed assets, whether tangible or intangible, all
inventory sold in conjunction with the disposition of fixed assets, and
all Securities), and
(e) any net income or gain or loss during such period from
(i) any change in accounting principles in accordance with GAAP, (ii)
any prior period adjustments resulting from any change in accounting
principles in accordance with GAAP, or (iii) any extraordinary items.
"Consolidated Non-Cash Charges" means, with respect to any period, the
aggregate depreciation and amortization (other than amortization of debt
discount), and any non-cash employee compensation expenses for such period, in
each case, reducing Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated July 2, 1998, between the Company and the banks named therein,
as the same may be amended and supplemented from time to time.
"Debt" means, with respect to any Person, without duplication,
(a) its liabilities for borrowed money;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising in
the ordinary course of business but including, without limitation, all
liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such property);
(c) its Capital Lease Obligations;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities); and
(e) any Guaranty of such Person with respect to
liabilities of a type described in any of
clauses (a) through (d) hereof.
Debt of any Person shall include all obligations of such Person of the character
described in clauses (a) through (e) to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is deemed to
be extinguished under GAAP.
"Default" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"Default Rate" means with respect to any Note that rate of interest
that is the greater of (i) 2% per annum above the rate of interest stated in
clause (a) of the first paragraph of such Note or (ii) 2% over the rate of
interest publicly announced by Wells Fargo Bank, N.A. in San Francisco,
California as its "base" or "prime" rate.
"Distribution" means, in respect of any corporation, association or
other business entity:
(a) dividends or other distributions or payments on capital
stock or other equity interest of such corporation, association or
other business entity (except distributions in such stock or other
equity interest); and
(b) the redemption, retirement, purchase or acquisition of
such stock or other equity interests or of warrants, rights or other
options to purchase such stock or other equity interests (except when
solely in exchange for such stock or other equity interests) unless
made, contemporaneously, from the net proceeds of a sale of such stock
or other equity interests.
"Environmental Laws" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under Section 414 of the Code.
"Event of Default" is defined in Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, at any time and with respect to any
property, the sale value of such property that would be realized in an
arm's-length sale at such time between an informed and willing buyer and an
informed and willing seller (neither being under a compulsion to buy or sell).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"General Partner" means Ferrellgas, Inc., a Delaware corporation.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any
State or other political subdivision
thereof, or
(ii) any jurisdiction in which the Company or
any Subsidiary conducts all or any
part of its business, or which asserts jurisdiction
over any properties of the Company or any
Subsidiary, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative
functions of, or pertaining to, any such government.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such Indebtedness or obligation or
any property constituting security
therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such Indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income
statement condition of any other Person or otherwise to advance or make
available funds for the purchase or payment of such Indebtedness or
obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of any other Person to make payment of the
Indebtedness or obligation; or
(d) otherwise to assure the owner of such
Indebtedness or obligation against loss in
respect thereof.
In any computation of the Indebtedness or other liabilities of the obligor under
any Guaranty, the Indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"Holder" or "holder" means, with respect to any Note, the Person in
whose name such Note is registered in the register maintained by the Company
pursuant to Section 13.1.
"Indebtedness" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its
redemption obligations in respect of
mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable arising in
the ordinary course of business but including all liabilities created
or arising under any conditional sale or other title retention
agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of
Capital Leases;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not it
has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions (whether or not
representing obligations for borrowed money); and
(f) any Guaranty of such Person with respect to
liabilities of a type described in any of
clauses (a) through (e) hereof.
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (f) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"Institutional Investor" means (a) any original purchaser of a Note,
(b) any holder of a Note holding more than 2% of the aggregate principal amount
of the Notes then outstanding, and (c) any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"Investment" means any investment, made in cash or by delivery of
property, by the Company or any of its Restricted Subsidiaries (i) in any
Person, whether by acquisition of stock, Indebtedness or other obligations or
Security, or by loan, Guaranty, advance, capital contribution or otherwise, or
(ii) in any property that would be classified as Investments on a balance sheet
prepared in accordance with GAAP.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Maintenance Capital Expenditures" means cash capital expenditures made
to maintain, up to the level thereof that existed at the time of such
expenditure, the operating capacity of the capital assets of the Company and its
Restricted Subsidiaries, taken as a whole, as such assets existed at the time of
such expenditure.
"Make-Whole Amount" is defined in Section 8.6.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties or prospects of the Company and
its Restricted Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Restricted Subsidiaries taken as a whole, or (b) the ability of
the Company to perform its obligations under this Agreement and the Notes, or
(c) the validity or enforceability of this Agreement or the Notes.
"Memorandum" is defined in Section 5.3.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA).
"Notes", "Series A Notes", "Series B Notes", "Series C Notes", "Series
D Notes" and "Series E Notes" are defined in Section 1.
"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Person" means an individual, partnership, joint venture, corporation,
limited liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in Section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Preferred Stock" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Priority Debt" means, without duplication, the sum of (a) all Debt of
the Company and its Restricted Subsidiaries secured by Liens permitted by
Section 10.4(m), and (b) all Debt of Restricted Subsidiaries that is not
permitted by Section 10.3(a), (b) or (c).
"property" or "properties" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"Refinancing" is defined in Section 10.1(b).
"Required Holders" means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"Restricted Payment" means any Distribution in respect of the Company.
For purposes of this Agreement, the amount of any Restricted Payment made in
property shall be the greater of (x) the Fair Market Value of such property (as
determined in good faith by the board of directors (or equivalent governing
body) of the Person making such Restricted Payment) and (y) the net book value
thereof on the books of such Person, in each case determined as of the date on
which such Restricted Payment is made.
"Restricted Subsidiary" means any Subsidiary (i) of which more than 80%
of the Voting Stock is beneficially owned, directly or indirectly by the
Company, (ii) which is organized under the laws of the United States or any
State thereof, (iii) which maintains substantially all of its assets and
conducts substantially all of its business within the United States, and (iv)
which is properly designated as such by the Company in the most recent notice
(or, prior to any such notice, on Schedule 5.4) with respect to such Subsidiary
given by the Company pursuant to and in accordance with the provisions of
Section 7.4.
"Sale and Leaseback Transaction" means, with respect to a Person and
property, a transaction or series of transactions pursuant to which such Person
sells such property with the intent at the time of entering into such
transaction or transactions of leasing such property for a term in excess of six
months.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Security" has the meaning set forth in section 2(a)(1) of the
Securities Act of 1933, as amended.
"Senior Debt" means (a) any Debt of the Company (other than
Subordinated Debt) and (b) any Debt of any Restricted Subsidiary.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of the Company.
"Subordinated Debt" means any Debt of the Company that shall contain or
have applicable thereto subordination provisions substantially in the form set
forth in Exhibit 10.1 attached hereto providing for the subordination thereof to
the Notes, or other provisions as may be approved in writing prior to the
incurrence thereof by the Holders of not less than 66-2/3% in aggregate
principal amount or the outstanding Notes.
"Subsidiary" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries (unless such partnership can and does ordinarily
take major business actions without the prior approval of such Person or one or
more of its Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.
"Subsidiary Stock" means the stock (or any options or warrants to
purchase stock or other Securities exchangeable for or convertible into stock)
of any Restricted Subsidiary.
"Transfer" means, with respect to any Person, any transaction in which
such Person sells, conveys, abandons, transfers, leases (as lessor), or
otherwise disposes of (including, without limitation, in connection with a Sale
Leaseback Transaction), any of its property, including, without limitation,
Subsidiary Stock.
"Unrestricted Subsidiary" means a Subsidiary which is not a Restricted
Subsidiary.
"Voting Stock" means (i) Securities of any class of classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the directors (or Persons performing similar functions) or
(ii) in the case of a partnership or joint venture, interests in the profits or
capital thereof entitling the holders of such interests to approve major
business actions.
"Wholly-Owned Restricted Subsidiary" means, at any time, any Restricted
Subsidiary one hundred percent (100%) of all of the equity interests (except
directors' qualifying shares) and voting interests of which are owned by any one
or more of the Company and the Company's other Wholly-Owned Restricted
Subsidiaries at such time.
"Working Capital Facility" means the Debt facility made available to
the Company for working capital purposes under the "Facility A Commitments"
pursuant to the Credit Agreement dated June 30, 1998, between the Company and
the banks named therein, as from time to time amended, supplemented and
Refinanced and any other credit agreement from time to time entered into by the
Company and its Restricted Subsidiaries for purposes of obtaining working
capital Debt.
<PAGE>
EXHIBIT 1-A
(to Note Purchase Agreement)
[FORM OF SERIES A NOTE]
FERRELLGAS, L.P.
6.99% SENIOR NOTE, SERIES A, DUE AUGUST 1, 2005
FOR VALUE RECEIVED, the undersigned, FERRELLGAS, L.P. (herein called
the "Company"), a limited partnership organized and existing under the laws of
the State of Delaware, hereby promises to pay to [_____________________] or
registered assigns, the principal sum of [______________] DOLLARS on August 1,
2005 with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 6.99% per annum from
the date hereof, payable semiannually, on the first day of February and August
in each year, commencing with the February or August next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreement
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 8.99% or (ii) 2% over the rate of interest publicly
announced by Wells Fargo Bank, N.A. from time to time in San Francisco,
California as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of the Company in Liberty, Missouri or at such
other place as the Company shall have designated by written notice to the holder
of this Note as provided in the Note Purchase Agreement referred to below.
This Note is one of the 6.99% Senior Notes, Series A (herein called the
"Series A Notes"), issued pursuant to the Note Purchase Agreement, dated as of
July 1, 1998 (as from time to time amended, the "Note Purchase Agreement"),
between the Company and the Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement.
This Note is a registered Series A Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Series A Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to optional prepayment, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreement, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.
This Note shall be construed and enforced in accordance with, and the
rights of the issuer and holder hereof shall be governed by, the law of the
State of Illinois excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than such
State.
FERRELLGAS, L.P.
By Ferrellgas, Inc., its general partner
By___________________________________________
Its__________________________________________
<PAGE>
EXHIBIT 1-B
(to Note Purchase Agreement)
[FORM OF SERIES B NOTE]
FERRELLGAS, L.P.
7.08% SENIOR NOTE, SERIES B, DUE AUGUST 1, 2006
FOR VALUE RECEIVED, the undersigned, FERRELLGAS, L.P. (herein called
the "Company"), a limited partnership organized and existing under the laws of
the State of Delaware, hereby promises to pay to [_____________________] or
registered assigns, the principal sum of [______________] DOLLARS on August 1,
2006 with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 7.08% per annum from
the date hereof, payable semiannually, on the first day of February and August
in each year, commencing with the February or August next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreement
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 9.08% or (ii) 2% over the rate of interest publicly
announced by Wells Fargo Bank, N.A. from time to time in San Francisco,
California as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of the Company in Liberty, Missouri or at such
other place as the Company shall have designated by written notice to the holder
of this Note as provided in the Note Purchase Agreement referred to below.
This Note is one of the 7.08% Senior Notes, Series B (herein called the
"Series B Notes"), issued pursuant to Note Purchase Agreement, dated as of July
1, 1998 (as from time to time amended, the "Note Purchase Agreement"), between
the Company and the Purchasers named therein and is entitled to the benefits
thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i)
to have agreed to the confidentiality provisions set forth in Section 20 of the
Note Purchase Agreement and (ii) to have made the representation set forth in
Section 6.2 of the Note Purchase Agreement.
This Note is a registered Series B Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Series B Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to optional prepayment, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreement, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.
This Note shall be construed and enforced in accordance with, and the
rights of the issuer and holder hereof shall be governed by, the law of the
State of Illinois excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than such
State.
FERRELLGAS, L.P.
By Ferrellgas, Inc., its general partner
By_________________________________________
Its____________________________________________
<PAGE>
EXHIBIT 1-C
(to Note Purchase Agreement)
[FORM OF SERIES C NOTE]
FERRELLGAS, L.P.
7.12% SENIOR NOTE, SERIES C, DUE AUGUST 1, 2008
FOR VALUE RECEIVED, the undersigned, FERRELLGAS, L.P. (herein called
the "Company"), a limited partnership organized and existing under the laws of
the State of Delaware, hereby promises to pay to [_____________________] or
registered assigns, the principal sum of [______________] DOLLARS on August 1,
2008 with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 7.12% per annum from
the date hereof, payable semiannually, on the first day of February and August
in each year, commencing with the February or August next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreement
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 9.12% or (ii) 2% over the rate of interest publicly
announced by Wells Fargo Bank, N.A. from time to time in San Francisco,
California as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of the Company in Liberty Missouri or at such
other place as the Company shall have designated by written notice to the holder
of this Note as provided in the Note Purchase Agreement referred to below.
This Note is one of the 7.12% Senior Notes, Series C (herein called the
"Series C Notes"), issued pursuant to Note Purchase Agreement, dated as of July
1, 1998 (as from time to time amended, the "Note Purchase Agreement"), between
the Company and the Purchasers named therein and is entitled to the benefits
thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i)
to have agreed to the confidentiality provisions set forth in Section 20 of the
Note Purchase Agreement and (ii) to have made the representation set forth in
Section 6.2 of the Note Purchase Agreement.
This Note is a registered Series C Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Series C Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to optional prepayment, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreement, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.
This Note shall be construed and enforced in accordance with, and the
rights of the issuer and holder hereof shall be governed by, the law of the
State of Illinois excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than such
State.
FERRELLGAS, L.P.
By Ferrellgas, Inc., its general partner
By___________________________________________
Its__________________________________________
<PAGE>
EXHIBIT 1-D
(to Note Purchase Agreement)
[FORM OF SERIES D NOTE]
FERRELLGAS, L.P.
7.24% SENIOR NOTE, SERIES D, DUE AUGUST 1, 2010
FOR VALUE RECEIVED, the undersigned, FERRELLGAS, L.P. (herein called
the "Company"), a limited partnership organized and existing under the laws of
the State of Delaware, hereby promises to pay to [_____________________] or
registered assigns, the principal sum of [______________] DOLLARS on August 1,
2010 with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 7.24% per annum from
the date hereof, payable semiannually, on the first day of February and August
in each year, commencing with the February or August next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreement
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 9.24% or (ii) 2% over the rate of interest publicly
announced by Wells Fargo Bank, N.A. from time to time in San Francisco,
California as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of the Company in Liberty Missouri or at such
other place as the Company shall have designated by written notice to the holder
of this Note as provided in the Note Purchase Agreement referred to below.
This Note is one of the 7.24% Senior Notes, Series D (herein called the
"Series D Notes"), issued pursuant to Note Purchase Agreement, dated as of July
1, 1998 (as from time to time amended, the "Note Purchase Agreement"), between
the Company and the Purchasers named therein and is entitled to the benefits
thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i)
to have agreed to the confidentiality provisions set forth in Section 20 of the
Note Purchase Agreement and (ii) to have made the representation set forth in
Section 6.2 of the Note Purchase Agreement.
This Note is a registered Series D Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Series D Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to optional prepayment, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreement, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.
This Note shall be construed and enforced in accordance with, and the
rights of the issuer and holder hereof shall be governed by, the law of the
State of Illinois excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than such
State.
FERRELLGAS, L.P.
By Ferrellgas, Inc., its general partner
By______________________________________
Its____________________________________
<PAGE>
EXHIBIT 1-E
(to Note Purchase Agreement)
[FORM OF SERIES E NOTE]
FERRELLGAS, L.P.
7.42% SENIOR NOTE, SERIES E, DUE AUGUST 1, 2013
FOR VALUE RECEIVED, the undersigned, FERRELLGAS, L.P. (herein called
the "Company"), a limited partnership organized and existing under the laws of
the State of Delaware, hereby promises to pay to [_____________________] or
registered assigns, the principal sum of [______________] DOLLARS on August 1,
2013 with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) on the unpaid balance thereof at the rate of 7.42% per annum from
the date hereof, payable semiannually, on the first day of February and August
in each year, commencing with the February or August next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as defined in the Note Purchase Agreement
referred to below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 9.42% or (ii) 2% over the rate of interest publicly
announced by Wells Fargo Bank, N.A. from time to time in San Francisco,
California as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at the principal office of the Company in Liberty Missouri or at such
other place as the Company shall have designated by written notice to the holder
of this Note as provided in the Note Purchase Agreement referred to below.
This Note is one of the 7.42% Senior Notes, Series E (herein called the
"Series E Notes"), issued pursuant to Note Purchase Agreement, dated as of July
1, 1998 (as from time to time amended, the "Note Purchase Agreement"), between
the Company and the Purchasers named therein and is entitled to the benefits
thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i)
to have agreed to the confidentiality provisions set forth in Section 20 of the
Note Purchase Agreement and (ii) to have made the representation set forth in
Section 6.2 of the Note Purchase Agreement.
This Note is a registered Series E Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Series E Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
This Note is subject to optional prepayment, in whole or from time to
time in part, at the times and on the terms specified in the Note Purchase
Agreement, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note Purchase
Agreement.
This Note shall be construed and enforced in accordance with, and the
rights of the issuer and holder hereof shall be governed by, the law of the
State of Illinois excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than such
State.
FERRELLGAS, L.P.
By Ferrellgas, Inc., its general partner
By____________________________________________________
Its___________________________________________________
<PAGE>
EXHIBIT 4.4(a)
(to Note Purchase Agreement)
FORM OF OPINION OF SPECIAL COUNSEL FOR THE COMPANY
The closing opinion of Bryan Cave LLP, special counsel for the Company,
its Restricted Subsidiaries and the General Partner, which is called for by
Section 4.4(a) of the Note Purchase Agreement, shall be dated the date of the
Closing and addressed to the Purchasers, shall be satisfactory in scope and form
to the Purchasers and shall be to the effect that:
1. The Company is a partnership, duly formed, validly
existing and in good standing under the laws of the State of Delaware,
has the partnership power and authority to execute and perform the Note
Purchase Agreement and to issue the Notes and has the requisite
partnership power and authority to conduct its business in all material
respects as presently conducted and, based solely on certificates of
foreign qualification provided by the Secretary of State of each
jurisdiction, is duly qualified or registered as a foreign partnership
to transact business in, and is in good standing as a foreign
partnership in each jurisdiction set forth on Schedule I hereto, and,
to our knowledge, such jurisdictions are the only jurisdictions in
which the Company conducts any business that requires qualification or
registration to conduct business as a foreign partnership, except where
the failure to so qualify or register would not have a Material Adverse
Effect.
2. Each Restricted Subsidiary of the Company is a
corporation or limited partnership duly incorporated or formed, as the
case may be, validly existing and in good standing under the laws of
its jurisdiction of incorporation or formation and, based solely upon
certificates of foreign qualification provided by the Secretary of
State of each jurisdiction, is duly qualified or registered as a
foreign corporation or limited partnership to transact business in, and
is in good standing as a foreign corporation or limited partnership in
each jurisdiction set forth on Schedule II hereto, and, to our
knowledge, such jurisdictions are the only jurisdictions in which the
Restricted Subsidiaries of the Company conduct any business that
requires qualification or registration to conduct business as a foreign
corporation or partnership, except where the failure to so qualify or
register would not have a material adverse effect upon the respective
Restricted Subsidiaries; and all of the issued and outstanding shares
of capital stock or other ownership interests of each such Restricted
Subsidiary, as applicable, have been validly issued, are fully paid and
non-assessable and the Company and/or one or more Restricted
Subsidiaries is the holder of record of such shares or ownership
interests.
3. The Note Purchase Agreement has been duly authorized by
all necessary partnership action on the part of the Company, has been
duly executed and delivered by the Company and constitutes the legal,
valid and binding obligation of the Company enforceable in accordance
with its terms, except to the extent that enforceability may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance and similar
laws affecting creditors' rights generally, and general principles of
equity (regardless of whether the enforceability of such principles is
considered in a proceeding in equity or at law).
4. The Notes have been duly authorized by all necessary
partnership action on the part of the Company, have been duly executed
and delivered by the Company, and when paid for by the Purchasers, will
constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting creditors'
rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a
proceeding in equity or at law).
5. No approval, consent, registration, qualification or
other action on the part of, or filing with any governmental body,
Federal, state or local, is required for the execution, delivery and
performance by the Company of the Note Purchase Agreement or the
execution, delivery and performance by the Company of the Notes,
except, in each case, such approvals, consents, registrations, or
qualifications as have been obtained, or set forth or contemplated in
the Note Purchase Agreement.
6. The issuance and sale of the Notes and the execution,
delivery and performance by the Company of the Note Purchase Agreement
do not violate applicable provisions of statutory law applicable to or
binding on the Company or any order of any court or governmental
authority or agency applicable to or binding on the Company, or violate
or result in any breach of any of the provisions of or constitute a
default under, or result in the creation or imposition of a Lien with
respect to, any material bond, note, debenture or other evidence of
indebtedness or any material indenture, mortgage, deed of trust, loan
agreement, contract, lease or other material instrument for money
borrowed known to us to which the Company is a party or by which the
Company is bound or to which the property of the Company is subject,
nor will such action result in a breach or violation of the Certificate
of Formation or Articles of Partnership of the Company; provided,
however, that, for purposes of this paragraph 6, no opinion is
expressed with respect to Federal or state securities laws, other
antifraud laws and fraudulent transfer laws.
7. The issuance, sale and delivery of the Notes by the
Company under the circumstances contemplated by the Note Purchase
Agreement do not, under existing law, require the registration of the
Notes under the Securities Act of 1933, as amended, or the
qualification of an indenture in respect thereof under the Trust
Indenture Act of 1939, as amended.
8. To our knowledge, there are no actions, suits or
proceedings pending or overtly threatened by written communication
against the Company or any Restricted Subsidiary in any court or before
any arbitrator of any kind or before or by any Governmental Authority
either (i) which purport to affect the Note Purchase Agreement or the
Notes, or (ii) that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
9. The issuance of the Notes and the use of the proceeds of
the sale of the Notes in accordance with the provisions of and as
contemplated by the Note Purchase Agreement (including, without
limitation, the representations and warranties set forth in the Note
Purchase Agreement) do not violate or conflict with Regulation T, U or
X of the Board of Governors of the Federal Reserve System.
10. The Company is not an "investment company,"
or a company "controlled" by an
"investment company," under the Investment Company Act of 1940, as
amended.
11. A court sitting in the State of Missouri will look to the
conflict of law rules of the State of Missouri to determine which law
governs. Under the conflict of law rules of the State of Missouri, a
court sitting in the State of Missouri should give effect to the
contractual choice of law clause in the Note Purchase Agreement and the
Notes electing Illinois law assuming that the Purchasers have
reasonable contacts with the State of Illinois, including without
limitation, that Allstate Life Insurance Company, one of the Purchasers
is headquartered in the State of Illinois, that many of the Purchasers
have offices or agents in the State of Illinois, that the Notes will be
delivered in the State of Illinois, and that counsel to the Purchasers
is located in the State of Illinois.
The opinion of Bryan Cave LLP shall be limited to the laws of the State
of Missouri, the Delaware Revised Uniform Limited Partnership Act, the general
business corporation law of the State of Delaware and the Federal laws of the
United States. In rendering the opinions set forth in paragraphs (3) and (4)
above, Bryan Cave LLP shall assume that the laws of Missouri govern the Note
Purchase Agreement and the Notes. The opinion of Bryan Cave LLP shall cover such
other matters relating to the sale of the Notes as the Purchasers may reasonably
request. With respect to matters of fact on which such opinion is based, such
counsel shall be entitled to rely on appropriate certificates of public
officials and officers of the Company and upon representations of the Company
and the Purchasers delivered in connection with the issuance and sale of the
Notes.
<PAGE>
EXHIBIT 4.4(b)
(to Note Purchase Agreement)
FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS
The closing opinion of Chapman and Cutler, special counsel for the
Purchasers, called for by Section 4.4(b) of the Note Purchase Agreement, shall
be dated the date of the Closing and addressed to the Purchasers, shall be
satisfactory in form and substance to the Purchasers and shall be to the effect
that:
1. The Company is a partnership, validly existing and in
good standing under the laws of the State of Delaware and has the power
and the authority to execute and deliver the Note Purchase Agreement
and to issue the Notes.
2. The Note Purchase Agreement has been duly authorized by
all necessary action on the part of the Company, has been duly executed
and delivered by the Company and constitutes the legal, valid and
binding contract of the Company enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance and
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
3. The Notes have been duly authorized by all necessary
action on the part of the Company, and the Notes being delivered on the
date hereof have been duly executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent conveyance and similar laws affecting creditors'
rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a
proceeding in equity or at law).
4. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Purchase Agreement do not, under
existing law, require the registration of the Notes under the
Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the opinion of
Bryan Cave LLP, special counsel for the Company, is satisfactory in scope and
form to Chapman and Cutler and that, in their opinion, the Purchasers are
justified in relying thereon.
In rendering the opinion set forth in paragraph 1 above, Chapman and
Cutler may rely, as to matters referred to in paragraph 1, solely upon an
examination of the Certificate of Formation certified by, and a certificate of
good standing of the Company from, the Secretary of State of the State of
Delaware, the Articles of Partnership of the Company and the general partnership
law of the State of Delaware. The opinion of Chapman and Cutler shall be limited
to the laws of the State of Illinois, the Delaware Revised Uniform Limited
Partnership Act and the Federal laws of the United States.
With respect to matters of fact upon which such opinion is based,
Chapman and Cutler may rely on appropriate certificates of public officials and
officers of the Company and upon representations of the Company and the
Purchasers delivered in connection with the issuance and sale of the Notes.
<PAGE>
EXHIBIT 10.1
(to Note Purchase Agreement)
SUBORDINATION PROVISIONS APPLICABLE TO
Subordinated Debt
(a) The indebtedness evidenced by the subordinated notes and any
renewals or extensions thereof, premium, if any, interest (including, without
limitation any such interest accruing subsequent to the filing by or against the
Company of any proceeding brought under Chapter 11 of the Bankruptcy Code (11
U.S.C. Section 100 et seq.)) and any fees, charges, expenses or other sums
payable under or in respect of the agreements pursuant to which such
subordinated notes were issued, shall at all times be wholly and unconditionally
subordinate and junior in right of payment to any and all indebtedness of the
Company (including principal, premium, if any, accrued and unpaid interest,
including any interest which may accrue subsequent to commencement of
proceedings under bankruptcy laws (whether or not such interest is allowed as a
claim pursuant to the provisions of any such bankruptcy laws) evidenced by the
Company's $109,000,000 aggregate principal amount 6.99% Senior Notes, Series A,
due August 1, 2005, $37,000,000 aggregate principal amount 7.08% Senior Notes,
Series B, due August 1, 2006, $52,000,000 aggregate principal amount 7.12%
Senior Notes, Series C, due August 1, 2008, $82,000,000 aggregate principal
amount 7.24% Senior Notes, Series D, due August 1, 2010, and $70,000,000
aggregate principal amount 7.42% Senior Notes, Series E, due August 1, 2013
issued pursuant to the Note Purchase Agreement, dated as of July 1, 1998, as the
same shall be amended from time to time, between the Company and the
institutional investors named in Schedule A attached thereto and all other
amounts due under said Note Purchase Agreement (together with any renewal,
replacement or refinancing thereof, herein called "Superior Indebtedness"), in
the manner and with the force and effect hereafter set forth:
(1) In the event of any (i) liquidation, dissolution or
winding up of the Company, voluntary or involuntary, (ii) any
execution, sale, receivership, insolvency, bankruptcy, liquidation,
readjustment, reorganization or other similar proceeding relative to
the Company or its property, (iii) any general assignment by the
Company for the benefit of creditors, or (iv) any distribution,
division, marshalling or application of any of the properties or assets
of the Company or the proceeds thereof to creditors, voluntary or
involuntary, and whether or not involving legal proceedings, then and
in any event:
(A) all principal, premium, if any, and interest and
all other sums owing on all Superior Indebtedness shall first
be indefeasibly paid in full in cash before any payment or
distribution of any kind or character is made upon the
indebtedness evidenced by the subordinated notes; and in any
such event any payment or distribution of any kind or
character, whether in cash, property or securities (other than
in securities, including equity securities, or other evidences
of indebtedness, the payment of which is unconditionally
subordinated (to the same extent as the subordinated notes) to
the payment of all Superior Indebtedness which may at the time
be outstanding) which shall be made upon or in respect of the
subordinated notes shall immediately be paid over to the
holders of such Superior Indebtedness, pro rata, for
application in payment thereof, unless and until such Superior
Indebtedness shall have been indefeasibly paid or satisfied in
full in cash;
(2) In the event that the subordinated notes are in default
under circumstances when the foregoing clause (l) shall not be
applicable, the holders of the subordinated notes shall be entitled to
payments of principal, premium, if any, or interest only after there
shall first have been indefeasibly paid in full in cash all Superior
Indebtedness outstanding at the time the subordinated notes so become
in default; and
(3) During the continuance of any default with respect to any
Superior Indebtedness, no payment of principal, premium, if any, or
interest or any other fees, charges, expenses or other sums payable
under or in respect of the agreements pursuant to which such
subordinated notes were issued shall be made on the subordinated notes.
(b) The holder of each subordinated note agrees that: (1) it will not
initiate a proceeding for liquidation, dissolution or winding-up of the Company,
or for execution, sale, receivership, insolvency, bankruptcy, liquidation,
readjustment, reorganization or other similar proceeding relative to the Company
or its property and (2) it will not accelerate the maturity of or enforce the
collection of the subordinated notes.
(c) The holder of each subordinated note undertakes and agrees for
the benefit of each holder of Superior Indebtedness to execute, verify, deliver
and file any proofs of claim within 30 days before the expiration of the time to
file the same which any holder of Superior Indebtedness may at any time require
in order to prove and realize upon any rights or claims pertaining to the
subordinated notes and to effectuate the full benefit of the subordination
contained herein; and upon failure of the holder of any subordinated note so to
do, any such holder of Superior Indebtedness shall be deemed to be irrevocably
appointed the agent and attorney-in-fact of the holder of such note to execute,
verify, deliver and file any such proofs of claim.
(d) No right of any holder of any Superior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be affected or
impaired by any failure to act on the part of the Company or the holders of
Superior Indebtedness, or by any noncompliance by the Company with any of the
terms, provisions and covenants of the subordinated notes or the agreement under
which they are issued, regardless of any knowledge thereof that any such holder
of Superior Indebtedness may have or be otherwise charged with.
(e) The subordination effected by the foregoing provisions and the
rights created thereby of the holders of the Superior Indebtedness shall not be
affected by: (1) any amendment of or addition or supplement to any Superior
Indebtedness or any instrument or agreement relating thereto, (2) any exercise
or non-exercise of any right, power or remedy under or in respect of any
Superior Indebtedness or any instrument or agreement relating thereto, or (3)
the giving or denial of any waiver, consent, release, indulgence, extension,
renewal, modification or delay or the taking or nontaking of any other action,
inaction or omission, in respect of any Superior Indebtedness or any instrument
or agreement relating thereto or to any securities relating thereto or any
guarantee thereof, whether or not any holder of any subordinated notes shall
have had notice or knowledge of any of the foregoing.
(f) The Company agrees, for the benefit of the holders of Superior
Indebtedness, that in the event that any subordinated note is declared due and
payable before its expressed maturity because of the occurrence of a default
hereunder: (1) the Company will give prompt notice in writing of such happening
to the holders of Superior Indebtedness and (2) all Superior Indebtedness shall
forthwith become immediately due and payable upon demand, regardless of the
expressed maturity thereof and (3) the holders of such subordinated notes shall
not entitled to receive any payment or distribution in respect thereof or
applicable thereto until all Superior Indebtedness at the time outstanding shall
have been indefeasibly paid in full in cash.
(g) No holder of any subordinated notes will sell, assign, pledge,
encumber or otherwise dispose of any of its subordinated notes unless such sale,
assignment, pledge, encumbrance or disposition is made expressly subject to the
foregoing provisions.
(h) If any payment or distribution of any character, whether in cash,
securities or other property shall be received by any holder of any subordinated
notes in contravention of this Section ________, such payment or distribution
shall be received and held in trust for the benefit of, and shall be promptly
paid over or delivered and transferred in the form received to, the holders of
the Superior Indebtedness pro rata for application to the payment of all
Superior Indebtedness remaining unpaid, to the extent necessary to indefeasibly
pay all such Superior Indebtedness in full in cash. In the event of the failure
of any holder of the subordinated notes to endorse or assign any such payment,
distribution or security, any holder of the Superior Indebtedness or such
holder's representative is hereby irrevocably authorized to endorse or assign
the same.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of July 2, 1998
among
FERRELLGAS, L.P.,
FERRELLGAS, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
NATIONSBANK, N.A.,
as Documentation Agent
Arranged By
BANCAMERICA ROBERTSON STEPHENS
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of
July 2, 1998, among FERRELLGAS, L.P., a Delaware limited partnership (the
"Borrower"), FERRELLGAS, INC., a Delaware corporation and the sole general
partner of the Borrower (the "General Partner"), the several financial
institutions from time to time party to this Agreement (collectively, the
"Banks"; individually, a "Bank"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION ("BofA"), as agent for the Banks (in such capacity, the
"Administrative Agent"). NATIONSBANK, N.A. is named as documentation agent (the
"Documentation Agent") hereunder.
R E C I T A L S
WHEREAS, the Borrower, the General Partner, the Banks and the
Administrative Agent are parties to the Existing Credit Agreement (as defined
below), pursuant to which the Banks have (a) made revolving credit loans to the
Borrower and have issued or participated in letters of credit for the account of
the Borrower, in each case for working capital, Acquisitions and general
partnership purposes in an aggregate amount of up to $185,000,000, (b) made
additional revolving loans to Borrower solely for working capital purposes in an
aggregate amount of up to $20,000,000 and (c) made term loans to the Borrower to
refinance the $50,000,000 Series B Floating Rate Senior Notes due 2001 issued by
the Borrower and Finance Corp. (as defined below);
WHEREAS, the Borrower has requested that (i) the outstanding Facility A
Revolving Loans and Facility C Revolving Loans under the Existing Credit
Agreement be refinanced and converted into Facility C Revolving Loans under this
Agreement, (ii) the Facility A Commitments under the Existing Credit Agreement
be converted into Facility A Commitments under this Agreement, the proceeds of
which are to be used by the Borrower solely for working capital purposes, (iii)
the Facility C Commitments under the Existing Credit Agreement be converted into
Facility C Commitments under this Agreement, the proceeds of which are to be
used by the Borrower for Acquisitions and general partnership purposes, (iv)
separate and apart from the foregoing credit facilities, the Banks make new
Facility B Commitments and Facility B Revolving Loans to the Borrower in an
aggregate amount of up to $50,000,000, the proceeds of which are to be used by
the Borrower for working capital and general partnership purposes and (v) the
Existing Credit Agreement otherwise be amended and restated in its entirety as
set forth below in this Agreement;
WHEREAS, on or prior to the Restatement Effective Date, the Borrower
will issue pursuant to the 1998 Note Purchase Agreement (as defined below) the
1998 Fixed Rate Senior Notes (as defined below) in an aggregate principal amount
of not greater than $350,000,000, the proceeds of which will be used to redeem
the Fixed Rate Senior Notes (as defined below) and to repay in full the Facility
B Term Loans under (and as defined in) the Existing Credit Agreement; and
WHEREAS, the Banks are willing, on and subject to the terms and
conditions set forth in this Agreement, to amend and restate the terms of the
Existing Credit Agreement and to extend credit under this Agreement as more
particularly hereinafter set forth.
ACCORDINGLY, the parties hereto agree to amend and restate the Existing
Credit Agreement as follows:
ARTICLE I
DEFINITIONS
The following terms have the following meanings:
"1994 Indenture" means the Indenture dated as of July 5, 1994,
among the Borrower, Finance Corp. and Norwest Bank Minnesota, National
Association, pursuant to which the Fixed Rate Senior Notes and the
Floating Rate Senior Notes were issued, as it may be amended, modified
or supplemented from time to time.
"1996 Indenture" means the Indenture dated as of April 26,
1996, among the MLP, Ferrellgas Partners Finance Corp. and American
Bank National Association, pursuant to which the MLP Senior Notes were
issued, as it may be amended, modified or supplemented from time to
time.
"1998 Fixed Rate Senior Notes" means, collectively, (a) the
$109,000,000 6.99% Senior Notes, Series A, due August 1, 2005, (b) the
$37,000,000 7.08% Senior Notes, Series B, due August 1, 2006, (c) the
$52,000,000 7.12% Senior Notes, Series C, due 2008, (d) the $82,000,000
7.24% Senior Notes, Series D, due August 1, 2010 and (e) the
$70,000,000 7.42% Senior Notes, Series E, due August 1, 2013, in each
case issued by the Borrower pursuant to the 1998 Note Purchase
Agreement.
"1998 Note Purchase Agreement" means the Note Purchase
Agreement, dated as of July 1, 1998, among the Borrower and the
Purchasers named therein, pursuant to which the 1998 Fixed Rate Senior
Notes will be issued, as it may be amended, modified or supplemented
from time to time.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other
Person merged with or into or became a Subsidiary of such specified
Person, including Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness encumbering
any asset acquired by such specified Person.
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the acquisition
of in excess of 50% of the capital stock, partnership interests or
equity of any Person or otherwise causing any Person, to become a
Subsidiary, or (c) a merger or consolidation or any other combination
with another Person (other than a Person that is a Subsidiary) provided
that the Borrower or the Subsidiary is the surviving entity.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Administrative Agent" has the meaning specified in the
introductory clause hereto. References to the "Administrative Agent"
shall include BofA in its capacity as agent for the Banks hereunder,
and any successor agent arising under Section 10.09.
"Agent-Related Persons" means BofA and any successor
Administrative Agent arising under Section 10.09, together with their
respective Affiliates (including, in the case of BofA, the Arranger),
and the officers, directors, employees, agents and attorneys-in-fact of
such Persons and Affiliates.
"Administrative Agent's Payment Office" means the address for
payments set forth on Schedule 11.02 hereto in relation to the
Administrative Agent, or such other address as the Administrative Agent
may from time to time specify.
"Agreement" means this Credit Agreement.
"Applicable Margin" means, for each Type of Loan, effective as
of the first day of each fiscal quarter, the percentage per annum
(expressed in basis points) set forth below opposite the Level of the
Pricing Ratio applicable to such fiscal quarter as set forth herein.
Pricing Ratio Base Rate Loans Eurodollar Loans
------------- --------------- ----------------
Level 1 0.00 b.p. 42.50 b.p.
Level 2 0.00 b.p. 50.00 b.p.
Level 3 0.00 b.p. 60.00 b.p.
Level 4 0.00 b.p. 80.00 b.p.
Level 5 0.00 b.p. 110.00 b.p.
Level 6 12.50 b.p. 137.50 b.p.
"Arranger" means BancAmerica Robertson Stephens, a
Wholly-Owned Subsidiary of BankAmerica Corporation. The Arranger is a
registered broker-dealer and permitted to underwrite and deal in
certain Ineligible Securities.
"Asset Sale" has the meaning specified in Section 8.02.
"Assignee" has the meaning specified in subsection 11.08(a).
"Attorney Costs" means and includes all reasonable and
itemized fees and disbursements of any law firm or other external
counsel, the allocated cost of internal legal services and all
disbursements of internal counsel.
"Attributable Debt" means, in respect of a sale and leaseback
arrangement of any property, as at the time of determination, the
present value (calculated using a discount rate equal to 7.16%) of the
total obligations of the lessee for rental payments during the
remaining term of the lease included in such arrangement (including any
period for which such lease has been extended).
"Available Cash" has the meaning given to such term in the
Partnership Agreement, as amended to July 5, 1994; provided, that (i)
Available Cash shall not include any amount of Net Proceeds of Asset
Sales until the 270-day period following the consummation of the
applicable Asset Sale, (ii) investments, loans and other contributions
to a Non-Recourse Subsidiary are to be treated as "cash disbursements"
when made for purposes of determining the amount of Available Cash and
(iii) cash receipts of a Non-Recourse Subsidiary shall not constitute
cash receipts of the Borrower for purposes of determining the amount of
Available Cash until cash is actually distributed by such Non-Recourse
Subsidiary to the Borrower.
"Bank" has the meaning specified in the introductory clause
hereto. References to the "Banks" shall include BofA and any other Bank
designated by the Administrative Agent as an Issuing Bank from time to
time, including in their respective capacities as Issuing Banks; for
purposes of clarification only, to the extent that an Issuing Bank may
have any rights or obligations in addition to those of a Bank due to
its status as an Issuing Bank, its status as such will be specifically
referenced.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978, as
amended (11 U.S.C. ss.101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50% per
annum above the Federal Funds Rate in effect on such day; and (b) the
rate of interest in effect for such day as publicly announced from time
to time by BofA in San Francisco, California, as its "reference rate."
(The "reference rate" is a rate set by BofA based upon various factors
including BofA's costs and desired return, general economic conditions
and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate.)
Any change in the reference rate announced by BofA shall take effect at
the opening of business on the day specified in the public announcement
of such change or if no day is so specified, on the day of the
announcement.
"Base Rate Loan" means a Loan that bears interest based on the
Base Rate.
"BofA" has the meaning specified in the introductory clause hereto.
"Borrowing" means a borrowing hereunder consisting of Loans of
the same Type made to the Borrower on the same day by the Banks (or, in
the case of Swingline Loans, by BofA) and, for Eurodollar Rate Loans,
having the same Interest Period, in either case under Article II.
"Borrowing Date" means any date on which a Borrowing occurs.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York or San Francisco are
authorized or required by law to close and, if the applicable Business
Day relates to any Eurodollar Rate Loan, means such a day on which
dealings are carried on in the London interbank dollar market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Capital Interests" means, with respect to any corporation,
any and all shares, participations, rights or other equivalent
interests in the capital of the corporation, and with respect to any
partnership, any and all partnership interests (whether general or
limited) and other interests or participations that confer on a Person
the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in
respect of a capital lease that would at such time be so required to be
capitalized on the balance sheet in accordance with GAAP.
"Cash Collateralize" means to pledge and deposit with or
deliver to the Administrative Agent, for the benefit of the
Administrative Agent, the Issuing Banks and the Banks, as collateral
for the L/C Obligations or any outstanding Loan, cash or deposit
account balances pursuant to documentation in form and substance
satisfactory to the Administrative Agent (which documents are hereby
consented to by the Banks). Derivatives of such term shall have
corresponding meaning. The Borrower hereby grants to the Administrative
Agent, for the benefit of the Administrative Agent, the Issuing Banks
and the Banks, a security interest in all such cash and deposit account
balances. Cash collateral shall be maintained in blocked, non-interest
bearing deposit accounts at BofA. Such collateral may be invested from
time to time in short-term money market instruments and other
investments with the consent of the Administrative Agent and the
Majority Banks (which consent may be given or withheld in their sole
and absolute discretion) provided that the Administrative Agent, the
Issuing Banks and the Banks shall at all times have a first priority
perfected security interest in such collateral and the proceeds
thereof.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
having maturities of not more than eighteen months from the date of
acquisition, (iii) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any Bank or with any other
domestic commercial bank having capital and surplus in excess of $500
million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications
specified in clause (iii) above, (v) commercial paper or direct
obligations of a Person, provided such Person has publicly outstanding
debt having the highest short-term rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and provided
further that such commercial paper or direct obligation matures within
270 days after the date of acquisition, and (vi) investments in money
market funds all of whose assets consist of securities of the types
described in the foregoing clauses (i) through (v).
"Change of Control" means (i) the sale, lease, conveyance or
other disposition of all or substantially all of the Borrower's assets
to any Person or group (as such term is used in Section 13(d)(3) of the
Exchange Act) other than James E. Ferrell, the Related Parties and any
Person of which James E. Ferrell and the Related Parties beneficially
own in the aggregate 51% or more of the voting Capital Interests (or if
such Person is a partnership, 51% or more of the general partner
interests), (ii) the liquidation or dissolution of the Borrower or the
General Partner, (iii) the occurrence of any transaction, the result of
which is that James E. Ferrell and the Related Parties beneficially own
in the aggregate, directly or indirectly, less than 51% of the total
voting power entitled to vote for the election of directors of the
General Partner and (iv) the occurrence of any transaction, the result
of which is that the General Partner is no longer the sole general
partner of the Borrower.
"Class" means, with respect to any Loan, whether such Loan is
a Facility A Revolving Loan, Swingline Loan, Facility B Revolving Loan,
or Facility C Revolving Loan.
"Code" means the Internal Revenue Code of 1986, as amended,
and regulations promulgated thereunder.
"Commercial Letters of Credit" means commercial documentary
letters of credit issued by an Issuing Bank pursuant to Article III.
"Commercial Letter of Credit Risk Participation Percentage"
means, as of any date and based upon the Level of the Pricing Ratio on
such date, the percentage per annum (expressed in basis points) set
forth below opposite such Level:
Commercial Letter of Credit Risk
Pricing Ratio Participation Percentage
------------- ------------------------
Level 1 15.50 b.p.
Level 2 18.50 b.p.
Level 3 22.50 b.p.
Level 4 30.00 b.p.
Level 5 35.00 b.p.
Level 6 45.00 b.p.
"Commitment Fee Rate" means, as of any date and based upon the
Level of the Pricing Ratio on such date, the percentage per annum
(expressed in basis points) set forth below opposite such Level:
Pricing Ratio Commitment Fee Rate
------------- -------------------
Level 1 12.50 b.p.
Level 2 15.00 b.p.
Level 3 20.00 b.p.
Level 4 27.50 b.p.
Level 5 32.50 b.p.
Level 6 37.50 b.p.
"Compliance Certificate" means a certificate signed by a
Responsible Officer of the Borrower substantially in the form of
Exhibit C, demonstrating compliance with the covenants contained
herein, including Sections 7.12, 7.13, 7.16 and 8.12 and the 30 day
clean-up period contained in subsection 2.01(a)(ii).
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period,
plus (a) an amount equal to any extraordinary loss plus any net loss
realized in connection with an asset sale, to the extent such losses
were deducted in computing Consolidated Net Income, plus (b) provision
for taxes based on income or profits of such Person for such period, to
the extent such provision for taxes was deducted in computing
Consolidated Net Income, plus (c) Consolidated Interest Expense of such
Person for such period, whether paid or accrued (including amortization
of original issue discount, non-cash interest payments and the interest
component of any payments associated with Capital Lease Obligations and
net payments (if any) pursuant to Hedging Obligations), to the extent
such expense was deducted in computing Consolidated Net Income, plus
(d) depreciation and amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) of such Person for such
period, to the extent such depreciation and amortization were deducted
in computing Consolidated Net Income, plus (e) non-cash employee
compensation expenses of such Person for such period, plus (f) the
Synthetic Lease Principal Component of such Person for such period; in
each case, for such period without duplication on a consolidated basis
and determined in accordance with GAAP.
"Consolidated Interest Expense" means, as of the last day of
any fiscal period, on a consolidated basis, the sum of (a) all
interest, fees (including Letter of Credit fees), charges and related
expenses paid or payable (without duplication) for that fiscal period
to the Banks hereunder or to any other lender in connection with
borrowed money or the deferred purchase price of assets that are
considered "interest expense" under GAAP, plus (b) the portion of rent
paid or payable (without duplication) for that fiscal period under
Capital Lease Obligations that should be treated as interest in
accordance with Financial Accounting Standards Board Statement No. 13,
on a consolidated basis, plus (c) the Synthetic Lease Interest
Component for that fiscal period.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided, that (i) the Net Income of any Person
that is not a Subsidiary or that is accounted for by the equity method
of accounting shall be included only to the extent of the amount of
dividends or distributions paid to such Person or a Wholly-Owned
Subsidiary thereof, (ii) the Net Income of any Person that is a
Subsidiary (other than a Wholly-Owned Subsidiary) shall be included
only to the extent of the amount of dividends or distributions paid to
such Person or a Wholly-Owned Subsidiary thereof, (iii) the Net Income
of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded except
to the extent otherwise includable under clause (i) above and (iv) the
cumulative effect of a change in accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common
stockholders or partners of such Person and its consolidated
Subsidiaries as of such date, plus (ii) the respective amounts reported
on such Person's balance sheet as of such date with respect to any
series of preferred stock (other than Disqualified Interests) that by
its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect
of the year of such declaration and payment, but only to the extent of
any cash received by such Person upon issuance of such preferred stock,
less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going
concern business made within 12 months after the acquisition of such
business) subsequent to the Restatement Effective Date in the book
value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries (except, in each
case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges as of such date, all of the
foregoing determined in accordance with GAAP.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend, distribution, letter of credit or other obligation (the
"primary obligations") of another Person (the "primary obligor"),
including any obligation of that Person (i) to purchase, repurchase or
otherwise acquire such primary obligations or any security therefor,
(ii) to advance or provide funds for the payment or discharge of any
such primary obligation, or to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth
or solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation, or (iv) otherwise to assure or
hold harmless the holder of any such primary obligation against loss in
respect thereof (each, a "Guaranty Obligation"); (b) with respect to
any Surety Instrument (other than any Letter of Credit) issued for the
account of that Person or as to which that Person is otherwise liable
for reimbursement of drawings or payments; (c) to purchase any
materials, supplies or other property from, or to obtain the services
of, another Person if the relevant contract or other related document
or obligation requires that payment for such materials, supplies or
other property, or for such services, shall be made regardless of
whether delivery of such materials, supplies or other property is ever
made or tendered, or such services are ever performed or tendered; or
(d) in respect of any Hedging Obligation. The amount of any Contingent
Obligation shall, in the case of Guaranty Obligations, be deemed equal
to the stated or determinable amount of the primary obligation in
respect of which such Guaranty Obligation is made or, if not stated or
if indeterminable, the maximum reasonably anticipated liability in
respect thereof, and in the case of other Contingent Obligations, shall
be equal to the maximum reasonably anticipated liability in respect
thereof.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or by
which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under
Section 2.04, the Borrower (a) converts Loans of one Type to another
Type, or (b) continues as Loans of the same Type, but with a new
Interest Period, Loans having Interest Periods expiring on such date.
"Credit Extension" means and includes (a) the making of any
Loans hereunder and (b) the Issuance of any Letters of Credit
hereunder.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"Disqualified Interests" means any Capital Interests which, by
their terms (or by the terms of any security into which they are
convertible or for which they are exchangeable), or upon the happening
of any event, mature or are mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of
the holder thereof, in whole or in part, on or prior to December 31,
2001.
"Documentation Agent" means NationsBank, N.A.
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Effective Amount" means (i) with respect to any Loans on any
date, the aggregate outstanding principal amount thereof after giving
effect to any Borrowings and prepayments or repayments of Loans
occurring on such date; and (ii) with respect to any outstanding L/C
Obligations on any date, the amount of such L/C Obligations on such
date after giving effect to any Issuances of Letters of Credit
occurring on such date and any other changes in the aggregate amount of
the L/C Obligations as of such date, including as a result of any
reimbursements of outstanding unpaid drawings under any Letters of
Credit or any reductions in the maximum amount available for drawing
under Letters of Credit taking effect on such date. For purposes of
Section 2.07, the Effective Amount shall be determined without giving
effect to any mandatory prepayments to be made under such Section 2.07.
"Eligible Assignee" means (i) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $500,000,000; (ii) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of any such country, and
having a combined capital and surplus of at least $500,000,000,
provided that such bank is acting through a branch or agency located in
the United States; and (iii) a Person that is primarily engaged in the
business of commercial banking and that is (A) a Subsidiary of a Bank,
(B) a Subsidiary of a Person of which a Bank is a Subsidiary, or (C) a
Person of which a Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for
release or injury to the environment.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
"Equity Interests" means Capital Interests and all warrants,
options or other rights to acquire Capital Interests (but excluding any
debt security that is convertible into, or exchangeable for, Capital
Interests).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and regulations promulgated thereunder.
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Borrower or the General Partner
from a Pension Plan subject to Section 4063 of ERISA during a plan year
in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) the filing of a
notice of intent to terminate, the treatment of a plan amendment as a
termination under Section 4041 or 4041A of ERISA or the commencement of
proceedings by the PBGC to terminate a Pension Plan subject to Title IV
of ERISA; (d) a failure by the Borrower or the General Partner to make
required contributions to a Pension Plan or other Plan subject to
Section 412 of the Code; (e) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan; (f) the imposition of any liability under
Title IV of ERISA, other than PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon the Borrower or the General Partner;
or (g) an application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code with respect to
any Pension Plan.
"Eurodollar Rate" shall mean, for each Interest Period in
respect of Eurodollar Rate Loans comprising part of the same Borrowing,
an interest rate per annum (rounded to the nearest 1/16th of 1% or, if
there is no nearest 1/16th of 1%, rounded upward) determined pursuant
to the following formula:
Eurodollar Rate = LIBOR
1.00 - Eurodollar Reserve Percentage
The Eurodollar Rate shall be adjusted automatically as of the effective
date of any change in the Eurodollar Reserve Percentage.
"Eurodollar Rate Loan" means a Loan that bears interest based
on the Eurodollar Rate.
"Eurodollar Reserve Percentage" shall mean the maximum reserve
percentage (expressed as a decimal, rounded to the nearest 1/100th of
1% or, if there is no nearest 1/100th of 1%, rounded upward) in effect
on the date LIBOR for such Interest Period is determined (whether or
not applicable to any Bank) under regulations issued from time to time
by the Federal Reserve Board for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities") having a term comparable to
such Interest Period. Without limiting the effect of the foregoing, the
Eurodollar Reserve shall include any other reserves required to be
maintained by any Bank with respect to (a) any category of liabilities
that includes deposits by reference to which the Eurodollar Rate is to
be determined as provided in the definition of "Eurodollar Rate" in
this Section 1.01 or (b) any category of extensions of credit or other
assets that includes Eurodollar Rate Loans.
"Event of Default" means any of the events or circumstances
specified in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"Existing Credit Agreement" means the Amended and Restated
Credit Agreement, dated as of July 31, 1996, as amended prior to the
Restatement Effective Date, among Borrower, the General Partner, the
several financial institutions from time to time party thereto, Bank of
America National Trust and Savings Association, as Agent, with
NationsBank of Texas, N.A. as named Co-Agent thereunder.
"Existing Indebtedness" means Indebtedness of the Borrower and
its Subsidiaries (other than the Obligations) and certain Indebtedness
of the General Partner with respect to which the Borrower has assumed
the General Partner's repayment obligations, in each case in existence
on the Restatement Effective Date and as more fully set forth on
Schedule 8.05.
"Existing Letters of Credit" means the letters of credit
issued and outstanding on the Restatement Effective Date which are
described in Schedule 3.03. Each of the Existing Letters of Credit is
designated on such schedule as a standby letter of credit or a
commercial documentary letter of credit.
"Facility A Commitment" means, as to each Bank, the amount set
forth opposite such Bank's name on Schedule 2.01 hereof under the
caption "Facility A Commitment," as the same may be reduced under
Section 2.05 or 2.07 or as a result of one or more assignments under
Section 11.08; provided, that the maximum aggregate Facility A
Commitment of all Banks shall not exceed $40,000,000 at any time.
"Facility A Revolving Loan" has the meaning specified in
subsection 2.01(a), and may be a Base Rate Loan or a Eurodollar Rate
Loan.
"Facility B Commitment" means, as to each Bank, the amount set
forth opposite such Bank's name on Schedule 2.01 hereof under the
caption "Facility B Commitment," as the same may be reduced under
Section 2.05 or 2.07 or as a result of one or more assignments under
Section 11.08; provided, that the maximum aggregate Facility B
Commitment of all Banks shall not exceed $50,000,000 at any time.
"Facility B Revolving Loan" has the meaning specified in
subsection 2.01(b), and may be a Base Rate Loan or a Eurodollar Rate
Loan.
"Facility C Commitment" means, as to each Bank, the amount set
forth opposite such Bank's name on Schedule 2.01 hereof under the
caption "Facility C Commitment," as the same may be reduced under
Section 2.05 or 2.07 or as a result of one or more assignments under
Section 11.08; provided, that the maximum aggregate Facility C
Commitment of all Banks shall not exceed $55,000,000 at any time.
"Facility C Revolving Loan" has the meaning specified in
subsection 2.01(c), and may be a Base Rate Loan or a Eurodollar Rate
Loan.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Administrative Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m.
(New York City time) on that day by each of three leading brokers of
Federal funds transactions in New York City selected by the
Administrative Agent.
"Fee Letter" has the meaning specified in subsection 2.10(a).
"FCI ESOT" means the employee stock ownership trust of Ferrell
Companies, Inc. organized under section 4975(e)(7) of the Code.
"Ferrellgas Partners Finance Corp." means Ferrellgas Partners
Finance Corp., a Delaware corporation and a Wholly-Owned Subsidiary of
the MLP.
"Finance Corp." means Ferrellgas Finance Corp., a Delaware
corporation and a Wholly-Owned Subsidiary of the Borrower.
"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of Consolidated Cash Flow of such Person for
such period to the Fixed Charges of such Person for such period. In the
event that such Person or any of its Subsidiaries incurs, assumes,
guarantees, redeems or repays any Indebtedness (other than revolving
credit borrowings including, with respect to the Borrower, Swingline
Loans, Facility A Revolving Loans, Facility B Revolving Loans and
Facility C Revolving Loans) subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated
but prior to the date of the event for which the calculation of the
Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, guarantee, redemption or repayment of
Indebtedness, as if the same had occurred at the beginning of the
applicable reference period. The foregoing calculation of the Fixed
Charge Coverage Ratio shall also give pro forma effect to Acquisitions
(including all mergers and consolidations), dispositions and
discontinuances of businesses or assets that have been made by such
Person or any of its Subsidiaries during the reference period or
subsequent to such reference period and on or prior to the Calculation
Date assuming that all such Acquisitions, dispositions and
discontinuances of businesses or assets had occurred on the first day
of the reference period; provided, however, that with respect to the
Borrower, (a) Fixed Charges shall be reduced by amounts attributable to
businesses or assets that are so disposed of or discontinued only to
the extent that the obligations giving rise to such Fixed Charges would
no longer be obligations contributing to the Fixed Charges of the
Borrower subsequent to the Calculation Date and (b) Consolidated Cash
Flow generated by an acquired business or asset shall be determined by
the actual gross profit (revenues minus costs of goods sold) of such
acquired business or asset during the immediately preceding number of
full fiscal quarters as are in the reference period minus the pro forma
expenses that would have been incurred by the Borrower in the operation
of such acquired business or asset during such period computed on the
basis of (i) personnel expenses for employees retained by the Borrower
in the operation of the acquired business or asset and (ii)
non-personnel costs and expenses incurred by the Borrower on a per
gallon basis in the operation of the Borrower's business at similarly
situated Borrower facilities.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (a) consolidated interest
expense of such Person for such period, whether paid or accrued, to the
extent such expense was deducted in computing Consolidated Net Income
(including amortization of original issue discounts, non-cash interest
payments, the interest component of all payments associated with
Capital Lease Obligations and net payments (if any) pursuant to Hedging
Obligations permitted hereunder), (b) commissions, discounts and other
fees and charges incurred with respect to letters of credit, (c) any
interest expense on Indebtedness of another Person that is guaranteed
by such Person or secured by a Lien on assets of such Person, and (d)
the product of (i) all cash dividend payments (and non-cash dividend
payments in the case of a Person that is a Subsidiary) on any series of
preferred stock of such Person, times (ii) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, determined, in each case, on a consolidated
basis and in accordance with GAAP.
"Fixed Rate Senior Notes" means the 10% Series A Fixed Rate
Senior Notes due 2001, as amended or supplemented from time to time,
issued by the Borrower and Finance Corp. pursuant to the 1994
Indenture.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"Funded Debt" means all Indebtedness of the Borrower and its
Subsidiaries excluding all Contingent Obligations of the Borrower and
its Subsidiaries under or in connection with Letters of Credit
outstanding from time to time.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
"General Partner" has the meaning specified in the
introductory clause hereto.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Growth-Related Capital Expenditures" means, with respect to
any Person, all capital expenditures by such Person made to improve or
enhance the existing capital assets or to increase the customer base of
such Person or to acquire or construct new capital assets (but
excluding capital expenditures made to maintain, up to the level
thereof that existed at the time of such expenditure, the operating
capacity of the capital assets of such Person as such assets existed at
the time of such expenditure).
"Guarantor" means each Person that executes a Guaranty and its
successors and assigns.
"Guaranty" means a continuing guaranty of the Obligations in
favor of the Administrative Agent on behalf of the Banks, in form and
substance satisfactory to the Administrative Agent.
"Guaranty Obligation" has the meaning specified in the
definition of "Contingent Obligation."
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and
(ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"Honor Date" has the meaning specified in subsection 3.03(c).
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary course
of business on ordinary terms); (c) all non-contingent reimbursement or
payment obligations with respect to Surety Instruments; (d) all
obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case
with respect to property acquired by the Person (even though the rights
and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property); (f) all
Capital Lease Obligations; (g) all Hedging Obligations; (h) all
indebtedness referred to in clauses (a) through (g) above secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of
such Indebtedness; and (i) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (a) through (h) above; provided, however, that "Indebtedness"
shall not include Synthetic Lease Obligations.
"Indemnified Liabilities" has the meaning specified in
Section 11.05.
"Indemnified Person" has the meaning specified in
Section 11.05.
"Independent Auditor" has the meaning specified in subsection
7.01(a).
"Ineligible Securities" means securities which may not be
underwritten or dealt in by member banks of the Federal Reserve System
under Section 16 of the Banking Act of 1933 (12 U.S.C. ss. 24,
Seventh), as amended.
"Insolvency Proceeding" means (a) any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other similar arrangement in respect of a
Person's creditors generally or any substantial portion of a Person's
creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"Interest Coverage Ratio" means with respect to any Person for
any period, the ratio of Consolidated Cash Flow of such Person for such
period to Consolidated Interest Expense of such Person for such period.
The foregoing calculation of the Interest Coverage Ratio shall give pro
forma effect to Acquisitions (including all mergers and
consolidations), Asset Sales and other dispositions and discontinuances
of businesses or assets that have been made by such Person or any of
its Subsidiaries during the reference period or subsequent to such
reference period and on or prior to the date of calculation of the
Interest Coverage Ratio assuming that all such Acquisitions, Asset
Sales and other dispositions and discontinuances of businesses or
assets had occurred on the first day of the reference period; provided,
however, that with respect to the Borrower and its Subsidiaries,
Consolidated Cash Flow generated by an acquired business or asset shall
be determined by the actual gross profit (revenues minus costs of goods
sold) of such acquired business or asset during the immediately
preceding number of full fiscal quarters as in the reference period
minus the pro forma expenses that would have been incurred by the
Borrower and its Subsidiaries in the operation of such acquired
business or asset during such period computed on the basis of (i)
personnel expenses for employees retained by the Borrower and its
Subsidiaries in the operation of the acquired business or asset and
(ii) non-personnel costs and expenses incurred by the Borrower and its
Subsidiaries on a per gallon basis in the operation of the Borrower's
business at similarly situated facilities of the Borrower.
"Interest Payment Date" means, as to any Eurodollar Rate Loan,
the last day of each Interest Period applicable to such Loan and, as to
any Base Rate Loan, the first Business Day of each fiscal quarter of
the Borrower; provided, however, that if any Interest Period for a
Eurodollar Rate Loan exceeds three months, the date that is three
months after the beginning of such Interest Period and after each
Interest Payment Date thereafter is also an Interest Payment Date,
provided, further, that if there is no numerically corresponding day in
the calendar month during which an Interest Payment Date is to occur,
such Interest Payment Date shall occur on the last Business Day of such
calendar month.
"Interest Period" means, as to any Eurodollar Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as a Eurodollar Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Borrower in its
Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be extended
to the following Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period; and
(iii) no Interest Period for any Revolving
Loan shall extend beyond the Revolving Loan Termination Date.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions.
"Issuance Date" has the meaning specified in
subsection 3.01(a).
"Issue" means, with respect to any Letter of Credit, to issue
or to extend the expiry of, or to renew or increase the amount of, such
Letter of Credit; and the terms "Issued," "Issuing" and "Issuance" have
corresponding meanings.
"Issuing Banks" means BofA and Paribas in their respective
capacities as issuers of one or more Letters of Credit hereunder.
"Joint Venture" means a single-purpose corporation,
partnership, joint venture or other similar legal arrangement (whether
created by contract or conducted through a separate legal entity) now
or hereafter formed by the Borrower or any of its Subsidiaries with
another Person in order to conduct a common venture or enterprise with
such Person.
"L/C Advance" means each Bank's participation in any L/C
Borrowing in accordance with its Pro Rata Share.
"L/C Amendment Application" means an application form for
amendment of outstanding Standby Letters of Credit or Commercial
Letters of Credit as shall at any time be in use at the applicable
Issuing Bank, as such Issuing Bank shall request.
"L/C Application" means an application form for issuances of
Standby Letters of Credit or Commercial Letters of Credit as shall at
any time be in use at the applicable Issuing Bank, as such Issuing Bank
shall request.
"L/C Borrowing" means an extension of credit resulting from a
drawing under any Letter of Credit which shall not have been reimbursed
on the date when made nor converted into a Borrowing of Facility B
Revolving Loans under subsection 3.03(c).
"L/C Commitment" means the commitment of the Issuing Banks to
Issue, and the commitment of the Banks severally to participate in,
Letters of Credit from time to time Issued or outstanding under Article
III, in an aggregate amount not to exceed on any date the lesser of
$50,000,000 and the aggregate Facility B Commitment, as such amount may
be reduced as a result of a reduction in the L/C Commitment pursuant to
Section 2.05; provided that the L/C Commitment is a part of the
aggregate Facility B Commitment, rather than a separate, independent
commitment.
"L/C Obligations" means at any time the sum of (a) the
aggregate undrawn amount of all Letters of Credit then outstanding,
plus (b) the amount of all unreimbursed drawings under all Letters of
Credit, including all outstanding L/C Borrowings, plus (c) all other
Obligations of the Borrower under or in connection with the L/C-Related
Documents, to the extent not included within clauses (a) and (b)
hereof.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the Issuing Banks'
standard form reimbursement agreements and other documents for letter
of credit issuances.
"Lending Office" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Eurodollar Lending Office", as the case may be, on Schedule
11.02, or such other office or offices as such Bank may from time to
time notify the Borrower and the Administrative Agent.
"Letters of Credit" means, collectively, Standby Letters of
Credit and Commercial Letters of Credit.
"Level" means, at any time, Level 1, Level 2, Level 3, Level
4, Level 5 or Level 6 based on the amount of the Pricing Ratio at such
time. For purposes of this Agreement, the following "Levels" of Pricing
Ratio (PR) shall apply:
Level Pricing Ratio
----- -------------
Level 1 PR LT 1.75
Level 2 1.75 LT PR LT 2.75
Level 3 2.75 LT PR LT 3.25
Level 4 3.25 LT PR LT 3.75
Level 5 3.75 LT PR LT 4.25
Level 6 PR LT 4.25
The Level of the Pricing Ratio for the period from the Restatement
Effective Date to the end of the fiscal quarter of the Borrower during
which the Restatement Effective Date occurs shall be equal to Level 4.
Any change in the Level of the Pricing Ratio shall be determined by the
Administrative Agent based upon the financial information required to
be contained in the Compliance Certificates delivered by the Borrower
to the Administrative Agent with respect to each fiscal quarter of the
Borrower and shall become effective as of the first day of the fiscal
quarter following the fiscal quarter for which such Compliance
Certificate was delivered. Upon any failure of the Borrower to deliver
a Compliance Certificate for any fiscal quarter prior to 10 days after
the date on which such Compliance Certificate is required to be
delivered to the Administrative Agent, and without limiting the other
rights and remedies of the Administrative Agent and the Banks
hereunder, the Pricing Ratio shall be deemed to be Level 6 as of the
first day of the fiscal quarter beginning after the fiscal quarter for
which such Compliance Certificate was due.
"Leverage Ratio" means, with respect to any Person for any
period, the ratio of Funded Debt plus Synthetic Lease Obligations, in
each case of such Person as of the last day of such period, to
Consolidated Cash Flow of such Person for such period. In the event
that such Person or any of its Subsidiaries incurs, assumes,
guarantees, redeems or repays any Indebtedness (other than revolving
credit borrowings) subsequent to the commencement of the period for
which the Leverage Ratio is being calculated but prior to the date on
which the calculation of the Leverage Ratio is made (the "Leverage
Ratio Calculation Date"), then the Leverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee,
redemption or repayment of Indebtedness, as if the same had occurred at
the beginning of the applicable reference period. The foregoing
calculation of the Leverage Ratio shall also give pro forma effect to
Acquisitions (including all mergers and consolidations), Asset Sales
and other dispositions and discontinuances of businesses or assets that
have been made by such Person or any of its Subsidiaries during the
reference period or subsequent to such reference period and on or prior
to the Leverage Ratio Calculation Date assuming that all such
Acquisitions, Asset Sales and other dispositions and discontinuances of
businesses or assets had occurred on the first day of the reference
period; provided, however, that with respect to the Borrower and its
Subsidiaries, (a) Funded Debt shall be reduced by amounts attributable
to businesses or assets that are so disposed of or discontinued only to
the extent that the Indebtedness included within such Funded Debt would
no longer be an obligation of the Borrower or its Subsidiaries
subsequent to the Leverage Ratio Calculation Date and (b) Consolidated
Cash Flow generated by an acquired business or asset shall be
determined by the actual gross profit (revenues minus costs of goods
sold) of such acquired business or asset during the immediately
preceding number of full fiscal quarters as in the reference period
minus the pro forma expenses that would have been incurred by the
Borrower and its Subsidiaries in the operation of such acquired
business or asset during such period computed on the basis of (i)
personnel expenses for employees retained by the Borrower and its
Subsidiaries in the operation of the acquired business or asset and
(ii) non-personnel costs and expenses incurred by the Borrower and its
Subsidiaries on a per gallon basis in the operation of the Borrower's
business at similarly situated facilities of the Borrower.
"LIBOR" means the rate of interest per annum determined by the
Administrative Agent to be the arithmetic mean (rounded upward to the
next 1/16th of 1%) of the rates of interest per annum notified to the
Administrative Agent by BofA as the rates of interest at which dollar
deposits in the approximate amount of the amount of the Loan to be made
or continued as, or converted into, a Eurodollar Rate Loan by BofA and
having a maturity comparable to such Interest Period would be offered
to major banks in the London interbank market at their request at
approximately 11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale or
other title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as
debtor, under the Uniform Commercial Code or any comparable law) and
any contingent or other agreement to provide any of the foregoing, but
not including the interest of a lessor under an operating lease.
"Loan" means an extension of credit by a Bank to the Borrower
under Article II or Article III in the form of a Facility A Revolving
Loan, Facility B Revolving Loan, Facility C Revolving Loan, L/C Advance
or (in the case of BofA) Swingline Loan.
"Loan Documents" means this Agreement, any Notes, the Fee
Letters, the L/C-Related Documents, the Guaranties and all other
documents delivered to the Administrative Agent or any Bank in
connection herewith.
"Majority Banks" means at any time Banks then holding more
than 50% of the then aggregate unpaid principal amount of the Loans
(other than the Swingline Loans), or, if no such principal amount is
then outstanding, Banks then having more than 50% of the aggregate
Revolving Loan Commitments.
"Margin Stock" means "margin stock" as such term is defined in
Regulation U of the FRB.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the
Borrower or the Borrower and its Subsidiaries taken as a whole; (b) a
material impairment of the ability of the General Partner, the Borrower
or any Subsidiary to perform under any Loan Document or otherwise to
avoid any Event of Default; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against the
Borrower or any Subsidiary of any Loan Document.
"MLP" means Ferrellgas Partners, L.P., a Delaware limited
partnership and the sole limited partner of the Borrower.
"MLP Senior Notes" means the $160,000,000 9-3/8% Senior
Secured Notes issued by the MLP and Ferrellgas Partners Finance Corp.
pursuant to the 1996 Indenture.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before
any reduction in respect of preferred stock dividends, excluding,
however, (a) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in connection
with (i) any asset sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions), or (ii) the disposition
of any securities or the extinguishment of any Indebtedness of such
Person or any of its Subsidiaries, and (b) any extraordinary gain (but
not loss), together with any related provision for taxes on such
extraordinary gain (but not loss); provided, however, that all costs
and expenses with respect to the redemption of the Fixed Rate Senior
Notes, including, without limitation, cash premiums, tender offer
premiums, consent payments and all fees and expenses in connection
therewith, shall be added back to the Net Income of the Borrower, the
General Partner or their Subsidiaries to the extent that they were
deducted from such Net Income in accordance with GAAP.
"Net Proceeds of Asset Sale" means the aggregate cash proceeds
received by the Borrower or any of its Subsidiaries in respect of any
Asset Sale, net of the direct costs relating to such Asset Sale
(including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and
any tax sharing arrangements), and amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets
the subject of such Asset Sale.
"Non-Recourse Subsidiary" means any Person that would
otherwise be a Subsidiary of the Borrower but is designated as a
Non-Recourse Subsidiary in a resolution of the Board of Directors of
the General Partner, so long as each of the following remains true: (a)
no portion of the Indebtedness or any other obligation (contingent or
otherwise) of such Person (i) is a Contingent Obligation of the
Borrower or any of its Subsidiaries, (ii) is recourse or obligates the
Borrower or any of its Subsidiaries in any way or (iii) subjects any
property or asset of the Borrower or any of its Subsidiaries, directly
or indirectly, contingently or otherwise, to satisfaction thereof, (b)
neither the Borrower nor any of its Subsidiaries has any contract,
agreement, arrangement or understanding or is subject to an obligation
of any kind, written or oral, with such Person other than on terms no
less favorable to the Borrower and its Subsidiaries than those that
might be obtained at the time from persons who are not Affiliates of
the Borrower, (c) neither the Borrower nor any of its Subsidiaries has
any obligation with respect to such Person (i) to subscribe for
additional shares of capital stock, Capital Interests or other Equity
Interests therein or (ii) maintain or preserve such Person's financial
condition or to cause such Person to achieve certain levels of
operating or other financial results, (d) such Person has no more than
$1,000 of assets at the time of such designation, (e) such Person is in
compliance with the restrictions applicable to Affiliates of the MLP
under Section 8.22 hereof and (f) such Person takes steps designed to
assure that neither the Borrower nor any of its Subsidiaries will be
liable for any portion of the Indebtedness or other obligations of such
Person, including maintenance of a corporate or limited partnership
structure and observance of applicable formalities such as regular
meetings and maintenance of minutes, a substantial and meaningful
capitalization and the use of a corporate or partnership name, trade
name or trademark not misleadingly similar to those of the Borrower.
"Note" means a promissory note executed by the Borrower in
favor of a Bank pursuant to subsection 2.02(b), in substantially the
form of Exhibit F-1, F-2 or F-3.
"Notice of Borrowing" means a notice in substantially the form
of Exhibit A.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document,
owing by the Borrower to any Bank, the Administrative Agent, or any
Indemnified Person, whether direct or indirect (including those
acquired by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising including, without limitation, all
Indebtedness of the Borrower to the Banks for the payment of principal
of and interest on all outstanding Loans and all obligations of the
Borrower to the Issuing Banks for reimbursement of drawings under
Letters of Credit from time to time.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation and, for any general or limited
partnership, the partnership agreement of such partnership and all
amendments thereto and any agreements otherwise relating to the rights
of the partners thereof.
"Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"Participant" has the meaning specified in subsection 11.08(d).
"Partners' Equity" means the partners' equity as shown on a
balance sheet prepared in accordance with GAAP for any partnership.
"Partnership Agreement" shall mean the Agreement of Limited
Partnership of the Borrower dated July 5, 1994, as amended from time to
time in accordance with the terms of this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Borrower or the
General Partner sponsors, maintains, or to which it makes, is making,
or is obligated to make contributions, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five (5)
plan years.
"Permitted Acquisitions" means Acquisitions by the Borrower
and its Subsidiaries which comply with the provisions of Section 8.04.
"Permitted Investments" means (a) any Investments in Cash
Equivalents; (b) any Investments in the Borrower or in a Wholly-Owned
Subsidiary of the Borrower that is a Guarantor; (c) Investments by the
Borrower or any Subsidiary of the Borrower in a Person, if as a result
of such Investment (i) such Person becomes a Wholly-Owned Subsidiary of
the Borrower and a Guarantor or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Borrower
or a Wholly-Owned Subsidiary of the Borrower that is a Guarantor; and
(d) other Investments in Non-Recourse Subsidiaries of the Borrower that
do not exceed $30 million in the aggregate.
"Permitted Liens" has the meaning specified in Section 8.01.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Borrower or any Subsidiary of the Borrower issued in exchange for,
or the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund other Indebtedness of the Borrower or any of
its Subsidiaries; provided that (a) the principal amount of such
Indebtedness does not exceed the principal amount of the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (the
"Prior Indebtedness") (plus the amount of reasonable expenses incurred
in connection therewith), and the effective interest rate per annum on
such Indebtedness does not or is not likely to exceed the effective
interest rate per annum of the Prior Indebtedness, as determined by the
Administrative Agent in its sole discretion; (b) such Indebtedness has
a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Prior Indebtedness; (c) if the
Prior Indebtedness is subordinated to the Obligations, such
Indebtedness is subordinated to the Obligations on the terms and
conditions set forth on part II of Schedule 8.05; and (d) such
Indebtedness is incurred by the Borrower or the Subsidiary who is the
obligor on the Prior Indebtedness.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association,
Joint Venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Borrower sponsors or maintains or to which the
Borrower or the General Partner makes, is making, or is obligated to
make contributions and includes any Pension Plan.
"Pricing Ratio" means, as of the last day of each fiscal
quarter of the Borrower, the Leverage Ratio for the fiscal period
consisting of such fiscal quarter of the Borrower and the three
immediately preceding fiscal quarters of the Borrower.
"Pro Rata Share" means, as to any Bank at any time, the
percentage set forth on Schedule 2.01 hereto as its "Pro Rata Share,"
as such amount may be adjusted by assignments under Section 11.08.
"Related Party" means (i) the spouse or any lineal descendant
of James E. Ferrell, (ii) any trust for his benefit or for the benefit
of his spouse or any such lineal descendants, (iii) any corporation,
partnership or other entity in which James E. Ferrell and/or such other
Persons referred to in the foregoing clauses (i) and (ii) are the
direct record and beneficial owners of all of the voting and nonvoting
Equity Interests, (iv) the FCI ESOT or (v) any participant in the FCI
ESOT whose ESOT account has been allocated shares of Ferrell Companies,
Inc.
"Reportable Event" means any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case applicable
to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"Responsible Officer" means the chief executive officer or the
president of the General Partner or any other officer having
substantially the same authority and responsibility to act for the
General Partner on behalf of the Borrower; or, with respect to actions
taken or to be taken under Articles II and III and compliance with
financial covenants, the chief financial officer or the treasurer of
the General Partner or any other officer having substantially the same
authority and responsibility to act for the General Partner on behalf
of the Borrower or any other employee of the General Partner designated
in a certificate of a Responsible Officer to have authority in such
matters.
"Restatement Effective Date" means the later to occur of (a)
the first date on which all conditions precedent set forth in Section
5.01 and Section 5.02 are satisfied or waived by all Banks (or, in the
case of subsection 5.01(f), waived by the Persons entitled to receive
such payments) and (b) August 3, 1998.
"Revolving Loan Commitments" means, as to each Bank, the
Facility A Commitment, the Facility B Commitment and the Facility C
Commitment of such Bank.
"Revolving Loans" means, collectively, the Facility A
Revolving Loans, the Facility B Revolving Loans and the Facility C
Revolving Loans.
"Revolving Loan Termination Date" means the earlier of (a)
July 2, 2001 (or such later date to which the Revolving Loan
Termination Date may be extended pursuant to subsection 2.08(d) of this
Agreement) and (b) the date on which the Revolving Loan Commitments
shall have been terminated pursuant to this Agreement.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Significant Subsidiary" means any Subsidiary of the Borrower
that would be a "significant subsidiary" as defined in Article 1, Rule
1-02 of Regulation S-X, promulgated pursuant to the Securities Act of
1933, as such Regulation is in effect on the date hereof.
"Solvent" shall mean, with respect to any Person on any date,
that on such date (a) the fair value of the property of such Person is
greater than the fair value of the liabilities (including, without
limitation, contingent liabilities) of such Person, (b) such Person
does not intend to, and does not believe that it will, incur debts and
liabilities beyond such Person's ability to pay as such debts and
liabilities mature and (c) such Person is not engaged in business or a
transaction, and is not about to engage in a business or a transaction,
for which such Person's property would constitute an unreasonably small
capital.
"Standby Letters of Credit" means standby letters of credit
Issued by an Issuing Bank pursuant to Article III.
"Standby Letter of Credit Risk Participation Percentage"
means, as of any date and based upon the Level of the Pricing Ratio on
such date, the percent per annum (expressed in basis points) set forth
below opposite such Level:
Standby Letter of Credit Risk
Pricing Ratio Participation Percentage
------------- ------------------------
Level 1 42.50 b.p.
Level 2 50.00 b.p.
Level 3 60.00 b.p.
Level 4 80.00 b.p.
Level 5 110.00 b.p.
Level 6 137.50 b.p.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than
50% of the total voting power of shares of Capital Interests entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof (or, in the case of
a limited partnership, more than 50% of either the general partners'
Capital Interests or the limited partners' Capital Interests) is at the
time owned or controlled, directly or indirectly, by such Person or one
or more of the other Subsidiaries of that Person or a combination
thereof. Notwithstanding the foregoing, any Subsidiary of the Borrower
that is designated a Non-Recourse Subsidiary pursuant to the definition
thereof shall, for so long as all of the statements in the definition
thereof remain true, not be deemed a Subsidiary of the Borrower.
"Surety Instruments" means all letters of credit (including
standby and commercial), bankers' acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swingline Loan" has the meaning specified in Section 2.15.
"Synthetic Lease" means each arrangement, however described,
under which the obligor accounts for its interest in the property
covered thereby under GAAP as lessee of a lease which is not a Capital
Lease and accounts for its interest in the property covered thereby for
Federal income tax purposes as the owner.
"Synthetic Lease Interest Component" means, with respect to
any Person for any period, the portion of rent paid or payable (without
duplication) for such period under Synthetic Leases of such Person that
would be treated as interest in accordance with Financial Accounting
Standards Board Statement No. 13 if such Synthetic Leases were treated
as Capital Leases under GAAP.
"Synthetic Lease Obligation" means, as to any Person with
respect to any Synthetic Lease at any time of determination, the amount
of the liability of such Person in respect of such Synthetic Lease that
would (if such lease was required to be classified and accounted for as
a capital lease on a balance sheet of such Person in accordance with
GAAP) be required to be capitalized on the balance sheet of such Person
at such time.
"Synthetic Lease Principal Component" means, with respect to
any Person for any period, the portion of rent (exclusive of the
Synthetic Lease Interest Component) paid or payable (without
duplication) for such period under Synthetic Leases of such Person that
was deducted in calculating Consolidated Net Income of such Person for
such period.
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Bank and the
Administrative Agent, such taxes (including income taxes or franchise
taxes) as are imposed on or measured by each Bank's net income by the
jurisdiction (or any political subdivision thereof) under the laws of
which such Bank or the Administrative Agent, as the case may be, is
organized or maintains a lending office.
"Type" means, with respect to any Loan, whether such Loan is a
Base Rate Loan or a Eurodollar Rate Loan.
"UCP" has the meaning specified in Section 3.09.
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
"United States" and "U.S." each means the United States of
America.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a)
the sum of the products obtained by multiplying (x) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (y) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment, by (b) the then outstanding principal amount of such
Indebtedness; provided, however, that with respect to any revolving
Indebtedness, the foregoing calculation of Weighted Average Life to
Maturity shall be determined based upon the total available commitments
and the required reductions of commitments in lieu of the outstanding
principal amount and the required payments of principal, respectively.
"Wholly-Owned Subsidiary" means a Subsidiary of which all of
the outstanding Capital Interests or other ownership interests (other
than directors' qualifying shares) or, in the case of a limited
partnership, all of the partners' Capital Interests (other than up to a
1% general partner interest), is owned, beneficially and of record, by
the Borrower, a Wholly-Owned Subsidiary of the Borrower or both.
1.02 Other Interpretive Provisions
(a) The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and
means "including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) Unless otherwise expressly provided herein, financial
calculations applicable to the Borrower shall be made on a consolidated basis.
(h) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Administrative
Agent, the Borrower and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or the Administrative
Agent merely because of the Administrative Agent's or Banks' involvement in
their preparation.
1.03 Accounting Principles
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied. In the event that GAAP changes
during the term of this Agreement such that the covenants contained in Section
7.12 would then be calculated in a different manner or with different
components, (i) the Borrower and the Banks agree to amend this Agreement in such
respects as are necessary to conform those covenants as criteria for evaluating
Borrower's financial condition to substantially the same criteria as were
effective prior to such change in GAAP and (ii) the Borrower shall be deemed to
be in compliance with the covenants contained in Section 7.12 during the 90-day
period following any such change in GAAP if and to the extent that the Borrower
would have been in compliance therewith under GAAP as in effect immediately
prior to such change.
(b) Except as otherwise specified, references herein to
"fiscal year" and "fiscal quarter" refer to such fiscal periods of the Borrower.
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Revolving Loan Commitments
(a) Facility A Revolving Loans.
(i) Each Bank severally agrees, on the terms and
subject to the conditions set forth herein, to make loans to the
Borrower (each such loan, a "Facility A Revolving Loan") from time to
time on any Business Day during the period from the Restatement
Effective Date to the Revolving Loan Termination Date, in an aggregate
principal amount not to exceed at any time outstanding such Bank's
Facility A Commitment as in effect from time to time; provided,
however, that, after giving effect to any Borrowing of Facility A
Revolving Loans, the Effective Amount of all outstanding Facility A
Revolving Loans shall not at any time exceed the combined Facility A
Commitments, and the Effective Amount of the Facility A Revolving Loans
of any Bank shall not at any time exceed such Bank's Facility A
Commitment.
(ii) Within the limits of each Bank's Facility A
Commitment and on the other terms and subject to the other conditions
hereof, the Borrower may borrow under this subsection 2.01(a), prepay
under Section 2.06 and reborrow under this subsection 2.01(a);
provided, that the Borrower shall cause the aggregate outstanding
principal amount of Facility A Revolving Loans to be reduced to zero
for at least one period of 30 consecutive days during each fiscal year
of the Borrower, commencing with its fiscal year beginning August 1,
1998.
(b) Facility B Revolving Loans and Letters of Credit. (i) Each
Bank severally agrees, on the terms and subject to the conditions set
forth herein, to make loans to the Borrower (each such loan, a
"Facility B Revolving Loan") from time to time on any Business Day
during the period from the Restatement Effective Date to the Revolving
Loan Termination Date, in an aggregate principal amount not to exceed
at any time outstanding such Bank's Facility B Commitment as in effect
from time to time; provided, however, that, after giving effect to any
Borrowing of Facility B Revolving Loans, the sum of the Effective
Amount of all outstanding Facility B Revolving Loans plus the Effective
Amount of all L/C Obligations shall not at any time exceed the combined
Facility B Commitments, and the Effective Amount of the Facility B
Revolving Loans of any Bank plus the participation of such Bank in the
Effective Amount of all L/C Obligations shall not at any time exceed
such Bank's Facility B Commitment.
(ii) Within the limits of each Bank's Facility B
Commitment and on the other terms and subject to the other conditions
hereof, the Borrower may borrow under this subsection 2.01(b), prepay
under Section 2.06 and reborrow under this subsection 2.01(b).
(iii) As a subfacility of the Banks' Facility B
Commitments, the Borrower may request the Issuing Banks to Issue
Letters of Credit from time to time pursuant to Article III. On the
Restatement Effective Date, all Existing Letters of Credit shall be
Letters of Credit hereunder and shall constitute usage of the Facility
B Commitment under this Agreement.
(c) Facility C Revolving Loans and Swingline Loans.
(i) Each Bank severally agrees, on the terms and
subject to the conditions set forth herein, to make loans to the
Borrower (each such loan, a "Facility C Revolving Loan") from time to
time on any Business Day during the period from the Restatement
Effective Date to the Revolving Loan Termination Date, in an aggregate
principal amount not to exceed at any time outstanding such Bank's
Facility C Commitment as in effect from time to time; provided,
however, that, after giving effect to any Borrowing of Facility C
Revolving Loans, the sum of the Effective Amount of all outstanding
Facility C Revolving Loans plus the Effective Amount of all Swingline
Loans shall not at any time exceed the combined Facility C Commitments,
and the Effective Amount of the Facility C Revolving Loans of any Bank
plus such Bank's Pro Rata Share of the Effective Amount of all
outstanding Swingline Loans shall not at any time exceed such Bank's
Facility C Commitment. On the Restatement Effective Date, the aggregate
outstanding principal amount of the Facility A Revolving Loans,
Facility C Revolving Loans and Swingline Loans, in each case under (and
as defined in) the Existing Credit Agreement shall be automatically
deemed to be Facility C Revolving Loans under this Agreement for all
purposes of this Agreement and the other Loan Documents (including for
the purpose of determining usage of the Facility C Commitment under
this Agreement as set forth above).
(ii) Within the limits of each Bank's Facility C
Commitment and on the other terms and subject to the other conditions
hereof, the Borrower may borrow under this subsection 2.01(c), prepay
under Section 2.06 and reborrow under this subsection 2.01(c).
(iii) In addition, the Borrower may request BofA to
make Swingline Loans to the Borrower from time to time pursuant to
Section 2.15.
2.02 Loan Accounts. (a) The Loans made by each Bank and the Letters of
Credit Issued by the Issuing Banks shall be evidenced by one or more accounts or
records maintained by such Bank or Issuing Bank, as the case may be, in the
ordinary course of business. The accounts or records maintained by the
Administrative Agent, the Issuing Banks and each Bank shall be conclusive absent
manifest error of the amount of the Loans made by the Banks to the Borrower and
the Letters of Credit Issued for the account of the Borrower, and the interest
and payments thereon. Any failure so to record or any error in doing so shall
not, however, limit or otherwise affect the obligation of the Borrower hereunder
to pay any amount owing with respect to the Loans or any Letter of Credit.
(b) Upon the request of any Bank made through the
Administrative Agent, the Loans made by such Bank may be evidenced by one or
more Notes, instead of loan accounts. Each such Bank shall endorse on the
schedules annexed to its Note(s) the date, amount and maturity of each Loan made
by it and the amount of each payment of principal made by the Borrower with
respect thereto. Each such Bank is irrevocably authorized by the Borrower to
endorse its Note(s) and each Bank's record shall be conclusive absent manifest
error; provided, however, that the failure of a Bank to make, or an error in
making, a notation thereon with respect to any Loan shall not limit or otherwise
affect the obligations of the Borrower hereunder or under any such Note to such
Bank.
2.03 Provedure for Borrowing. (a) Each Borrowing of Loans (other than
Swingline Loans) shall be made upon the Borrower's irrevocable written
notice delivered to the Administrative Agent in the form of a Notice of
Borrowing (which notice must be received by the Administrative Agent prior
to 9:00 a.m. San Francisco time (i) three Business Days prior to the
requested Borrowing Date, in the case of Eurodollar Rate Loans, and (ii)
one Business Day prior to the requested Borrowing Date, in the case of Base
Rate Loans, specifying:
(A) the amount of the Borrowing, which shall
be in an aggregate minimum amount of $3,000,000 or any
multiple of $1,000,000 in excess thereof for Eurodollar Loans,
or $1,000,000 or any multiple of $100,000 in excess thereof
for Base Rate Loans;
(B) the requested Borrowing
Date, which shall be a Business Day;
(C) the Type and Class of
Loans comprising the Borrowing; and
(D) the duration of the Interest Period
applicable to any Eurodollar Rate Loans included in such
notice. If the Notice of Borrowing fails to specify the
duration of the Interest Period for any Borrowing comprised of
Eurodollar Rate Loans, such Interest Period shall be one
month.
(b) The Administrative Agent will promptly notify each Bank of
the Administrative Agent's receipt of any Notice of Borrowing and of the amount
of such Bank's Pro Rata Share of that Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of
each Borrowing available to the Administrative Agent for the account of the
Borrower at the Administrative Agent's Payment Office by 11:00 a.m. San
Francisco time on the Borrowing Date requested by the Borrower in funds
immediately available to the Administrative Agent. The proceeds of all such
Loans will then be made available to the Borrower by the Administrative Agent at
such office by crediting the account of the Borrower on the books of BofA with
the aggregate of the amounts made available to the Administrative Agent by the
Banks and in like funds as received by the Administrative Agent.
(d) After giving effect to any Borrowing, there may not be
more than ten different Interest Periods in effect with respect to Eurodollar
Rate Loans.
. (a) The Borrower may, upon irrevocable written notice to the
Administrative Agent in accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of Eurodollar Rate Loans, to convert any such Loans
(or any part thereof in an amount not less than $3,000,000, or that is
in an integral multiple of $1,000,000 in excess thereof) into Loans of
the other Type; or
(ii) elect as of the last day of the applicable
Interest Period, to continue as Eurodollar Rate Loans any Loans having
Interest Periods expiring on such day (or any part thereof in an amount
not less than $3,000,000, or that is in an integral multiple of
$1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of Eurodollar Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $3,000,000, such Eurodollar Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Borrower to continue such Loans as, and convert such Loans into,
Eurodollar Rate Loans shall terminate.
(b) The Borrower shall deliver a Notice of
Conversion/Continuation to be received by the Administrative Agent not later
than 9:00 a.m. San Francisco time at least (i) three Business Days in advance of
the Conversion/Continuation Date, if the Loans are to be converted into or
continued as Eurodollar Rate Loans; and (ii) one Business Day in advance of the
Conversion/Continuation Date, if the Loans are to be converted into Base Rate
Loans, specifying:
(A) the proposed Conversion/
Continuation Date;
(B) the aggregate amount and
Class of Loans to be converted or renewed;
(C) the Type of Loans resultin
from the proposed conversion or continuation; and
(D) other than in the case of conversions
into Base Rate Loans, the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period applicable
to Eurodollar Rate Loans, the Borrower has failed to select a new Interest
Period within the time period specified in subsection 2.04(b) to be applicable
to such Eurodollar Rate Loans, or if any Default or Event of Default then
exists, the Borrower shall be deemed to have elected to convert such Eurodollar
Rate Loans into Base Rate Loans effective as of the expiration date of such
Interest Period.
(d) The Administrative Agent will promptly notify each Bank of
its receipt of a Notice of Conversion/Continuation, or, if no notice is provided
by the Borrower within the time period specified in subsection 2.04(b), the
Administrative Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans with
respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise agree, during the
existence of a Default or Event of Default, the Borrower may not elect to have a
Loan converted into or continued as a Eurodollar Rate Loan.
(f) After giving effect to any conversion or continuation of
Loans, there may not be more than ten different Interest Periods in effect.
2.05 Voluntary Termination or Reduction of Revolving Loan
Commitments
(a) The Borrower may, not later than 11:00 a.m. San Francisco
time at least three Business Days prior to its effective date by notice to the
Administrative Agent, terminate or permanently reduce the Facility A Commitments
by an aggregate minimum amount of $5,000,000 or any multiple of $5,000,000 in
excess thereof; unless, after giving effect thereto and to any prepayments of
Loans made on the effective date thereof, the Effective Amount of all Facility A
Revolving Loans would exceed the amount of the combined Facility A Commitments
then in effect.
(b) The Borrower may, not later than 11:00 a.m. San Francisco
time at least three Business Days prior to its effective date by notice to the
Administrative Agent, terminate or permanently reduce the Facility B Commitments
by an aggregate minimum amount of $5,000,000 or any multiple of $5,000,000 in
excess thereof; unless, after giving effect thereto and to any prepayments of
Loans made on the effective date thereof, (i) the Effective Amount of all
Facility B Revolving Loans and L/C Obligations together would exceed the amount
of the combined Facility B Commitments then in effect, or (ii) the Effective
Amount of all L/C Obligations then outstanding would exceed the L/C Commitment.
(c) The Borrower may, not later than 11:00 a.m. San Francisco
time at least three Business Days prior to its effective date by notice to the
Administrative Agent, terminate or permanently reduce the Facility C Commitments
by an aggregate minimum amount of $5,000,000 or any multiple of $5,000,000 in
excess thereof; unless, after giving effect thereto and to any prepayments of
Loans made on the effective date thereof, the Effective Amount of all Facility C
Revolving Loans and Swingline Loans together would exceed the amount of the
combined Facility C Commitments then in effect.
(d) Once reduced in accordance with this Section, the
Commitments may not be increased. Any reduction of the Revolving Loan
Commitments shall be applied to each Bank according to its Pro Rata Share.
. (a) Subject to Section 4.04, the Borrower may, at any time or from
time to time, not later than 9:00 a.m. San Francisco time at least three (3)
Business Days prior to its effective date by irrevocable notice to the
Administrative Agent, in the case of Eurodollar Rate Loans, and not later than
9:00 a.m. San Francisco time at least one (1) Business Day prior to its
effective date by irrevocable notice to the Administrative Agent, in the case of
Base Rate Loans, ratably prepay Loans in whole or in part, in minimum amounts of
$3,000,000 or any multiple of $1,000,000 in excess thereof, for Eurodollar Rate
Loans, and in minimum amounts of $1,000,000 or any multiple of $100,000 in
excess thereof, for Base Rate Loans.
(b) Any such notice of prepayment shall specify the date and
amount of such prepayment and the Type(s) and, with respect to voluntary
prepayments occurring on or prior to the Revolving Loan Termination Date, the
Class(es) of Loans to be prepaid. Prepayments of Base Rate Loans of any Class
may be made hereunder on any Business Day. Prepayments of Eurodollar Rate Loans
of any Class may be made hereunder only on the last day of any applicable
Interest Period; provided, that prepayments of Eurodollar Rate Loans may be made
on a day other than the last day of the applicable Interest Period only with
payment by the Borrower of the aggregate amount of any associated funding losses
of any affected Banks pursuant to Section 4.04. The Administrative Agent will
promptly notify each Bank of its receipt of any such notice, and of such Bank's
Pro Rata Share of such prepayment.
(c) If any such notice is given by the Borrower, the Borrower
shall make such prepayment and the payment amount specified in such notice shall
be due and payable on the date specified therein, together, in the case of a
Eurodollar Rate Loan, with accrued interest to each such date on the amount
prepaid and any amounts required pursuant to Section 4.04.
. (a) Subject to Section 4.04, if on any date on or prior to the
Revolving Loan Termination Date the Effective Amount of all Facility A Revolving
Loans then outstanding exceeds the combined Facility A Commitments, the Borrower
shall immediately, and without notice or demand, prepay the outstanding
principal amount of Facility A Revolving Loans by an aggregate amount equal to
the applicable excess.
(b) If on any date the Effective Amount of L/C Obligations
exceeds the L/C Commitment, the Borrower shall Cash Collateralize on such date
the outstanding Letters of Credit in an amount equal to the excess of the
aggregate maximum amount then available to be drawn under the Letters of Credit
over the L/C Commitment. Subject to Section 4.04, if on any date after giving
effect to any Cash Collateralization made on such date pursuant to the preceding
sentence, the Effective Amount of all Facility B Revolving Loans then
outstanding plus the Effective Amount of all L/C Obligations then outstanding
exceeds the combined Facility B Commitments, the Borrower shall immediately, and
without notice or demand, prepay the outstanding principal amount of the
Facility B Revolving Loans and any L/C Advances by an aggregate amount equal to
the applicable excess.
(c) Subject to Section 4.04, if on any date on or prior to the
Revolving Loan Termination Date the Effective Amount of all Facility C Revolving
Loans then outstanding plus the Effective Amount of all Swingline Loans then
outstanding exceeds the combined Facility C Commitments, the Borrower shall
immediately, and without notice or demand, prepay the outstanding principal
amount of the Facility C Revolving Loans and Swingline Loans by an aggregate
amount equal to the applicable excess.
(d) The Borrower shall immediately, and without notice or
demand, prepay the Obligations in full, including, without limitation, the
aggregate principal amount of all outstanding Loans, all accrued and unpaid
interest thereon and all amounts payable under Section 4.04 hereof, and all of
the Revolving Loan Commitments shall be automatically reduced to zero, in each
case on the 30th day after any Change of Control shall have occurred and be
continuing.
(e) If and to the extent that the Revolving Loan Commitments
are not equal to zero on the Revolving Loan Termination Date, such Revolving
Loan Commitments shall be automatically reduced to zero on the Revolving Loan
Termination Date.
. 08 Repayment
(a) Revolving Loans. The Borrower shall repay to the Banks in
full on the Revolving Loan Termination Date the aggregate principal amount of
Revolving Loans outstanding on such date together with all accrued and unpaid
interest thereon.
(b) Swingline Loans. The Borrower shall repay to BofA in full
on the Revolving Loan Termination Date the aggregate principal amount of
Swingline Loans outstanding on such date, together with all accrued and unpaid
interest thereon.
(c) Extension of Revolving Loan Termination Date. Each Bank,
at its sole option and in its sole discretion, upon the written request of
Borrower given to Administrative Agent and each Bank not more than 90 days nor
less than 60 days prior to the Revolving Loan Termination Date at any time in
effect, may elect to extend such Revolving Loan Termination Date by a period of
one year. Within 30 days following receipt of such request, each Bank shall give
notice to Borrower and Administrative Agent of its decision to extend or not to
extend such Revolving Loan Termination Date. If, in accordance with the
immediately preceding sentence, all Banks shall have elected to extend such
Revolving Loan Termination Date, the Revolving Loan Termination Date shall be
extended by a period of one year. In the event that any Bank notifies Borrower
and Administrative Agent that it will not extend the Revolving Loan Termination
Date then in effect, or if any Bank fails to notify Borrower and Administrative
Agent of its decision to extend or not to extend such Revolving Loan Termination
Date, in either case within the applicable 30 day period referred to above, such
Revolving Loan Termination Date shall not be extended and the Revolving Loan
Termination Date then in effect shall be the Revolving Loan Termination Date for
all purposes of this Agreement.
. (a) Each Loan shall bear interest on the outstanding principal amount
thereof from the applicable Borrowing Date at a rate per annum equal to the
Eurodollar Rate (other than with respect to Swingline Loans) or the Base Rate,
as the case may be (and subject to the Borrower's right to convert to other
Types of Loans under Section 2.04), plus the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on each
applicable Interest Payment Date. Interest in all cases shall also be paid on
the date of any prepayment of Loans under subsection 2.07(d) and interest on
Eurodollar Rate Loans shall also be paid on the date of prepayment of Loans in
all other circumstances under Section 2.06 or 2.07, in each case for the portion
of the Loans so prepaid and upon payment (including prepayment) in full thereof
and, during the existence of any Event of Default, interest shall be paid on
demand of the Administrative Agent at the request or with the consent of the
Majority Banks.
(c) Notwithstanding subsection (a) of this Section, while any
Event of Default exists or after acceleration, the Borrower shall pay interest
(after as well as before entry of judgment thereon to the extent permitted by
law) on the principal amount of all outstanding Obligations, at a rate per annum
which is determined by adding 2% per annum to the Applicable Margin then in
effect for such Loans and, in the case of Obligations not subject to an
Applicable Margin, including, without limitation, all letter of credit and
commitment fees provided herein, at a rate per annum equal to the Base Rate plus
the Applicable Margin plus 2%; provided, however, that, on and after the
expiration of any Interest Period applicable to any Eurodollar Rate Loan
outstanding on the date of occurrence of such Event of Default or acceleration,
the principal amount of such Loan shall, during the continuation of such Event
of Default or after acceleration, bear interest at a rate per annum equal to the
Base Rate plus the Applicable Margin plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Borrower to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Bank would be contrary to
the provisions of any law applicable to such Bank limiting the highest rate of
interest that may be lawfully contracted for, charged or received by such Bank,
and in such event the Borrower shall pay such Bank interest at the highest rate
permitted by applicable law.
. In addition to certain fees described in Section 3.08:
(a) Arrangement, Agency Fees. The Borrower shall pay an
arrangement fee to the Arranger for the Arranger's own account, and shall pay an
agency fee to the Administrative Agent for the Administrative Agent's own
account, as required by the letter agreement (the "Fee Letter") between the
Borrower and the Arranger and Administrative Agent dated May 19, 1998.
(b) Commitment Fees. The Borrower shall pay to the
Administrative Agent for the account of each Bank (a) a commitment fee with
respect to such Bank's Facility A Commitment equal to the Commitment Fee Rate
per annum times the actual daily amount by which such Bank's Facility A
Commitment exceeded the sum of the aggregate Effective Amount of its Facility A
Revolving Loans, (b) a commitment fee with respect to such Bank's Facility B
Commitment equal to the Commitment Fee Rate per annum times the actual daily
amount by which such Bank's Facility B Commitment exceeded the aggregate
Effective Amount of its Facility B Revolving Loans plus its Pro Rata Share of
the Effective Amount of L/C Obligations and (c) a commitment fee with respect to
such Bank's Facility C Commitment equal to the Commitment Fee Rate per annum
times the actual daily amount by which such Bank's Facility C Commitment
exceeded the aggregate Effective Amount of its Facility C Revolving Loans. Such
commitment fees shall accrue from the Restatement Effective Date to the
Revolving Loan Termination Date and shall be due and payable quarterly in
arrears on the first Business Day of each fiscal quarter following the quarter
for which payment is to be made, commencing on the Restatement Effective Date
through the Revolving Loan Termination Date, with the final payment to be made
on the Revolving Loan Termination Date; provided that, in connection with the
full termination of Revolving Loan Commitments under Section 2.05 or Section
2.07, the accrued commitment fees calculated for the period ending on such date
shall also be paid on the date of such termination. The commitment fees provided
in this subsection shall accrue at all times after the above-mentioned
commencement date, including at any time during which one or more conditions in
Article V are not met.
(c) Participation Fees. On the Restatement
Effective Date, the Borrower shall pay to the Administrative Agent for the
account of each Bank a participation fee in an amount equal to (i) 0.075 percent
multiplied by (ii) the sum of such Bank's Revolving Loan Commitments.
. (a) All computations of interest for Base Rate Loans when the Base
Rate is determined by BofA's "reference rate" shall be made on the basis of a
year of 365 or 366 days, as the case may be, and actual days elapsed. All other
computations of fees and interest shall be made on the basis of a 360-day year
and actual days elapsed (which results in more interest being paid than if
computed on the basis of a 365-day year). Interest and fees shall accrue during
each period during which interest or such fees are computed from the first day
thereof to the last day thereof.
(b) Each determination of an interest rate by the
Administrative Agent shall be conclusive and binding on the Borrower and the
Banks in the absence of manifest error.
. (a) All payments to be made by the Borrower under any Loan Document
shall be made without set-off, recoupment, counterclaim or other defense. Except
as otherwise expressly provided herein, all payments by the Borrower shall be
made to the Administrative Agent for the account of the Banks at the
Administrative Agent's Payment Office, and shall be made in dollars and in
immediately available funds, no later than 10:00 a.m. (San Francisco time) on
the date specified herein. The Administrative Agent will promptly distribute to
each Bank its Pro Rata Share (or other applicable share as expressly provided
herein) of such payment in like funds as received. Any payment received by the
Administrative Agent later than 10:00 a.m. (San Francisco time) shall be deemed
to have been received on the following Business Day and any applicable interest
or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Administrative Agent receives notice from the
Borrower prior to the date on which any payment is due to the Banks that the
Borrower will not make such payment in full as and when required, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date in immediately available funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Borrower has not made such
payment in full to the Administrative Agent, each Bank shall repay to the
Administrative Agent on demand such amount distributed to such Bank, together
with interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Bank until the date repaid.
(d) Unless a due date is otherwise specified herein, the due
date for any Obligation shall be 30 days after demand therefor by the Person to
whom the Obligation is owed.
. (a) Unless the Administrative Agent receives notice from a Bank on or
prior to the Restatement Effective Date or, with respect to any Borrowing after
the Restatement Effective Date, by 2:00 p.m. (San Francisco time) on the
Business Day prior to the date of such Borrowing, that such Bank will not make
available as and when required hereunder to the Administrative Agent for the
account of the Borrower the amount of that Bank's Pro Rata Share of the
Borrowing, the Administrative Agent may assume that each Bank has made such
amount available to the Administrative Agent in immediately available funds on
the Borrowing Date and the Administrative Agent may (but shall not be so
required), in reliance upon such assumption, make available to the Borrower on
such date a corresponding amount. If and to the extent any Bank shall not have
made its full amount available to the Administrative Agent in immediately
available funds and the Administrative Agent in such circumstances has made
available to the Borrower such amount, that Bank shall on the Business Day
following such Borrowing Date make such amount available to the Administrative
Agent, together with interest at the Federal Funds Rate for each day during such
period. A notice of the Administrative Agent submitted to any Bank with respect
to amounts owing under this subsection (a) shall be conclusive, absent manifest
error. If such amount is so made available, such payment to the Administrative
Agent shall constitute such Bank's Loan on the date of Borrowing for all
purposes of this Agreement. If such amount is not made available to the
Administrative Agent on the Business Day following the Borrowing Date, the
Administrative Agent will notify the Borrower of such failure to fund and, upon
demand by the Administrative Agent, the Borrower shall pay such amount to the
Administrative Agent for the Administrative Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing
Date shall not relieve any other Bank of any obligation hereunder to make a Loan
on such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
If, other than as expressly provided elsewhere herein, any Bank shall
obtain on account of the Loans made by it any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) in
excess of its Pro Rata Share, such Bank shall immediately (a) notify the
Administrative Agent of such fact, and (b) purchase from the other Banks such
participations in the Loans made by them as shall be necessary to cause such
purchasing Bank to share the excess payment pro rata with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrower agrees
that any Bank so purchasing a participation from another Bank may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Bank were the direct creditor of the Borrower in the amount of such
participation. The Administrative Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Banks following
any such purchases or repayments.
..15 Discretionary Swingline Loans
(a) From time to time, subject to the conditions set forth
below, at the request of the Borrower, made through the Administrative Agent as
set forth below, BofA in its sole and absolute discretion may make short-term
loans to the Borrower not to exceed in the aggregate at any one time outstanding
the principal sum of $20,000,000, to be used by the Borrower to cover
overdrafts, for cash management purposes, or for other general working capital
needs of the Borrower (each, a "Swingline Loan"). The availability of Swingline
Loans is conditioned on the satisfaction of each of the following conditions:
(i) it shall be in the sole and absolute discretion of BofA, on each occasion
that a Swingline Loan is requested, whether to make such Swingline Loan; (ii)
each Swingline Loan shall bear interest from the time made until the time
repaid, or until the time, if any, that such Swingline Loan is converted into a
Base Rate Loan as provided below, at the rate(s) from time to time applicable to
Base Rate Loans hereunder; (iii) at the time of making of any Swingline Loan,
the sum of the Effective Amount of all outstanding Swingline Loans plus the
Effective Amount of all outstanding Facility C Revolving Loans, without
duplication, shall not exceed the aggregate Facility C Commitment; (iv) each
Swingline Loan, when made, all interest accrued thereon, and all reimbursable
costs and expenses incurred or payable in connection therewith, shall constitute
an Obligation of Borrower hereunder; and (v) each request for a Swingline Loan
from BofA pursuant to this Section 2.15 shall be made by the Borrower to the
Administrative Agent, shall be funded by BofA through the Administrative Agent,
and shall be repaid by the Borrower through the Administrative Agent (in order
that the Administrative Agent may keep an accurate record of the outstanding
balance at any time of Swingline Loans so as to monitor compliance with the
terms and provisions hereof), and each such request shall be in writing unless
the Administrative Agent in its sole discretion accepts an oral or telephonic
request. Each Swingline Loan shall be made upon the Borrower's irrevocable
written notice delivered to the Administrative Agent substantially in the form
of a Notice of Borrowing (which notice must be received by the Administrative
Agent prior to 1:00 p.m. (San Francisco time) on the requested date of such
Swingline Loan, specifying:
(i) the amount of the Swingline Loan,
which shall be in a minimum amount of $200,000 or any multiple of $100,000 in
excess thereof; and
(ii) the requested date of such Swingline
Loan, which shall be a Business Day;
(b) If any Swingline Loan made pursuant to this Section 2.15,
and in compliance with the conditions set forth in the immediately preceding
paragraph of this Section 2.15, is not repaid by the Borrower on or before the
seventh calendar day following the day that it was funded by BofA, BofA shall
have the right in BofA's sole and absolute discretion, by giving notice to the
Borrower and the Banks, to cause such Swingline Loan automatically upon the
giving of such notice to be converted into a Facility C Revolving Loan which is
a Base Rate Loan, and upon receipt of such notice each Bank shall fund to the
Administrative Agent, for the account of BofA, such Bank's ratable share of such
Facility C Revolving Loan, based on such Bank's Pro Rata Share; provided, that
if any Insolvency Proceeding has been commenced with respect to the Borrower on
or prior to the date on which such Swingline Loan is due, and in lieu of funding
its Pro Rata Share of a Facility C Revolving Loan, each Bank shall be deemed to,
and hereby irrevocably and unconditionally agrees to, purchase from BofA a
participation in such Swingline Loan equal to the product of such Bank's Pro
Rata Share times the amount of such Swingline Loan.
(c) Each Bank's obligation in accordance with this Agreement
to make Facility C Revolving Loans upon the failure of a Swingline Loan to be
repaid in full when due, or to purchase participations in such Swingline Loans,
shall, in each case, be absolute and unconditional and without recourse to BofA
and shall not be affected by any circumstance, including (i) any set-off,
counterclaim, recoupment, defense or other right which such Bank may have
against BofA, the Borrower or any other Person for any reason whatsoever; (ii)
the occurrence or continuance of a Default, an Event of Default or a Material
Adverse Effect; or (iii) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
ARTICLE III
THE LETTERS OF CREDIT
. (a) On the terms and subject to the conditions set forth herein and
as a subfacility of the Facility B Commitment, (i) the Issuing Banks agree, from
time to time on any Business Day during the period from the Restatement
Effective Date to the date that is 30 days prior to the Revolving Loan
Termination Date to issue Letters of Credit for the account of the Borrower and
to amend or renew Letters of Credit previously issued by them, in each case in
accordance with subsections 3.02(c) and 3.02(d); and (ii) the Banks severally
agree to participate in Letters of Credit Issued for the account of the
Borrower; provided, that the Issuing Banks shall not be obligated to Issue, and
no Bank shall be obligated to participate in, any Letter of Credit if, as of the
date of Issuance of such Letter of Credit (the "Issuance Date"), (1) the
Effective Amount of all L/C Obligations plus the Effective Amount of all
Facility B Revolving Loans exceeds the combined Facility B Commitments, or (2)
the Effective Amount of L/C Obligations exceeds the L/C Commitment. Within the
foregoing limits, and subject to the other terms and conditions hereof, the
ability of the Borrower to obtain Letters of Credit shall be fully revolving,
and, accordingly, the Borrower may, during the foregoing period, obtain Letters
of Credit to replace Letters of Credit which have expired or which have been
drawn upon and reimbursed.
(b) No Issuing Bank is under any obligation to Issue any
Letter of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or
restrain such Issuing Bank from Issuing such Letter of Credit, or any
Requirement of Law applicable to such Issuing Bank or any request or
directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over such Issuing Bank shall
prohibit, or request that such Issuing Bank refrain from, the Issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon such Issuing Bank with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which such
Issuing Bank is not otherwise compensated hereunder) not in effect on
the Restatement Effective Date, or shall impose upon such Issuing Bank
any unreimbursed loss, cost or expense which was not applicable on the
Restatement Effective Date and which such Issuing Bank in good faith
deems material to it;
(ii) such Issuing Bank has received written notice
from any Bank, the Administrative Agent or the Borrower, on or prior to
the Business Day prior to the requested date of Issuance of such Letter
of Credit, that one or more of the applicable conditions contained in
Article V is not then satisfied;
(iii) the expiry date of any requested Letter of
Credit is (A) with respect to Commercial Letters of Credit supporting
the purchase of inventory by the Borrower, more than (1) 180 days after
the date of Issuance or (2) 30 days prior to the Revolving Loan
Termination Date, unless the Majority Banks have approved such expiry
date in writing, (B) with respect to Standby Letters of Credit, more
than (1) 364 days after the date of Issuance or (2) 30 days prior to
the Revolving Loan Termination Date, unless the Majority Banks have
approved such expiry date in writing; or (C) with respect to any other
Letter of Credit, 30 days prior to the Revolving Loan Termination Date,
unless all of the Banks have approved such expiry date in writing;
(iv) the expiry date of any requested
Letter of Credit is prior to the maturity date of any financial obligation to be
supported by the requested Letter of Credit;
(v) any requested Letter of Credit does not provide
for drafts (unless there is a demand for payment in the documentation
required to be delivered in connection with any drawing), or is not
otherwise in form and substance acceptable to such Issuing Bank, or the
Issuance of a Letter of Credit shall violate any applicable policies of
such Issuing Bank;
(vi) any Standby Letter of Credit is for the purpose
of supporting the issuance of any letter of credit by any other Person
other than with respect to any Existing Letter of Credit so designated
in Schedule 3.03; or
(vii) such Letter of Credit is to be used for a
purpose other than any permitted use of the proceeds of Facility B
Revolving Loans as set forth in Section 7.11.
. (a) Each Letter of Credit shall be issued upon the irrevocable
written request of the Borrower received by the Issuing Bank (with a copy sent
by the Borrower to the Administrative Agent) prior to 10:00 a.m. (San Francisco
time) on the proposed date of Issuance for Letters of Credit in the form of
Exhibit H, I or J hereto and at least four days prior to the proposed date of
Issuance for other forms of Letters of Credit. Each such request for issuance of
a Letter of Credit shall be by facsimile, confirmed by telephone, in the form of
an L/C Application, and shall specify in form and detail satisfactory to the
applicable Issuing Bank: (i) the proposed date of issuance of the Letter of
Credit (which shall be a Business Day); (ii) the face amount of the Letter of
Credit; (iii) the expiry date of the Letter of Credit; (iv) the name and address
of the beneficiary thereof; (v) the documents to be presented by the beneficiary
of the Letter of Credit in case of any drawing thereunder; (vi) the full text of
any certificate to be presented by the beneficiary in case of any drawing
thereunder; and (vii) such other matters as the Issuing Bank may require.
(b) Prior to the Issuance of any Letter of Credit, the
applicable Issuing Bank will confirm with the Administrative Agent (by telephone
or in writing) that the Administrative Agent has received a copy of the L/C
Application or L/C Amendment Application from the Borrower and, if not, such
Issuing Bank will provide the Administrative Agent with a copy thereof. Unless
such Issuing Bank has received notice on or before 11:00 a.m. (San Francisco
time) on the date such Issuing Bank is to issue a requested Letter of Credit
from the Administrative Agent (A) directing such Issuing Bank not to issue such
Letter of Credit because such issuance is not then permitted under subsection
3.01(a) as a result of the limitations set forth in clauses (1) or (2) thereof
or subsection 3.01(b)(ii); or (B) that one or more conditions specified in
Article V are not then satisfied; then, subject to the terms and conditions
hereof, such Issuing Bank shall, on the requested date, issue a Letter of Credit
in accordance with such Issuing Bank's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding
and prior to the Revolving Loan Termination Date, any Issuing Bank will, upon
the written request of the Borrower received by such Issuing Bank (with a copy
sent by the Borrower to the Administrative Agent) at least four days (or such
shorter time as such Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of amendment, amend any Letter of Credit
issued by it. Each such request for amendment of a Letter of Credit shall be
made by facsimile, confirmed by telephone, made in the form of an L/C Amendment
Application and shall specify in form and detail satisfactory to such Issuing
Bank: (i) the Letter of Credit to be amended; (ii) the proposed date of
amendment of the Letter of Credit (which shall be a Business Day); (iii) the
nature of the proposed amendment; and (iv) such other matters as such Issuing
Bank may require. The applicable Issuing Bank shall be under no obligation to
amend any Letter of Credit if: (A) such Issuing Bank would have no obligation at
such time to issue such Letter of Credit in its amended form under the terms of
this Agreement; or (B) the beneficiary of any such Letter of Credit does not
accept the proposed amendment to the Letter of Credit. The Administrative Agent
will promptly notify the Banks of the receipt by it of any L/C Application or
L/C Amendment Application.
(d) The Issuing Banks and the Banks agree that, while a Letter
of Credit is outstanding and prior to the Revolving Loan Termination Date, at
the option of the Borrower and upon the written request of the Borrower received
by the applicable Issuing Bank (with a copy sent by the Borrower to the
Administrative Agent) at least four days (or such shorter time as such Issuing
Bank may agree in a particular instance in its sole discretion) prior to the
proposed date of notification of renewal, such Issuing Bank shall be entitled to
authorize the automatic renewal of any Letter of Credit issued by it. Each such
request for renewal of a Letter of Credit shall be made by facsimile, confirmed
by telephone, in the form of an L/C Amendment Application, and shall specify in
form and detail satisfactory to such Issuing Bank: (i) the Letter of Credit to
be renewed; (ii) the proposed date of notification of renewal of the Letter of
Credit (which shall be a Business Day); (iii) the revised expiry date of the
Letter of Credit; and (iv) such other matters as such Issuing Bank may require.
The applicable Issuing Bank shall be under no obligation to so renew any Letter
of Credit if: (A) such Issuing Bank would have no obligation at such time to
issue or amend such Letter of Credit in its renewed form under the terms of this
Agreement; or (B) the beneficiary of any such Letter of Credit does not accept
the proposed renewal of the Letter of Credit. If any outstanding Letter of
Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the applicable Issuing Bank that such
Letter of Credit shall not be renewed, and if at the time of renewal such
Issuing Bank would be entitled to authorize the automatic renewal of such Letter
of Credit in accordance with this subsection 3.02(d) upon the request of the
Borrower, but such Issuing Bank shall not have received any L/C Amendment
Application with respect to such renewal or other written direction by the
Borrower with respect thereto, such Issuing Bank shall nonetheless be permitted
to allow such Letter of Credit to renew, and the Borrower and the Banks hereby
authorize such renewal, and, accordingly, such Issuing Bank shall be deemed to
have received an L/C Amendment Application from the Borrower requesting such
renewal.
(e) The Issuing Banks may, at their election (or as required
by the Administrative Agent at the direction of the Majority Banks), deliver any
notices of termination or other communications to any Letter of Credit
beneficiary or transferee, and take any other action as necessary or
appropriate, at any time and from time to time, in order to cause the expiry
date of such Letter of Credit to be a date not later than the Revolving Loan
Termination Date.
(f) This Agreement shall control in the event of any conflict
with any L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Banks will also deliver to the Administrative
Agent, concurrently or promptly following delivery of a Letter of Credit, or
amendment to or renewal of a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit or amendment
to or renewal of a Letter of Credit.
. (a) On and after the Restatement Effective Date, the Existing Letters
of Credit shall be deemed for all purposes, including for purposes of the fees
to be collected pursuant to subsections 3.08(a) and 3.08(c), and reimbursement
costs and expenses to the extent provided herein, Letters of Credit outstanding
under this Agreement and entitled to the benefits of this Agreement and the
other Loan Documents, and shall be governed by the applications and agreements
pertaining thereto and by this Agreement. Each Existing Letter of Credit
designated as a "standby letter of credit" on Schedule 3.03 shall be deemed to
be a Standby Letter of Credit, and each Existing Letter of Credit designated as
a "commercial documentary letter of credit" on Schedule 3.03 shall be deemed to
be a Commercial Letter of Credit. Each Bank shall be deemed to, and hereby
irrevocably and unconditionally agrees to, purchase from the Issuing Banks on
the Restatement Effective Date a participation in each such Letter of Credit and
each drawing thereunder in an amount equal to the product of (i) such Bank's Pro
Rata Share times (ii) the maximum amount available to be drawn under such Letter
of Credit and the amount of such drawing, respectively. For purposes of
subsection 2.01(a) and subsection 2.10(b), the Existing Letters of Credit shall
be deemed to utilize the Pro Rata Share of each Bank.
(b) Immediately upon the Issuance of each Letter of Credit in
addition to those described in subsection 3.03(a), each Bank shall be deemed to,
and hereby irrevocably and unconditionally agrees to, purchase from the
applicable Issuing Bank a participation in such Letter of Credit and each
drawing thereunder in an amount equal to the product of (i) the Pro Rata Share
of such Bank, times (ii) the maximum amount available to be drawn under such
Letter of Credit and the amount of such drawing, respectively. For purposes of
subsection 2.01(a), each Issuance of a Letter of Credit shall be deemed to
utilize the Facility B Commitment of each Bank by an amount equal to the amount
of such participation.
(c) In the event of any request for a drawing under a Letter
of Credit by the beneficiary or transferee thereof, the applicable Issuing Bank
will promptly notify the Borrower. The Borrower shall reimburse such Issuing
Bank prior to 10:00 a.m. (San Francisco time), on each date that any amount is
paid by such Issuing Bank under any Letter of Credit (each such date, an "Honor
Date"), in an amount equal to the amount so paid by such Issuing Bank. In the
event the Borrower fails to reimburse such Issuing Bank of any Letter of Credit
for the full amount of any drawing under such Letter of Credit by 10:00 a.m.
(San Francisco time) on the Honor Date, such Issuing Bank will promptly notify
the Administrative Agent and the Administrative Agent will promptly notify each
Bank thereof, and the Borrower shall be deemed to have requested that Base Rate
Loans be made by the Banks to be disbursed on the Honor Date under such Letter
of Credit, subject to the conditions set forth in Section 5.02 (including,
without limitation, the condition that no Insolvency Proceeding shall have been
commenced by or against the Borrower on the Honor Date). Any notice given by an
Issuing Bank or the Administrative Agent pursuant to this subsection 3.03(c) may
be oral if immediately confirmed in writing (including by facsimile); provided
that the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.
(d) Each Bank shall upon any notice pursuant to subsection
3.03(c) make available to the Administrative Agent for the account of the
applicable Issuing Bank an amount in Dollars and in immediately available funds
equal to its Pro Rata Share of the amount of the drawing, whereupon the
participating Banks shall (subject to subsection 3.03(e)) each be deemed to have
made a Facility B Revolving Loan consisting of a Base Rate Loan to the Borrower
in that amount. If any Bank so notified fails to make available to the
Administrative Agent for the account of the applicable Issuing Bank the amount
of such Bank's Pro Rata Share of the amount of the drawing by no later than
11:00 a.m. (San Francisco time) on the Honor Date, then interest shall accrue on
such Bank's obligation to make such payment, from the Honor Date to the date
such Bank makes such payment, at a rate per annum equal to the Federal Funds
Rate in effect from time to time during such period. The Administrative Agent
will promptly give notice of the occurrence of the Honor Date, but failure of
the Administrative Agent to give any such notice on the Honor Date or in
sufficient time to enable any Bank to effect such payment on such date shall not
relieve such Bank from its obligations under this Section 3.03.
(e) With respect to any unreimbursed drawing that is not
converted into Facility B Revolving Loans consisting of Base Rate Loans to the
Borrower in whole or in part, because of the Borrower's failure to satisfy the
conditions set forth in Section 5.02 or for any other reason, the Borrower shall
be deemed to have incurred from an Issuing Bank an L/C Borrowing in the amount
of such drawing, which L/C Borrowing shall be due and payable on demand
(together with interest) and shall bear interest at a rate per annum equal to
the Base Rate plus the Applicable Margin plus 2% per annum, and each Bank's
payment to such Issuing Bank pursuant to subsection 3.03(d) shall be deemed
payment in respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Bank in satisfaction of its participation
obligation under this Section 3.03.
(f) Each Bank's obligation in accordance with this Agreement
to make the Facility B Revolving Loans or L/C Advances, as contemplated by this
Section 3.03, as a result of a drawing under a Letter of Credit, shall be
absolute and unconditional and without recourse to the Issuing Banks (except in
circumstances arising solely as a result of willful misconduct or gross
negligence by the Issuing Banks) and shall not be affected by any circumstance,
including (i) any set-off, counterclaim, recoupment, defense or other right
which such Bank may have against any Issuing Bank, the Borrower or any other
Person for any reason whatsoever; (ii) the occurrence or continuance of a
Default, an Event of Default or a Material Adverse Effect; or (iii) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
. (a) Upon (and only upon) receipt by the Administrative Agent for the
account of an Issuing Bank of immediately available funds from the Borrower (i)
in reimbursement of any payment made by such Issuing Bank under the Letter of
Credit with respect to which any Bank has paid the Administrative Agent for the
account of such Issuing Bank for such Bank's participation in the Letter of
Credit pursuant to Section 3.03 or (ii) in payment of interest thereon, the
Administrative Agent will pay to each Bank, in the same funds as those received
by the Administrative Agent for the account of such Issuing Bank, the amount of
such Bank's Pro Rata Share of such funds, and such Issuing Bank shall receive
the amount of the Pro Rata Share of such funds of any Bank that did not so pay
the Administrative Agent for the account of such Issuing Bank.
(b) If the Administrative Agent or any Issuing Bank is
required at any time to return to the Borrower, or to a trustee, receiver,
liquidator, custodian, or any official in any Insolvency Proceeding, any portion
of the payments made by the Borrower to the Administrative Agent for the account
of such Issuing Bank pursuant to subsection 3.04(a) in reimbursement of a
payment made under the Letter of Credit or interest or fee thereon, each Bank
shall, on demand of the Administrative Agent, forthwith return to the
Administrative Agent or such Issuing Bank the amount of its Pro Rata Share of
any amounts so returned by the Administrative Agent or such Issuing Bank plus
interest thereon from the date such demand is made to the date such amounts are
returned by such Bank to the Administrative Agent or such Issuing Bank, at a
rate per annum equal to the Federal Funds Rate in effect from time to time.
. (a) Each Bank and the Borrower agree that, in paying any drawing
under a Letter of Credit, the applicable Issuing Bank shall not have any
responsibility to obtain any document (other than any sight draft and
certificates expressly required by the Letter of Credit) or to ascertain or
inquire as to the validity or accuracy of any such document or the authority of
the Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective
correspondents, participants or assignees of an Issuing Bank shall be liable to
any Bank for: (i) any action taken or omitted in connection herewith at the
request or with the approval of the Banks (including the Majority Banks, as
applicable); (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Borrower hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit; provided, however, that this assumption is not intended to, and shall
not, preclude the Borrower's pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
assignees of any Issuing Bank, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of Section 3.06; provided,
however, anything in such clauses to the contrary notwithstanding, that the
Borrower may have a claim against an Issuing Bank, and an Issuing Bank may be
liable to the Borrower, to the extent, but only to the extent, of any direct, as
opposed to consequential or exemplary, damages suffered by the Borrower which
the Borrower proves were caused by an Issuing Bank's willful misconduct or gross
negligence or an Issuing Bank's willful failure to pay under any Letter of
Credit after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of a Letter of
Credit. In furtherance and not in limitation of the foregoing: (i) an Issuing
Bank may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) an Issuing Bank shall not be responsible
for the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.
. The obligations of the Borrower under this Agreement and any
L/C-Related Document to reimburse the Issuing Banks for drawings under Letters
of Credit, and to repay any L/C Borrowing and any drawings under Letters of
Credit converted into Facility B Revolving Loans, shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement and each such other L/C-Related Document under all circumstances,
including the following:
(i) any lack of validity or
enforceability of this Agreement or any L/C-Related Document;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the obligations of
the Borrower in respect of any Letter of Credit or any other amendment
or waiver of or any consent to departure from all or any of the
L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or
other right that the Borrower may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any Person
for whom any such beneficiary or any such transferee may be acting), an
Issuing Bank or any other Person, whether in connection with this
Agreement, the transactions contemplated hereby or by the L/C-Related
Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by an Issuing Bank under any Letter
of Credit against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit; or any payment
made by an Issuing Bank under any Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession,
assignee for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of
any Letter of Credit, including any arising in connection with any
Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the obligations
of the Borrower in respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or
a discharge of, the Borrower or a guarantor.
. Upon (i) the request of the Administrative Agent, (A) if an Issuing
Bank has honored any full or partial drawing request on any Letter of Credit and
such drawing has resulted in an L/C Borrowing hereunder, or (B) if, as of the
Revolving Loan Termination Date, any Letters of Credit may for any reason remain
outstanding and partially or wholly undrawn, or (ii) the occurrence of the
circumstances described in subsection 2.07(b) requiring the Borrower to Cash
Collateralize Letters of Credit, then, the Borrower shall immediately Cash
Collateralize the L/C Obligations in an amount equal to the L/C Obligations.
. (a) The Borrower agrees to pay to the Administrative Agent for the
account of each of the Banks based on their respective Pro Rata Shares a letter
of credit fee (i) with respect to the Standby Letters of Credit equal to the
Standby Letter of Credit Risk Participation Percentage of the average daily
maximum amount available to be drawn of the outstanding Standby Letters of
Credit and (ii) with respect to the Commercial Letters of Credit equal to the
Commercial Letter of Credit Risk Participation Percentage of the average daily
maximum amount available to be drawn of the outstanding Commercial Letters of
Credit, in each case computed on a quarterly basis in arrears on the last
Business Day of each fiscal quarter based upon Letters of Credit outstanding for
that quarter as calculated by the Administrative Agent. Such letter of credit
fees shall be due and payable quarterly in arrears on the first Business Day
following each fiscal quarter during which Standby Letters of Credit or
Commercial Letters of Credit, as the case may be, are outstanding, commencing on
the first such quarterly date to occur after the Restatement Effective Date,
through the Revolving Loan Termination Date, with the final payment to be made
on the Revolving Loan Termination Date.
(b) The Borrower agrees to pay to the applicable Issuing Bank
for its sole account a letter of credit fronting fee (i) for each Standby Letter
of Credit Issued by such Issuing Bank, equal to 0.125% per annum of the face
amount (or increased face amount, as the case may be) of such Standby Letter of
Credit and (ii) for each Commercial Letter of Credit Issued by such Issuing
Bank, equal to 0.10% per annum of the face amount (or increased face amount, as
the case may be) of such Commercial Letter of Credit. Such Letter of Credit
fronting fee shall be due and payable quarterly in arrears on the first Business
Day following each fiscal quarter during which such Letter of Credit is
outstanding, commencing on the first such quarterly date to occur after the
Restatement Effective Date, with the final payment to be made on the Revolving
Loan Termination Date.
(c) The Borrower agrees to pay to the Issuing Banks from time
to time on demand the normal issuance, presentation, amendment and other
processing fees, and other standard costs and charges, of the Issuing Banks
relating to Standby Letters of Credit and Commercial Letters of Credit as from
time to time in effect.
. The Uniform Customs and Practice for Documentary Credits as published
by the International Chamber of Commerce ("UCP") most recently at the time of
issuance of any Letter of Credit shall (unless otherwise expressly provided in
the Letters of Credit) apply to such Letter of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
. (a) Any and all payments by the Borrower to each Bank or the
Administrative Agent under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding for any Taxes. In
addition, the Borrower shall pay all Other Taxes.
(b) The Borrower agrees to indemnify and hold harmless each
Bank and the Administrative Agent for the full amount of Taxes or Other Taxes
(including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section) paid by the Bank or the Administrative Agent and any
liability (including interest, additions to tax and expenses) arising therefrom
or with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. Payment under this indemnification shall be made within 30
days after the date the Bank or the Administrative Agent makes written demand
therefor.
(c) If the Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Bank or the Administrative Agent, then:
(i) the sum payable shall be increased as necessary
so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums
payable under this Section) such Bank or the Administrative Agent, as
the case may be, receives an amount equal to the sum it would have
received had no such deductions or withholdings been made;
(ii) the Borrower shall make such deductions and
withholdings;
(iii) the Borrower shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Borrower shall also pay to each Bank or the
Administrative Agent for the account of such Bank, at the time interest
is paid, all additional amounts which the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received
if such Taxes or Other Taxes had not been imposed.
(d) Within 30 days after the date of any payment by the
Borrower of Taxes or Other Taxes, the Borrower shall furnish the Administrative
Agent the original or a certified copy of a receipt evidencing payment thereof,
or other evidence of payment satisfactory to the Administrative Agent.
(e) If the Borrower is required to pay additional amounts to
any Bank or the Administrative Agent pursuant to subsection (c) of this Section,
then such Bank shall use reasonable efforts (consistent with legal and
regulatory restrictions) to change the jurisdiction of its Lending Office so as
to eliminate any such additional payment by the Borrower which may thereafter
accrue, if such change in the judgment of such Bank is not otherwise
disadvantageous to such Bank.
. (a) If any Bank determines that the introduction of any Requirement
of Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for any Bank or its applicable Lending Office to make Eurodollar Rate Loans,
then, on notice thereof by the Bank to the Borrower through the Administrative
Agent, any obligation of that Bank to make Eurodollar Rate Loans shall be
suspended until the Bank notifies the Administrative Agent and the Borrower that
the circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any
Eurodollar Rate Loan, the Borrower shall, upon its receipt of notice of such
fact and demand from such Bank (with a copy to the Administrative Agent), prepay
in full such Eurodollar Rate Loans of that Bank then outstanding, together with
interest accrued thereon and amounts required under Section 4.04, either on the
last day of the Interest Period thereof, if the Bank may lawfully continue to
maintain such Eurodollar Rate Loans to such day, or immediately, if the Bank may
not lawfully continue to maintain such Eurodollar Rate Loan. If the Borrower is
required to so prepay any Eurodollar Rate Loan, then concurrently with such
prepayment, the Borrower shall borrow from the affected Bank, in the amount of
such repayment, a Base Rate Loan.
(c) If the obligation of any Bank to make or maintain
Eurodollar Rate Loans has been so terminated or suspended, the Borrower may
elect, by giving notice to the Bank through the Administrative Agent that all
Loans which would otherwise be made by the Bank as Eurodollar Rate Loans shall
be instead Base Rate Loans.
(d) Before giving any notice to the Administrative Agent under
this Section, the affected Bank shall designate a different Lending Office with
respect to its Eurodollar Rate Loans if such designation will avoid the need for
giving such notice or making such demand and will not, in the judgment of the
Bank, be illegal or otherwise disadvantageous to the Bank.
. (a) If any Bank determines that, due to either (i) the introduction
of or any change (other than any change by way of imposition of or increase in
reserve requirements included in the calculation of the Eurodollar Rate or in
respect of the assessment rate payable by any Bank to the FDIC for insuring U.S.
deposits) in or in the interpretation of any law or regulation or (ii) the
compliance by that Bank with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Bank of agreeing to make or making,
funding or maintaining any Eurodollar Rate Loans or participating in Letters of
Credit, or, in the case of any Issuing Bank, any increase in the cost to such
Issuing Bank of agreeing to issue, issuing or maintaining any Letter of Credit
or of agreeing to make or making, funding or maintaining any unpaid drawing
under any Letter of Credit, then the Borrower shall be liable for, and shall
from time to time, upon demand (with a copy of such demand to be sent to the
Administrative Agent), pay to the Administrative Agent for the account of such
Bank, additional amounts as are sufficient to compensate such Bank for such
increased costs.
(b) If any Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of
any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Bank (or its Lending Office) or any corporation controlling
the Bank with any Capital Adequacy Regulation, affects or would affect the
amount of capital required or expected to be maintained by the Bank or any
corporation controlling the Bank and (taking into consideration such Bank's or
such corporation's policies with respect to capital adequacy and such Bank's
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Revolving Loan Commitments, Loans, credits or
obligations under this Agreement, then, upon demand of such Bank to the Borrower
through the Administrative Agent, the Borrower shall pay to the Bank, from time
to time as specified by the Bank, additional amounts sufficient to compensate
the Bank for such increase.
. The Borrower shall reimburse each Bank and hold each Bank harmless
from any loss or expense which the Bank may sustain or incur as a consequence
of:
(a) the failure of the Borrower to make on a
timely basis any payment of principal of any Eurodollar Rate Loan;
(b) the failure of the Borrower to borrow, continue or convert
a Loan after the Borrower has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/ Continuation;
(c) the failure of the Borrower to make any
prepayment in accordance with any notice delivered under Section 2.06;
(d) the prepayment (including pursuant to Section 2.07) or
other payment (including after acceleration thereof) of a Eurodollar Rate Loan
on a day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.04
of any Eurodollar Rate Loan to a Base Rate Loan on a day that is not the last
day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Eurodollar Rate Loans or from fees
payable to terminate the deposits from which such funds were obtained. For
purposes of calculating amounts payable by the Borrower to the Banks under this
Section and under subsection 4.03(a), each Eurodollar Rate Loan made by a Bank
(and each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the LIBOR used in determining the
Eurodollar Rate for such Eurodollar Rate Loan by a matching deposit or other
borrowing in the interbank eurodollar market for a comparable amount and for a
comparable period, whether or not such Eurodollar Rate Loan is in fact so
funded.
. If the Administrative Agent determines that for any reason adequate
and reasonable means do not exist for determining the Eurodollar Rate for any
requested Interest Period with respect to a proposed Eurodollar Rate Loan or
that the Eurodollar Rate applicable pursuant to subsection 2.09(a) for any
requested Interest Period with respect to a proposed Eurodollar Rate Loan does
not adequately and fairly reflect the cost to such Banks of funding such Loan,
the Administrative Agent will promptly so notify the Borrower and each Bank.
Thereafter, the obligation of the Banks to make or maintain Eurodollar Rate
Loans, hereunder shall be suspended until the Administrative Agent upon the
instruction of the Majority Banks revokes such notice in writing. Upon receipt
of such notice, the Borrower may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Borrower does not revoke
such Notice, the Banks shall make, convert or continue the Loans, as proposed by
the Borrower, in the amount specified in the applicable notice submitted by the
Borrower, but such Loans shall be made, converted or continued as Base Rate
Loans instead of Eurodollar Rate Loans.
. The agreements and obligations of the Borrower in this Article IV
shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
. The effectiveness of the amendment and restatement of the Existing
Credit Agreement is subject to the condition that the Administrative Agent have
received on or before August 4, 1998 all of the following, in form and substance
satisfactory to the Administrative Agent and, where provided below, each Bank,
and in sufficient copies for each Bank:
(a) Credit Agreement and any Notes. This
Agreement and any Notes requested by the Banks, executed by each party thereto.
(b) [Intentionally Omitted.]
(c) Resolutions; Incumbency.
(i) Copies of partnership authorizations for the
Borrower and resolutions of the board of directors of the General
Partner authorizing the transactions contemplated hereby, certified as
of the Restatement Effective Date by the Secretary or an Assistant
Secretary of the General Partner; and
(ii) A certificate of the Secretary or Assistant
Secretary of the General Partner certifying the names and true
signatures of the officers of the General Partner authorized to
execute, deliver and perform, as applicable, on behalf of the Borrower
and the General Partner, this Agreement and all other Loan Documents to
be delivered by the Borrower and the General Partner hereunder.
(d) Organization Documents; Good Standing. Each
of the following documents:
(i) the articles or certificate of incorporation and
the bylaws of the General Partner and the Certificate of Limited
Partnership and the Partnership Agreement of the Borrower, in each case
as in effect on the Restatement Effective Date, certified by the
Secretary or Assistant Secretary of the General Partner as of the
Restatement Effective Date;
(ii) a good standing and tax good standing
certificate for the General Partner and the Borrower from the Secretary
of State (or similar, applicable Governmental Authority) of its state
of incorporation or organization, as applicable, and each other state
designated by Administrative Agent where the General Partner or the
Borrower conducts significant business, in each case as of a recent
date.
(e) Legal Opinions.
(i) opinion of Bryan Cave LLP, counsel to the
Borrower, the General Partner and the Guarantor, or of such other
counsel as are acceptable to the Administrative Agent and the Banks,
addressed to the Administrative Agent and the Banks, substantially in
the form of Exhibit D; and
(ii) a favorable opinion of Orrick,
Herrington & Sutcliffe LLP, special counsel to the Administrative Agent.
(f) Payment of Fees. Evidence of payment by the Borrower of
all accrued and unpaid fees, costs and expenses to the extent then due and
payable on the Restatement Effective Date, together with Attorney Costs of the
Administrative Agent to the extent invoiced prior to or on the Restatement
Effective Date, plus such additional amounts of Attorney Costs as shall
constitute the Administrative Agent's reasonable estimate of Attorney Costs
incurred or to be incurred by it through the closing proceedings (provided that
such estimate shall not thereafter preclude final settling of accounts between
the Borrower and the Administrative Agent); including any such costs, fees and
expenses arising under or referenced in the Fee Letter or otherwise in Sections
2.10 and 11.04.
(g) Certificate. A certificate signed by a
Responsible Officer, dated as of the Restatement Effective Date, stating that:
(i) the representations and warranties
contained in Article VI are true and correct on and as of such date, as though
made on and as of such date;
(ii) no Default or Event of Default
exists or would result from the Credit Extension; and
(iii) there has occurred since April 30, 1998, no
event or circumstance that has resulted or could reasonably be expected
to result in a Material Adverse Effect.
(h) Redemption of Fixed Rate Senior Notes.
Evidence that the Fixed Rate Senior Notes will be redeemed in full on the
Restatement Effective Date in accordance with the terms of the 1994
Indenture.
(i) No Material Change. There shall have been no
Material AdverseEffect between April 30, 1998 and the Restatement Effective Date
(j) Trading Policies. The trading position policy and the
supply inventory position policy as in effect on the Restatement Effective Date,
as evidenced by the written policies delivered to the Administrative Agent,
shall be satisfactory to the Administrative Agent and the Majority Banks.
(k) Payments under Existing Credit Agreement. Evidence that
all interest and fees accrued under the Existing Credit Agreement through and
including the Restatement Effective Date shall have been paid by the Borrower.
(l) Issuance of 1998 Fixed Rate Senior Notes. Evidence that
the 1998 Fixed Rate Senior Notes shall have been issued by the Borrower, on
terms and conditions satisfactory to the Administrative Agent, Arranger and the
Banks, in an aggregate amount of $350,000,000.
(m) Repayment of Existing Facility B Term Loans.
Evidence that the existing Facility B Term Loans under the Existing Credit
Agreement shall have been repaid in full by the Borrower.
(n) Other Documents. Such other approvals,
opinions, documents or materials as
the Administrative Agent or any Bank may request.
. The obligation of each Bank to make any Loan to be made by it
(including its initial Loan) or to continue or convert any Loan under Section
2.04 and the obligation of the Issuing Banks to Issue any Letters of Credit
(including any initial Letters of Credit) is subject to the satisfaction of the
following conditions precedent on the relevant Borrowing Date,
Conversion/Continuation Date or Issuance Date:
(a) Notice, Application. The Administrative Agent shall have
received (with, in the case of the initial Loans only, a copy for each Bank) a
Notice of Borrowing or a Notice of Conversion/Continuation, as applicable, or in
the case of any Issuance of any Letter of Credit, the applicable Issuing Bank
and the Administrative Agent shall have received an L/C Application or L/C
Amendment Application, as required under Section 3.02;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VI shall be true and correct in all
material respects on and as of such Borrowing Date, Conversion/Continuation Date
or Issuance Date with the same effect as if made on and as of such Borrowing
Date, Conversion/Continuation Date or Issuance Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct in all material respects as of such earlier date
and other than Section 6.22, which shall be true and correct in all material
respects on the Restatement Effective Date); and
(c) No Existing Default. No Default or Event of
Default shall exist or shall result from such Borrowing, continuation or
conversion or Issuance.
(d) 1998 Note Purchase Agreement. The incurrence and
maintenance of such Loan or Letter of Credit, as the case may be, shall be
permitted under Section 10.1 or Section 10.3, as applicable, of the 1998 Note
Purchase Agreement and the Borrower shall have delivered to the Administrative
Agent (1) an officer's certificate demonstrating compliance with such sections
and (2) in the case of a Loan or Letter of Credit (other than a Loan for working
capital purposes), an opinion of counsel to the Borrower and its Subsidiaries,
which counsel shall be satisfactory to the Administrative Agent, to the effect
that the incurrence and maintenance of such Loan or Letter of Credit, as
applicable, does not violate any indenture, note purchase agreement or other
credit arrangement of the Borrower or any of its Subsidiaries, and covering such
other matters as may be reasonably requested by the Administrative Agent.
Each Notice of Borrowing, Notice of Conversion/Continuation
and L/C Application or L/C Amendment Application submitted by the Borrower
hereunder shall constitute a representation and warranty by the Borrower
hereunder, as of the date of each such notice and as of each Borrowing Date,
Conversion/Continuation Date or Issuance Date, as applicable, that the
conditions in Section 5.02 are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Each of the Borrower and the General Partner represents and
warrants to the Administrative Agent and each Bank that:
. The General Partner, the MLP, the Borrower and each of its
Subsidiaries: (a) is a corporation or
partnership duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business
as now being or as proposed to be conducted and to execute, deliver, and perform
its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation or partnership
and is licensed and in good standing under the laws of each jurisdiction where
its ownership, lease or operation of property or the conduct of its business
requires such qualification or license or where the failure so to qualify would
have a Material Adverse Effect; and
(d) is in compliance with all material
Requirements of Law.
. The execution, delivery and performance by the Borrower and the
General Partner of this Agreement and each other Loan Document to which the
General Partner, the Borrower or any Subsidiary is party, have been duly
authorized by all necessary partnership action on behalf of the Borrower and all
necessary corporate action on behalf of the General Partner and any Subsidiary,
and do not and will not:
(a) contravene the terms of any of the General
Partner's, the MLP's, the Borrower's or any Subsidiary's Organization Documents;
(b) conflict with or result in any breach or contravention of,
or the creation of any Lien under, any document evidencing any Contractual
Obligation to which the General Partner, the MLP, the Borrower or any Subsidiary
is a party or any order, injunction, writ or decree of any Governmental
Authority to which such Person or its property is subject where such conflict,
breach, contravention or Lien could reasonably be expected to have a Material
Adverse Effect; or
(c) violate any material Requirement of Law.
. No approval, consent, exemption, authorization, or other action by,
or notice to, or filing with, any Governmental Authority is necessary or
required in connection with (a) the execution, delivery or performance by, or
enforcement against, the General Partner, the Borrower or any Subsidiary of this
Agreement or any other Loan Document, or (b) the continued operation of
Borrower's business as contemplated to be conducted after the date hereof by the
Loan Documents, except in each case such approvals, consents, exemptions,
authorizations or other actions, notices or filings (i) as have been obtained,
(ii) as may be required under state securities or Blue Sky laws, (iii) as are of
a routine or administrative nature and are either (A) not customarily obtained
or made prior to the consummation of transactions such as the transactions
described in clauses (a) or (b) or (B) expected in the judgment of the Borrower
to be obtained in the ordinary course of business subsequent to the consummation
of the transactions described in clauses (a) or (b), or (iv) that, if not
obtained, could not reasonably be expected to have a Material Adverse Effect.
. This Agreement and each other Loan Document to which the General
Partner, the Borrower or any Subsidiary is a party constitute the legal, valid
and binding obligations of such Person, enforceable against such Person in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles relating to
enforceability.
. There are no actions, suits, proceedings, claims or disputes pending,
or to the best knowledge of the Borrower, threatened or contemplated, at law, in
equity, in arbitration or before any Governmental Authority, against the General
Partner, the MLP, the Borrower or any of its Subsidiaries or any of their
respective properties which:
(a) purport to affect or pertain to this
Agreement or any other Loan Document or any of the transactions contemplated
hereby or thereby; or
(b) if determined adversely to the Borrower or its
Subsidiaries, would reasonably be expected to have a Material Adverse Effect. No
injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
. No Default or Event of Default exists or would result from the
incurring, continuing or converting of any Obligations by the Borrower. As of
the Restatement Effective Date, neither the Borrower nor any Affiliate of the
Borrower is in default under or with respect to any Contractual Obligation in
any respect which, individually or together with all such defaults, could
reasonably be expected to have a Material Adverse Effect, or that would, if such
default had occurred after the Restatement Effective Date, create an Event of
Default under subsection 9.01(e).
. (a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of the
Borrower and the General Partner, nothing has occurred which would cause the
loss of such qualification.
(b) There are no pending, or to the best knowledge of Borrower
and the General Partner, threatened claims, actions or lawsuits, or action by
any Governmental Authority, with respect to any Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect. There has been no
prohibited transaction or other violation of the fiduciary responsibility rule
with respect to any Plan which could reasonably result in a Material Adverse
Effect.
(c) No ERISA Event has occurred or is reasonably expected
to occur with respect to any Pension Plan.
(d) No Pension Plan has any Unfunded Pension Liability,
except that the Ferrellgas, Inc. Retirement Income Plan has an Unfunded Pension
Liability in the amount of $921,304, however, the Ferrellgas, Inc.
Retirement Income Plan is not underfunded.
(e) The Borrower has not incurred, nor does it reasonably
expect to incur, any liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA).
(f) The Borrower has not transferred any Unfunded Pension
Liability to any Person or otherwise engaged in a transaction that could be
subject to Section 4069 of ERISA.
(g) Except as specifically disclosed in Schedule 6.07, no
trade or business (whether or not incorporated under common control with the
Borrower within the meaning of Section 414(b), (c), (m) or (o) of the Code)
maintains or contributes to any Pension Plan or other Plan subject to Section
412 of the Code. Except as specifically disclosed in Schedule 6.07, neither the
Borrower nor any Person under common control with the Borrower (as defined in
the preceding sentence) has ever contributed to any multiemployer plan within
the meaning of Section 4001(a)(3) of ERISA.
. The proceeds of the Loans are to be used solely for the purposes set
forth in and permitted by Section 7.11 and Section 8.07. Neither the Borrower
nor any Affiliate of the Borrower is generally engaged in the business of
purchasing or selling Margin Stock or extending credit for the purpose of
purchasing or carrying Margin Stock.
. The Borrower and each Subsidiary have good record and marketable
title in fee simple to, or valid leasehold interests in, all real property
necessary or used in the ordinary conduct of their respective businesses, except
for such defects in title as could not, individually or in the aggregate, have a
Material Adverse Effect. As of the Restatement Effective Date and subject to the
preceding sentence, the property of the Borrower and its Subsidiaries is subject
to no Liens other than Permitted Liens.
. The General Partner has filed all Federal and other material tax
returns and reports required to be filed, for itself and for the Borrower, and
has paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon it or its properties, income or
assets otherwise due and payable, except those which are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
the Borrower that would, if made, have a Material Adverse Effect.
. (a) The audited consolidated financial statements of the General
Partner, the Borrower, the MLP and their respective Subsidiaries dated July 31,
1997 and the unaudited consolidated financial statements of the General Partner,
the Borrower, the MLP and their respective Subsidiaries dated April 30, 1998, in
each case together with the related consolidated statements of income or
operations, shareholders' equity and cash flows for the fiscal periods ended on
those respective dates:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein, subject to ordinary, good faith year
end audit adjustments;
(ii) fairly present the financial
condition of the Borrower and its Subsidiaries as of the date thereof and
results of operations for the period covered thereby; and
(iii) show all material indebtedness and other
liabilities, direct or contingent, of the Borrower and its consolidated
Subsidiaries as of the date thereof, including liabilities for taxes,
material commitments and Contingent Obligations.
(b) Since April 30, 1998, there has been no Material
Adverse Effect.
(c) The General Partner, the MLP, the Borrower and each of the
other Subsidiaries of the Borrower are each Solvent, both before and after
giving effect to the consummation of each of the transactions contemplated by
the Loan Documents.
. The Borrower conducts in the ordinary course of business a review of
the effect of existing Environmental Laws and existing Environmental Claims on
its business, operations and properties, and as a result thereof the Borrower
has reasonably concluded that such Environmental Laws and Environmental Claims
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
. None of the Borrower or any Affiliate of the Borrower, is an
"Investment Company" within the meaning of the Investment Company Act of 1940.
The Borrower is not subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any
state public utilities code, or any other Federal or state statute or regulation
limiting its ability to incur Indebtedness.
. Neither the Borrower nor any Subsidiary is a party to or bound by any
Contractual Obligation, or subject to any restriction in any Organization
Document, or any Requirement of Law, which could reasonably be expected to have
a Material Adverse Effect.
The Borrower and its Subsidiaries own or are licensed or otherwise
have the right to use all of the patents, trademarks, service marks, trade
names, copyrights, contractual franchises, authorizations and other rights that
are reasonably necessary for the operation of their respective businesses,
without conflict with the rights of any other Person. To the best knowledge of
the Borrower, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by the Borrower or any Subsidiary infringes upon any rights held by
any other Person. No claim or litigation regarding any of the foregoing is
pending or, to the best knowledge of the Borrower, threatened, and no patent,
invention, device, application, principle or any statute, law, rule, regulation,
standard or code is pending or, to the knowledge of the Borrower, proposed,
which, in either case, could reasonably be expected to have a Material Adverse
Effect.
. The Borrower has no Subsidiaries or other Affiliates other than those
specifically disclosed in part (a) of Schedule 6.16 hereto and has no equity
investments in any other corporation or entity other than those Permitted
Investments specifically disclosed in part (b) of Schedule 6.16.
. The properties of the Borrower and its Subsidiaries are insured with
financially sound and reputable insurance companies not Affiliates of the
Borrower, in such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the Borrower or such Subsidiary operates.
. The Borrower is subject to taxation under the Code only as a
partnership and not as a corporation.
. None of the representations or warranties made by the Borrower or any
Affiliate of the Borrower in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Borrower or any Affiliate of the Borrower in connection
with the Loan Documents contains any untrue statement of a material fact or
omits any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading as of the time when made or delivered.
. None of the Borrower and its Subsidiaries is a party to any contract
for the supply of propane or other product except where (a) the purchase price
is set with reference to a spot index or indices substantially contemporaneously
with the delivery of such product or (b) delivery of such propane or other
product is to be made no more than one year after the purchase price is agreed
to.
. The Borrower has provided to the Administrative Agent an accurate and
complete summary of its trading position policy and supply inventory position
policy and the Borrower has complied in all respects with such policies.
As of the Restatement Effective Date, all actions, notices and
consents required for the redemption in full of the Fixed Rate Senior Notes in
compliance with the 1994 Indenture and the Fixed Rate Senior Notes have been
made, taken and obtained.
. The Borrower and its Subsidiaries have reviewed the areas within
their business and operations which could be adversely affected by, and have
developed or are developing a program to address on a timely basis, the "Year
2000 Problem" (that is, the risk that computer applications used by the Borrower
and its Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date on or
after December 31, 1999), and have made related appropriate inquiry of material
suppliers and vendors. Based on such review and program, the Borrower believes
that the "Year 2000 Problem" will not have a Material Adverse Effect.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Revolving Loan Commitment
hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied,
or any Letter of Credit shall remain outstanding, unless the Majority Banks
waive compliance in writing:
. The Borrower shall deliver to the Administrative Agent, in form and
detail satisfactory to the Administrative Agent and the Majority Banks and
consistent with the form and detail of financial statements and projections
provided to the Administrative Agent by the Borrower and its Affiliates prior to
the Restatement Effective Date, with sufficient copies for each Bank:
(a) as soon as available, but not later than 100 days after
the end of each fiscal year (commencing with the fiscal year ended July 31,
1998), a copy of the audited consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such year and the related consolidated statements
of income or operations, partners' or shareholders' equity and cash flows for
such year, setting forth in each case in comparative form the figures for the
previous fiscal year, and accompanied by the opinion of a nationally-recognized
independent public accounting firm ("Independent Auditor") which report shall
state that such consolidated financial statements present fairly the financial
position for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years. Such opinion shall not be qualified or limited in
any manner, including on account of any limitation on it because of a restricted
or limited examination by the Independent Auditor of any material portion of the
Borrower's or any Subsidiary's records;
(b) as soon as available, but not later than 45 days after the
end of each of the first three fiscal quarters of each fiscal year (commencing
with the fiscal quarter ended October 31, 1998), a copy of the unaudited
consolidated balance sheet of the Borrower and its Subsidiaries as of the end of
such quarter and the related consolidated statements of income, partners' or
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by a Responsible
Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good
faith year-end audit adjustments), the financial position and the results of
operations of the Borrower and the Subsidiaries;
(c) as soon as available, but not later than 100 days after
the end of each fiscal year (commencing with the first fiscal year during all or
any part of which the Borrower had one or more Significant Subsidiaries), a copy
of an unaudited consolidating balance sheet of the Borrower and its Subsidiaries
as at the end of such year and the related consolidating statement of income,
partners' or shareholders' equity and cash flows for such year, certified by a
Responsible Officer as having been developed and used in connection with the
preparation of the financial statements referred to in subsection 7.01(a);
(d) as soon as available, but not later than 45 days after the
end of each of the first three fiscal quarters of each fiscal year (commencing
with the first fiscal quarter during all or any part of which the Borrower had
one or more Significant Subsidiaries), a copy of the unaudited consolidating
balance sheets of the Borrower and its Subsidiaries, and the related
consolidating statements of income, partners' or shareholders' equity and cash
flows for such quarter, all certified by a Responsible Officer as having been
developed and used in connection with the preparation of the financial
statements referred to in subsection 7.01(b);
(e) as soon as available, but not later than 60 days after the
end of each fiscal year (commencing with the fiscal year beginning August 1,
1998), projected consolidated balance sheets of the Borrower and its
Subsidiaries as at the end of each of the current and following two fiscal years
and related projected consolidated statements of income, partners' or
shareholders' equity and cash flows for each such fiscal year, including therein
a budget for the current fiscal year, certified by a Responsible Officer as
having been developed and prepared by the Borrower in good faith and based upon
the Borrower's best estimates and best available information;
(f) as soon as available, but not later than 100 days after
the end of each fiscal year of the General Partner, commencing with the fiscal
year ended July 31, 1998, a copy of the unaudited (or audited, if available)
consolidated balance sheets of the General Partner as of the end of such fiscal
year and the related consolidated statements of income, shareholders' equity and
cash flows for such fiscal year, certified by a Responsible Officer as fairly
presenting, in accordance with GAAP, the financial position and the results of
operations of the General Partner and its Subsidiaries (or, if available,
accompanied by an opinion of an Independent Auditor as described in subsection
7.01(a)); and
(g) as soon as available, but not later than 45 days after the
end of each of the first three fiscal quarters of each fiscal year and, with
respect to the final fiscal quarter, concurrently with the financial statements
referred to in subsection 7.01(a), a trading position report as of the last day
of each fiscal quarter, certified by a Responsible Officer.
. The Borrower shall furnish to the Administrative Agent, with
sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.01(a), a certificate of the Independent Auditor
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.01(a) and (b), a Compliance Certificate executed by
a Responsible Officer with respect to the periods covered by such financial
statements together with supporting calculations and such other supporting
detail as the Administrative Agent and Majority Banks shall require;
(c) promptly, copies of all financial statements and reports
that the Borrower, the General Partner, the MLP or any Subsidiary sends to its
partners or shareholders, and copies of all financial statements and regular,
periodic or special reports (including Forms 10-K, 10-Q and 8-K) that the
Borrower or any Affiliate of the Borrower, the General Partner, the MLP or any
Subsidiary may make to, or file with, the SEC; and
(d) promptly, such additional information regarding the
business, financial or corporate affairs of the Borrower, the General Partner,
the MLP or any Subsidiary as the Administrative Agent, at the request of any
Bank, may from time to time request.
. The Borrower shall promptly notify the Administrative Agent and eac
Bank:
(a) of the occurrence of any Default or Event o
Default, and of the occurrence or existence of any event or circumstance that
foreseeably will become a Default or Event of Default;
(b) of any matter that has resulted or may reasonably be
expected to result in a Material Adverse Effect, including (i) breach or
non-performance of, or any default under, a Contractual Obligation of the
Borrower, the General Partner, the MLP or any Subsidiary; (ii) any dispute,
litigation, investigation, proceeding or suspension between the Borrower, the
General Partner, the MLP or any Subsidiary and any Governmental Authority; or
(iii) the commencement of, or any material development in, any litigation or
proceeding affecting the Borrower, the General Partner, the MLP or any
Subsidiary, including pursuant to any applicable Environmental Laws;
(c) of any of the following events affecting the Borrower, the
General Partner, the MLP or any Subsidiary, together with a copy of any notice
with respect to such event that may be required to be filed with a Governmental
Authority and any notice delivered by a Governmental Authority to such Person
with respect to such event:
(i) an ERISA Event;
(ii) if any of the representations and
warranties in Section 6.07 ceases to be true and correct;
(iii) the adoption of any new Pension Plan
or other Plan subject to Section 412 of the Code;
(iv) the adoption of any amendment to a Pension Plan
or other Plan subject to Section 412 of the Code, if such amendment
results in a material increase in contributions or Unfunded Pension
Liability; or
(v) the commencement of contributions
to any Pension Plan or other Plan subject to Section 412 of the Code;
(d) of any material change in accounting
policies or financial reporting practices
by the Borrower or any of its consolidated Subsidiaries; and
(e) not later than five Business Days after the effective date
of a change in the Borrower's trading position policy or inventory supply
position policy, of any change in either policy.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the Borrower or any
affected Affiliate proposes to take with respect thereto and at what time. Each
notice under subsection 7.03(a) shall describe with particularity any and all
clauses or provisions of this Agreement or other Loan Document that have been
(or foreseeably will be) breached or violated.
The General Partner and the Borrower shall, and the Borrower shall
cause each Subsidiary to:
(a) preserve and maintain in full force and effect its
partnership or corporate existence and good standing under the laws of its state
or jurisdiction of organization or incorporation except in connection with
transactions permitted by Section 8.03;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business except
in connection with transactions permitted by Section 8.03 and sales of assets
permitted by Section 8.02;
(c) use reasonable efforts, in the ordinary
course of business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.
. The Borrower shall maintain, and shall cause each Subsidiary to
maintain, and preserve all its property which is used or useful in its business
in good working order and condition, ordinary wear and tear excepted. The
Borrower and each Subsidiary shall use the standard of care typical in the
industry in the operation and maintenance of its facilities.
. The Borrower shall maintain, and shall cause each Subsidiary to
maintain, with financially sound and reputable independent insurers, insurance
with respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business,
of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons.
. The Borrower and the General Partner shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable
(except to the extent the failure to so pay and discharge could not reasonably
be expected to have a Material Adverse Effect), all their respective obligations
and liabilities, including:
(a) all tax liabilities, assessments and governmental charges
or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Borrower, the General Partner
or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a
Lien upon its property, unless such claims are being contested in good faith by
appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by the Borrower, the General Partner or such Subsidiary; and
(c) all Indebtedness, as and when due and
payable, but subject to any subordination provisions contained in any instrument
or agreement evidencing such Indebtedness.
. The Borrower shall comply, and shall cause each Subsidiary to comply,
in all material respects with all Requirements of Law of any Governmental
Authority having jurisdiction over it or its business (including the Federal
Fair Labor Standards Act), except such as may be contested in good faith or as
to which a bona fide dispute may exist.
. The Borrower shall maintain and shall cause each Subsidiary to
maintain proper books of record and account, in which full, true and correct
entries in conformity with GAAP consistently applied shall be made of all
financial transactions and matters involving the assets and business of the
Borrower and such Subsidiary. The Borrower shall permit, and shall cause each
Subsidiary to permit, representatives and independent contractors of the
Administrative Agent or any Bank to visit and inspect any of their respective
properties, to examine their respective corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective directors,
officers, and independent public accountants, all at the expense of the Borrower
and at such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Borrower; provided,
however, when an Event of Default exists the Administrative Agent or any Bank
may do any of the foregoing at the expense of the Borrower at any time during
normal business hours and without advance notice.
. The Borrower shall, and shall cause each Subsidiary to, conduct its
operations and keep and maintain its property in material compliance with all
Environmental Laws.
. The Borrower shall use the proceeds of (a) the Facility A Revolving
Loans for working capital purposes only, (b) the Facility B Revolving Loans for
working capital and other general partnership purposes and (c) the Facility C
Revolving Loans for Acquisitions and other general partnership purposes, in each
case not in contravention of any Requirement of Law or of any Loan Document.
..12 Financial Covenants
(a) Leverage Ratio. The Borrower shall maintain as of the last
day of each fiscal quarter a Leverage Ratio equal to or less than 4.50 to 1.00;
provided, that to the extent the Borrower borrows Loans to make Restricted
Payments within 45 days after the end of any fiscal quarter, the aggregate
amount of Loans so borrowed shall be added to the amount of Funded Debt
outstanding at the end of such quarter for purposes of determining the Leverage
Ratio at the end of such quarter. For purposes of this Section 7.12(a), (x)
Funded Debt and Synthetic Lease Obligations shall be calculated as of the last
day of such fiscal quarter and (y) Consolidated Cash Flow shall be calculated
for the most recently ended four consecutive fiscal quarters; provided, however,
that prior to or concurrently with each delivery of a Compliance Certificate
pursuant to Section 7.02(b), the Borrower may elect to calculate Consolidated
Cash Flow for the most recently ended eight consecutive fiscal quarters (in
which case Consolidated Cash Flow shall be divided by two).
(b) Interest Coverage Ratio. The Borrower shall maintain, as
of the last day of each fiscal quarter of the Borrower, an Interest Coverage
Ratio for the fiscal period consisting of such fiscal quarter and the three
immediately preceding fiscal quarters of at least 2.50 to 1.00.
. The Borrower and its Affiliates shall comply with the Borrower's
trading position policy and supply inventory position policy as in effect on
January 31, 1998, copies of which have been provided to the Administrative Agent
on or prior to the Restatement Effective Date; provided, however, that the
Borrower and its Affiliates may, during any period of four consecutive fiscal
quarters, (a) increase the stop loss limit specified in either the trading
position or supply inventory position policy by up to 100% of the amount of such
limit as in effect on July 5, 1994 and (b) increase the volume limit specified
in either of such policies on the number of barrels of a single product or of
all products in the aggregate by up to 100% of each such number as in effect on
July 5, 1994.
..14 Other General Partner Obligations
(a) The General Partner shall cause the Borrower to pay and
perform each of its Obligations when due. The General Partner acknowledges and
agrees that it is executing this Agreement as a principal as well as the general
partner on behalf of the Borrower, and that its obligations hereunder as general
partner are full recourse obligations to the same extent as those of the
Borrower.
(b) The General Partner represents, warrants and covenants
that it is Solvent, both before and after giving effect to the consummation of
the transactions contemplated by the Loan Documents, and that it will remain
Solvent until all Obligations hereunder shall have been repaid in full and all
commitments shall have terminated.
(c) The General Partner, for so long as it is the general
partner of the Borrower, (i) agrees that its sole business will be to act as the
general partner of the Borrower, the MLP and any further limited partnership of
which the Borrower or the MLP is, directly or indirectly, a limited partner and
to undertake activities that are ancillary or related thereto (including being a
limited partner in the Borrower), (ii) shall not enter into or conduct any
business or incur any debts or liabilities except in connection with or
incidental to (A) its performance of the activities required or authorized by
the partnership agreement of the MLP or the Partnership Agreement or described
in or contemplated by the MLP Registration Statement, and (B) the acquisition,
ownership or disposition of Partnership Interests in the Borrower or partnership
interests in the MLP or any further limited partnership of which the Borrower or
the MLP is, directly or indirectly, a limited partner, except that,
notwithstanding the foregoing, employees of the General Partner may perform
services for Ferrell Companies, Inc. and its Affiliates.
(d) The General Partner agrees that, until all Obligations
hereunder shall have been repaid in full and all commitments shall have
terminated, it will not exercise any rights it may have (at law, in equity, by
contract or otherwise) to terminate, limit or otherwise restrict (whether
through repurchase or otherwise and whether or not the General Partner shall
remain a general partner in the Borrower) the ability of the Borrower to use the
name "Ferrellgas".
(e) The General Partner shall not take any action or refuse to
take any reasonable action the effect of which, if taken or not taken, as the
case may be, would be to cause the Borrower to be treated as an association
taxable as a corporation or otherwise to be taxed as an entity other than a
partnership for federal income tax purposes.
. If one or more judgments, orders, decrees or arbitration awards is
entered against the Borrower or any Subsidiary involving in the aggregate a
liability (to the extent not covered by independent third-party insurance as to
which the insurer does not dispute coverage other than through a standard
reservation of rights letter) as to any single or related series of
transactions, incidents or conditions, of more than $10 million, then the
Borrower shall reserve for such amount in excess of $10 million, on a quarterly
basis, with each quarterly reserve being at least equal to one-twelfth of such
amount in excess of $10 million. Such amount so reserved shall be treated as
establishment of a reserve for purposes of calculating Available Cash hereunder.
. The Borrower shall ensure that all of the computer software, computer
firmware, computer hardware (whether general or special purpose), and other
similar or related items of automated, computerized, and/or software system(s)
that are used or relied on by the Borrower or any Subsidiary in the conduct of
its business will not malfunction, will not cease to function, will not generate
incorrect data, and will not produce material incorrect results when processing,
providing and/or receiving date-related data in connection with any valid date
in the twentieth and twenty-first centuries. From time to time, at the request
of any Bank, the Borrower and its Subsidiaries shall provide to such Bank such
updated information or documentation as is requested regarding the status of
their efforts to address the Year 2000 Problem (as defined in Section 6.23).
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Bank shall have any Revolving Loan Commitment
hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied,
or any Letter of Credit shall remain outstanding, unless the Majority Banks
waive compliance in writing:
. The Borrower shall not, and shall not suffer or permit any Subsidiary
to, directly or indirectly, make, create, incur, assume or suffer to exist any
Lien upon or with respect to any part of its property or sell any of its
accounts receivable, whether now owned or hereafter acquired, other than the
following ("Permitted Liens"):
(a) Liens existing on the Restatement Effective
Date set forth in Schedule 8.01 of the Existing Credit Agreement;
(b) Liens in favor of the Borrower or Liens to
secure Indebtedness of a Subsidiary
to the Borrower or a Wholly-Owned Subsidiary;
(c) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Borrower or any Subsidiary,
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Borrower;
(d) Liens on property existing at the time acquired by the
Borrower or any Subsidiary, provided that such Liens were in existence prior to
the contemplation of such acquisition and do not extend to any assets other than
those of the Person acquired;
(e) Liens on any property or asset acquired by the Borrower or
any Subsidiary in favor of the seller of such property or asset and construction
mortgages on property, in each case, created within six months after the date of
acquisition, construction or improvement of such property or asset by the
Borrower or such Subsidiary to secure the purchase price or other obligation of
the Borrower or such Subsidiary to the seller of such property or asset or the
construction or improvement cost of such property in an amount up to 80% of the
total cost of the acquisition, construction or improvement of such property or
asset; provided that in each case such Lien does not extend to any other
property or asset of the Borrower and its Subsidiaries;
(f) Liens incurred or pledges and deposits made in connection
with worker's compensation, unemployment insurance and other social security
benefits and Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature, in each
case, incurred in the ordinary course of business;
(g) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor;
(h) Liens imposed by law, such as mechanics', carriers',
warehousemen's, materialmen's, and vendors' Liens, incurred in good faith in the
ordinary course of business with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings if a reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made therefor;
(i) zoning restrictions, easements, licenses, covenants,
reservations, restrictions on the use of real property or minor irregularities
of title incident thereto that do not, in the aggregate, materially detract from
the value of the property or the assets of the Borrower or any of its
Subsidiaries or impair the use of such property in the operation of the business
of the Borrower or any of its Subsidiaries;
(j) Liens of landlords or mortgages of landlords, arising
solely by operation of law, on fixtures and movable property located on premises
leased by the Borrower or any of its Subsidiaries in the ordinary course of
business;
(k) Liens incurred and financing statements filed or recorded,
in each case with respect to personal property leased by the Borrower and its
Subsidiaries in the ordinary course of business to the owners of such personal
property which are either (i) operating leases (including, without limitation,
Synthetic Leases) or (ii) Capital Leases to the extent (but only to the extent)
permitted by Section 8.05; provided, that in each case such Lien does not extend
to any other property or asset of the Borrower and its Subsidiaries;
(l) judgment Liens to the extent that such
judgments do not cause or constitute a
Default or an Event of Default;
(m) Liens incurred in the ordinary course of business of the
Borrower or any Subsidiary with respect to obligations that do not exceed
$5,000,000 in the aggregate at any one time outstanding and that (i) are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of business) and (ii)
do not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Borrower
or such Subsidiary;
(n) Liens securing Indebtedness incurred to refinance
Indebtedness that has been secured by a Lien otherwise permitted under this
Agreement, provided that (i) any such Lien shall not extend to or cover any
assets or property not securing the Indebtedness so refinanced and (ii) the
refinancing Indebtedness secured by such Lien shall have been permitted to be
incurred under Section 8.05 hereof and shall not have a principal amount in
excess of the Indebtedness so refinanced;
(o) any extension or renewal, or successive extensions or
renewals, in whole or in part, of Liens permitted pursuant to the foregoing
clauses (a) through (n); provided that no such extension or renewal Lien shall
(i) secure more than the amount of Indebtedness or other obligations secured by
the Lien being so extended or renewed or (ii) extend to any property or assets
not subject to the Lien being so extended or renewed; and
(p) Liens in favor of the Administrative Agent,
any Issuing Bank and the Banks
relating to the Cash Collateralization of the Borrower's Obligations.
. The Borrower shall not, and shall not permit any of its Subsidiaries
to, (i) sell, lease, convey or otherwise dispose of any assets (including by way
of a sale-and-leaseback) other than sales of inventory in the ordinary course of
business consistent with past practice (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Borrower shall be governed by the provisions of Section 8.03 hereof and not by
the provisions of this Section 8.02), or (ii) issue or sell Equity Interests of
any of its Subsidiaries, in the case of either clause (i) or (ii) above, whether
in a single transaction or a series of related transactions, (A) that have a
fair market value in excess of $5,000,000, or (B) for net proceeds in excess of
$5,000,000 (each of the foregoing, an "Asset Sale"), unless (X) the Borrower (or
the Subsidiary, as the case may be) receives consideration at the time of such
Asset Sale at least equal to the fair market value (evidenced by a resolution of
the board of directors of the General Partner (and, if applicable, the audit
committee of such board of directors) set forth in a certificate signed by a
Responsible Officer and delivered to the Administrative Agent) of the assets
sold or otherwise disposed of and (Y) at least 80% of the consideration therefor
received by the Borrower or such Subsidiary is in the form of cash; provided,
however, that the amount of (1) any liabilities (as shown on the Borrower's or
such Subsidiary's most recent balance sheet or in the notes thereto), of the
Borrower or any Subsidiary (other than liabilities that are by their terms
subordinated in right of payment to the Obligations hereunder) that are assumed
by the transferee of any such assets and (2) any notes or other obligations
received by the Borrower or any such Subsidiary from such transferee that are
immediately converted by the Borrower or such Subsidiary into cash (to the
extent of the cash received), shall be deemed to be cash for purposes of this
provision; and provided, further, that the 80% limitation referred to in this
clause (Y) shall not apply to any Asset Sale in which the cash portion of the
consideration received therefrom, determined in accordance with the foregoing
proviso, is equal to or greater than what the after-tax proceeds would have been
had such Asset Sale complied with the aforementioned 80% limitation.
Notwithstanding the foregoing, Asset Sales shall not be deemed to include (x)
any transfer of assets by the Borrower or any of its Subsidiaries to a
Subsidiary of the Borrower that is a Guarantor, (y) any transfer of assets by
the Borrower or any of its Subsidiaries to any Person in exchange for other
assets used in a line of business permitted under Section 8.15 hereof and having
a fair market value not less than that of the assets so transferred and (z) any
transfer of assets pursuant to a Permitted Investment.
..03 Consolidations and Mergers
(a) The Borrower shall not consolidate or merge with or into
(whether or not the Borrower is the surviving Person), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless (i) the Borrower is the surviving Person, or the Person formed by or
surviving any such consolidation or merger (if other than the Borrower) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation or partnership organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
and (ii) the Person formed by or surviving any such consolidation or merger (if
other than the Borrower) or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
Obligations of the Borrower pursuant to an assumption agreement in a form
reasonably satisfactory to the Administrative Agent, under this Agreement; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) the Borrower or any Person formed by or surviving any such consolidation or
merger, or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made (A) shall have Consolidated Net Worth
(immediately after the transaction but prior to any purchase accounting
adjustments resulting from the transaction) equal to or greater than the
Consolidated Net Worth of the Borrower immediately preceding the transaction and
(B) shall, at the time of such transaction and after giving effect thereto, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Leverage Ratio test set forth in Section 7.12(a).
(b) Within five days after the Restatement
Effective Date, Finance Corp. shall be
either dissolved or merged with or into the Borrower (in which case the Borrower
shall be the surviving Person).
(c) The Borrower shall deliver to the Administrative Agent
prior to the consummation of the proposed transaction pursuant to the foregoing
paragraphs (a) and (b) an officers' certificate to the foregoing effect signed
by a Responsible Officer and an opinion of counsel satisfactory to the
Administrative Agent stating that the proposed transaction complies with this
Agreement. The Administrative Agent and the Banks shall be entitled to
conclusively rely upon such officer's certificate and opinion of counsel.
(d) Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Borrower in accordance with this Section 8.03, the successor
Person formed by such consolidation or into or with which the Borrower is merged
or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Agreement referring to the "Borrower" shall
refer to or include instead the successor Person and not the Borrower), and may
exercise every right and power of the Borrower under this Agreement with the
same effect as if such successor Person had been named as the Borrower herein;
provided, however, that the predecessor Borrower shall not be relieved from the
obligation to pay the principal of, premium, if any, and interest on the
Obligations except in the case of a sale of all of such Borrower's assets that
meets the requirements of Section 8.03 hereof.
. Without limiting the generality of any other provision of this
Agreement, neither the Borrower nor any Subsidiary shall consummate any
Acquisition unless (i) the acquiree is primarily a retail propane distribution
business; (ii) such Acquisition is undertaken in accordance with all applicable
Requirements of Law; (iii) the prior, effective written consent or approval to
such Acquisition of the board of directors or equivalent governing body of the
acquiree is obtained; and (iv) immediately after giving effect thereto, no
Default or Event of Default will occur or be continuing and each of the
representations and warranties of the Borrower herein is true on and as of the
date of such Acquisition, both before and after giving effect thereto. Nothing
in Section 8.22 shall prohibit (x) the making by the Borrower of a Permitted
Acquisition indirectly through the General Partner, the MLP or any of its or
their Affiliates in a series of substantially contemporaneous transactions in
which the Borrower shall ultimately own the assets that are the subject of such
Permitted Acquisition or (y) the assumption of Acquired Debt in connection
therewith to the extent such Acquired Debt is provided by a Bank and, upon such
assumption, is (to the extent such Acquired Debt is not otherwise permitted to
be incurred by the Borrower pursuant to this Agreement) immediately repaid (with
the proceeds of Revolving Loans or otherwise).
. The Borrower shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, suffer to exist,
guarantee or otherwise become directly or indirectly liable with respect to any
Indebtedness (including Acquired Debt) or any Synthetic Leases and the Borrower
shall not issue any Disqualified Interests and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Borrower and any Subsidiary of the Borrower may create, incur, issue, assume,
suffer to exist, guarantee or otherwise become directly or indirectly liable
with respect to any Indebtedness or any Synthetic Lease to the extent that the
Leverage Ratio is maintained in accordance with Section 7.12(a), both before and
after giving effect to the incurrence of such Indebtedness or such Synthetic
Lease, as the case may be, and, provided, further, that (x) the aggregate
principal amount of (1) all Capitalized Lease Obligations and all Synthetic
Lease Obligations (other than Capitalized Lease Obligations and Synthetic Lease
Obligations in respect of Growth-Related Capital Expenditures) of the Borrower
and its Subsidiaries and (2) all Indebtedness for which the Borrower and any
Subsidiary of the Borrower become liable in connection with Acquisitions of
retail propane businesses in favor of the sellers of such businesses and secured
by any Lien on any property of the Borrower or any of its Subsidiaries, shall
not exceed $65,000,000 at any one time outstanding and (y) the principal amount
of any Indebtedness for which the Borrower or any Subsidiary of the Borrower
becomes liable in connection with Acquisitions of retail propane businesses in
favor of the sellers of such businesses shall not exceed the fair market value
of the assets so acquired.
. The Borrower shall not, and shall not permit any of its Subsidiaries
to, sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate, including any Non-Recourse Subsidiary (each of the foregoing,
an "Affiliate Transaction"), unless (a) such Affiliate Transaction is on terms
that are no less favorable to the Borrower or the relevant Subsidiary than those
that would have been obtained in a comparable transaction by the Borrower or
such Subsidiary with an unrelated Person and (b) with respect to (i) any
Affiliate Transaction with an aggregate value in excess of $500,000, a majority
of the directors of the General Partner having no direct or indirect economic
interest in such Affiliate Transaction determines by resolution that such
Affiliate Transaction complies with clause (a) above and approves such Affiliate
Transaction and (ii) any Affiliate Transaction involving the purchase or other
acquisition or sale, lease, transfer or other disposition of properties or
assets other than in the ordinary course of business, in each case, having a
fair market value or for net proceeds in excess of $15,000,000, the Borrower
delivers to the Administrative Agent an opinion as to the fairness to the
Borrower or such Subsidiary from a financial point of view issued by an
investment banking firm of national standing; provided, however, that (i) any
employment agreement or stock option agreement entered into by the Borrower or
any of its Subsidiaries in the ordinary course of business and consistent with
the past practice of the Borrower (or the General Partner) or such Subsidiary,
Restricted Payments permitted by the provisions of Section 8.12, and
transactions entered into by the Borrower in the ordinary course of business in
connection with reinsuring the self-insurance programs or other similar forms of
retained insurable risks of the retail propane businesses operated by the
Borrower, its Subsidiaries and its Affiliates, in each case, shall not be deemed
Affiliate Transactions, and (ii) nothing herein shall authorize the payments by
the Borrower to the General Partner or any other Affiliate of the Borrower for
administrative expenses incurred by such Person other than such out-of-pocket
administrative expenses as such Person shall incur and the Borrower shall pay in
the ordinary course of business.
. The Borrower shall not, and shall not suffer or permit any Subsidiary
to, use any portion of the Loan proceeds or any Letter of Credit, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of the Borrower or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act.
. The Borrower shall not, directly or indirectly, use any portion of
the Loan proceeds or any Letter of Credit (i) knowingly to purchase Ineligible
Securities from the Arranger or the Documentation Agent during any period in
which the Arranger or the Documentation Agent makes a market in such Ineligible
Securities, (ii) knowingly to purchase during the underwriting or placement
period Ineligible Securities being underwritten or privately placed by the
Arranger or the Documentation Agent, or (iii) to make payments of principal or
interest on Ineligible Securities underwritten or privately placed by the
Arranger or the Documentation Agent and issued by or for the benefit of the
Borrower or any Affiliate of the Borrower.
. The Borrower shall not, and shall not suffer or permit any Subsidiary
to, create, incur, assume or suffer to exist any Contingent Obligations except:
(a) endorsements for collection or deposit in
the ordinary course of business;
(b) subject to compliance with the trading policies in effect
from time to time as submitted to the Administrative Agent, Hedging Obligations
entered into in the ordinary course of business as bona fide hedging
transactions;
(c) the Guaranties hereunder; and
(d) Guaranty Obligations to the extent not
prohibited by Section 8.05.
. The Borrower shall not, and shall not suffer or permit any
Subsidiary to enter into any Joint Venture.
. The aggregate obligations of the Borrower and its Subsidiaries for
the payment of rent for any property under lease or agreement to lease
(excluding obligations of the Borrower and its Subsidiaries under or with
respect to Synthetic Leases) for any fiscal year shall not exceed the greater of
(a) $25,000,000 or (b) 20% of (i) Consolidated Cash Flow of the Borrower for the
most recently ended eight consecutive fiscal quarters divided by (ii) two;
provided, however, that any payment of rent for any property under lease or
agreement to lease for a term of less than one year (after giving effect to all
automatic renewals) shall not be subject to this Section 8.11. For purposes of
this Section 8.11, the calculation of Consolidated Cash Flow shall give pro
forma effect to Acquisitions (including all mergers and consolidations), Asset
Sales and other dispositions and discontinuances of businesses or assets that
have been made by the Borrower or any of its Subsidiaries during the reference
period or subsequent to such reference period and on or prior to the date of
calculation of Consolidated Cash Flow assuming that all such Acquisitions, Asset
Sales and other dispositions and discontinuances of businesses or assets had
occurred on the first day of the reference period.
. The Borrower shall not and shall not permit any of its Subsidiaries
to, directly or indirectly (i) declare or pay any dividend or make any
distribution on account of the Borrower's or any Subsidiary's Equity Interests
(other than (x) dividends or distributions payable in Equity Interests (other
than Disqualified Interests) of the Borrower, (y) dividends or distributions
payable to the Borrower or a Wholly-Owned Subsidiary of the Borrower that is a
Guarantor or (z) distributions or dividends payable pro rata to all holders of
Capital Interests of any such Subsidiary); (ii) purchase, redeem, call or
otherwise acquire or retire for value any Equity Interests of the Borrower or
any Subsidiary or other Affiliate of the Borrower (other than, subject to
compliance with Section 8.21, any such Equity Interests owned by a Wholly-Owned
Subsidiary of the Borrower that is a Guarantor); (iii) make any Investment other
than a Permitted Investment; or (iv) prepay, purchase, redeem, retire, defease
or refinance the 1998 Fixed Rate Senior Notes (all payments and other actions
set forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), except to the extent that, at the time of such
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof and each of the
representations and warranties of the Borrower set forth herein is true on and
as of the date of such Restricted Payment both before and after giving effect
thereto; and
(b) the Fixed Charge Coverage Ratio of the Borrower for the
Borrower's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
Restricted Payment is made, calculated on a pro forma basis as if such
Restricted Payment had been made at the beginning of such four-quarter period,
would have been more than 2.25 to 1; and
(c) such Restricted Payment (the amount of any such payment,
if other than cash, to be determined by the Board of Directors, whose
determination shall be conclusive and evidenced by a resolution in an officer's
certificate signed by a Responsible Officer and delivered to the Administrative
Agent), together with the aggregate of all other Restricted Payments (other than
any Restricted Payments permitted by the provisions of clause (ii) of the
penultimate paragraph of this Section 8.12) made by the Borrower and its
Subsidiaries in the fiscal quarter during which such Restricted Payment is made
shall not exceed an amount equal to (x) Available Cash of the Borrower for the
immediately preceding fiscal quarter plus (y) the lesser of (i) the amount of
any Available Cash of the Borrower during the first 45 days of such fiscal
quarter and (ii) the excess of the aggregate amount of Loans that the Borrower
could have borrowed over the actual amount of Loans outstanding, in each case as
of the last day of the immediately preceding fiscal quarter; and
(d) such Restricted Payment (other than any Restricted
Payments described in clauses (iii) or (iv) of the first paragraph of this
Section 8.12) the amount of which, if made other than with cash, to be
determined in accordance with clause (c) of this Section 8.12, shall not exceed
an amount equal to (1) Consolidated Cash Flow of the Borrower and its
Subsidiaries for the period from and after October 31, 1996 through and
including the last day of the fiscal quarter ending immediately preceding the
date of the proposed Restricted Payment (the "Determination Period"), minus (2)
the sum of Consolidated Interest Expense of the Borrower and its Subsidiaries
for the Determination Period plus all capital expenditures (other than
Growth-Related Capital Expenditures and net of capital asset sales in the
ordinary course of business) made by the Borrower and its Subsidiaries during
the Determination Period plus the aggregate of all other Restricted Payments
(other than any Restricted Payments described in clauses (iii) or (iv) of the
first paragraph of this Section 8.12) made by the Borrower and its Subsidiaries
during the period from and after October 31, 1996 through and including the date
of the proposed Restricted Payment, plus (3) $30,000,000, plus (4) the excess,
if any, of consolidated working capital of the Borrower and its Subsidiaries at
July 31, 1996 over consolidated working capital of the Borrower and its
Subsidiaries at the end of the fiscal year immediately preceding the date of the
proposed Restricted Payment, minus (5) the excess, if any, of consolidated
working capital of the Borrower and its Subsidiaries at the end of the fiscal
year immediately preceding the date of the proposed Restricted Payment over
consolidated working capital of the Borrower and its Subsidiaries at July 31,
1996. For purposes of this subsection 8.12(d), the calculation of Consolidated
Cash Flow shall give pro forma effect to Acquisitions (including all mergers and
consolidations), Asset Sales and other dispositions and discontinuances of
businesses or assets that have been made by such Person or any of its
Subsidiaries during the reference period or subsequent to such reference period
and on or prior to the date of calculation of Consolidated Cash Flow assuming
that all such Acquisitions, Asset Sales and other dispositions and
discontinuances of businesses or assets had occurred on the first day of the
reference period.
The foregoing provisions will not prohibit (i) the payment of
any distribution within 60 days after the date on which the Borrower becomes
committed to make such distribution, if at said date of commitment such payment
would have complied with the provisions of this Agreement; and (ii) the
redemption, repurchase, retirement or other acquisition of any Equity Interests
of the Borrower in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Borrower) of other Equity
Interests of the Borrower (other than any Disqualified Interests).
Not later than the date of making any Restricted Payment, the
General Partner shall deliver to the Administrative Agent an officer's
certificate signed by a Responsible Officer stating that such Restricted Payment
is permitted and setting forth the basis upon which the calculations required by
this Section 8.12 were computed, which calculations may be based upon the
Borrower's latest available financial statements.
. The Borrower shall not, and shall not permit any of its Subsidiaries
to, (a) purchase, redeem, retire or otherwise acquire for value, or set apart
any money for a sinking, defeasance or other analogous fund for, the purchase,
redemption, retirement or other acquisition of, or make any payment or
prepayment of the principal of or interest on, or any other amount owing in
respect of, any Indebtedness that is subordinated to the Obligations, except for
regularly scheduled payments of interest in respect of such Indebtedness
required pursuant to the instruments evidencing such Indebtedness that are not
made in contravention of the terms and conditions of subordination set forth on
part II of Schedule 8.05 or (b) directly or indirectly, make any payment in
respect of, or set apart any money for a sinking, defeasance or other analogous
fund on account of, Guaranty Obligations subordinated to the Obligations. The
foregoing provisions will not prohibit the defeasance, redemption or repurchase
of subordinated Indebtedness with the proceeds of Permitted Refinancing
Indebtedness.
. The Borrower shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Subsidiary
to (a) pay dividends or make any other distributions to the Borrower or any of
its Subsidiaries (1) on its Capital Interests or (2) with respect to any other
interest or participation in, or interest measured by, its profits, (b) pay any
indebtedness owed to the Borrower or any of its Subsidiaries, (c) make loans or
advances to the Borrower or any of its Subsidiaries or (d) transfer any of its
properties or assets to the Borrower or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (i) Existing
Indebtedness, (ii) this Agreement, the 1998 Note Purchase Agreement and the 1998
Fixed Rate Senior Notes, (iii) applicable law, (iv) any instrument governing
Indebtedness or Capital Interests of a Person acquired by the Borrower or any of
its Subsidiaries as in effect at the time of such Acquisition (except to the
extent such Indebtedness was incurred in connection with or in contemplation of
such Acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that the Consolidated
Cash Flow of such Person to the extent that dividends, distributions, loans,
advances or transfers thereof is limited by such encumbrance or restriction on
the date of acquisition is not taken into account in determining whether such
acquisition was permitted by the terms of this Agreement, (v) customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (vi) purchase money obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (d) above on the property so acquired, (vii)
Permitted Refinancing Indebtedness of any Existing Indebtedness, provided that
the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced or (viii) other
Indebtedness permitted to be incurred subsequent to the Restatement Effective
Date pursuant to the provisions of Section 8.05 hereof, provided that such
restrictions are no more restrictive than those contained in this Agreement.
. The Borrower shall not, and shall not suffer or permit any Subsidiary
to, engage in any material line of business substantially different from those
lines of business carried on by the Borrower and its Subsidiaries on the date
hereof.
. The Borrower shall not, and shall not suffer or permit any Subsidiary
to, make any significant change in accounting treatment or reporting practices,
except as required by GAAP, or change the fiscal year of the Borrower or of any
Subsidiary except as required by the Code.
. The Borrower will not, and will not permit any of its Subsidiaries
to, enter into any arrangement with any Person providing for the leasing by the
Borrower or such Subsidiary of any property that has been or is to be sold or
transferred by the Borrower or such Subsidiary to such Person in contemplation
of such leasing; provided, however, that the Borrower or such Subsidiary may
enter into such sale and leaseback transaction if (i) the Borrower could have
(A) incurred Indebtedness in an amount equal to the Attributable Debt relating
to such sale and leaseback transaction pursuant to the Leverage Ratio test set
forth in Section 7.12(a) and (B) secured a Lien on such Indebtedness pursuant to
Section 8.01 or (ii) the lease in such sale and leaseback transaction is for a
term not in excess of the lesser of (A) three years and (B) 60% of the remaining
useful life of such property.
8.18 [Intentionally Omitted]
. The Borrower shall not modify, amend, supplement or replace, nor
permit any modification, amendment, supplement or replacement of the
Organization Documents of the General Partner, the Borrower or any Subsidiary of
the Borrower, the MLP Senior Notes, the 1996 Indenture, the 1998 Fixed Rate
Senior Notes or the 1998 Note Purchase Agreement or any document executed and
delivered in connection with any of the foregoing, in any respect that would
adversely affect the Banks, the Borrower's ability to perform the Obligations,
or the Guarantor's ability to perform its obligations under the Guaranty, in
each such case without the prior written consent of the Administrative Agent and
the Majority Banks. Furthermore, the Borrower shall not permit any modification,
amendment, supplement or replacement of the Organization Documents of the MLP
that would have a material effect on the Borrower without the prior written
consent of the Administrative Agent and the Majority Banks.
. None of the Borrower and its Subsidiaries shall at any time be a
party or subject to any contract for the supply of propane or other product
except where (a) the purchase price is set with reference to a spot index or
indices substantially contemporaneously with the delivery of such product or (b)
delivery of such propane or other product is to be made no more than one year
after the purchase price is agreed to.
. The Borrower shall not conduct any of its operations through
Subsidiaries unless: (a) such Subsidiary executes a Guaranty substantially in
the form of Exhibit G guaranteeing payment of the Obligations, accompanied by an
opinion of counsel to the Subsidiary addressed to the Administrative Agent and
the Banks as to the due authorization, execution, delivery and enforceability of
the Guaranty; (b) such Subsidiary agrees not to incur any Indebtedness other
than (i) trade debt and (ii) Acquired Debt permitted by Section 8.05; (c) the
Consolidated Cash Flow of such Subsidiary, when added to Consolidated Cash Flow
of all other Subsidiaries for any fiscal year, shall not exceed 10% of the
Consolidated Cash Flow of the Borrower and its Subsidiaries for such fiscal
year; and (d) the value of the assets of such Subsidiary, when added to the
value of the assets of all other Subsidiaries for any fiscal year, shall not
exceed 10% of the consolidated value of the assets of the Borrower and its
Subsidiaries for such fiscal year, as determined in accordance with GAAP.
. Except in connection with an indirect Acquisition permitted by
Section 8.04, the General Partner and the Borrower shall not permit the MLP or
any of its Affiliates (including any Non-Recourse Subsidiary) to operate or
conduct any business substantially similar to that conducted by the Borrower and
its Subsidiaries within a 25 mile radius of any business conducted by the
Borrower and its Subsidiaries. In order to comply with this Section 8.22, the
Borrower may enter into one or more transactions by which its assets and
properties are "swapped" or "exchanged" for assets and properties of another
Person prior to or concurrently with another transaction which, but for such
swap or exchange would violate this Section; provided, that (i) if the value of
the MLP's assets or units to be so swapped or exchanged exceeds $15 million, as
determined by the audit committee of the Board of Directors of the General
Partner, the Borrower shall have first obtained at its expense an opinion from a
nationally recognized investment banking firm, addressed to it, the
Administrative Agent and the Banks and opining without material qualification
and based on assumptions that are realistic at the time, that the exchange or
swap transactions are fair to the Borrower and its Subsidiaries, and (ii) if the
value of the MLP's assets or units to be so swapped or exchanged exceeds $50
million, as determined by the audit committee of the Board of Directors of the
General Partner, at the option of the Majority Banks, the Administrative Agent
shall have first retained, at the Borrower's expense, an investment banking firm
on behalf of the Banks who shall also have rendered an opinion containing the
statements and content referred to in clause (i).
ARTICLE IX
EVENTS OF DEFAULT
. Any of the following shall constitute an "Event of Default":
(a) Non-Payment. The Borrower or the General Partner fails to
pay, (i) when and as required to be paid herein, any amount of principal of any
Loan or of any L/C Obligation, or (ii) within 5 days after the same becomes due,
any interest, fee or any other amount payable hereunder or under any other Loan
Document; or
(b) Representation or Warranty. Any representation or warranty
by the Borrower, the General Partner or any Subsidiary made or deemed made
herein, in any other Loan Document, or which is contained in any certificate,
document or financial or other statement by the Borrower, the General Partner,
any Subsidiary, or any Responsible Officer, furnished at any time under this
Agreement, or in or under any other Loan Document, is incorrect in any material
respect on or as of the date made or deemed made; or
(c) Specific Defaults. The Borrower fails to
perform or observe any term,
covenant or agreement contained in any of Sections 2.01(a)(ii), 7.01, 7.02,
7.03, 7.04, 7.06, 7.09, 7.12, 7.13,
7.15, 7.16 or in any Section in Article VIII; or
(d) Other Defaults. The Borrower, the General Partner or any
Subsidiary fails to perform or observe any other term or covenant contained in
this Agreement or any other Loan Document, and such default shall continue
unremedied for a period of 20 days after the earlier of (i) the date upon which
a Responsible Officer knew or reasonably should have known of such failure or
(ii) the date upon which written notice thereof is given to the Borrower by the
Administrative Agent or any Bank; or
(e) Cross-Default. The Borrower, the General Partner or any
Subsidiary (i) fails to make any payment in respect of any Indebtedness or
Contingent Obligation having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors
under any combined or syndicated credit arrangement) of more than $10,000,000
when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise) and such failure continues after the applicable grace or
notice period, if any, specified in the relevant document on the date of such
failure; or (ii) fails to perform or observe any other condition or covenant, or
any other event shall occur or condition exist, under any agreement or
instrument relating to any such Indebtedness or Contingent Obligation, and such
failure continues after the applicable grace or notice period, if any, specified
in the relevant document on the date of such failure if the effect of such
failure, event or condition is to cause, or to permit the holder or holders of
such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause such Indebtedness to be declared to be due and payable
prior to its stated maturity or to cause such Indebtedness or Contingent
Obligation to be prepaid, purchased or redeemed by the Borrower, the MLP, the
General Partner or any Subsidiary, or such Contingent Obligation to become
payable or cash collateral in respect thereof to be demanded; or
(f) Insolvency; Voluntary Proceedings. The General Partner,
the MLP, the Borrower or any Subsidiary (i) ceases or fails to be solvent, or
generally fails to pay, or admits in writing its inability to pay, its debts as
they become due, subject to applicable grace periods, if any, whether at stated
maturity or otherwise; (ii) voluntarily ceases to conduct its business in the
ordinary course; (iii) commences any Insolvency Proceeding with respect to
itself; or (iv) takes any action to effectuate or authorize any of the
foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the General Partner, the MLP, the
Borrower or any Subsidiary, or any writ, judgment, warrant of attachment,
execution or similar process, is issued or levied against a substantial part of
any such Person's properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60 days after
commencement, filing or levy; (ii) the General Partner, the MLP, the Borrower or
any Subsidiary admits the material allegations of a petition against it in any
Insolvency Proceeding, or an order for relief (or similar order under non-U.S.
law) is ordered in any Insolvency Proceeding; or (iii) the General Partner, the
MLP, the Borrower or any Subsidiary acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business; or
(h) ERISA. (i) An ERISA Event occurs with respect to a Pension
Plan which has resulted or could reasonably be expected to result in liability
of the Borrower or the General Partner under Title IV of ERISA to the Pension
Plan or the PBGC in an aggregate amount in excess of $5 million; or (ii) the
commencement or increase of contributions to, or the adoption of or the
amendment of a Pension Plan by the Borrower, the General Partner or any of their
Affiliates which has resulted or could reasonably be expected to result in an
increase in Unfunded Pension Liability among all Pension Plans in an aggregate
amount in excess of $5 million.
(i) Monetary Judgments. One or more judgments, orders, decrees
or arbitration awards is entered against the Borrower, the General Partner or
any Subsidiary involving in the aggregate a liability (to the extent not covered
by independent third-party insurance as to which the insurer does not dispute
coverage) as to any single or related series of transactions, incidents or
conditions, of more than $40,000,000; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order
or decree is entered against the Borrower, the General Partner or any Subsidiary
which does or would reasonably be expected to have a Material Adverse Effect,
and there shall be any period of 60 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(k) Loss of Licenses. Any Governmental Authority revokes or
fails to renew any material license, permit or franchise of the Borrower or any
Subsidiary, or the Borrower or any Subsidiary for any reason loses any material
license, permit or franchise, or the Borrower or any Subsidiary suffers the
imposition of any restraining order, escrow, suspension or impound of funds in
connection with any proceeding (judicial or administrative) with respect to any
material license, permit or franchise; or
(l) Adverse Change. There occurs a Material
Adverse Effect; or
(m) Certain Indenture Defaults, Etc. (i) To the extent not
otherwise within the scope of subsection 9.01(e) above, any "Event of Default"
shall occur and be continuing under and as defined in the 1998 Note Purchase
Agreement or (ii) any of the following shall occur under or with respect to the
1996 Indenture or any other Indebtedness guaranteed by the Borrower or its
Subsidiaries (collectively, the "Guaranteed Indebtedness"): (A) any demand for
payment shall be made under any such Guaranty Obligation with respect to the
Guaranteed Indebtedness or (B) so long as any such Guaranty Obligation shall be
in effect (x) the Borrower or any such Subsidiary shall fail to pay principal of
or premium, if any, or interest on such Guaranteed Indebtedness after the
expiration of any applicable notice or cure periods or (y) any "Event of
Default" (however defined) shall occur and be continuing under such Guaranteed
Indebtedness which results in the acceleration of such Guaranteed Indebtedness;
or
(n) Guarantor Defaults. Any Guarantor fails in any material
respect to perform or observe any term, covenant or agreement in its Guaranty;
or any Guaranty is for any reason partially (including with respect to future
advances) or wholly revoked or invalidated, or otherwise ceases to be in full
force and effect, or any Guarantor or any other Person contests in any manner
the validity or enforceability thereof or denies that it has any further
liability or obligation thereunder; or any event described at subsections (f) or
(g) of this Section occurs with respect to the Guarantor.
. If any Event of Default occurs, the Administrative Agent shall, at
the request of, or may, with the
consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Loans and any
obligation of an Issuing Bank to Issue Letters of Credit to be terminated,
whereupon such commitments and obligation shall be terminated;
(b) declare an amount equal to the maximum aggregate amount
that is or at any time thereafter may become available for drawing under any
outstanding Letters of Credit (whether or not any beneficiary shall have
presented, or shall be entitled at such time to present, the drafts or other
documents required to draw under such Letters of Credit) to be immediately due
and payable;
(c) declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder or under any other Loan Document to be immediately due and
payable (including, without limitation, amounts due under Section 4.04), without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; and
(d) exercise on behalf of itself and the Banks
all rights and remedies available
to it and the Banks under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 9.01 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans and any obligation of the Issuing Banks to Issue Letters of Credit
shall automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall automatically become
due and payable without further act of the Administrative Agent, any Issuing
Bank or any Bank.
. The rights provided for in this Agreement and the other Loan
Documents are cumulative and are not exclusive of any other rights, powers,
privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter arising.
. In the event that, after taking into account any extraordinary charge
to earnings taken or to be taken as of the end of any fiscal period of the
Borrower (a "Charge"), and if solely by virtue of such Charge, there would exist
an Event of Default due to the breach of any of subsections 7.12(a) or 7.12(b)
as of such fiscal period end date, such Event of Default shall be deemed to
arise upon the earlier of (a) the date after such fiscal period end date on
which the Borrower announces publicly it will take, is taking or has taken such
Charge (including an announcement in the form of a statement in a report filed
with the SEC) or, if such announcement is made prior to such fiscal period end
date, the date that is such fiscal period end date, and (b) the date the
Borrower delivers to the Administrative Agent its audited annual or unaudited
quarterly financial statements in respect of such fiscal period reflecting such
Charge as taken.
ARTICLE X
THE ADMINISTRATIVE AGENT
. (a) Each of the Banks and each Issuing Bank hereby irrevocably
appoints, designates and authorizes the Administrative Agent to take such action
on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the
Administrative Agent have or be deemed to have any fiduciary relationship with
any Bank or any Issuing Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent. The Documentation Agent shall have no duties or
responsibilities in such capacity under this Agreement.
(b) Each Issuing Bank shall act on behalf of the Banks with
respect to any Letters of Credit Issued by it and the documents associated
therewith until such time and except for so long as the Administrative Agent may
agree at the request of the Majority Lenders to act for such Issuing Bank with
respect thereto; provided, however, that such Issuing Bank shall have all of the
benefits and immunities (i) provided to the Administrative Agent in this Article
X with respect to any acts taken or omissions suffered by such Issuing Bank in
connection with Letters of Credit Issued by it or proposed to be Issued by it
and the application and agreements for letters of credit pertaining to the
Letters of Credit as fully as if the term "Administrative Agent", as used in
this Article X, included such Issuing Bank with respect to such acts or
omissions, and (ii) as additionally provided in this Agreement with respect to
such Issuing Bank.
. The Administrative Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
. None of the Agent-Related Persons and Issuing Banks shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Borrower or any Subsidiary or
Affiliate of the Borrower, or any officer thereof, contained in this Agreement
or in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of the Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower or any
of the Borrower's Subsidiaries or Affiliates.
. (a) The Administrative Agent and each Issuing Bank shall be entitled
to rely, and shall be fully protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Borrower), independent accountants and other experts selected by
the Administrative Agent or applicable Issuing Bank. The Administrative Agent
and each Issuing Bank shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Banks as it deems appropriate
and, if it so requests, it shall first be indemnified to its satisfaction by the
Banks against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Administrative Agent
and each Issuing Bank shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Majority Banks and such request and
any action taken or failure to act pursuant thereto shall be binding upon all of
the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 5.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Administrative Agent or an Issuing
Bank to such Bank for consent, approval, acceptance or satisfaction, or required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Bank.
. The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default, except with respect
to defaults in the payment of principal, interest and fees required to be paid
to the Administrative Agent for the account of the Banks, unless the
Administrative Agent shall have received written notice from a Bank or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". The
Administrative Agent will notify the Banks of its receipt of any such notice.
The Administrative Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Majority Banks in accordance with
Article IX; provided, however, that unless and until the Administrative Agent
has received any such request, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable or in the best
interest of the Banks.
. Each Bank acknowledges that none of the Agent-Related Persons or any
Issuing Bank has made any representation or warranty to it, and that no act by
the Administrative Agent or any Issuing Bank hereinafter taken, including any
review of the affairs of the Borrower and its Subsidiaries, shall be deemed to
constitute any representation or warranty by any Agent-Related Person or any
Issuing Bank to any Bank. Each Bank represents to the Administrative Agent and
the Issuing Banks that it has, independently and without reliance upon any
Agent-Related Person or any Issuing Bank and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Borrower and its Subsidiaries, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to the Borrower hereunder. Each Bank also represents that it will,
independently and without reliance upon any Agent-Related Person or any Issuing
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents to be furnished to the Banks by the Administrative Agent or any
Issuing Bank as specified on Schedule 10.06, neither the Administrative Agent
nor any Issuing Bank shall have any duty or responsibility to provide any Bank
with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of the
Borrower which may come into the possession of any of the Agent-Related Persons
or any Issuing Bank. The Administrative Agent shall promptly deliver to the
Banks the items specified on Schedule 10.06 that are required to be provided by
the Borrower only to the extent such items are actually provided by the
Borrower.
. Whether or not the transactions contemplated hereby are consummated,
the Banks shall indemnify upon demand the Agent-Related Persons and the Issuing
Banks (to the extent not reimbursed by or on behalf of the Borrower and without
limiting the obligation of the Borrower to do so), pro rata in accordance with
its Pro Rata Share on the date the Borrower's reimbursement obligation arises,
from and against any and all Indemnified Liabilities; provided, however, that no
Bank shall be liable for the payment to the Agent-Related Persons or the Issuing
Banks of any portion of such Indemnified Liabilities resulting solely from such
Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Bank shall reimburse the Administrative Agent and the Issuing
Banks upon demand for their ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by them in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, any other
Loan Document, or any document contemplated by or referred to herein, to the
extent that the Administrative Agent or the applicable Issuing Bank is not
reimbursed for such expenses by or on behalf of the Borrower. The undertaking in
this Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of the Administrative Agent or any Issuing Bank.
. BofA and its Affiliates may make loans to, issue letters of credit
for the account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with the Borrower and its Subsidiaries and Affiliates as
though BofA were not the Administrative Agent or an Issuing Bank hereunder and
without notice to or consent of the Banks. The Banks acknowledge that, pursuant
to such activities, BofA or its Affiliates may receive information regarding the
Borrower or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Borrower or such Subsidiary) and
acknowledge that the Administrative Agent shall be under no obligation to
provide such information to them. With respect to its Loans and participations
in Letters of Credit, BofA shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though it were not the
Administrative Agent or an Issuing Bank.
. The Administrative Agent may, and at the request of the Majority
Banks shall, resign as Administrative Agent upon 30 days' notice to the Banks.
If the Administrative Agent resigns under this Agreement, the Majority Banks
shall appoint from among the Banks a successor agent for the Banks. If no
successor agent is appointed prior to the effective date of the resignation of
the Administrative Agent, the Administrative Agent may appoint, after consulting
with the Banks and the Borrower, a successor agent from among the Banks. Upon
the acceptance of its appointment as successor agent hereunder, such successor
agent shall succeed to all the rights, powers and duties of the retiring
Administrative Agent and the term "Administrative Agent" shall mean such
successor agent and the retiring Administrative Agent's appointment, powers and
duties as Administrative Agent shall be terminated. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Article X and Sections 11.04 and 11.05 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. If no successor agent has accepted
appointment as Administrative Agent by the date which is 30 days following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become effective
and the Banks shall perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Majority Banks appoint a successor
agent as provided for above. Notwithstanding the foregoing, however, BofA may
not be removed as the Administrative Agent at the request of the Majority Banks
unless BofA shall also simultaneously be replaced as an "Issuing Bank" hereunder
pursuant to documentation in form and substance reasonably satisfactory to BofA.
. (a) If any Bank is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such
Bank agrees with and in favor of the Administrative Agent, to deliver to the
Administrative Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
properly completed IRS Forms 1001 and W-8 (or any successor forms)
before the payment of any interest in the first calendar year and
before the payment of any interest in each third succeeding calendar
year during which interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of such
Bank, two properly completed and executed copies of IRS Form 4224 (or
any successor form) before the payment of any interest is due in the
first taxable year of such Bank and in each succeeding taxable year of
such Bank during which interest may be paid under this Agreement, and
IRS Form W-9 (or any successor form); and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Administrative Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Bank sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Borrower to such Bank, such Bank agrees to
notify the Administrative Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Borrower to such Bank. To the
extent of such percentage amount, the Administrative Agent will treat such
Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Administrative Agent sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of the Borrower to such Bank, such Bank agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest payment
to such Bank an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to the Administrative Agent,
then the Administrative Agent may withhold from any interest payment to such
Bank not providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Administrative
Agent did not properly withhold tax from amounts paid to or for the account of
any Bank (because the appropriate form was not delivered, was not properly
executed, or because such Bank failed to notify the Administrative Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Bank shall indemnify
the Administrative Agent fully for all amounts paid, directly or indirectly, by
the Administrative Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
the Administrative Agent under this Section, together with all costs and
expenses (including Attorney Costs). The obligation of the Banks under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of the Administrative Agent.
ARTICLE XI
MISCELLANEOUS
. No amendment or waiver of any provision of this Agreement or any
other Loan Document, and no consent with respect to any departure by the
Borrower or the General Partner therefrom, shall be effective unless the same
shall be in writing and signed by the Majority Banks (or by the Administrative
Agent at the written request of the Majority Banks) and the Borrower and
acknowledged by the Administrative Agent, and then any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no such waiver, amendment, or consent
shall, unless in writing and signed by all the Banks, the Borrower and the
General Partner and acknowledged by the Administrative Agent, do any of the
following:
(a) increase or extend the Revolving Loan
Commitment of any Bank (or reinstate any
Revolving Loan Commitment terminated pursuant to Section 9.02);
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Banks (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to clause (ii) below) any fees or other amounts
payable hereunder or under any other Loan Document;
(d) change the percentage of the Revolving Loan Commitments or
of the aggregate unpaid principal amount of the Loans which is required for the
Banks or any of them to take any action hereunder;
(e) amend this Section, or Section 2.14, or any
provision herein providing for
consent or other action by all Banks; or
(f) release any of the Guaranties;
and, provided, further, that (i) no amendment, waiver or consent shall, unless
in writing and signed by the Issuing Banks in addition to the Majority Banks or
all the Banks, as the case may be, affect the rights or duties of the Issuing
Banks under this Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by any such Issuing Bank, (ii) no amendment,
waiver or consent shall, unless in writing and signed by the Administrative
Agent in addition to the Majority Banks or all the Banks, as the case may be,
affect the rights or duties of the Administrative Agent under this Agreement or
any other Loan Document, and (iii) the Fee Letter may be amended, or rights or
privileges thereunder waived, in a writing executed solely by the parties
thereto.
. (a) Except as otherwise specifically provided in Section 3.02, all
notices, requests and other communications shall be in writing (including,
unless the context expressly otherwise provides, by facsimile transmission;
provided, that any matter transmitted by the Borrower by facsimile (i) shall be
immediately confirmed by a telephone call to the recipient at the number
specified on Schedule 11.02, and (ii) shall be followed promptly by delivery of
a hard copy original thereof) and mailed, faxed or delivered, to the address or
facsimile number specified for notices on Schedule 11.02; or, as directed to the
Borrower or the Administrative Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Borrower and the Administrative Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II, III or X shall not be effective until actually
received by the Administrative Agent, and notices pursuant to Article III to any
Issuing Bank shall not be effective until actually received by such Issuing Bank
at the address specified for the "Issuing Banks" on the applicable signature
page hereof.
(c) Any agreement of the Administrative Agent and the Banks
herein to receive certain notices by telephone or facsimile is solely for the
convenience and at the request of the Borrower. The Administrative Agent and the
Banks shall be entitled to rely on the authority of any Person purporting to be
a Person authorized by the Borrower to give such notice and the Administrative
Agent and the Banks shall not have any liability to the Borrower or other Person
on account of any action taken or not taken by the Administrative Agent or the
Banks in reliance upon such telephonic or facsimile notice. The obligation of
the Borrower to repay the Loans and L/C Obligations shall not be affected in any
way or to any extent by any failure by the Administrative Agent and the Banks to
receive written confirmation of any telephonic or facsimile notice or the
receipt by the Administrative Agent and the Banks of a confirmation which is at
variance with the terms understood by the Administrative Agent and the Banks to
be contained in the telephonic or facsimile notice.
. No failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Bank, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.
. The Borrower shall:s and Expenses
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Administrative
Agent and an Issuing Bank) and the Arranger within five Business Days after
demand (subject to subsection 5.01(f)) for all costs and expenses incurred by
BofA (including in its capacity as Administrative Agent and an Issuing Bank) and
the Arranger in connection with the development, preparation, delivery,
administration, syndication and execution of, and any amendment, supplement,
waiver or modification to (in each case, whether or not consummated), this
Agreement, any Loan Document, the Existing Credit Agreement and any other
documents prepared in connection herewith or therewith, and the consummation of
the transactions contemplated hereby and thereby, including reasonable (giving
due regard to the prevailing circumstances) Attorney Costs incurred by BofA
(including in its capacity as Administrative Agent and an Issuing Bank) and the
Arranger with respect thereto; and
(b) pay or reimburse the Administrative Agent, the Arranger,
each Issuing Bank and each Bank within five Business Days after demand for all
costs and expenses (including Attorney Costs) incurred by them in connection
with the enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement or any other Loan Document during the existence of
an Event of Default or after acceleration of the Loans (including in connection
with any "workout" or restructuring regarding the Loans, and including in any
Insolvency Proceeding or appellate proceeding).
. Whether or not the transactions contemplated hereby are consummated,
the Borrower shall indemnify and hold the Agent-Related Persons, the Issuing
Banks, the Arranger and each Bank and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits and
reasonable (giving due regard to the prevailing circumstances) costs, charges,
expenses and disbursements (including Attorney Costs) of any kind or nature
whatsoever which may at any time (including at any time following repayment of
the Loans, the termination of the Letters of Credit and the termination,
resignation or replacement of the Administrative Agent or replacement of any
Bank or Issuing Bank) be imposed on, incurred by or asserted against any such
Person in any way relating to or arising out of this Agreement or any document
contemplated by or referred to herein, or the transactions contemplated hereby,
or any action taken or omitted by any such Person under or in connection with
any of the foregoing, including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate proceeding) related
to or arising out of this Agreement or the Loans or Letters of Credit or the
actual or proposed use of the proceeds thereof, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Borrower shall have no obligation hereunder to
any Indemnified Person with respect to Indemnified Liabilities resulting solely
from the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
. To the extent that the Borrower makes a payment to the Administrative
Agent or the Banks, or the Administrative Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by the
Administrative Agent or such Bank in its discretion) to be repaid to a trustee,
receiver or any other party, in connection with any Insolvency Proceeding or
otherwise, then (a) to the extent of such recovery the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such set-off had
not occurred, and (b) each Bank severally agrees to pay to the Administrative
Agent upon demand its pro rata share of any amount so recovered from or repaid
by the Administrative Agent.
. The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
except that the Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent and each Bank. Any attempted or purported assignment in
contravention of the preceding sentence shall be null and void.
(a) Any Bank may, with the written consent of the Borrower (at all
times other than during the existence of an Event of Default), the
Administrative Agent and the applicable Issuing Bank(s), which consents shall
not be unreasonably withheld, at any time assign and delegate to one or more
Eligible Assignees (provided that no written consent of the Borrower, the
Administrative Agent or an Issuing Bank shall be required in connection with any
assignment and delegation by a Bank to an Eligible Assignee that is an Affiliate
of such Bank) (each an "Assignee") all, or any ratable part of all, of the
Loans, the Revolving Loan Commitments, the L/C Obligations and the other rights
and obligations of such Bank hereunder in an aggregate minimum amount of
$10,000,000, pro-rated in accordance with the respective amounts of the Facility
A Commitment, the Facility B Commitment and the Facility C Commitment of such
Bank; provided that such Bank shall retain an aggregate amount of not less than
$10,000,000 in respect thereof, unless such Bank assigns and delegates all of
its rights and obligations hereunder to one or more Eligible Assignees on the
time and subject to the conditions set forth herein; and provided, further,
however, that the Borrower and the Administrative Agent may continue to deal
solely and directly with such Bank in connection with the interest so assigned
to an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Borrower and the Administrative Agent by
such Bank and the Assignee; (ii) such Bank and its Assignee shall have delivered
to the Borrower and the Administrative Agent an Assignment and Acceptance in the
form of Exhibit E ("Assignment and Acceptance"), together with any Note or Notes
subject to such assignment; and (iii) the assignor Bank has paid to the
Administrative Agent a processing fee in the amount of $3,500.
(b) From and after the date that the Administrative Agent
notifies the assignor Bank that it has received (and provided its consent with
respect to) an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Bank under the Loan Documents, and (ii) the assignor Bank
shall, to the extent that rights and obligations hereunder and under the other
Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Loan Documents.
(c) Within five Business Days after its receipt of notice by
the Administrative Agent that it has received an executed Assignment and
Acceptance and payment of the processing fee (and provided that it consents to
such assignment in accordance with subsection 11.08(a)), if the Assignee so
requests, the Borrower shall execute and deliver to the Administrative Agent,
new Notes evidencing such Assignee's assigned Loans and Revolving Loan
Commitments and, if the assignor Bank has retained a portion of its Loans and
its Revolving Loan Commitments and so requests, replacement Notes in the
principal amount or amounts of the Loans retained by the assignor Bank (such
Notes to be in exchange for, but not in payment of, the Notes held by such
Bank). Immediately upon each Assignee's making its processing fee payment under
the Assignment and Acceptance, this Agreement shall be deemed to be amended to
the extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Revolving Loan Commitments arising
therefrom. The Revolving Loan Commitments allocated to each Assignee shall
reduce such Revolving Loan Commitments of the assigning Bank pro tanto and the
Administrative Agent shall promptly prepare and distribute a new Schedule 2.01
reflecting the new commitments.
(d) Any Bank may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Borrower (a "Participant")
participating interests in any Loans, the Revolving Loan Commitments of that
Bank and the other interests of that Bank (the "originating Bank") hereunder and
under the other Loan Documents; provided, however, that (i) the originating
Bank's obligations under this Agreement shall remain unchanged, (ii) the
originating Bank shall remain solely responsible for the performance of such
obligations, (iii) the Borrower, the Issuing Banks and the Administrative Agent
shall continue to deal solely and directly with the originating Bank in
connection with the originating Bank's rights and obligations under this
Agreement and the other Loan Documents, and (iv) no Bank shall transfer or grant
any participating interest under which the Participant has rights to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, except to the extent such amendment, consent or waiver
would require unanimous consent of the Banks as described in the first proviso
to Section 11.01. In the case of any such participation, the Participant shall
be entitled to the benefit of Sections 4.01, 4.03 and 11.05 as though it were
also a Bank hereunder, and if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this Agreement.
(e) Each Bank agrees to take normal and reasonable precautions
and exercise due care to maintain the confidentiality of all information
identified as "confidential" or "secret" by the Borrower and provided to it by
the Borrower or any Subsidiary, or by the Administrative Agent on such
Borrower's or Subsidiary's behalf, under this Agreement or any other Loan
Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents; except to the extent such information (i) was or
becomes generally available to the public other than as a result of disclosure
by the Bank, or (ii) was or becomes available on a non-confidential basis from a
source other than the Borrower, provided that such source is not bound by a
confidentiality agreement with the Borrower known to the Bank; provided,
however, that any Bank may disclose such information (A) at the request or
pursuant to any requirement of any Governmental Authority to which the Bank is
subject or in connection with an examination of such Bank by any such authority;
(B) pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable Requirement of Law; (D) to the
extent reasonably required in connection with any litigation or proceeding to
which the Administrative Agent, any Bank or their respective Affiliates may be
party; (E) to the extent reasonably required in connection with the exercise of
any remedy hereunder or under any other Loan Document; (F) to such Bank's
independent auditors and other professional advisors; (G) to any Affiliate of
such Bank, or to any Participant or Assignee, actual or potential, provided that
such Affiliate, Participant or Assignee agrees to keep such information
confidential to the same extent required of the Banks hereunder, and (H) as to
any Bank, as expressly permitted under the terms of any other document or
agreement regarding confidentiality to which the Borrower is party or is deemed
party with such Bank.
(f) Notwithstanding any other provision in this Agreement, any
Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and any Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
. In addition to any rights and remedies of the Banks provided by law,
if an Event of Default exists or the Loans have been accelerated, each Bank is
authorized at any time and from time to time, without prior notice to the
Borrower, any such notice being waived by the Borrower to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, such Bank to or for the credit or the account
of the Borrower against any and all Obligations owing to such Bank, now or
hereafter existing, irrespective of whether or not the Administrative Agent or
such Bank shall have made demand under this Agreement or any Loan Document and
although such Obligations may be contingent or unmatured. Each Bank agrees
promptly to notify the Borrower and the Administrative Agent after any such
set-off and application made by such Bank; provided, however, that the failure
to give such notice shall not affect the validity of such set-off and
application.
Each Bank shall notify the Administrative Agent in writing of any
changes in the address to which notices to the Bank should be directed, of
addresses of any Lending Office, of payment instructions in respect of all
payments to be made to it hereunder and of such other administrative information
as the Administrative Agent shall reasonably request.
. (a) On or prior to the Restatement Effective Date, the Administrative
Agent shall notify each Bank of the amount required to be paid by or to such
Bank so that the Facility C Revolving Loans held by the Banks on the Restatement
Effective Date (before giving effect to any new Facility C Revolving Loans made
on such date) shall be held by each Bank pro rata in accordance with the
Facility C Commitments of the Banks set forth on Schedule 2.01. Each Bank which
is required to reduce the amount of Facility C Revolving Loans held by it (each
such Bank, a "Decreasing Bank") shall irrevocably assign, without recourse or
warranty of any kind whatsoever (except that each Decreasing Bank warrants that
it is the legal and beneficial owner of the Loans assigned by it under this
Section 11.11 and that such Loans are held by such Decreasing Bank free and
clear of adverse claims), to each Bank which is required to increase the amount
of Facility C Loans held by it (each such Bank, an "Increasing Bank"), and each
Increasing Bank shall irrevocably acquire from the Decreasing Banks, a portion
of the principal amount of the Facility C Revolving Loans of each Decreasing
Bank (collectively, the "Acquired Portion") outstanding on the Restatement
Effective Date (before giving effect to any new Facility C Revolving Loans made
on such date) in an amount such that the principal amount of the Facility C
Revolving Loans held by each Increasing Bank and each Decreasing Bank as of the
Restatement Effective Date shall be held in accordance with each such Bank's
Facility C Commitment Percentage (if any) as of such date. Such assignment and
acquisition shall be effective on the Restatement Effective Date automatically
and without any action required on the part of any party other than the payment
by the Increasing Banks to the Administrative Agent for the account of the
Decreasing Banks of an aggregate amount equal to the Acquired Portion, which
amount shall be allocated and paid by the Administrative Agent at or before
12:00 p.m. San Francisco time on the Restatement Effective Date to the
Decreasing Banks pro rata based upon the respective reductions in the principal
amount of the Facility C Revolving Loans held by such Banks on the Restatement
Effective Date (before giving effect to any new Facility C Revolving Loans made
on such date). Each of the Administrative Agent and the Banks shall adjust its
records accordingly to reflect the payment of the Acquired Portion. The payment
to be made in respect of the Acquired Portion shall be made by the Increasing
Banks to the Administrative Agent in Dollars in immediately available funds at
or before 11:00 a.m. San Francisco time on the Restatement Effective Date, such
payment to be made by the Increasing Banks pro rata based upon the respective
increases in the principal amount of the Facility C Revolving Loans held by such
Banks on the Restatement Effective Date (before giving effect to any new
Facility C Revolving Loans made on such date). For purposes of this subsection
11.11(a), "Facility C Commitment Percentage" means, with respect to any Bank,
the ratio of (i) the amount of the Facility C Commitment of such Bank to (ii)
the aggregate amount of the Facility C Commitments of all of the Banks.
(b) To the extent any of the Facility C Revolving Loans
acquired by the Increasing Banks from the Decreasing Banks pursuant to
subsection 11(a) above are Eurodollar Rate Loans and the Restatement Effective
Date is not the last day of an Interest Period for such Loans, the Decreasing
Banks shall be entitled to compensation from the Borrower as provided in Section
4.04 of the Existing Credit Agreement (as if the Borrower had prepaid such Loans
in an amount equal to the Acquired Portion on the Restatement Effective Date).
The payment made by the Increasing Banks in respect of the Acquired Portion
shall constitute a Loan made by the Increasing Banks on the Restatement
Effective Date, and to the extent any Loan acquired by the Increasing Banks on
the Restatement Effective Date is a Eurodollar Rate Loan and such date is not
the last day of an Interest Period for such Loan, such Loan shall accrue
interest at the rate then applicable to such Loan until such last day; provided
however that the Borrower shall compensate the Increasing Banks for an amount
equal to the amount, if any, by which the cost to the Increasing Banks of
funding the amount of each such Loan in the respective market for the period
from such date to the last day of the then Interest Period for such Loan exceeds
such applicable rate.
. This Agreement may be executed in any number of separate
counterparts, each of which, when so executed, shall be deemed an original, and
all of said counterparts taken together shall be deemed to constitute but one
and the same instrument. Transmission by telecopier of an executed counterpart
of this Agreement shall be deemed to constitute due and sufficient delivery of
such counterpart. The parties hereto shall deliver to each other an original
counterpart of this Agreement promptly after the delivery by telecopier;
provided, however, that the failure by any party to so deliver an original
counterpart shall not affect the sufficiency of a telecopy of such counterpart
(and the fact that such telecopy constitutes the due and sufficient delivery of
such counterpart), as provided above.
. The illegality or unenforceability of any provision of this Agreement
or any instrument or agreement required hereunder shall not in any way affect or
impair the legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder.
. This Agreement is made and entered into for the sole protection and
legal benefit of the Borrower, the Banks, the Administrative Agent and the
Agent-Related Persons, the Arranger and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
. (a) THIS AGREEMENT AND ALL NOTES ISSUED HEREUNDER SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED
THAT THE ADMINISTRATIVE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING
UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE GENERAL
PARTNER, THE ADMINISTRATIVE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH
OF THE BORROWER, THE GENERAL PARTNER, THE ADMINISTRATIVE AGENT AND THE BANKS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE BORROWER, THE GENERAL
PARTNER, THE ADMINISTRATIVE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF
ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY NEW YORK LAW.
. THE BORROWER, THE GENERAL PARTNER, THE BANKS AND THE ADMINISTRATIVE
AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE
BORROWER, THE GENERAL PARTNER, THE BANKS AND THE ADMINISTRATIVE AGENT EACH AGREE
THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO
ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS.
. From and after the Restatement Effective Date (if it shall occur),
this Agreement, together with the other Loan Documents, embodies the entire
agreement and understanding between and among the Borrower, the General Partner,
the Banks and the Administrative Agent, and supersedes the Existing Credit
Agreement and all other understandings of such Persons, verbal or written,
relating to the subject matter hereof and thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
FERRELLGAS, L.P.
By: Ferrellgas, Inc.
Its: General Partner
By: /s/ Danley K. Sheldon
Name: Danley K. Sheldon
Title: President
FERRELLGAS, INC.
By: /s/ Danley K. Sheldon
Name: Danley K. Sheldon
Title: President
Address for Notices for each of the Borrower and the General Partner:
One Liberty Plaza
Liberty, Missouri 64068
Attention: Danley K. Sheldon
Telephone: (816) 792-6828
Facsimile: (816) 792-6979
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
Administrative Agent
By: /s/ Darryl G. Patterson
Name: Darryl G. Patterson
Title: Vice President
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By: /s/ Darryl G. Patterson
Name: Darryl G. Patterson
Title: Vice President
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
NATIONSBANK, N.A.,
as a Bank
By: /s/ Linda J. Laurence
Name: Linda J. Laurence
Title: Vice President
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
WELLS FARGO BANK, N.A.,
as a Bank
B: /s/ Charles D. Kirkham
Name: Charles D. Kirkham
Title: Vice President
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
THE BANK OF NOVA SCOTIA,
as a Bank
By: /s/ F. C. H. Ashby
Name: F. C. H. Ashby
Title: Senior Manager Loan Operations
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
PARIBAS, as a Bank
By: /s/ Timothy A. Donnon
Name: Timothy A. Donnon
Title: Managing Director
By: /s/ Rosine K. Matthews
Name: Rosine K. Matthews
Title: Vice President
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
UNION BANK OF CALIFORNIA, N.A.,
as a Bank
By:/s/ Randall Osterberg
Name: Randall Osterberg
Title: Vice President
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
THE BANK OF NEW YORK, as a Bank
By: /s/ William O'Daly
Name: William O'Daly
Title: Vice President
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS 2
1.01 Certain Defined Terms 2
1.02 Other Interpretive Provisions 26
1.03 Accounting Principles 27
ARTICLE II THE CREDITS 27
2.01 Amounts and Terms of Revolving Loan Commitments 27
2.02 Loan Accounts 29
2.03 Procedure for Borrowing 29
2.04 Conversion and Continuation Elections 30
2.05 Voluntary Termination or Reduction of Revolving Loan Commitments 31
2.06 Optional Prepayments 32
2.07 Mandatory Prepayments of Loans; Mandatory Commitment Reductions 32
2.08 Repayment 33
2.09 Interest 34
2.10 Fees 34
2.11 Computation of Fees and Interest 35
2.12 Payments by the Borrower 35
2.13 Payments by the Banks to the Administrative Agent 36
2.14 Sharing of Payments, Etc. 37
2.15 Discretionary Swingline Loans 37
ARTICLE III THE LETTERS OF CREDIT 38
3.01 The Letter of Credit Subfacility 38
3.02 Issuance, Amendment and Renewal of Letters of Credit 40
3.03 Existing Letters of Credit; Risk Participations, Drawings and 42
Reimbursements
3.04 Repayment of Participations 43
3.05 Role of the Issuing Banks 44
3.06 Obligations Absolute 44
3.07 Cash Collateral Pledge 45
3.08 Letter of Credit Fees 46
3.09 Uniform Customs and Practice 46
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY 46
4.01 Taxes 46
4.02 Illegality 47
4.03 Increased Costs and Reduction of Return 48
4.04 Funding Losses 49
4.05 Inability to Determine Rates 49
4.06 Survival 49
ARTICLE V CONDITIONS PRECEDENT 50
5.01 Conditions to Effectiveness 50
5.02 Conditions to All Credit Extensions 52
ARTICLE VI REPRESENTATIONS AND WARRANTIES 53
6.01 Corporate or Partnership Existence and Power 53
6.02 Corporate or Partnership Authorization; No Contravention 53
6.03 Governmental Authorization 53
6.04 Binding Effect 54
6.05 Litigation 54
6.06 No Default 54
6.07 ERISA Compliance 54
6.08 Use of Proceeds; Margin Regulations 55
6.09 Title to Properties 55
6.10 Taxes 55
6.11 Financial Condition 56
6.12 Environmental Matters 56
6.13 Regulated Entities 56
6.14 No Burdensome Restrictions 56
6.15 Copyrights, Patents, Trademarks and Licenses, etc. 56
6.16 Subsidiaries and Affiliates 57
6.17 Insurance 57
6.18 Tax Status 57
6.19 Full Disclosure 57
6.20 Fixed Price Supply Contracts 57
6.21 Trading Policies 57
6.22 Redemption of Fixed Rate Senior Notes. 57
6.23 Year 2000 57
ARTICLE VII AFFIRMATIVE COVENANTS 58
7.01 Financial Statements 58
7.02 Certificates; Other Information 59
7.03 Notices 60
7.04 Preservation of Corporate or Partnership Existence, Etc. 61
7.05 Maintenance of Property 61
7.06 Insurance 61
7.07 Payment of Obligations 61
7.08 Compliance with Laws 62
7.09 Inspection of Property and Books and Records 62
7.10 Environmental Laws 62
7.11 Use of Proceeds 62
7.12 Financial Covenants 62
7.13 Trading Policies 63
7.14 Other General Partner Obligations 63
7.15 Monetary Judgments 64
7.16 Year 2000 Compliance 64
ARTICLE VIII NEGATIVE COVENANTS 64
8.01 Limitation on Liens 65
8.02 Asset Sales 66
8.03 Consolidations and Mergers 67
8.04 Acquisitions 68
8.05 Limitation on Indebtedness 68
8.06 Transactions with Affiliates 69
8.07 Use of Proceeds 69
8.08 Use of Proceeds - Ineligible Securities 70
8.09 Contingent Obligations 70
8.10 Joint Ventures 70
8.11 Lease Obligations 70
8.12 Restricted Payments 70
8.13 Prepayments of Subordinated Indebtedness 72
8.14 Dividend and Other Payment Restrictions Affecting Subsidiaries 73
8.15 Change in Business 73
8.16 Accounting Changes 73
8.17 Limitation on Sale and Leaseback Transactions 73
8.19 Amendments of Organization Documents or 1996 Indenture or 1998 Note 74
Purchase Agreement
8.20 Fixed Price Supply Contracts 74
8.21 Operations through Subsidiaries 74
8.22 Operations of MLP 74
ARTICLE IX EVENTS OF DEFAULT 75
9.01 Event of Default 75
9.02 Remedies 77
9.03 Rights Not Exclusive 78
9.04 Certain Financial Covenant Defaults 78
ARTICLE X THE ADMINISTRATIVE AGENT 78
10.01 Appointment and Authorization 78
10.02 Delegation of Duties 79
10.03 Liability of Administrative Agent and Issuing Banks 79
10.04 Reliance by Administrative Agent and Issuing Banks 79
10.05 Notice of Default 80
10.06 Credit Decision 80
10.07 Indemnification 81
10.08 Administrative Agent in Individual Capacity 81
10.09 Successor Administrative Agent 81
10.10 Withholding Tax 82
ARTICLE XI MISCELLANEOUS 83
11.01 Amendments and Waivers 83
11.02 Notices 84
11.03 No Waiver; Cumulative Remedies 85
11.04 Costs and Expenses 85
11.05 Indemnity 85
11.06 Payments Set Aside 86
11.07 Successors and Assigns 86
11.08 Assignments, Participations, Etc. 86
11.09 Set-off 88
11.10 Notification of Addresses, Lending Offices, Etc. 89
11.11 Assignment of Facility C Revolving Loans 89
11.12 Counterparts 90
11.13 Severability 90
11.14 No Third Parties Benefited 90
11.15 Governing Law and Jurisdiction 90
11.16 Waiver of Jury Trial 91
11.17 Entire Agreement 91
</TABLE>
<PAGE>
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this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
FERRELL COMPANIES, INC.
1998 INCENTIVE COMPENSATION PLAN
1. PURPOSE. The purposes of the Ferrell Companies, Inc. 1998 Incentiv
Compensation Plan (the "Plan") are as follows:
(a) to allow upper middle and senior level managers of
Ferrellgas, Inc. ("FGI") to participate in
the equity growth of Ferrell Companies, Inc. ("FCI") and,
indirectly (through its "subsidiary"
holding), in the equity growth of Ferrellgas Partners, L.P.
(the "Partnership") and its subsidiaries (with FCI, FGI, the
Partnership and its subsidiaries being collectively referred
to herein as "Companies");
(b) to generate an increased incentive to contribute to the
Partnership's future success and
prosperity and to focus on the value growth of FCI; and
(c) to focus on profitable Partnership growth and acquisition
activities that will enable subordinated Partnership units
("Subordinated Units") held by FCI to convert to common
Partnership units ("Common Units"), to increase the value of
all Partnership Units (including both Common and Subordinated
Units) and to increase the equity value of FCI, through an
increasing Partnership value, a maximization of Partnership
distributions, a reduction of FCI debt, and an optimization
of share value growth for the FCI shares held by FCI's
employee stock ownership plan (its "ESOP").
Unless defined in the sentence or paragraph in which they are used, definitions
used herein are set forth in Section 9.9 below.
2. ADMINISTRATION.
2.1 Administration by Committee. The Plan shall be administered
by the FCI Options Committee (comprised of three members of
the FCI's or FGI's Management Committee, and generally
including the CEO and CFO of FGI, as well as the senior
personnel manager of FGI) (the "Committee").
2.2 Authority. Subject to the provisions of the Plan, the
Committee shall have the authority to (a) interpret the
provisions of the Plan, and prescribe, amend, and rescind
rules and procedures relating to the Plan, (b) grant
incentives under the Plan, in such forms and amounts and
subject to such terms and conditions as it deems appropriate,
including, without limitation, incentives which are made in
combination with or in tandem with other incentives (whether
or not contemporaneously granted) or compensation or in lieu
of current or deferred compensation, (c) modify the terms of,
cancel and reissue, or repurchase outstanding incentives,
subject to Section 9.7, (d) suspend the operation of the Plan
(or any portion thereof) pursuant to the provisions of
Section 9.8 hereinbelow and (e) make all other determinations
and take all other actions as it deems necessary or desirable
for the administration of the Plan. The determination of the
Committee on matters within its authority shall be conclusive
and binding on Companies and all other persons. The Committee
shall comply with all applicable law in administering the
Plan.
<PAGE>
3. Participation. Subject to the terms and conditions of the Plan, the
Committee shall designate from time to time employees of Companies
(including, without limitation, employees who are officers and/or
directors of any Companies entity) who shall receive incentives under
the Plan ("Participants").
4. SHARES SUBJECT TO THE PLAN
4.1 Number of Shares Reserved. Subject to adjustment in
accordance with Sections 4.2 and 4.3, the aggregate number of
shares of FCI common stock ("Common Stock") available for
incentives under the Plan shall be that number of shares of
Common Stock equaling 20% of FCI's outstanding Common Stock
shares, on a fully-diluted basis, immediately following the
date on which the ESOP has acquired all of the outstanding
Common Stock shares.
All shares of Common Stock issued under the Plan may be
authorized and unissued shares or treasury shares. In
addition, all of such shares may, but need not, be issued
pursuant to the exercise of nonqualified stock options.
4.2 Reusage of Shares.
(a) In the event of the termination (by reason of
forfeiture, expiration, cancellation, surrender, or
otherwise) of any incentive under the Plan, that
number of shares of Common Stock that was subject to
the incentive but not delivered shall be available
again for incentives under the Plan.
(b) In the event that shares of Common Stock are
delivered under the Plan and are thereafter forfeited
or reacquired by FCI (whether or not pursuant to
rights reserved upon the award thereof), such
forfeited or reacquired shares shall be available
again for incentives under the Plan.
2
<PAGE>
4.3 Adjustments to Shares Reserved. In the event of any merger,
consolidation, reorganization, recapitalization, spinoff,
stock dividend, stock split, reverse stock split, exchange,
or other distribution with respect to shares of Common Stock
or other change in the corporate structure or capitalization
affecting the Common Stock (each being an "Adjustment"), the
type and number of shares of stock which are or may be
subject to incentives under the Plan and the terms of any
outstanding incentives (including the price at which shares
of stock may be issued pursuant to an outstanding incentive)
shall be equitably adjusted by the Committee, in its sole
discretion, to preserve both the value of incentives awarded
or to be awarded to Participants under the Plan and the
percentage of outstanding Common Stock shares (on a
fully-diluted basis) available for incentives under the Plan
immediately prior to the date of the Adjustment (taking into
account both incentives granted but not yet distributed from
the Plan and incentives not yet granted under the Plan).
5. STOCK OPTIONS.
5.1 Awards. Subject to the terms and conditions of the Plan, the
Committee shall designate the individuals to whom
"nonqualified stock options" to purchase shares of Common
Stock ("Stock Options") are to be awarded under the Plan and
shall determine the number, and terms of the Stock Options to
be awarded to each of them. Unless and until the Committee
makes a decision to the contrary, the Participants to whom
Stock Options are granted hereunder shall be designated from
the following two employee groups:
(i) field employees who are at or above the "area
manager" designation level; and
(ii) corporate (Liberty or Houston) employees who are
deemed by the Committee to have a material positive
impact on developing and implementing the strategies,
systems or processes that support the operations of
the Partnership and contribute to the achievement by
the Partnership of its financial and operational
goals and the maximization of the equity value of
FCI.
Stock Options awarded under the Plan will, unless and until
the Committee makes a decision to the contrary, be classified
as either "Tranche A Options" or "Tranche B Options." Each
Stock Option awarded under the Plan shall be a "nonqualified
stock option" for tax purposes.
3
<PAGE>
5.2 Adjustment of Awards. If a Participant experiences a material
change in job status (or other similar compensation
measurement as may, from time to time, be utilized by the
Committee), the Committee may, in its sole discretion,
determine whether any or all of the unvested portion of the
Participant's Stock Option(s) shall be taken from the
Participant and returned to FCI. In addition, in the event of
a Change in Control, the Committee may, in its sole
discretion, determine what adjustments, if any, should be
made to (i) Stock Options awarded hereunder and/or (ii) the
Plan.
5.3 Time For Exercise. Each Stock Option shall be exercisable
only if it is vested (as described in Section 5.4 below) and,
then, only to the extent, at the times and until the
expiration date(s) described in the following table:
<TABLE>
<CAPTION>
------------------------ -------------------------------------- ------------------------------------
<S> <C> <C>
Exercise Event Percentage of Vested Portion of Percentage of Vested Portion of
Tranche A Options Which May be Tranche B Options Which May be
Exercised on Specified Exercise Dates Exercised on Specified Exercise
Dates
------------------------ -------------------------------------- ------------------------------------
Full repayment of the Up to 25% of the vested portion of a Up to 25% of the vested portion of
"FCI Senior Notes" (as Participant's Stock Option(s) may be a Participant's Stock Option(s)
defined in Section 9.9 exercised, upon (and only upon) the may be exercised, upon (and only
below) ("Trigger 1") first odd-numbered year "Exercise upon) the first even-numbered year
Date" (as defined in Section 9.9 "Exercise Date" next following
below) next following such repayment such repayment of the FCI Senior
of the FCI Senior Notes. Notes.
------------------------ -------------------------------------- ------------------------------------
Full repayment of the An additional 25% of the vested An additional 25% of the vested
"Subordinated Notes" portion of a Participant's Stock portion of a Participant's Stock
(as defined in Section Option(s) may be exercised, upon Option(s) may be exercised, upon
9.9 below), and (and only upon) the first (and only upon) the first
assuming Trigger 1 odd-numbered year Exercise Date next even-numbered year Exercise Date
occurs ("Trigger 2") following such repayment of the next following such repayment of
Subordinated Notes. the Subordinated Notes.
------------------------ -------------------------------------- ------------------------------------
Assuming that both The vested portion of a The vested portion of a
Trigger 1 and Trigger Participant's Stock Option(s) may be Participant's Stock Option(s) may
2 have occurred: exercised up to the following be exercised up to the following
percentages on the Exercise Date percentages on the Exercise Date
occurring in each of the following occurring in each of the following
years: years:
2009 60% 2010 70%
2011 80% 2012 90%
2013 100% 2014 100%
2015 100% 2016 100%
2017 100% 2018 100%
------------------------ -------------------------------------- ------------------------------------
</TABLE>
4
<PAGE>
In the event that either or both of Trigger 1 and Trigger 2
has (have) not occurred by 2013 (for Tranche A Options) or
2014 (for Tranche B Options), then (i) 100% of the vested
portion of a Participant's Tranche A Option(s) may be
exercised on the Exercise Date occurring in each of 2013,
2015 and 2017; and (ii) to up to 100% of the vested portion
of a Participant's vested Tranche B Option(s) may be
exercised on the Exercise Date occurring in each of 2014,
2016 and 2018.
5.4 Vesting. Subject to the next succeeding sentence, vesting of
Tranche A Options and Tranche B Options shall occur as
follows:
<TABLE>
<CAPTION>
Anniversary of Annual Cumulative
Stock Option Vested Vested
Grant Date Percentage Percentage
<S> <C> <C> <C>
1st 5% 5%
2nd 5% 10%
3rd 5% 15%
4th 5% 20%
5th 5% 25%
6th 10% 35%
7th 10% 45%
8th 10% 55%
9th 10% 65%
10th 10% 75%
11th 10% 85%
12th 15% 100%
</TABLE>
Notwithstanding the immediately preceding vesting schedule,
however, all Stock Options granted hereunder shall fully vest
upon (a) a "Change in Control" of the Partnership or FCI, (b)
the Participant's death, or "permanent disability" or (c) the
Participant's retirement from FCI at or after attainment of
age 65. A Stock Option, whether or not vested, will be
forfeited, no longer exercisable and, if vested, divested and
if (i) a Participant's employment with FGI is terminated for
gross insubordination (as determined by FGI's Board of
Directors) or (ii) the Participant enters a plea of "guilty"
or "nolo contendre" to, or is convicted by a court of
competent jurisdiction of, a felony.
5
<PAGE>
5.5 Option Price. The option price per share ("Option Price") for
any Stock Option awarded shall not be less than the "Fair
Market Value" of a share of Common Stock on the date the
Stock Option is granted. Recipients of Stock Options shall be
timely notified no less frequently than twice annually of the
Fair Market Value of a share of Common Stock.
5.6 Manner of Exercise. The vested portion of a Stock Option may
be exercised, in whole or in part, once a year on the
Exercise Date by notice to FCI specifying the number of whole
(not fractional) shares of Common Stock to be purchased. Such
notice shall be given at least thirty (30) days prior to the
Exercise Date and it shall be accompanied by (or provision
shall be made for) (i) payment of the Option Price by a
certified or cashiers check or wire transfer payable to the
order of the Company on or prior to the Exercise Date; (ii)
an executed share transfer restriction agreement (the form of
which shall either be attached to the agreement memorializing
the Participant's Stock Option grant or be provided to the
Participant prior to the first Exercise Date for the Stock
Option); and (iii) such other documents or representations
(including, without limitation, representations as to the
intention of the Participant or his/her successor to acquire
the shares for investment) as the Company may reasonably
request in order to comply with securities, tax or other laws
then applicable to the exercise of the Stock Option.
Unless the Committee sets a shorter exercise period in its
grant of Stock Options hereunder, the vested portion of the
Stock Option so granted may be exercised until (and must be
exercised on or before) January 31, 2018. Subject to the next
succeeding sentence, if the Participant becomes no longer
employed by a Companies entity prior to the exercise of all
of the vested portion of the Participant's Stock Option(s)
(and the Participant is not immediately thereafter employed
with another Companies entity), the nonvested portion of the
Participant's Stock Option(s) shall expire, terminate and be
forfeited, and the Participant will be permitted to exercise
the vested portion of his/her Stock Option(s) during the
times set for exercise as described in the table set forth in
Section 5.3 above. In such case, the Committee may, in its
sole discretion, give the terminated participant one
opportunity to exercise all of the vested portion of his/her
Stock Option(s) (with the opportunity specifying the early
Exercise Date on which such vested portion must be
exercised). If the Participant is given such an opportunity
and chooses not to exercise all of the remaining vested
portion of his/her remaining Stock Option(s) by the early
Exercise Date, such vested portion of the Stock Option(s)
will immediately expire, terminate and be forfeited as of
such date.
6
<PAGE>
5.7 ESOP Call. All shares acquired by a Participant pursuant to
the exercise of a Stock Option shall be subject to a "call
option" which shall be granted to and may be (a) exercised by
the Ferrell Companies, Inc. Employee Stock Ownership Trust
(the "Trust") and (b) assigned by the trustee of the Trust
(the "Trustee") to FCI. Although the call option may
generally be exercised by either (i) the Trust or (ii) by the
Trust's assignee, if applicable, it may not be exercised
during the first six months following the Exercise Date.
The shares acquired by a Participant pursuant to such
exercise may be called by the Trust (or its assignee) at
their Fair Market Value as of the date of the call (the "Call
Date") by giving the Participant who acquired the shares
notice of the Trust's (or its assignee's) intention to call
the shares (a "call notice") at least ten (10) business days
prior to the Call Date. As stated in Section 5.5 above,
Participants receiving grants of Stock Options shall be
notified every six (6) months of the Fair Market Value of a
share of Common Stock.
A Participant receiving a call notice shall deliver to the
Trustee (or the Trust's assignee, as applicable) stock
certificate(s) for the called shares prior to the Call Date.
The Participant's sale of the called shares shall be deemed
to have occurred as of the Call Date, with the purchase price
being payable in one lump sum by the Trust (or its assignee)
within ninety (90) days of any Call Date not occurring on
July 31st or January 31st and within ninety (90) days after
the receipt of the ESOP financial advisor's determination of
the Fair Market Value of the called shares as of any July
31st or January 31st Call Date. Notwithstanding the
immediately preceding sentence, however, if a Participant's
employment is terminated prior to the Participant's exercise
of all of the vested portion of his/her Stock Option and the
Committee gives the Participant one opportunity to exercise
such vested portion as of an early Exercise Date, the
purchase price to be paid by the Trust (or its assignee) for
any early Exercise Date shares acquired pursuant to its call
option will be payable in the form of a five-year promissory
note given by the Trust (or its assignee) (with (i) interest
payable at the lowest percentage of libor which equals or
exceeds the "Applicable Federal Rate" and (ii) semi-annual
equal payments of principal and interest being made during
the five-year payment period).
5.8 Put Option. All shares acquired by a Participant pursuant to
the exercise of a Stock Option shall be subject to a "put
option" (the "Put Option") which shall be granted as of the
acquisition date to and may be exercised by the Participant
or other party receiving such shares (as provided hereunder,
the "Other Party") if, at the time of their receipt, the
shares are not readily tradable on an established market, as
defined in Section 409(h) of the Internal Revenue Code of
1986, as amended (the "Code") and the Treasury regulations
promulgated thereunder. The Put Option shall permit the
7
<PAGE>
Participant or Other Party to sell some or all of the shares
acquired at their Fair Market Value as of (and only as of)
any July 31st or January 31st following the Exercise Date
(each being a "Permissible Put Date"). The Put Option may
not, however, be exercised during the first six months
following the Exercise Date and it may no longer ever be
exercised once a call notice (as described in Section 5.7
above) has been sent or delivered by the Company.
Shares acquired pursuant to the exercise of a Participant's
Stock Option may be put by the Participant or Other Party at
their Fair Market Value as of a Permissible Put Date by
giving the Company notice of the Participant's (or Other
Party's) intention to put the shares (a "put notice") at
least ten (10) business days prior to the Permissible Put
Date. As is stated in Section 5.5 above, Participants
receiving grants of Stock Options shall be notified every six
(6) months of the Fair Market Value of a share of a share of
Common Stock.
In the event the Company receives a put notice, the sale
pursuant to the put shall be deemed to have occurred as of
the Permissible Put Date referenced in the Put Notice, with
the purchase price being payable by the Company (or its
assignee) in one lump sum within ninety (90) days after the
receipt of the ESOP financial advisor's determination of the
Fair Market Value of the put shares as of the specified
Permissible Put Date. Notwithstanding the immediately
preceding sentence, however, if a Participant's employment is
terminated prior to the Participant's exercise of all of the
vested portion of his/her Stock Option and the Committee
gives the Participant one opportunity to exercise such vested
portion as of an early Exercise Date, the purchase price to
be paid by the Company (or its assignee) for any early
Exercise Date shares acquired pursuant to the Put Option will
be payable in the form of a five-year promissory note given
by the Company (or its assignee) (with (i) interest payable
at the lowest percentage of libor which equals or exceeds the
"Applicable Federal Rate" and (ii) semi-annual equal payments
of principal and interest being made during the five-year
payment period).
5.9 Share Restrictions. The exercise of a Participant's Stock
Option shall be conditioned upon the Participant's execution
of a share transfer restriction agreement (which shall either
be attached to the agreement memorializing the Participant's
Stock Option grant or provided to the Participant prior to
the first Exercise Date for the Stock Option so granted).
Unless and until the Committee makes a decision to the
contrary, all shares purchased pursuant to the exercise of
Stock Options granted hereunder (i) must be held for at
least, and shall be non-transferable during, the six-month
period immediately following the Exercise Date; (ii) will be
subject to the call option described in Section 5.7 above;
and (iii) will be subject to the Put Option described in
Section 5.8 above.
8
<PAGE>
6. STOCK APPRECIATION RIGHTS.
6.1 Grant of SARs. Subject to the terms and conditions of the
Plan, the Committee shall designate the employees to whom
stock appreciation rights ("SARs") are to be awarded under
the Plan and shall determine the number, type and terms of
the SARs to be awarded to each of them. An SAR may be granted
in tandem with a Stock Option granted under the Plan, or the
SAR may be granted on a free-standing basis. Tandem SARs may
be granted either at or after the time of grant of a Stock
Option, provided that, in the case of an ISO a tandem SAR may
be granted only at the time of the grant of such Stock
Option. The grant price of a tandem SAR shall equal the
option price of the related Stock Option and the grant price
of a free-standing SAR shall be equal to the Fair Market
Value of a share of Common Stock on the SAR's grant date.
6.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all
or part of the shares subject to the related option upon the
surrender of the right to exercise the equivalent portion of
the related Stock Option. A tandem SAR shall terminate and no
longer be exercisable upon termination or exercise of the
related Stock Option. A tandem SAR may be exercised only with
respect to the shares for which its related option is then
exercisable.
6.3 Exercise of Free-Standing SARs. Free-standing SARs may be
exercised upon such terms and conditions as the Committee,
in its sole discretion, determines.
6.4 Term of SARs. The term of an SAR granted under the Plan shall
be determined by the Committee in its sole discretion;
provided, however, that such term shall not exceed the option
term in the case of a tandem SAR, or ten years in the case of
a free-standing SAR.
6.5 Payment of SAR Amount. Upon exercise of an SAR, a Participant
shall be entitled to receive payment from Companies in an
amount determined by multiplying:
(a) The excess of the Fair Market Value of a share of
Common Stock on the date of exercise
over the "grant price" of the SAR; by
(b) The number of shares with respect to which the SAR is
exercised.
At the discretion of the Committee, the payment to be made
upon an SAR exercise may be in cash, in shares of Common
Stock of equivalent value, or in some combination thereof.
9
<PAGE>
7. PERFORMANCE SHARES.
7.1 Awards. Subject to the terms and conditions of the Plan, the
Committee shall designate the employees to whom Performance
Shares are to be awarded and determine the number of shares
and the terms and conditions of each such award. Subject to
the terms of Section 7.3 below and the immediately preceding
sentence, each Performance Share shall entitle the
Participant to a payment in the form of one share of Common
Stock as soon as reasonably practicable following the date on
which the specified performance goals and other terms and
conditions specified by the Committee are attained (the
"Attainment Date").
7.2 No Adjustments. Except as otherwise provided by the Committee
or in section 4.3 hereof, no adjustment shall be made in
Performance Shares awarded on account of cash dividends which
may be paid or other rights which may be provided to the
holders of Common Stock prior to the end of any performance
period.
7.3 Substitution of Cash. The Committee may, in its sole
discretion, substitute cash equal to the Fair Market Value of
shares of Common Stock otherwise required to be issued to a
Participant hereunder (with such Fair Market Value being the
Fair Market Value most recently determined by the ESOP
financial advisor immediately prior to the Attainment Date).
8. OTHER INCENTIVES. In addition to the incentives described in Sections 5
through 7 above and subject to the terms and conditions of the Plan,
the Committee may grant other incentives ("Other Incentives"), payable
in cash or in stock, under the Plan as it determines to be in the best
interest of Companies.
9. GENERAL
9.1 Effective Date. The Plan was adopted by the Board of
Directors effective as of July 17, 1998.
9.2 Duration. The Plan shall remain in effect until all
incentives granted under the Plan have been satisfied by the
issuance of shares of Common Stock, lapse of restrictions or
the payment of cash, or have been terminated in accordance
with the terms of the Plan or the incentive.
9.3 Non-transferability of Incentives. No incentive granted under
the Plan may be transferred, pledged, or assigned by the
employee except by will or the laws of descent and
distribution in the event of death, and FCI shall not be
required to recognize any attempted assignment of such rights
by any Participant. During a Participant's lifetime, awards
10
<PAGE>
may be exercised only by the Participant or by the
Participant's guardian or legal representative.
Notwithstanding the foregoing, at the discretion of the
Committee, a grant of an award may (but need not) permit the
transfer of the award by the Participant solely to members of
the Participant's immediate family or trusts or family
partnerships for the benefit of such persons, subject to such
terms and conditions as may be established by the Committee.
9.4 Compliance with Applicable Law and Withholding.
(a) The award of any benefit under the Plan may also be
made subject to such other provisions as the
Committee determines appropriate, including, without
limitation, provisions to comply with federal and
state securities laws or stock exchange requirements.
(b) If, at any time, FCI, in its sole discretion,
determines that the listing,
registration, qualification of any type of incentive,
or the shares of Common Stock issuable pursuant
thereto, or availability of exemption is necessary on
any securities exchange or under any federal or state
securities or blue sky law, or that the consent
or approval of any governmental regulatory body is
necessary or desirable, the exercise or issuance of
shares of Common Stock pursuant to any incentive, or
the removal of any restrictions imposed on shares
subject to an incentive, may be delayed
until such listing, registration, qualification,
exemption, consent, or approval is
effected.
(c) The Companies' entities shall have the right to
withhold from any award under the Plan or to collect
as a condition of any payment under the Plan, as
applicable, any taxes required by law to be withheld.
To the extent permitted by the Committee, to fulfill
any tax withholding obligation, a Participant may
elect to have any distribution otherwise required to
be made under the Plan (or a portion thereof) to be
withheld or, where Stock Options are to be exercised,
the Participant may use shares received from the
exercise of the Stock Option.
9.5 No Continued Employment. Participation in the Plan will not
affect any right any entity of Companies has to terminate the
employment of a Participant or give any Participant the right
to be retained in the employ of Companies or any right or
claim to any benefit under the Plan unless such right or
claim has specifically accrued under the terms of any
incentive under the Plan.
9.6 Treatment as a Stockholder. No incentive granted to a
Participant under the Plan shall create any rights in such
Participant as a stockholder of FCI until shares of Common
Stock related to the incentive are registered in the name of
the Participant.
9.7 Amendment or Discontinuation of the Plan. The Board of
Directors may amend, suspend, or discontinue the Plan at any
11
<PAGE>
time; provided, however, that (a) the Committee may amend or
suspend the Plan to avoid the occurrence of any of the
events/circumstances described in Clauses (i) thru (iii) in
Section 9.8 below; and (b), other than such an amendment or
suspension by the Committee, no amendment, suspension or
discontinuance shall adversely affect any outstanding benefit
and if any law, agreement or exchange on which Common Stock
is traded requires stockholder approval for an amendment to
become effective, no such amendment shall become effective
unless approved by vote of FCI's stockholders.
9.8 Limitations on Applicability. No Plan provision shall be
applicable if its application would (i) cause a default under
the terms of an extension of credit made to any Companies'
entity, or (ii) have an effect on the ability of the
Partnership to make any "Restricted Payment," or (iii) cause
a material change in FCI's Federal, state or local corporate
or tax status. In addition to the powers reserved to the
Committee in Section 2.2 above, the Committee shall have
complete discretion to administer the Plan in such a way as
will prevent the occurrence of any such default, inability to
make a Restricted Payment or change in corporate tax status.
9.9 Definitions.
(a) Change in Control. The term "Change in Control"
shall be defined as
(1) any merger or consolidation of FCI in which
such entity is not the survivor,
(2) any sale of all or substantially all of the
Common Stock of FCI by the Trust,
(3) a sale of all or substantially all of the
Common Stock of FGI,
(4) a replacement of FGI as the General Partner of
the Partnership, or
(5) a public sale of a "material" amount of FCI's
equity (with materiality being determined by
the Committee, but with a material amount of
such equity being at least 51% thereof).
(b) Exercise Date. The term "Exercise Date" refers to the
31st day of January (i.e., January 31st) of each year
in which a Stock Option may be exercised (with each
such year being an odd-numbered year for Tranche A
Options and an even-numbered year for Tranche B
Options).
(c) Fair Market Value. Except as otherwise determined by
the Committee, the "Fair Market Value" of a share of
Common Stock as of any date shall equal the value of
such a share most recently determined for the ESOP by
its independent financial advisor to the ESOP
12
<PAGE>
(assuming no material change in such value since the
date as of which such determination was made);
provided, however, that the "Fair Market Value" of a
share of Common Stock as of any July 31st or January
31st shall equal the value of such a share, as of
such date, as determined by such independent
financial advisor .
(d) FCI Senior Notes. The term "FCI Senior Notes" means
the Series A Notes, the Series B Notes and the Series
C Loans issued pursuant to the Master Agreement dated
July 15, 1998 among FCI, the initial purchasers of
the Series A Notes, the initial purchasers of the
Series B Notes, the Series C Lenders referred therein
and U.S. Bank National Association, as collateral
agent (the "Master Agreement").
(e) Master Agreement. The term "Master Agreement" shall
have the meaning set forth in Section 9.9(d) above.
(f) Permanent Disability. The term "permanent disability"
means any mental or physical condition which entitles
the referenced Participant to disability benefits
under the long-term disability plans of the
Participant's employer.
(g) Restricted Payment. The term "Restricted Payment"
of the Partnership or its subsidiaries means, as
applicable, a "Restricted Payment" as defined in the
debt documents of either the Partnership or its
subsidiaries.
(h) Subordinated Notes. The term "Subordinated Notes"
means any promissory note(s)
constituting "Subordinated Debt" (as said term is
defined in the Master Agreement).
(i) Subsidiary. The term "subsidiary" means any
business, whether or not incorporated, in
which FCI has a direct or indirect ownership interest.
13
EMPLOYMENT, CONFIDENTIALITY, AND NONCOMPETE AGREEMENT
This Employment, Confidentiality, and Noncompete Agreement
("Agreement") is made and entered into this 17th day of July, 1998, by and among
Ferrell Companies, Inc., a Kansas corporation ("FCI"), Ferrellgas, Inc., a
Delaware corporation ("FGI"; FCI and FGI are jointly and severally referred to
herein as the "Company" or the "Companies", as the context so requires), James
E. Ferrell (the "Executive") and LaSalle National Bank, not in its corporate
capacity, but solely as Trustee ("Trustee") of the Ferrell Companies Inc.
Employee Stock Ownership Trust.
WHEREAS, the James E. Ferrell Revocable Trust, an affiliate of
Executive, has made $40,000,000 subordinated loan to FCI pursuant to a
Subordinated Note Purchase Agreement dated as of the date hereof (the
"Subordinated Loan").
WHEREAS, FGI is a wholly-owned subsidiary of FCI and serves as
the general partner of Ferrellgas Partners, L.P., a Delaware limited partnership
("Ferrellgas Partners") and Ferrellgas, L.P., a Delaware limited partnership
("Ferrellgas", and referred to herein collectively with Ferrellgas Partners as
the "Partnerships"), which are engaged primarily in the retail sale,
distribution and marketing of propane (the "Business").
WHEREAS, the Companies, through the Partnerships, conduct the
Business throughout the United States.
WHEREAS, the Companies, through the Partnerships, have
expended a great deal of time, money, and effort to develop and maintain
proprietary Confidential Information (as defined below) which, if misused or
disclosed, could be harmful to the Business.
WHEREAS, the success of the Companies depends to a substantial
extent upon the protection of the Confidential Information and customer goodwill
by all of their employees and the employees of the Partnerships.
WHEREAS, the Executive desires to be employed, and to continue
to be employed, by the Companies as Chairman of the Board of the Companies.
WHEREAS, the Executive desires to be eligible for other
opportunities within the Companies and/or compensation increases which otherwise
would not be available to the Executive and to be given access to Confidential
Information of the Companies and the Partnerships which is necessary for the
Executive to perform his duties, but which the Companies would not make
available to the Executive but for the Executive's signing and agreeing to abide
by the terms of this Agreement as a condition of the Executive's employment and
continued employment with the Companies.
WHEREAS, the Executive recognizes and acknowledges that the
Executive's position with the Companies has provided and/or will continue to
provide the Executive with access to Confidential Information of the Companies
and the Partnerships.
WHEREAS, the Companies compensate their employees to, among
other things, develop and preserve goodwill with their customers on each
respective Company's behalf and business information for each respective
Company's ownership and use.
NOW, THEREFORE, in consideration of the compensation and other
benefits of the Executive's employment by the Companies and the recitals, mutual
covenants and agreements hereinafter set forth, the Executive and the Companies
agree as follows:
Term. The Executive is hereby employed by the Companies, and the Executive
hereby accepts such employment upon the terms and conditions set forth herein.
The Executive's term of employment under this Agreement shall be for a period of
five (5) years, commencing on July 17, 1998 (the "Initial Period"), and shall
continue for a period through and including July 17, 2003, unless earlier
terminated pursuant to the terms and conditions of this Agreement.
Notwithstanding anything herein to the contrary, this Agreement and the term of
employment shall be automatically renewed for one year successive periods
following the Initial Period (the "Successive Period" and together with the
Initial Period, the "Employment Period"), until notice of either party's desire
that the Agreement not be renewed for a Successive Period is given by such party
on or prior to March 31 of the year in which the next Successive Period shall
commence, in which case, subject to Sections 8, 9 and 10, Executives employment
under this Agreement shall terminate upon the expiration of the Initial Period
or current Successive Period, as the case may be; provided, however, that except
as provided in Section 9 (a) the Companies may not terminate any Successive
Period for such time as any amount is due under the FCI Subordinated Notes from
Ferrell Companies, Inc., a Kansas corporation, to the Executive or his designee
dated as of July 17, 1998.
Duties and Responsibilities. During the Employment Period the Executive
shall, on a non-exclusive basis, perform the duties and responsibilities
customarily incident to the position of Chairman of the Board of the Companies
("Chairman") and as are consistent with the each Company's Bylaws, as now
existing or hereafter amended. The duties and responsibilities of the Executive
shall include, but not be limited to, the following:
chairing the Board of Director meetings for the Companies;
serving as an ex-officio member of the Senior Management Committee of the
Companies;
providing strategic advice and insights related to the industry and the
operations and development of the Business, as well as acquisition
opportunities, to the Chief Executive Officer of the Companies;
interviewing and providing feedback to the Chief Executive Officer of the
Companies regarding candidates for senior management positions;
performing periodic visits to the Companies' district offices at which time
advice is provided to area managers and senior field managers, consistent with
past practices, and providing feedback to the Chief Executive Officer of the
Companies regarding such matters;
meeting on a regular basis with the Chief Executive Officer of the
Companies to provide insight, consultation, guidance, and direction related to
the operation and development of the Companies;
materially participating in company wide meetings, consistent with past
practices;
migrate the role of Chief Operating Officer-Houston as soon as practicable
following the date hereof, but in any event no later than July 17, 1999;
assisting in the re-application of FGI's membership to the National Propane
Gas Association;
maintaining PERC board membership until such membership is transferred to
another senior officer of FGI, which transfer shall occur as soon as practicable
following the date hereof, but in any event no later than July 15, 2003;
attempting to facilitate the transfer of board membership on the Propane
Vehicle Counsel to another senior officer of FGI, as soon as practicable
following the date hereof, but in any event no later than July 17, 2003;
maintaining membership with the World LPG Association as a representative
of FGI, until such membership is transferred to another senior officer of FGI,
as soon as practicable following the date hereof, but in any event no later than
July 17, 2003;
actively participating in the maintenance and development of appropriate
and
amicable lender, debtholder, and equity holder relationships; and
such other senior management activities as may be agreed to in writing by
the parties from time to time.
Performance of Services. During the Employment Period, the Executive agrees
to dedicate a reasonably sufficient amount of time per year (which the parties
estimate to equate to approximately 1,000 hours) to the accomplishment of his
duties and responsibilities and to perform the duties and responsibilities in a
diligent, trustworthy, loyal, business-like and efficient manner. The Executive
agrees to follow and act in accordance with all of the Companies' rules,
policies, and procedures.
<PAGE>
Compensation.
(a) Salary. During the Employment Period, the Companies shall pay the
Executive as compensation for his services a monthly base salary of not less
than ten thousand dollars ($10,000), payable in accordance with the Companies'
usual practices. The Executive's base salary shall be eligible for review and
increase consistent with practices of the Companies in effect from time to time
during the Employment Period, but shall not be reduced. The Executive shall be
eligible to participate in such perquisites as may from time to time be awarded
to the Executive by the Companies payable at such times and in such amounts as
the Companies, in their sole discretion, may determine; provided, however, that
such perquisites so awarded are no less favorable to Executive than similar
perquisites awarded to other members of the Companies' senior management.
(b) Personal Service Bonus. As an additional inducement, the Executive
shall be entitled to receive a bonus (the "Incentive Bonus") payable by the
Companies on the later of: (i) the date the Executive's employment under this
Agreement terminates (for any reason; (the "Employment Termination Date");(ii)
the date that all indebtedness under the Subordinated Loan has been paid in full
(the "Subordinated Loan Payment Date"); or (iii) the Incentive Bonus is
permitted to be paid pursuant to the covenants, terms and conditions of any
financing documents applicable to FCI (the "Bonus Payment Date"). The amount of
the Incentive Bonus shall be equal to .005 of the increase in the equity value
of FCI from July 31, 1998 (as determined by an appraisal by the financial
advisor to the trustee of the ESOT (the "Appraiser")) to and including the date
of the most recent appraisal conducted by the Appraiser prior to the earlier of:
(y) the Employment Termination Date; or (z) the Subordinated Loan Payment Date.
Benefit Plans. During the Employment Period and as otherwise provided
herein, the Executive shall be entitled to participate in any and all employee
welfare and health benefit plans (including, but not limited to life insurance,
health and medical, dental, and disability plans) and other employee benefit
plans (including but not limited to the Companies' 401(k) plan and qualified
pension plans) established by the Companies from time to time for the benefit of
executive employees of the Companies; provided, however, that nothing herein
shall entitle the Executive to participate in any Company employee stock
ownership plan or any equity board incentive compensatoin plan of the Company
and its affiliates. Such employee benefit plans in which the Executive shall be
entitled to participate on the date hereof shall include those listed on
Schedule 5 hereof. The Executive shall be required to comply with the conditions
attendant to coverage by such plans and shall comply with and, except as
otherwise provided herein, shall be entitled to benefits only in accordance with
the terms and conditions of such plans as they may be amended from time to time.
Nothing herein contained shall be construed as requiring the Companies to
establish or continue any particular benefit plan in discharge of their
obligations under this Agreement.
Other Benefits.
During the Employment Period, the Executive shall be entitled to such other
employment benefits extended or provided to other key executives of the
Companies, including, but not limited to, payment or reimbursement of all
business expenses incurred by the Executive in the performance of his duties and
other job related activities set forth in this Agreement or subsequently agreed
to by the parties and in the promotion of the Business in accordance with the
Companies' customary policies and procedures. The Executive shall submit to the
Companies periodic statements of all expenses so incurred. Subject to such
audits as the Companies may deem necessary, the Companies shall reimburse the
Executive the full amount of any such expenses advanced by him in the ordinary
course of business.
During the Employment Period the Companies shall provide the Executive with
office space and administrative support services consistent with past practices.
The Executive shall be entitled to reimbursement of reasonable expenses
incurred by Executive in connection with the negotiation of this Agreement,
which shall be paid to Executive upon submission to the Companies of proper
vouchers evidencing such expenses and the purposes for which the same were
incurred.
The Board of Directors of the Companies may, in their sole discretion,
approve additional benefits to be offered to the Executive at such time as they
deem appropriate.
Deductions from Salary and Benefits. The Companies shall withhold from any
compensation or benefits payable to the Executive all customary federal, state,
local and other withholdings, including, without limitation, federal and state
withholding taxes, social security taxes and state disability insurance.
Death or Disability.
In the event of the death or termination of employment due to permanent
disability of the Executive during the Employment Period, (i) all sums payable
to the Executive under this Agreement through the end of the second month
following the month in which such event occurs, (ii) all amounts earned by the
Executive but not taken at the time of the termination of employment, and (iii)
a cash, lump-sum amount equal to three (3) times the greater of (X) 125% of the
then current base salary, or (Y) the average compensation paid for the prior
three (3) fiscal years, shall be paid to the Executive or the Executive's estate
or guardian, as the case may be, as soon as practicable after the death occurs
or permanent disability is determined. In addition, if such termination occurs
after the third month of the Companies' then fiscal year, sums payable to the
Executive shall include a pro rata portion of any amounts to which the Executive
would have otherwise been entitled for the year in which such event occurs under
any Company perquisite to which Executive is a participant. For purposes of
calculating any bonus as applicable pursuant to Section 6(d), to be paid to the
Executive pursuant to this Section 8(a), the Executive shall be entitled to the
payment of any bonus normally calculated with reference to a future period based
upon a percentage of the amount paid for such item in the previous fiscal year;
such percentage to be calculated by dividing the number of days of his
employment during the Companies' then current fiscal year by the number 365.
For purposes of this Agreement, "permanent disability" means the impairment
of Executive's physical or mental health which makes the performance of duties
impractical or impossible as evidenced by the certification of Executive's
doctor.
Termination by the Companies.
The Executive's duties and responsibilities under this Agreement may be
terminated by the Companies for good Cause, subject to the provisions
of this Section 9(a), upon at least sixty (60) calendar days' ("Notice
Period") written notice ("Notice") to the Executive of their intent to
terminate Executive's employment. The Notice shall specify the
particulars of such Cause and shall afford the Executive an opportunity
to discuss the particulars of such Cause with the Board of Directors of
FCI and to cure such Cause to the reasonable satisfaction of the Board
of Directors of FCI during the Notice Period. If such Cause shall not
be cured accordingly, Executive's employment shall terminate upon
expiration of the Notice Period and no compensation shall be due him
beyond the date of such termination (other than pursuant to pension or
other plans which by their terms provide payments beyond the date of
termination in such circumstances). For purposes of this Agreement
"Cause" means: (i) the conviction of Executive by a court of competent
jurisdiction of, or entry of a plea of nolo contendere with respect to,
a felony or any other crime, which other crime involves fraud,
dishonesty or moral turpitude which interferes with the performance of
Executive's duties, responsibilities or obligations under this
Agreement; (ii) fraud or embezzlement related to either of the
Companies on the part of Executive; (iii) Executive's chronic abuse of
or dependency on alcohol or drugs (illicit or otherwise) which
materially interferes with the performance of Executive's duties,
responsibilities or obligations under this Agreement; (iv) the material
breach by Executive of Sections 15, 16 or 17 hereof, except as
permitted pursuant to Section 11 hereof; (v) any act of moral turpitude
or willful misconduct by Executive which (A) results in personal
enrichment of Executive at the expense of the Companies, or (B) may
have a material adverse impact on the Business or reputation of the
Companies; (vi) gross and willful neglect of material duties and
responsibilities of the Executive pursuant hereto, or an intentional
violation of a material term of this Agreement; (vii) any material
violation of any statutory or common law fiduciary duty of Executive to
FCI or FGI; or (viii) failure by Executive to comply with a material
Company policy, as reasonably determined by the Board of Directors of
FCI.
While the parties agree that the Companies may not terminate the
Executive's duties and responsibilities under this Agreement except as provided
in Section 9(a), if such duties and responsibilities are involuntarily
terminated by the Companies for any reason other than for good Cause as noted in
Section 9(a), the Companies shall pay Executive the payments and provide him the
benefits specified in Section 8(a) hereof.
Termination by the Executive. The Executive may terminate his employment
under this Agreement upon at least sixty (60) calendar days' ("Executive Notice
Period") written notice ("Executive Notice") to the Companies of such
termination:
without Cause, upon expiration of the Executive Notice Period, in which
event no compensation shall be due him beyond the date of such termination
(other than pursuant to pension or other plans which by their terms provide
payment beyond the date of termination); and
for Executive Cause. The Executive Notice shall specify the particulars of
such Executive Cause and during the Executive Notice Period the Executive shall
afford the Board of Directors of FCI an opportunity to discuss the particulars
of such Executive Cause with the Executive and to cure such Executive Cause to
the satisfaction of the Executive during the Executive Notice Period. If such
Executive Cause shall not be cured accordingly, Executive's employment shall
terminate upon expiration of the Executive Notice Period. In all events,
Executive shall be paid all compensation and provided all benefits due him
during the Executive Notice Period (and thereafter under Section 8(a)).
"Executive Cause" means any of the following to which the Executive does not
agree: (i) assignment to the Executive of duties or responsibilities, or the
material diminution of duties or responsibilities, that are inconsistent with
his position, duties, responsibilities or status as they exist at the
commencement of the term of this Agreement; (ii) material change in the
reporting responsibilities of the Executive; provided, however, that
notwithstanding the effect of changes on the Board under Section 11 hereof,
changes in the identity of persons on the Board shall not be considered a change
in reporting responsibilities for purposes of this Section; or (iii) withdrawal
from the Executive of his title as Chairman or a material breach of any
provision of this Agreement by the Companies.
Effect of Certain Terminations; Change in Control. If (a) any Company or
Partnership merges with or is consolidated into another corporation or other
entity not theretofore affiliated with any Company or Partnership (i.e.,
controlled by, controlling or under common control with the Companies or the
Partnerships, as applicable) and the Company or Partnership so merging or
consolidating is not the surviving entity pursuant to such merger or
consolidation, or if all or substantially all of the assets of any Company or
Partnership are acquired by another corporation or other entity not theretofore
affiliated with either Company or Partnership in a single transaction or a
series of related transactions, or if more than a majority of the Board of
Directors of either Company changes within a 12-month period, or if FGI is no
longer the general partner of the Partnerships, or if either Company registures
a class of equity securities under the Securities Exchange Act of 1934 (all such
events being referred to herein as "Change in Control"), and (b) within eighteen
(18) months after any such Change in Control the Executive's employment under
this Agreement is terminated, then upon such termination or occurence: (i) the
Companies shall pay the Executive a cash, lump-sum termination benefit not later
than thirty (30) calendar days after such termination equal to three (3) times
the greatest of 125% of (A) his then current base salary, (B) the average
compensation (base salary plus bonuses, if any) paid for the prior three (3)
fiscal years prior to such termination, or (C) the total compensation remaining
for the Initial Period, if such Change of Control occurs during the Initial
Period, or for the Successive Period, if such occurs during any Successive
Period, (ii) the Companies shall pay the Executive any other amounts earned but
unpaid, (iii) if such termination occurs after the third month of the Companies'
then current fiscal year, the Companies shall pay the Executive a pro rata
portion (such proration shall be on the basis that the number of months of his
employment during the Companies' then current fiscal year bears to the number
12, considering the month of termination as a month of full employment, and in
the case of any plan measured over a full year, such determination and payment
shall be made after the close of such year) of any amounts to which he would
have otherwise been entitled under any Company perquisite to which Executive is
a participant, (iv) the Companies, at their expense, shall continue the
Executive's health, accident and life insurance benefits for six (6) months
after the month in which such termination occurs (following which the Executive,
at his expense, shall have the right to extend such benefits under COBRA for a
period of eighteen (18) months), and (iv) Section 17 hereof shall terminate and
be of no effect. For purposes of calculating any bonus, if applicable, to be
paid to the Executive pursuant to this Section 11, the Executive shall be
entitled to the payment of any bonus normally calculated with reference to a
future period based upon the total amount paid for such bonus in the three (3)
previous fiscal years.
Mitigation or Reduction of Benefits. Executive shall not be required to
mitigate or reduce the amount of any payment upon termination provided for
herein by seeking other employment or otherwise nor, except as otherwise
specifically set forth herein, shall the amount of any payment or benefits
provided upon termination be reduced by any compensation or other amounts paid
to or earned by Executive as the result of employment by another employer after
such termination or otherwise.
Certain Additional Payments by the Companies.
(a) Notwithstanding anything in this Agreement to the
contrary and except as set forth below, in the event it shall be
determined that any payment or distribution by the Companies to or for
the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under
this Section) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then the Executive shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 13(c), all
determinations required to be made under this Section 13, including
whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by certified public accounting firm as
designated by the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Companies and the
Executive within fifteen (15) business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time
as is requested by the Companies. In the event that the Accounting Firm
is serving as accountant or auditor for the individual, entity or group
effecting a Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as
the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Companies. Any Gross-Up Payment, as
determined pursuant to this Section 13, shall be paid by the Companies
to the Executive within five (5) calendar days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting
Firm shall be binding upon the Companies and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made by
the Companies should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that the
Companies exhaust their remedies pursuant to Section 13(c) and the
Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the
Companies to or for the benefit of the Executive.
(c) The Executive shall notify the Companies in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Companies of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no
later than ten (10) business days after the Executive is informed in
writing of such claim and shall apprise the Companies of the nature of
such claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which the Executive gives such
notice to the Companies (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the
Companies notify the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive shall:
(1) give the Companies any information reasonably requested by the
Companies relating to such claim,
(2) take such action in connection with contesting such claim as the
Companies shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Companies,
(3) cooperate with the Companies in good faith in order to effectively
contest such claim, and
(4) permit the Companies to participate in any proceedings relating to such
claim;
provided, however, that the Companies shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section 13(c), the Companies shall control all proceedings taken in
connection with such contest and, at their sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may,
at their sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Companies
shall determine; provided, however, that if the Companies direct the
Executive to pay such claim and sue for a refund, the Companies shall
advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold Executive harmless, on
an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an
amount advanced by the Companies pursuant to Section 13(c), the
Executive becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Companies' complying with
the requirements of Section 13(c)) promptly pay to the Companies the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Companies pursuant to Section
13(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Companies do not
notify the Executive in writing of their intent to contest such denial
of refund prior to the expiration of thirty (30) calendar days after
such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be
paid.
Indemnification. The Companies shall indemnify the Executive to the fullest
extent permitted by law against any liability he incurs, or which is threatened
against him, during or after termination of his employment, by reason of the
fact that he is or was a director, officer, employee or agent of the Companies,
or is or was serving at the request of the Companies as a director, officer,
employee or agent of another corporation or other entity. In providing such
indemnification, and in addition to and not in lieu of its general obligations
to indemnify the Executive, the Companies shall reimburse the Executive upon
demand for all reasonable expenses and payments incurred or made by the
Executive relating to any matter for such indemnification hereunder is due.
15. Confidential Information. The Executive acknowledges that
the information, observations and data (whether in human or machine readable
form) obtained by him while employed by the Companies concerning the business or
affairs of the Companies, a Partnership, or any other affiliate, including any
information pertaining to the Business which is not generally known in the
propane industry, including, but not limited to, trade secrets, internal
processes, designs, design information, products, test data, research and
development plans and activities, equipment modifications, techniques, software
and computer programs and derivative works, business and marketing plans,
projections, sales data and reports, confidential evaluations, compilations
and/or analyses of technical or business information, profit margins, customer
requirements, costs, profitability, sales and marketing strategies, pricing
policies, strategic plans, training materials, internal financial information,
operating and financial data and projections, names and addresses of customers,
inventory lists, sources of supplies, supply lists, employee lists, mailing
lists, and information concerning relationships between any Company or
Partnership and their employees or customers which gives or may give the
Companies or the Partnerships an advantage over competitors ("Confidential
Information") are the property of the Company, the Partnership or such other
affiliate, as applicable. Therefore, Executive agrees that he shall not use any
Confidential Information other than in connection with performing the
Executive's services for or on behalf of the Companies in accordance with this
Agreement, or disclose to any unauthorized person or use for his own account any
Confidential Information without the prior written consent of the Board of the
Companies, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a result of
Executive's acts or omissions to act. Executive shall deliver to the Companies
at the termination of Executive's employment, or at any other time the Companies
may request, all memoranda, notes, plans, records, reports, computer tapes and
software and other documents and data (and copies thereof) relating to the
Confidential Information, Work Product (as defined below) and the Business which
he may then possess or have under his control. The Companies and the Executive
acknowledge that: (a) the Confidential Information is commercially and
competitively valuable to the Companies and their affiliates; (b) the
unauthorized use or disclosure of the Confidential Information would cause
irreparable harm to the Companies and their affiliates; (c) the Companies have
taken and are taking all reasonable measures to protect their legitimate
interest in the Confidential Information, including, without limitation,
affirmative action to safeguard the confidentiality of such Confidential
Information; (d) the restrictions on the activities in which Executive may
engage set forth in this Agreement, and the periods of time for which such
restrictions apply, are reasonably necessary in order to protect the Companies'
legitimate interests in their Confidential Information; and (e) nothing herein
shall prohibit the Companies from pursuing any remedies, whether in law or
equity, available to the Companies for breach or threatened breach of this
Agreement, including the recovery of damages from Executive.
16. Inventions and Patents. Executive agrees that all
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports, and all similar or related information which relates to the
Companies' actual or anticipated business (to the extent the Executive is aware
thereof), research and development or existing or future products or services
and which are conceived, developed or made by Executive while employed by the
Companies or any of their affiliates (whether prior to or during the Employment
Period) ("Work Product") belong to the Companies or such other affiliate, and
Executive hereby assigns to the Companies his entire right, title and interest
in any such Work Product. Executive will promptly disclose such Work Product to
the Board of the Companies and perform all actions reasonably requested by the
Board of the Companies (whether during or after Executive's employment period)
to establish and confirm such ownership (including, without limitation,
assignments, consents, powers of attorney and other instruments).
Noncompete; Nonsolicitation.
Executive acknowledges that in the course of his employment with the
Companies he will become familiar with Confidential Information and that his
services will be of special, unique and extraordinary value to the Companies.
Therefore, Executive agrees that, during the time he is employed by the
Companies pursuant hereto and thereafter for the period of time of five (5)
years (ii) until the payment in full of the Senior Secured Notes (as defined in
the Subordinated Note Purchase Agreement) and any indebtdness incurred in
connection with any extensions, renewals, replacements or refinancing of the
indebtedness evidenced thereby in the extent that all or any portion of the
Subordiantd Loan has been transferred or assigned to any person who is not a
"Permitted Assignee" (as defined in the Subordinated Note Purchase
Agreement)(the "Noncompete Period"), Executive shall not directly or indirectly
own, manage, control, or engage in any business with any person (including by
himself or in association with any person, firm, corporate or other business
organization or through any other entity) whose business is substantially
similar to the Business (as defined in the first "Whereas" clause of this
Agreement, and for purposes of this Section 17, shall be limited to the retail
aspects of the Business) as such business exists or is in process on the date of
the termination of Executive's employment, within any geographical area in which
the Companies engage in Business on the date of the termination of Executive's
employment; provided, however, that nothing herein shall prohibit the Executive
either directly or indirectly from owning, managing, controlling or engaging in
any business which competes with the Companies in areas other than the retail
sale of propane gas.
Nothing herein shall prohibit Executive from being a passive owner of not
more than 5% of the outstanding stock of a corporation which is publicly traded,
so long as Executive has no active participation in the business of such
corporation.
During the Noncompete Period, Executive shall not directly or indirectly
through another entity (i) induce or attempt to induce any employee of the
Companies or any affiliate of the Companies to leave the employ of the Companies
or such affiliate, or in any way interfere with the relationship between the
Companies and any employee thereof, (ii) hire any person who was an employee of
the Companies at any time within the six-month period prior to the date of
termination of Executive's employment with the Companies or any affiliate
thereof, or (iii) induce or attempt to induce any customer, supplier, licensee,
licensor, franchisee, franchisor or other business relation of the Companies or
any affiliate to cease doing business with the Companies or such affiliate, or
in any way interfere with the relationship between any such customer, supplier,
licensee, licensor, franchisee, franchisor or business relation and the
Companies or any affiliate thereof.
The Companies and the Executive agree that: (i) the covenants set forth in
this Section 17 are reasonable in geographical and temporal scope and in all
other respects, (ii) the Companies would not have entered into this Agreement
but for the covenants of Executive contained herein, and (iii) the covenants
contained herein have been made in order to induce the Companies to enter into
this Agreement.
If, at the time of enforcement of this Section 17, a court or arbiter shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
The Executive hereby agrees that he shall at no time either prior to or
following expiration of the Noncompete Period use the name "Ferrellgas" in any
business venture unrelated to FGI engaged in by Executive without the prior
written consent of the FGI; provided, however, that nothing herein shall be
construed to limit the Executive from using the name "Ferrell" in any context
which is not substantially related to the Business of the Companies.
Companies' Right to Injunctive Relief, Tolling. In the event of a breach or
threatened breach of any of the Executive's duties and obligations under the
terms and provisions of Sections 15, 16 or 17 hereof, the Companies shall be
entitled, in addition to any other legal or equitable remedies it may have in
connection therewith (including any right to damages that it may suffer), to
temporary, preliminary, and permanent injunctive relief restraining such breach
or threatened breach. The Executive hereby expressly acknowledges that the harm
which might result to the Business as a result of any noncompliance by the
Executive with any of the provisions of Sections 15, 16 or 17 hereof would be
largely irreparable.
Judicial Enforcement. If any provision of this Agreement is adjudicated to
be invalid or unenforceable under applicable law in any jurisdiction, the
validity or enforceability of the remaining provisions thereof shall be
unaffected as to such jurisdiction and such adjudication shall not affect the
validity or enforceability of such provisions in any other jurisdiction. To the
extent that any provision of this Agreement is adjudicated to be invalid or
unenforceable because it is overbroad, that provision shall not be void but
rather shall be limited only to the extent required by applicable law and
enforced as so limited. The parties expressly acknowledge and agree that this
Section is reasonable in view of the parties' respective interests.
Executive Warranties and Representations. The Executive warrants and
represents that the execution and delivery of the Agreement and the Executive's
employment with the Companies do not violate any previous employment agreement
or other contractual obligation of the Executive.
Payments to Executive. For the avoidance of doubt, while the Companies are
jointly and severally liable for payments due to the Executive hereunder nothing
herein shall be construed to entitle the Executive to duplicate compensation or
benefits to be paid by both of FCI and FGI pursuant hereto. Payments due to the
Executive by the Companies shall be paid by FCI and/or FGI as determined
appropriate by the Board of Directors of FGI.
Covenants.
The Companies hereby covenant that unless the Executive's employment is
terminated for good Cause pursuant to Section 9 (a) hereof, they shall ensure
that during the Employment Period, (i) the Executive is elected to the Board of
Directors of the Companies and that the Executive shall be appointed as
Chairman, (ii) the Executive, and Danley K. Sheldon and Elizabeth Solberg are
elected as the Plan Administrator as defined in, and pursuant to, the Ferrell
Companies, Inc. Stock Ownership Plan, and that they are, and they each remain,
for so long as they are Directors of the Company, the only members thereof, and
(iii) the Plan Administrator directs the Trustee that the Executive is elected
to the Board of the Companies and appointed Chairman thereof.
The Trustee, subject to its duties to comply with applicable provisions of
ERISA and the Department of Labor regulations promulgated in connection
therewith, hereby covenants to vote the capital stock of the Ferrell Companies
Inc. Employee Stock Ownership Trust to elect the Executive to the Board of the
Companies.
The Executive may designate in writing to the Companies, a replacement
director (the "Designee") to take Executive's place on the Board of Directors of
the Companies in the event of termination of Executive's employment pursuant to
Section 8, 9 or 10 hereof at such time as the FCI Subordinated Notes are
outstanding. The Companies acknowledge that in the event of such a termination
of Executive's employment and for such time as the FCI Subordinated Notes are
outstanding and held directly or indirectly by the Executive's trust, estate,
hiers or beneficiaries, the Executive or the Executor (or guardian, as the case
may be) of the Executive's estate shall have the right to appoint the Designee,
or if not so designated by Executive pursuant hereto, in its sole discretion to
designate the Designee, and the Companies hereby covenant to ensure that the
Designee is elected to the Board of the Companies.
In the event that the Executive's employment is terminated pursuant to
Section 8, 9 or 10 hereof at such time as the FCI Subordinated Notes are
outstanding, the Trustee, subject to compliance with applicable ERISA and the
Department of Labor regulations promulgated thereunder, hereby covenants to vote
the capital of the Ferrell Companies Inc. Employee Stock Ownership Trust to
elect the Designee to the Board of the Companies, for such period as the FCI
Subordinated Notes are outstanding and held directly or indirectly by the
Executive's estate, hiers or beneficiaries.
In the event of a breach or threatened breach of this Section 22, the
Executive shall be entitled, in addition to any other legal or
equitable remedies he may have in connection therewith (including any
right to damages that he may suffer) to temporary, preliminary, and
permanent injunctive relief restraining such breach or threatened
breach.
Survival. The provisions of this Agreement, except as otherwise provided
herein, shall continue in full force in accordance with their terms
notwithstanding any termination of the Executive's employment by the Companies.
Right to Recover Costs and Fees. The Executive and the Companies undertake
and agree that if either the Executive or a Company breaches or threatens to
breach this Agreement (the "Breaching Party"), the Breaching Party shall be
liable for any attorneys' fees and costs incurred by the non-Breaching Party in
enforcing the non-Breaching Party's rights hereunder.
Entire Agreement, Amendments and Modifications. This Agreement constitutes
the entire agreement and understanding of the parties regarding the employment
of the Executive by the Companies and supersedes all prior agreements and
understandings between the Executive and the Companies to the extent that any
such agreements or understandings conflict with the terms of this Agreement. No
modification, amendment or waiver of any of the provisions of this Agreement
shall be effective unless in writing specifically referring hereto, and signed
by the parties hereto.
Assignments. This Agreement shall be freely assignable by the Companies to,
and shall inure to the benefit of and be binding upon, their successors and
assigns and/or any other entity which shall succeed to the business presently
being conducted by the Companies. Being a contract for personal services,
neither this Agreement nor any rights hereunder shall be assigned by the
Executive.
Choice of Forum; Governing Law. In light of the Companies' substantial
contacts with the State of Missouri, the parties' interests in ensuring that
disputes regarding the interpretation, validity, and enforceability of this
Agreement are resolved on a uniform basis, and the Companies execution of, and
the making of, this Agreement in Missouri, the parties agree that: (i) any
litigation involving any noncompliance with or breach of the Agreement, or
regarding the interpretation, validity and/or enforceability of the Agreement,
shall be filed and conducted in the state or federal courts in the State of
Missouri; and (ii) the Agreement shall be interpreted in accordance with and
governed by the laws of the State of Missouri, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Missouri or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Missouri.
Headings and Interpretation. Section headings are provided in this
Agreement for convenience only and shall not be deemed to substantively alter
the content of such sections. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". References to the singular or plural tense of a
word shall also include the plural or singular as the context may require.
Neutral Construction. Each party acknowledges that in the negotiation and
drafting of this Agreement, they have been represented by and relied upon the
advice of counsel of their choice. The parties affirm that they and their
counsel have had a substantial role in such negotiation and drafting and,
therefore, the parties agree that this Agreement shall be deemed to have been
drafted by all the parties hereto and the rule of construction to the effect
that any contract ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any exhibit
hereto.
Notices. Any notice, request, consent or communication (collectively, a
"Notice") under this Agreement shall be effective only if it is in writing and
(i) personally delivered with written receipt thereof, (ii) sent by certified or
registered mail, return receipt requested, postage prepaid or (iii) sent by a
nationally recognized overnight delivery service, with delivery confirmed,
addressed as follows (or at such other address for a party as shall be specified
by like notice):
(a) If to the Executive, to: Mr. James E. Ferrell
2142 Inwood Drive
Houston, Texas 77019
(b) With a copy to: Bryan Cave LLP
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Attn: John M. Edgar, Esq.
(c) If to FGI, to: Ferrellgas, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. Danley K. Sheldon,
President
(d) If to FCI, to: Ferrell Companies, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. Danley K. Sheldon,
` President
(e) If to the Trustee, to: LaSalle National Bank
Trust & Asset Management
135 S. LaSalle, 19th Floor
Chicago, Illinois 60606-5096
Attn: William W. Merten, Esq.
(f) With a copy to: McDermott, Will & Emery
277 West Monroe Street
Chicago, Illinois 60606-5096
Attn: William W. Merten, Esq.
A Notice shall be deemed to have been given as of the date when (i)
personally delivered as indicated by date of receipt, (ii) five (5) days after
the date when deposited with the United States certified mail, return receipt
requested, properly addressed, or (iii) when receipt of a Notice sent by an
overnight delivery service is confirmed by such overnight delivery service, as
the case may be, unless the sending party has actual knowledge that a Notice was
not received by the intended recipient.
32. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and together shall
constitute one and the same Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
FERRELL COMPANIES, INC. EXECUTIVE
By: /s/ Kevin T. Kelly By: /s/ James E. Ferrell
- ---------------------------- ---------------------------
Kevin T. Kelly James E. Ferrell
Vice President
FERRELLGAS, INC. TRUSTEE
By: /s/ Kenneth A. Heinz By: /s/ E. Vaughn Gordy
- -------------------------- -----------------------------------
Kenneth A. Heinz E. Vaughn Gordy, on behalf of
Assistant Secretary LaSalle National Bank, solely as
Trustee of the Ferrell Companies Inc.
Employee Stock Ownership Trust,
and not in Mr.Gordy's individual
capacity or LaSalle National Bank's
corporate capacity.
PLEASE NOTE: BY SIGNING THIS AGREEMENT, EXECUTIVE IS HEREBY CERTIFYING THAT
EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE
EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C) HAS
HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS
EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL
SUCH QUESTIONS; AND (D) UNDERSTANDS EXECUTIVE'S RIGHTS AND OBLIGATIONS UNDER THE
AGREEMENT.
<PAGE>
Schedule 5
Employee Benefit Plans
The following is a listing of the benefit plans available to
James E. Ferrell:
Comprehensive medical plan.
Dental plan.
Vision plan.
Short-term disability plan.
Long-term disability plan.
Employee life insurance - maximum of $500,000.
Dependent life insurance.
Accidental death and disability - maximum of $300,000.
401(k) plan - maximum employee contribution of 15%; employer
match of 50% of first 8% of employee contribution. Maximum
contributions subject to statutory limitations.
Profit sharing plan - discretionary employer contribution to
retirement plan. Contribution subject to statutory
limitations.
Supplemental savings plan - non-qualified deferred
compensation plan. Maximum contribution of 100% of earnings,
subject to annual limitation. This plan provides the balance
of the 4% match contemplated by the 401(k) plan for Employee's
capped out of the 401(k) plan due to statutory limitations.
EMPLOYMENT, CONFIDENTIALITY, AND NONCOMPETE AGREEMENT
This Employment, Confidentiality, and Noncompete Agreement
("Agreement") is made and entered into this 17th day of July, 1998, by and among
Ferrell Companies, Inc., a Kansas corporation ("FCI"), Ferrellgas, Inc., a
Delaware corporation ("FGI"; FCI and FGI are jointly and severally referred to
herein as the "Company" or the "Companies", as the context so requires), Danley
K. Sheldon (the "Executive") and LaSalle National Bank, not in its corporate
capacity, but solely as trustee ("Trustee") of the Ferrell Companies Inc.
Employee Stock Ownership Trust.
WHEREAS, the FGI is a wholly-owned subsidiary of FCI and
serves as the general partner of Ferrellgas Partners, L.P., a Delaware limited
partnership ("Ferrellgas Partners") and Ferrellgas, L.P., a Delaware limited
partnership ("Ferrellgas", and referred to herein collectively with Ferrellgas
Partners as the "Partnerships"), which are engaged primarily in the sale,
distribution and marketing of propane and other natural gas liquids (the
"Business").
WHEREAS, the Companies, through the Partnerships, conduct the
Business throughout the United States.
WHEREAS, the Companies, through the Partnerships, have
expended a great deal of time, money, and effort to develop and maintain
proprietary Confidential Information (as defined below) which, if misused or
disclosed, could be harmful to the Business.
WHEREAS, the success of the Companies depends to a substantial
extent upon the protection of the Confidential Information and customer goodwill
by all of their employees and the employees of the Partnerships.
WHEREAS, the Executive desires to be employed by each of the
Companies as President and Chief Executive Officer.
WHEREAS, the Executive desires to be eligible for other
opportunities within the Companies and/or compensation increases which otherwise
would not be available to the Executive and to be given access to Confidential
Information of the Companies and the Partnerships which is necessary for the
Executive to perform his duties, but which the Companies would not make
available to the Executive but for the Executive's signing and agreeing to abide
by the terms of this Agreement as a condition of the Executive's employment and
continued employment with the Companies.
WHEREAS, the Executive recognizes and acknowledges that the
Executive's position with the Companies has provided and/or will continue to
provide the Executive with access to Confidential Information of the Companies
and the Partnerships.
WHEREAS, the Companies compensate their employees to, among
other things, develop and preserve goodwill with their customers on each
respective Company's behalf and business information for each respective
Company's ownership and use.
NOW, THEREFORE, in consideration of the compensation and other
benefits of the Executive's employment by the Companies and the recitals, mutual
covenants and agreements hereinafter set forth, the Executive and the Companies
agree as follows:
Term. The Executive is hereby employed by the Companies, and the Executive
hereby accepts such employment upon the terms and conditions set forth herein.
The Executive's term of employment under this Agreement shall be for a period of
eight (8) years, commencing on July 17, 1998 and shall continue for a period
through and including July 17, 2006 (the "Initial Period"), unless earlier
terminated pursuant to the terms and conditions of this Agreement.
Notwithstanding anything herein to the contrary, this Agreement and the term of
employment, unless either the Companies or the Executive provides six (6) months
written notice to the other parties hereto that the Agreement shall not renew
upon expiration of then current employment period, subject to Sections 8, 9 and
10, shall be automatically renewed for one year successive periods following the
Initial Period (each a "Successive Period" and together with the Initial Period,
the "Employment Period").
Duties and Responsibilities. During the Employment Period, the Executive
shall (i) be employed as President and Chief Executive Officer of the Companies,
with such duties as are customarily incident to such offices and as consistent
with the Bylaws of the Companies, as now existing or hereafter amended, and (ii)
be a member of the Board of Directors of the Companies. The precise services of
the Executive may be extended or curtailed at the discretion of the Companies,
so long as after such extension or curtailment, the duties of the Executive are
consistent with the duties normally attendant to the aforesaid offices. The
Executive will perform his duties in a diligent, trustworthy, loyal, and
business-like manner, all for
the purpose of advancing the Business.
Performance of Services. During the Employment Period, the Executive shall
devote his primary time, attention and energies to the Business and shall not
during such time be substantially engaged in any other business activity whether
or not such business activity is pursued for gain, profit, or other pecuniary
advantage; provided, however, that nothing herein shall be construed as
preventing the Executive (i) from being involved in civic, philanthropic or
community service activities, from participating in other businesses and
receiving compensation therefore, to the extent that such involvement and
participation does not involve management or participation in day-to-day
activities thereof and does not detract from the performance by the Executive of
his duties to the Companies pursuant hereto; provided, further, that at the
request of the Board of Directors of the Companies, the Executive shall disclose
such involvement therein, or (ii) from investing his assets in such form or
manner as will not require any appreciable services on the part of the Executive
in the operation of the affairs of any entity in which such investments are
made, so long as such activities do not substantially interfere or conflict with
the Executive's discharge of his duties and responsibilities hereunder. The
Executive agrees to follow and act in accordance with all of the rules,
policies, and procedures of the Companies.
Compensation.
During the Employment Period, Executive's base salary shall be not less
than $340,000 per year ("Base Salary"), payable in regular installments in
accordance with the Companies usual payroll practices and subject to review and
increase consistent with practices of the Companies in effect from time to time
during the Employment Period, but shall not be reduced.
Performance Bonus. During the Employment Period, the Executive shall be
entitled to an annual bonus as set forth below (collectively, the "Performance
Bonus"):
A percentage of the Base Salary
based on Ferrellgas Partners
achieving certain reasonably
budgeted EBITDA (as defined below)
targets, which budgeted EBITDA shall
be approved at least annually by the
Board of Directors of FGI,
calculated as follows:
Actual to Bonus as a
to Budgeted EBITDA % of Base Salary
Less than 90% 0%
90% 15.0%
91% 17.0%
92% 19.0%
93% 21.0%
94% 23.0%
95% 25.0%
96% 27.5%
97% 30.0%
98% 32.5%
99% 35.0%
100% 37.5%
In the event actual EBITDA exceeds
the budgeted EBITDA, the Performance
Bonus shall include, in addition to
the bonus provided for in subpart
(1) hereof, an additional bonus of
one percent (1%) of Base Salary for
each percent that the actual EBITDA
exceeds the budgeted EBITDA.
During the Employment Period, the Performance Bonus
shall be payable within fifteen (15) calendar days following receipt of
by Ferrellgas Partners' of its audited financial statements; provided,
however, that notwithstanding anything herein to the contrary,
Executive's entitlement to and calculation and payment of a Performance
Bonus for the fiscal year ended July 31, 1998 shall be at the sole
discretion of the Board of Directors of FGI, which determination and
payment, if any, shall be made no later than September 30, 1998.
"EBITDA" means, for any period, consolidated net
income of Ferrellgas Partners and its subsidiaries determined in
accordance with generally accepted accounting principles plus (i)
provisions for taxes based on income or profits to the extent included
in computing such consolidated net income, plus (ii) consolidated
interest expense (including deferred financing fees and expenses) and
other expenses in respect of indebtedness of Ferrellgas Partners and
its subsidiaries for such period, whether paid or accrued or otherwise
allocated, to the extent any such expense was deducted in computing
such consolidated net income, plus (iii) depreciation, amortization and
other non-cash expenses of Ferrellgas Partners and its subsidiaries for
such period (excluding any such non-cash expenses to the extent it
represents an accrual or reserve for cash expenses in any future period
or amortization of a prepaid cash expense paid in a prior period) to
the extent any such expense was deducted in computing such consolidated
net income, and plus (vii) any non-cash employee compensation or
benefit expenses to the extent that such expenses were deducted in
computing consolidated net income for such period.
Discretionary Bonus. At the sole discretion of the Board of Directors of
FCI an additional bonus may be paid to the Executive of up to 12.5% of the Base
Salary based upon the Executive's performance with respect to FGI's "Management
by Objective" program (the "Discretionary Bonus"). Failure of the Board of
Directors of FCI to award any such Discretionary Bonus shall not give rise to
any claim against the Companies. The amount, if any, and timing of such bonus,
shall be determined by the Board of Directors of FCI in its sole discretion.
Benefit Plans. During the Employment Period and as otherwise provided
herein, the Executive shall be entitled to participate in any and all employee
welfare and health benefit plans (including, but not limited to life insurance,
health and medical, dental, and disability plans) and other employee benefit
plans (including, but not limited to qualified pension plans and FCI stock
incentive plans), established by the Companies from time to time for the benefit
of executive employees of the Companies. Such employee benefit plans in which
the Executive shall be entitled to participate on the date hereof shall include
those listed on Schedule 5 hereof. The Executive shall be required to comply
with the conditions attendant to coverage by such plans and shall comply with
and, except as otherwise provided herein, shall be entitled to benefits only in
accordance with the terms and conditions of such plans as they may be amended
from time to time. Nothing herein contained shall be construed as requiring the
Companies to establish or continue any particular benefit plan in discharge of
their obligations under this Agreement.
Other Benefits and Reimbursements.
During the Employment Period, the Executive shall be entitled to not less
than four (4) weeks of paid vacation each year of his employment hereunder,
which shall accumulate if not used in any given year. Pursuant to the provisions
of this Agreement, vacation time earned but unused shall be paid to the
Executive upon termination of this Agreement.
During the Employment Period, the Executive shall be entitled to such other
employment benefits extended or provided to other key executives of the
Companies, including, but not limited to, payment or reimbursement of all
business expenses incurred by the Executive in the performance of his duties and
other job related activities set forth in this Agreement or subsequently agreed
to by the parties and in the promotion of the Business in accordance with the
Companies customary policies and procedures. The Executive shall submit to the
Companies periodic statements of all expenses so incurred. Subject to such
audits as the Companies may deem necessary, the Companies shall reimburse the
Executive the full amount of any such expenses advanced by him in the ordinary
course of business.
The Executive shall be entitled to reimbursement of reasonable expenses
incurred by Executive in connection with the negotiation of this Agreement,
which shall be paid to Executive upon submission to the Companies of proper
vouchers evidencing such expenses and the purposes for which the same were
incurred.
During the Employment Period, the Companies shall permit the Executive to
retain membership in the Young Presidents Organization and the Civic Council and
shall pay the costs of such membership; provided, however, that such involvement
and participation does not involve management or participation in day-to-day
activities thereof and does not detract from the performance by the Executive of
his duties to the Companies pursuant hereto.
The Board of Directors of the Companies may, in their sole discretion,
approve additional bonuses or benefits to be offered to the Executive at
including but not limited to, the carryover of earned but unused vacation, such
time as they deem appropriate.
Deductions from Salary and Benefits. The Companies, as applicable, shall
withhold from any compensation, bonus or benefits payable to the Executive all
customary federal, state, local and other withholdings, including, without
limitation, federal and state withholding taxes, social security taxes and state
disability insurance.
Death or Disability.
In the event of the death or termination of employment due to permanent
disability of the Executive during the Employment Period ("Triggering Event"),
(1) all sums payable to the Executive under this Agreement (including salary and
bonuses) through the end of the second month following the month in which the
Triggering Event occurs, (2) credit for any vacation earned by the Executive but
not taken at the time of Triggering Event, (3) all other amounts earned by the
Executive and unpaid as of the time of the Triggering Event, and (4) a cash,
lump-sum amount equal to three (3) times the greater of (i) 125% of the then
current Base Salary, or (ii) the average compensation (Base Salary plus
Performance Bonus and Discretionary Bonus) paid for the prior three (3) fiscal
years shall be paid to the Executive or the Executive's estate (or guardian, as
the case may be) as soon as practicable after the Triggering Event occurs or is
determined. In addition, if such termination occurs after the third month of the
Companies' then fiscal year, sums payable to the Executive shall include a pro
rata portion of any amounts to which the Executive would have otherwise been
entitled for the year in which such event occurs under any Company perquisite to
which Executive is a participant. For purposes of calculating any bonus to be
paid to the Executive pursuant to this Section 8(a), the Executive shall be
entitled to the payment of any bonus normally calculated with reference to a
future period based upon a percentage of the amount paid for such item in the
previous fiscal year; such percentage to be calculated by dividing the number of
days of his employment during the Companies' then current fiscal year by the
number 365.
For purposes of this Agreement, "permanent disability" means any mental as
well as physical condition which entitles the Executive to disability benefits
under the Companies' long-term disability plan.
Termination by the Companies. The Companies may terminate Executive's
employment under this Agreement upon at least sixty (60) calendar days ("Notice
Period") written notice ("Notice") to the Executive of their intent to terminate
Executive's employment:
without Cause (as defined in subsection (b) hereof). The Notice shall
specify that such Termination is without Cause, and upon the expiration of the
Notice Period, the Companies shall pay the Executive the payments and provide
him the benefits specified in Section 8(a) hereof (the expiration of the notice
period pursuant to this Section 9(a) shall be considered a "Triggering Event"
with respect thereto).
for good Cause (as defined below). The Notice shall specify the particulars
of such Cause and shall afford the Executive an opportunity to discuss the
particulars of such Cause with the Board of Directors of FCI and to cure such
Cause. If such Cause shall not be cured accordingly, Executive's employment
shall terminate upon expiration of the Notice Period and no compensation shall
be due to the Executive beyond the date of such termination (other than pursuant
to pension or other plans which by their terms provide payments beyond the date
of termination in such circumstances, including but not limited to, the Ferrell
Companies Inc. Employee Stock Ownership Plan, the Companies' non-qualified
deferred compensation plan and vacation earned but not taken). For purposes of
this Agreement "Cause" means: (i) the conviction of Executive by a court of
competent jurisdiction of, or entry of a plea of nolo contendere with respect
to, a felony or any other crime, which other crime involves fraud, dishonesty or
moral turpitude which interferes with the performance of Executive's duties,
responsibilities or obligations under this Agreement; (ii) fraud or embezzlement
related to either of the Companies on the part of Executive; (iii) Executive's
chronic abuse of or dependency on alcohol or drugs (illicit or otherwise) which
materially interferes with the performance of Executive's duties,
responsibilities or obligations under this Agreement; (iv) the material breach
by Executive of Sections 15, 16 or 17 hereof, except as permitted pursuant to
Section 11 hereof; (v) any act of moral turpitude or willful misconduct by
Executive which (A) results in personal enrichment of Executive at the expense
of the Companies, or (B) may have a material adverse impact on the Business or
reputation of the Companies; (vi) gross and willful neglect of material duties
and responsibilities of the Executive pursuant hereto, or an intentional
violation of a material term of this Agreement; (vii) any material violation of
any statutory or common law fiduciary duty of Executive to FCI or FGI; or (viii)
failure by the Executive to comply with a material Company policy, as reasonably
determined by the Board of Directors of FCI.
Termination by the Executive. The Executive may terminate his employment
under this Agreement upon at least sixty (60) calendar days' ("Executive Notice
Period") written notice ("Executive Notice") to the Companies of such
termination:
without Cause, upon expiration of the Executive Notice Period, in which
event no compensation shall be due him beyond the date of such termination
(other than pursuant to pension or other plans which by their terms provide
payment beyond the date of termination, including but not limited to, the
Ferrell Companies, Inc. Employee Stock Plan, the Companies' non-qualified
deferred compensation plan and vacation earned but not taken); or
for Executive Cause. The Executive Notice shall specify the particulars of
such Executive Cause and during the Executive Notice Period, the Executive shall
afford the Board of Directors of FCI an opportunity to discuss the particulars
of such Executive Cause with the Executive and to cure such Executive Cause to
the satisfaction of the Executive during the Executive Notice Period. If such
Executive Cause shall not be cured accordingly, Executive's employment shall
terminate upon expiration of the Executive Notice Period. In all events,
Executive shall be paid all payments and benefits due him during the Employment
Period (and thereafter as specified in Section 8(a) hereof (expiration of the
Executive Notice Period shall be considered a "Triggering Event" for such
purpose)). "Executive Cause" means any of the following to which the Executive
does not agree: (i) assignment to the Executive of duties or responsibilities,
or the material diminution of duties or responsibilities, that are inconsistent
with his position, duties, responsibilities or status as they exist at the
commencement of the term of this Agreement; (ii) material change in the
reporting responsibilities of the Executive; provided, however, that,
notwithstanding the effect of changes on the Board under Section 11 hereof,
changes in the identity of persons on the Board shall not be considered a change
in reporting responsibilities for purposes of this Section, or (iii) a breach of
any material provision of this Agreement by the Companies.
Effect of Certain Terminations; Change in Control. If (a) any Company or
Partnership merges with or is consolidated into another corporation or other
entity not theretofore affiliated with any Company or Partnership (i.e.,
controlled by, controlling or under common control with the Companies or the
Partnerships, as applicable) and the Company or Partnership so merging or
consolidating is not the surviving entity pursuant to such merger or
consolidation, or if all or substantially all of the assets of any Company or
Partnership are acquired by another corporation or other entity not theretofore
affiliated with either Company or Partnership in a single transaction, or a
series of related transactions, and a majority of the then current Board of
Directors of the Companies does not control the entity that has made such
acquisition, changes within a 12-month period, or if FGI is no longer the
general partner of the Partnerships, or if eitherCompany registers a class of
equity securities under the Securities and Exchange Act of 1934 (all such events
being referred to herein as "Change in Control"), and (b) within eighteen (18)
months after any such Change in Control the Executive's employment under this
Agreement is terminated, then upon such termination or occurence (i) the
Companies shall pay the Executive a cash, lump-sum termination benefit not later
than thirty (30) calendar days after such termination equal to three (3) times
the greatest of 125% of (A) his then current Base Salary, (B) the average
compensation (Base Salary plus Performance Bonus and Discretionary Bonus) paid
for the prior three (3) fiscal years prior to such termination, or (C) the total
compensation remaining for the Initial Period, if such Change of Control occurs
during the Initial Period, (ii) the Companies shall pay the Executive for any
vacation earned by the Executive but not taken and any other amounts earned but
unpaid, (iii) if such termination occurs after the third month of the then
current fiscal year, the Companies shall pay the Executive a pro rata portion
(such proration shall be on the basis that the number of months of his
employment during the Companies' then current fiscal year bears to the number
12, considering the month of termination as a month of full employment, and in
the case of any plan measured over a full year, such determination and payment
shall be made after the close of such year) of any amounts to which he would
have otherwise been entitled under any Company perquisite to which Executive is
a participant (iv) the Companies shall continue the Executive's health, accident
and life insurance benefits for the COBRA period of eighteen (18) months after
the month in which such termination occurs, and (v) Section 17 hereof shall
terminate and be of no effect. For purposes of calculating any bonus to be paid
to the Executive pursuant to this Section 11, the Executive shall be entitled to
the payment of any bonus normally calculated with reference to a future period
based upon the total amount paid for such bonus in the three (3) previous fiscal
years.
Mitigation or Reduction of Benefits. Executive shall not be required to
mitigate or reduce the amount of any payment upon termination provided for
herein by seeking other employment or otherwise nor, except as otherwise
specifically set forth herein, shall the amount of any payment or benefits
provided upon termination be reduced by any compensation or other amounts paid
to or earned by Executive as the result of employment by another employer after
such termination or otherwise.
Certain Additional Payments by the Companies.
a) Notwithstanding anything in this Agreement to the
contrary and except as set forth below, in the event it shall be
determined that any payment or distribution by the Companies to or for
the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under
this Section) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to
as the "Excise Tax"), then the Executive shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
b) Subject to the provisions of Section 13(c), all
determinations required to be made under this Section 13, including
whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by certified public accounting firm as may
be designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Companies and the
Executive within fifteen (15) business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time
as is requested by the Companies. In the event that the Accounting Firm
is serving as accountant or auditor for the individual, entity or group
effecting a Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as
the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Companies. Any Gross-Up Payment, as
determined pursuant to this Section 13, shall be paid by the Companies
to the Executive within five (5) calendar days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting
Firm shall be binding upon the Companies and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made by
the Companies should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that the
Companies exhaust their remedies pursuant to Section 13(c) and the
Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the
Companies to or for the benefit of the Executive.
c) The Executive shall notify the Companies in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Companies of the Gross-Up
Payment. Such notification shall be given as soon as practicable but no
later than ten (10) business days after the Executive is informed in
writing of such claim and shall apprise the Companies of the nature of
such claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which the Executive gives such
notice to the Companies (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the
Companies notify the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive shall:
(1) give the Companies any information
reasonably requested by the Companies
relating to such claim,
(2) take such action in connection with
contesting such claim as the Companies shall
reasonably request in writing from time to
time, including, without limitation,
accepting legal representation with respect
to such claim by an attorney reasonably
selected by the Companies,
(3) cooperate with the Companies in good faith
in order to effectively contest
such claim, and
(4) permit the Companies to participate in any
proceedings relating to such claim;
provided, however, that the Companies shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this
Section 13(c), the Companies shall control all proceedings taken in
connection with such contest and, at their sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may,
at their sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Companies
shall determine; provided, however, that if the Companies direct the
Executive to pay such claim and sue for a refund, the Companies shall
advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold Executive harmless, on
an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the
Companies' control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other
taxing authority.
d) If, after the receipt by the Executive of an
amount advanced by the Companies pursuant to Section 13(c), the
Executive becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Companies' complying with
the requirements of Section 13(c)) promptly pay to the Companies the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Companies pursuant to Section
13(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Companies do not
notify the Executive in writing of their intent to contest such denial
of refund prior to the expiration of thirty (30) calendar days after
such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be
paid.
Indemnification. The Companies shall indemnify the Executive to the fullest
extent permitted by law against any liability he incurs, or which is threatened
against him, during or after termination of his employment, by reason of the
fact that he is or was a director, officer, employee or agent of the Companies,
or is or was serving at the request of the Companies as a director, officer,
employee or agent of another corporation or other entity. In providing such
indemnification, and in addition to and not in lieu of its general obligations
to indemnify the Executive, the Companies shall reimburse the Executive upon
demand for all reasonable expenses and payments incurred or made by the
Executive relating to any matter for such indemnification hereunder is due.
15. Confidential Information. The Executive acknowledges that
the information, observations and data (whether in human or machine readable
form) obtained by him while employed by the Companies concerning the business or
affairs of the Companies, a Partnership, or any other affiliate, including any
information pertaining to the Business which is not generally known in the
propane industry, including, but not limited to, trade secrets, internal
processes, designs, design information, products, test data, research and
development plans and activities, equipment modifications, techniques, software
and computer programs and derivative works, business and marketing plans,
projections, sales data and reports, confidential evaluations, compilations
and/or analyses of technical or business information, profit margins, customer
requirements, costs, profitability, sales and marketing strategies, pricing
policies, strategic plans, training materials, internal financial information,
operating and financial data and projections, names and addresses of customers,
inventory lists, sources of supplies, supply lists, employee lists, mailing
lists, and information concerning relationships between the Companies or a
Partnership and their employees or customers which gives or may give the
Companies or the Partnerships an advantage over competitors ("Confidential
Information") are the property of the Companies, the Partnership or such other
affiliate, as applicable. Therefore, Executive agrees that he shall not use any
Confidential Information other than in connection with performing the
Executive's services for or on behalf of the Companies, or disclose to any
unauthorized person or use for his own account any Confidential Information
without the prior written consent of the Board of the Companies, unless and to
the extent that the aforementioned matters become generally known to and
available for use by the public other than as a result of Executive's acts or
omissions to act. Executive shall deliver to the Companies at the termination of
Executive's employment, or at any other time the Companies may request, all
memoranda, notes, plans, records, reports, computer tapes and software and other
documents and data (and copies thereof) relating to the Confidential
Information, Work Product (as defined below) and the Business which he may then
possess or have under his control. The Companies and the Executive acknowledge
that: (a) the Confidential Information is commercially and competitively
valuable to the Companies and their affiliates; (b) the unauthorized use or
disclosure of the Confidential Information would cause irreparable harm to the
Companies and their affiliates; (c) the Companies have taken and are taking all
reasonable measures to protect their legitimate interest in the Confidential
Information, including, without limitation, affirmative action to safeguard the
confidentiality of such Confidential Information; (d) the restrictions on the
activities in which Executive may engage set forth in this Agreement, and the
periods of time for which such restrictions apply, are reasonably necessary in
order to protect each Company's legitimate interests in its Confidential
Information; and (e) nothing herein shall prohibit the Companies from pursuing
any remedies, whether in law or equity, available to the Companies for breach or
threatened breach of this Agreement, including the recovery of damages from
Executive.
16. Inventions and Patents. Executive agrees that all
inventions, innovations, improvements, developments, methods, designs, analyses,
drawings, reports, and all similar or related information which related or
relates to the Companies' actual or anticipated business (to the extent the
Executive is aware thereof), research and development or existing or future
products or services and which are conceived, developed or made by Executive
while employed by the Companies or any of their affiliates (whether prior to or
during the Employment Period) ("Work Product") belong to the Companies or such
other affiliate, and Executive hereby assigns to the Companies his entire right,
title and interest in any such Work Product. Executive will promptly disclose
such Work Product to the Board of the Companies and perform all actions
reasonably requested by the Board of the Companies (whether during or after
Executive's employment period) to establish and confirm such ownership
(including, without limitation, assignments, consents, powers of attorney and
other instruments).
Noncompete; Nonsolicitation.
Executive acknowledges that in the course of his employment with the
Companies he will become familiar with Confidential Information and that his
services will be of special, unique and extraordinary value to the Companies.
Therefore, Executive agrees that, during the time he is employed by the
Companies pursuant hereto and thereafter for the period of time of two (2) years
(the "Noncompete Period"), Executive shall not directly or indirectly own,
manage, control, or engage in any business with any person (including by himself
or in association with any person, firm, corporate or other business
organization or through any other entity) whose business is substantially
similar to the business of the Companies, as such business exists or is in
process on the date of the termination of Executive's employment, within any
geographical area in which the Companies are engaged in business on the date of
the termination of Executive's employment.
Nothing herein shall prohibit Executive from being a passive owner of not
more than 2% of the outstanding stock of a corporation which is publicly traded,
so long as Executive has no active participation in the business of such
corporation.
During the Noncompete Period, Executive shall not directly or indirectly
through another entity (i) induce or attempt to induce any employee of the
Companies or any affiliate of the Companies to leave the employ of the Companies
or such affiliate, or in any way interfere with the relationship between the
Companies and any employee thereof, (ii) hire any person who was an employee of
the Companies at any time within the six-month period prior to the date of
termination of Executive's employment with the Companies or any affiliate
thereof, or (iii) induce or attempt to induce any customer, supplier, licensee,
licensor, franchisee, franchisor or other business relation of the Companies or
any affiliate to cease doing business with the Companies or such affiliate, or
in any way interfere with the relationship between any such customer, supplier,
licensee, licensor, franchisee, franchisor or business relation and the
Companies or any affiliate thereof.
The Companies and the Executive agree that: (i) the covenants set forth in
this Section 17 are reasonable in geographical and temporal scope and in all
other respects, (ii) the Companies would not have entered into this Agreement
but for the covenants of Executive contained herein, and (iii) the covenants
contained herein have been made in order to induce the Companies to enter into
this Agreement.
If, at the time of enforcement of this Section 17, a court or arbiter shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
Companies' Right to Injunctive Relief, Tolling. In the event of a breach or
threatened breach of any of the Executive's duties and obligations under the
terms and provisions of Sections 15, 16 or 17 hereof, the Companies shall be
entitled, in addition to any other legal or equitable remedies it may have in
connection therewith (including any right to damages that it may suffer), to
temporary, preliminary, and permanent injunctive relief restraining such breach
or threatened breach. The Executive hereby expressly acknowledges that the harm
which might result to the Business as a result of any noncompliance by the
Executive with any of the provisions of Sections 15, 16 or 17 hereof would be
largely irreparable.
Judicial Enforcement. If any provision of this Agreement is adjudicated to
be
invalid or unenforceable under applicable law in any jurisdiction, the validity
or enforceability of the remaining provisions thereof shall be unaffected as to
such jurisdiction and such adjudication shall not affect the validity or
enforceability of such provisions in any other jurisdiction. To the extent that
any provision of this Agreement is adjudicated to be invalid or unenforceable
because it is overbroad, that provision shall not be void but rather shall be
limited only to the extent required by applicable law and enforced as so
limited. The parties expressly acknowledge and agree that this Section is
reasonable in view of the parties' respective interests.
Executive Warranties and Representations. The Executive warrants and
represents that the execution and delivery of the Agreement and the Executive's
employment with the Companies do not violate any previous employment agreement
or other contractual obligation of the Executive.
Payments to Executive. For the avoidance of doubt, while the Companies are
jointly and severally liable for payments due to the Executive hereunder nothing
herein shall be construed to entitle the Executive to duplicate compensation or
benefits to be paid by both of FCI and FGI pursuant hereto. Payments due to the
Executive by the Companies shall be paid by FCI and/or FGI as determined
appropriate by the Board of Directors of FCI.
Covenants. The Companies hereby covenant unless the Executives employment
is terminated for good cause pursuant to Section 9 (a) hereof, they shall ensure
that during the Employment Period, (i) the Executive is elected to the Board of
Directors of the Companies, (ii) the Executive, James E. Ferrell and Elizabeth
Solberg are elected as the Plan Administrator as defined in and pursuant to, the
Ferrell Companies, Inc. Employee Stock Ownership Plan, and that they are and
they each remain, for so long as they are directors of the Company, the only
members thereof and (iii) the Plan Administrator directs the Trustee that the
Executive is elected to the Board of the Companies. The Trustee, subject to
compliance with applicable ERISA regulations, hereby covenants to vote the
capital of the Ferrell Companies Inc. Employee Stock Ownership Trust to elect
the Executive to the Board of the Companies, during the Employment Period. In
the event of a breach or threatened breach of this Section 22, the Executive
shall be entitled, in addition to any other legal or equitable remedies he may
have in connection therewith (including any right to damages that he may
suffer), to temporary, preliminary, and permanent injunctive relief restraining
such breach or threatened breach.
Survival. The provisions of this Agreement, except as otherwise provided
herein, shall continue in full force in accordance with their terms
notwithstanding any termination of Executive's employment by the Companies.
Right to Recover Costs and Fees. The Executive and the Companies undertake
and agree that if either the Executive or the Companies breach or threaten to
breach this Agreement (the "Breaching Party"), the Breaching Party shall be
liable for any attorneys' fees and costs incurred by the non-Breaching Party in
enforcing the non-Breaching Party's rights hereunder.
Entire Agreement, Amendments and Modifications. This Agreement constitutes
the entire agreement and understanding of the parties regarding the employment
of Executive by the Companies and supersedes all prior agreements and
understandings between the Executive and the Companies to the extent that any
such agreements or understandings conflict with the terms of this Agreement,
including that certain Employee Agreement between FGI and the Executive dated as
of March 23, 1998. No modification, amendment or waiver of any of the provisions
of this Agreement shall be effective unless in writing specifically referring
hereto, and signed by the parties hereto.
Assignments. This Agreement shall be freely assignable by the Companies to,
and shall inure to the benefit of and be binding upon, their successors and
assigns and/or any other entity which shall succeed to the business presently
being conducted by the Companies. Being a contract for personal services,
neither this Agreement nor any rights hereunder shall be assigned by the
Executive.
Choice of Forum; Governing Law. In light of the Companies' substantial
contacts with the State of Missouri, the parties' interests in ensuring that
disputes regarding the interpretation, validity, and enforceability of this
Agreement are resolved on a uniform basis, and the Companies execution of, and
the making of, this Agreement in Missouri, the parties agree that: (i) any
litigation involving any noncompliance with or breach of the Agreement, or
regarding the interpretation, validity and/or enforceability of the Agreement,
shall be filed and conducted in the state or federal courts in the State of
Missouri; and (ii) the Agreement shall be interpreted in accordance with and
governed by the laws of the State of Missouri, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Missouri or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Missouri.
Headings and Interpretation. Section headings are provided in this
Agreement for convenience only and shall not be deemed to substantively alter
the content of such sections. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". References to the singular or plural tense of a
word shall also include the plural or singular as the context may require.
Neutral Construction. Each party acknowledges that in the negotiation and
drafting of this Agreement, they have been represented by and relied upon the
advice of counsel of their choice. The parties affirm that they and their
counsel have had a substantial role in such negotiation and drafting and,
therefore, the parties agree that this Agreement shall be deemed to have been
drafted by all the parties hereto and the rule of construction to the effect
that any contract ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any exhibit
hereto.
Notices. Any notice, request, consent or communication (collectively, a
"Notice") under this Agreement shall be effective only if it is in writing and
(i) personally delivered with written receipt thereof, (ii) sent by certified or
registered mail, return receipt requested, postage prepaid or (iii) sent by a
nationally recognized overnight delivery service, with delivery confirmed,
addressed as follows (or at such other address for a party as shall be specified
by like notice):
(a) If to the Executive, to: Mr. Danley K. Sheldon
421 N.W. Briarcliff Parkway
Kansas City, Missouri 64116
(b) With a copy to: Bryan Cave LLP
One Kansas City Place
1200 Main Street
Kansas City, MO 64105
Attn: John M. Edgar, Esq.
(c) If to FCI, to: Ferrell Companies, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. James E. Ferrell
(d) If to FGI, to: Ferrellgas, Inc.
One Liberty Plaza
Liberty, Missouri 64068
Attention: Mr. James E. Ferrell
(e) If to the Trustee, to: LaSalle National Bank
Trust & Asset Management
125 S. LaSalle, 17th Floor
Chicago, Illinois 60603
Attn: Mr. E. Vaughn Gordy
(f) With a copy to: McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606-5096
Attn: William W. Merten, Esq.
A Notice shall be deemed to have been given as of the date when (i)
personally delivered as indicated by date of receipt, (ii) five (5) days after
the date when deposited with the United States certified mail, return receipt
requested, properly addressed, or (iii) when receipt of a Notice sent by an
overnight delivery service is confirmed by such overnight delivery service, as
the case may be, unless the sending party has actual knowledge that a Notice was
not received by the intended recipient.
32. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and together shall
constitute one and the same Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
FERRELL COMPANIES, INC. EXECUTIVE
By: /s/ Kevin T. Kelly /s/ Danley K. Sheldon
- ------------------------------- -----------------------------------
Kevin T. Kelly Danley K. Sheldon
Vice President
FERRELLGAS, INC. TRUSTEE
By: /s/ Kenneth A. Heinz By: /s/ E. Vaughn Gordy
- ---------------------------------- -----------------------------------
Kenneth A. Heinz E. Vaughn Gordy, on behalf of
Assistant Secretary LaSalle National Bank, solely as
Trustee of the Ferrell Companies
Inc. Employee Stock
Ownership Trust, and not in Mr.
Gordy's individual capacity or
LaSalle National Bank's
corporate capacity.
PLEASE NOTE: BY SIGNING THIS AGREEMENT, EXECUTIVE IS HEREBY CERTIFYING THAT
EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE
EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C) HAS
HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS
EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL
SUCH QUESTIONS; AND (D) UNDERSTANDS EXECUTIVE'S RIGHTS AND OBLIGATIONS UNDER THE
AGREEMENT.
<PAGE>
Schedule 5
Employee Benefit Plans
The following is a listing of the benefit plans available to
Dan Sheldon:
1998 Ferrell Companies, Inc. Stock Incentive Plan.
Ferrell Companies, Inc. Employee Stock Plan.
Comprehensive medical plan.
Dental plan.
Vision plan.
Short-term disability plan.
Long-term disability plan.
Employee life insurance - maximum of $500,000.
Dependent life insurance.
Accidental death and disability - maximum of $300,000.
401(k) plan - maximum employee contribution of 15%; employer
match of 50% of first 8% of employee contribution. Maximum
contributions subject to statutory limitations.
Profit sharing plan - discretionary employer contribution to
retirement plan. Contribution subject to statutory
limitations.
Supplemental savings plan - non-qualified deferred
compensation plan. Maximum contribution of 100% of earnings,
subject to annual limitation. This plan provides the balance
of the 4% match contemplated by the 401(k) plan for Employee's
capped out of the 401(k) plan due to statutory limitations.
Exhibit 21.1
SUBSIDIARIES OF
FERRELLGAS PARTNERS, L.P.
Ferrellgas, L.P., a Delaware limited partnership
Ferrellgas Partners Finance Corp., a Delaware Corporation
SUBSIDIARIES OF
FERRELLGAS, L.P.
Ferrellgas Finance Corp., a Delaware Corporation
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-Effective Amendment No. 1
to Registration Statement No. 33-55185 of Ferrellgas Partners, L.P. on Form S-4
of our reports dated September 24, 1998, appearing in the Annual Report on Form
10-K of Ferrellgas Partners, L.P. for the year ended July 31, 1998.
We also consent to the incorporation by reference in Post-Effective Amendment
No. 1 to Registration Statement No. 33-55185 of Ferrellgas Partners, L.P. on
Form S-4 of our report on Ferrellgas Partners Finance Corp. dated September 24,
1998, appearing in the Annual Report on Form 10-K of Ferrellgas Partners, L.P.
for the year ended July 31, 1998.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
October 29, 1998
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