<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 1994
REGISTRATION NO. 33-53379
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 5984
DELAWARE 6799 43-1676206
43-1677595
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
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ONE LIBERTY PLAZA
LIBERTY, MISSOURI 64068
(816) 792-1600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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DANLEY K. SHELDON
ONE LIBERTY PLAZA
LIBERTY, MISSOURI 64068
(816) 792-1600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
SMITH, GILL, FISHER & BUTTS, P.C. LATHAM & WATKINS
1200 MAIN STREET 885 THIRD AVENUE
KANSAS CITY, MISSOURI 64105 NEW YORK, NEW YORK 10022
(816) 474-7400 (212) 906-1200
ATTENTION: KENDRICK T. WALLACE ATTENTION: PHILIP E. COVIELLO
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
FERRELLGAS, L.P.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
-------------------------------- ----------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back
of Prospectus............................. Cover Pages
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges.............. Prospectus Summary; Risk
Factors; Selected Historical
and Pro Forma Consolidated
Financial and Operating Data
4. Use of Proceeds............................ Prospectus Summary; Use of
Proceeds
5. Determination of Offering Price............ Underwriting
6. Dilution................................... *
7. Selling Security Holders................... *
8. Plan of Distribution....................... Outside Front Cover Page;
Underwriting
9. Description of Securities to be Registered. Prospectus Summary;
Description of Senior Notes;
Certain Federal Income Tax
Consequences
10. Interests of Named Experts and Counsel..... *
11. Information with Respect to the Registrant. Outside Front Cover Page;
Prospectus Summary; Risk
Factors; The Transactions;
Capitalization; Selected
Historical and Pro Forma
Consolidated Financial and
Operating Data; Management's
Discussion and Analysis of
Financial Condition and
Results of Operations;
Business; Management; Cash
Distributions to Partners;
The Partnership; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... *
</TABLE>
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* Not Applicable
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 9, 1994
PROSPECTUS
, 1994
$250,000,000
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
LOGO
Ferrellgas % SENIOR NOTES DUE 2001
The % Senior Notes due 2001 (the "Senior Notes") offered hereby (the
"Offering") are being issued, jointly and severally, by Ferrellgas, L.P. (the
"Partnership") and Ferrellgas Finance Corp., a wholly owned subsidiary of the
Partnership ("Finance Corp." and, together with the Partnership, the
"Issuers").
The Senior Notes will bear interest from the date of issuance at the rate of
% per annum, payable semi-annually in arrears on and
of each year, commencing , 1994. The Issuers will not be required to
make any mandatory redemption or sinking fund payment with respect to the
Senior Notes prior to maturity. The Senior Notes are redeemable at the option
of the Issuers, in whole or in part, at any time on or after , 1998
at the redemption prices set forth herein, plus accrued and unpaid interest to
the date of redemption. In the event of a Change of Control (as defined
herein), holders of the Senior Notes will have the right to require the Issuers
to purchase each such holder's Senior Notes, in whole or in part, at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest to the date of purchase. There can be no assurance that the Issuers
would have adequate funds available to repurchase the Senior Notes.
The Senior Notes will be general unsecured obligations of the Issuers and
will rank on an equal basis in right of payment with all existing and future
senior indebtedness of the Issuers and senior to all existing and future
subordinated indebtedness of the Issuers. At April 30, 1994, on a pro forma
basis after giving effect to the Offering and the other transactions described
herein, the Partnership and its subsidiaries would have had outstanding
approximately $268.9 million in aggregate principal amount of indebtedness on a
consolidated basis (excluding trade payables and other accrued liabilities),
all of which would have ranked on an equal basis in right of payment. See "The
Transactions."
The sale of the Senior Notes offered hereby is subject to, among other
things, completion of a public offering of approximately 13,100,000 million
Common Units by the sole limited partner of the Partnership, Ferrellgas
Partners, L.P., a Delaware limited partnership (the "Master Partnership").
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SENIOR NOTES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC(1) COMMISSIONS(2) ISSUERS(3)
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<S> <C> <C> <C>
Per Senior Note.......................... % % %
Total.................................... $ $ $
</TABLE>
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(1) Plus accrued interest, if any, from the date of issuance.
(2) See "Underwriting" for indemnification arrangements with the Underwriters.
(3) Before deducting estimated expenses of $ payable by the Issuers.
The Senior Notes are being offered by the several Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, subject to
various prior conditions, including the right to reject any order in whole or
in part. It is expected that delivery of the Senior Notes will be made in New
York, New York on or about , 1994, against payment therefor.
DONALDSON, LUFKIN & JENRETTE GOLDMAN, SACHS & CO.
SECURITIES CORPORATION
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY STATE.
<PAGE>
[GRAPHIC APPEARS HERE]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR NOTES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and historical and pro forma financial statements appearing
elsewhere in this Prospectus and should be read only in conjunction with the
entire Prospectus. For ease of reference, a glossary of certain terms used in
this Prospectus is included as Appendix A to this Prospectus.
FERRELLGAS, L.P.
Ferrellgas, L.P. (the "Partnership") is a Delaware limited partnership
recently formed to acquire and operate the propane business and assets of
Ferrellgas, Inc. (the "Company" or "Ferrellgas"). Ferrellgas is the general
partner (the "General Partner") of the Partnership and a wholly owned
subsidiary of Ferrell Companies, Inc. ("Ferrell"). Ferrell was founded in 1939
as a single retail propane outlet in Atchison, Kansas, and has grown
principally through the acquisition of retail propane operations throughout the
United States. The Company believes that it is the third largest retail
marketer of propane in the United States, based on gallons sold, serving more
than 600,000 residential, industrial/commercial and agricultural customers in
45 states and the District of Columbia through approximately 416 retail outlets
and 226 satellite locations in 36 states (some outlets serve an interstate
market). The Company's largest market concentrations are in the Midwest, Great
Lakes and Southeast regions of the United States. The Company operates in areas
of strong retail market competition, which has required it to develop and
implement strict capital expenditure and operating standards in its existing
and acquired retail propane operations in order to control operating costs.
This effort has resulted in upgrades in the quality of its field managers, the
application of strong return on asset benchmarks and improved productivity
methodologies.
The Company's retail propane sales volumes were approximately 553 million,
496 million and 482 million gallons during the fiscal years ended July 31,
1993, 1992 and 1991, respectively. Earnings before depreciation, amortization,
interest and taxes ("EBITDA") were $89.4 million, $87.6 million and $99.2
million for the fiscal years ended July 31, 1993, 1992 and 1991, respectively.
EBITDA for the twelve months ended April 30, 1994 was $98.6 million. The
Company's net losses for the fiscal years ended July 31, 1993 and 1992 were
$0.8 million and $11.7 million, respectively, and its net earnings for the
fiscal year ended July 31, 1991 were $2.0 million. Net earnings for the nine
month periods ended April 30, 1994 and 1993 were $19.5 million and $12.8
million, respectively. For a discussion of the seasonality of the Company's
operations, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--General."
BUSINESS STRATEGY
The retail propane industry is a mature one, in which the Company foresees
only limited growth in total demand for the product. Based on information
available from the Energy Information Administration, the Company believes the
overall demand for propane has remained relatively constant over the past
several years, with year to year industry volumes being impacted primarily by
weather patterns. As a result, growth in this industry is accomplished
primarily through acquisitions. Except for a few large competitors, the propane
industry is highly fragmented and principally composed of over 3,000 local and
regional companies. Historically, the Company has been successful in acquiring
independent propane retailers and integrating them into the Company's
operations at what it believes to be attractive returns. In July 1984, the
Company acquired propane operations with annual retail sales volumes of
approximately 33 million gallons at a cost of approximately $13.0 million, and
in December 1986, the Company acquired propane operations with annual retail
sales volumes of approximately 395 million gallons at a cost of approximately
$457.5 million. Since December 1986, and as of April 30, 1994, the Company has
acquired 67 smaller independent propane retailers which the Company believes
were not individually material. These acquisitions have significantly expanded
and diversified the Company's geographic presence and resulted in greater
operating efficiencies and improved operating cash flow.
The Partnership plans to continue to expand its business principally through
acquisitions in areas in close proximity to the Company's existing operations
so that such newly acquired operations can be efficiently combined with
existing operations and savings can be achieved through the elimination of
certain overlapping functions. An additional goal of these acquisitions will be
to improve the operations and profitability of the
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businesses the Partnership acquires by integrating them into its established
propane supply network and by improving customer service. The Partnership also
plans to pursue acquisitions which broaden its geographic coverage. The Company
has historically increased its existing customer base and retained the
customers of acquired operations through marketing efforts that focus on
providing quality service to customers. The General Partner believes that there
are numerous local retail propane distribution companies that are possible
candidates for acquisition by the Partnership and that the Partnership's
geographic diversity of operations helps to create many attractive acquisition
opportunities for the Partnership.
The General Partner is unable to predict the amount or timing of future
capital expenditures for acquisitions. Prior to the closing of this Offering,
however, the Partnership will enter into a bank credit facility (the "Credit
Facility") providing a maximum $185 million commitment for borrowings and
letters of credit. Under the terms of the Credit Facility, at least $60 million
will be available solely to finance acquisitions and growth capital
expenditures. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Pro Forma Financial Condition--Credit Facility." In
addition to borrowings under the Credit Facility, the Partnership may fund
future acquisitions from internal cash flow or proceeds from the issuance by
the Master Partnership of additional partnership interests. Under the Indenture
for the Senior Notes, the Partnership is prohibited from making distributions
to its partners and other Restricted Payments (as defined in the Indenture)
unless certain specified targets for capital expenditures and expenditures for
permitted acquisitions have been met.
In addition to growth through acquisitions, the General Partner believes that
the Partnership may also achieve growth within its existing propane operations.
Historically, the Company has experienced modest internal growth in its
customer base. As a result of its experience in responding to competition and
in implementing more efficient operating standards, the General Partner
believes that it has positioned the Partnership to be more successful in direct
competition for customers. The Company currently has marketing programs
underway which focus specific resources toward this effort. See "Business--
Retail Operations--Business Strategy."
GENERAL
Propane, a byproduct of natural gas processing and petroleum refining, 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 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. Consumption of propane as a heating fuel peaks sharply in winter
months.
The Company sells propane primarily to four specific markets: residential,
industrial/commercial, agricultural and other (principally to other propane
retailers and as an engine fuel). During the fiscal year ended July 31, 1993,
sales to residential customers accounted for 61% of the Company's retail gross
profits, sales to industrial/commercial customers accounted for 26% of the
Company's retail gross profits, sales to agricultural customers accounted for
6% of the Company's retail gross profits and sales to other customers accounted
for 7% of the Company's retail gross profits. Residential sales have a greater
profit margin and a more stable customer base and tend to be less sensitive to
price changes than the other markets served by the Company. While the propane
distribution business is seasonal in nature and historically sensitive to
variations in weather, management believes that the Company's geographical
diversity of the Company's areas of operations helps to minimize the Company's
exposure to regional weather or economic patterns. Furthermore, long-term
historic weather data from the National Climatic Data Center indicate that
average annual temperatures have remained relatively constant over the last 30
years, with fluctuations occurring on a year-to-year basis only.
Profits in the retail propane industry are primarily based on the cents-per-
gallon difference between the purchase price and the sales price of propane.
The Company generally purchases propane on a short-term basis; therefore, its
supply costs generally fluctuate with market price fluctuations. Should the
wholesale cost
4
<PAGE>
of propane decline in the future, the Company believes that 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. Historically, the Company has
been able to maintain margins on an annual basis following changes in the
wholesale cost of propane. The Company's success in maintaining its margins is
evidenced by the fact that since fiscal 1989 average annual retail gross
margins, measured on a cents-per-gallon basis, have generally varied by a
relatively low percentage. The General Partner is unable to predict, however,
how and to what extent a substantial increase or decrease in the wholesale cost
of propane would affect the Partnership's margins and profitability.
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 expensive than natural gas on an equivalent BTU basis in
locations served by natural gas, although propane is sold in such areas as a
standby fuel for use during peak demand periods and during interruption in
natural gas service. Propane is generally less expensive to use than
electricity for space heating, water heating and cooking. 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, lessening
competition between such fuels.
The retail propane business of the Company consists principally of
transporting propane to its retail distribution outlets and then to tanks
located on its customers' premises. Propane supplies are purchased in the
contract and spot markets, primarily from natural gas processing plants and
major oil companies. In addition, retail propane customers typically lease
their stationary storage tanks from their propane distributors. Approximately
70% of the Company's customers lease their tank from the Company. The lease
terms and, in most states, certain fire safety regulations, restrict the
refilling of a leased tank solely to the propane supplier that owns the tank.
The cost and inconvenience of switching tanks minimizes a customer's tendency
to switch among suppliers of propane on the basis of minor variations in price.
The Company is also engaged in the trading of propane and other natural gas
liquids, chemical feedstocks marketing and wholesale propane marketing. In
fiscal year 1993, the Company's annual wholesale and trading sales volume was
approximately 1.2 billion gallons of propane and other natural gas liquids,
approximately 64% of which was propane. Because the Partnership will possess a
large distribution system, underground storage capacity and the ability to buy
large volumes of propane, the General Partner believes that the Partnership
will be 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.
PARTNERSHIP STRUCTURE AND MANAGEMENT
Concurrently with the closing of this Offering, the sole limited partner of
the Partnership, Ferrellgas Partners, L.P., a Delaware limited partnership (the
"Master Partnership"), will offer to the public 13,100,000 Common Units
representing limited partnership interests in the Master Partnership (the "MLP
Offering"). See "The Transactions." The General Partner will serve as general
partner of the Partnership and the Master Partnership. Following this Offering,
the officers and employees of Ferrellgas who currently manage and operate the
propane business and assets to be owned by the Partnership will continue to
manage and operate the Partnership's business as officers and employees of the
General Partner. See "Management." Unless the context otherwise requires,
references herein to the Partnership include the Partnership and the Master
Partnership.
The General Partner will receive no management fee in connection with its
management of the Partnership and will receive no remuneration for its services
as General Partner of the Partnership other than reimbursement for all direct
and indirect expenses incurred in connection with the Partnership's operations
and all other necessary or appropriate expenses allocable to the Partnership or
otherwise reasonably incurred by the General Partner in connection with the
operation of the Partnership's business. The Partnership Agreement provides
that the General Partner shall determine the fees and expenses that are
5
<PAGE>
allocable to the Partnership in any reasonable manner determined by the General
Partner in its sole discretion. Because of the broad authority granted to the
General Partner to determine the fees and expenses allocable to the
Partnership, including compensation of the General Partner's officers and other
employees, certain conflicts of interest could arise between the General
Partner and its affiliates, on the one hand, and the Partnership and its
limited partners, on the other, and the limited partners and holders of Senior
Notes will have no ability to control the expenses allocated by the General
Partner to the Partnership.
The principal executive offices of the Partnership are located at One Liberty
Plaza, Liberty, Missouri 64068, and its telephone number is (816) 792-1600.
TRANSACTIONS AT CLOSING
Concurrently with the closing of this Offering, Ferrellgas will contribute
all of its propane business and assets to the Partnership in exchange for
1,000,000 Common Units, 16,118,559 Subordinated Units and certain rights to
receive incentive distributions (the "Incentive Distribution Rights") if
distributions of Available Cash exceed certain target levels, as well as a 2%
general partner interest in the Partnership and the Master Partnership on a
combined basis. In connection with the contribution of such business and assets
by Ferrellgas, the Partnership will assume substantially all of the
liabilities, whether known or unknown, associated with such business and assets
(other than income tax liabilities). The Partnership intends to maintain
insurance and reserves at levels that it believes will be adequate to satisfy
such liabilities. In addition, the Partnership will assume the payment
obligations of Ferrellgas under its Series A and Series C Floating Rate Notes
due 1996 (the "Existing Floating Rate Notes"), the Series B and Series D Fixed
Rate Notes due 1996 (the "Existing Fixed Rate Notes" and, together with the
Existing Floating Rate Notes, the "Existing Senior Notes") and its 11 5/8%
Senior Subordinated Debentures (the "Existing Subordinated Debentures"). All of
the Existing Senior Notes and Existing Subordinated Debentures will be retired
with the net proceeds from the sale by the Master Partnership of the Common
Units in the MLP Offering (estimated to be approximately $260.3 million at an
assumed initial offering price of $21.375 per Common Unit) and the net proceeds
from the issuance of $250 million in aggregate principal amount of Senior Notes
offered hereby (estimated to be approximately $245.3 million). Immediately
prior to the closing of this Offering, the Partnership expects to enter into
the $185 million Credit Facility. The Credit Facility will permit borrowings of
up to $100 million on a senior unsecured revolving line of credit basis to fund
working capital and general partnership requirements (of which $50 million will
be available to support letters of credit). In addition, up to $85 million of
borrowings will be permitted on a senior unsecured basis, at least $60 million
of which will be available solely to finance acquisitions and growth capital
expenditures.
Ferrellgas will retain and will not contribute to the Partnership
approximately $39 million in cash, approximately $17 million in receivables
from affiliates of its parent, Ferrell, and Class B redeemable common stock of
Ferrell ("the Ferrell Class B Stock") with a book value of approximately $36
million. It is anticipated that following the closing of this Offering,
Ferrellgas will loan approximately $25 million to Ferrell and will dividend to
Ferrell the remainder of the cash, receivables and Ferrell Class B Stock
retained by Ferrellgas, as well as the Common Units, Subordinated Units and
Incentive Distribution Rights received by Ferrellgas in exchange for the
contribution of its propane business and assets to the Partnership.
Concurrently with the closing of this Offering, the Company will consummate a
tender offer and consent solicitation with respect to its Existing Subordinated
Debentures. The consent solicitation is necessary to modify the indenture
related to the Existing Subordinated Debentures in order to permit the Company
to consummate the transactions contemplated by this Prospectus. As of the date
of this Prospectus, all of the outstanding Existing Subordinated Debentures
have been tendered to and will be retired by the Partnership, as described
above.
Concurrently with the closing of this Offering, the Company will mail to the
holders of the Existing Senior Notes a notice of redemption of all outstanding
Existing Senior Notes, pursuant to the optional
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redemption provisions of the indenture governing the Existing Senior Notes (the
"Existing Senior Notes Indenture"). The redemption date will be 30 days after
the date of mailing of such notice. The Existing Senior Notes Indenture
provides for a redemption price equal to 100% of the principal amount plus
accrued and unpaid interest, if any, to the redemption date plus a premium
which is based on certain yield information for U.S. Treasury securities as of
three business days prior to the redemption date. The Partnership will deposit
with the trustee on the date of closing of this Offering an amount expected to
be more than sufficient to pay the redemption price. As a result of the
transactions contemplated hereby, during the 30-day period prior to the
redemption date, an event of default will exist under the Existing Senior Notes
Indenture. The holders of at least 25% of the principal amount of Existing
Senior Notes, therefore, will be entitled, by notice to the Company and the
trustee, to declare the unpaid principal of, and accrued and unpaid interest
and the applicable premium on, the Existing Senior Notes to be immediately due
and payable. The trustee under the Existing Senior Notes Indenture has advised
the Company that it intends to notify the holders of the Existing Senior Notes
of this right. In the event of such a declaration, the amount already deposited
by the Partnership in payment of the redemption price would be applied to pay
the amount so declared immediately due and payable. The Partnership will incur
an extraordinary loss of approximately $20.4 million related to the retirement
of the Existing Senior Notes, approximately $31.2 million relating to the
Existing Subordinated Debentures resulting from consent and tender offer fees
and approximately $11.2 million relating to the write-off of unamortized
financing costs, all in accordance with generally accepted accounting
principles ("GAAP").
At the closing of this Offering, it is anticipated that the Partnership will
borrow approximately $10 million under the Credit Facility which will enable
the Partnership to commence operations with an initial cash balance of at least
$20 million. To the extent that the initial public offering price per Common
Unit in the MLP Offering is less than $21.375, the Partnership may need to
borrow additional funds under the Credit Facility in order to commence
operations with an initial cash balance of at least $20 million. For a
description of the Credit Facility, see "Management's Discussion and Analysis
of Financial Condition and Results of Operation--Pro Forma Financial
Condition--Credit Facility."
The foregoing description assumes that the Underwriters' overallotment option
with respect to the MLP Offering is not exercised. If the Underwriters'
overallotment option is exercised in full, the Master Partnership will issue
1,965,000 additional Common Units. The Partnership will use the net proceeds
from any exercise of the Underwriters' overallotment option to repay any
amounts borrowed under the Credit Facility or, if no such borrowings have been
made, to establish an initial cash balance of up to $20 million. Any remaining
net proceeds from the exercise of such Underwriters' overallotment option will
be used by the Master Partnership to repurchase for retirement up to 1,000,000
Common Units held by Ferrell at a price per Unit equal to the initial public
offering price less the underwriting discounts and commissions. Any net
proceeds remaining after such repurchase will be retained by the Partnership
for general partnership purposes.
Immediately following this Offering, Ferrellgas will own an effective 2%
general partner interest in the Master Partnership and the Partnership on a
combined basis, and Ferrell will own 1,000,000 Common Units (if the
Underwriters' overallotment option with respect to the MLP Offering is
exercised in full all of such Common Units will be repurchased and retired by
the Master Partnership) and 16,118,559 Subordinated Units representing an
aggregate 55.5% limited partner interest in the Master Partnership (50.7% if
such Underwriters' overallotment option is exercised in full) and the Incentive
Distribution Rights. See "The Transactions."
FERRELLGAS FINANCE CORP.
Ferrellgas Finance Corp., a Delaware corporation ("Finance Corp."), a wholly
owned subsidiary of the Partnership which has nominal assets and will not
conduct any operations, is acting as co-obligor for the Senior Notes. Certain
institutional investors that might otherwise be limited in their ability to
invest in securities issued by partnerships by reason of the legal investment
laws of their states of organization or their charter documents, may be able to
invest in the Senior Notes because Finance Corp. is a co-obligor.
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<PAGE>
The following chart depicts the organization and ownership of the Partnership
and the Master Partnership after giving effect to the MLP Offering and related
transactions. The percentages reflected below represent the approximate
ownership interest in each of the Partnership and the Master Partnership,
individually. Except in the following chart, the ownership percentages referred
to in this Prospectus reflect the approximate effective ownership interest of
the holder in the Partnership and the Master Partnership on a combined basis.
[GRAPHIC APPEARS HERE]
8
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SUMMARY HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL AND OPERATING DATA
The following tables set forth for the periods and the dates indicated,
summary historical financial and operating data for the Company and pro forma
financial and operating data for the Partnership after giving effect to the
transactions contemplated by this Prospectus. The summary historical financial
data for the three years ended July 31, 1993 and the nine-month periods ended
April 30, 1993 and 1994, are derived from the audited and unaudited
consolidated financial statements contained elsewhere in this Prospectus. The
historical financial data for the interim period ended April 30, 1993 and the
Partnership's summary pro forma financial data are derived from unaudited
financial information. The Partnership's summary pro forma financial data
should be read in conjunction with the financial statements and the pro forma
consolidated financial information and notes thereto included elsewhere in this
Prospectus. In addition, the propane business is seasonal in nature with its
peak activity during the winter months. Therefore, the results for the interim
periods are not indicative of the results that can be expected for a full year.
See also "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
PARTNERSHIP
HISTORICAL PRO FORMA
-------------------------------------------------- --------------
YEAR ENDED JULY 31, YEAR ENDED
-------------------------------------------------- JULY 31,
1989 1990 1991 1992 1993 1993
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues......... $409,953 $467,641 $543,933 $501,129 $541,945 $541,945
Depreciation and
amortization.......... 32,528 33,521 36,151 31,196 30,840 30,840
Operating income....... 53,425 54,388 63,045 56,408 58,553 58,053
Interest expense....... 54,572 55,095 60,507 61,219 60,071 29,029
Earnings (loss) from
continuing operations. (1,506) (347) 1,979 (1,700)(1) 109 28,750
Ratio of earnings to
fixed charges(2)...... -- -- 1.1x -- 1.0x 1.9x
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital........ $(39,708) $ 50,456 $ 53,403 $ 67,973 $ 74,408
Total assets........... 487,631 554,580 580,260 598,613 573,376
Payable to (receivable
from) parent and
affiliates............ 13,109 10,743 3,763 2,236 (916)
Long-term debt......... 354,626 465,644 466,585 501,614 489,589
Stockholder's equity... 6,616 11,463 21,687 8,808 11,359
OPERATING DATA:
Retail propane sales
volumes (in gallons).. 498,395 499,042 482,211 495,707 553,413 553,413
Capital
expenditures(3):
Maintenance............ $ 7,271 $ 5,428 $ 7,958 $ 10,250 $ 10,527 $ 10,527
Growth................. 10,062 10,447 2,478 3,342 2,851 2,851
Acquisition............ 14,668 18,005 25,305 10,112 897 897
-------- -------- -------- -------- -------- --------
Total................. $ 32,001 $ 33,880 $ 35,741 $ 23,704 $ 14,275 $ 14,275
======== ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
EBITDA(4).............. $ 85,953 $ 87,909 $ 99,196 $ 87,604 $ 89,393 $ 88,893
Fixed charge coverage
ratio (5)............. 3.0x
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
PARTNERSHIP
HISTORICAL PRO FORMA
-------------------- -----------------
NINE MONTHS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
-------------------- 1994
1993 1994
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues...................... $468,302 $450,477 $450,477
Depreciation and amortization....... 23,238 21,688 21,688
Operating income.................... 64,708 75,445 75,070
Interest expense.................... 45,056 44,233 21,187
Earnings from continuing operations. 12,785 20,356 53,892
Ratio of earnings to fixed
charges(2)......................... 1.4x 1.7x 3.2x
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital..................... $100,645 $104,164 $ 54,304
Total assets........................ 602,063 600,113 478,254
Payable to (receivable from) parent
and affiliates..................... 2,076 (3,909) 91
Long-term debt...................... 500,227 476,471 267,441
Stockholder's equity................ 21,855 30,848
Partners' capital:
Limited partner..................... 143,022
General partner..................... 1,459
OPERATING DATA:
Retail propane sales volume (in
gallons)........................... 483,489 490,254 490,254
Capital Expenditures(3):
Maintenance......................... $ 9,232(6) $ 3,377(6) $ 3,377
Growth.............................. 2,597 2,568 2,568
Acquisition......................... 0 2,472 2,472
-------- -------- --------
Total.............................. $ 11,829 $ 8,417 $ 8,417
======== ======== ========
SUPPLEMENTAL DATA:
EBITDA(4)........................... $ 87,946 $ 97,133 $ 96,758
Fixed charge coverage ratio(5)...... 3.3x
</TABLE>
- --------------------
(1) In August 1991, the Company revised the estimated useful lives of storage
tanks from 20 to 30 years in order to more closely reflect the expected
useful lives of these assets. The effect of the change in accounting
estimates resulted in a favorable impact on net loss from continuing
operations of approximately $3.7 million for the fiscal year ended July 31,
1992.
(2) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings (loss) from continuing operations before
income taxes, plus fixed charges. Fixed charges consist of interest expense
on all indebtedness (including amortization of deferred debt issuance
costs) and the portion of operating lease rental expense that is
representative of the interest factor. For the fiscal years ended July 31,
1989, 1990 and 1992, earnings were inadequate to cover fixed charges by
$2.4 million, $0.1 million and $2.4 million, respectively. Earnings before
fixed charges for the periods presented were reduced by certain non-cash
expenses, consisting principally of depreciation and amortization. Such
non-cash charges totaled $34.7 million, $35.8 million, $38.5 million, $33.5
million and $33.0 million for the fiscal years ended July 31, 1989, 1990,
1991, 1992 and 1993, respectively, and totaled $24.8 million and $23.7
million for the nine months ended April 30, 1993 and 1994, respectively.
(3) The Company'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 Company's retail
customer base; and (iii) acquisition capital expenditures, which include
expenditures related to the acquisition of retail propane operations.
Acquisition capital expenditures include a portion of the purchase price
allocated to intangibles associated with the acquired businesses.
(4) EBITDA is calculated as operating income plus depreciation and
amortization. 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 payments in respect of the Senior Notes.
EBITDA is not intended as an alternative to earnings from continuing
operations or net income.
(5) The term fixed charge coverage ratio is defined in the Indenture as the
ratio of the Partnership's consolidated cash flow for the immediately
preceding four fiscal quarters to fixed charges for such period.
Consolidated cash flow is defined in the Indenture as earnings from
continuing operations before income taxes, plus interest expenses
(including amortization of original issue discount) and depreciation and
amortization (excluding amortization of prepaid cash expenses). The term
fixed charges is defined in the Indenture as interest expense (including
amortization of original issue discount).
(6) The decrease in maintenance capital expenditures from the nine months ended
April 30, 1993 to the nine months ended April 30, 1994 is primarily due to
the purchase of the Company's corporate headquarters in Liberty, Missouri
for its fair market value of $4.1 million in the first nine months of
fiscal 1993.
10
<PAGE>
THE OFFERING
Securities Offered.......... $250 million aggregate principal amount of %
Senior Notes due 2001 (the "Senior Notes").
Maturity Date............... , 2001.
Interest Payment Dates...... The Senior Notes will bear interest at the rate
of % per annum, payable semi-annually on
and of each year, commencing on
, 1994.
Optional Redemption......... The Senior Notes will be redeemable, in whole or
in part, at the option of the Issuers, at any
time on or after , 1998, at the
redemption prices set forth herein plus accrued
and unpaid interest thereon to the redemption
date.
Mandatory Redemption........ The Issuers are not required to make mandatory
redemption or sinking fund payments with respect
to the Senior Notes.
Ranking.....................
The Senior Notes will be general unsecured joint
and several obligations of the Issuers. The
Senior Notes will rank on an equal basis in right
of payment to all existing and future senior
indebtedness of the Issuers, including borrowings
under the Credit Facility, and senior in right of
payment to all existing and future subordinated
indebtedness of the Issuers. At April 30, 1994,
after giving effect to the Offering of the Senior
Notes and the transactions described herein, see
"The Transactions," the Partnership and its
subsidiaries would have had outstanding
approximately $268.9 million in aggregate
principal amount of indebtedness on a
consolidated basis (excluding trade payables and
other accrued liabilities) which includes, in
addition to certain other indebtedness, the
Senior Notes in the aggregate principal amount of
$250 million and borrowings under the Credit
Facility in the aggregate principal amount of
$15.0 million, all of which would have ranked on
an equal basis in right of payment. Actual
borrowings under the Credit Facility at closing
are estimated to be approximately $10 million,
assuming that the Underwriters' overallotment
option in the MLP Offering is not exercised. To
the extent that the initial public offering price
per Common Unit in the MLP Offering is less than
$21.375, the Partnership may need to borrow
additional funds under the Credit Facility in
order to commence operations with an initial cash
balance of $20 million.
Change of Control...........
Upon a Change of Control (as defined herein),
each Holder of Senior Notes shall have the right
to require the Issuers to repurchase all or any
part of such Holder's Senior Notes at a purchase
price equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest
to the date of purchase. There can be no
assurance that the Issuers would have adequate
funds available to repurchase the Senior Notes.
11
<PAGE>
Asset Sales................. If the aggregate amount of Excess Proceeds (as
defined herein) received by the Partnership or
any of its Subsidiaries (as defined herein) from
Asset Sales (as defined herein) exceeds $15
million, the Issuers shall make an offer to all
Holders of Senior Notes to purchase the Senior
Notes with such Excess Proceeds at a purchase
price equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon
to the date of purchase.
Certain Covenants...........
The Indenture contains covenants restricting or
limiting the ability of the Partnership and its
Subsidiaries to, among other things, (i) pay
distributions or make other restricted payments,
(ii) incur additional indebtedness and issue
preferred stock, (iii) enter into sale and
leaseback transactions, (iv) create liens, (v)
incur dividend and other payment restrictions
affecting Subsidiaries, (vi) enter into mergers,
consolidations or sales of all or substantially
all assets, (vii) enter into transactions with
affiliates or (viii) engage in other lines of
business.
Use of Proceeds.............
The net proceeds from the Offering of the Senior
Notes (estimated to be approximately $245.3
million after deducting the underwriting
discounts and commissions and the expenses of
this Offering) will be used by the Partnership to
repay certain outstanding indebtedness of the
Company. See "Use of Proceeds."
Events of Default........ The following will constitute Events of Default
under the Indenture: the failure after 30 days to
pay interest on the Senior Notes, the failure to
pay when due principal on the Senior Notes, the
failure after applicable grace periods to comply
with any other covenants in the Indenture, a
payment default or acceleration of all amounts
owing under any other indebtedness of the
Partnership or any of its Subsidiaries (if the
principal amount of such indebtedness, together
with the principal amount of all other
indebtedness so defaulted or accelerated,
aggregates $10 million or more), the failure by
the Partnership or any of its Subsidiaries to pay
final judgments aggregating in excess of $10
million, the invalidation of any Subsidiary
Guarantee (as defined herein), and certain events
of bankruptcy with regard to the Partnership or
its Subsidiaries.
RISK FACTORS
Prospective purchasers of the Senior Notes should consider carefully the
information set forth in "Risk Factors" and elsewhere in this Prospectus in
evaluating an investment in the Senior Notes.
12
<PAGE>
RISK FACTORS
Prospective purchasers should carefully consider the following investment
considerations and risks, as well as the other information set forth in this
Prospectus, before making a decision to invest in the Senior Notes.
Distributions of Available Cash
Pursuant to its governing partnership agreement (the "Partnership
Agreement"), the Partnership is required to distribute, on a quarterly basis,
100% of its Available Cash to the Master Partnership and the General Partner.
"Available Cash" is generally all of the cash receipts of the Partnership,
adjusted for cash disbursements and net changes in reserves. See "Glossary of
Terms," attached hereto as Appendix A. The Master Partnership in turn will
distribute 100% of its Available Cash to its partners. Distributions by the
Partnership will be subject to the covenant in the Indenture limiting
restricted payments. Such covenant provides that no such distributions may be
made unless, among other things, no default or event of default shall exist,
the Partnership's pro forma fixed charge coverage ratio for the preceding four
fiscal quarters shall be at least 2.25 to 1 and certain minimum targets for
capital expenditures and expenditures for permitted acquisitions have been met.
The fixed charge coverage ratio is defined as the ratio of earnings from
continuing operations before income taxes, plus interest expense (including
amortization of original issue discount) and depreciation and amortization
(excluding amortization of prepaid cash expenses) to fixed charges. As of April
30, 1994, the Partnership's fixed charge coverage ratio would have been 3.3 to
1 on a pro forma basis after giving effect to the Transactions. See
"Description of Senior Notes--Certain Covenants--Restricted Payments."
The timing and amount of distributions by the Partnership could
significantly reduce the cash available to the Partnership to meet its business
needs and to pay principal, premium (if any) and interest on the Senior Notes.
The General Partner will determine the amount and timing of such distributions
and has broad discretion to establish and make additions to reserves of the
Partnership for any proper purpose, including but not limited to reserves for
the purpose of (i) complying with the terms of any agreement or obligation of
the Partnership (including the establishment of reserves to fund the payment of
interest and principal in the future), (ii) to provide for level distributions
of cash notwithstanding the seasonality of the Partnership's business, and
(iii) providing for future capital expenditures and other payments deemed by
the General Partner to be necessary or advisable.
Leverage
Upon the consummation of the transactions contemplated by this Prospectus,
the Partnership will be significantly leveraged and will have indebtedness that
is substantial in relation to its equity. As of April 30, 1994, after giving
pro forma effect to such transactions, the Partnership would have had an
aggregate of $267.4 million of long-term indebtedness (excluding current
maturities) and $144.5 million in equity, resulting in a debt to equity ratio
of 1.9 to 1. See "Capitalization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
The Partnership's leverage could have important consequences to investors in
the Senior Notes. The Partnership's ability to make scheduled payments, to
refinance its obligations with respect to its indebtedness or its ability to
obtain additional financing in the future will depend on its financial and
operating performance, which, in turn, is subject to prevailing economic
conditions and to financial, business and other factors beyond its control. The
Partnership believes that it will have sufficient cash flow from operations and
available borrowings under the Credit Facility to service its indebtedness,
although the principal amount of the Senior Notes will likely need to be
refinanced at maturity in whole or in part. However, a significant downturn in
the propane industry or other development adversely affecting the Partnership's
cash flow could materially impair the Partnership's ability to service its
indebtedness. If the Partnership's cash flow and capital resources are
insufficient to fund its debt service obligations, the Partnership may be
forced to refinance all or a portion of its debt or sell assets. There can be
no assurance that the Partnership would be able to refinance its existing
indebtedness or sell assets on terms that are commercially reasonable.
The Partnership's pro forma consolidated financial statements assume that the
Partnership will issue $250 million of Senior Notes with a fixed interest rate
of 9.75%. It is possible, however, that a portion of the
13
<PAGE>
Senior Notes, not anticipated to be in excess of $50 million, will bear
interest at a floating rate. In such event, the Partnership would be subject to
increases in the rate of interest which, if material, could adversely impact
the Partnership's ability to make payments in respect of the Senior Notes. In
order to mitigate the risk of such interest rate increases, the General Partner
intends, if possible, to cause the Partnership to enter into appropriate
interest rate protection arrangements with respect to all or a portion of the
Senior Notes bearing interest at a floating rate. There can be no assurance,
however, as to whether the Partnership will be able to enter into such
arrangements or whether such arrangements will be on terms satisfactory to the
Partnership.
Limitations Imposed by Certain Indebtedness
The credit agreement relating to the Credit Facility (the "Credit Agreement")
and the Indenture are expected to contain a number of restrictive covenants
limiting the Partnership from incurring other indebtedness, making certain
restricted payments, entering into sale and leaseback transactions, incurring
liens and engaging in transactions with affiliates. A failure by the
Partnership to comply with the restrictions contained in the Credit Agreement,
the Indenture or other agreements relating to the Partnership's indebtedness
could result in a default thereunder, which in turn could cause such
indebtedness (and, by reason of cross-default provisions, other indebtedness)
to become immediately due and payable. There can be no assurance that such
restrictions will not adversely affect the Partnership's ability to conduct its
operations or finance its capital needs or impair the Partnership's ability to
pursue attractive business and investment opportunities if such opportunities
arise. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Description of
Senior Notes."
Fraudulent Conveyance Considerations
The incurrence by the Issuers of indebtedness such as the Senior Notes for
the purposes described herein may be subject to review under relevant federal
and state fraudulent conveyance laws if a bankruptcy case or a lawsuit
(including in circumstances where bankruptcy is not involved) is commenced by
or on behalf of unpaid creditors of the Issuers. Under these laws, if a court
were to find that, at the time the Senior Notes were issued, (a) the Issuers
either incurred indebtedness represented by the Senior Notes with the intent of
hindering, delaying or defrauding creditors or received less than reasonably
equivalent value or fair consideration for incurring such indebtedness and (b)
the Issuers (i) were insolvent or were rendered insolvent by reason of such
transaction, (ii) were engaged in a business or transaction for which the
assets remaining with them constituted unreasonably small capital or (iii)
intended to incur, or believed that they would incur, debts beyond their
ability to pay such debts as they matured, such court may subordinate the
Senior Notes to presently existing and future indebtedness of such entities,
void the issuance of the Senior Notes and direct the repayment of any amounts
paid thereunder to the Issuers or to a fund for the benefit of the Issuers'
creditors or take other action detrimental to the Holders of the Senior Notes.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the relevant jurisdiction. Generally, however, an entity would
be considered insolvent for purposes of the foregoing if the sum of its debts,
including contingent liabilities, were greater than the fair saleable value of
all of its assets at a fair valuation, or if the present fair saleable value of
its assets were less than the amount that would be required to pay its probable
liability on its existing debts, including contingent liabilities, as they
become absolute and matured.
The Issuers believe they will receive equivalent value at the time the
indebtedness represented by the Senior Notes is incurred. In addition, neither
of the Issuers believes that it, as a result of the issuance of the Senior
Notes, (i) will be insolvent or rendered insolvent under the foregoing
standards, (ii) will be engaged in a business or transaction for which its
remaining assets constitute unreasonably small capital or (iii) intends to
incur or believes that it will incur, debts beyond its ability to pay such
debts as they mature. These beliefs are based on the Company's operating
history, the Issuers' net worth and management's analysis of internal cash flow
projections and estimated values of assets and liabilities of the Issuers at
the time of this Offering. There can be no assurance, however, that a court
passing on these issues would make the same determination.
14
<PAGE>
Lack of Previous Public Market
The Senior Notes will constitute a new issue of securities with no
established trading market. The Issuers do not intend to list the Senior Notes
on any national securities exchange or to seek the admission of the Senior
Notes for quotation and trading in the Nasdaq National Market. The Underwriters
have advised the Issuers that the Underwriters currently intend to make a
market in the Senior Notes, but they are not obligated to do so and may
discontinue any such market-making activities at any time without notice at
their sole discretion. Accordingly, there can be no assurance that an active
public market will develop or be sustained upon completion of the Offering or
as to the liquidity of any such trading market. If such a market does not
develop or is not maintained, the prices at which the Senior Notes trade, as
well as the liquidity of the trading market for the Senior Notes, could be
adversely affected. If such a market were to develop, the Senior Notes may
trade at prices that are higher or lower than the initial offering price
depending upon many factors, including, among others, prevailing interest
rates, the Partnership's operating results, the market for similar securities
and general economic and political conditions.
Weather Conditions Affect the Demand For Propane
National weather conditions can have a substantial impact on the demand for
propane and, therefore, the results of operations of the Partnership. In
particular, the demand for propane by residential customers is affected by
weather, with peak sales typically occurring during the winter months. Average
winter temperatures as measured by degree days across the Company's operating
areas in fiscal 1991, 1992 and 1993 were warmer than historical standards, thus
lowering demand for propane. Average winter temperatures as measured by degree
days across the Company's operating areas in fiscal 1994 to date have been
slightly colder than historical averages. There can be no assurance that
average temperatures in future years will be close to the historical average.
Agricultural demand is also affected by weather. Wet weather during harvest
season causes an increase in propane used for crop drying and dry weather
during the growing season causes an increase in propane used for irrigation.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Retail Propane Industry is a Mature One
The retail propane industry is a mature one, with only limited growth in
total demand for the product foreseen (the exception being in the case of motor
fuel applications, which is being driven by recent environmental legislation,
but for which the opportunity cannot be estimated). Based on information
available from the Energy Information Administration, the Company believes the
overall demand for propane has remained relatively constant over the past
several years, with year to year industry volumes being impacted primarily by
weather patterns. Therefore, the Partnership's ability to grow within the
industry is dependent on the success of its marketing efforts to acquire new
customers and on the ability to acquire other retail distributors.
The Partnership Will Be Subject To Pricing and Inventory Risk
An important element of the Company's high retention of retail customers has
been its ability to deliver propane during periods of extreme demand. To help
insure this capability, the Partnership intends to continue engaging in the
brokerage and trading of propane and other natural gas liquids historically
performed by the Company. If the Partnership sustains material losses from its
trading activities, payments in respect of the Senior Notes and the other
indebtedness of the Partnership could be jeopardized. The Company has sought to
minimize its trading risks through the enforcement of trading policies, which
include total inventory limits and loss limits. The Partnership intends to
continue these policies. Personnel responsible for trading activities have an
average of over 10 years of trading experience with the General Partner. See
"Business--Other Operations." In addition, depending on inventory and price
outlooks, the Partnership may purchase and store propane or other natural gas
liquids. This activity may subject the Partnership to losses if the prices of
propane or such other natural gas liquids decline prior to their sale by the
Partnership. The Partnership may be unable to pass rapid increases in the
wholesale cost of propane on to its retail customers, reducing margins
15
<PAGE>
on retail sales. In the long term, however, margins generally have not been
materially impacted by rapid increases in the wholesale cost of propane, as the
Company has generally been able to eventually pass on increases to its retail
customers. There can be no assurance as to whether the Partnership will be able
to pass on such costs in the future.
The Retail Propane Business Experiences Competition From Other Energy Sources
and Within the Industry
The Partnership will compete for customers against suppliers of natural gas,
electricity and fuel oil. Because of the significant cost advantage of natural
gas over propane, propane is generally not competitive with natural gas in
those areas where natural gas is readily available. The expansion of the
nation's natural gas distribution systems has resulted in the availability of
natural gas in many areas that previously depended upon propane. 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. In addition, given the cost of conversion from fuel oil to
propane, potential customers of propane generally will only switch from fuel
oil if there is a significant price advantage with propane.
Long-standing customer relationships are also typical to the retail propane
industry. Retail propane customers generally lease their storage tanks from
their suppliers. The lease terms and, in most states, certain fire safety
regulations, restrict the refilling 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 among suppliers of propane on the
basis of minor variations in price. As a result, the Partnership may experience
difficulty in acquiring new retail customers in areas where there are existing
relationships between potential customers and other propane distributors.
Partnership Operations are Subject to Operating Risks
The Partnership's operations will be subject to all operating hazards and
risks normally incidental to handling, storing, transporting and otherwise
providing for use by consumers of combustible liquids such as propane. As a
result, the Company is, and the Partnership will be, a defendant in various
legal proceedings and litigation arising in the ordinary course of business.
The Partnership will maintain insurance policies with insurers in such amounts
and with such coverages and deductibles as the General Partner believes are
reasonable and prudent. However, there can be no assurance that such insurance
will be adequate to protect the Partnership from all material expenses related
to potential future claims for personal and property damage or that such levels
of insurance will be available in the future at economical prices. After taking
into account the pending and threatened matters against the Company that will
be assumed by the Partnership and the insurance coverage and reserves to be
maintained by the Partnership, the General Partner is of the opinion that there
are no known contingent claims or uninsured claims that are likely to have a
material adverse effect on the results of operations or financial condition of
the Partnership. See "Business--Litigation." The General Partner will neither
guarantee nor indemnify the Partnership against any claims, whether known or
unknown, or contingent liabilities. The occurrence of an event not fully
covered by insurance, or the occurrence of a large number of claims that are
self-insured, may have a material adverse effect on the results of operations
or financial position of the Partnership.
The Partnership May Not Be Successful in Making Acquisitions
The Company has historically expanded its business through acquisitions. The
Partnership intends to consider and evaluate opportunities for growth through
acquisitions in its industry, although it currently has no material
acquisitions under consideration. There can be no assurance that the
Partnership will find attractive acquisition candidates in the future, or that
the Partnership will be able to acquire such candidates on economically
acceptable terms.
16
<PAGE>
Energy Efficiency and Technology Trends May Affect Demand For Propane
Retail customers primarily use propane as a heating fuel. Increased
technological advances in energy efficiency, including the development of more
efficient heating devices, has slowed the growth of demand for propane by
retail gas customers. The Partnership is unable to predict the effect that any
technological advances in energy efficiency, conservation, energy generation or
other devices might have on the Partnership's operations.
The Partnership Will Be Dependent Upon Key Personnel of the General Partner
The Company believes its success has been, and the Partnership's success will
be, dependent to a significant extent upon the efforts and abilities of its
senior management team, in particular James E. Ferrell, President and Chairman
of the Board of the Company. The failure of the General Partner to retain Mr.
Ferrell and other executive officers could adversely affect the Partnership's
operations. Mr. Ferrell, who has been associated with the Company for nearly 30
years and who will indirectly own approximately 57.5% of the Partnership, has
indicated to the Company that he intends to continue as chief executive officer
of the General Partner.
The General Partner and Its Affiliates May Have Conflicts of Interest with the
Partnership
Conflicts of interest may arise between the Partnership, on the one hand, and
Ferrellgas and its affiliates, on the other hand. The directors and officers of
Ferrellgas have fiduciary duties to manage Ferrellgas in a manner beneficial to
the sole shareholder of Ferrellgas, Ferrell. At the same time, Ferrellgas, as
general partner, has fiduciary duties to manage the Partnership in a manner
beneficial to the Partnership. The duties of Ferrellgas, as general partner, to
the Partnership therefore may conflict with the duties of the directors and
officers of Ferrellgas to its sole shareholder. Such conflicts of interest
might arise in the following situations, among others: (i) the Partnership will
rely solely on employees of the General Partner and its affiliates, (ii) the
Partnership will reimburse the General Partner and its affiliates for costs
incurred in the Partnership's operations, (iii) the General Partner intends to
limit, whenever possible, its liability under contractual arrangements of the
Partnership, (iv) the contractual arrangements between the Partnership, on the
one hand, and the General Partner and its affiliates, on the other hand, may
not be the result of arms'-length negotiations (although the Indenture requires
that all transactions between the Partnership and its affiliates must be on
terms at least as favorable to the Partnership as those which could have been
obtained on an arms'-length basis), (v) the General Partner may redeem the
Common Units as provided in the Partnership Agreement provided that the
Partnership meets certain financial tests and conditions set forth in the
Indenture and (vi) the Partnership Agreement does not restrict the General
Partner and its affiliates from engaging in activities that may be in
competition with the Partnership, except that the General Partner and its
affiliates may not engage in the retail sale of propane to end users in the
continental United States. See "Description of Senior Notes--Certain
Covenants--Affiliate Transactions" and "--Restricted Payments." The General
Partner will have an audit committee consisting of independent members of its
Board of Directors which will be able, at the General Partner's discretion or
as required by the Indenture, to review matters involving potential conflicts
of interest.
The General Partner Will Manage and Operate the Partnership
The General Partner will manage and operate the Partnership. The control
exercised by the General Partner may make it more difficult for others to gain
control or influence the activities of the Partnership.
17
<PAGE>
THE TRANSACTIONS
Concurrently with the closing of this Offering, Ferrellgas will contribute
all of its propane business and assets to the Partnership in exchange for
1,000,000 Common Units, 16,118,559 Subordinated Units and the Incentive
Distribution Rights, as well as a 2% general partner interest in the Master
Partnership and the Partnership, on a combined basis (see "The Partnership--
Incentive Distribution Rights"). In connection with the contribution of such
business and assets by Ferrellgas, the Partnership will assume substantially
all of the liabilities, whether known or unknown, associated with such business
and assets (other than income tax liabilities). The Partnership intends to
maintain insurance and reserves at levels that it believes will be adequate to
satisfy such liabilities. In addition, the Partnership will assume the payment
obligations of Ferrellgas under (i) $50 million of Existing Floating Rate Notes
bearing interest at 5.5% per annum at April 30, 1994, (ii) $177.6 million of
Existing Fixed Rate Notes bearing interest at 12% per annum and (iii) $246.4
million of Existing Subordinated Debentures bearing interest at 11 5/8% per
annum. All of the Existing Senior Notes and the Existing Subordinated
Debentures will be retired with the net proceeds from the sale by the Master
Partnership of the Common Units in the MLP Offering (estimated to be
approximately $260.3 million at an assumed initial public offering price of
$21.375 per Common Unit) and the net proceeds from the issuance of
approximately $250 million in aggregate principal amount of the Senior Notes
offered hereby (estimated to be approximately $245.3 million). Immediately
prior to the closing of this Offering, the Partnership expects to enter into
the $185 million Credit Facility. The Credit Facility will permit borrowings of
up to $100 million on a senior unsecured revolving line of credit basis to fund
working capital and general partnership requirements (of which $50 million will
be available to support letters of credit). In addition, up to $85 million of
borrowings will be permitted on a senior unsecured basis, at least $60 million
of which will be available solely to finance acquisitions and growth capital
expenditures.
Ferrellgas will retain and will not contribute to the Partnership
approximately $39 million in cash, approximately $17 million in receivables
from affiliates of Ferrell and Ferrell Class B Stock with a book value of
approximately $36 million. It is anticipated that following the closing of this
Offering, Ferrellgas will loan approximately $25 million to Ferrell and will
dividend to Ferrell the remainder of the cash, receivables and Ferrell Class B
Stock, as well as the Common Units, Subordinated Units and Incentive
Distribution Rights received by Ferrellgas in exchange for the contribution of
its propane business and assets to the Partnership.
Concurrently with the closing of this Offering, the Company will consummate a
tender offer and consent solicitation with respect to its Existing Subordinated
Debentures. The consent solicitation is necessary to modify the indenture
related to the Existing Subordinated Debentures in order to permit the Company
to consummate the transactions contemplated by this Prospectus. As of the date
of this Prospectus, all of the outstanding Existing Subordinated Debentures
have been tendered to and will be retired by the Partnership, as described
above.
Concurrently with the closing of this Offering, the Company will mail to the
holders of the Existing Senior Notes a notice of redemption of all outstanding
Existing Senior Notes, pursuant to the optional redemption provisions of the
Existing Senior Notes Indenture. The redemption date will be 30 days after the
date of mailing of such notice. The Existing Senior Notes Indenture provides
for a redemption price equal to 100% of the principal amount plus accrued and
unpaid interest, if any, to the redemption date plus in the case of the
Existing Fixed Rate Notes, a premium which is based on certain yield
information for U.S. Treasury securities as of three business days prior to the
redemption date. The Partnership will deposit with the trustee on the date of
closing of this Offering an amount expected to be more than sufficient to pay
the redemption price. As a result of the transactions contemplated hereby,
during the 30-day period prior to the redemption date, an event of default will
exist under the Existing Senior Notes Indenture. The holders of at least 25% of
the principal amount of Existing Senior Notes, therefore, will be entitled, by
notice to the Company and the trustee, to declare the unpaid principal of, and
accrued and unpaid interest and the applicable premium on, the Existing Senior
Notes to be immediately due and payable. The trustee under the Existing Senior
Notes Indenture has advised the Company that it intends to notify the holders
of the Existing Senior Notes of this right. In the event of such a declaration,
the amount already deposited by the Partnership in payment of the redemption
price would be applied to pay the amount so declared immediately due and
18
<PAGE>
payable. The Partnership will incur an extraordinary loss of approximately
$20.4 million related to the retirement of the Existing Senior Notes,
approximately $31.2 million relating to the Existing Subordinated Debentures
resulting from consent and tender offer fees and approximately $11.2 million
relating to the write-off of unamortized financing costs in accordance with
GAAP.
At the closing of this Offering, it is anticipated that the Partnership will
borrow approximately $10 million under the Credit Facility which will enable
the Partnership to commence operations with an initial cash balance of at least
$20 million. To the extent that the initial public offering price per Common
Unit is less than $21.375, the Partnership may need to borrow additional funds
under the Credit Facility in order to commence operations with an initial cash
balance of at least $20 million. For a description of the Credit Facility, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operation--Pro Forma Financial Condition--Credit Facility."
The foregoing description assumes that the Underwriters' overallotment option
with respect to the MLP Offering is not exercised. If the Underwriters'
overallotment option is exercised in full, the Master Partnership will issue
1,965,000 additional Common Units. The Partnership will use the net proceeds
from any exercise of such Underwriters' overallotment option first to repay any
amounts borrowed under the Credit Facility or, if no such borrowings have been
made, to establish an initial cash balance of up to $20 million. Any remaining
net proceeds from the exercise of such Underwriters' overallotment option will
be used by the Master Partnership to repurchase for retirement up to 1,000,000
Common Units held by Ferrell at a price per Unit equal to the initial public
offering price less the underwriting discounts and commissions. Any net
proceeds remaining after such repurchase, will be retained by the Partnership
for general partnership purposes.
Immediately following this Offering, Ferrellgas will own an effective 2%
general partner interest in the Master Partnership and the Partnership on a
combined basis, and Ferrell will own 1,000,000 Common Units (if the
Underwriters' overallotment option with respect to the MLP Offering is
exercised in full all of such Common Units will be repurchased and retired by
the Master Partnership) and 16,118,559 Subordinated Units representing an
aggregate 55.5% limited partner interest in the Master Partnership (50.7% if
the Underwriters' overallotment option is exercised in full) and the Incentive
Distribution Rights.
USE OF PROCEEDS
The net proceeds to the Partnership from the sale of the Senior Notes offered
hereby are estimated to be approximately $245.3 million after deducting the
underwriting discount and the expenses of this Offering. The net proceeds of
this Offering, together with the net proceeds from the issuance of the Common
Units in the MLP Offering (estimated to generate approximately $260.3 million),
will be used by the Partnership to repay indebtedness of Ferrellgas.
The indebtedness to be repaid consists of $50 million of Existing Floating
Rate Notes, which have a floating rate of interest (5.5% per annum at April 30,
1994) and mature in August 1996, $177.6 million of Existing Fixed Rate Notes,
which have an interest rate of 12% per annum and mature in August 1996, and up
to $246.4 million of Existing Subordinated Debentures, which have an interest
rate of 11 5/8% per annum and mature in December 2003. See "Capitalization." If
the Underwriters' overallotment option with respect to the MLP Offering is
exercised in full, the estimated additional net proceeds to the Partnership
will be approximately $39.3 million. The Partnership will use the net proceeds
from any exercise of such Underwriters' option first to repay any amounts
borrowed under the Credit Facility (anticipated to be approximately $10
million) to enable the Partnership to commence operations with an initial cash
balance of at least $20 million or, if no such borrowings have been made, to
establish an initial cash balance of up to $20 million that will be used for
general partnership purposes. See "The Transactions." Any remaining net
proceeds from the exercise of the Underwriters' overallotment option will be
used by the Partnership to repurchase for retirement up to 1,000,000 Common
Units held by Ferrell at a price per Unit equal to the initial public offering
price less the underwriting discounts and commissions. Any net proceeds
remaining after such repurchase will be retained by the Partnership for general
partnership purposes.
19
<PAGE>
CAPITALIZATION
The following table sets forth: (i) the consolidated capitalization of
Ferrellgas at April 30, 1994, (ii) the pro forma adjustments required to
reflect the transactions to be consummated at the closing of this Offering,
including the issuance of Common Units pursuant to the MLP Offering at an
assumed offering price of $21.375 per Common Unit and (iii) the pro forma
capitalization of the Partnership at such date after giving effect thereto. The
table should be read in conjunction with the historical and pro forma
consolidated financial statements and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
APRIL 30, 1994
--------------------------------------
FERRELLGAS PRO FORMA PARTNERSHIP
HISTORICAL ADJUSTMENTS(1) PRO FORMA
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt, including
current portion of long-term
debt......................... $ 1,486 $ -- $ 1,486
======== ========= ========
Long-term debt:
Senior Notes, interest at
%, due in 2001.......... -- 250,000(2) 250,000
Existing Floating Rate
Notes, interest at
applicable LIBOR rate plus
2.25% (5.5% at April 30,
1994), due in August 1996.. 50,000 (50,000) --
Existing Fixed Rate Notes,
interest at 12%, due in
August 1996................ 177,600 (177,600) --
Existing Subordinated
Debentures, interest at 11
5/8%, due in December 2003. 246,430 (246,430) --
Other long-term debt........ 2,441 15,000(3) 17,441
-------- --------- --------
Total long-term debt...... 476,471 (209,030) 267,441
-------- --------- --------
Stockholder's equity.......... 30,848 (30,848) --
Partners' capital:
Limited partner(4).............. -- 143,022 143,022
General partner............. -- 1,459 1,459
-------- --------- --------
Total stockholder's
equity/partners' capital. 30,848 113,633 144,481
-------- --------- --------
Total capitalization...... $507,319 $ (95,397) $411,922
======== ========= ========
</TABLE>
- ---------------------
(1) Reflects the conveyance of the assets of Ferrellgas to the Partnership in
return for the assumption of liabilities and the issuance of a 1.0101%
general partner interest. In addition, the Partnership will issue a
98.9899% limited partner interest to the Master Partnership in return for
the net proceeds of the MLP Offering estimated to be $260.3 million.
(2) The Partnership's pro forma consolidated financial statements assume that
the Partnership will issue $250 million of Senior Notes with a fixed
interest rate of 9.75%. It is possible, however, that a portion of the
Senior Notes, not anticipated to be in excess of $50 million, will bear
interest at a floating rate.
(3) Represents borrowings at April 30, 1994 under the Credit Facility to enable
the Partnership to commence operations with an initial cash balance of $20
million. Assuming a closing date of June 30, 1994, the Partnership
anticipates it will borrow approximately $10 million under the Credit
Facility. Actual borrowings under the Credit Facility at the closing of
this Offering will depend upon the Partnership's cash balances at such
time, the initial offering price per Common Unit and the timing of any
exercise of the Underwriters' overallotment option.
(4) Includes limited partnership capital resulting from the issuance of
13,100,000 Common Units offered by the Master Partnership in the MLP
Offering. Such limited partnership capital is less than the estimated net
proceeds of the MLP Offering of $260.3 million due to the assets and
liabilities contributed by Ferrellgas to the Partnership being recorded at
historical cost by the Partnership, rather than fair value, in accordance
with GAAP. Total capital of the Partnership is allocated to the limited
partners based on their relative limited partner unit ownership percentage.
It is anticipated that the Partnership will also enter into the Credit
Facility in the amount of $185 million. For a discussion of the Credit Facility
and other capital resources and liquidity of the Partnership, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Pro
Forma Financial Condition."
20
<PAGE>
SELECTED HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL AND OPERATING DATA
The following tables set forth for the periods and the dates indicated,
selected historical financial and operating data for the Company and selected
pro forma financial and operating data for the Partnership after giving effect
to the transactions contemplated by this Prospectus. The selected historical
income statement and balance sheet data of the Company for the five years ended
July 31, 1993, and for the nine months ended April 30, 1994 is derived from
financial statements which have been audited by Deloitte & Touche, independent
auditors, certain of which appear elsewhere in this Prospectus. The historical
financial data for the nine-month period ended April 30, 1993, has been derived
from the unaudited financial statements appearing herein, and, in the opinion
of management of the Company, contain all adjustments, consisting only of
normal recurring adjustments necessary for a fair presentation of the Company's
results of operation and financial condition. The Partnership's selected pro
forma financial data should be read in conjunction with such consolidated
financial statements and the pro forma financial information and notes thereto
included elsewhere in this Prospectus. The propane industry is seasonal in
nature with its peak activity during the winter months. Therefore, the results
for the interim period are not indicative of the results that can be expected
for a full fiscal year. The following should be read in conjunction with the
Financial Statements and Notes to Financial Statements contained elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
PARTNERSHIP
HISTORICAL PRO FORMA
-------------------------------------------------- --------------
YEAR ENDED JULY 31, YEAR ENDED
-------------------------------------------------- JULY 31,
1989 1990 1991 1992 1993 1993
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues........... $409,953 $467,641 $543,933 $501,129 $541,945 $541,945
Depreciation and
amortization............ 32,528 33,521 36,151 31,196 30,840 30,840
Operating income......... 53,425 54,388 63,045 56,408 58,553 58,053
Interest expense......... 54,572 55,095 60,507 61,219 60,071 29,029
Earnings (loss) from
continuing operations... (1,506) (347) 1,979 (1,700)(1) 109 28,750
Ratio of earnings to
fixed charges(2)........ -- -- 1.1x -- 1.0x 1.9x
BALANCE SHEET DATA (AT END
OF PERIOD):
Working capital.......... $(39,708) $ 50,456 $ 53,403 $ 67,973 $ 74,408
Total assets............. 487,631 554,580 580,260 598,613 573,376
Payable to (receivable
from) parent and
affiliates.............. 13,109 10,743 3,763 2,236 (916)
Long-term debt........... 354,626 465,644 466,585 501,614 489,589
Stockholder's equity..... 6,616 11,463 21,687 8,808 11,359
OPERATING DATA:
Retail propane sales
volume (in gallons)..... 498,395 499,042 482,211 495,707 553,413 553,413
Capital expenditures(3):
Maintenance.............. $ 7,271 $ 5,428 $ 7,958 $ 10,250 $ 10,527 $ 10,527
Growth................... 10,062 10,447 2,478 3,342 2,851 2,851
Acquisition.............. 14,668 18,005 25,305 10,112 897 897
-------- -------- -------- -------- -------- --------
Total................... $ 32,001 $ 33,880 $ 35,741 $ 23,704 $ 14,275 $ 14,275
======== ======== ======== ======== ======== ========
SUPPLEMENTAL DATA:
EBITDA(4)................ $ 85,953 $ 87,909 $ 99,196 $ 87,604 $ 89,393 $ 88,893
Fixed charge coverage
ratio(5)................ 3.0x
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
PARTNERSHIP
HISTORICAL PRO FORMA
-------------------- -----------------
NINE MONTHS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
-------------------- 1994
1993 1994
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues...................... $468,302 $450,477 $450,477
Depreciation and amortization....... 23,238 21,688 21,688
Operating income.................... 64,708 75,445 75,070
Interest expense.................... 45,056 44,233 21,187
Earnings from continuing operations. 12,785 20,356 53,892
Ratio of earnings to fixed
charges(2)......................... 1.4x 1.72x 3.2x
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital..................... $100,645 $104,164 $ 54,304
Total assets........................ 602,063 600,113 478,254
Payable to (receivable from) parent
and affiliates..................... 2,076 (3,909) 91
Long-term debt...................... 500,227 476,471 267,441
Stockholder's equity................ 21,855 27,348
Partners' capital:
Limited Partner..................... 143,022
General partner..................... 1,459
OPERATING DATA:
Retail Propane sales volumes (in
gallons)........................... 483,489 490,254 490,254
Capital expenditures(3):
Maintenance......................... $ 9,260(6) $ 3,377(6) $ 3,377
Growth.............................. 2,597 2,568 2,568
Acquisition......................... 2,472 2,472
-------- -------- --------
Total.............................. $ 11,829 $ 8,417 $ 8,417
======== ======== ========
SUPPLEMENTAL DATA:
EBITDA(4)........................... $ 87,946 $ 97,133 $ 96,758
Fixed charge coverage ratio(5)...... 3.3x
</TABLE>
- ---------------------
(1) In August 1991, the Company revised the estimated useful lives of storage
tanks from 20 to 30 years in order to more closely reflect expected useful
lives of the assets. The effect of the change in accounting estimates
resulted in a favorable impact on net loss from continuing operations of
approximately $3.7 million for the fiscal year ended July 31, 1992.
(2) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings (loss) from continuing operations before
income taxes, plus fixed charges. Fixed charges consist of interest
expense on all indebtedness (including amortization of deferred debt
issuance costs) and the portion of operating lease rental expense that is
representative of the interest factor. For the fiscal years ended July 31,
1989, 1990 and 1992, earnings were inadequate to cover fixed charges by
$2.4 million, $0.1 million and $2.4 million, respectively. Earnings before
fixed charges for the periods presented were reduced by certain non-cash
expenses, consisting principally of depreciation and amortization. Such
non-cash charges totaled $34.7 million, $35.8 million, $38.5 million,
$33.5 million and $33.0 million for the fiscal years ended July 31, 1989,
1990, 1991, 1992 and 1993, respectively, and totaled $24.8 million and
$23.7 million for the nine months ended April 30, 1993 and 1994,
respectively.
(3) The Company's capital expenditures fall generally into three categories:
(1) maintenance capital expenditures, which include expenditures for major
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 Company's
retail customer base; and (iii) acquisition capital expenditures, which
include expenditures related to the acquisition of retail propane
operations. Acquisition capital expenditures include a portion of the
purchase price allocated to intangibles associated with the acquired
businesses.
(4) EBITDA is calculated as operating income plus depreciation and
amortization. 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 payments in respect of the Senior Notes.
EBITDA is not intended as an alternative to earnings from continuing
operations and net income.
(5) The term fixed charge coverage ratio is defined in the Indenture as the
ratio of the Partnership's consolidated cash flow for the preceding four
fiscal quarters to fixed charges for such period. Consolidated cash flow
is defined in the Indenture as earnings from continuing operations before
income taxes, plus interest expenses (including amortization of original
issue discount) and depreciation and amortization (excluding amortization
of prepaid cash expenses). The term fixed charges is defined in the
Indenture as interest expense (including amortization of original issue
discount).
(6) The decrease in maintenance capital expenditures for the nine months ended
April 30, 1993 to the nine months ended April 30, 1994 is primarily due to
the purchase of the Company's corporate headquarters in Liberty, Missouri
for its fair market value of $4.1 million in the first nine months of
fiscal 1993.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the historical and pro forma financial
condition and results of operations of the Company and the Partnership. The
discussion should be read in conjunction with the historical and pro forma
consolidated financial statements and the notes thereto included elsewhere in
this Prospectus.
GENERAL
The Partnership was recently formed to acquire and operate the business and
assets of the Company. The Company is engaged in the sale, distribution,
marketing and trading of propane and other natural gas liquids. The Company's
revenue is derived primarily from the retail propane marketing business. The
Company believes it is the third largest retail marketer of propane in the
United States, based on gallons sold, serving more than 600,000 residential,
industrial/commercial and agricultural customers in 45 states and the District
of Columbia through approximately 416 retail outlets and 226 satellite
locations. The Company's annual retail propane sales volume was approximately
553 million, 496 million and 482 million gallons during the fiscal years ended
July 31, 1993, 1992 and 1991, respectively.
The retail propane business of the Company 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.
The retail market for propane is seasonal because of its primary use for
heating in residential and commercial buildings. In addition, sales volumes
have traditionally been affected by various factors, including competitive
conditions, demand for product, variations in weather and fluctuations in
propane prices. The Company's results for its first fiscal quarter (August,
September and October) and fourth fiscal quarter (May, June and July) are
typically lower than the second and the third fiscal quarters, primarily as a
result of warmer weather in its first and fourth fiscal quarters. The following
tables set forth historical unaudited revenues and operating income for the
Company for the period from August 1, 1991 to July 31, 1993, for each quarter
in fiscal years 1992 and 1993:
QUARTERLY REVENUES
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR
1992 % 1993 %
----------- ----- ----------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Quarter ended:
October 31.......................... $114,263 22.8 $116,497 21.5
January 31.......................... 193,652 38.6 191,499 35.3
April 30............................ 122,658 24.5 160,306 29.6
July 31............................. 70,556 14.1 73,643 13.6
-------- ----- -------- -----
Total............................. $501,129 100.0 $541,945 100.0
======== ===== ======== =====
</TABLE>
23
<PAGE>
QUARTERLY OPERATING INCOME
<TABLE>
<CAPTION>
FISCAL YEAR FISCAL YEAR
1992 % 1993 %
----------- ----- ----------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Quarter ended:
October 31........................ $ 5,488 9.7 $ 3,823 6.5
January 31........................ 39,194 69.5 39,186 66.9
April 30.......................... 16,777 29.7 21,699 37.1
July 31........................... (5,051) (8.9) (6,155) (10.5)
------- ----- ------- -----
Total........................... $56,408 100.0 $58,553 100.0
======= ===== ======= =====
</TABLE>
The Company 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 Company
has become one of the largest independent traders of propane and natural gas
liquids in the United States. In fiscal year 1993, the Company's annual
wholesale and trading sales volume was approximately 1.2 billion gallons of
propane and other natural gas liquids, approximately 64% of which was propane.
This volume, when combined with the Company's retail volume, makes the Company
one of the largest purchasers of propane, which the General Partner believes
will help assure the Partnership favorable prices and supply of propane during
times of increased demand. For the fiscal years ended July 31, 1993, 1992 and
1991, the Company had net revenues of $6.7 million, $4.9 million and $9.9
million, respectively, from its trading activities.
RESULTS OF OPERATIONS
NINE MONTHS ENDED APRIL 30, 1994 VERSUS APRIL 30, 1993
Total Revenues. Total revenues decreased 3.8% to $450,477,000 as compared
with $468,302,000 for the prior year period. The overall decrease was
attributable to revenues from other operations (net trading operations,
wholesale propane marketing and chemical feedstocks marketing) decreasing 23.1%
to $56,237,000, and revenues from retail operations decreasing 0.2% to
$394,240,000.
The decrease in revenues from other operations was primarily due to higher
sales of chemical feedstocks in the prior period resulting from sales of
chemical feedstocks that were designated for storage but were sold due to
storage limitations. Additional decreases were the result of lower product
costs for chemical feedstocks and wholesale propane marketing and decreased net
trading results due to reduced market volatility relative to the prior period.
The decrease in revenues from retail operations was primarily due to a
decrease in selling price partially offset by an increase in sales volume due
to cooler temperatures than those which existed in the prior period. The volume
of gallons sold, excluding acquisitions, increased revenues by $3,339,000.
Fiscal year 1994 and 1993 acquisitions increased revenues in the nine months
ended April 30, 1994 by $1,659,000. These increases were offset by a $6,775,000
decrease in selling prices due to lower product costs.
Gross Profit. Gross profit increased 4.5% to $221,151,000 as compared with
$211,566,000 for the prior period, primarily due to an increase in retail
operations gross profits. Retail operations results improved due to increased
sales volume as discussed previously and to margin increases as a result of
favorable changes in the competitive pressures of the industry and to normal
fluctuations in the Company's product mix. These increases were offset by a
decrease in net trading results due to reduced market volatility relative to
the prior period.
Operating Expenses. Operating expenses increased 0.1% to $112,687,000 as
compared with $112,553,000, for the prior period, primarily due to (i) an
increase in incentive compensation expense and (ii)
24
<PAGE>
an increase in overtime, variable labor and vehicle expenses due to increased
sales volume. These increases were primarily offset by a decrease in general
liability and workers compensation expense due to improved claims
administration and decreased sales and use tax audit assessments.
General and Administrative Expenses. General and administrative expenses
increased 10.1% to $8,128,000 as compared with $7,385,000 for the prior period
due to increased incentive compensation expense. This increase was partially
offset by a reduction in facilities rent expense in the second and third
quarters of fiscal year 1993 due to the purchase of the Liberty, Missouri,
corporate offices.
Depreciation and Amortization. Depreciation expense decreased 6.7% to
$21,688,000 as compared with $23,238,000 for the prior period due primarily to
extending the use of the Company's vehicles beyond the depreciable life and to
the reduction in the number of Company owned vehicles.
Net Interest Expense. Net interest expense decreased 3.0% to $41,442,000 as
compared with $42,723,000 for the prior period due to the reacquisition of
$11,900,000 and $10,500,000 of senior notes in the third quarter of fiscal year
1994 and in the fourth quarter of fiscal 1993, respectively, offset by
increased non-cash amortization of financing costs.
Net Earnings. Net earnings increased 52.4% to $19,489,000 as compared with
$12,785,000 for the prior period primarily due to the increase in retail
operations sales volume and margins offset by increased operating, and general
and administrative expenses and the fiscal 1994 extraordinary loss from early
extinguishment of debt.
FISCAL YEAR ENDED JULY 31, 1993 VERSUS JULY 31, 1992
Total Revenues. Total revenues increased 8.1% to $541,945,000 as compared
with $501,129,000 for the prior year. This increase was attributable to an
increase in revenues from retail operations of 10.6% to $451,966,000 partially
offset by a decrease in revenues from other operations (net trading operations,
chemical feedstocks marketing and wholesale propane marketing) of 2.6% to
$89,979,000.
The increase in revenues attributable to retail operations resulted from
increased sales volume. The sales volume increase was mainly due to a surge in
agricultural business from crop drying in farm belt states and cooler
temperatures than those which existed in the prior year. The volume of gallons
sold, excluding the effects of acquisitions, increased revenues by $42,648,000.
This increase was offset by a decrease in selling prices which reduced revenues
by $3,326,000. Acquisitions completed in fiscal 1993 and 1992 increased
revenues by $3,172,000.
Total revenues attributable to other operations decreased as compared with
the prior year. Wholesale propane marketing revenues decreased as a result of a
change in focus and marketing strategy. This decrease was offset by an increase
in net trading operations as a result of increased market volatility relative
to the prior year.
Gross Profit. Gross profit increased 4.3% to $243,912,000 as compared with
$233,850,000 for the prior year. The increase was primarily due to an increase
in retail operations' sales volume and an increase in net trading and wholesale
marketing operating results. These increases were offset by a decrease in
retail operations' margins due to competitive pricing pressures in the
industry.
Operating Expenses. Operating expenses increased 4.1% to $139,617,000 as
compared with $134,165,000 for the prior year, due to (i) an increase in
personnel costs from increased sales volume and accrued incentive compensation
expense, (ii) an increase in vehicle expenses from increased sales volume,
(iii) an increase in other expenses from sales and use tax assessments on prior
year purchases and leases, and (iv) general increases in the cost of doing
business. These increases were partially offset by a decrease in general
liability expense due to improved claims administration and to a decrease in
bad debt expense due to improved credit and collections administration.
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Depreciation and Amortization. Depreciation and amortization expense
decreased 1.1% to $30,840,000 as compared with $31,196,000 for the prior year
due to retirements and fully depreciated assets.
General and Administrative Expenses. General and administrative expenses
increased 33.3% to $10,079,000 as compared with $7,561,000 for the prior year
period due to an increase in compensation expense related to the long-term
incentive plan and an increase in non-capitalized software maintenance costs.
Net Interest Expense. Net interest expense of $56,805,000 remained
essentially unchanged as compared with $56,818,000 for the prior year.
Decreases in interest expense due to lower effective interest rates were offset
by a decrease in interest income as a result of lower interest rates on short-
term investments.
Extraordinary Loss. The extraordinary loss of $886,000, net of $543,000
income tax benefit, was due to the early extinguishment of $10,500,000 of the
senior notes as discussed in the notes to the consolidated financial
statements.
Net Loss. Net loss decreased to $777,000 as compared with a loss of
$11,679,000 for the prior year due to a $9,093,000 decrease in the
extraordinary loss from the early extinguishment of debt and to an increase in
net operating results.
FISCAL YEAR ENDED JULY 31, 1992 VERSUS JULY 31, 1991
Total Revenues. Total revenues decreased 7.9% to $501,129,000 as compared
with $543,933,000 for the prior year. This decrease was attributable to a
decrease in revenues from retail operations of 8.1% to $408,781,000 and a
decrease in revenues from other operations (net trading operations, chemical
feedstocks marketing and wholesale propane marketing) of 6.8% to $92,348,000.
The decrease in revenues attributable to retail operations resulted mainly
from a decrease in selling prices related to the end of the Persian Gulf crisis
and to competitive pressures within the industry. In fiscal 1991, selling
prices were increased in response to product cost increases brought about by
the Persian Gulf crisis. The volume of gallons sold, excluding the effects of
acquisitions, decreased due to temperatures being warmer than normal and warmer
than the prior year in the primary heating months, along with competitive
pressures within the industry. The decrease in selling prices and volumes
reduced total revenues by $45,080,000 and $1,727,000, respectively.
Acquisitions in fiscal 1991 and 1992 increased fiscal 1992 revenues by
$10,120,000.
The decrease in revenues attributable to other operations resulted from
declines in net trading operations and wholesale propane marketing revenues
offset by an increase in revenues from chemical feedstocks marketing. Net
trading operations decreased due to a less volatile market than that which
existed in fiscal 1991 during the Persian Gulf crisis. Wholesale propane
marketing revenues decreased as a result of changes in marketing strategy and
focus of the business and a decrease in selling price and volumes for the
reasons noted above for retail operations. Chemical feedstocks marketing
revenues increased due to additional emphasis on butane sales.
Gross Profit. Gross profit decreased 4.9% to $233,850,000 as compared with
$245,965,000 for the prior year. Approximately half of the decrease was
attributable to retail operations as a result of competitive pressures in the
industry and warmer than normal and warmer than prior year temperatures in the
primary heating months. The remaining decrease was attributable to net trading
operations and wholesale propane marketing.
Operating Expenses. Operating expenses increased 3.5% to $134,165,000 as
compared with $129,684,000 for the prior year. This increase was primarily due
to an increase in payroll expenses, general liability and workers' compensation
insurance and an increase in expenses due to acquisitions in fiscal 1992 and
1991. These increases were partially offset by a reduction in incentive
compensation expense.
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Depreciation and Amortization. Depreciation and amortization expense
decreased 13.7% to $31,196,000 as compared with $36,151,000 for the prior year
due primarily to a change in the useful lives of certain assets as discussed in
the notes to the consolidated financial statements. The change was based on the
expected useful lives of the assets and industry practice.
General and Administrative Expenses. General and administrative expenses
decreased 41.6% to $7,561,000 as compared with $12,953,000 for the prior year
due primarily to a reversal of expense previously provided related to the long-
term incentive plan and the elimination of certain management positions.
Net Interest Expense. Net interest expense increased 0.3% to $56,818,000 as
compared with $56,666,000 for the prior year. In connection with the
refinancing of the subordinated debt (as discussed in Note F to the notes to
the consolidated financial statements) the Company borrowed an additional
$40,000,000. The impact of this additional borrowing on interest expense was
offset by a lower effective interest rate on the new subordinated debt and the
investment of the excess cash proceeds from the refinancing.
Extraordinary Loss. The extraordinary loss of $9,979,000, net of income tax
benefit, was due to the refinancing of the subordinated debt as discussed in
the notes to the consolidated financial statements.
Net Earnings (Loss). Net earnings decreased to a net loss of $11,679,000 as
compared with net earnings of $1,979,000 for the prior year due primarily to
the decrease in gross profit and the extraordinary loss on the refinancing of
subordinated debt.
FISCAL YEAR ENDED JULY 31, 1991 VERSUS JULY 31, 1990
Total Revenues. Total revenues increased 16.3% to $543,933,000 as compared
with $467,641,000 for the prior year. This increase was attributable to (i) an
increase in revenues from retail operations of 12.6% to $444,886,000 and (ii)
an increase in revenues from other operations (wholesale propane marketing,
chemical feedstocks marketing and net trading operations) of 36.3% to
$99,047,000.
The increase in revenues from retail operations resulted primarily from an
increase in selling prices in response to an increase in product costs brought
about by the Persian Gulf crisis. Selling prices were increased in order to
maintain normal operating margins. Increased retail selling prices resulted in
a $62,505,000 revenue variance. The acquisitions of retail propane businesses
increased revenues by approximately $18,484,000. A reduction in residential,
motor fuel applications and reseller sales volumes decreased revenues
approximately $30,236,000. Retail operations volumes decreased 3.4% compared to
the prior year due to temperatures being warmer than the prior year and warmer
than normal in addition to customers requesting smaller volume deliveries while
propane selling prices remained high.
The increase in revenues from other operations resulted from increases in all
areas of other operations. Wholesale propane and chemical feedstocks marketing
revenues increased due primarily to an increase in selling prices in response
to increased product costs as noted above. Net trading operations revenues
increased due to increased volatility in the market generating a larger volume
of trades. Other operations volumes increased 35.2% compared to the prior year.
Gross Profit. Gross profit increased 10.4% to $245,965,000 as compared with
$222,834,000 for the prior year. This increase was attributed to the
acquisitions of retail propane businesses in fiscal year 1991 and 1990 and an
increase in retail operations margins. Retail margins from existing business
increased to cover the increased costs of product delivery resulting from
smaller volume deliveries and increased carrying costs involved with higher
inventory and receivables balance. Also, gross profit for fiscal year 1990 was
adversely impacted by high product costs from inventory purchased in January
1990. Gross profit from other operations also increased primarily due to
increased wholesale propane marketing margins resulting from focusing marketing
efforts on higher margin sales and increased net trading operations volume and
margins resulting from the volatile propane market.
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Operating Expenses. Operating expenses increased 13.1% to $129,684,000 as
compared with $114,639,000 for the prior period primarily due to (i) an
increase in full time payroll, incentive compensation expense and the related
payroll taxes as a result of increased retail operations margins and other
operations, (ii) an increase in vehicle expenses and in plant and office
expenses primarily from increases in vehicle fuel costs and customers
requesting more frequent, smaller volume deliveries and (iii) acquisitions of
retail propane businesses during fiscal year 1991 and 1990.
General and Administrative Expenses. General and administrative expenses
decreased 19.6% to $12,953,000 as compared with $16,113,000 for the prior
period. A cost reduction program which was implemented March 1990 included
reductions of staff in non-critical areas and cuts in non-essential projects.
The results of this program and a reversal of expense previously provided
related to the long-term incentive plan contributed to the general and
administrative expense decrease.
Net Interest Expense. Net interest expense increased 6.0% to $56,666,000 as
compared with $53,463,000 due to the issuance of senior notes in July of 1990.
The excess cash proceeds from the issuance of the senior notes were invested to
offset interest expense incurred.
Net Earnings (Loss). Net earnings increased to $1,979,000 as compared with a
net loss of $3,814,000 for the prior period due to the increase in gross profit
which was offset partially by an increase in operating expenses and net
interest expense. Also in 1990, earnings were unfavorably impacted by an
extraordinary loss from refinancing of debt.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended April 30, 1994 and the twelve months ended July 31,
1993, the Company's operating cash flow provided from operations (as measured
by operating income before depreciation and amortization, interest and taxes)
was sufficient to (i) make interest payments and required reductions to
existing debt and (ii) make purchases of property, plant and equipment.
Cash Flows from Operating Activities. Cash provided by operating activities
increased to $58,246,000 for the nine months ended April 30, 1994, as compared
with $46,951,000 for the prior period. This increase was primarily attributable
to an increase in net earnings and accounts payable, which were offset by
increases in inventory and accounts and notes receivable. Cash provided by
operating activities increased to $36,961,000 for the twelve months ended July
31, 1993, as compared with $22,965,000 for the prior period. This increase was
primarily attributable to an increase in earnings and a decrease in inventory
purchases in anticipation of future propane requirements, offset by a decrease
in accounts payable.
Cash Flows From Investing Activities. During the nine months ended April 30,
1994, the Company made aggregate expenditures for intangible assets and
property, plant and equipment of $8,417,000. During the twelve months ended
July 31, 1993, the Company made aggregate expenditures for intangible assets
and property, plant and equipment of $14,275,000. Total capital expenditures
are essentially governed by the cash interest coverage ratio covenants
contained in the various debt agreements. These covenants limited capital
expenditures depending upon the amount of cash flow and cash interest expense
of the Company.
The Company maintains its vehicle and transportation equipment fleet by
leasing light and medium duty trucks and tractors. The Company believes vehicle
leasing is a cost effective method for financing transportation equipment.
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 Company's principal physical
assets, are generally long.
The Company invested in U.S. Treasury Bills and U.S. government obligations
with remaining maturities, as of April 30, 1994, ranging from four to ten
months. These investments are presented as short-term investments in the
Company's consolidated financial statements.
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Cash Flows From Financing Activities. The Company currently has a $50 million
bank credit facility which terminates July 31, 1995. The facility provides for
a working capital facility and a letter of credit facility. At April 30, 1994,
there were no borrowings outstanding under the working capital facility and
letters of credit outstanding under the letter of credit facility, which are
used primarily to secure obligations under certain insurance and leasing
arrangements, totaled $32,778,000, resulting in an available bank credit
facility of $17,222,000. The Company does not have any significant commitments
for fixed asset acquisitions, unusual working capital commitments or contingent
liabilities which might materially affect short-term liquidity.
Effects of Inflation. In the past the Company has been able to adjust its
sales price of product in response to market demand, cost of product,
competitive factors and other industry trends. Consequently, changing prices as
a result of inflationary pressures have not had a material adverse effect on
profitability although revenues may be affected. Inflation has not materially
impacted the results of operations and the Company does not believe normal
inflationary pressures will have a material adverse effect on the profitability
of the Partnership in the future.
Adoption of New Accounting Standards. The Company provides postretirement
medical benefits to a closed group of approximately 400 retired employees and
their spouses. The plan requires the Company to provide primary medical
benefits to the participants until age 65, at which time the Company will only
pay a fixed amount of $55 per month per participant for medical benefits.
Effective August 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106--Employers' Accounting for Postretirement Benefits Other Than
Pensions which requires accrual of postretirement benefits (such as health care
benefits) during the years an employee provides services. The Company elected
to amortize the postretirement benefit obligation over a period not to exceed
the average remaining life expectancy of the plan participants (since all of
the plan participants are retired). The cumulative effect as of August 1, 1993,
and impact for the nine months ended April 30, 1994, of adopting this statement
was not material to the financial statements of the Company. The Company has
provided additional disclosure of the postretirement benefit obligation. See
Note L to the consolidated financial statements.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112--Employers' Accounting For Postemployment Benefits
which is effective for fiscal years beginning after December 15, 1993. This
statement requires that employers recognize over the service lives of employees
the costs of postemployment benefits if certain conditions are met. The General
Partner does not believe that adoption of the statement will have a material
impact on the results of operations or financial condition of the Partnership.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 115--Accounting for Certain Investments in Debt and
Equity Securities, which is effective for fiscal years beginning after December
15, 1993. The statement addresses the accounting and reporting for certain
investments in debt and equity securities and expands the use of fair value
accounting for those securities but retains the use of the amortized cost
method for investments that the Company has the positive intent and ability to
hold to maturity. The General Partner does not believe that the adoption of
this statement will have a material effect on the results of operations or
financial condition of the Partnership.
PRO FORMA FINANCIAL CONDITION
The ability of the Partnership to satisfy its obligations will be dependent
upon future performance, which will be subject to prevailing economic
conditions and to financial, business and weather conditions and other factors,
many of which are beyond its control. For the fiscal year ending July 31, 1995,
the General Partner believes that the Partnership will generate sufficient
income to make all required payments in respect of the Senior Notes. Future
capital needs of the Partnership are expected to be provided by future
operations, existing cash balances and the working capital facility. The
Partnership may incur additional indebtedness in order to fund possible future
acquisitions.
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Concurrent with the closing of the sale of the Senior Notes offered hereby,
the Master Partnership will sell in a registered public offering 13,100,000
Common Units for aggregate net proceeds of approximately $260.3 million, which
proceeds, along with the estimated $245.3 million net proceeds of the offering
of Senior Notes, will be used to retire substantially all of the approximately
$481.5 million of indebtedness of the Company to be assumed by the Partnership.
The sale of the Senior Notes offered hereby is subject to, among other things,
the sale of the Common Units. Upon the consummation of the transactions
contemplated by this Prospectus, the Partnership expects to have total
indebtedness of approximately $263.9 million. See "The Transactions."
Credit Facility. Immediately prior to the closing of this Offering, the
Partnership expects to enter into a $185 million Credit Facility with Bank of
America National Trust and Savings Association ("BofA"), a portion of which
will be syndicated to a group of financial institutions (together with BofA,
the "Banks"). The form of the loan agreement which will govern the Credit
Facility is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
The Credit Facility will permit borrowings of up to $100 million on a senior
unsecured revolving line of credit basis (the "Working Capital Facility") and
up to $85 million on a senior unsecured basis (the "Expansion Facility"). The
Credit Facility will be committed for up to a three-year period, at which time
the Working Capital Facility will expire. The Expansion Facility may be
converted, at the option of the Partnership, to a three year term loan at the
end of the initial three-year period. Under the Working Capital Facility, up to
$100 million will be available to fund working capital and general partnership
requirements (of which up to $50 million will be available to support letters
of credit). Under the Expansion Facility, up to $25 million will be available
to retire existing indebtedness of the General Partner, the payment obligation
of which will be assumed by the Partnership, and up to $60 million (plus any
unused amount from the retirement of the existing assumed indebtedness and any
amount repaid with the proceeds from the exercise of the Underwriters'
overallotment option) will be available solely to finance acquisitions and
growth capital expenditures.
At the Partnership's option, borrowings under the Credit Facility may bear
interest either at the Base Rate (i.e., the higher of the Federal funds rate
plus 1/2% per annum or BofA's reference rate) or the London Interbank Offered
Rate, in each case plus the applicable margin. The applicable margin will vary
from 62.5 basis points to 125 basis points for LIBOR and between zero basis
points and 25 basis points for the Base Rate, depending upon the Partnership's
"Leverage Ratio," which is defined generally as the ratio of all debt for
borrowed money to EBITDA. At the time of the closing of the Credit Facility,
the Partnership anticipates that, based upon the then applicable Leverage
Ratio, its applicable LIBOR margin will be 112.5 basis points and its
applicable Base Rate margin will be 12.5 basis points. There can be no
guarantee that the Partnership will be able to continue to maintain the
Leverage Ratio which it anticipates will exist at closing.
The loan agreement for the Credit Facility will contain restrictive covenants
substantially similar to those for the Senior Notes including restrictions on
the Partnership's ability to make cash distributions and the requirement that
the Partnership repay all outstanding amounts under the Credit Facility within
30 days after the occurrence of a change of control thereunder. In the case of
the Credit Facility, however, there is an additional limitation in that the
occurrence of any transaction which results in James E. Ferrell and his
affiliates beneficially owning less than 20% of the equity interests of the
Partnership will constitute a "Change of Control," requiring repayment of the
Credit Facility. The Credit Facility also includes certain additional covenants
and restrictions relating to the activities of the Partnership which are
customary for similar credit facilities and are not expected to affect
materially and adversely the conduct of the Partnership's business as described
in this Prospectus.
In connection with the transactions to be consummated at the closing of this
Offering, the Partnership may borrow up to $25 million under the Expansion
Facility. Assuming a closing date of June 30, 1994, the
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Partnership anticipates it will borrow approximately $10 million if the
Underwriters' overallotment option is not exercised at the time of closing.
Actual borrowings under the Credit Facility at the closing of this Offering
will depend upon the Partnership's cash balances at such time, the initial
offering price per Common Unit and the timing of any exercise of the
underwriters' overallotment option. If the Underwriters' overallotment option
is exercised subsequent to the closing, the Partnership will use the net
proceeds therefrom first to repay any amounts borrowed under the Expansion
Facility and next to repurchase for retirement up to 1,000,000 Common Units
held by Ferrell.
The closing of the Credit Facility is conditioned upon, among other things,
the successful public offering of the Common Units and the Senior Notes, the
cancellation of Ferrellgas' current $50 million revolving credit facility and
there having been no material adverse change in the financial markets in
general or the financial condition of the General Partner or the Partnership
prior to the closing of the Credit Facility.
TAX AUDIT
The IRS has examined Ferrell's consolidated income tax returns for the years
ended July 31, 1987 and 1986, and has proposed to disallow $90 million of
deductions for amortization of customer relationships taken or to be taken on
Ferrell's consolidated income tax returns. On April 20, 1993, the United States
Supreme Court held in Newark Morning Ledger v. United States that a taxpayer
may amortize customer-based intangibles if that taxpayer can prove such
intangibles are capable of being valued and the value diminishes over time. The
Company contends it has met this burden of proof and feels this recent Supreme
Court decision supports the positions taken during the Company's allocation of
purchase price to customer relationships.
The Company was originally made aware of the audit based on a letter received
from the IRS dated April 24, 1989. The Company received a closing conference
letter of the proposed adjustments on December 6, 1990, and finally, a 60-day
letter to act dated August 5, 1991. The 60-day letter has been extended through
December 31, 1994.
The Company intends to vigorously defend against these proposed adjustments
and is in the process of protesting these adjustments through the appeals
process of the IRS. At this time, it is not possible to determine the ultimate
resolution of this matter.
In connection with the formation of the Partnership, the Company will
contribute the customer relationships that are the subject of the IRS audit
together with additional customer relationships to the Partnership. The General
Partner intends to treat such customer relationships as amortizable assets of
the Partnership for federal income tax purposes. It is possible that the IRS
will challenge that treatment. If the IRS were to successfully challenge the
amortization of customer relationships by the Partnership, the ability of the
Partnership to make payments in respect of the Senior Notes and the other
indebtedness of the Partnership could be adversely affected, although the
Partnership does not believe the impact of such effect will be material.
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BUSINESS
GENERAL
The Partnership will be engaged in the sale, distribution, marketing and
trading of propane and other natural gas liquids. The discussion that follows
focuses on the Company's retail operations and its other operations, which
consist of propane and natural gas liquids trading operations, chemical
feedstocks marketing and wholesale propane marketing, all of which will be
conveyed to the Partnership. The Company believes it is the third largest
retail marketer of propane in the United States (as measured by gallons sold),
serving approximately 600,000 residential, commercial, agricultural and
industrial customers in 45 states and the District of Columbia through
approximately 416 retail outlets with 226 satellite locations in 36 states
(some outlets serve interstate markets). For the fiscal years ended July 31,
1993, 1992 and 1991, the Company's annual retail propane sales volumes were
approximately 553 million, 496 million and 482 million gallons, respectively.
EBITDA was $89.4 million, $87.6 million and $99.2 million for the fiscal years
ended July 31, 1993, 1992 and 1991, respectively. EBITDA for the twelve months
ended April 30, 1994 was $98.6 million. The Company's net losses for the fiscal
years ended July 31, 1993 and 1992 were $0.8 million and $11.7 million,
respectively, and its net earnings for the fiscal year ended July 31, 1991 were
$2.0 million. Net earnings for the nine month periods ended April 30, 1994 and
1993 were $19.5 million and $12.8 million, respectively. The retail propane
business of the Company consists principally of transporting propane purchased
through various suppliers to its retail distribution outlets, then to tanks
located on its customers' premises, as well as to portable propane cylinders.
The Company also believes it is a leading natural gas liquids trading company.
The Company's annual propane and natural gas liquids trading, chemical
feedstocks and wholesale propane sales volumes were approximately 1.2 billion,
1.3 billion and 1.1 billion gallons during the fiscal years ended July 31,
1993, 1992 and 1991, respectively.
RETAIL OPERATIONS
FORMATION
Ferrell, the parent of the Company, was founded in 1939 as a single retail
propane outlet in Atchison, Kansas and was incorporated in 1954. In 1984, a
subsidiary was formed under the name Ferrellgas, Inc. to operate the retail
propane business previously conducted by Ferrell. Ferrell is owned by James E.
Ferrell and his family. The Company's initial growth was largely the result of
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 at a cost of approximately $13.0
million, and in December 1986, the Company acquired propane operations with
annual retail sales volumes of approximately 395 million gallons at a cost of
approximately $457.5 million. These major acquisitions and many other smaller
acquisitions have significantly expanded and diversified the Company's
geographic coverage and resulted in greater operating efficiencies and improved
operating cash flow.
BUSINESS STRATEGY
The Partnership's business strategy will be to continue the Company's
historical focus on residential and commercial retail propane operations and to
expand its operations through strategic acquisitions of smaller retail propane
operations located throughout the United States and through increased
competitiveness and efforts to acquire new customers. The propane industry is
relatively fragmented, with the ten largest retail distributors possessing less
than 35% of the total retail propane market and much of the industry consisting
of over 3,000 local or regional companies. The Company's retail operations
account for approximately 6% of the retail propane purchased in the United
States, as measured by gallons sold. Since 1986, and as of April 30, 1994, the
Company has acquired 67 smaller independent propane retailers which the Company
believes were not individually material. For the fiscal years ended July 31,
1989 to 1993 the Company spent approximately $14.7 million, $18.0 million,
$25.3 million, $10.1 million and $0.9 million, respectively, for acquisitions
of operations with annual retail sales of approximately 7.3 million, 11.3
million, 18.0 million, 8.6 million and 0.7 million gallons of propane,
respectively. The General Partner believes that approximately $7.5 million of
capital expenditures will be required on an annual basis to maintain the
current business to be
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acquired by the Partnership and that approximately $2.5 million in additional
capital expenditures will be required on an annual basis to sustain the modest
level of growth historically experienced generated by the business to be
acquired.
The Partnership intends to initially concentrate its acquisition activities
in geographical areas in close proximity to the Company's existing operations
to acquire propane retailers that can be efficiently combined with such
operations to provide an attractive return on the Partnership's investment
after taking into account the efficiencies which may result from such
combination. The Partnership will, however, 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 and by
improving customer service. The Company has achieved significant administrative
and operating efficiencies and improved operating cash flow in connection with
its substantial acquisitions in July 1984 and December 1986, as well as its
recent acquisitions of smaller retail propane distribution companies. The
Company regularly evaluates a number of propane distribution companies which
may be candidates for acquisition. The General Partner believes that there are
numerous local retail propane distribution companies that are possible
candidates for acquisition by the Partnership and that the Partnership's
geographic diversity of operations helps to create many attractive acquisition
opportunities for the Partnership. The Partnership intends to fund acquisitions
through internal cash flow, external borrowings or the issuance of additional
Partnership interests. 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 increasing the level of acquisitions or that any acquisitions
that are made will prove beneficial to the Partnership.
In addition to growth through acquisitions, the Company believes that it can
be successful in competing for new customers. Since 1989, the Company has
experienced modest internal growth in its customer base. During that same
period of time the quality of field management has been improved and
improvements in operating efficiencies have been implemented. The residential
and commercial retail propane distribution business has been characterized by a
relatively stable customer base, primarily due to the expense of switching to
alternative fuels, as well as the quality of service and personal relations. In
addition, since safety regulations adopted in most states in which the Company
operates prohibit propane retailers from filling tanks owned by other
retailers, customers that lease tanks generally develop long-term relationships
with their suppliers. The cost and inconvenience of switching tanks minimizes a
customer's tendency to switch among suppliers of propane and among alternative
fuels on the basis of minor variations in price. Based on its market surveys,
the Company believes that within the retail propane industry, approximately 12%
of all residential propane users switch suppliers annually. The Partnership's
aim will be to minimize losses of existing customers while attracting as many
new customers as possible. To achieve this objective extensive market research
was conducted by the Company to determine the critical factors that cause
customers to value their propane supplier. Based upon the results of such
surveys, the Company has designed and implemented a monthly process of
assessing customer satisfaction in each of its local retail markets. The
Company believes that these surveys give it an advantage over its competitors,
none of whom it is believed conduct comparable surveys. By highlighting
specific areas of customer satisfaction, the Company believes that it can move
quickly to both retain existing customers who are at risk, and gain new
customers. Specific measures have been and are continuing to be designed to
take advantage of the information gained regarding customer satisfaction. The
Company has also begun the process of upgrading computer equipment and software
in order to improve customer service and achieve efficiencies that enable local
market personnel to direct more efforts towards sales activities.
Approximately 70% of the Company's customers lease their tanks from the
Company, as compared to approximately 60% of all propane customers nationwide.
The Company believes there is a significant growth opportunity in marketing to
the 40% of propane users that own their own tank. As a result, the Company has
directly sought to identify locations where it can achieve rapid growth by
marketing more effectively to these potential customers. The Company believes
that since the commencement of this effort in August 1992, it has added
thousands of new customers that own their own tank. For both customers who
lease their tank,
33
<PAGE>
and customers that own their tank, the Partnership's continued ability to
deliver propane to customers when needed and during periods of extreme demand,
especially in remote areas and during inclement weather, will be critical to
maintaining margins, maintaining the loyalty of its retail customers and
expanding its customer base.
MARKETING
Natural gas liquids are derived from petroleum products and 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.
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 where natural gas
service is not available. 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.
Profits in the retail propane business are primarily based on the cents-per-
gallon difference between the purchase price and the sales price of propane.
The Company generally purchases propane on a short-term basis; therefore, its
supply costs fluctuate with market price fluctuations. Should wholesale propane
prices decline in the future, the Company believes that 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. The Company historically has
been able to maintain margins on an annual basis despite propane supply cost
changes. The General Partner is unable to predict, however, how and to what
extent a substantial increase or decrease in the wholesale cost of propane
would affect the Partnership's margins and profitability.
The Company has a network of approximately 416 retail outlets and 226
satellite locations marketing propane under the "Ferrellgas" trade name to
approximately 600,000 customers located in 45 states and the District of
Columbia. The Company's largest market concentrations are in the Midwest, Great
Lakes and Southeast regions of the United States. The Company operates in areas
of strong retail market competition, which has required it to develop and
implement strict capital expenditure and operating standards in its existing
and acquired retail propane operations in order to control operating costs.
The Company utilizes marketing programs targeting both new and existing
customers. The Company emphasizes its superior ability to deliver propane to
customers as well as its training and safety programs. During the fiscal year
ended July 31, 1993, sales to residential customers accounted for 44% of the
Company's retail propane sales volume, sales to industrial and other commercial
customers accounted for 33% of the Company's retail propane sales volume, sales
to agricultural customers accounted for 13% of the Company's retail propane
sales volume and sales to other customers accounted for 10% of the Company's
retail propane sales volume. 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 Company. No single customer of Ferrellgas
accounts for 10% or more of the Company's consolidated revenues.
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
(November through April). Cash inflows from these quarters will be realized in
the third and
34
<PAGE>
fourth quarters. In addition, sales volume traditionally fluctuates from year
to year in response to variations in weather, prices and other factors,
although the Company believes that the broad geographic distribution of the
Company's operations helps to minimize the Company's exposure to regional
weather or economic patterns. Long-term, historic weather data from the
National Climatic Data Center indicate 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, such as the conditions experienced by certain regions served by
the Company in the second and third quarters of fiscal year 1994, the Company
has been able to take advantage of its larger and more efficient distribution
network to help avoid supply disruptions such as those experienced by some of
its competitors, thereby broadening its long-term customer base.
The following chart illustrates the impact of annual variations in weather on
the Company's sales volumes. Set forth are (i) the average national degree days
(population weighted) (a measure of the relative warmth of a particular year in
which a larger number indicates a colder year), (ii) degree days as a
percentage of the average normal degree days as of 1993 (100.0% represents a
normal year with larger percentages representing colder-than-normal years and
smaller percentages representing warmer-than-normal years), (iii) the annual
retail propane sales volumes of the Company, and (iv) a retail gross margin
index for the Company (demonstrating changes in retail gross margins from a
base year of 100.0% in 1989) for the five fiscal years ended July 31, 1989 to
1993 and the nine months ended April 30, 1993 and 1994. The average degree days
in regions served by the Company have historically varied on an annual basis by
a greater amount than the average national degree days.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FOR THE YEAR ENDED JULY 31, APRIL 30,
--------------------------------- ------------
1989 1990 1991 1992 1993 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C>
National Degree Days.......... 4,673 4,549 4,211 4,303 4,663 4,444 4,526
Degree Days as % of 1993 Nor-
mal
Degree Days(1)............... 99.7% 97.0% 89.8% 91.8% 99.4% 99.3% 101.1%
Sales Volumes (in millions of
gallons)(2).................. 498 499 482 496 553 483 490
Retail gross margin index(3).. 100.0% 98.4% 114.5% 109.7% 101.1% 102.1% 105.8%
</TABLE>
- ---------------------
(1) The normal average national degree days as of the fiscal year ended July
31, 1993 were 4,689 and the normal average national degree days as of the
nine months ended April 30, 1994 were 4,477.
(2) From 1989 through 1993, 49 acquisitions were completed at a total cost of
approximately $69.0 million. The aggregate annual sales volumes
attributable to these acquisitions (measured with respect to each
acquisition on the date of the acquisition) were estimated to be 7.3
million gallons, 11.3 million gallons, 18.0 million gallons, 8.6 million
gallons and 0.7 million gallons for the fiscal years ended July 31, 1989
through 1993, respectively.
(3) The Company's average retail gross margins, on a cents per gallon basis,
are measured as a percentage of fiscal 1989 retail gross margins. Average
retail gross margins in fiscal 1991 were affected by the Persian Gulf
crisis.
SUPPLY AND DISTRIBUTION
The Company 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 Company's ability to
buy large volumes of propane and (ii) the Company's large distribution system
and underground storage capacity, the Company 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. The Company is not dependent upon any single supplier or group of
suppliers, the loss of which would have a material adverse effect on the
Company. For the year ended July 31, 1993, no supplier at any single delivery
point provided more than
35
<PAGE>
10% of the Company's total domestic propane supply. A portion of the Company'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 Company's contracts specify certain minimum and maximum amounts of
propane to be purchased thereunder. The Company may purchase and store
inventories of propane in order to help insure uninterrupted deliverability
during periods of extreme demand. The Company owns three underground storage
facilities with an aggregate capacity of approximately 168 million gallons.
Currently, approximately 80 million gallons of this capacity is leased to third
parties, and approximately 6 million gallons of capacity is exchanged with
another company for approximately 6 million gallons of storage capacity at
Bumstead, Arizona. The remaining space is available for the Company's own 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 Company and
highway transport trucks owned or leased by the Company. The Company operates a
fleet of 62 transport trucks to transport propane from refineries, natural gas
processing plants or pipeline terminals to the Company's 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
Company's retail distribution outlets to customers by the Company's fleet of
1,059 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 information contained in the Energy Information Administration's
Annual Energy Review 1993 magazine, propane accounts for approximately 3.0% of
household energy consumption in the United States, an average level which has
remained relatively constant for the past 10 years. It 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 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 Company 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. 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 Company competes
with other companies engaged in the retail propane distribution business.
Competition within the propane distribution industry
36
<PAGE>
stems from two types of participants: the larger multi-state marketers, and the
smaller, local independent marketers. Based upon information contained in the
National Propane Gas Association's LP-Gas Market Facts and the June 1993 issue
of LP Gas magazine, the Company believes that the ten largest multi-state
retail marketers of propane, including the Company, account for less than 35%
of the total retail sales of propane in the United States. Based upon
information contained in industry publications, the Company also believes no
single marketer has a greater than 10% share of the total market in the United
States and that the Company is the third largest retail marketer of propane in
the United States, with a market share of approximately 6.0% as measured by
volume of national retail propane sales.
Most of the Company'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 Company 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 Company consist of: (1) trading, (2) chemical
feedstocks marketing, and (3) wholesale propane marketing. The Company, through
its natural gas liquids trading operations and wholesale marketing, has become
one of the largest independent traders of propane and natural gas liquids in
the United States. The Company owns no properties that are material to these
operations, but leases 371 railroad tank cars for use in its chemical
feedstocks marketing operations.
TRADING
The Company's traders are engaged in trading propane and other natural gas
liquids for the Company's account and for supplying the Company's retail and
wholesale propane operations. The Company primarily trades products purchased
from its over 200 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 65% of the Company's total trading volume, with the
remainder consisting of various other natural gas liquids. The Company 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 fiscal years ended
July 31, 1993, 1992 and 1991, the Company had net revenues of $6.7 million,
$4.9 million and $9.9 million, respectively, from its trading activities.
CHEMICAL FEEDSTOCKS MARKETING
The Company is also involved in the marketing of refinery and petrochemical
feedstocks. Petroleum by-products are purchased from refineries and
petrochemical plants and sold to end users of such by-products. The Company had
revenues of $54.0 million, $50.6 million and $31.8 million from such activities
for the fiscal years ended July 31, 1993, 1992 and 1991, respectively.
WHOLESALE MARKETING
The Company engages in the wholesale distribution of propane to other retail
propane distributors. During the fiscal years ended July 31, 1993, 1992 and
1991 the Company sold 129 million, 95 million and 73 million gallons,
respectively, of propane to wholesale customers and had revenues attributable
to such sales of $29.3 million, $37.7 million and $57.4 million, respectively.
37
<PAGE>
EMPLOYEES
At April 30, 1994, the Company had 2,342 full-time employees and 990
temporary and part-time employees. The number of temporary and part-time
employees is generally higher by approximately 500 people during the winter
heating season. At April 30, 1994, the Company's full-time employees were
employed in the following areas:
<TABLE>
<S> <C>
Retail Market Locations............................................. 1,979
Transportation and Storage.......................................... 115
Field Services...................................................... 56
Corporate Offices (Liberty & Houston)............................... 192
-----
Total............................................................. 2,342
=====
</TABLE>
Approximately two percent of the Company's employees are represented by nine
local labor unions, which are all affiliated with the International Brotherhood
of Teamsters. The Company has not experienced any significant work stoppages or
other labor problems.
The Company's supply, trading, chemical feedstocks marketing, distribution
scheduling and product accounting functions are operated out of the Company's
offices located in Houston, Texas, by a total full time corporate staff of 60
people (which includes four traders as well as necessary support staff).
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 Company 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 Company 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 Company
employees look for evidence of hazardous substances or the existence of
underground storage tanks.
With respect to the transportation of propane by truck, the Company 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. 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 Company operates. There are no material environmental claims pending and
the Company complies in all material respects with all material governmental
regulations and industry standards applicable to environmental and safety
matters.
SERVICE MARKS AND TRADEMARKS
The Company markets retail propane under the "Ferrellgas" tradename and uses
the tradename "Ferrell North America" for its other operations. In addition,
the Company has a trademark on the name "Ferrellmeter," its patented gas leak
detection device. The Company will contribute all of its right, title and
interest to such tradenames and trademark in the continental United States to
the Partnership. The Company will have an option to purchase such tradenames
and trademark from the Partnership for a nominal value if the Company is
removed as general partner of the Partnership other than for cause. If the
Company 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.
38
<PAGE>
MANAGEMENT INFORMATION AND CONTROL SYSTEMS
The Company has, in each of its retail outlets, a computer-based information
and control system. This system provides for remote billing of, and collections
from, customers and is designed to enhance the local outlets' responsiveness to
customers. Each outlet can be monitored by headquarters to determine volume of
sales, selling price and gross margin.
PROPERTIES
At April 30, 1994, the Company owned or leased the following transportation
equipment which was utilized primarily in retail operations, except for
railroad tank cars, which are used primarily by chemical feedstocks operations:
The highway 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.
<TABLE>
<CAPTION>
OWNED LEASED TOTAL
<S> <C> <C> <C>
Truck tractors............................................ 15 47 62
Transport trailers........................................ 69 -- 69
Bulk delivery trucks...................................... 442 617 1,059
Pickup and service trucks................................. 399 574 973
Railroad tank cars........................................ -- 371 371
</TABLE>
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 Company provides to its retail
customers for propane storage. The Company owns the land and buildings of about
50% of its retail outlets and leases the remaining facilities on terms
customary in the industry and in the applicable local markets.
Approximately 500,000 propane tanks are owned by the Company, most of which
are located on customer property and leased to those customers. The Company
also owns approximately 545,000 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 Company for resale.
Ferrellgas owns underground storage facilities at Hutchinson, Kansas;
Adamana, Arizona; and Moab, Utah. At April 30, 1994, the capacity of these
facilities approximated 73 million gallons, 88 million gallons and 7 million
gallons, respectively (an aggregate of approximately 168 million gallons).
Currently, approximately 80 million gallons of this capacity is leased to third
parties, and approximately 6 million gallons of capacity is exchanged with
another company for approximately 6 million gallons of storage capacity at
Bumstead, Arizona. The remaining space is available for the Company's own use.
The Company purchased, in fiscal year 1993, the land and two buildings
(50,245 square feet of office space) comprising its corporate headquarters in
Liberty, Missouri, from Ferrell Leasing Corp. The Company leases the 18,124
square feet of office space in Houston, Texas, where its trading, chemical
feedstocks marketing and wholesale marketing operations are located.
The Company believes that it has satisfactory title to or valid right 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 Company does not believe that any such burdens will
materially interfere with the continued use of such properties by the
Partnership in its business, taken as a whole. In addition, the Company
believes that it has, or is in the
39
<PAGE>
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 Company's properties or the operations of its business.
LITIGATION
Propane is a flammable, combustible gas. Serious personal and property damage
can occur in connection with its transportation, storage or use. The Company,
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 products liability, personal injury and property damage.
The Company maintains liability insurance policies with insurers in such
amounts and with such coverages and deductibles as management of the Company
believes is reasonable and prudent. However, there can be no assurance that
such insurance will be adequate to protect the Company 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, after taking into consideration the Company's
insurance coverage and existing reserves, management is of the opinion that
there are no known uninsured claims or known contingent claims that are likely
to have a material adverse effect on the results of operations or financial
condition of the Company. When the Partnership assumes all outstanding
liabilities relating to the business, it will assume such liabilities, whether
or not asserted against or known by the Company at the time of the transfer.
TRANSFER OF THE PARTNERSHIP ASSETS
The Company will transfer its right, title and interest in its propane
business and assets to the Partnership at or shortly before the closing of this
offering, subject to the following. The assets include the Company's interests
in leases covering several types of assets, including railcars, trucks and
retail distribution centers. Many of these leases are transferable to the
Partnership only with the consent of the lessor. The Company expects to obtain,
prior to the closing of this offering, third party consents which are
sufficient to enable the Company to transfer to the Partnership the assets
necessary to enable the Partnership to conduct the Company's propane business
in all material respects as described in this Prospectus. In the event any such
consents are not obtained, the Company will enter into other agreements,
including the lease or purchase of other assets, in order to insure that the
Partnership has the assets necessary to enable it to conduct the Company's
propane business in all material respects as described in this Prospectus. In
addition, certain of the Company's licenses, permits and other similar rights
relating to the assets to be assigned to the Partnership are not transferable
or are transferable only with the consent of third parties. Such transferable
rights will not be transferred to the Partnership at the closing of this
offering unless applicable consents have been obtained. In the case of non-
transferable rights or rights where no consent has been obtained by the
closing, the Company will seek to obtain such consents in the normal course of
business after the closing or seek to have comparable rights granted to the
Partnership prior to the closing. Numerous licenses, permits and rights will be
required for the operation of the Partnership's business, and no assurance can
be given that the Partnership will obtain all licenses, permits and rights
which are required in connection with the ownership and operation of its
business. Although failure by the Partnership to obtain such licenses, permits
or rights could have a material adverse effect on the Partnership, the Company
believes that the Partnership will have the licenses, permits and rights which
will enable the Partnership to conduct its propane business in a manner which
is similar in all material respects to that which was conducted by the Company
prior to the closing of this offering and that any such failure to obtain
licenses, permits or rights will not have a material adverse impact on the
business of the Partnership as described in this Prospectus.
40
<PAGE>
MANAGEMENT
PARTNERSHIP MANAGEMENT
The General Partner will manage and operate the activities of the
Partnership, and the General Partner anticipates that its activities will be
limited to such management and operation. Notwithstanding any limitation on
obligations or duties, the General Partner will be liable, as the general
partner of the Partnership, for all the debts of the Partnership (to the extent
not paid by the Partnership), except to the extent that indebtedness incurred
by the Partnership is made specifically non-recourse to the General Partner.
The General Partner will appoint two 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 members
will be elected no later than three months after the date of this Prospectus.
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.
The Partnership will not directly employ any of the persons responsible for
managing or operating the Partnership. The current management and workforce of
Ferrellgas will continue to manage and operate the Partnership's business as
officers and employees of the General Partner. At April 30, 1994, 2,342 full-
time and 990 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 Company. Each of the persons named
below is elected to their respective office or offices annually. The executive
officers are not subject to employment agreements with their respective
employer or employers. The General Partner intends to promptly add additional
members to its Board of Directors, including at least two independent members.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITION
<S> <C> <C> <C>
James E. Ferrell........... 54 1984 President, Chairman of the Board and a
Director of the Company
Bradley A. Cochennet....... 40 -- Executive Vice President and Chief
Operating Officer of the Company
Danley K. Sheldon.......... 35 -- Vice President and Chief Financial
Officer/Treasurer of the Company
Rhonda E. Smiley........... 38 -- Vice President of Legal Affairs
Vice President of Marketing and
Brian M. Smith............. 43 -- Communications
</TABLE>
James E. Ferrell--Mr. Ferrell has been with Ferrell or its predecessors and
its affiliates in various executive capacities since 1965.
Bradley A. Cochennet--Mr. Cochennet has been Chief Operating Officer since
January, 1993 and has been a Vice President of the Company since 1985. Mr.
Cochennet joined the Company in 1980.
41
<PAGE>
Danley K. Sheldon--Mr. Sheldon has been Chief Financial Officer of the
Company since January 1994 and has served as Treasurer since 1989. He joined
the Company in 1986.
Rhonda E. Smiley--Ms. Smiley joined the Company in 1991 as Director of Legal
Affairs and has been a Vice President of the Company since April 1994. Prior to
joining the Company, Ms. Smiley practiced law with Shook, Hardy & Bacon for ten
years, the last five years as a partner.
Brian M. Smith--Mr. Smith joined the Company in 1991 as Managing Director of
Marketing and Communications and has been a Vice President of the Company since
April 1994. Prior to joining the Company, Mr. Smith was President and owner of
The Smith Group, Inc., a marketing communications firm.
COMPENSATION OF THE GENERAL PARTNER
The General Partner will receive no management fee or similar compensation in
connection with its management of the Partnership and will receive no
remuneration other than:
(i) distributions in respect of its 2% general partner interest, on a
combined basis, in the Partnership and the Master 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.
In addition, Ferrell, the parent of the General Partner, will receive
1,000,000 Common Units, 16,118,559 Subordinated Units and the Incentive
Distribution Rights in connection with the transactions described in this
Prospectus and will be entitled to distributions thereon, as described under
"Cash Distributions Policy" above.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual salary, bonuses and all other
compensation awards and payouts to the Chief Executive Officer and to named
executive officers of the Company, for the fiscal years ended July 31, 1991,
1992 and 1993.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------- ------------------- ---------
OTHER
ANNUAL RESTRICTED STOCK LONG-TERM ALL OTHER
COMPEN- STOCK OPTIONS/ INCENTIVE COMPEN-
NAME AND SALARY BONUS SATION AWARDS SARS PAYOUTS SATION
POTENTIAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James E. Ferrell........ 1993 480,000 -- -- -- -- 1,502,080(1) 25,489(2)
Chairman and Chief 1992 480,000 13,000 -- -- -- -- 32,401
Executive Officer 1991 246,000 20,000 -- -- -- -- 18,439
Bradley A. Cochennet.... 1993 150,000 -- -- -- 2,762 -- 9,315(3)
Vice President and 1992 150,000 -- -- -- -- -- 12,317
Chief Operating Officer 1991 151,667 -- -- -- -- -- 18,373
Geoffrey H. Ramsden (4). 1993 120,000 -- -- -- 9,566 -- 7,453(3)
Vice President and 1992 120,000 -- -- -- -- -- 12,000
Chief Financial Officer 1991 120,000 -- -- -- -- -- 17,550
</TABLE>
- ---------------------
(1) Early purchase of all the employee's 64,000 Equity Units under Ferrell's
Long-Term Incentive Plan at a price per unit of $23.47.
(2) Includes (i) Company contributions of $13,787 to the employee's 401(k) and
profit sharing plans and (ii) compensation of $11,702 resulting from the
Company's payment of split dollar life insurance premiums.
(3) Company contributions to the employee's 401(k) and profit sharing plans.
(4) Mr. Ramsden resigned in January 1994.
42
<PAGE>
STOCK OPTION TABLES
The Board of Directors of Ferrell adopted the 1992 Key Employee Stock Option
Plan (the "Option Plan") on June 26, 1992. The Option Plan reserves 100,000
shares of Class M Common Stock of Ferrell for the purpose of allowing Ferrell
to offer options on the Class M Common Stock to officers and key employees of
Ferrell and the Company. The value of each share of Class M Common Stock is
determined by the Board of Directors of Ferrell and shall not be less than fair
market value of such stock on the date the option is granted. The following
table sets forth the option grants for the fiscal year ended July 31, 1993:
<TABLE>
<CAPTION>
INDIVIDUAL GRANT
-----------------------------------------------
POTENTIAL REALIZED
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL STOCK APPRECIATIONS
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM(2)
OPTIONS TO EMPLOYEES PRICE EXPIRATION --------------------
NAME GRANTED IN FISCAL YEAR ($/SH) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Bradley A. Cochennet.... 2,762 22% $36.20 12/30/02 $29,000 $106,000
Geoffrey H. Ramsden..... 3,836(1) 31% $36.20 12/30/02 $41,000 $147,000
Geoffrey H. Ramsden..... 5,730(1) 47% $89.36 01/08/03 -- --
</TABLE>
- ---------------------
(1) Options terminated as a result of Mr. Ramsden's resignation in January
1994.
(2) These dollar amounts represent the potential realizable value of each grant
of options assuming that the market price of the Class M Common Stock
appreciates in value from the date of grant at 5% and 10% annual rates and
are not intended to forecast possible future appreciation, if any, of the
price of the Class M Common Stock.
The following table lists information on the named executive officer's
exercised/unexercised options for the fiscal year ended July 31, 1993:
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END
------------- ----------------
NUMBER OF
SHARES
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED ($) UNEXERCISABLE UNEXERCISABLE($)
<S> <C> <C> <C> <C>
Bradley A. Cochennet.... -- -- 2,762/-- $57,357/--
Geoffrey H. Ramsden(1).. -- -- 9,566/-- 79,674/--
</TABLE>
- ---------------------
(1) Options terminated as a result of Mr. Ramsden's resignation in January
1994.
LONG-TERM INCENTIVE PLAN AWARDS
The goal of Ferrell's Long-Term Incentive Plan (the "Plan") is to attract and
retain officers and key executives needed for the continued growth and success
of Ferrell and its affiliates through long-term incentives in the form of units
("Equity Units"). The plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors of Ferrell. The Committee members who
hold an award under the Plan are ineligible to vote on matters relating to the
Plan. The Committee has the authority to determine, within the express
provisions of the Plan, the individuals to whom awards will be granted; the
amount, size and terms of each such award; the time when awards will be
granted; and the objectives and conditions for earning such awards. The
Committee has the full and final authority to interpret the provisions of the
Plan, to decide all questions of fact arising upon its application and to make
all other determinations necessary or advisable for the administration of the
plan.
The Equity Units awarded under the Plan, which were 100% vested as of July
31, 1993, are subject to purchase by Ferrell at a cash price related to the
increased value of Ferrell's common stock from 1986, as determined pursuant to
(i) an appraisal conducted by a nationally recognized investment banking firm,
(ii)
43
<PAGE>
the mean of the closing bid and asked price of a class of Ferrell's common
stock if a class of Ferrell's common stock is publicly traded, or (iii) in
certain limited circumstances, including if the appraisal referred to in (i) is
more than 90 days old or if there is no public market as referred to in (ii),
the Committee shall determine the value of the Equity Units. Unless purchased
earlier, Ferrell will purchase all of the issued and outstanding Equity Units
as of July 31, 1996. The value of the Equity Units as of July 31, 1996 will be
the value of Ferrell's common stock as of such date, determined in accordance
with the valuation methods described above, less the "deemed" value of
Ferrell's common equity as of August 1, 1986.
As of July 31, 1993, a total of 60,000 Equity Units, awarded in previous
years, were outstanding to the group of executive officers named in the Summary
Compensation Table as follows: Geoffrey H. Ramsden--30,000 Equity Units and
Bradley A. Cochennet--30,000 Equity Units. When Mr. Ramsden resigned in January
1994, all of his Equity Units were fully vested and were subsequently
repurchased by Ferrell. During fiscal 1993, James E. Ferrell had a total of
64,000 Equity Units repurchased by Ferrell. No additional Equity Units were
awarded under the Plan in fiscal 1993, therefore, no long-term incentive plan
awards table is presented.
Compensation expense of $720,000 and $80,000 was recorded for the nine months
ended April 30, 1994 and for the fiscal year ended July 31, 1993, respectively,
pursuant to the Plan for the benefit of the Equity Unit holders. As of April
30, 1994, a liability totaling approximately $2,145,000 is recorded in the
financial statements of Ferrell as a result of the grants under this Plan.
PROFIT SHARING PLAN
The Ferrell Profit Sharing 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. 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 Company and Ferrell. The contributions are allocated to the Profit
Sharing Plan participant's 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 2%
to 7% of each participant's annual wage or salary. The Profit Sharing Plan also
has a cash-or-deferred, or 401(k), feature allowing plan participants to
specify a portion of their pre-tax and/or after-tax compensation to be
contributed to the Profit Sharing Plan.
COMPENSATION OF DIRECTORS
The Company pays no additional remuneration to its employees (or employees
of, or legal counsel to, a direct or indirect wholly-owned subsidiary) for
serving as directors. Directors who are not employees of the Company, a direct
or indirect wholly-owned subsidiary, or counsel to any of the foregoing,
receive a fee per meeting of $500, plus reimbursement for out-of-pocket
expenses.
TERMINATION OF EMPLOYMENT ARRANGEMENT
On January 3, 1991, Warren Gfeller resigned as President of the Company and
as Director of Ferrell. In connection with such resignation, a severance
agreement was executed by and among Mr. Gfeller, the Company and Ferrell,
whereby Mr. Gfeller would receive $2.6 million, payable in four equal annual
installments commencing on or before January 11, 1991. As consideration for
these payments, Mr. Gfeller agreed not to compete with the Company and to the
termination and release of his participation in the Ferrell Long-Term Incentive
Plan and all bonus or performance plans maintained by the Company and Ferrell.
In connection with Geoffrey H. Ramsden's resignation in January 1994, Ferrell
and Mr. Ramsden entered into a severance agreement dated March 23, 1994.
Pursuant to the terms of the agreement, Mr.
44
<PAGE>
Ramsden received approximately $500,000 in exchange for the repurchase of his
Class M Stock and Equity Units and the termination of all rights under
Ferrell's bonus and performance plans.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company is a wholly owned subsidiary of Ferrell. The following table sets
forth the beneficial ownership of the outstanding capital stock of Ferrell by
beneficial owners of five percent or more of any class of capital stock of
Ferrell, by directors of Ferrell and by all directors and officers of Ferrell
as a group as of May 31, 1994.
<TABLE>
<CAPTION>
SHARES
TITLE OF BENEFICIALLY PERCENT
CLASS NAME OF BENEFICIAL OWNER OWNED(1) OF CLASS
<S> <C> <C> <C>
Class A Common Stock.... James E. Ferrell(2) 2,562,680(3) 99.6%
All Directors and Officers as a Group 2,562,680 99.6%
Class M Common Stock(4). James E. Ferrell -- --
Bradley A. Cochennet 2,770 17.9%
All Directors and Officers as a Group 4,325 27.9%
</TABLE>
- ---------------------
(1) Beneficial ownership for the purposes of the foregoing table is defined by
Rule 13d-3 under the Securities Exchange Act of 1934, as amended. 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 impose or direct the disposition thereof
("Investment Power") or has the right to acquire either of those powers
within 60 days.
(2) The address for James E. Ferrell is c/o Ferrell Companies, Inc., One
Liberty Plaza, Liberty, Missouri 64081.
(3) James E. Ferrell has sole Voting and Investment Power with respect to
1,525,817 shares of Class A Common Stock held by Mr. Ferrell as Trustee of
the James E. Ferrell Revocable Trust. Mr. Ferrell shares Voting and
Investment Power with respect to 1,036,823 shares of Class A Common Stock
held by himself and his wife, Elizabeth J. Ferrell, as joint tenants with
rights of survivorship.
(4) The shares of Class M Common Stock are restricted to eligible employees of
Ferrell and the Company and are non-voting and non-transferable. Ferrell
will repurchase all of the shares of Class M Common Stock owned by such
employees upon their death, disability, retirement, voluntary or
involuntary termination of employment or bankruptcy. The purchase price for
such shares is based on valuation formulas set forth in the Class M Stock
Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a discussion of certain relationships and related
transactions among affiliates of the Company. Upon the consummation of the
transactions contemplated hereby, the indebtedness set forth below will be
repaid and will no longer be outstanding.
In the second and third quarter of fiscal year 1993, Ferrell Leasing Corp., a
subsidiary of Ferrell Properties, Inc., sold to the Company for the fair market
value of $4,100,000, the land and two buildings comprising the Company's
corporate headquarters in Liberty, Missouri. The purchase price was based on an
independent appraisal. The land and building were acquired by Ferrell Leasing
Corp. in December 1989. James E. Ferrell, a director and executive officer of
the Company, owns all of the issued and outstanding stock of Ferrell
Properties, Inc. Prior to the purchase of the buildings, the Company paid total
rent to Ferrell Leasing of $403,000.
In fiscal year 1993, the Company received a capital contribution from
Ferrell. The contribution consisted of (i) the forgiveness of a $3,015,000
long-term note payable to an affiliate, including interest, and (ii) a $262,000
note receivable from an affiliate.
45
<PAGE>
During the three fiscal years ended July 31, 1993, the directors and
executive officers of the Company listed below have, or corporations in which
such directors or executive officers beneficially own ten percent or more of
any class of equity securities have, from time to time, been indebted to the
Company, Ferrell and/or their respective subsidiaries or affiliates in an
amount in excess of $60,000 as follows:
<TABLE>
<CAPTION>
HIGHEST AMOUNT AMOUNT
OUTSTANDING SINCE OUTSTANDING AT
NAME RELATIONSHIP APRIL 30, 1990 APRIL 30, 1994
<S> <C> <C> <C>
James E. Ferrell(1)......... Executive Officer $8,895,810 $8,895,810
and Director
Ferrell Development,
Inc.(2).................... Affiliate $1,500,000 $1,500,000
One Liberty Plaza, Inc.(2).. Affiliate $3,000,000 $3,000,000
Ferrell Properties, Inc.(2). Affiliate $1,757,946 $ 262,199
</TABLE>
- ---------------------
(1) All loans or advances to Mr. Ferrell are cash loans made by the Company for
Mr. Ferrell's personal use. The loans or advances did not arise as a result
of any transactions with the Company. All loans or advances to Mr. Ferrell
are represented by a demand note which bears interest at the prime rate.
The interest rate charged on this loan ranged from 6% to 8.5% during fiscal
1993, from 8.5% to 10.5% during fiscal 1992, and 10.0% to 10.5% during
fiscal 1991.
(2) Ferrell Development, Inc., and One Liberty Plaza, Inc. are wholly owned
subsidiaries of Ferrell Properties, Inc. The indebtedness of Ferrell
Development and One Liberty Plaza arose as a result of cash loans made by
the Company. The indebtedness of Ferrell Properties, which was contributed
to the Company by Ferrell in fiscal 1993, arose as a result of cash loans
made by Ferrell. The loans did not arise as a result of any transactions
with the Company or Ferrell. The terms of the loans, as fixed by the loan
documents, are as favorable as could be obtained from a third party and the
loans were approved by a majority of the Company's or Ferrell's independent
directors. The interest income generated from the loans, which bear
interest of the prime rate plus 1.125%, is not material to the Company or
Ferrell.
46
<PAGE>
CASH DISTRIBUTIONS
A principal objective of the Partnership is to generate cash from Partnership
operations and to distribute Available Cash to the General Partner and the
Master Partnership for distribution, in turn, to its partners. "Available Cash"
is defined in the glossary and generally means, with respect to any fiscal
period of the Partnership, the sum of all of the cash received by the
Partnership from all sources plus reductions to reserves less all of its cash
disbursements and net additions to reserves.
The Partnership will make distributions to its partners with respect to each
fiscal quarter of the Partnership prior to liquidation in an amount equal to
100% of its Available Cash for such quarter. Distributions will also be made
upon liquidation of the Partnership as follows: (i) first to the creditors of
the Partnership (including the Holders of the Senior Notes) and to the creation
of a reserve for contingent liabilities and (ii) then to the General Partner
and the Master Partnership in accordance with the positive balance in their
respective capital accounts.
THE PARTNERSHIP
The following paragraphs are a summary of certain provisions of the
Partnership Agreement. The form of the Partnership Agreement for the
Partnership is included as an exhibit to the Registration Statement of which
this Prospectus constitutes a part. The following discussion is qualified in
its entirety by reference to the Partnership Agreement. The General Partner
will serve as the general partner of the Partnership and will also serve as the
General Partner of the Master Partnership, collectively owning a 2% general
partner interest in the business and properties owned by the Partnership and
the Master Partnership on a combined basis. The Master Partnership will serve
as the sole limited partner of the Partnership, owning a 98.9899% limited
partner interest, and the General Partner, owning a 1.0101% general partner
interest, will manage and operate the Partnership. The control exercised by the
General Partner may make it more difficult for others to gain control over or
influence the activities of the Partnership.
THE PARTNERSHIP
The Partnership and the Master Partnership were recently organized as
Delaware limited partnerships. Upon the sale of the Common Units offered
concurrently herewith, the General Partner will hold an aggregate 2% interest
as general partner, and the Unitholders (including Ferrell as an owner of
Common Units, Subordinated Units and Incentive Distribution Rights) will hold a
98% interest as limited partners in the Partnership and the Master Partnership,
on a combined basis. The Partnership will dissolve on July 31, 2084, unless
sooner dissolved pursuant to the terms of the Partnership Agreement.
WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER
The General Partner has agreed not to voluntarily withdraw as general partner
of the Partnership prior to July 31, 2004, without obtaining the approval of
the limited partner, providing at least 90 days' written notice to the limited
partner of the Partnership, and furnishing an opinion of counsel that such
withdrawal will not result in the loss of limited liability of the limited
partner of the Partnership or cause the Partnership to be treated as an
association taxable as a corporation or otherwise taxed as an entity for
federal income tax purposes (an "Opinion of Counsel"). On or after July 31,
2004, the General Partner may withdraw as general partner of the Partnership by
giving at least 90 days' advance written notice to the limited partner, and
such withdrawal will not constitute a violation of the Partnership Agreement.
47
<PAGE>
Under the terms of both the Partnership Agreement and the Agreement of
Limited Partnership of the Master Partnership (the "Master Partnership
Agreement"), however, withdrawal of the General Partner as general partner of
the Master Partnership shall also constitute the withdrawal as general partner
of the Partnership. Under the terms of the Master Partnership Agreement, the
General Partner has agreed not to voluntarily withdraw as general partner of
the Master Partnership prior to July 31, 2004 (with limited exceptions
described below), without obtaining the approval of at least 66 2/3% of the
outstanding Units (excluding for purposes of such determination Units held by
the General Partner and its affiliates), providing 90 days' written notice to
the Master Partnership and its limited partners and furnishing an Opinion of
Counsel with respect to the Master Partnership and its limited partners. On or
after July 31, 2004, the General Partner may withdraw as general partner of the
Master Partnership by giving 90 days' written notice (without first obtaining
approval from the Unitholders), and such withdrawal will not constitute a
violation of the Master Partnership Agreement. Notwithstanding the foregoing,
the General Partner may withdraw as general partner of the Master Partnership
without Unitholder approval upon 90 days' notice to the limited partners if
more than 50% of the outstanding Units are held or controlled by one person and
its affiliates (other than the General Partner and its affiliates). In
addition, the Master Partnership Agreement permits the General Partner (in
certain limited instances) to sell all of its general partner interest in the
Master Partnership and permits the parent corporation of the General Partner to
sell all or any portion of the capital stock of the General Partner to a third
party without the approval of the Unitholders. The transfer of all or any part
of the General Partner's partnership interest in the Master Partnership is
subject to such transferee agreeing to assume the rights and duties of the
General Partner under the Partnership Agreement and the Master Partnership
Agreement and to be bound by the provisions of the Partnership Agreement and
the Master Partnership Agreement, the receipt of an Opinion of Counsel and such
transferee agreeing to purchase all (or the appropriate portion thereof, if
applicable) of the partnership interest of the General Partner as the general
partner of the Partnership. Upon the withdrawal of the General Partner under
any circumstances (other than as a result of a transfer by the General Partner
of all or a part of its general partner interest in the Master Partnership),
the holders of a majority of the outstanding Units (excluding for purposes of
such determination Units held by the General Partner and its affiliates) may
select a successor to such withdrawing General Partner. Any successor to the
General Partner of the Master Partnership so elected shall automatically become
the successor general partner of the Partnership. If such a successor is not
elected, or is elected but an Opinion of Counsel cannot be obtained, the Master
Partnership will be dissolved, wound up and liquidated, unless within 180 days
after such withdrawal a majority of the Unitholders agree in writing to
continue the business of the Partnership and to the appointment of a successor
General Partner. See "--Termination and Dissolution."
The General Partner shall only be removed as general partner of the
Partnership upon the General Partner's removal as general partner of the Master
Partnership. The General Partner may not be removed as general partner of the
Master Partnership unless such removal is approved by the vote of the holders
of not less than 66 2/3% of the outstanding Units and the Master Partnership
receives an Opinion of Counsel. Any such removal is also subject to the
approval of a successor general partner by the vote of the holders of not less
than a majority of the outstanding Units.
In the event of withdrawal of the General Partner from the Master Partnership
where such withdrawal violates the Master Partnership Agreement or removal of
the General Partner by the limited partners of the Master Partnership under
circumstances where cause exists, a successor general partner will have the
option to purchase the general partner interest of the departing General
Partner (the "Departing Partner") in the Partnership and the Master Partnership
for a cash payment equal to the fair market value of such interest. Under all
other circumstances where the General Partner withdraws or is removed by the
limited partners of the Master Partnership, the Departing Partner will have the
option to require the successor general partner to purchase such general
partner interest of the Departing Partner for such amount. In each case such
fair market value will be determined by agreement between the Departing Partner
and the successor general partner, or if no agreement is reached, by an
independent investment banking firm or other independent experts selected by
the Departing Partner and the successor general partner (or if no expert can be
agreed
48
<PAGE>
upon, by the expert chosen by agreement of the experts selected by each of
them). In addition, the Partnership would also be required to reimburse the
Departing Partner for all amounts due the Departing Partner, including without
limitation, all employee related liabilities, including severance liabilities,
incurred in connection with the termination of the employees employed by the
Departing Partner for the benefit of the Partnership.
If the above-described option is not exercised by either the Departing
Partner or the successor general partner, as applicable, the Departing
Partner's general partner interest in the Partnership and the Master
Partnership will be converted into Common Units equal to the fair market value
of such interest as determined by an investment banking firm or other
independent expert selected in the manner described in the preceding paragraph.
AMENDMENT OF PARTNERSHIP AGREEMENT
The General Partner may make amendments to the Partnership Agreement without
the consent of the limited partner if such amendments (i) do not adversely
affect the limited partner in any material respect, (ii) are necessary or
desirable to satisfy any requirements, conditions or guidelines contained in
any opinion, directive, ruling or regulation of any federal or state agency or
judicial authority or contained in any federal or state statute, (iii) are
required to conform the provisions of the Partnership Agreement with the
provisions of the Master Partnership Agreement or (iv) are required or
contemplated by the Partnership Agreement. In addition, the General Partner may
make certain other amendments to the Partnership Agreement without the approval
of the limited partner.
All other amendments to the Partnership Agreement may be proposed only by or
with the consent of the General Partner and require the approval of the
Partnership's limited partner.
TERMINATION AND DISSOLUTION
The Partnership will continue until July 31, 2084, unless sooner terminated
pursuant to the Partnership Agreement. The Partnership will be dissolved upon
(i) an election by the General Partner to dissolve the Partnership that is
approved by the limited partner, (ii) the sale of all or substantially all of
the assets and properties of the Partnership, (iii) the entry of a decree of
judicial dissolution of the Partnership, (iv) the dissolution of the Master
Partnership or (v) withdrawal or removal of the General Partner or any other
event that results in its ceasing to be the General Partner (other than by
reason of a transfer in accordance with the Partnership Agreement or withdrawal
or removal following approval of a successor), provided that the Partnership
shall not be dissolved upon an event described in clause (v) if within a
specified period after such event the limited partner elects to continue the
business of the Partnership on the same terms and conditions set forth in the
Partnership Agreement by forming a new limited partnership on terms identical
to those set forth in the Partnership Agreement and having as a general partner
an entity approved by the limited partner of the Partnership. In addition, if
the Partnership is dissolved pursuant to an event described in clause (v) and
the Master Partnership is reconstituted pursuant to the Master Partnership
Agreement, the reconstituted Master Partnership may, as the limited partner of
the Partnership, within 180 days after such event of dissolution, elect to
reconstitute the Partnership. If such an election is made and the successor
General Partner is not the former General Partner, then the interest of the
former General Partner shall be purchased by the successor General Partner or
converted into Common Units. Such right to elect a successor general partner
and reconstitute the Partnership is subject to receipt by the Partnership of an
opinion of counsel that the exercise of such right will not result in the loss
of the limited liability of the limited partner or cause the Partnership or the
reconstituted limited partnership to be treated as an association taxable as a
corporation or otherwise subject to taxation as an entity for federal income
tax purposes.
49
<PAGE>
LIQUIDATION AND DISTRIBUTION OF PROCEEDS
Upon dissolution of the Partnership, unless the Partnership is reconstituted
and continued as a new limited partnership, the person authorized to wind up
the affairs of the Partnership (the "Liquidator") will, acting with all of the
powers of the general partner that such Liquidator deems necessary or desirable
in its good faith judgment in connection therewith, liquidate the Partnership's
assets and apply the proceeds of the liquidation as follows: (i) first towards
the payment of all creditors of the Partnership and the creation of a reserve
for contingent liabilities and (ii) then to all partners in accordance with the
positive balance in their respective capital accounts. Under certain
circumstances and subject to certain limitations, the Liquidator may defer
liquidation or distribution of the Partnership's assets for a reasonable period
of time or distribute assets to partners in kind if it determines that a sale
would be impractical or would cause undue loss to the partners.
50
<PAGE>
DESCRIPTION OF SENIOR NOTES
GENERAL
The Senior Notes will be issued pursuant to an Indenture (the "Indenture")
between the Issuers and Norwest Bank, Minnesota, National Association, as
trustee (the "Trustee"). The terms of the Senior Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Senior Notes
are subject to all such terms, and Holders of Senior Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Senior Notes and the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Senior Notes and the Indenture, including the definitions therein of certain
terms used below. A copy of the proposed form of Indenture will be filed as an
exhibit to the Registration Statement of which this Prospectus is a part and is
available as set forth under "Available Information." The definitions of
certain terms used in the following summary are set forth below under "Certain
Definitions."
The Senior Notes will be unsecured general joint and several obligations of
the Issuers and will rank senior in right of payment to all subordinated
Indebtedness of the Issuers and on an equal basis in right of payment with all
senior Indebtedness of the Issuers, including the Partnership's borrowings
under the Credit Facility. The Senior Notes will be recourse to the property
and assets of the General Partner in its capacity as general partner of the
Partnership.
PRINCIPAL, MATURITY AND INTEREST
The Senior Notes will be limited in aggregate principal amount to $250
million and will mature on , 2001. Interest on the Senior Notes will
accrue at the rate of % per annum and will be payable semi-annually in
arrears on and , commencing on , 1994, to
Holders of record on the immediately preceding and .
Interest on the Senior Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. The Senior Notes will be payable both as to
principal and interest at the office or agency of the Issuers maintained for
such purpose within the City and State of New York or, at the option of the
Issuers, payment of interest may be made by check mailed to the Holders of the
Senior Notes at their respective addresses set forth in the register of Holders
of Senior Notes. Until otherwise designated by the Issuers, the Issuers' office
or agency in New York will be the office of the Trustee maintained for such
purpose. The Senior Notes will be issued in registered form, without coupons,
and in denominations of $1,000 and integral multiples thereof.
The foregoing paragraph assumes that all Senior Notes issued in the Offering
will bear interest at a fixed rate. See the Partnership's pro forma
consolidated financial statements. It is possible, however, that a portion of
the Senior Notes, not anticipated to be in excess of $50 million, will bear
interest at a floating rate based on three month LIBOR.
OPTIONAL REDEMPTION
The Senior Notes are not redeemable at the Issuers' option prior to
, 1998. Thereafter, the Senior Notes will be subject to redemption at
the option of the Issuers, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the 12-month period
beginning on of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
1998.......................................................... %
1999.......................................................... %
2000.......................................................... 100.000%
</TABLE>
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Issuers are not required to make mandatory redemption or sinking fund payments
with respect to the Senior Notes.
51
<PAGE>
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Senior Notes will
have the right to require the Issuers to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Senior Notes pursuant
to the offer described below (the "Change of Control Offer") at an offer price
in cash equal to 101% of the aggregate principal amount thereof plus accrued
and unpaid interest, if any, to the date of purchase (the "Change of Control
Payment"). Within 10 days following any Change of Control, the Issuers will
mail a notice to each Holder stating: (1) that the Change of Control Offer is
being made pursuant to the covenant entitled "Change of Control" and that all
Senior Notes tendered will be accepted for payment; (2) the purchase price and
the purchase date, which will be no earlier than 30 days nor later than 40 days
from the date such notice is mailed (the "Change of Control Payment Date"); (3)
that any Senior Note not tendered will continue to accrue interest; (4) that,
unless the Issuers default in the payment of the Change of Control Payment, all
Senior Notes accepted for payment pursuant to the Change of Control Offer will
cease to accrue interest after the Change of Control Payment Date; (5) that
Holders electing to have any Senior Notes purchased pursuant to a Change of
Control Offer will be required to surrender the Senior Notes, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Senior
Notes completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the third Business Day preceding the Change
of Control Payment Date; (6) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the second Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Senior Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have such Senior
Notes purchased; and (7) that Holders whose Senior Notes are being purchased
only in part will be issued new Senior Notes equal in principal amount to the
unpurchased portion of the Senior Notes surrendered, which unpurchased portion
must be equal to $1,000 in principal amount or an integral multiple thereof.
The Issuers will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations to the extent such laws and
regulations are applicable in connection with the repurchase of the Senior
Notes in connection with a Change of Control.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (1) accept for payment Senior Notes or portions thereof tendered
pursuant to the Change of Control Offer, (2) deposit with the paying agent
therefor an amount equal to the Change of Control Payment in respect of all
Senior Notes or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Senior Notes so accepted together with an
officers' certificate stating the aggregate amount of the Senior Notes or
portions thereof tendered to the Issuers. The Paying Agent will promptly mail
to each Holder of Senior Notes so accepted the Change of Control Payment for
such Senior Notes, and the Trustee will promptly authenticate and mail to each
Holder a new Senior Note equal in principal amount to any unpurchased portion
of the Senior Notes surrendered, if any; provided that each such new Senior
Note will be in a principal amount of $1,000 or an integral multiple thereof.
The Issuers will publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Payment Date.
"Change of Control" means (i) the sale, lease, conveyance or other
disposition of all or substantially all of the Partnership'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 Partnership 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 Partnership.
52
<PAGE>
"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 or (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.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of the Senior Notes to
require that the Issuers repurchase or redeem the Senior Notes in the event of
a takeover, recapitalization or similar restructuring.
With respect to the sale of assets referred to in the definition of "Change
of Control" above, the phrase "all or substantially all" as used in the
Indenture varies according to the facts and circumstances of the subject
transaction, has no clearly established meaning under New York law (which
governs the Indenture) and is subject to judicial interpretation. Accordingly,
in certain circumstances there may be a degree of uncertainty in ascertaining
whether a particular transaction would involve a disposition of "all or
substantially all" of the assets of a person and therefore it may be unclear
whether a Change of Control has occurred and whether the Senior Notes are
subject to a Change of Control Offer.
The agreement governing the Credit Facility will require the Partnership to
repay all amounts owing thereunder within 30 days following certain events
constituting a change of control thereunder (which are substantially similar to
the events constituting a Change of Control under the Indenture). In addition,
the exercise by the Holders of Senior Notes of their right to require the
Partnership to repurchase the Senior Notes could cause a default under the
Credit Facility, even if the occurrence of a Change of Control itself does not,
due to the financial effect of such repurchases on the Partnership. Finally,
the Partnership's ability to pay cash to the Holders of Senior Notes upon a
repurchase may be limited by the Partnership's then existing financial
resources. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Pro Forma Financial Condition--Credit Facility."
ASSET SALES
The Indenture will provide that the Partnership will not, and will 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 Partnership shall be governed by the provisions of the
Indenture described above under the caption "Change of Control" and/or the
provisions described below under the caption "Merger, Consolidation or Sale of
Assets" and not by the provisions of this paragraph) 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 million, or (b)
for net proceeds in excess of $5 million (each of the foregoing, an "Asset
Sale"), unless (x) the Partnership (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 of the assets sold or otherwise disposed of and (y) at least
80% of the consideration therefor received by the Partnership or such
Subsidiary is in the form of cash; provided, however, that the amount of (A)
any liabilities (as shown on the Partnership's or such Subsidiary's most recent
balance sheet or in the notes thereto) of the Partnership or any Subsidiary
(other than liabilities that are by their terms subordinated in right of
payment to the Senior Notes) that are assumed by the transferee of any such
assets and (B) any notes or other obligations received by the Partnership or
any such Subsidiary from such transferee that are immediately converted by the
Partnership 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 (1) any transfer of assets by the
Partnership or any of its Subsidiaries to a Subsidiary of the Partnership that
is a Guarantor, (2) any transfer of assets by the Partnership or any of its
Subsidiaries to any Person in exchange for other assets used in a line of
business permitted under the "Line of Business" covenant
53
<PAGE>
and having a fair market value not less than that of the assets so transferred
and (3) any transfer of assets pursuant to a Permitted Investment.
Within 270 days after any Asset Sale, the Partnership may apply the Net
Proceeds from such Asset Sale to (a) permanently reduce Indebtedness
outstanding under the Credit Facility (with a permanent reduction of
availability in the case of revolving Indebtedness) or (b) an investment in
capital expenditures or other long-term/tangible assets, in each case, in the
same line of business as the Partnership was engaged in on the date of the
Indenture. Pending the final application of any such Net Proceeds, the
Partnership may temporarily reduce borrowings under the Credit Facility or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from the Asset Sale that are not applied or
invested as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $15 million, the Issuers shall make an offer to all Holders of Senior
Notes (an "Asset Sale Offer") to purchase the maximum principal amount of
Senior Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase, in accordance
with the procedures set forth in the Indenture. The Issuers will comply with
the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations to the extent such laws and regulations are applicable in
connection with the repurchase of the Senior Notes in connection with an Asset
Sale Offer. To the extent that the aggregate amount of Senior Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Partnership may use such deficiency for general business purposes. If the
aggregate principal amount of Senior Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Senior
Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
Selection and Notice
If less than all of the Senior Notes are to be redeemed at any time,
selection of Senior Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, or the Nasdaq National Market on which the Senior Notes are listed or
quoted, as applicable, or, if the Senior Notes are not so listed or quoted,
then, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate, provided that no Senior Notes of $1,000 or less shall be
redeemed in part. Notices of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Senior Notes to be redeemed at its registered address. If any Senior Note is to
be redeemed in part only, the notice of redemption that relates to such Senior
Note shall state the portion of the principal amount thereof to be redeemed. A
new Senior Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon cancellation of the
original Senior Note. On and after the redemption date, interest ceases to
accrue on Senior Notes or portions of them called for redemption.
SUBSIDIARY GUARANTEES
The Indenture will provide that the Partnership may, at any time that it
transfers or causes to be transferred to any of its Subsidiaries assets,
businesses or properties having a fair market value (as determined in good
faith by the Board of Directors of the General Partner, whose determination
shall be conclusive and evidenced by a resolution of such Board) of $5 million
or more, cause such Subsidiary (each such Subsidiary, a "Guarantor") to
unconditionally guarantee (each such guarantee, a "Subsidiary Guarantee"),
jointly and severally, the Issuers' payment obligations under the Senior Notes.
Each Guarantor shall execute and deliver to the Trustee a supplemental
indenture evidencing its Subsidiary Guarantee, together with an opinion of
counsel with respect to certain matters set forth in the Indenture. The
obligations of each Guarantor under its Subsidiary Guarantee will be limited so
as not to constitute a fraudulent conveyance under applicable law. See,
however, "Risk Factors--Fraudulent Conveyance Matters."
The Indenture will provide that no Guarantor may consolidate with or merge
with or into (whether or not such Guarantor is the surviving Person), another
Person whether or not affiliated with such Guarantor unless (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such
54
<PAGE>
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Senior Notes and
the Indenture; (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists; and (iii) such Guarantor, or any Person
formed by or surviving any such consolidation or merger, (A) would have
Consolidated Net Worth (immediately after giving effect to such transaction),
equal to or greater than the Consolidated Net Worth of such Guarantor
immediately preceding the transaction and (B) would be permitted by virtue of
the Partnership's pro forma Fixed Charge Coverage Ratio to incur, immediately
after giving effect to such transaction, to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock."
The Indenture will provide that in the event of a sale or other disposition
of all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the Capital Interests of
any Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all of the
Capital Interests of such Guarantor) or the corporation acquiring the property
(in the event of a sale or other disposition of all of the assets of such
Guarantor) will be released and relieved of any obligations under its
Subsidiary Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture. See "Redemption or Repurchase at Option of Holders--Asset Sales."
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture will provide that the Partnership will not, and will not permit
any of its Subsidiaries to, directly or indirectly: (i) declare or make any
distribution or pay any dividend on account of the Partnership's or any
Subsidiary's Equity Interests (other than (x) distributions or dividends
payable in Equity Interests (other than Disqualified Interests) of the
Partnership, (y) distributions or dividends payable to the Partnership or a
Wholly Owned Subsidiary of the Partnership 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 or otherwise acquire or retire
for value any Equity Interests of the Partnership or any Subsidiary or other
Affiliate of the Partnership (other than any such Equity Interests owned by the
Partnership or a Wholly Owned Subsidiary of the Partnership that is a
Guarantor); (iii) purchase, redeem or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Senior Notes; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, 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;
(b) the Fixed Charge Coverage Ratio of the Partnership for the
Partnership'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;
(c) such Restricted Payment (the amount of any such payment, if other
than cash, to be determined by the Board of Directors of the General
Partner, whose determination shall be conclusive and evidenced by a
resolution in an Officer's Certificate delivered to the Trustee), together
with the aggregate of all other Restricted Payments (other than any
Restricted Payments permitted by the provisions of clauses (ii), (iii) or
(iv) of the immediately succeeding paragraph) made by the Partnership and
its Subsidiaries in the fiscal quarter during which such Restricted Payment
is made shall not exceed the amount of Available Cash of the Partnership
for the immediately preceding fiscal quarter (or, with respect to the first
fiscal quarter during which Restricted Payments are made, the amount of
Available Cash of the Partnership for the period commencing on the date of
the Indenture and ending on the last day of the immediately preceding
fiscal quarter); provided that for purposes of this clause (c), the amount
of any
55
<PAGE>
Available Cash of the Partnership during the first 45 days of any fiscal
quarter may be included in the amount of Available Cash for the immediately
preceding fiscal quarter so long as the amount of such Available Cash so
included does not exceed the amount of working capital Indebtedness that
the Partnership could have incurred on the last day of such immediately
preceding fiscal quarter under the terms of the agreements and instruments
governing its outstanding Indebtedness on such date; and
(d) at the time of such Restricted Payment and after giving effect
thereto, the Partnership or any of its Subsidiaries or Non-Recourse
Subsidiaries shall have (i) acquired, improved or repaired property, plant
or equipment which is accounted for as a capital expenditure in accordance
with GAAP or (ii) acquired, through merger or otherwise, all or
substantially all of the outstanding Capital Interests, or all or
substantially all of the assets, of any entity engaged in the business in
which the Partnership is engaged on the date of the Indenture (each of the
transactions referred to in clauses (i) and (ii) above, a "Capital
Investment") for Aggregate Consideration since the date of the Indenture
which, when added to all cash reserves then funded and maintained by the
Partnership (the proceeds of which shall be used solely for Capital
Investments) is no less than the amounts set forth in the table below, if
such Restricted Payment is made in the 12-month period beginning August 1
of the years indicated:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------------
<S> <C>
1994...................................... $0
1995...................................... $15 million
1996...................................... $30 million
1997...................................... $45 million
1998...................................... $70 million
1999...................................... $95 million
2000...................................... $120 million
</TABLE>
For purposes of the foregoing, "Aggregate Consideration" at any date shall
mean all cash paid in connection with the all Capital Investments consummated
on or prior to such date, the fair market value of all Capital Interests of the
Master Partnership or the Partnership (determined by the General Partner in
good faith with reference to, among other things, the trading price of such
Capital Interests, if then traded on any national securities exchange or
automated quotation system) constituting all or a portion of the purchase price
of all Capital Investments consummated on or prior to such date, and the
aggregate principal amount of all Indebtedness incurred or assumed by the
Partnership in connection with all Capital Investments consummated on or prior
to such date.
The foregoing provisions will not prohibit (i) the payment of any
distribution within 60 days after the date on which the Partnership becomes
committed to make such distribution, if at said date of commitment such payment
would have complied with the provisions of the Indenture; (ii) the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Partnership in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Partnership) of other Equity
Interests of the Partnership (other than any Disqualified Interests); (iii) the
defeasance, redemption or repurchase of subordinated Indebtedness with the
proceeds of Permitted Refinancing Indebtedness; and (iv) the defeasance,
redemption or repurchase of any Existing Subordinated Debentures of the Company
and the payment of all costs and expenses in connection therewith.
Not later than the date of making any Restricted Payment, the General Partner
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed,
which calculations may be based upon the Partnership's latest available
financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED INTERESTS
The Indenture will provide that the Partnership will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with
respect to (collectively, "incur") any Indebtedness (including Acquired Debt)
and that the Partnership will not issue any Disqualified Interests and will not
permit any of its Subsidiaries to issue any shares of
56
<PAGE>
preferred stock; provided, however, that the Partnership may incur Indebtedness
and any Subsidiary of the Partnership may incur Acquired Debt if:
(a) the Fixed Charge Coverage Ratio for the Partnership's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional
Indebtedness is incurred would have been at least 2.75 to 1 if such date is
on or prior to , 1996 and 3.00 to 1 if such date is after
, 1996, in each case, determined on a pro forma basis (including
a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred at the beginning of such four-
quarter period; and
(b) either (x) such Indebtedness shall be subordinated in right of
payment to the Senior Notes and shall have a Weighted Average Life to
Maturity greater than the remaining Weighted Average Life to Maturity of
the Senior Notes or (y) such Indebtedness shall be Permitted Senior Debt
and the Senior Debt Ratio Test shall have been met at the time of
incurrence thereof.
The foregoing limitations will not apply to: (i) the Indebtedness represented
by the Senior Notes and any Subsidiary Guarantees; (ii) the incurrence by the
Partnership of Indebtedness pursuant to the Credit Facility in an aggregate
principal amount at any time outstanding not to exceed $185 million; (iii)
revolving Indebtedness incurred solely for working capital purposes in an
aggregate outstanding principal amount not to exceed $20 million at any time on
or prior to , 1996 and $40 million thereafter, provided, in each
case, that the outstanding principal balance of such revolving Indebtedness
(or, if such revolving Indebtedness is incurred as an addition or extension to
the Credit Facility, the outstanding principal balance under the Credit
Facility in excess of the limits set forth in clause (ii) above) shall be
reduced to zero for a period of 30 consecutive days during each fiscal year;
(iv) the incurrence by the Partnership of Indebtedness in respect of
Capitalized Lease Obligations in an aggregate principal amount not to exceed
$15 million; (v) the Existing Indebtedness; (vi) the incurrence by the
Partnership or any of its Subsidiaries of Permitted Refinancing Indebtedness in
exchange for, or the proceeds of which are used to extend, refinance, renew,
replace, defease or refund any then outstanding Indebtedness of the Partnership
or such Subsidiary not incurred in violation of the Indenture; (vii) Hedging
Obligations that are incurred for the purpose of fixing or hedging interest
rate risk with respect to any floating rate Indebtedness that is permitted by
the terms of the Indenture to be outstanding; (viii) Indebtedness of any
Subsidiary of the Partnership to the Partnership or any of its Wholly Owned
Subsidiaries; (ix) the incurrence by the Partnership or the Insurance Company
Subsidiary of Indebtedness owing directly to its insurance carriers (without
duplication) in connection with the Partnership's, its Subsidiaries' or its
Affiliates' self-insurance programs or other similar forms of retained
insurable risks for their respective retail propane businesses, consisting of
reinsurance agreements and indemnification agreements (and guarantees of the
foregoing) secured by letters of credit, provided that the Indebtedness
evidence by such reinsurance agreements, indemnification agreements, guarantees
and letters of credit shall be counted (without duplication) for purposes of
all calculations pursuant to the Fixed Charge Coverage Ratio test above; (x)
surety bonds and appeal bonds required in the ordinary course of business or in
connection with the enforcement of rights or claims of the Partnership or any
of its Subsidiaries or in connection with judgments that do not result in a
Default or Event of Default; (xi) the incurrence by the Partnership (or any
Subsidiary of the Partnership that is a Guarantor) of Indebtedness in
connection with acquisitions of retail propane businesses in favor of the
sellers of such businesses in a principal amount not to exceed $15 million in
any fiscal year or $45 million in the aggregate outstanding at any one time,
provided that the principal amount of such Indebtedness incurred in connection
with any such acquisition shall not exceed the fair market value of the assets
so acquired; and (xii) in addition to the Indebtedness permitted under the
foregoing clauses (i) through (xi), the incurrence by the Partnership of
Indebtedness in an aggregate principal amount outstanding not to exceed $15
million at any time, provided that any Indebtedness incurred pursuant to this
clause (xii) shall be subordinated in right of payment to the Senior Notes and
shall have a Weighted Average Life to Maturity greater than the remaining
Weighted Average Life to Maturity of the Senior Notes.
The "Senior Debt Ratio Test" will be met with respect to the incurrence of
any Indebtedness by the Partnership or any Subsidiary of the Partnership if the
ratio of (1) the aggregate outstanding principal amount
57
<PAGE>
of Senior Debt on the date of and after giving effect to the incurrence of such
Indebtedness (the "Incurrence Date") to (2) the Consolidated Cash Flow for the
Partnership's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the Incurrence Date
would have been 2.50 to 1 or less. For purposes of the computation in clause
(1) of the foregoing sentence, the outstanding principal amount of Indebtedness
under the Credit Facility shall be deemed to equal the principal amount of such
Indebtedness actually outstanding plus the maximum additional principal amount
of such Indebtedness available thereunder, and letters of credit shall be
deemed to have a principal amount equal to the maximum potential liability of
the Partnership or any of its Subsidiaries thereunder. The foregoing
calculation of Consolidated Cash Flow shall give pro forma effect to
acquisitions (including all mergers and consolidations), dispositions and
discontinuance of operations that have been made by the Partnership or any of
its Subsidiaries during the four-quarter reference period or subsequent to such
reference period and on or prior to the Incurrence Date assuming that all such
acquisitions, dispositions and discontinuance of operations had occurred on the
first day of the four-quarter reference period in the same manner as described
under the definition of "Fixed Charge Coverage Ratio."
For purposes of the foregoing, any revolving Indebtedness (under the Credit
Facility or otherwise) shall be deemed to have been incurred only at such time
at which the agreements and instruments (or any amendments thereto that
increase the amount, reduce the Weighted Average Life to Maturity, change any
subordination provisions or create any additional obligor of such revolving
Indebtedness) are executed, in an amount equal to the maximum amount of such
revolving Indebtedness permitted to be borrowed thereunder, and the
Partnership's ability to borrow or reborrow such revolving Indebtedness up to
such maximum permitted amount shall not thereafter be limited by the foregoing
(other than the proviso set forth in clause (iii) of the second paragraph of
the description of such covenant contained herein).
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
The Indenture will provide that the Partnership will not, and will not permit
any of its Subsidiaries to, enter into any arrangement with any Person
providing for the leasing by the Partnership or such Subsidiary of any property
that has been or is to be sold or transferred by the Partnership or such
Subsidiary to such Person in contemplation of such leasing, unless (a) the
Partnership or such Subsidiary would be permitted under the Indenture to incur
Indebtedness secured by a Lien on such property in an amount equal to the
Attributable Debt with respect to such sale and leaseback transaction or (b)
the lease in such sale and leaseback transaction is for a term not in excess of
the lesser of (i) three years and (ii) 60% of the useful remaining life of such
property.
LIENS
The Indenture will provide that the Partnership will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture will provide that the Partnership will not, and will 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 Partnership or any of its Subsidiaries (1) on its Capital Interests or
(2) with respect to any other interest or participation in, or measured by, its
profits, (b) pay any indebtedness owed to the Partnership or any of its
Subsidiaries, (c) make loans or advances to the Partnership or any of its
Subsidiaries or (d) transfer any of its properties or assets to the Partnership
or any of its Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (i) Existing Indebtedness as in effect on the
date of the Indenture, (ii) the Indenture and the Notes, (iii) applicable law,
(iv) any instrument governing Indebtedness or Capital Interests of a Person
acquired by the Partnership or any of its Subsidiaries as in effect at the time
of such acquisition
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(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 the
Indenture, (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, or (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.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture will provide that the Partnership may not consolidate or merge
with or into (whether or not the Partnership 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 Partnership is the surviving Person, or the Person formed
by or surviving any such consolidation or merger (if other than the
Partnership) 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; (ii) the Person formed by or surviving any such
consolidation or merger (if other than the Partnership) or the Person to which
such sale, assignment, transfer, lease, conveyance or other disposition shall
have been made assumes all the obligations of the Partnership, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, under
the Senior Notes and the Indenture; (iii) immediately after such transaction no
Default or Event of Default exists; and (iv) the Partnership or such other
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) will 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
Partnership immediately preceding the transaction and (B) will, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock."
The Indenture will also provide that Finance Corp. may not consolidate or
merge with or into (whether or not Finance Corp. 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) Finance Corp. is the surviving
Person, or the Person formed by or surviving any such consolidation or merger
(if other than Finance Corp.) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia and a Wholly Owned Subsidiary of the Partnership; (ii)
the Person formed by or surviving any such consolidation or merger (if other
than Finance Corp.) or the Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of Finance Corp., pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee, under the Senior Notes and the
Indenture; and (iii) immediately after such transaction no Default or Event of
Default exists.
TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Partnership will not, and will 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
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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 Partnership or the
relevant Subsidiary than those that would have been obtained in a comparable
transaction by the Partnership 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 million, the Partnership delivers to the Trustee
an opinion as to the fairness to the Partnership or such Subsidiary from a
financial point of view issued by an investment banking firm of national
standing; provided, however, that (A) any employment agreement or stock option
agreement entered into by the Partnership (or the General Partner) in the
ordinary course of business and consistent with the past practice of the
Partnership or such Subsidiary, (B) transactions permitted by the provisions of
the Indenture described above under the covenant "Restricted Payments," and (C)
transaction entered into by the Partnership or the Insurance Company Subsidiary
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 Partnership, its Subsidiaries and its
Affiliates, in each case, shall not be deemed Affiliate Transactions.
RESTRICTIONS ON NATURE OF INDEBTEDNESS AND ACTIVITIES OF FINANCE CORP.
In addition to the restrictions set forth under the "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant above, the Indenture
will provide that Finance Corp. may not incur any Indebtedness unless (a) the
Partnership is a co-obligor or guarantor of such Indebtedness or (b) the net
proceeds of such Indebtedness are lent to the Partnership, used to acquire
outstanding debt securities issued by the Partnership or used directly or
indirectly to refinance or discharge Indebtedness permitted under the
limitations of this paragraph. The Indenture will also provide that Finance
Corp. may not engage in any business not related directly or indirectly to
obtaining money or arranging financing for the Partnership.
LINE OF BUSINESS
The Indenture will provide that for so long as any Senior Notes are
outstanding, the Partnership and its Subsidiaries will not materially or
substantially engage in any business other than that in which the Partnership
and its Subsidiaries were engaged on the date of the Indenture.
REPORTS
Whether or not required by the rules and regulations of the Securities and
Exchange Commission (the "Commission"), so long as any Senior Notes are
outstanding, the Issuers will furnish to the Holders of Senior Notes (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Issuers
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Issuers' certified
independent accountants and (ii) all reports that would be required to be filed
with the Commission on Form 8-K if the Issuers were required to file such
reports. To the extent permitted under the rules and regulations of the
Commission, such information and reports with respect to the Master Partnership
may be filed in lieu of such information and reports with respect to the
Partnership. In addition, whether or not required by the rules and regulations
of the Commission, the Issuers will file a copy of all such information with
the Commission for public availability (unless the Commission will not accept
such a filing) and make such information available to investors who request it
in writing.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on the
Senior Notes; (ii) default in payment when due of the
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principal of or premium, if any, on the Senior Notes; (iii) failure by the
Issuers for 20 days to comply with the provisions described under the covenants
"Change of Control," "Asset Sales," "Restricted Payments," "Incurrence of
Indebtedness and Issuance of Preferred Stock" or "Merger, Consolidation, or
Sale of Assets"; (iv) failure by the Issuers or any Guarantor for 60 days after
notice to comply with any of its other agreements in the Indenture or the
Senior Notes; (v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Partnership or any of its Subsidiaries
(or the payment of which is guaranteed by the Partnership or any of its
Subsidiaries), whether such Indebtedness or guarantee now exists or is created
after the date of the Indenture, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness (a "Payment
Default") or (b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10 million or more, excluding any acceleration of
maturity of the Indebtedness represented by the Company's Existing Floating
Rate Notes and Existing Fixed Rate Notes to the extent that such Indebtedness
shall be redeemed on or prior to the 40th day after the date of the Indenture;
(vi) failure by the Partnership or any of its Subsidiaries to pay final
judgments aggregating in excess of $10 million, which judgments are not paid,
discharged or stayed within 60 days; (vii) except as permitted by the
Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to
be unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Guarantor, or any Person acing on behalf of any Guarantor,
shall deny or disaffirm its obligations under its Subsidiary Guarantee; and
(viii) certain events of bankruptcy or insolvency with respect to the
Partnership or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Senior Notes may
declare all the Senior Notes to be due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events
of bankruptcy or insolvency, with respect to either Issuer, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute
a Significant Subsidiary, all outstanding Senior Notes will become due and
payable immediately without further action or notice. Holders of the Senior
Notes may not enforce the Indenture or the Senior Notes except as provided in
the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Senior Notes may direct the Trustee in
its exercise of any trust or power. The Trustee may withhold from Holders of
the Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful action
(or inaction) taken (or not taken) by or on behalf of the Issuers with the
intention of avoiding payment of the premium that the Issuers would have had to
pay if the Issuers then had elected to redeem the Senior Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Senior Notes. If an Event of Default occurs prior
to , 1998, by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Issuers with the intention of avoiding the
prohibition on redemption of the Senior Notes prior to such date, then the
premium specified in the Indenture shall also become immediately due and
payable to the extent permitted by law upon the acceleration of the Senior
Notes.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of principal of, premium, if any, or interest on the
Senior Notes.
The Issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuers are required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF LIMITED PARTNERS, DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS
No limited partner of the Partnership or director, officer, employee,
incorporator or stockholder of the General Partner or Finance Corp., as such,
shall have any liability for any obligations of the Issuers or any Guarantor
under the Senior Notes, the Subsidiary Guarantees, the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Senior Notes by accepting a Senior Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Senior Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of their
obligations discharged with respect to the outstanding Senior Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Senior Notes
to receive payments in respect of the principal of, premium, if any, and
interest on such Senior Notes when such payments are due, (ii) the Issuers'
obligations with respect to the Senior Notes concerning issuing temporary
Senior Notes, registration of Senior Notes, mutilated, destroyed, lost or
stolen Senior Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Issuers' obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Issuers may, at their option and at any time, elect to have
the obligations of the Issuers released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or
Event of Default with respect to the Senior Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Issuers must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Senior Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding
Senior Notes on the stated maturity or on the applicable redemption date, as
the case may be, of such principal or installment of principal of, premium, if
any, or interest on the outstanding Senior Notes; (ii) in the case of Legal
Defeasance, the Issuers shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Issuers shall have received from, or there shall have been
published by, the Internal Revenue Service a ruling or (B) since the date of
the Indenture, there shall have been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of the outstanding Senior Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Issuers shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Senior Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred; (iv) no Event of Default shall have
occurred and be continuing on the date of such deposit or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance shall not result in a breach or violation of,
or constitute a default under any material agreement or instrument (other than
the Indenture) to which the Issuers or any of their Subsidiaries is a party or
by which the Issuers or any of their Subsidiaries is bound; (vi) the Issuers
shall have delivered to the Trustee an opinion of counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency,
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reorganization or similar laws affecting creditors' rights generally; (vii) the
Issuers shall have delivered to the Trustee an Officers' Certificate stating
that the deposit was not made by the Issuers with the intent of preferring the
Holders of Senior Notes over the other creditors of the Issuers with the intent
of defeating, hindering, delaying or defrauding creditors of the Issuers or
others; and (viii) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers are not required to transfer or
exchange any Senior Note selected for redemption. Also, the Issuers are not
required to transfer or exchange any Senior Note for a period of 15 days before
a selection of Senior Notes to be redeemed.
The registered Holder of a Senior Note will be treated as its owner for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraphs, the Indenture or the
Senior Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Senior Notes then outstanding
(including consents obtained in connection with a tender offer or exchange
offer for Senior Notes), and any existing default or compliance with any
provision of the Indenture or the Senior Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Senior
Notes (including consents obtained in connection with a tender offer or
exchange offer for Senior Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Senior Notes held by a non-consenting Holder): (i) reduce
the principal amount of Senior Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Senior Note or alter the provisions with respect to the
redemption of the Senior Notes (other than provisions relating to the covenants
described above under the caption "Repurchase at the Option of Holders"), (iii)
reduce the rate of or change the time for payment of interest on any Senior
Note, (iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Senior Notes (except a rescission of
acceleration of the Senior Notes by the Holders of at least a majority in
aggregate principal amount of the Senior Notes and a waiver of the payment
default that resulted from such acceleration), (v) make any Senior Note payable
in money other than that stated in the Senior Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of Senior Notes to receive payments of principal of, premium,
if any, or interest on the Senior Notes, (vii) waive a redemption payment with
respect to any Senior Note (other than provisions relating to the covenants
described above under the caption "Repurchase at the Option of Holders"),
(viii) except as otherwise permitted in the Indenture, release any Guarantor
from its obligations under its Subsidiary Guarantee or change any Subsidiary
Guarantee in any manner that would adversely affect the rights of Holders of
Senior Notes or (ix) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any Holder of Senior
Notes, the Issuers and the Trustee may amend or supplement the Indenture or the
Senior Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes, to provide for the assumption of the Issuers' obligations to Holders of
the Senior Notes in the case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the
Senior Notes (including the creation of any Subsidiary Guarantees) or that does
not adversely affect the
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legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding Senior
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Senior Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Senior Note Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"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.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"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 the interest rate of the Senior Notes and annual
compounding) 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 the date of the Indenture.
"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.
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"Capital Interests" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, with respect to partnerships, partnership interests
(whether general or limited) and any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, such partnership.
"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 lender party to the Credit
Facility or with any 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 having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within nine months 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).
"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, in each case, for such period without duplication on a consolidated
basis and determined in accordance with GAAP.
"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 the referent 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 the referent
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 partners or common stockholders
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 date of the
Indenture 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
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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.
"Credit Facility" means the credit facility under that certain Credit
Agreement, dated as of , 1994, by and among the Partnership, the
Insurance Company Subsidiary, the General Partner and Bank of America National
Trust and Savings Association, as Agent for the financial institutions listed
therein, providing for up to $185 million of credit borrowings and letters of
credit, including any related notes, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be 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, matures or is
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 , 2001.
"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).
"Existing Indebtedness" means up to $ million in aggregate principal
amount of Indebtedness of the Partnership and its Subsidiaries (other than
under the Credit Facility) in existence on the date of the Indenture, until
such amounts are repaid.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
reference 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 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 discontinuance of businesses or assets that
have been made by the reference 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
discontinuance of businesses or assets had occurred on the first day of the
reference period; provided, however, that (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 Partnership's Fixed
Charges 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 cost 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 Partnership 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 Partnership in the operation of the acquired business or asset and (ii)
non-personnel costs and expenses incurred by the Partnership on a per gallon
basis in the operation of the Partnership's business at similarly situated
Partnership facilities. If the applicable reference period for any calculation
of the Fixed Charge Coverage Ratio with respect to the Partnership shall
include a portion prior to the date of the Indenture, then such Fixed Charge
Coverage Ratio shall be calculated based upon the Consolidated Cash Flow and
the Fixed Charges of the General Partner for such portion of the reference
period prior to the date
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of the Indenture and the Consolidated Cash Flow and the Fixed Charges of the
Partnership for the remaining portion of the reference period on and after the
date of the Indenture, giving pro forma effect, as described in the two
foregoing sentences, to all applicable transactions occurring on the date of
the Indenture or otherwise.
"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
discount, non-cash interest payments, the interest component of all payments
associated with Capital Lease Obligations and net payments (if any) pursuant to
Hedging Obligations), (b) commissions, discounts and other fees and charges
incurred with respect to letters of credit and bankers' acceptances financing,
(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, in each case,
on a consolidated basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect in the United States of America on the date of
the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"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.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of
the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all indebtedness of others secured
by a Lien on any asset of such Person (whether or not such indebtedness is
assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person.
"Insurance Company Subsidiary" means Stratton Insurance Company, a Vermont
corporation, a wholly owned subsidiary of the Partnership.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
Guarantees), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under
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applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"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, (i) any gain (but not loss),
together with any related provision for taxes on such gain (but not loss),
realized in connection with (a) any asset sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions), or (b) the
disposition of any securities or the extinguishment of any Indebtedness of such
Person or any of its Subsidiaries, and (ii) 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 retirement of the Existing Senior Notes and the Existing Subordinated
Debentures, 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 Company, the Partnership or their
Subsidiaries to the extent that the same were deducted from such Net Income in
accordance with GAAP.
"Net Proceeds" means the aggregate cash proceeds received by the Partnership
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), 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 and any reserve for adjustment in respect of the
sale price of such asset or assets.
"Non-Recourse Subsidiary" means (1) the Insurance Company Subsidiary and (2)
any other Person that would otherwise be a Subsidiary of the Partnership but is
designated as a Non-Recourse Subsidiary in a resolution of the Board of
Directors of the General Partner, so long as (a) no portion of the Indebtedness
or any other obligation (contingent or otherwise) of such Person (i) is
guaranteed by the Partnership or any of its Subsidiaries, (ii) is recourse or
obligates the Partnership or any of its Subsidiaries in any way or (iii)
subjects any property or asset of the Partnership or any of its Subsidiaries,
directly or indirectly, contingently or otherwise, to satisfaction thereof, (b)
neither the Partnership 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 Partnership and its Subsidiaries than those that might be obtained at
the time from persons who are not Affiliates of the Partnership, (c) neither
the Partnership nor any of its Subsidiaries has any obligation with respect to
such Person (i) to subscribe for additional shares of Capital Stock 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, and (d) such Person has no more than $1,000 of assets
at the time of such designation.
"Obligations" means any principal, premiums, interest, penalties, fees, in-
demnifications, reimbursements, damages and other liabilities payable under the
documentation governing any Indebtedness.
"Permitted Investments" means (a) any Investments in Cash Equivalents; (b)
any Investments in the Partnership or in a Wholly Owned Subsidiary of the
Partnership that is a Guarantor; (c) Investments by the Partnership or any
Subsidiary of the Partnership in a Person, if as a result of such Investment
(i) such Person becomes a Wholly Owned Subsidiary of the Partnership 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 Partnership or a Wholly Owned Subsidiary of the
Partnership that is a Guarantor; and (d) other Investments in Non-Recourse
Subsidiaries of the Partnership that do not exceed $30 million at any time
outstanding.
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"Permitted Liens" means (a) Liens existing on the date of the Indenture; (b)
Liens in favor of the Issuers or Liens to secure Indebtedness of a Subsidiary
of the Partnership to the Partnership or a Wholly Owned Subsidiary of the
Partnership; (c) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Partnership or any Subsidiary of the
Partnership; 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
Partnership; (d) Liens on property existing at the time of acquisition thereof
by the Partnership or any Subsidiary of the Partnership; provided that such
Liens were in existence prior to the contemplation of such acquisition; (e)
Liens on any property or asset acquired by the Partnership or any of its
Subsidiaries 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
Partnership or such Subsidiary to secure the purchase price or other obligation
of the Partnership 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 Partnership 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;
(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 Partnership or any of its
Subsidiaries or impair the use of such property in the operation of the
business of the Partnership or any of its Subsidiaries; (j) Liens of landlords
or mortgagees of landlords, arising solely by operation of law, on fixtures and
movable property located on premises leased by the Partnership or any of its
Subsidiaries in the ordinary course of business; (k) financing statements
granted with respect to personal property leased by the Partnership and its
Subsidiaries in the ordinary course of business to the owners of such personal
property, provided that such financing statements are granted solely in
connection with such leases and not the borrowing of money or the obtaining of
advances or credit; (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 Partnership or any Subsidiary of the
Partnership with respect to obligations that do not exceed $5 million 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 Partnership or such
Subsidiary; (n) Liens securing Indebtedness incurred to refinance Indebtedness
that has been secured by a Lien permitted under the Indenture, 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 the
"Incurrence of Indebtedness and Issuance of Preferred Stock" covenant and shall
not have a principal amount in excess of the Indebtedness so refinanced; and
(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 (m);
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.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Partnership or any Subsidiary of the Partnership issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Partnership or any of its Subsidiaries (other
than
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Indebtedness under the Credit Facility) or the Indebtedness represented by the
then outstanding existing Subordinated Debentures of the Company; 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 (plus the amount of reasonable expenses incurred in connection
therewith); (b) such Indebtedness has a Weighted Average Life to Maturity equal
to or greater than the Weighted Average Life to Maturity of the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; (c) such
Indebtedness is subordinated in right of payment to the Senior Notes on terms
at least as favorable to the Holders of Senior Notes as those, if any,
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (d) such Indebtedness
(other than indebtedness incurred to extend, refinance, renew, replace, defease
or refund the Existing Subordinated Debentures) is incurred by the Partnership
or the Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Permitted Senior Debt" means, with respect to any Person, (i) any Acquired
Debt of such Person, (ii) any Indebtedness incurred by such Person, the
proceeds of which are applied solely to finance capital expenditures made to
improve or enhance the existing capital assets of such Person or to acquire or
construct new capital assets (but excluding capital expenditures necessary to
maintain the existing capital assets of such Person) and (iii) any Indebtedness
incurred by such Person, the proceeds of which are used solely for working
capital purposes.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Senior Debt" means, without duplication, (i) the Senior Notes, (ii) all
other Indebtedness of the Partnership or Finance Corp., unless the instrument
under which such Indebtedness is incurred expressly provides that it is
subordinated in right of payment to the Notes and (iii) all Indebtedness of
Subsidiaries of the Partnership, other than Finance Corp.
"Significant Subsidiary" means any Subsidiary of the Partnership that would
be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Act, as such Regulation is in effect on the
date hereof.
"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 the 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 such Person or a
combination thereof. Notwithstanding the foregoing, any Subsidiary of the
Partnership that is designated a Non-Recourse Subsidiary pursuant to the
definition thereof shall not thereafter be deemed a Subsidiary of the
Partnership.
"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.
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"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person all
of the outstanding Capital Interests or other ownership interests or, in the
case of a limited partnership, all of the partners' Capital Interests (other
than up to a 1% general partner interest), of which (other than directors'
qualifying shares) shall at the time be owned by such Person or by one or more
Wholly Owned Subsidiaries of such Person and one or more Wholly Owned
Subsidiaries of such Person.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the principal federal income tax consequences
of ownership and disposition of the Senior Notes to Holders who are initial
holders and who purchase the Senior Notes at the "issue price" (as defined
below) and certain federal income tax issues affecting the Partnership. This
summary represents the opinion of Smith, Gill, Fisher & Butts, P.C., counsel to
the General Partner and the Issuers, insofar as it relates to matters of law
and legal conclusions. This summary is based on the Internal Revenue Code of
1986, as amended to the date hereof (the "Code"), administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations, changes to any of which subsequent to the date of this Prospectus
may affect the tax consequences described herein. This summary discusses only
Senior Notes that are held as capital assets within the meaning of Section 1221
of the Code. It does not discuss all of the tax consequences that may be
relevant to a Holder in light of its particular circumstances or to Holders
subject to special rules, such as certain financial institutions, insurance
companies, dealers in securities and foreign persons. This summary also does
not discuss any aspects of state, local or foreign tax laws.
PERSONS CONSIDERING THE PURCHASE OF SENIOR NOTES SHOULD CONSULT THEIR TAX
ADVISORS WITH REGARD TO THE APPLICATION OF THE FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF
ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
CLASSIFICATION OF PARTNERSHIP
Concurrently with the closing of this Offering, the Partnership will receive
an opinion of counsel that, based on certain representations by the General
Partner, under current law the Partnership will be classified as a partnership
for federal income tax purposes. No ruling has been requested from the Internal
Revenue Service ("IRS") with respect to the classification of the Partnership
as a partnership for federal income tax purposes and there can be no assurance
that the IRS will not challenge this position or that a court would not sustain
such a challenge. In addition, the continued applicability of counsel's opinion
is conditioned upon continued compliance by the Partnership with certain
representations by the General Partner. If the Partnership were treated as an
association or otherwise taxable as a corporation in any taxable year, its
items of income, gain, loss, deduction and credit would be reflected only on
its tax return rather than being passed through to the Unitholders, and the
Partnership would be taxable on its net income at corporate rates.
PAYMENTS OF INTEREST
Interest paid on a Senior Note will generally be taxable to a Holder as
ordinary interest income at the time it accrues or is received in accordance
with the Holder's method of accounting for federal income tax purposes.
AMORTIZABLE BOND PREMIUM
If a Holder purchases a Senior Note for an amount that is greater than its
principal amount, such Holder will be considered to have purchased such Senior
Note with "amortizable bond premium" equal in amount to such excess, and may
elect (in accordance with applicable Code provisions) to amortize such premium,
using a constant-yield method, over the term of the Senior Note. Because the
Senior Notes are redeemable prior to maturity, the amount of amortizable bond
premium will be determined with reference to the amount payable on the earlier
redemption date if such determination results in a smaller premium attributable
to the
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period ending on the earlier redemption date. A Holder who elects to amortize
bond premium must reduce its tax basis in the Senior Note by the amount of the
premium amortizable in any year. Amortizable bond premium is treated as an
offset to interest received on the obligation rather than as an interest
deduction, except as provided in the Treasury Regulations. An election to
amortize bond premium applies to all taxable debt obligations then owned and
thereafter acquired by the taxpayer and may be revoked only with the consent of
the IRS.
SALE, RETIREMENT OR OTHER TAXABLE DISPOSITION OF THE SENIOR NOTES
Upon the sale, retirement or other taxable disposition of a Senior Note, a
Holder will recognize taxable gain or loss equal to the difference between (a)
the amount of cash and the fair market value of property received (not
including any amount attributable to accrued interest not previously included
in income) in exchange therefor and (b) such Holder's adjusted tax basis in the
Senior Note. A Holder's adjusted tax basis in a Senior Note will equal the cost
of the Senior Note to such Holder reduced by any amortized premium and any
principal payments previously received by the Holder.
Any gain or loss recognized on the sale, retirement or other taxable
disposition of a Senior Note will be capital gain or loss and will be long-term
capital gain or loss if at the time of such sale, retirement or other taxable
disposition the Senior Note has been held for more than one year.
SUBSEQUENT PURCHASERS
The foregoing does not discuss special rules which may affect the treatment
of purchasers that acquire Senior Notes other than at the time of original
issuance at the issue price, including those provisions of the Code relating to
the treatment of "market discount" and "acquisition premium." For example, the
market discount provisions of the Code may require a subsequent purchaser of a
Senior Note at a market discount to treat all or a portion of any gain
recognized upon sale or other disposition of the Senior Note as ordinary income
and to defer a portion of any interest expense that would otherwise be
deductible on any indebtedness incurred or maintained to purchase or carry such
Senior Note until the holder disposes of the Senior Note in a taxable
transaction.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain noncorporate Holders may be subject to backup withholding at a rate
of 31% on payments of principal, premium and interest on, and the proceeds of
disposition of, a Senior Note. Backup withholding will apply only if the Holder
(i) fails to furnish its Taxpayer Identification Number ("TIN") which, for an
individual, would be his Social Security number, (ii) furnishes an incorrect
TIN, (iii) is notified by the IRS that such Holder has failed to properly
report payments of interest and dividends or (iv) under certain circumstances,
fails to certify, under penalty of perjury, that it has furnished a correct TIN
and has not been notified by the IRS that such Holder is subject to backup
withholding for failure to report interest and dividend payments. Holders
should consult their tax advisers regarding their qualification for exemption
from backup withholding and the procedure for obtaining such an exemption if
applicable.
The amount of any backup withholding from a payment to a Holder will be
allowed as a credit against such Holder's federal income tax liability and may
entitle such Holder to a refund, provided that the required information is
furnished to the IRS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE SENIOR NOTES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") between the Issuers, and Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") and Goldman, Sachs & Co. as
underwriters (collectively, the "Underwriters"), the Issuers have agreed to
issue and sell to the Underwriters, and each Underwriter has severally agreed
to purchase from the Issuers, the respective principal amounts of Senior Notes
set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITERS AMOUNT
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......... $
Goldman, Sachs & Co.........................................
------------
Total..................................................... $250,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to the approval of certain legal matters by counsel
and to certain other conditions. If any of the Senior Notes are purchased by
the Underwriters pursuant to the Underwriting Agreement, all such Senior Notes
must be so purchased.
The Underwriters have advised the Issuers that the Underwriters propose to
offer the Senior Notes to the public initially at the price set forth on the
cover page of this Prospectus and to certain dealers (who may include the
Underwriters) at such offering price less a concession not to exceed % of
the principal amount of the Senior Notes. The Underwriters may allow and such
dealers may reallow discounts not in excess of % of such principal amount to
any other Underwriter and certain other dealers. After the initial public
offering, the public offering price and such concessions may be changed at any
time without notice. The Underwriters do not intend to confirm sales of Senior
Notes offered hereby to any account over which they exercise discretionary
authority.
The Senior Notes will constitute a new class of securities with no
established trading market. The Issuers do not intend to list the Senior Notes
on any national securities exchange or to seek the admission of the Senior
Notes for quotation and trading in the Nasdaq National Market. The Issuers have
been advised by the Underwriters that following the completion of the Offering,
the Underwriters currently intend to make a market in the Senior Notes.
However, the Underwriters are not obligated to do so and any market-making
activities with respect to the Senior Notes may be discontinued at any time
without notice at the Underwriters' sole discretion. In addition, such market
making activity will be subject to the limits imposed by the Securities Act and
the Exchange Act. Accordingly, no assurance can be given as to the liquidity of
or the trading market for the Senior Notes.
The Issuers have agreed to indemnify the Underwriters against certain
liabilities in connection with the offer and sale of the Senior Notes,
including liabilities under the Securities Act, and to contribute to payments
that the Underwriters may be required to make in respect thereof.
Each of the Underwriters is acting as an underwriter in connection with the
concurrent offering of Common Units by the Master Partnership and will receive
underwriting discounts and commissions in connection therewith. See "The
Transactions." In addition, the Company has retained DLJ as Dealer/Manager for
the Tender Offer.
73
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the Senior Notes being offered hereby are
being passed upon for the Issuers by Smith, Gill, Fisher & Butts, P.C., Kansas
City, Missouri. The validity of the Senior Notes is being passed upon for the
Underwriters by Latham & Watkins, New York, New York.
EXPERTS
The consolidated financial statements of Ferrellgas, Inc. as of April 30,
1994 and July 31, 1993 and 1992 and for the nine months ended April 30, 1994
and for each of the three years in the period ended July 31, 1993 included in
this Prospectus and the related financial statement schedules included
elsewhere in the Registration Statement have been audited by Deloitte & Touche,
independent auditors, as stated in their reports appearing herein and elsewhere
in the Registration Statement (which reports expressed an unqualified opinion
and included an explanatory paragraph concerning an uncertainty involving an
income tax matter), and have been so included in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.
The consolidated balance sheet of Ferrellgas, L.P. as of May 20, 1994,
included in this Prospectus has been audited by Deloitte & Touche, independent
auditors, as stated in their report appearing herein, and has been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The consolidated balance sheet of Ferrellgas Finance Corp. as of May 20,
1994, included in this Prospectus has been audited by Deloitte & Touche,
independent auditors, as stated in their report appearing herein, and has been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The pro forma financial information of Ferrellgas, L.P. included in this
Prospectus has been examined by Deloitte & Touche, independent accountants, as
stated in their report appearing herein, and has been so included in reliance
upon the report of such firm given upon their authority as experts in
accounting.
ADDITIONAL INFORMATION
The Issuers have filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall encompass all
amendments, exhibits and schedules thereto) on Form S-1 under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the Senior
Notes being offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain items of which are omitted in accordance
with the rules and regulations of the Commission, and to which reference is
hereby made. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by this reference.
Immediately following this Offering, the Issuers will be subject to the
informational requirements of the Securities Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith will be required to file reports
and other information with the Commission. In addition, the Issuers have
agreed, whether or not required by the rules and regulations of the Commission,
for so long as the Senior Notes are outstanding to file with the Commission (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Issuers
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of
74
<PAGE>
Operations" and, with respect to the annual information only, a report thereon
by the Issuer's certified independent accountants and (ii) all reports that
would be required to be filed with the Commission on Form 8-K if the Issuers
were required to file such reports. To the extent permitted under the rules and
regulations of the Commission, such information and reports with respect to the
Master Partnership may be filed in lieu of such information and reports with
respect to the Partnership.
The Registration Statement and the exhibits and schedules thereto, as well as
such reports and other information filed with the Commission, can be inspected
and copies at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and the following
regional offices of the Commission, 7 World Trade Center, 13th Floor, New York,
New York 10048 and Northwestern Atrium Center, Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661. Copies of such information can also be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Issuers
have agreed to furnish to the holders of the Senior Notes all such reports and
information required to be filed with the Commission pursuant to the preceding
paragraph.
75
<PAGE>
FERRELLGAS, L.P.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Ferrellgas L.P. Pro Forma Consolidated Financial Statements:
Independent Accountants' Report......................................... F-2
Pro Forma Consolidated Balance Sheet--April 30, 1994.................... F-3
Pro Forma Consolidated Statement of Earnings--Nine Months Ended April
30, 1994 and Year Ended July 31, 1993.................................. F-4
Notes to Pro Forma Consolidated Financial Statements.................... F-5
Ferrellgas, L.P. Historical Consolidated Financial Statements:
Independent Auditors' Report............................................ F-7
Consolidated Balance Sheet--May 20, 1994................................ F-8
Note to Consolidated Balance Sheet...................................... F-9
Ferrellgas Finance Corp. Historical Financial Statements:
Independent Auditors' Report............................................ F-10
Balance Sheet--May 20, 1994............................................. F-11
Note to Balance Sheet................................................... F-12
Ferrellgas, Inc. Historical Consolidated Financial Statements:
Independent Auditors' Report............................................ F-13
Consolidated Balance Sheet--April 30, 1994 and July 31, 1993 and 1992... F-14
Consolidated Statement of Operations--Nine Months Ended April 30, 1994
and 1993
(unaudited), and Years Ended July 31, 1993, 1992 and 1991.............. F-15
Consolidated Statement of Stockholder's Equity--Nine months Ended April
30, 1994 and
Years Ended July 31, 1993, 1992 and 1991............................... F-16
Consolidated Statement of Cash Flows--Nine Months Ended April 30, 1994
and 1993
(unaudited), and Years Ended July 31, 1993, 1992 and 1991.............. F-17
Notes to Consolidated Financial Statements.............................. F-18
</TABLE>
F-1
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Ferrellgas, L.P.
Liberty, Missouri
We have examined the pro forma adjustments reflecting the proposed transactions
described in the Notes to Pro Forma Consolidated Financial Statements and the
application of those adjustments to the historical amounts in the accompanying
pro forma consolidated balance sheet of Ferrellgas, L.P. as of April 30, 1994,
and the related pro forma consolidated statements of earnings for the nine-
month period ended April 30, 1994, and the year ended July 31, 1993. The
historical financial statements are derived from the historical financial
statements of Ferrellgas, Inc. and subsidiaries, which were audited by us (on
which we have issued our report dated June 3, 1994, which expressed an
unqualified opinion and included an explanatory paragraph concerning an
uncertainty involving an income tax matter) that appears elsewhere herein. Such
pro forma adjustments are based upon management's assumptions described in the
Notes to Pro Forma Consolidated Financial Statements. Our examination was made
in accordance with standards established by the American Institute of Certified
Public Accountants and, accordingly, included such procedures as we considered
necessary in circumstances.
The objective of this pro forma financial information is to show what the
significant effects on the historical financial information might have been had
the proposed transactions occurred at an earlier date. However, the pro forma
consolidated financial statements are not necessarily indicative of the results
of operations or related effects on financial position that would have been
attained had the above-mentioned proposed transactions actually occurred
earlier.
In our opinion, management's assumptions provide a reasonable basis for
presenting the significant effects directly attributable to the above-mentioned
proposed transactions described in the Notes to Pro Forma Consolidated
Financial Statements, the related pro forma adjustments give appropriate effect
to those assumptions, and the pro forma column reflects the proper application
of those adjustments to the historical financial statement amounts in the pro
forma consolidated balance sheet of Ferrellgas, L.P. as of April 30, 1994, and
the related pro forma consolidated statements of earnings for the nine-month
period ended April 30, 1994, and the year ended July 31, 1993.
DELOITTE & TOUCHE
Kansas City, Missouri
June 3, 1994
F-2
<PAGE>
FERRELLGAS, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET
APRIL 30, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY PARTNERSHIP
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term invest-
ments......................... $ 88,151 $ 260,314 (A) $ 21,680
(254,001)(B)
(33,679)(C)
(39,105)(D)
Accounts and notes receivable.. 55,869 (500)(D) 55,369
Inventories.................... 29,781 -- 29,781
Prepaid expenses and other cur-
rent assets................... 3,272 -- 3,272
-------- --------- --------
TOTAL CURRENT ASSETS......... 177,073 (66,971) 110,102
Property, plant and equipment.. 295,423 -- 295,423
Intangible assets.............. 65,569 -- 65,569
Investment in Class B redeem-
able common stock of parent... 36,031 (36,031)(D) --
Other assets................... 22,017 (14,857)(B),(C),(D) 7,160
Note receivable from parent.... 4,000 (4,000)(D) --
-------- --------- --------
TOTAL ASSETS................. $600,113 $(121,859) $478,254
======== ========= ========
LIABILITIES AND SPONSOR
EQUITY/PARTNERS' CAPITAL
CURRENT LIABILITIES:
Accounts payable............... $ 34,266 $ -- $ 34,266
Current portion of long-term
debt.......................... 1,486 -- 1,486
Accrued interest expense....... 17,237 (17,111)(B),(C) 126
Other current liabilities...... 19,829 -- 19,829
Payable to parent.............. 91 -- 91
-------- --------- --------
TOTAL CURRENT LIABILITIES.... 72,909 (17,111) 55,798
Long-term debt................. 476,471 (209,030)(B),(C) 267,441
Other liabilities.............. 10,534 -- 10,534
Deferred income taxes.......... 9,351 (9,351)(D) --
SPONSOR EQUITY/PARTNERS' CAPITAL:
Equity of sponsor.............. 30,848 260,314 (A) --
(24,641)(B)
(38,597)(C)
(83,443)(D)
(144,481)(E)
PARTNERS' CAPITAL:
Limited partner................ -- 143,022 (E) 143,022
General partner................ -- 1,459 (E) 1,459
-------- --------- --------
TOTAL SPONSOR
EQUITY/PARTNERS' CAPITAL.... 30,848 113,633 144,481
-------- --------- --------
TOTAL LIABILITIES AND SPONSOR
EQUITY/PARTNERS' CAPITAL.... $600,113 $(121,859) $478,254
======== ========= ========
</TABLE>
See notes to pro forma consolidated financial statements.
F-3
<PAGE>
FERRELLGAS, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(IN THOUSANDS, EXCEPT RATIO)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1993 NINE MONTHS ENDED APRIL 30, 1994
------------------------------------ ------------------------------------
COMPANY PARTNERSHIP COMPANY PARTNERSHIP
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Gas liquids and
related product
sales................ $516,891 $ -- $516,891 $430,401 $ -- $430,401
Other................. 25,054 -- 25,054 20,076 -- 20,076
-------- ------- -------- -------- ------- --------
Total revenues...... 541,945 -- 541,945 450,477 -- 450,477
COSTS AND EXPENSES:
Cost of product sold.. 298,033 -- 298,033 229,326 -- 229,326
Operating............. 139,617 -- 139,617 112,687 -- 112,687
Depreciation and
amortization......... 30,840 -- 30,840 21,688 -- 21,688
General and
administrative....... 10,079 500 (F) 10,579 8,128 375 (F) 8,503
Vehicle leases........ 4,823 -- 4,823 3,203 -- 3,203
-------- ------- -------- -------- ------- --------
Total costs and
expenses........... 483,392 500 483,892 375,032 375 375,407
-------- ------- -------- -------- ------- --------
OPERATING INCOME........ 58,553 (500) 58,053 75,445 (375) 75,070
Loss on disposal of
assets............... (1,153) -- (1,153) (888) -- (888)
Interest income....... 3,266 (2,387)(G) 879 2,791 (1,894)(G) 897
Interest expense...... (60,071) 31,042 (H) (29,029) (44,233) 23,046 (H) (21,187)
-------- ------- -------- -------- ------- --------
EARNINGS BEFORE INCOME
TAXES AND EXTRAORDINARY
ITEM................... 595 28,155 28,750 33,115 20,777 53,892
Income tax expense...... 486 (486)(I) -- 12,759 (12,759)(I) --
-------- ------- -------- -------- ------- --------
EARNINGS FROM CONTINUING
OPERATIONS (BEFORE
EXTRAORDINARY ITEM).... $ 109 $28,641 28,750 $ 20,356 $33,536 53,892
======== ======= ======== =======
GENERAL PARTNER'S
INTEREST IN EARNINGS
FROM CONTINUING
OPERATIONS............. 290 544
-------- --------
LIMITED PARTNERS'
INTEREST IN NET
EARNINGS FROM
CONTINUING OPERATIONS.. $ 28,460 $ 53,348
======== ========
RATIO OF EARNINGS TO
FIXED CHARGES.......... 1.0x 1.9x 1.7x 3.2x
======== ======== ======== ========
</TABLE>
See notes to pro forma consolidated financial statements.
F-4
<PAGE>
FERRELLGAS, L.P. NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS NINE
MONTHS ENDED APRIL 30, 1994 AND YEAR ENDED JULY 30, 1993
The pro forma financial statements are based upon the historical financial
position and results of operations of Ferrellgas, Inc. and its subsidiaries
("Ferrellgas"). The propane business of Ferrellgas will be owned and operated
by a newly formed limited partnership (the "Partnership").
Ferrellgas will convey substantially all of its assets to the Partnership
(excluding cash, receivables from parent and affiliates and an investment in
the Class B Stock of parent) and the Partnership will assume all of the
liabilities, whether known or unknown, associated with the business that are
reflected or should be reflected on the balance sheet of the Company prepared
in accordance with generally accepted accounting principles (excluding income
tax liabilities). In connection with the acquisition of the propane business,
the Master Partnership will issue Common Units, Subordinated Units and
Incentive Distribution Rights to Ferrellgas, as well as general partner
interests in the Partnership and the Partnership. Ferrellgas will make a
dividend of the Common Units, Subordinated Units and Incentive Distribution
Rights to its parent, Ferrell Companies, Inc.
The Partnership has also agreed with Ferrellgas to be primarily responsible
for all obligations of Ferrellgas under the approximately $477,957,000 of
Ferrellgas long-term debt outstanding as of April 30, 1994. Substantially all
of this long-term debt will be retired with the net proceeds from the sale by
the Master Partnership of the Common Units (estimated to be approximately
$260,314,000) and the net proceeds from the issuance of an aggregate principal
amount of Senior Notes due 2001 (the "Senior Notes") (estimated to be
approximately $245,250,000 and assuming an interest rate of 9.75%) to be issued
by the Partnership. It is possible, however, that a portion of the Senior
Notes, not anticipated to be in excess of $50,000,000, will bear interest at a
floating rate.
The following pro forma adjustments have been prepared as if the transactions
to be effected at the closing of the offering of Senior Notes and the offering
of Common Units (assuming that the Underwriters' overallotment option is not
exercised) had taken place on April 30, 1994, in the case of the pro forma
consolidated balance sheet, or as of August 1, 1992, in the case of the pro
forma consolidated statement of income for the year ended July 31, 1993, or as
of August 1, 1993 in the case of the pro forma consolidated statement of income
for the nine months ended April 30, 1994. The adjustments are based upon
currently available information and certain estimates and assumptions, and
therefore the actual adjustments may differ from the pro forma adjustments.
However, management believes that the assumptions provide a reasonable basis
for presenting the significant effects of the transactions as contemplated and
that the pro forma adjustments give appropriate effect to those assumptions and
are properly applied in the pro forma financial information.
(A) Reflects the net proceeds to the Master Partnership of approximately
$260,314,000 from the issuance and sale of 13,100,000 Common Units at an
assumed offering price of $21.375 per Common Unit, net of the Underwriters'
discount (estimated to be $18,202,000) and offering expenses (estimated to be
$1,500,000), and a concurrent transfer of such net proceeds to the Partnership
in return for an additional limited partnership interest in the Partnership to
the Master Partnership.
(B) Reflects the retirement of $227,600,000 in aggregate principal amount of
Existing Senior Notes and the payment of related accrued interest of $6,051,000
and defeasance interest of $814,000 from the net proceeds from the sale by the
Partnership of the Common Units and existing cash balances of the Partnership.
The early extinguishment of the Existing Senior Notes results in an
extraordinary loss of approximately $24,641,000, resulting from prepayment
premiums of $19,536,000, the write-off of unamortized financing costs of
$4,291,000, and defeasance interest of $814,000.
(C) Reflects the net proceeds to the Partnership of approximately
$245,250,000 from the issuance of $250,000,000 of Senior Notes, net of the
Underwriters' discount (estimated to be $4,250,000) and offering expenses
(estimated to be $500,000), and the proceeds from term loan borrowings on the
Partnership's Credit
F-5
<PAGE>
FERRELLGAS, L.P. NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS NINE
MONTHS ENDED APRIL 30, 1994 AND YEAR ENDED JULY 31, 1993
Facility of approximately $15,000,000 (anticipated to be approximately
$10,000,000 at closing). The net proceeds from the issuance of the Senior Notes
and existing cash balances of the Partnership are used to retire the
$250,000,000 face amount (carrying amount of $246,430,000) Existing
Subordinated Debentures, and the payment of related accrued interest of
$11,060,000. The early extinguishment of the Existing Subordinated Debentures
results in an extraordinary loss of approximately $38,597,000, resulting from
subordinated bondholder consent solicitation and tender offer fees of
$31,250,000, write-off of unamortized note discount of $3,570,000, and write-
off of unamortized financing costs of $3,777,000. The Operating Partnership
will incur estimated additional financing costs of approximately $6,369,000 in
connection with the issuance of the Senior Notes and entrance into the Credit
Facility, each of which will be deferred and amortized over the term of the
indebtedness.
(D) Reflects elimination of the assets, liabilities and equity of the Company
that will not be conveyed to the Partnership, including approximately
$39,105,000 of cash, receivables from parent and affiliates of $17,658,000,
investment in Class B stock of Ferrell of $36,031,000, income tax liabilities
of $9,351,000 and equity of the Company of $83,443,000.
(E) Reflects the allocation of Partnership equity resulting from the
completion of the transactions associated with the closing of this offering,
using the following relative partnership interests: (1) general partner
interest in the Partnership equal to 1.0101% of total partners' capital; and
(2) limited partner interest in the Partnership equal to 98.9899%.
(F) Reflects estimated incremental general and administrative costs (e.g.
costs of tax return preparation and annual and quarterly reports to
Unitholders, investor relations and registrar and transfer agent fees)
associated with the Partnership at an annual rate of $500,000.
(G) Reflects the reduction of interest income to the Partnership as a result
of the reduction in cash balances available for short-term investment
opportunity.
(H) Reflects the adjustment to interest expense resulting from the
transactions described in (B) and (C) above, reconciled as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR NINE
ENDED MONTHS
JULY ENDED
31, APRIL 30,
1993 1994
<S> <C> <C>
Historical interest expense attributable to retired debt:
Interest expense on senior notes.......................... $26,741 $18,923
Interest expense on subordinated debentures............... 29,063 21,797
Amortization of note discount and financing costs......... 2,577 2,157
------- -------
58,381 42,877
------- -------
Pro forma interest expense applicable to the Partnership:
Interest expense assuming 9.75% per annum on the Senior
Notes.................................................... (24,375) (18,281)
Amortization of note discount and financing costs on all
indebtedness............................................. (912) (684)
Interest expense attributable to Credit Facility.......... (2,052) (866)
------- -------
(27,339) (19,831)
------- -------
Pro forma interest expense reductions..................... $31,042 $23,046
======= =======
</TABLE>
If the interest rate on the Senior Notes were to fluctuate one-half of one
percent, pro forma interest expense would fluctuate approximately $1,250,000
for the year ended July 31, 1993 and approximately $938,000 for the nine months
ended April 30, 1994.
(I) Reflects the elimination of the provision for current and deferred income
taxes as income taxes will be borne by the partners and not the Partnership.
F-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ferrellgas, L.P.
Liberty, Missouri
We have audited the accompanying consolidated balance sheet of Ferrellgas,
L.P. and subsidiary as of May 20, 1994. This financial statement is the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated balance sheet presents fairly, in all
material respects, the financial position of Ferrellgas, L.P. and subsidiary as
of May 20, 1994, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Kansas City, Missouri
June 3, 1994
F-7
<PAGE>
FERRELLGAS, L.P., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MAY 20, 1994
<TABLE>
<S> <C>
ASSETS
Cash.................................................................. $1,000
------
Total Assets........................................................ $1,000
======
PARTNERS' CAPITAL
General Partner....................................................... $ 10
Limited Partner....................................................... 990
------
Total Partners' Capital............................................. $1,000
======
</TABLE>
See note to consolidated balance sheet.
F-8
<PAGE>
FERRELLGAS, L.P., AND SUBSIDIARY
NOTE TO CONSOLIDATED BALANCE SHEET
MAY 20, 1994
Ferrellgas, L.P. (the "Partnership") was formed April 22, 1994 as a Delaware
limited partnership. The Partnership was formed to acquire, own and operate
substantially all of the assets of Ferrellgas, Inc. ("Ferrellgas"). Ferrellgas
will convey substantially all of its assets to the Partnership (excluding cash,
receivables from parent and affiliates and an investment in the Class B Stock
of Parent) and all of the liabilities, whether known or unknown, associated
with such assets (other than income tax liabilities). The Partnership has
agreed with Ferrellgas to assume the payment obligations of Ferrellgas under
its Series A and Series C Floating Rate Notes (due 1996), the Series B and
Series D Fixed Rate Notes and its 11 5/8% Senior Subordinated Debentures. The
Partnership has not commenced operations.
The sole limited partner of the Partnership, Ferrellgas Partners, L.P. (the
"Master Partnership") intends to offer Common Units, representing limited
partner interests in the Master Partnership, to third parties and to
concurrently issue Common Units, Subordinated Units and Incentive Distribution
Rights, representing additional limited partner interest in the Master
Partnership, to the general partner of the Master Partnership, Ferrellgas. The
Partnership intends to offer $250,000,000 aggregate principal amount of Senior
Notes. Such proceeds and the net proceeds of the Master Partnership's offering
of Common Units are intended to be utilized to retire substantially all of the
existing Senior Notes and existing Subordinated Debentures that the Partnership
will assume the related payment obligations from Ferrellgas.
Ferrellgas, as general partner, contributed $10 and the Master Partnership,
as limited partner contributed $990 to the Partnership on May 20, 1994. There
have been no other transactions involving the Partnership as of May 20, 1994.
The consolidated balance sheet includes the accounts of the Partnership and
its wholly-owned subsidiary Ferrellgas Finance Corp. All material intercompany
balances have been eliminated.
F-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ferrellgas Finance Corp.
Liberty, Missouri
We have audited the accompanying balance sheet of Ferrellgas Finance Corp. (a
wholly-owned subsidiary of Ferrellgas, L.P.), as of May 20, 1994. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on
our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of Ferrellgas Finance Corp. as of May 20, 1994 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Kansas City, Missouri
June 3, 1994
F-10
<PAGE>
FERRELLGAS FINANCE CORP.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELLGAS, L.P.)
BALANCE SHEET
MAY 20, 1994
<TABLE>
<S> <C>
ASSETS
Cash................................................................... $1,000
------
Total Assets......................................................... $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
======
</TABLE>
See note to balance sheet.
F-11
<PAGE>
FERRELLGAS FINANCE CORP.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELLGAS, L.P.)
NOTE TO BALANCE SHEET
MAY 20, 1994
Ferrellgas Finance Corp. (the "Company"), a Delaware corporation, was formed
on April 28, 1994 and is a wholly-owned subsidiary of Ferrellgas, L.P. (the
"Partnership"). Ferrellgas, L.P. was formed April 19, 1994 as a Delaware
limited partnership. The Partnership was formed to acquire, own and operate
substantially all of the assets of Ferrellgas, Inc. ("Ferrellgas"). Ferrellgas
will convey substantially all of its assets to the Partnership (excluding cash,
receivables from parent and affiliates and an investment in the Class B Stock
of Parent) and all of the liabilities, whether known or unknown, associated
with such assets (other than income tax liabilities). The Partnership has
agreed with Ferrellgas to assume the payment obligations of Ferrellgas under
its existing floating rate notes, fixed rate notes and senior subordinated
debentures.
The Partnership intends to offer $250,000,000 aggregate principal amount of
Senior Notes. The Company will serve as a co-obligor for the new Senior Notes
to be offered.
The Partnership contributed $1,000 to the Company on May 20, 1994. There have
been no other transactions involving the Company as of May 20, 1994.
F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ferrellgas, Inc.
Liberty, Missouri
We have audited the accompanying consolidated balance sheet of Ferrellgas,
Inc. (a wholly owned subsidiary of Ferrell Companies, Inc.) and subsidiaries as
of April 30, 1994 and July 31, 1993 and 1992, and the related consolidated
statements of operations, stockholder's equity and cash flows for the nine
months ended April 30, 1994 and for each of the three years in the period ended
July 31, 1993. 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 consolidated financial statements present fairly, in all
material respects, the financial position of Ferrellgas, Inc. and subsidiaries
as of April 30, 1994 and July 31, 1993 and 1992, and the results of their
operations and their cash flows for the nine months ended April 30, 1994 and
for each of the three years in the period ended July 31, 1993, in conformity
with generally accepted accounting principles.
As discussed in Note J to the consolidated financial statements, the Internal
Revenue Service has proposed certain adjustments to the Company's consolidated
income tax returns for the years ended July 31, 1987 and 1986. The ultimate
outcome of this matter cannot presently be determined. Accordingly, no
provision for any loss that may result upon resolution of this matter has been
made in the accompanying consolidated financial statements.
DELOITTE & TOUCHE
Kansas City, Missouri
June 3, 1994
F-13
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JULY 31
APRIL 30, ------------------
ASSETS 1994 1993 1992
------ --------- -------- --------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents...................... $ 58,806 $ 32,706 $ 27,959
Short-term investments......................... 29,345 25,040 23,165
Accounts and notes receivable including related
party
(1994--$500; 1993--$500; 1992--$1,000), less
allowance for doubtful accounts (1994--$884;
1993--$607; 1992--$837)....................... 55,869 52,190 53,802
Inventories.................................... 29,781 23,652 33,881
Prepaid expenses and other current assets...... 3,272 1,898 3,020
Receivable from parent and affiliate........... -- 916 26
-------- -------- --------
TOTAL CURRENT ASSETS......................... 177,073 136,402 141,853
Property, plant and equipment.................... 295,423 303,816 313,126
Intangible assets................................ 65,569 72,537 82,448
Other assets, including notes receivable from
related parties
(1994--$13,158; 1993--$10,909; 1992--$10,088)... 22,017 21,833 23,137
Investment in Class B redeemable common stock of
parent.......................................... 36,031 36,031 32,813
Deferred income taxes............................ -- 2,757 2,094
Note receivable from parent...................... 4,000 -- 3,142
-------- -------- --------
TOTAL ASSETS................................. $600,113 $573,376 $598,613
======== ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable............................... $ 34,266 $ 32,946 $ 44,864
Other current liabilities...................... 38,552 29,048 29,016
Payable to parent.............................. 91 -- --
-------- -------- --------
TOTAL CURRENT LIABILITIES.................... 72,909 61,994 73,880
Long-term debt................................... 476,471 489,589 501,614
Other liabilities................................ 10,534 10,434 8,907
Payable to parent................................ -- -- 2,542
Note and accrued interest payable to parent and
affiliate....................................... -- -- 2,862
Deferred income taxes............................ 9,351 -- --
STOCKHOLDER'S EQUITY:
Common stock, one dollar par value; 10,000
shares authorized; 990 shares issued.......... 1 1 1
Additional paid-in capital..................... 32,863 32,863 29,535
Accumulated deficit............................ (2,016) (21,505) (20,728)
-------- -------- --------
TOTAL STOCKHOLDER'S EQUITY................... 30,848 11,359 8,808
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY... $600,113 $573,376 $598,613
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-14
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE YEAR ENDED JULY
ENDED 31,
---------------------- ----------------------------
APRIL 30, APRIL 30,
1994 1993 1993 1992 1991
--------- ----------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Gas liquids and related
products.............. $430,401 $448,269 $516,891 $480,088 $515,507
Other.................. 20,076 20,033 25,054 21,041 28,426
-------- -------- -------- -------- --------
Total revenues....... 450,477 468,302 541,945 501,129 543,933
-------- -------- -------- -------- --------
COSTS AND EXPENSES:
Cost of products sold.. 229,326 256,736 298,033 267,279 297,968
Operating.............. 112,687 112,553 139,617 134,165 129,684
Depreciation and amor-
tization.............. 21,688 23,238 30,840 31,196 36,151
General and administra-
tive.................. 8,128 7,385 10,079 7,561 12,953
Vehicle leases......... 3,203 3,682 4,823 4,520 4,132
-------- -------- -------- -------- --------
Total costs and ex-
penses.............. 375,032 403,594 483,392 444,721 480,888
-------- -------- -------- -------- --------
OPERATING INCOME......... 75,445 64,708 58,553 56,408 63,045
Loss on disposal of as-
sets.................... (888) (947) (1,153) (1,959) (2,842)
Interest income, includ-
ing related parties
($787 and $539 at April
30, 1994 and 1993, re-
spectively; $725, $890,
and $696 at July 31,
1993, 1992 and 1991, re-
spectively)............. 2,791 2,333 3,266 4,401 3,841
Interest expense, includ-
ing parent and affiliate
($114 at April 30, 1993;
$153, $180 and $238 at
July 31, 1993, 1992, and
1991, respectively)..... (44,233) (45,056) (60,071) (61,219) (60,507)
-------- -------- -------- -------- --------
Earnings (loss) before
income taxes and ex-
traordinary loss........ 33,115 21,038 595 (2,369) 3,537
Income tax expense (bene-
fit).................... 12,759 8,253 486 (669) 1,558
-------- -------- -------- -------- --------
Earnings (loss) before
extraordinary loss...... 20,356 12,785 109 (1,700) 1,979
Extraordinary loss on
early extinguishment of
debt, net of income
taxes ($531 at April 30,
1994; $543 and $6,116 at
July 31, 1993 and 1992,
respectively)........... 867 -- 886 9,979 --
-------- -------- -------- -------- --------
NET EARNINGS (LOSS)...... $ 19,489 $ 12,785 $ (777) $(11,679) $ 1,979
======== ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NUMBER OF ADDITIONAL TOTAL
COMMON COMMON PAID-IN ACCUMULATED STOCKHOLDER'S
SHARES STOCK CAPITAL DEFICIT EQUITY
--------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AUGUST 1, 1990... 990 $ 1 $22,490 $(11,028) $ 11,463
Capital contribution from
parent................... -- -- 6,687 -- 6,687
Capital transaction--
Ferrell Companies, Inc.
Long-Term Incentive
Plan.................... -- -- 1,558 -- 1,558
Net earnings............. -- -- -- 1,979 1,979
--- ------ ------- -------- --------
BALANCE JULY 31, 1991.... 990 1 30,735 (9,049) 21,687
Capital transaction--
Ferrell Companies, Inc.
Long-Term Incentive
Plan.................... -- -- (1,200) -- (1,200)
Net loss................. -- -- -- (11,679) (11,679)
--- ------ ------- -------- --------
BALANCE JULY 31, 1992.... 990 1 29,535 (20,728) 8,808
Capital contribution from
parent.................. -- -- 3,277 -- 3,277
Capital transaction --
Ferrell Companies, Inc.
Long-Term Incentive
Plan.................... -- -- 51 -- 51
Net loss................. -- -- -- (777) (777)
--- ------ ------- -------- --------
BALANCE JULY 31, 1993.... 990 1 32,863 (21,505) 11,359
Net earnings............. -- -- -- 19,489 19,489
--- ------ ------- -------- --------
BALANCE APRIL 30, 1994... 990 $ 1 $32,863 $ (2,016) $ 30,848
=== ====== ======= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED FOR THE YEAR ENDED JULY 31,
--------------------- -----------------------------
APRIL 30, APRIL 30,
1994 1993 1993 1992 1991
--------- ----------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Earnings (loss) before
extraordinary loss..... $20,356 $12,785 $ 109 $ (1,700) $ 1,979
Reconciliation of
earnings (loss) to net
cash provided by
operating activities:
Depreciation and
amortization......... 21,688 23,238 30,840 31,196 36,151
Other................. 4,127 4,664 5,236 7,007 8,141
Decrease (increase) in
assets:
Accounts and notes
receivable......... (4,610) (4,023) (252) (1,475) (10,001)
Inventories......... (6,129) 13,730 10,229 (12,447) (4,620)
Prepaid expenses and
other current
assets............. (1,374) 206 977 (801) (218)
Increase (decrease) in
liabilities:
Accounts payable.... 1,320 (23,323) (11,918) 3,742 7,851
Other current
liabilities........ 10,278 11,959 1,729 (1,912) 9,780
Other liabilities... (49) 151 131 325 871
Deferred income
taxes.............. 12,639 7,694 (120) (970) 1,006
------- ------- -------- --------- --------
Net cash provided by
operating activities..... 58,246 47,081 36,961 22,965 50,940
------- ------- -------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures.... (8,330) (11,816) (14,188) (20,392) (25,942)
Net short-term
investment activity.... (4,305) (25,894) (1,875) (23,165) --
Proceeds from asset
sales.................. 643 1,670 1,983 3,040 1,315
Net additions to
intangible assets...... (62) (1) (82) (3,175) (9,619)
Net reductions
(additions) to other
assets................. (271) (2) 1 (520) (14)
------- ------- -------- --------- --------
Net cash used in investing
activities............... (12,325) (36,043) (14,161) (44,212) (34,260)
------- ------- -------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Additions to long-term
debt................... -- -- 81 246,804 3,202
Reductions of long-term
debt................... (13,336) (1,863) (12,796) (212,637) (2,964)
Additional payments to
retire debt............ (1,190) -- (1,195) (11,983) --
Additions to financing
costs.................. (53) (24) (627) (4,918) (644)
Investment in Class B
redeemable common stock
of parent.............. -- (3,218) (3,218) (9,092) (7,249)
Net advances to related
party.................. (2,249) 585 (59) (3,832) (2,756)
Net advances from (to)
parent and affiliates.. (2,993) (274) (239) (2,907) 718
------- ------- -------- --------- --------
Net cash provided by (used
in) financing activities. (19,821) (4,794) (18,053) 1,435 (9,693)
------- ------- -------- --------- --------
Increase (decrease) in
cash and cash
equivalents.............. 26,100 6,244 4,747 (19,812) 6,987
Cash and cash
equivalents--beginning of
year..................... 32,706 27,959 27,959 47,771 40,784
------- ------- -------- --------- --------
CASH AND CASH
EQUIVALENTS--END OF
PERIOD................... $58,806 $34,203 $ 32,706 $ 27,959 $ 47,771
======= ======= ======== ========= ========
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
A. BASIS OF PRESENTATION:
The accompanying consolidated financial statements and related notes present
the consolidated financial position, results of operations and cash flows of
Ferrellgas, Inc. (the "Company") and its subsidiaries. The Company is a wholly-
owned subsidiary of Ferrell Companies, Inc. ("Ferrell" or "Parent"). These
consolidated financial statements are prepared in connection with the proposed
public offering of limited partner interests in Ferrellgas Partners, L.P. (the
"Master Partnership"), as described in Note B.
B. INITIAL PUBLIC OFFERING OF COMMON UNITS AND OTHER TRANSACTIONS
The Master Partnership was formed April 19, 1994, as a Delaware limited
partnership. The Master Partnership was formed to acquire, own and operate the
propane business and substantially all of the assets of the Company. In order
to simplify the Master Partnership's obligations under the laws of several
jurisdictions in which the Master Partnership will conduct business, the Master
Partnership's activities will be conducted through a subsidiary operating
partnership, Ferrellgas, L.P. (the "Partnership"). The Company will convey
substantially all of the assets to the Partnership (excluding cash, payables to
or receivables from Parent and affiliates and an investment in Class B Stock of
Parent) and all of the liabilities, whether known or unknown, associated with
such assets (other than income tax liabilities).
The Master Partnership intends to offer 13,100,000 Common Units, representing
limited partner interests in the Master Partnership, to third parties and to
concurrently issue Common Units, Subordinated Units and Incentive Distribution
Rights, representing additional limited partner interests in the Partnership,
to the Company, as well as a 2% general partner interest in the Master
Partnership and the Partnership, on a combined basis. The Company will make a
dividend of such Common Units, Subordinated Units and Incentive Distribution
Rights to its parent, Ferrell.
The Partnership will assume the payment obligations of the Company under its
Series A and Series C Floating Rate Senior Notes due 1996 (the "Existing
Floating Rate Notes"), its Series B and Series D Fixed Rate Senior Notes (the
"Existing Fixed Rate Notes" and together with the Existing Floating Rate Notes
the "Existing Senior Notes") and its 11 5/8% Senior Subordinated Debentures
(the "Existing Subordinated Debentures"). All of this long-term debt will be
retired with the net proceeds from the sale by the Master Partnership of the
Common Units and the net proceeds from the issuance of approximately
$250,000,000 in aggregate principal amount of Senior Notes due 2001 to be
issued by the Partnership.
Concurrent with the closing of the offering of Senior Notes, the Company will
consummate a tender offer and consent solicitation with respect to the Existing
Subordinated Debentures. The consent solicitation is necessary to modify the
indenture related to the Existing Subordinated Debentures in order to permit
the Company to consummate the transactions contemplated by this Prospectus. As
of June 3, 1994, all outstanding Existing Subordinated Debentures have been
tendered and will be retired by the Partnership, as described above.
Concurrent with the closing of this offering, the Company will mail to the
holders of the Existing Senior Notes a notice of redemption of all outstanding
Existing Senior Notes, pursuant to the optional redemption provisions of the
indenture governing the Existing Senior Notes (the "Existing Senior Notes
F-18
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
Indenture"). The redemption date will be 30 days after the date of mailing of
such notice. The Existing Senior Notes Indenture provides for a redemption
price equal to 100% of the principal amount plus accrued and unpaid interest,
if any, to the redemption date plus, in the case of the Existing Fixed Rate
Notes, a premium which is based on certain yield information for U.S. Treasury
securities as of three business days prior to the redemption date. The
Partnership will deposit with the trustee on the date of closing of this
offering an amount expected to be more than sufficient to pay the redemption
price. As a result of the transactions contemplated hereby, during the 30-day
period prior to the redemption date, an event of default will exist under the
Existing Senior Notes Indenture. The holders of at least 25% of the principal
amount of Existing Senior Notes, therefore, will be entitled, by notice to the
Company and the trustee, to declare the unpaid principal of, and accrued and
unpaid interest and the applicable premium on, the Existing Senior Notes to be
immediately due and payable. In the event of such a declaration, the amount
already deposited by the Partnership in payment of the redemption price would
be applied to pay the amount so declared immediately due and payable.
C. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(1) PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All material intercompany profits, transactions and balances
have been eliminated.
The interim financial data for the nine months ended April 30, 1994 is
audited. The interim financial data for the nine months ended April 30, 1993 is
unaudited; however, in the opinion of management, the 1993 interim data
reflects all adjustments, consisting only of normal, recurring adjustments,
necessary for a fair statement of the results of the interim period presented.
The propane industry is seasonal in nature with peak activity during the
winter months. Therefore, the results of operations for the nine months ended
April 30, 1994 and 1993 are not indicative of the results to be expected for a
full fiscal year.
(2) RECLASSIFICATIONS:
Certain reclassifications have been made to the 1992 consolidated balance
sheet and the 1993, 1992 and 1991 consolidated statement of cash flows in order
to conform with the 1994 and 1993 presentation.
(3) SHORT-TERM INVESTMENTS:
Short-term investments consist of U.S. Treasury Bills and U.S. government
obligations with remaining maturities as of April 30, 1994, ranging from
approximately four to ten months. Short-term investments are carried at cost
which approximates market value.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 115--Accounting for Certain Investments in Debt and
Equity Securities, which is effective for fiscal years beginning after December
15, 1993. The statement addresses the accounting and reporting for certain
investments in debt and equity securities and expands the use of fair value
accounting for those securities but retains the use of the amortized cost
method for investments that the Company has the positive intent and ability to
hold to maturity. The Company does not believe that the adoption of this
statement will have a material effect on the results of operations or financial
condition of the Company.
F-19
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
(4) INVENTORIES:
Inventories are stated at the lower of cost or market using average cost and
actual cost methods.
The Company enters into forward purchase/sale agreements and options
involving propane and related products which are for trading purposes. To the
extent such contracts are entered into at fixed prices and thereby subject the
Company to market risk, the contracts are accounted for on a mark-to-market
basis.
(5) PROPERTY, PLANT AND EQUIPMENT AND OTHER NONCURRENT ASSETS:
Property, plant and equipment is stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are computed by the straight-
line method over the estimated useful lives of the assets ranging from two to
thirty years. Expenditures for maintenance and routine repairs are expensed as
incurred.
On August 1, 1991, the Company revised the estimated useful lives of storage
tanks from twenty to thirty years in order to more closely reflect expected
useful lives of the assets. The effect of this change in accounting estimate
resulted in a favorable impact on loss before extraordinary loss of $3,763,000
for the year ended July 31, 1992.
Intangible assets, consisting primarily of customer location values and
goodwill, are stated at cost, net of amortization computed on the straight-line
method over fifteen years for customer location values and forty years for
goodwill. The Company evaluates its intangible assets for impairment by
calculating the anticipated cash flow attributable to each acquisition over its
expected remaining life. Such expected cash flows, on an undiscounted basis,
are compared to the carrying value of the tangible and intangible assets, and
if impairment is indicated, the carrying value of the intangible assets are
adjusted. Accumulated amortization of intangible assets totaled $66,211,000 as
of April 30, 1994, and $59,181,000 and $49,188,000 as of July 31, 1993 and
1992, respectively.
Other assets consist primarily of non-current notes receivable and deferred
financing costs. The deferred financing costs are amortized using the effective
interest method over the terms of the respective debt agreements. Accumulated
amortization of other assets totaled $9,401,000 as of April 30, 1994 and
$7,592,000 and $5,286,000 as of July 31, 1993 and 1992, respectively.
(6) INCOME TAXES:
The Company files a consolidated Federal income tax return with its parent
and affiliates. Income taxes are computed as though each company filed its own
income tax return in accordance with the Company's tax sharing agreement.
Deferred income taxes are provided as a result of temporary differences
between financial and tax reporting as described in NOTE I.
Effective August 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109--Accounting for Income Taxes. The adoption
of this statement changed the Company's method of
F-20
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
accounting for income taxes from the deferred method, under APB 11, to the
asset/liability method. Under SFAS No. 109, deferred income taxes are
recognized for the tax consequences of temporary differences between the
financial statement carrying amounts and the tax basis of existing assets and
liabilities. The statement was adopted on a prospective basis and prior year
amounts are not restated. The fiscal year 1993 and cumulative effects of
adopting the statement as of August 1, 1992, did not have a material impact on
earnings or cash flow and is therefore not disclosed separately.
(7) CONSOLIDATED STATEMENT OF CASH FLOWS:
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid, debt instruments purchased with a maturity of
three months or less to be cash equivalents.
Interest paid totaled $35,062,000 and $35,853,000 for the nine months ended
April 30, 1994 and 1993, respectively, and $57,563,000, $59,054,000, and
$51,518,000 for the three fiscal years ended July 31, 1993, 1992 and 1991,
respectively.
In 1993 and 1991, the Company received capital contributions, as described in
NOTE M, from its parent.
In connection with the early extinguishment of certain senior notes in 1994
and 1993 and the refinancing of subordinated debentures in 1992, as described
in NOTE H, the Company recorded noncash extraordinary losses from the write-off
of financing costs, net of income tax benefits, of $129,000, $145,000 and
$2,550,000, respectively.
D. INVENTORIES:
<TABLE>
<CAPTION>
JULY 31,
APRIL -----------------
30, 1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Liquified propane gas and related products........... $25,055 $ 19,378 $ 29,658
Appliances, parts and supplies....................... 4,726 4,274 4,223
-------- -------- --------
$29,781 $ 23,652 $ 33,881
======== ======== ========
In addition to inventories on hand, the Company enters into contracts to buy
product for supply purposes. All such contracts have terms of less than one
year and call for payment based on market prices of less than one year and call
for payment based on market prices at date of delivery.
E. PROPERTY, PLANT AND EQUIPMENT:
<CAPTION>
JULY 31,
APRIL -----------------
30, 1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Land and improvements................................ $ 18,517 $ 18,459 $ 17,150
Buildings and improvements........................... 22,860 23,001 20,339
Vehicles............................................. 37,229 37,564 39,205
Furniture and fixtures............................... 17,368 16,402 14,194
Bulk equipment and market facilities................. 33,276 33,612 32,051
Tanks and customer equipment......................... 316,801 314,127 313,634
Other................................................ 2,846 1,456 99
-------- -------- --------
448,897 444,621 436,672
Less accumulated depreciation and amortization....... 153,474 140,805 123,546
-------- -------- --------
$295,423 $303,816 $313,126
======== ======== ========
</TABLE>
F-21
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
F. INVESTMENT IN CLASS B REDEEMABLE COMMON STOCK OF PARENT:
The investment in Class B redeemable common stock of parent represents all of
the authorized and issued shares of the parent's Class B redeemable common
stock. All shares were purchased from unrelated parties and are recorded at
historical cost. It is the intent of the parent to repay the Company the full
amount of its investment in Class B redeemable common stock with funds from
sources other than the Company. Upon redemption by the parent, the difference,
if any, between the Company's cost and the redemption amount received from the
parent will be recorded as a capital contribution from or dividend to the
parent.
G. OTHER CURRENT LIABILITIES:
<TABLE>
<CAPTION>
APRIL JULY 31,
30, ---------------
1994 1993 1992
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt...................... $ 1,486 $ 1,766 $ 1,912
Accrued insurance...................................... 7,996 8,846 10,515
Accrued interest....................................... 17,237 10,374 10,759
Accrued payroll........................................ 7,924 3,273 2,122
Other.................................................. 3,909 4,789 3,708
------- ------- -------
$38,552 $29,048 $29,016
======= ======= =======
</TABLE>
H. LONG-TERM DEBT:
<TABLE>
<CAPTION>
APRIL JULY 31,
30, -----------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed rate senior notes, interest at 12%, due in
August 1996........................................ $177,600 $189,500 $200,000
Floating rate senior notes, interest at applicable
LIBOR rate plus 2.25%
(5.5% at April 30, 1994), due in August 1996....... 50,000 50,000 50,000
Senior subordinated debentures, interest at 11 5/8%,
$250,000,000 face amount, due in December 2003..... 246,430 246,293 246,293
Notes payable, including approximately $2,329,000,
$2,975,000 and $3,848,000 secured by property and
equipment, interest rates ranging from noninterest-
bearing to 12%, due on various dates through 2001.. 3,927 5,562 7,233
-------- -------- --------
477,957 491,355 503,526
Less current portion................................ 1,486 1,766 1,912
-------- -------- --------
$476,471 $489,589 $501,614
======== ======== ========
</TABLE>
For the nine months ended April 30, 1994, the Company reacquired $11,900,000
of its fixed rate senior notes, at an approximate price of 110.00% of face
value together with accrued interest. The early extinguishment of senior notes
resulted in an extraordinary loss from debt premium and write-off of financing
costs of approximately $867,000, net of income tax benefit of $531,000.
F-22
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
In fiscal year 1993, the Company reacquired $10,500,000 of its fixed rate
senior notes, at an approximate aggregate price of 111.35% of face value,
together with accrued interest. The early extinguishment of senior notes
resulted in an extraordinary loss from debt premium and write-off of financing
costs of approximately $886,000, net of income tax benefit of $543,000.
In December 1991, the Company issued, at 98.418% of face value, $250,000,000
of 11 5/8% senior subordinated debentures due 2003. A portion of the proceeds
was used to acquire the Company's existing subordinated debt, together with a
prepayment premium, leaving the remainder available to finance future
acquisitions and for additional working capital purposes. The refinancing of
the subordinated debt resulted in an extraordinary loss from prepayment premium
and write-off of financing costs of approximately $9,979,000, net of income tax
benefit of $6,116,000.
The Company currently has a $50,000,000 bank credit facility which terminates
July 31, 1995. The facility provides for a working capital facility and a
letter of credit facility. At April 30, 1994, there were no borrowings
outstanding under the working capital facility and letters of credit
outstanding under the letter of credit facility, which are used primarily to
secure obligations under certain insurance and leasing arrangements, totaled
$32,778,000. Such letters of credit reduce the amount otherwise available for
borrowings under the facility.
The various agreements for the senior notes and bank credit facility have
similar requirements for maintaining certain working capital and net worth
amounts and meeting interest coverage tests. These loan agreements and the
senior subordinated debentures also place various limitations on the Company,
the most restrictive relating to additional indebtedness and guarantees, sale
and disposition of assets, intercompany transactions, common stock issuance,
and essentially prohibit the payment of dividends. The Company is in compliance
with all requirements, tests, limitations and covenants related to the senior
notes and bank credit facility. The senior notes and bank credit agreement are
collateralized by the stock of the Company.
Annual principal payments on long-term debt for each of the next five fiscal
years are $1,486,000 in 1995, $1,022,000 in 1996, $227,884,000 in 1997,
$125,000 in 1998 and $94,000 in 1999.
I. INCOME TAXES:
Income tax expense (benefit) consists of (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED FOR THE YEAR ENDED
APRIL 30, JULY 31,
--------------- ----------------------
1994 1993 1993 1992 1991
------- ------ ----- ------- ------
<S> <C> <C> <C> <C> <C>
Current.................................. $ 120 $ 559 $ 606 $ 301 $ 552
Deferred................................. 12,108 7,694 (663) (7,086) 1,006
------- ------ ----- ------- ------
$12,228 $8,253 $ (57) $(6,785) $1,558
======= ====== ===== ======= ======
Allocated to:
Operating activities................... $12,759 $8,253 $ 486 $ (669) $1,558
Extraordinary loss..................... (531) -- (543) (6,116) --
------- ------ ----- ------- ------
$12,228 $8,253 $ (57) $(6,785) $1,558
======= ====== ===== ======= ======
</TABLE>
F-23
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
Deferred taxes result from temporary differences in the recognition of income
and expense for tax and financial statement purposes. The significant temporary
differences and related deferred tax provision (benefit) are as follows (in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED FOR THE YEAR ENDED JULY
APRIL 30, 31,
--------------- --------------------------
1994 1993 1993 1992 1991
------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Depreciation expense.............. $ (49) $1,175 $ 1,568 $ 7,010 $ 19,555
Net operating loss................ 12,584 6,712 (1,975) (9,055) (15,539)
Net cash, accrual and other
differences...................... (794) (564) (752) (5,427) (3,260)
Amortization...................... 367 371 496 386 250
------- ------ ------- ------- --------
$12,108 $7,694 $ (663) $(7,086) $ 1,006
======= ====== ======= ======= ========
</TABLE>
For Federal income tax purposes, the Company has net operating loss
carryforwards of approximately $187,000,000 at April 30, 1994, available to
offset future taxable income. These net operating loss carryforwards expire at
various dates through 2009.
A reconciliation between the effective tax rate and the statutory Federal
rate follows (amounts in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED APRIL
30, FOR THE YEAR ENDED JULY 31,
-------------------------- ------------------------------------------
1994 1993 1993 1992 1991
------------- ----------- ------------- -------------- -----------
AMOUNT % AMOUNT % AMOUNT % AMOUNT % AMOUNT %
------- ---- ------ ---- ------ ----- ------- ----- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income tax expense (ben-
efit) at statutory
rate................... $11,100 35.0 $7,153 34.0 $(284) (34.0) $(6,278) (34.0) $1,202 34.0
Statutory surtax........ (317) (1.0) -- -- -- -- -- -- -- --
State income taxes, net
of Federal benefit..... 1,402 4.4 970 4.6 182 21.8 (518) (2.7) 310 8.7
Nondeductible meal and
entertainment expense.. 30 .1 27 .1 36 4.3 42 .2 41 1.2
Other................... 13 -- 103 .5 9 1.1 (31) (.2) 5 .1
------- ---- ------ ---- ----- ----- ------- ----- ------ ----
$12,228 38.5 $8,253 39.2 $ (57) (6.8) $(6,785) (36.7) $1,558 44.0
======= ==== ====== ==== ===== ===== ======= ===== ====== ====
</TABLE>
F-24
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
The significant components of the net deferred tax asset (liability) included
in the Consolidated Balance Sheet are as follows (in thousands):
<TABLE>
<CAPTION>
APRIL
30, JULY 31,
1994 1993
-------- --------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Differences between book and tax basis of property and
intangible assets....................................... $(98,788) $(86,533)
Other.................................................... -- (3,267)
-------- --------
Total deferred tax liabilities......................... (98,788) (89,800)
DEFERRED TAX ASSETS:
Operating loss carryforwards............................. 72,871 85,790
Reserves not currently deductible........................ 14,764 6,767
Other.................................................... 1,802 --
-------- --------
Total deferred tax assets.............................. 89,437 92,557
-------- --------
NET DEFERRED TAX ASSET (LIABILITY)......................... $ (9,351) $ 2,757
======== ========
</TABLE>
J. CONTINGENCIES AND COMMITMENTS:
The Company 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, after
taking into consideration the Company's insurance coverage and its existing
reserves, management is of the opinion that there are no known uninsured claims
or known contingent claims that are likely to have a material adverse effect on
the results of operations or financial condition of the Company.
The Internal Revenue Service ("IRS") has examined the Company's consolidated
income tax returns for the years ended July 31, 1987 and 1986, and has proposed
certain adjustments which relate principally to the purchase price allocations
for an acquisition made during 1987. The IRS has proposed to disallow $61
million of deductions taken or to be taken for depreciation of customer tanks
for which the Company asserts the methods and principles used during the
valuation of the customer tanks are defensible. Also, the IRS has proposed to
disallow $90 million of deductions for amortization of customer relationships
taken or to be taken in the Company's consolidated income tax returns. On April
20, 1993, the United States Supreme Court held in Newark Morning Ledger v.
United States that a taxpayer may amortize customer based intangibles if that
taxpayer can prove such intangibles are capable of being valued and the value
diminishes over time. The Company contends it has met this burden of proof and
feels this recent Supreme Court decision supports the positions taken during
the Company's allocation of purchase price to customer relationships. The
Company intends to vigorously defend against these proposed adjustments and is
in the process of protesting these adjustments through the appeals process of
the IRS. At this time, it is not possible to determine the ultimate resolution
of this matter.
Certain property and equipment is leased under noncancellable operating
leases which require fixed monthly rental payments and which expire at various
dates through 2016. Rental expense under these leases totalled $7,822,000 and
$8,379,000 for the nine months ended April 30, 1994 and 1993, respectively, and
F-25
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
$10,903,000, $10,317,000, and $9,334,000 for the three fiscal years ended July
31, 1993, 1992 and 1991. Future minimum lease commitments for such leases are
$7,939,000 in 1995, $5,703,000 in 1996, $3,694,000 in 1997, $1,707,000 in 1998,
and $441,000 in 1999.
K. EMPLOYEE BENEFITS:
The Company and its parent have a defined contribution profit-sharing plan
which covers substantially all employees with more than one year of service.
Contributions are made to the plan at the discretion of the parent's Board of
Directors. This plan also provides for matching contributions under a cash or
deferred arrangement (401(k) plan) based upon participant salaries and employee
contributions to the plan. Company contributions under the profit sharing
provision of the plan were $1,200,000 and $1,000,000 for the nine months ended
April 30, 1994 and 1993, respectively, and were $1,000,000, $2,711,000 and
$2,200,000 for the three fiscal years ended July 31, 1993, 1992 and 1991,
respectively. Company matching contributions to the plan under the 401(k)
provision of the plan were $1,153,000 and $1,175,000 for the nine months ended
April 30, 1994 and 1993, respectively, and were $1,541,000, $1,420,000 and
$1,398,000 for the three fiscal years ended July 31, 1993, 1992 and 1991,
respectively.
The Company has a defined benefit plan that provides participants who were
covered under a previously terminated plan with a guaranteed retirement benefit
at least equal to the benefit they would have received under the terminated
plan. Benefits under the terminated plan are determined by years of credited
service and salary levels. The Company's funding policy for this plan is to
contribute amounts deductible for Federal income tax purposes. Plan assets
consist primarily of corporate stocks and bonds, U.S. Treasury bonds and short-
term cash investments.
The following table sets forth the plan's projected funded status for the
respective periods based on the most recent actuarial valuations:
ACTUARIALLY COMPUTED PENSION EXPENSE INCLUDES THE FOLLOWING COMPONENTS:
<TABLE>
<CAPTION>
NINE MONTHS FOR THE YEAR
ENDED APRIL ENDED
30, JULY 31,
------------ -------------------
1994 1993 1993 1992 1991
----- ----- ----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Service cost................................. $ 184 $ 213 $ 285 $ 318 $ 361
Interest on obligations...................... 277 284 378 407 407
Actual return on plan assets................. 109 (500) (448) (320) 92
Amortization and deferral of:
Prior service cost......................... (23) (23) (31) 1 1
Gain....................................... (139) (74) (98) (98) (83)
Deferred asset (gain)/loss................. (347) 282 157 108 (310)
----- ----- ----- ----- -----
ACTUARIALLY COMPUTED PENSION EXPENSE......... $ 61 $ 182 $ 243 $ 416 $ 468
===== ===== ===== ===== =====
</TABLE>
F-26
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
JULY 31,
APRIL 30, ----------------
1994 1993 1992
--------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS:
Vested benefit obligation........................ $ 2,917 $ 2,215 $ 1,840
======= ======= =======
Accumulated benefit obligation................... $ 3,520 $ 2,747 $ 2,378
======= ======= =======
Projected benefit obligation..................... $ 5,556 $ 4,917 $ 4,981
Less: plan assets at fair value.................. (3,142) (3,605) (2,727)
------- ------- -------
Benefit obligation in excess of plan assets...... 2,414 1,312 2,254
Unrecognized prior service cost.................. 306 329 (12)
Unrecognized gain................................ 1,454 2,573 2,054
------- ------- -------
ACCRUED BENEFIT OBLIGATION......................... $ 4,174 $ 4,214 $ 4,296
======= ======= =======
</TABLE>
The actuarial computations assumed a discount rate, annual salary increase
and expected long-term rate of return on plan assets of 7.5%, 5% and 9.5%,
respectively, for the nine months ended April 30, 1994, 8%, 5% and 9.5%,
respectively, for fiscal year 1993 and 1992 and 8.5%, 5.5% and 9.5%,
respectively, for fiscal year 1991.
In fiscal 1987, Ferrell Companies, Inc. (Ferrell) established the Ferrell
Companies, Inc. Long-Term Incentive Plan (the Plan). The Plan provides long-
term incentives to officers and executives of Ferrell and its subsidiaries in
the form of units (Equity Units). The Plan provides for the redemption of the
Equity Units after July 31, 1996, based upon the excess of an appraised value
as of July 31, 1996, over a minimum value established at Plan inception. Earned
awards are 100% vested by the participants at July 31, 1993.
Because the participants are primarily employees of Ferrellgas, compensation
expense charges (credits) representing increases (decreases) in the estimated
value of the vested Equity Units are recorded by the Company. Compensation
expense charged (credited) to income was $720,000 and $0 for the nine months
ended April 30, 1994 and 1993, respectively, and was $80,000, $(1,934,000) and
$2,508,000, respectively, for the three fiscal years ended July 31, 1993, 1992
and 1991.
L. EMPLOYEE BENEFITS OTHER THAN PENSIONS:
The Company provides postretirement medical benefits to a closed group of
approximately 400 retired employees and their spouses. The plan requires the
Company to provide primary medical benefits to the participants until age 65,
at which time the company only pays a fixed amount of $55 per month participant
for medical benefits. Effective August 1, 1993, the Company adopted Statement
of Financial Accounting Standards No. 106--Employers' Accounting for
Postretirement Benefits Other Than Pensions which requires accrual of
postretirement benefits (such as health care benefits) during the years an
employee provides services. The Company elected to amortize the postretirement
benefit obligation over a period not to exceed the average remaining life
expectancy of the plan participants (since all of the plan participants are
retired). The cumulative effect as of August 1, 1993, and impact for the nine
months ended April 10, 1994, of adopting this statement was not material to the
financial statements of the Company.
F-27
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
The Company has expensed $560,000, $471,000 and $532,000 for the years ended
July 31, 1993, 1992 and 1991, respectively, on a pay-as-you-go-basis relative
to this postretirement benefit obligation.
The actuarial liabilities for these postretirement benefits, none of which
have been funded, are as follows at April 30, 1994:
<TABLE>
<S> <C>
Accumulated Postretirement Benefit Obligation--Retirees....... $2,270,000
Fair Value of Assets.......................................... 0
----------
Accrued Liability............................................. $2,270,000
==========
</TABLE>
Net periodic postretirement benefit cost for the nine months ended April 30,
1994, included the following components:
<TABLE>
<S> <C>
Interest Cost on Obligation..................................... $145,647
Amortization of Transition Obligation........................... 171,320
--------
Net Periodic Postretirement Benefit Cost........................ $316,967
========
</TABLE>
The accumulated postretirement benefit obligation was determined using a
discount rate of 7.75% and a health care cost trend rate of 10% in fiscal year
1994, 8% in fiscal years 1995 through 1997 and 5% thereafter for any
individuals who have not attained the age of 65 by such cut-off dates.
Benefits relate to a closed group of retirees whose benefits convert to a
fixed monthly supplement at age 65. Because of the nature of this group, a 1%
change in the assumed health care cost trend rates does not have a significant
impact on net periodic postretirement benefit cost or the accumulated
postretirement benefit obligation.
F-28
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112--Employers' Accounting For Postemployment Benefits
which is effective for fiscal years beginning after December 15, 1993. This
statement requires that employers recognize over the service lives of employees
the costs of postemployment benefits if certain conditions are met. The Company
does not believe that adoption of the statement will have a material impact on
results of operations or financial condition of the Company.
M. TRANSACTIONS WITH RELATED PARTIES:
All notes receivable from related parties bear interest at the prime rate
plus 1.375% (8.125% at April 30, 1994) except for one note totaling $8,896,000
which bears interest at the prime rate (6.75% at April 30, 1994).
In 1993 and 1991, the Company received capital contributions from its parent.
In 1993, the contribution consisted of (i) the forgiveness of a $3,015,000
long-term note payable to affiliate, including interest, and (ii) a $262,000
note receivable from affiliate. In 1991, the contribution consisted of
forgiveness of $6,687,000 long-term note payable to Parent, including interest.
In the second and third quarter of fiscal year 1993, Ferrell Leasing
Corporation, a subsidiary of Ferrell Properties, Inc., sold to the Company for
the fair market value of $4,100,000, the land and two buildings comprising the
Company's corporate headquarters in Liberty, Missouri. James E. Ferrell, a
director and executive officer in the Company, owns all of the issued and
outstanding stock of Ferrell Properties, Inc. Prior to the purchase of the
buildings, the Company paid rent to Ferrell Leasing of $403,000, $692,000 and
$661,000 in fiscal years 1993, 1992 and 1991, respectively.
A. Andrew Levison, a director of the parent, is a Managing Director of
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"). DLJ acted as
placement agent with regard to the senior subordinated notes issued in December
1991 and was paid fees of $3,545,000.
The law firm of Smith, Gill, Fisher & Butts, a Professional Corporation, is
general counsel to the Company, the parent and their respective subsidiaries
and affiliates. David S. Mouber, a director of the Parent, is a member of such
law firm. The Company, the Parent and their respective subsidiaries paid such
firm fees of $987,000 and $899,000 for the nine months ended April 30, 1994 and
1993, respectively, and paid fees of $1,381,000, $2,189,000 and $2,776,000
during the three fiscal years ended July 31, 1993, 1992 and 1991, respectively.
N. DISCLOSURES ABOUT OFF BALANCE SHEET RISK AND FAIR VALUE OF FINANCIAL
INSTRUMENTS:
In fiscal year 1993, the Company adopted Statement of Financial Accounting
Standards No. 107--Disclosures about Fair Value of Financial Instruments which
requires disclosing the fair value of financial instruments which can be
reasonably determined.
F-29
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Current Assets. The carrying amount of cash and cash equivalents and
short-term investments approximates fair value because of the short
maturity of those instruments.
Long-term Debt. The estimated fair value of the Company's long-term debt
was $505,597,000 and $539,651,000 as of April 30, 1994 and July 31, 1993,
respectively. The fair value is estimated based on quoted market prices and
discounted cash flows.
The Company is a party to certain option and forward contracts in connection
with its trading activities involving various liquified petroleum products.
Contracts are executed with private counterparties and to a lesser extent on
national mercantile exchanges. Open contract positions are summarized as
follows:
AS OF APRIL 30, 1994
(IN THOUSANDS EXCEPT PRICE PER GALLON DATA)
<TABLE>
<CAPTION>
MARKET
VOLUME PRICE MATURITY CONTRACT VALUE OF UNREALIZED
(IN GALLONS) (PER GALLON) DATES AMOUNTS CONTRACTS GAIN/(LOSS)
------------ ------------ ------------------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Exchange Traded Option
Contracts
to Buy................. 2,730 $ 0.26 June - July 1994 $ 723 $ 820 $ 97
Forward Contracts to
Buy.................... 61,893 $.19 to $.34 May - December 1994 15,717 16,093 376
Forward Contracts to
(Sell)................. (30,142) $.29 to $.37 May - December 1994 (10,180) (9,588) 592
------- ------- ------ ------
Total.................. 34,481 $ 6,260 $7,325 $1,065
======= ======= ====== ======
</TABLE>
Risks related to these contracts arise from the possible inability of
counterparties to meet the terms of their contracts and changes in underlying
product prices. The Company 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.
In connection with its trading activities, at July 31, 1993, the Company had
open forward and option contracts to buy $10,394 and sell ($11,347) of various
liquified petroleum products expressed in dollars based on contract prices. At
July 31, 1992, similar contracts to buy were $7,582 and to sell ($4,986). Net
unrealized gains/(losses) on those open positions were $281 and $0,
respectively, at July 31, 1993 and 1992.
F-30
<PAGE>
FERRELLGAS, INC.
(A WHOLLY-OWNED SUBSIDIARY OF FERRELL COMPANIES, INC.)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOR THE NINE MONTHS ENDED APRIL 30, 1994 AND 1993 (UNAUDITED)
AND FOR THE YEARS ENDED JULY 31, 1993, 1992 AND 1991
O. SUMMARIZED FINANCIAL DATA--FERRELL COMPANIES, INC. AND SUBSIDIARIES:
The Company is the sole operating subsidiary of Ferrell Companies, Inc.
Summarized consolidated financial information for Ferrell Companies, Inc. and
subsidiaries is presented below (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED FOR THE YEARS ENDED JULY
APRIL 30, 31,
-------------------- ----------------------------
1994 1993 1993 1992 1991
----------- -------- -------- -------- --------
(UNAUDITED))
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Operating revenues......... $450,482 $468,308 $542,116 $501,297 $544,021
Operating expenses......... 375,332 403,840 483,782 445,048 481,246
Earnings (loss) before ex-
traordinary loss.......... 20,142 12,784 174 (1,653) 2,102
Extraordinary loss......... (867) -- (886) (9,979) --
Net earnings (loss)........ 19,275 12,784 (712) (11,632) 2,102
<CAPTION>
JULY 31,
APRIL 30, ------------------
1994 1993 1992
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUMMARY OF FINANCIAL
POSITION:
Current assets............. $180,648 $136,373 $142,161
Non-current assets......... 384,095 401,702 423,906
Current liabilities........ 72,924 62,804 74,517
Non-current liabilities and
equity.................... 491,819 475,271 491,550
</TABLE>
F-31
<PAGE>
APPENDIX A
GLOSSARY OF TERMS
AVAILABLE CASH: Generally, for any period, all of the cash receipts of the
Partnership during such period (other than cash receipts that are attributable
to the liquidation of the Partnership) plus net reductions to reserves less all
of its cash disbursements and net additions to reserves during such period,
including, for the period from the closing of this offering through October 31,
1994, the cash balance of the Partnership on the date the Partnership commences
operations. The full definition of Available Cash is set forth in the
Partnership Agreement, a form of which is included as an exhibit to the
Registration Statement of which this Prospectus is a part. The definition of
Available Cash permits the General Partner to maintain reserves for
distributions with respect to any of the next four succeeding quarters in order
to reduce quarter-to-quarter variations in distributions. The General Partner
has broad discretion in establishing reserves for other purposes, and its
decisions regarding reserves could have a significant impact on the amount of
Available Cash available for distribution.
COMMON UNITS: The 13,100,000 Common Units (15,065,000 if the Underwriters'
overallotment option is exercised in full) of the Master Partnership offered
concurrently herewith and to be issued at the closing of this offering together
with the 1,000,000 Common Units (if the Underwriters' overallotment option is
exercised in full, all of such Common Units will be repurchased by the
Partnership) to be held by Ferrell at the closing of this offering. Each Common
Unit represents a fractional part of the partnership interests of all limited
partners and assignees and has the rights and obligations specified with
respect to Common Units in the Partnership Agreement.
COMPANY: Ferrellgas, Inc., a Delaware corporation and a wholly owned
subsidiary of Ferrell. Also referred to in this Prospectus as "Ferrellgas" and
the "General Partner."
CREDIT FACILITY: The credit facility to be entered into by the Partnership
and Bank of America National Trust and Savings Association, as Agent, which
will permit borrowings by the Partnership of up to $100 million on a senior
unsecured revolving line of credit basis and up to $85 million on a senior
unsecured basis.
EBITDA: Earnings before interest, income taxes and depreciation and
amortization, calculated as operating income plus depreciation and amortization
excluding interest.
FERRELL: Ferrell Companies, Inc., a Kansas corporation.
FERRELLGAS: Ferrellgas, Inc., a Delaware corporation and a wholly owned
subsidiary of Ferrell. Also referred to in this Prospectus as the "Company" and
the "General Partner."
GENERAL PARTNER: Ferrellgas, a wholly owned subsidiary of Ferrell, and its
successors as general partner of the Partnership.
INCENTIVE DISTRIBUTION RIGHTS: The right to receive specified incentive
distributions of Available Cash constituting Cash from Operations if quarterly
distributions of Available Cash constituting Cash from Operations exceed
certain specified target levels, issued to Ferrellgas in connection with the
transfer of its assets to the Partnership.
MASTER PARTNERSHIP: Ferrellgas Partners, L.P., a Delaware limited
partnership.
PARTNERSHIP: Ferrellgas, L.P., a Delaware limited partnership of which the
Master Partnership will own a 99% limited partner interest and Ferrellgas will
own a 1% general partner interest. The Partnership will conduct the Master
Partnership's business and has been established to simplify the Partnership's
obligations under the laws of certain jurisdictions in which it will conduct
business.
A-1
<PAGE>
PARTNERSHIP AGREEMENT: The partnership agreement for the Partnership (the
form of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part), and unless the context requires otherwise,
references to the Partnership Agreement constitute references to the
Partnership Agreements of the Partnership and of the Master Partnership,
collectively.
SUBORDINATED UNITS: The subordinated limited partner interests to be issued
to Ferrellgas in connection with the transfer of its assets to the Partnership.
UNITHOLDERS: Holders of the Common Units and the Subordinated Units.
UNITS: The Common Units and the Subordinated Units, collectively.
A-2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS OR ANY UNDERWRIT-
ER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RE-
LATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHO-
RIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALI-
FIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HERE-
UNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 13
The Transactions.......................................................... 18
Use of Proceeds........................................................... 19
Capitalization............................................................ 20
Selected Historical and Pro Forma Consolidated Financial and Operating
Data..................................................................... 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 23
Business.................................................................. 32
Management................................................................ 41
Cash Distributions........................................................ 47
The Partnership........................................................... 47
Description of Senior Notes............................................... 51
Certain Federal Income Tax Consequences................................... 71
Underwriting.............................................................. 73
Legal Matters............................................................. 74
Experts................................................................... 74
Additional Information.................................................... 74
Index to Financial Statements............................................. F-1
Glossary of Terms......................................................... A-1
</TABLE>
-----------
UNTIL , 1994 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
LOGO
Ferrellgas
$250,000,000
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
% SENIOR NOTES DUE 2001
---------------
PROSPECTUS
---------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
, 1994
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below are the expenses (other than underwriting discounts and
commissions) expected to be incurred in connection with the issuance and
distribution of the securities registered hereby. With the exception of the
Securities and Exchange Commission registration fee and the NASD filing fee,
the amounts set forth below are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 86,207
NASD filing fee................................................. 25,500
Rating agency fees.............................................. 30,000
Printing and engraving expenses................................. 100,000
Legal fees and expenses......................................... 182,818
Accounting fees and expenses.................................... 68,750
Blue Sky fees and expenses...................................... 15,675
Trustee fees and expenses....................................... 12,000
Miscellaneous................................................... 19,593
--------
Total......................................................... $540,543
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Section of the Prospectus entitled "The Partnership Agreement--
Indemnification" is incorporated herein by reference.
Article VII of the Company's bylaws provides, with respect to
indemnification, as follows:
"Section 7.01. Indemnification of Authorized Representatives in Third Party
Proceedings. The Corporation shall indemnify any person who was or is an
"authorized representative" of the Corporation (which shall mean for purposes
of this Article a Director or officer of the Corporation, or a person serving
at the request of the Corporation as a director, officer, or trustee, of
another corporation, partnership, joint venture, trust or other enterprise) and
who was or is a "party" (which shall include for purposes of this Article the
giving of testimony or similar involvement) or is threatened to be made a party
to any "third party proceeding" (which shall mean for purposes of this Article
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative, other than an action by or in the
right of the Corporation) by reason of the fact that such person was or is an
authorized representative of the Corporation, against expenses (which shall
include for purposes of this Article attorneys' fees), judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such third party proceeding if such person acted in
good faith and in a manner such person reasonably believed to be in, or not
opposed to, the best interests of the Corporation and, with respect to any
criminal third party proceeding (which could or does lead to a criminal third
party proceeding) had no reasonable cause to believe such conduct was unlawful.
The termination of any third party proceeding by judgment, order, settlement,
indictment, conviction or upon a plea of nolo contendere or its equivalent,
shall not of itself create a presumption that the authorized representative did
not act in good faith and in a manner which such person reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal third party proceeding, had reasonable cause to believe
that such conduct was unlawful.
II-1
<PAGE>
Section 7.02. Indemnification of Authorized Representatives in Corporate
Proceedings. The Corporation shall indemnify any person who was or is an
authorized representative of the Corporation and who was or is a party or is
threatened to be made a party to any "corporation proceeding" (which shall mean
for purposes of this Article any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor
or investigative proceeding by the Corporation) by reason of the fact that such
person was or is an authorized representative of the Corporation, against
expenses actually and reasonably incurred by such person in connection with the
defense or settlement of such corporate action if such person acted in good
faith and in a manner reasonably believed to be in, or not opposed to, the best
interests of the Corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of such
person's duty to the Corporation unless and only to the extent that the Court
of Chancery or the court in which such corporate proceeding was pending shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such authorized representative is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
Section 7.03. Mandatory Indemnification of Authorized Representatives. To the
extent that an authorized representative of the Corporation has been successful
on the merits or otherwise in defense of any third party or corporate
proceeding or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses actually and reasonably incurred by such
person in connection therewith.
Section 7.04. Determination of Entitlement to Indemnification. Any
indemnification under Section 7.01, 7.02 or 7.03 of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the authorized
representative is proper in the circumstances because such person has either
met the applicable standards of conduct set forth in Section 7.01 or 7.02 or
has been successful on the merits or otherwise as set forth in Section 7.03 and
that the amount requested has been actually and reasonably incurred. Such
determination shall be made:
(1) By the Board of Directors by a majority of a quorum consisting of
Directors who were not parties to such third party or corporate proceeding,
or
(2) If such a quorum is not obtainable, or, even if obtainable, a
majority vote of such a quorum so directs, by independent legal counsel in
a written opinion, or
(3) By the stockholders.
Section 7.05. Advancing Expenses. Expenses actually and reasonably incurred
in defending a third party or corporate proceeding shall be paid on behalf of
an authorized representative by the Corporation in advance of the final
disposition of such third party or corporate proceeding as authorized in the
manner provided in Section 7.04 of this Article upon receipt of an undertaking
by or on behalf of the authorized representative to repay such amount unless it
shall ultimately be determined that such person is entitled to be indemnified
by the Corporation as authorized in this Article. The financial ability of such
authorized representative to make such repayment shall not be a prerequisite to
the making of an advance.
Section 7.06. Employee Benefit Plans. For purposes of this Article, the
Corporation shall be deemed to have requested an authorized representative to
serve an employee benefit plan where the performance by such person of duties
to the Corporation also imposes duties on, or otherwise involves services by,
such person to the plan or participants or beneficiaries of the plan; excise
taxes assessed on an authorized representative with respect to an employee
benefit plan pursuant to applicable law shall be deemed "fines"; and action
taken or omitted by such person with respect to an employee benefit plan in the
performance of duties for a purpose reasonably believed to be in the interest
of the participants and beneficiaries of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the Corporation.
II-2
<PAGE>
Section 7.07. Scope of Article. The indemnification of authorized
representatives, as authorized by this Article, shall (1) not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any statute, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in an official capacity and as to
action in another capacity, (2) continue as to a person who has ceased to be an
authorized representative and (3) inure to the benefit of the heirs, executors
and administrators of such a person.
Section 7.08. Reliance on Provisions. Each person who shall act as an
authorized representative of the Corporation shall be deemed to be doing so in
reliance upon rights of indemnification provided by this Article."
Article EIGHTH of Ferrell's Articles of Incorporation provides, with respect
to indemnification, as follows:
"Article EIGHTH. No Director shall be personally liable to this Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director provided that nothing in this Article EIGHTH shall be construed so as
to eliminate or limit the liability of a director (A) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (B) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (C) under the provisions of K.S.A. 17-6424 and
amendments thereto, (D) for any transaction from which the director derived an
improper personal benefit or (E) for any act or omission occurring prior to the
effective date of this Article EIGHTH. No amendment to or repeal of this
Article EIGHTH shall adversely affect any right, benefit or protection of a
director of the Corporation existing at the time of such amendment or repeal
with respect to any acts or omissions occurring prior to such amendment or
repeal."
In addition, paragraph 22 of Ferrell's bylaws provides as follows:
"22. Indemnification of Directors and Officers. (a) Subject to subparagraph
(c) below, the corporation shall indemnify every director and officer who is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation),
by reason of the fact that he is or was a director or officer of the
corporation, or is or was serving at the request of the corporation, as a
director or officer, of another corporation, partnership, joint venture, trust
or other enterprise, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement, actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) Subject to subparagraph (c) below, the corporation shall indemnify every
person who is a party or is threatened to be made a party, to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against expenses, including attorneys'
fees, and amounts paid in settlement actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation; except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the corporation unless and only to the extent that the court in
which the action or suit was brought determines upon application that, despite
the adjudication of liability and in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such expense
which the court shall deem proper.
II-3
<PAGE>
(c) Any indemnification under the subparagraphs (a) or (b) above, unless
ordered by a court, shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director or
officer is proper in the circumstances because he has met the applicable
standard of conduct set forth in this Section 22. The determination shall be
made by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding, or if such a
quorum is not obtainable, or even if obtainable a quorum of disinterested
directors so directs, by independent counsel in a written opinion, or by the
stockholders.
(d) It is the intent of this Section 22 that the corporation shall be
obligated to indemnify every officer and director of this corporation to the
fullest extent permitted by law provided that the officer and director has met
the standard of conduct applicable by law which entitles such director and
officer to such indemnification. To such end:
(i) The indemnification and advancement of expenses provided by this
Section 22 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under
any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a
person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person; and
(ii) In the event the matter with respect to which indemnification is
sought under this Section 22 is required by law to be authorized in
accordance with subparagraph (c) above, then the exercise of discretion in
granting any such authorization shall be on the basis of the utmost good
faith consistent with the intent of this Section 22 to indemnify every
officer and director of this corporation to the fullest extent permitted by
law.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of the action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director or officer to repay such amounts if it is ultimately
determined that the director or officer is not entitled to be indemnified by
the corporation as authorized in this Section 22.
(f) Absent a vote by a majority of the Board of Directors or a determination
by independent legal counsel appointed by a majority of the Board of Directors
upon the facts of a specific case, indemnification described in this Section 22
will be limited to defensive application.
(g) The corporation may purchase and maintain insurance on behalf of any
person who is or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would have
the power to indemnify him against such liability under the provisions of this
Section 22.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consideration or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors or officers so that any person who is or
was a director or officer of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this Section with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
(i) For purposes of this Section, reference to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as director or
II-4
<PAGE>
officer of the corporation which imposes duties on, or involves services by,
such director or officer, with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the corporation"
as referred to in this Section."
Section 145 of the General Corporation Law of the State of Delaware
authorizes the indemnification of directors and officers of a corporation
against liability incurred by reason of being a director or officer and against
expenses (including attorneys' fees) in connection with defending any action
seeking to establish such liability, in the case of third party claims, if the
director or officer acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and in the
case of action by or in the right of the corporation, if the director or
officer acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and if such director or
officer shall not have been adjudged liable to the corporation, unless a court
otherwise determines. Indemnification is also authorized with respect to any
criminal action or proceeding where the director or officer had no reasonable
cause to believe his conduct was unlawful.
Reference is made to Section 6 of the Underwriting Agreement filed as Exhibit
1.1 to this Registration Statement.
Subject to any terms, conditions or restrictions set forth in the Partnership
Agreements, Section 17-108 of the Delaware Revised Limited Partnership Act
empowers a Delaware limited partnership to indemnify and hold harmless any
partner or other person from and against any and all claims and demands
whatsoever.
Under insurance policies maintained by Ferrell, directors and officers of
Ferrell and its subsidiaries may be indemnified against losses arising from
certain claims, including claims under the Securities Act of 1933, as amended,
which may be made against such persons by reason of their being directors or
officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
There has been no sale of securities of the Partnership within the past three
years.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<C> <S>
*1.1 --Form of Underwriting Agreement
*3.1 --Form of Agreement of Limited Partnership of Ferrellgas, L.P.
*5.1 --Opinion of Smith, Gill, Fisher & Butts, P.C. as to the legality
of the securities being registered
*8.1 --Opinion of Smith, Gill, Fisher & Butts, P.C. relating to tax
matters
*10.1 --Form of Credit Agreement dated as of , 1994 among Ferrellgas,
L.P., Stratton Insurance Company, Ferrellgas, Inc., Bank of
America National Trust and Savings Association, as Agent, and the
other financial institutions party thereto in the amount of
$185,000,000
*10.2 --Form of Indenture among Ferrellgas, L.P., and Norwest Bank
Minnesota, National Association, as Trustee, relating to %
Senior Notes due 2001
**10.3 --$250,000,000 11 5/8% Senior Subordinated Debenture Indenture due
2003, dated as of December 1, 1991, between the Company and
Norwest Bank Minnesota, National Association, as Trustee
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
**10.4 --Assignment and Agreement dated as of January 1, 1989 between BP Oil
Company and Ferrell Petroleum, Inc.
**10.5 --Ferrell Long-Term Incentive Plan, dated June 23, 1987, between Ferrell
and the participants in the Plan
**10.6 --Ferrell 1992 Key Employee Stock Option Plan
*10.7 --Form of Contribution, Conveyance and Assumption Agreement between
Ferrellgas, the Partnership and the Master Partnership
*10.8 --First Supplemental Indenture dated June 2, 1994 relating to $250,000,000
11 5/8% Senior Subordinated Debentures
*12.1 --Computation of Ratio of Earnings to Fixed Charges
*21.1 --List of subsidiaries
*23.1 --Consent of Deloitte & Touche
*23.2 --Consent of Smith, Gill, Fisher & Butts, P.C. (included in Exhibit 5.1)
*23.3 --Consent of Smith, Gill, Fisher & Butts, P.C. (included in Exhibit 8.1)
**24.1 --Powers of Attorney (included on signature page)
*25.1 --Statement of Eligibility of Trustee
</TABLE>
- --------
* Filed herewith
**Previously filed
<TABLE>
<S> <C>
Index of Financial Statement Schedules..................................... S-1
Independent Auditors' Report............................................... S-2
Schedule I--Marketable Securities--Other Investments ...................... S-3
Schedule II--Amounts Receivable From Related Parties and Employees......... S-4
Schedule V--Property, Plant and Equipment.................................. S-5
Schedule VI--Accumulated Depreciation and Amortization of Property, Plant
and Equipment ............................................................ S-6
Schedule VIII--Valuation and Qualifying Accounts........................... S-7
Schedule IX--Short-Term Borrowings......................................... S-8
Schedule X--Supplementary Income Statement Information..................... S-9
</TABLE>
All other financial statement schedules are omitted because the information
is not required, is not material or is otherwise included in the financial
statements or related notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act") may be permitted to directors, officers or
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-6
<PAGE>
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF LIBERTY, STATE OF MISSOURI, ON THE 9TH DAY OF JUNE, 1994.
Ferrellgas Finance Corp.
*
By: _________________________________
JAMES E. FERRELLCHAIRMAN OF THE
BOARD ANDCHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Director, Chairman
* of the Board and June 9, 1994
- ------------------------------------- Chief Executive
JAMES E. FERRELL Officer (Principal
Executive Officer)
/s/ Danley K. Sheldon Chief Financial
- ------------------------------------- Officer/Treasurer June 9, 1994
DANLEY K. SHELDON (Principal
Financial and
Accounting Officer)
/s/ Danley K. Sheldon
*By: ___________________________
DANLEY K. SHELDONATTORNEY-IN-FACT
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT
TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
THE CITY OF LIBERTY, STATE OF MISSOURI, ON THE 9TH DAY OF JUNE, 1994.
Ferrellgas, L.P.
By: Ferrellgas, Inc., as General
Partner
*
By: _________________________________
JAMES E. FERRELLCHAIRMAN OF THE
BOARD ANDCHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Director, Chairman
* of the Board and June 9, 1994
- ------------------------------------- Chief Executive
JAMES E. FERRELL Officer (Principal
Executive Officer)
/s/ Danley K. Sheldon Chief Financial
- ------------------------------------- Officer/Treasurer June 9, 1994
DANLEY K. SHELDON (Principal
Financial and
Accounting Officer)
/s/ Danley K. Sheldon
*By: ___________________________
DANLEY K. SHELDONATTORNEY-IN-FACT
II-9
<PAGE>
INDEX OF FINANCIAL STATEMENTS SCHEDULES
<TABLE>
<S> <C>
Independent Auditors' Report............................................... S-2
Schedule I--Marketable Securities--Other Investments ...................... S-3
Schedule II--Amounts Receivable From Related Parties and Employees......... S-4
Schedule V--Property, Plant and Equipment.................................. S-5
Schedule VI--Accumulated Depreciation and Amortization of Property, Plant
and Equipment ............................................................ S-6
Schedule VIII--Valuation and Qualifying Accounts........................... S-7
Schedule IX--Short-Term Borrowings......................................... S-8
Schedule X--Supplementary Income Statement Information..................... S-9
</TABLE>
S-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Ferrellgas, Inc.
Liberty, Missouri
We have audited the consolidated financial statements of Ferrellgas, Inc. and
subsidiaries as of April 30, 1994 and July 31, 1993 and 1992, and for the nine
months ended April 30, 1994 and for each of the three years in the period ended
July 31, 1993, and have issued our report thereon dated June 3, 1994, which
expressed an unqualified opinion and included an explanatory paragraph
concerning an uncertainty involving an income tax matter. Our audits also
included the financial statement schedules listed at Item 16(b). These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. 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
Kansas City, Missouri
June 3, 1994
S-2
<PAGE>
SCHEDULE I
FERRELLGAS, INC. AND SUBSIDIARIES
MARKETABLE SECURITIES--OTHER INVESTMENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SHARES/ MARKET BALANCE
ISSUANCE/ISSUER PAR VALUE COST VALUE SHEET VALUE
<S> <C> <C> <C> <C>
Year ended July 31, 1993
United States Treasury Bills
United States Government....... $15,000 $14,497 $14,703 $14,497(1)
United States Treasury Notes
United States Government....... $ 5,000 $ 5,116 $ 5,171 $ 5,116(1)
Corporate Commercial Paper
Beta Finance, Inc.............. $ 2,500 $ 2,474 $ 2,474 $ 2,474(1)
General Electric Capital Corp.. $ 3,000 $ 2,953 $ 2,977 $ 2,953(1)
Class B Redeemable Common Stock
Ferrell Companies, Inc......... 643(4) $36,031 $36,031(2) $36,031(3)
Year ended July 31, 1992
United States Treasury Bills
United States Government....... $24,000 $23,165 $23,600 $23,165(1)
Class B Redeemable Common Stock
Ferrell Companies, Inc......... 576 $32,813 $32,813(2) $32,813(3)
Year ended July 31, 1991
Class B Redeemable Common Stock
Ferrell Companies, Inc. ....... 394 $23,721 $23,721(2) $23,721(3)
</TABLE>
- ---------------------
(1) Short-term investments on Consolidated Balance Sheet.
(2) Class B redeemable common stock is not publicly traded. Therefore, market
value was considered the same as cost for this schedule.
(3) Investment in Class B redeemable common stock of parent (eliminated in
consolidation) on Balance Sheet.
(4) Total authorized and issued shares of Ferrell's Class B redeemable common
stock.
S-3
<PAGE>
SCHEDULE II
FERRELLGAS, INC. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND EMPLOYEES
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT END
BALANCE OF PERIOD
AT ---------------
BEGINNING AMOUNTS NOT
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED CURRENT CURRENT
<S> <C> <C> <C> <C> <C>
Year ended July 31, 1993
One Liberty Plaza, Inc.
(1).................... $3,000 $ -- $ -- $ -- $3,000
====== ====== ====== ====== ======
Ferrell Development,
Inc. (1)............... $1,500 $ -- $ -- $ -- $1,500
====== ====== ====== ====== ======
Ferrell Properties, Inc.
(1).................... $ -- $ 262(3) $ -- $ -- $ 262
====== ====== ====== ====== ======
James E. Ferrell (2).... $6,588 $4,400 $4,341 $ 500 $6,147
====== ====== ====== ====== ======
Year ended July 31, 1992
One Liberty Plaza, Inc.
(1).................... $3,000 $ -- $ -- $ -- $3,000
====== ====== ====== ====== ======
Ferrell Development,
Inc. (1)............... $1,500 $ -- $ -- $ -- $1,500
====== ====== ====== ====== ======
James E. Ferrell (2).... $2,756 $5,480 $1,648 $1,000 $5,588
====== ====== ====== ====== ======
Year ended July 31, 1991
One Liberty Plaza, Inc.
(1).................... $3,000 $ -- $ -- $ -- $3,000
====== ====== ====== ====== ======
Ferrell Development,
Inc. (1)............... $1,500 $ -- $ -- $ -- $1,500
====== ====== ====== ====== ======
James E. Ferrell (2).... $ -- $6,216 $3,460 $2,756 $ --
====== ====== ====== ====== ======
</TABLE>
- ---------------------
(1) Notes are due December 31, 1997, and bear interest at the prime rate plus
1.375%.
(2) Note is due on demand and bears interest at the prime rate.
(3) Contributed by Ferrell in fiscal year 1993.
S-4
<PAGE>
SCHEDULE V
FERRELLGAS, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JULY 31, 1993 JULY 31, 1992 JULY 31, 1991
<S> <C> <C> <C>
Land and improvements... $ 18,459 $ 17,150 $ 16,974
Buildings and improve-
ments.................. 23,001 20,339 18,560
Vehicles................ 37,564 39,205 40,662
Furniture and fixtures.. 16,402 14,194 11,182
Bulk equipment and mar-
ket facilities......... 33,612 32,051 30,462
Tanks and customer
equipment.............. 314,127 313,634 307,210
Other................... 1,456 99 1,790
-------- -------- --------
$444,621 $436,672 $426,840
======== ======== ========
Additions, at cost...... $ 14,187 $ 20,392 $ 25,942
======== ======== ========
Retirements............. $ 6,238 $ 10,560 $ 9,854
======== ======== ========
</TABLE>
- ---------------------
Note: See Notes to financial statements for a description of the methods and
estimated useful lives used in computing depreciation and amortization.
Detail of additions and retirements by major classification is not
provided as the totals for such additions and retirements are less than
10% of the total property, plant and equipment for each year.
S-5
<PAGE>
SCHEDULE VI
FERRELLGAS, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
CHARGED TO
BEGINNING COSTS AND END OF
OF YEAR EXPENSES RETIREMENTS YEAR
<S> <C> <C> <C> <C>
Year ended July 31, 1993
Land and improvements.............. $ 1,293 $ 263 $ 5 $ 1,551
Buildings and improvements......... 5,831 996 124 6,703
Vehicles........................... 21,804 4,466 2,260 24,010
Furniture and fixtures............. 8,162 2,433 92 10,503
Bulk equipment and market facili-
ties.............................. 9,186 1,712 92 10,806
Tanks and customer equipment....... 77,270 10,579 617 87,232
-------- ------- ------ --------
$123,546 $20,449 $3,190 $140,805
======== ======= ====== ========
Year ended July 31, 1992
Land and improvements.............. $ 1,049 $ 248 $ 4 $ 1,293
Buildings and improvements......... 5,033 979 181 5,831
Vehicles........................... 20,403 5,107 3,706 21,804
Furniture and fixtures............. 6,742 2,072 652 8,162
Bulk equipment and market facili-
ties.............................. 7,955 1,507 276 9,186
Tanks and customer equipment....... 67,455 10,573 758 77,270
-------- ------- ------ --------
$108,637 $20,486 $5,577 $123,546
======== ======= ====== ========
Year ended July 31, 1991
Land and improvements.............. $ 826 $ 234 $ 11 $ 1,049
Buildings and improvements......... 5,095 1,057 1,119 5,033
Vehicles........................... 17,323 5,115 2,035 20,403
Furniture and fixtures............. 5,301 1,978 537 6,742
Bulk equipment and market facili-
ties.............................. 6,263 1,826 134 7,955
Tanks and customer equipment....... 52,521 15,775 841 67,455
-------- ------- ------ --------
$ 87,329 $25,985 $4,677 $108,637
======== ======= ====== ========
</TABLE>
S-6
<PAGE>
SCHEDULE VIII
FERRELLGAS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED DEDUCTIONS BALANCE
BEGINNING TO COST/ (AMOUNTS AT END
DESCRIPTION OF PERIOD EXPENSES CHARGED-OFF) OF PERIOD
<S> <C> <C> <C> <C>
Year ended July 31, 1993
Allowance for uncollectible re-
ceivables........................ $ 837 $ 1,343 $1,573 $ 607
======= ======= ====== =======
Accumulated amortization of intan-
gible assets..................... $49,188 $ 9,993 $ -- $59,181
======= ======= ====== =======
Accumulated amortization of other
assets........................... $ 5,286 $ 2,538 $ 232 $ 7,592
======= ======= ====== =======
Year ended July 31, 1992
Allowance for uncollectible re-
ceivables........................ $ 1,005 $ 2,071 $2,239 $ 837
======= ======= ====== =======
Accumulated amortization of intan-
gible assets..................... $38,901 $10,306 $ 19 $49,188
======= ======= ====== =======
Accumulated amortization of other
assets........................... $ 6,895 $ 2,654 $4,263 $ 5,286
======= ======= ====== =======
Year ended July 31, 1991
Allowance for uncollectible re-
ceivables........................ $ 1,005 $ 2,423 $2,423 $ 1,005
======= ======= ====== =======
Accumulated amortization of intan-
gible assets..................... $29,116 $ 9,785 $ -- $38,901
======= ======= ====== =======
Accumulated amortization of other
assets........................... $ 4,309 $ 2,586 $ -- $ 6,895
======= ======= ====== =======
</TABLE>
S-7
<PAGE>
SCHEDULE IX
FERRELLGAS, INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAXIMUM WEIGHTED
WEIGHTED AMOUNT AVERAGE AVERAGE
BALANCE AVERAGE OUTSTANDING OUTSTANDING INTEREST
AT END INTEREST DURING DURING RATE DURING
CATEGORY OF YEAR RATE THE YEAR THE YEAR THE YEAR*
<S> <C> <C> <C> <C> <C>
Year ended July 31, 1993
(There were no short-term borrowings during the fiscal year ended July 31,
1993).
Year ended July 31, 1992
Working capital loan.... $ -- -- $1,000 $ 453 7.82%
==== ==== ====== ====== ====
Revolving loan.......... $ -- -- $4,275 $2,640 7.53%
==== ==== ====== ====== ====
Year ended July 31, 1991
(There were no short-term borrowings during the fiscal year ended July 31,
1991).
</TABLE>
- ---------------------
* Based upon the actual rate in effect and the average daily outstanding
balance.
S-8
<PAGE>
SCHEDULE X
FERRELLGAS, INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED TO COSTS AND
EXPENSES
-----------------------
YEAR YEAR YEAR
ENDED ENDED ENDED
JULY JULY JULY
31, 31, 31,
1993 1992 1991
<S> <C> <C> <C>
1. Maintenance and repairs............................. $10,110 $ 9,855 $ 8,819
======= ======= =======
2. Depreciation........................................ $20,472 $20,486 $25,985
Amortization of intangibles......................... 9,993 10,306 9,785
Amortization of other assets........................ 2,538 2,654 2,586
------- ------- -------
$33,003 $33,446 $38,356
======= ======= =======
</TABLE>
- ---------------------
Note: Detail for the other items required for this schedule has been omitted
since each of the other items is less than 1% of total revenues.
S-9
<PAGE>
GRAPHICS APPENDIX LIST
PAGE WHERE
GRAPHIC DESCRIPTION OF GRAPHIC OR CROSS-REFERENCE
- ------------ -----------------------------------------
INSIDE FRONT A map depicting the locations of assets and operations of
COVER PAGE Ferrellgas, L.P. (the "Partnership") in the United States. The
OF PROSPECTUS map is coded to reflect the locations of the following: (1)
(FOLDOUT) retail markets; (ii) the headquarters; (iii) the Houston
headquarters; (iv) a service center; (v) owned underground
storage; and (vi) owned throughput terminals. The map also
depicts LPG common carrier pipelines not owned by the
Partnership and seaborne import terminals not owned by the
Partnership.
PAGE 8 A chart depicting the organization and ownership of
Ferrellgas Partners, L.P. (the "Master Partnership") and the
Master Partnership after giving effect to the sale of the
Common Units by the Master Partnership and related
transactions. The ownership interests as depicted are as
follow: (1) Ferrell Companies, Inc. ("Ferrell") will own
1,000,000 Common Units, 16,118,559 Subordinated Units and
Incentive Distribution Rights representing a 56.1% limited
partner interest in the Master Partnership; Ferrellgas, Inc.
("Ferrellgas"), a wholly owned subsidiary of Ferrell, will own
a 1% general partner interest in the Master Partnership and a
1.0101% general partner interest in the Partnership; the Master
Partnership will own a 98.9899% limited partner interest in the
Partnership; and the public unitholders will own 13,100,000
Common Units representing a 42.9% limited partner interest in
the Master Partnership.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
EXHIBITS DESCRIPTION NO.
<S> <C> <C>
*1.1 --Form of Underwriting Agreement
*3.1 --Form of Agreement of Limited Partnership of Ferrellgas, L.P.
*5.1 --Opinion of Smith, Gill, Fisher & Butts, P.C. as to the legality of the
securities being registered
*8.1 --Opinion of Smith, Gill, Fisher & Butts, P.C. relating to tax matters
*10.1 --Form of Credit Agreement dated as of , 1994 among Ferrellgas,
L.P., Stratton Insurance Company, Ferrellgas, Inc., Bank of America
National Trust and Savings Association, as Agent, and the other
financial institutions party thereto in the amount of $185,000,000
*10.2 --Form of Indenture among Ferrellgas, L.P., and Norwest Bank Minnesota,
National Association as Trustee, relating to % Senior Notes due 2001
**10.3 --$250,000,000 11 5/8% Senior Subordinated Debenture Indenture due 2003,
dated as of December 1, 1991, between the Company and Norwest Bank
Minnesota, National Association, as Trustee
**10.4 --Assignment and Agreement dated as of January 1, 1989 between BP Oil
Company and Ferrell Petroleum, Inc.
**10.5 --Ferrell Long-Term Incentive Plan, dated June 23, 1987, between Ferrell
and the participants in the Plan
**10.6 --Ferrell 1992 Key Employee Stock Option Plan
*10.7 --Form of Contribution, Conveyance and Assumption Agreement between
Ferrellgas, the Partnership and the Master Partnership
*10.8 --First Supplemental Indenture dated June 2, 1994 relating to
$250,000,000 11 5/8% Senior Subordinated Debentures
*12.1 --Computation of Ratio of Earnings to Fixed Charges
*21.1 --List of subsidiaries
*23.1 --Consent of Deloitte & Touche
*23.2 --Consent of Smith, Gill, Fisher & Butts, P.C. (included in Exhibit 5.1)
*23.3 --Consent of Smith, Gill, Fisher & Butts, P.C. (included in Exhibit 8.1)
**24.1 --Powers of Attorney (included on signature page)
*25.1 --Statement of Eligibility of Trustee
</TABLE>
- ---------------------
* Filed herewith
** Previously filed
<PAGE>
EXHIBIT 1.1
L&W DRAFT OF 06/03/94
---------------------
FERRELLGAS, L.P.
and
FERRELLGAS FINANCE CORP.
_____% Senior Notes Due 2001
UNDERWRITING AGREEMENT
June ___, 1994
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
Ladies and Gentlemen:
Ferrellgas, L.P., a Delaware limited partnership (the "Partnership"), and
Ferrellgas Finance Corp., a wholly owned subsidiary of the Partnership ("Finance
Corp." and, together with the Partnership, the "Issuers"), propose to issue and
sell to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and Goldman,
Sachs & Co. ("Goldman, Sachs" and, together with DLJ, the "Underwriters") an
aggregate of $250,000,000 principal amount of their ____% Senior Notes due 2001
(the "Senior Notes"). The Senior Notes are to be issued pursuant to the
provisions of an Indenture to be dated as of July __, 1994 by and among the
Issuers and ________, as Trustee (the "Indenture").
It is understood by all parties that (i) Ferrellgas Partners L.P, a
Delaware limited Partnership (the "Master Partnership"), the Underwriters and
certain other underwriters are entering into an underwriting agreement (the
"Common Units Underwriting Agreement") providing for the sale by the Master
Partnership of 13,100,000 common units (the "Common Units") representing limited
partner interests in the Master Partnership and, at the option of such
Underwriters, the sale by Ferrellgas, Inc., a Delaware corporation (the "General
Partner"), of up to 1,965,000 additional Common Units to cover overallotments,
if any, and (ii) concurrent with the Closing Date (as defined in Section 3
herein), (a) the closing under the Common Units Underwriting Agreement will
occur, (b) the General Partner will accept for purchase all of its 11 5/8%
Senior Subordinated Debentures due December 15, 2003 (the "Senior Subordinated
Debentures") validly tendered and not withdrawn pursuant to its Offer to
Purchase the Senior Subordinated Debentures (the "Offer to Purchase"), thereby
giving effect to the supplemental indenture deleting or amending certain
restrictive covenants and events of default relating to the Senior Subordinated
Debentures, (c) the General Partner will call for redemption its Series A and
Series C Floating Rate Senior Notes due 1996 and Series B and Series D Fixed
Rate Senior Notes due 1996 (collectively, the "Existing Senior Notes") and the
Partnership will deposit with the trustee under the
<PAGE>
Indenture, dated as of July 1, 1990 (the "Existing Indenture"), relating to the
Existing Senior Notes an amount of funds reasonably anticipated to be sufficient
to redeem such Existing Senior Notes on their redemption date and (d) the
Partnership will enter into a working capital credit facility for up to $___
million (the "Credit Facility") with a group of commercial banks. The closing
of the issuance and sale of Senior Notes pursuant hereto is conditional on the
closing with respect to the transactions described in the preceding sentence.
1. Registration Statement and Prospectus. The Issuers have prepared and
-------------------------------------
filed with the Securities and Exchange Commission (the "Commission"), in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 (No. 33-53379), including a
preliminary prospectus, subject to completion, relating to the Senior Notes.
Any preliminary prospectus included in such registration statement or filed with
the Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act, is hereinafter referred to as the "Preliminary
Prospectus"; the registration statement, as amended at the time it becomes
effective or, if a post-effective amendment is filed with respect thereto, as
amended by such post-effective amendment at the time of its effectiveness,
including, in each case, all documents incorporated by reference therein, all
financial statements and exhibits thereto, and the information (if any)
contained in a prospectus subsequently filed with the Commission pursuant to
Rule 424(b) under the Act and deemed to be a part of the registration statement
at the time of its effectiveness pursuant to Rule 430A under the Act, is
hereinafter referred to as the "Registration Statement"; and the prospectus in
the form first used to confirm sales of the Senior Notes, whether or not filed
with the Commission pursuant to Rule 424(b) under the Act, including all
documents incorporated by reference therein, is hereinafter referred to as the
"Prospectus."
2. Agreements to Sell and Purchase. The Issuers agree to issue and sell
-------------------------------
to the Underwriters, and on the basis of the representations and warranties
contained in this Agreement, and subject to its terms and conditions, the
Underwriters agree, severally and not jointly, to purchase from the Issuers,
Senior Notes in the respective principal amounts set forth opposite their names
on Schedule A hereto at a purchase price equal to ___% of the principal amount
thereof (the "Purchase Price").
3. Delivery and Payment. Delivery to you of and payment for the Senior
--------------------
Notes shall be made at [10:00] A.M., New York City time, on the fifth business
day (such time and date being referred to as the "Closing Date") following the
date of the initial public offering of the Senior Notes as advised by you to the
Partnership, at the offices of Sullivan & Cromwell, 125 Broad Street, New York,
New York. The Closing Date and the location of delivery of the Senior Notes may
be varied by agreement among you and the Partnership.
The Senior Notes in definitive form shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Closing Date, and shall be made available to you
at the offices of DLJ (or at such other place as shall be acceptable to you) for
inspection not later than 9:30 A.M., New York City time, on the business day
next preceding the Closing Date. The Senior Notes shall be delivered to you at
the Closing Date with any transfer taxes payable upon initial issuance thereof
duly paid by the Partnership, for your respective accounts against payment of
the Purchase Price therefor. Payment shall be made to the Partnership by, at
the option of the Partnership, (i) certified or official bank check or checks
drawn in New York Clearing House funds or similar next day funds payable to the
order of the Partnership or (ii) certified or official bank check or checks
drawn in, or a wire transfer to an account designated in writing by the
Partnership to the Underwriters of, immediately available funds; provided that
if the payment shall be made in such immediately available funds, the amount of
net payment shall be reduced by one day's
2
<PAGE>
interest on the amount of gross payment at the Underwriters' cost of borrowing
such funds plus any other expenses associated with such payment of immediately
available funds.
4. Agreements of the Parties. Each of the Partnership, Finance Corp. and
-------------------------
the General Partner agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to comply fully and
in a timely manner with all other applicable provisions of Rule 424 and Rule
430A under the Act;
(b) If necessary, to file an amendment to the Registration Statement
including, if necessary pursuant to Rule 430A under the Act, a post-effective
amendment to the Registration Statement, in each case as soon as practicable
after the execution and delivery of this Agreement, and to use its best
efforts to cause the Registration Statement or such post-effective amendment
to become effective at the earliest possible time;
(c) To advise you promptly and, if requested by any of you, to confirm
such advice in writing, (i) when the Registration Statement has become
effective, if and when the Prospectus is sent for filing pursuant to Rule 424
under the Act and when any post-effective amendment to the Registration
Statement becomes effective, (ii) of the receipt of any comments from the
Commission or any state securities commission or regulatory authority that
relate to the Registration Statement or requests by the Commission or any
state securities commission or regulatory authority for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement, or of the
suspension of qualification of the Senior Notes for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by the
Commission or any state securities commission or other regulatory authority,
and (iv) of the happening of any event during such period as in your
reasonable judgment you are required to deliver a prospectus in connection
with sales of the Senior Notes which makes any statement of a material fact
made in the Registration Statement untrue or which requires the making of any
additions to or changes in the Registration Statement (as amended or
supplemented from time to time) in order to make the statements therein not
misleading or that makes any statement of a material fact made in the
Prospectus (as amended or supplemented from time to time) untrue or which
requires the making of any additions to or changes in the Prospectus (as
amended or supplemented from time to time) in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; to use its best efforts to prevent the issuance of any stop order
or order suspending the qualification or exemption of the Senior Notes under
any state securities or Blue Sky laws, and, if at any time the Commission
shall issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption of the Senior
Notes under any state securities or Blue Sky laws, to use every reasonable
effort to obtain the withdrawal or lifting of such order at the earliest
possible time;
(d) To furnish to each of you without charge one signed copy (plus one
additional signed copy to your legal counsel) of the Registration Statement
as first filed with the Commission and of each amendment thereto, including
all exhibits filed therewith, and to furnish to you such number of
3
<PAGE>
conformed copies of the Registration Statement as so filed and of each
amendment thereto, without exhibits, as you may reasonably request;
(e) Not to file any amendment or supplement to the Registration
Statement, whether before or after the time when it becomes effective, or
make any amendment or supplement to the Prospectus, of which you shall not
previously have been advised and provided a copy within two business days
prior to the filing thereof (or such reasonable amount of time as is
necessitated by the exigency of such amendment or supplement) or to which you
shall reasonably object; and to prepare and file with the Commission,
promptly upon your reasonable request, any amendment to the Registration
Statement or supplement to the Prospectus which may be necessary or advisable
in connection with the distribution of the Senior Notes by you, and to use
its best efforts to cause the same to become effective as promptly as
possible;
(f) Promptly from time to time to take such action as you may reasonably
request to qualify the Senior Notes for offering and sale under the state
securities or Blue Sky laws of such jurisdictions as you may reasonably
request and to comply with such laws so as to permit the continuance of sales
and dealings therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Senior Notes, provided that in connection
therewith neither Issuer shall be required to qualify as a foreign
partnership or corporation or to file a general consent to service of process
in any jurisdiction in which it is not so qualified or has not so filed;
(g) Promptly after the Registration Statement becomes effective, and from
time to time thereafter prior to the expiration of nine months after the time
of issue of the Prospectus if the delivery of a prospectus is required in
connection with the offering or sale of the Senior Notes, to furnish to each
Underwriter and dealer without charge as many copies of the Prospectus (and
of any amendment or supplement to the Prospectus) as such Underwriters and
dealers may reasonably request; if in your reasonable judgment a prospectus
is required to be delivered any time prior to the expiration of such nine-
month period any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would include an untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made when such Prospectus was delivered, not misleading, or, if for
any other reason it shall be necessary during such period to amend or
supplement the Prospectus in order to comply with any law, to promptly notify
you and upon your request to promptly prepare, file with the Commission and
furnish without charge to each Underwriter and to any dealer in securities as
many copies as such Underwriter may from time to time reasonably request of
an amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance; and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Senior Notes at any time nine months or more after the time of
issue of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as you
may request of an amended or supplemental Prospectus complying with Section
10(a)(3) of the Act;
(h) To mail and make generally available to security holders of each of
the Issuers as soon as reasonably practicable, but in any event not later
than 18 months after the "effective date" (as defined in Rule 158 under the
Act) of the Registration Statement a consolidated earning statement of each
of the Issuers covering a period of at least twelve months beginning after
such effective date (but in no event commencing later than 90 days after such
effective date) which shall satisfy the provisions of Section 11(a) of the
Act and Rule 158 thereunder, and to advise you in writing when such statement
has been so made available;
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(i) To timely complete all required filings and otherwise fully comply in
a timely manner with all provisions of the Securities Exchange Act of 1934,
as amended, including the rules and regulations thereunder (collectively, the
"Exchange Act"), in connection with the registration, if any, of the Senior
Notes thereunder;
(j) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement becomes effective or is terminated, to pay all
costs, expenses, fees and taxes incident to and in connection with; (i) the
fees, disbursements and expenses of the Partnership's counsel and accountants
in connection with the registration of the Senior Notes under the Act and all
other expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or
producing any Agreement among Underwriters, this Agreement, the Blue Sky
Memorandum and any other documents in connection with the offering, purchase,
sale and delivery of the Senior Notes; (iii) all expenses in connection with
the qualification of the Senior Notes for offering and sale under state
securities laws as provided in paragraph (f) above, including the reasonable
fees and disbursements of counsel for the Underwriters in connection with
such qualification and in connection with the Blue Sky Memorandum; (iv) the
filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale
of the Senior Notes; (v) the cost of preparing certificates representing the
Senior Notes; (vi) the cost and charges of any transfer agent or registrar;
(vii) the rating of the Senior Notes by rating agencies; (viii) all fees and
expenses of listing the Senior Notes on a stock exchange or automated
quotation system; and (ix) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section;
(k) To furnish to the holders of Senior Notes within 120 days after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, security holders' equity and cash flow of such Issuer
and the entities consolidated therewith certified by independent public
accountants) and, within 90 days after the end of each of the first three
quarters of each fiscal year, consolidated summary financial information of
each of the Issuers for such quarter in reasonable detail;
(l) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to security holders of each of
the Issuers, and deliver to you (i) as soon as they are available, copies of
any reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of any Issuer is listed; and (ii) such additional information
concerning the business and financial condition of each of the Issuers as you
may from time to time reasonably request (such financial statements to be on
a consolidated basis to the extent the accounts of any Issuer and the
entities consolidated therewith are consolidated in reports furnished to its
security holders generally or to the Commission);
(m) To use the net proceeds from the sale of the Senior Notes pursuant to
this Agreement in the manner specified in the Prospectus under the caption
"Use of Proceeds";
(n) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usuary laws against the holders of Senior Notes;
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(o) To file with the Commission such reports on Form SR as may be
required by Rule 463 under the Act; and
(p) To use their best efforts to do and perform all things required to be
done and performed under this Agreement by them prior to or after the Closing
Date and to satisfy all conditions precedent on their part to the delivery of
the Senior Notes.
5. Representations and Warranties. Each of the Partnership, Finance Corp.
------------------------------
and the General Partner represents and warrants to, and agrees with, each of the
Underwriters that:
(a) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of the
Commission thereunder, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in writing
to the Partnership by an Underwriter through you expressly for use therein;
(b) When the Registration Statement becomes effective, including at the
date of any post-effective amendment, at the date of the Prospectus (if
different) and at the Closing Date, the Registration Statement will comply in
all material respects with the provisions of the Act and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; the Prospectus and any supplements or amendments thereto will not
at the date of the Prospectus, at the date of any such supplements or
amendments and at the Closing Date contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties
contained in this paragraph (b) shall not apply to statements in or omissions
from the Registration Statement or the Prospectus (or any supplement or
amendment to them) made in reliance upon and in conformity with information
relating to you furnished to the Issuers in writing by you expressly for use
therein. When the Registration Statement becomes effective, including at the
date of any post-effective amendment, at the date of the Prospectus and any
amendment or supplement thereto (if different) and at the Closing Date, the
Indenture will have been qualified under and will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as amended,
and the rules and regulations thereunder (collectively, the "TIA"). No
contract or document of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement is not described or filed as required;
(c) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus and up to each Closing Date,
(i) none of the Partnership, Finance Corp., the General Partner or any of
their respective subsidiaries (collectively, the "Subsidiaries") has incurred
(A) any material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus or (B) any liabilities or
obligations, direct or contingent, which are material to the Partnership,
Finance Corp., the General Partner and the Subsidiaries, taken
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as a whole, or entered into any material transaction not in the ordinary
course of business, and (ii) there has not been any change in the
capitalization or long-term debt or increase in short-term debt of the
Partnership, Finance Corp. or the General Partner or, singly or in the
aggregate, any material adverse change, or any development which may
reasonably be expected to involve a material adverse change, in the
properties, business, general affairs, management, condition (financial or
otherwise), financial position, results of operations or prospects of the
Partnership, Finance Corp., the General Partner and the Subsidiaries, taken
as a whole, otherwise than as set forth or contemplated in the Prospectus;
(d) The firm of accountants that has certified or shall certify the
applicable consolidated financial statements and supporting schedules of the
General Partner and its Subsidiaries filed or to be filed with the Commission
as part of the Registration Statement and the Prospectus are independent
public accountants with respect to the General Partner and its Subsidiaries,
as required by the Act. The consolidated historical and pro forma financial
statements, together with related schedules and notes, set forth in the
Prospectus and the Registration Statement comply as to form in all material
respects with the requirements of the Act; at April 30, 1994, the Partnership
would have had, on the pro forma basis indicated in the Prospectus, a duly
authorized and outstanding capitalization as set forth therein. The audited
balance sheet of the Partnership included in the Prospectus presents fairly
the financial position of the Partnership as of the date indicated. The
audited and unaudited historical consolidated financial statements of the
General Partner included in the Prospectus present fairly the consolidated
financial position of the General Partner and the Subsidiaries as of the
dates indicated and their results of operations and cash flows for the
periods specified. The supplemental schedules included in the Registration
Statement, when considered in relation to the audited and unaudited
historical consolidated financial statements of the General Partner, present
fairly in all material respects the information shown therein. Such audited
and unaudited historical consolidated financial statements and supplemental
schedules included in the Registration Statement and the Prospectus have been
prepared in conformity with generally accepted accounting principles applied
on a substantially consistent basis, except to the extent disclosed therein;
the historical information set forth in the Prospectus under the caption
"Selected Historical and Pro Forma Financial and Operating Data" is fairly
stated in all material respects in relation to the audited and unaudited
historical consolidated financial statements from which it has been derived.
The pro forma financial information set forth in the Prospectus under the
caption "Selected Historical and Pro Forma Financial and Operating Data" is
fairly stated in all material respects in relation to the pro forma financial
statements from which it has been derived. The pro forma financial
statements of the Partnership included in the Registration Statement and the
Prospectus have been prepared on a basis consistent with such historical
statements, except for the pro forma adjustments specified therein, and in
accordance with the applicable published rules and regulations of the
Commission, the assumptions used in the preparation of such pro forma
financial statements are reasonable, and the pro forma entries reflected in
such pro forma financial statements have been properly applied in such pro
forma financial statements. The other financial and statistical information
and data included in the Prospectus and in the Registration Statement,
historical and pro forma, are, in all material respects, accurately presented
and prepared on a basis consistent with such financial statements and the
books and records of the Partnership and the General Partner;
(e) Each of the Partnership and the Master Partnership has been duly
formed and is validly existing as a limited partnership under the Delaware
Revised Limited Uniform Partnership Act (the "Delaware Act"), with
partnership power and authority to own or lease the
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properties it will own or lease at the Closing Date and conduct the business
it will conduct at the Closing Date, in each case as described in the
Prospectus, and has been duly qualified or registered as a foreign limited
partnership for the transaction of business under the laws of each
jurisdiction in which the failure to so qualify or register would have a
material adverse effect upon the Partnership or the Master Partnership or
subject the Partnership or the Master Partnership to any material liability
or disability;
(f) The General Partner is and, upon consummation of the transactions
described under the caption "The Transactions" in the Prospectus and
contemplated by the Operative Agreements (as defined in (m) below) (the
"Transactions"), will be the sole general partner of the Partnership with a
general partner interest in the Partnership of 1.0101%. Such general partner
interest is duly authorized by the Agreement of Limited Partnership of the
Partnership (as it may be amended or restated at or prior to the Closing
Date, the "Partnership Agreement"), and will be validly issued to the General
Partner and will be fully paid (to the extent required at such time). At the
Closing Date the General Partner will own such general partner interest free
and clear of all liens, encumbrances, charges or claims;
(g) Upon consummation of the Transactions, the Master Partnership will be
the sole limited partner of the Partnership, with a limited partner interest
of 98.9899%. At the Closing Date, such limited partner interest will be duly
authorized by the Partnership Agreement, will have been validly issued and
will be fully paid and non-assessable (except as such non-assessability may
be affected by matters described in the prospectus relating to the Common
Units under the caption "The Partnership Agreement--Limited Liability").
Upon consummation of the Transactions, the Master Partnership will own such
limited partner interest in the Partnership free and clear of all liens,
encumbrances, charges or claims;
(h) Each of the General Partner and Finance Corp. has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the state of its incorporation, with power and authority
(corporate and other) to own or lease its properties, to conduct its business
and (in the case of the General Partner) to act as general partner of the
Partnership, in each case as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which the failure
to so qualify or register would have a material adverse effect upon the
General Partner, the Partnership or Finance Corp. or subject the General
Partner, the Partnership or Finance Corp. to any material liability or
disability;
(i) All of the issued shares of capital stock of the General Partner have
been duly authorized and validly issued and are fully paid and non-
assessable; and all of the issued shares of capital stock of the General
Partner are owned by Ferrell Companies, Inc., a Kansas corporation
("Ferrell"), free and clear of all liens, security interests, mortgages,
pledges, encumbrances, equities or claims (each a "Lien") except as set forth
in the Prospectus and except for such Liens in favor of the lenders under
that certain Amended and Restated Loan Agreement, dated as of May 10, 1993,
among Ferrellgas, Inc., Stratton Insurance Company, Inc., Ferrell Companies,
Inc., One Liberty Oil Company, Ferrellgas International (F.L.) Establishment,
Vaduz and Wells Fargo Bank, National Association, as agent and the other
lenders party thereto (the "Wells Fargo Agreement") created pursuant to such
agreement.
(j) All of the issued and outstanding shares of capital stock of, or
other ownership interests in, each Subsidiary of the Partnership, Finance
Corp. and the General Partner have
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been duly and validly authorized and issued, and all of the shares of capital
stock of, or other ownership interests in, each such Subsidiary are owned,
directly or through other Subsidiaries, by the Partnership, Finance Corp. or
the General Partner, as the case may be. All such shares of capital stock
are fully paid and nonassessable, and are owned free and clear of any Liens,
except as set forth in the Prospectus and except (A) for such Liens in favor
of the Lenders under the Wells Fargo Agreement pursuant to such agreement and
(B) for such Liens in favor of the trustee under the Existing Indenture
pursuant to the pledge agreement entered into in connection therewith (the
"Existing Pledge Agreement"). There are no outstanding subscriptions,
rights, warrants, options, calls, convertible securities, commitments of sale
or Liens related to or entitling any person to purchase or otherwise to
acquire any shares of the capital stock of, or other ownership interest in,
any such Subsidiary;
(k) The General Partner has the corporate power and authority to convey
the Properties (as defined in paragraph (s) below) to the Partnership
pursuant to the Closing Agreement (as defined in paragraph (m) below). The
General Partner has, and, upon execution, delivery and performance of the
Closing Agreement, the Partnership will have, good and indefeasible title to
the Properties, free and clear of all liens, encumbrances, security
interests, equities, charges, claims or defects except such as are described
in the Prospectus or such as do not materially interfere with the ownership
or benefits of ownership or materially increase the cost of ownership of the
Properties, taken as a whole. The Properties then owned by the General
Partner are accurately reflected in the General Partner's consolidated
financial statements at and for the period ended [April 30,], 1994. All real
property, buildings and equipment held under lease by the General Partner are
held by the General Partner under valid, subsisting and enforceable leases
and, following the execution, delivery and performance of the Closing
Agreement, the Partnership will have the right to use all such real property,
buildings and equipment in a manner consistent with the past business
practices of the General Partner, in each case, except as described in the
Prospectus and except as are not material and do not interfere with the use
made and proposed to be made of such real property, buildings and equipment
by the General Partner and the Partnership;
(l) Each of the Partnership, Finance Corp., the General Partner and the
Master Partnership has full power and authority to execute, deliver and
perform this Agreement and the Operative Agreements, as applicable, and each
of the Partnership and Finance Corp. has full power and authority to
authorize, issue, sell and deliver the Senior Notes as contemplated by this
Agreement;
(m) This Agreement has been duly authorized, executed and delivered by
each of the Partnership, Finance Corp. and the General Partner and (assuming
the due execution and delivery by you) is a valid and legally binding
agreement of each of the Partnership, Finance Corp. and the General Partner,
enforceable against each of them in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles. At or before the Closing Date, the
Partnership Agreement will have been duly authorized, executed and delivered
by the General Partner and the Master Partnership and will be a valid and
legally binding agreement of the General Partner and the Master Partnership,
enforceable against the General Partner and the Master Partnership in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles and except as set forth in the Registration Statement. At
or before the Closing Date,
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the Contribution and Closing Agreement among the Partnership, the Master
Partnership and the General Partner (the "Closing Agreement") will have been
duly authorized, executed and delivered by the Partnership, the Master
Partnership and the General Partner and will be a valid and legally binding
agreement of the Partnership, the Master Partnership and the General Partner
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; the Partnership Agreement, the Closing Agreement, the
Credit Facility and the Indenture are herein collectively referred to as the
"Operative Agreements";
(n) The Senior Notes have been duly authorized by each Issuer and, at the
Closing Date, will have been duly executed by each Issuer and will conform in
all material respects to the description thereof in the Prospectus. When the
Senior Notes are issued, authenticated and delivered in accordance with the
Indenture and paid for in accordance with the terms of this Agreement, they
will constitute valid and legally binding obligations of each Issuer,
enforceable against each Issuer in accordance with their terms and entitled
to the benefits of the Indenture, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles;
(o) The Indenture has been duly authorized by each Issuer and, at the
Closing Date, will have been duly executed by each Issuer and will conform in
all material respects to the description thereof in the Prospectus. When the
Indenture has been duly executed and delivered, the Indenture will be a valid
and legally binding agreement of each Issuer, enforceable against each Issuer
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles;
(p) The capitalization of the Partnership is in all material respects as
described in the Prospectus under the caption "Capitalization";
(q) The execution and delivery of this Agreement and the Indenture by the
Issuers, the issuance and sale of the Senior Notes by the Issuers, the
execution, delivery and performance by the Partnership, Finance Corp., the
General Partner and the Master Partnership, as the case may be, of the
Operative Agreements and the consummation by the Partnership, Finance Corp.,
the General Partner, the Master Partnership and Ferrell, as the case may be,
of the Transactions will not conflict with or result in a breach or violation
of any of the terms provisions of, or constitute a default or cause an
acceleration of any obligation under, or result in the imposition or creation
of (or the obligation to create or impose) 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 agreement or instrument to which the Partnership, Finance Corp., the
General Partner, the Master Partnership or any of the Subsidiaries is a party
or by which the Partnership, Finance Corp., the General Partner, the Master
Partnership or any of the Subsidiaries is bound or to which any of their
properties or assets is subject (other than any default or event of default
arising as a result of the Transactions under the Existing Indenture) nor
will such action result in any breach or violation of the provisions of the
Partnership Agreement or of the charter or bylaws of the General Partner,
Finance Corp. or any of the Subsidiaries or contravene any order of any court
or governmental agency or body having jurisdiction over the Partnership,
Finance Corp., the General Partner,
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the Master Partnership or any of the Subsidiaries or any of their respective
properties, or violate or conflict with any statute, rule or regulation or
administrative or court decree applicable to the Partnership, Finance Corp.,
the General Partner, the Master Partnership or any of the Subsidiaries or any
of their respective properties, and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the issuance and sale of the
Senior Notes by the Partnership and Finance Corp. or the consummation by the
Partnership, Finance Corp., the General Partner or the Master Partnership, as
the case may be, of the Transactions, except (i) the registration under the
Act of the Senior Notes and under the Trust Indenture Act of 1939, as
amended, of the Indenture or (ii) such consents, approvals, authorizations,
orders, registrations or qualifications (A) as have been, or prior to the
Closing Date will be, obtained or (B) as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution
of the Senior Notes;
(r) No action has been taken and no statute, rule or regulation or order
has been enacted, adopted or issued by any governmental agency or body which
prevents the issuance of the Senior Notes, suspends the effectiveness of the
Registration Statement, prevents or suspends the use of any preliminary
prospectus or suspends the sale of the Senior Notes in any jurisdiction
referred to in Section 4(f) hereof; no injunction, restraining order or order
of any nature by a federal or state court of competent jurisdiction has been
issued with respect to the Partnership, Finance Corp., the General Partner or
any of the Subsidiaries which would prevent or suspend the issuance or sale
of the Senior Notes, the effectiveness of the Registration Statement, or the
use of any preliminary prospectus in any jurisdiction referred to in Section
4(f) hereof; no action, suit or proceeding is pending against or, to the best
knowledge of the Partnership, Finance Corp. or the General Partner,
threatened against or affecting the Partnership, Finance Corp., the General
Partner or any of the Subsidiaries before any court or arbitrator or any
governmental body, agency or official, domestic or foreign, which, if
adversely determined, would materially interfere with or adversely affect the
issuance of the Senior Notes or in any manner draw into question the validity
of this Agreement, the Indenture or the Senior Notes; and every request of
the Commission or any securities authority or agency of any jurisdiction for
additional information (to be included in the Registration Statement or the
Prospectus or otherwise) has been complied with in all material respects;
(s) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body will be
required for the conveyance of the real and personal property to be conveyed
pursuant to the Closing Agreement (the "Properties"), except such consents,
approvals, authorizations, orders, registrations or qualifications (i) as
have been, or prior to the Closing Date will be, obtained, or (ii) which, if
not obtained, would not, individually or in the aggregate, have a material
adverse effect upon the ability of the Partnership to conduct its business
substantially in accordance with the past practice of the General Partner;
(t) The Partnership has, or at or before the Closing Date will have, all
necessary consents, approvals, authorizations, orders, registrations and
qualifications (or the equivalent thereof in all material respects) of or
with any court or governmental agency or body having jurisdiction over it or
any of its properties or of or with any other person to permit the
Partnership to conduct its business substantially in accordance with the past
practice of the General Partner, except such consents, approvals,
authorizations, orders, registrations or qualifications which, if not
obtained, would not, individually or in the aggregate, have a material
adverse effect upon the properties, business, general affairs, management,
condition
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(financial or otherwise), financial position, results of operations, or
prospects of the Partnership, Finance Corp., the General Partner and the
Subsidiaries taken as a whole, or upon the holders of Senior Notes;
(u) Except as set forth or contemplated in the Prospectus or as
contemplated by this Agreement, neither the Partnership nor Finance Corp. has
incurred any material liabilities or obligations, direct or contingent, or
entered into any material agreement or engaged in any material business other
than in connection with its formation;
(v) Other than as set forth in the Prospectus, there is no action, suit
or proceeding before or by any court or governmental agency or body, domestic
or foreign, pending against the Partnership, Finance Corp., the General
Partner or any of the Subsidiaries, or any of their respective properties,
which is required to be disclosed in the Prospectus and is not so disclosed,
which, if determined adversely to such person, would individually or in the
aggregate have a material adverse effect upon the properties, business,
general affairs, management, condition (financial or otherwise), financial
position, results of operations or prospects of the Partnership, Finance
Corp., the General Partner and the Subsidiaries, taken as a whole, or which
could reasonably be expected to materially and adversely affect the
consummation of this Agreement, the Operative Agreements or the Transactions;
and to the best of the knowledge of the Partnership, Finance Corp. and the
General Partner, no such actions, suits or proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(w) The statements made in the Prospectus under the caption "Description
of Senior Notes", insofar as they purport to constitute summaries of the
terms of the Senior Notes and the Indenture, under the caption "The
Partnership", under the caption "Tax Considerations" and under the caption
"Underwriting", insofar as they describe the provisions of the documents
therein, are accurate, complete and fair summaries;
(x) None of the Partnership, Finance Corp., the General Partner or any
Subsidiary is in: (i) breach or violation of its agreement of limited
partnership or of its charter or bylaws, as the case may be; or (ii) default
(and no event has occurred which, with notice or lapse of time or both, would
constitute such a default) in the due performance or observance of any term,
covenant or condition contained in any bond, note, debenture or other
evidence of indebtedness or any indenture, mortgage, deed of trust, loan
agreement, contract, lease or other agreement or instrument to which it is a
party or by which it is bound or to which any of its properties or assets is
subject (other than any default or event of default arising as a result of
the Transactions under the Existing Indenture); or (iii) violation of any
statute, rule or regulation or administrative or court decree applicable to
it or any of its properties, which default or violation described in clause
(ii) or (iii), individually or in the aggregate, could have a material
adverse effect upon the holders of Senior Notes or the properties, business,
general affairs, management, prospects, condition (financial or otherwise),
financial position or results of operations of any of the Partnership,
Finance Corp., the General Partner and the Subsidiaries taken as a whole;
(y) Except as described in the Prospectus, (i) each of the Partnership,
Finance Corp., the General Partner and the Subsidiaries has all certificates,
consents, exemptions, orders, permits, licenses, authorizations, or other
approvals (each, an "Authorization") of and from, and has made all
declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts
and other tribunals, necessary or
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required to own, lease, license and use its properties and assets and to
conduct its business in the manner described in the Prospectus, except to the
extent that the failure to obtain or file would not, singly or in the
aggregate, have a material adverse effect upon the ability of the
Partnership, Finance Corp., the General Partner or the Subsidiaries to
conduct their businesses in all material respects as currently conducted and
as contemplated by the Prospectus to be conducted; (ii) all such
Authorizations are valid and in full force and effect; (iii) the Partnership,
Finance Corp., the General Partner and the Subsidiaries are in compliance in
all material respects with the terms and conditions of all such
Authorizations and with the rules and regulations of the regulatory
authorities and governing bodies having jurisdiction with respect thereto;
and, (iv) except as described in the Prospectus, none of the Partnership,
Finance Corp., the General Partner or the Subsidiaries has received any
notice of proceedings relating to the revocation or modification of any such
Authorization which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or filing, would be expected to have a material
adverse effect upon the ability of the Partnership, Finance Corp., the
General Partner and the Subsidiaries to conduct their businesses in all
material respects as currently conducted and as contemplated by the
Prospectus to be conducted;
(z) None of the Partnership, Finance Corp., the General Partner nor any
of the Subsidiaries has violated any environmental safety or similar law or
regulation applicable to its business relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), lacks any permits,
licenses or other approvals required of them under applicable Environmental
Laws to own, lease and operate their respective properties and to conduct
their business in the manner described in the Prospectus, is violating any
terms and conditions of any such permit, license or approval or has permitted
to occur any event that allows, or after notice or lapse of time would allow,
revocation or termination of any such permit, license or approval or results
in any other impairment of their rights thereunder, which in each case might
result, singly or in the aggregate, in a material adverse effect on the
Partnership, Finance Corp., the General Partner and the Subsidiaries, taken
as a whole (a "Material Adverse Effect"). None of the Partnership, Finance
Corp., the General Partner nor any of the Subsidiaries violated any federal,
state or local law relating to discrimination in the hiring, promotion or pay
of employees prior to any applicable wage or hour laws, nor any provisions of
the Employee Retirement Income Security Act of 1974 ("ERISA") or the rules
and regulations promulgated thereunder, nor has the Partnership, Finance
Corp., the General Partner or any of the Subsidiaries engaged in any unfair
labor practice, which in each case might result, singly or in the aggregate,
in a Material Adverse Effect. There is (i) no significant unfair labor
practice complaint pending against the Partnership, Finance Corp., the
General Partner or any of the Subsidiaries or, to the best knowledge of the
Partnership, Finance Corp. or the General Partner, threatened against any of
them before the National Labor Relations Board or any state or local labor
relations board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against the Partnership, Finance Corp., the General Partner or any of
the Subsidiaries or, to the best knowledge of the Partnership, Finance Corp.
or the General Partner, threatened against any of them, (ii) no significant
strike, labor dispute, slowdown or stoppage pending against the Partnership,
Finance Corp., the General Partner or any of the Subsidiaries or, to the best
knowledge of the Partnership, Finance Corp. or the General Partner,
threatened against the Partnership, Finance Corp., the General Partner or any
of the Subsidiaries and (iii) to the best knowledge of the Partnership,
Finance Corp. or the General Partner, no union representation question
existing with respect to the employees of the Partnership, Finance Corp., the
General Partner or any of the Subsidiaries and, to the best
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knowledge of the Partnership, Finance Corp. or the General Partner, no union
organizing activities are taking place, except (with respect to any matter
specified in clause (i), (ii) or (iii) above, singly or in the aggregate)
such as could not have a Material Adverse Effect;
(aa) All tax returns required to be filed by the Partnership, Finance
Corp., the General Partner or any of the Subsidiaries in any jurisdiction
have been filed, other than those filings being contested in good faith, and
all material taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due or claimed to be due from such
entities have been paid, other than those being contested in good faith and
for which adequate reserves have been provided or those currently payable
without penalty or interest;
(bb) Except pursuant to this Agreement, none of the Partnership, Finance
Corp., the General Partner or the Subsidiaries has (i) taken, directly or
indirectly, any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of any Issuer to
facilitate the sale or resale of the Senior Notes or (ii) since the initial
filing of the Registration Statement (A) sold, bid for, purchased, or paid
anyone any compensation for soliciting purchases of, the Senior Notes or (B)
paid or agreed to pay to any person any compensation for soliciting another
to purchase any other securities of the Partnership or Finance Corp.;
(cc) None of the Partnership, Finance Corp., the General Partner nor any
of the Subsidiaries is (i) an "investment company" or a company "controlled"
by an investment company within the meaning of the Investment Company Act of
1940, as amended, or (ii) a "holding company" or a "subsidiary company" of a
holding company, or an "affiliate" thereof within the meaning of the Public
Utility Holding Company Act of 1935, as amended;
(dd) Except as disclosed in the Prospectus, no holder of any security of
the Partnership or Finance Corp. has or will have any right to require the
registration of such security by virtue of any transaction contemplated by
this Agreement;
(ee) None of the Partnership, Finance Corp., the General Partner or the
Subsidiaries does business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section 517.075 of Florida
Statutes (Chapter 92-198, Laws of Florida);
(ff) At the Closing Date, the General Partner will have (excluding its
interests in the Partnership and the Master Partnership and any notes
receivable from or payable to the Partnership or the Master Partnership) a
net worth of at least $25,000,000;
(gg) Each of the Partnership, Finance Corp., the General Partner and
their respective Subsidiaries maintains insurance which is adequate in
accordance with customary industry practice; none of the Partnership, the
Finance Corp., the General Partner and their respective Subsidiaries has
received notice from any insurer or agent of such insurer that substantial
capital improvements or other expenditures will have to be made in order to
continue such insurance; all such insurance is outstanding and duly in force
on the date hereof and will be outstanding and duly in force at the Closing
Date; and
(hh) Each certificate signed by any officer of an Issuer and delivered to
the Underwriters or counsel for the Underwriters shall be deemed to be a
joint and several representation and warranty by the Issuers to each
Underwriter as to the matters covered thereby.
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6. Indemnification.
---------------
(a) The Issuers, jointly and severally, agree to indemnify and hold
harmless (i) each of the Underwriters, (ii) each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act) any of the Underwriters (any of the persons referred to in this clause
(ii) being hereinafter referred to as a "controlling person"), and (iii) the
respective officers, directors, partners, employees, representatives and
agents of any of the Underwriters or any controlling person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an
"Indemnified Person") to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all
reasonable costs of investigating, preparing, pursuing or defending any claim
or action, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, including the reasonable fees and expenses of
counsel to any Indemnified Person) directly or indirectly caused by, related
to, based upon, arising out of or in connection with any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto) or the Prospectus (including any
amendment or supplement thereto) or any preliminary prospectus or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of
the Prospectus, in the light of the circumstances under which they were made)
not misleading, except (i) insofar as such losses, claims, damages,
liabilities or expenses are caused by an untrue statement or omission or
alleged untrue statement or omission that is made in reliance upon and in
conformity with information relating to any of the Underwriters furnished in
writing to the Issuers by any of the Underwriters expressly for use in the
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus and (ii)
insofar as any such losses, claims, damages, liabilities or expenses are
caused by an untrue statement or omission or alleged untrue statement or
omission contained in any preliminary prospectus, the foregoing indemnity
shall not inure to the benefit of any Underwriter which sold Senior Notes to
a person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus or of the Prospectus as
then amended or supplemented, whichever is most recent, if the Partnership
has previously furnished copies thereof to such Underwriter, and if such
Prospectus or Prospectus as amended or supplemented, as the case may be,
completely corrected the untrue statement or alleged untrue statement or
omission or alleged omission giving rise to such losses, claims, damages,
liabilities or expenses. The Issuers shall notify you promptly of the
institution, threat or assertion of any claim, proceeding (including any
governmental investigation) or litigation in connection with the matters
addressed by this Agreement which involves an Issuer or an Indemnified
Person.
(b) In case any action or proceeding (including any governmental
investigation) shall be brought or asserted against any of the Indemnified
Persons with respect to which indemnity may be sought against the Issuers,
such Underwriter (or the Underwriter controlled by such controlling person)
shall promptly notify the Partnership in writing (provided, that the failure
to give such notice shall not relieve the Issuers of their obligations
pursuant to this Agreement). Such Indemnified Person shall have the right to
employ its own counsel in any such action and the reasonable fees and
expenses of such counsel shall be paid, as incurred, by the Issuers
(regardless of whether it is ultimately determined that an Indemnified Party
is not entitled to Indemnification hereunder). The Issuers shall not, in
connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
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jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) at any time for such Indemnified
Persons, which firm shall be designated by the Underwriters. The Issuers
shall be liable for any settlement of any such action or proceeding effected
with any Issuer's prior written consent, which consent will not be
unreasonably withheld, and the Issuers agree to indemnify and hold harmless
any Indemnified Person from and against any loss, claim, damage, liability or
expense by reason of any settlement of any action effected with the written
consent of any Issuer. The Issuers shall not, without the prior written
consent of each Indemnified Person, settle or compromise or consent to the
entry of Judgment in or otherwise seek to terminate any pending or threatened
action, claim or litigation proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not any Indemnified Person
is a party thereto), unless such settlement, compromise, consent or
termination includes an unconditional release of each Indemnified Person from
all liability arising out of such action, claim, litigation or proceeding.
(c) Each of the Underwriters agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, their directors, their officers who
sign the Registration Statement, any person controlling (within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act) the Partnership,
and the officers, directors, partners, employees, representatives and agents
of each such person, to the same extent as the foregoing indemnity from the
Issuers to each of the Indemnified Persons, but only with respect to claims
and actions based on information relating to such Underwriter furnished in
writing by such Underwriter expressly for use in the Registration Statement
or the Prospectus.
(d) If the indemnification provided for in this Section 6 is unavailable
to an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party on the one
hand and the indemnified party on the other hand from the offering of the
Senior Notes or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the indemnifying parties and the indemnified party, as well
as any other relevant equitable considerations. The relative benefits
received by the Issuers, on the one hand, and any of the Underwriters, on the
other hand, shall be deemed to be in the same proportion as the total
proceeds from the offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Issuers bear to the total
underwriting discounts and commissions received by such underwriter, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault of the Issuers and the Underwriters shall be determined by
reference to, among other things whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact related to information supplied by the Issuers or the
Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The indemnity and contribution obligations of the Issuers set forth herein
shall be in addition to any liability or obligation the Issuers may otherwise
have to any Indemnified Person.
The Issuers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the
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Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 6, none of
the Underwriters (and its related Indemnified Persons) shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total underwriting discount applicable to the Senior Notes purchased by such
Underwriter exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 6(d) are several in proportion to the respective
principal amount of Senior Notes purchased by each of the Underwriters
hereunder and not joint.
7. Conditions of Underwriters' Obligations. The obligations of the
---------------------------------------
Underwriters hereunder shall be subject, in their discretion, to the condition
that all representations and warranties and other statements on the part of the
Partnership, Finance Corp. and the General Partner herein are, at and as of the
Closing Date, true and correct with the same force and effect as if made at and
as of the Closing Date, the condition that each of the Partnership, Finance
Corp. and the General Partner shall have performed all of its obligations and
agreements hereunder theretofore to be performed, and the following additional
conditions:
(a) The Registration Statement shall have become effective (or, if a
post-effective amendment is required to be filed pursuant to Rule 430A
promulgated under the Act, such post-effective amendment shall have become
effective) not later than 10:00 A.M., New York City time, on the date of this
Agreement or at such later date and time as you may approve in writing; the
Prospectus shall have been filed with the Commission pursuant to Rule 424(b)
within the applicable time period prescribed for such filing by the rules and
regulations under the Act and in accordance with Section 4(a) hereof; no stop
order suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; all requests for additional
information on the part of the Commission shall have been complied with to
your reasonable satisfaction; no stop order suspending the sale of the Senior
Notes in any jurisdiction referred to in Section 4(f) shall have been issued
and no proceeding for that purpose shall have been commenced or shall be
pending or threatened;
(b) No action shall have been taken and no statute, rule, regulation or
order shall have been enacted, adopted or issued, by any governmental agency
which would, as of the Closing Date, prevent the issuance of the Senior
Notes; and no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction shall have been issued as of
the Closing Date which would prevent the issuance of the Senior Notes;
(c) Andrews and Kurth, special counsel for the Partnership, Finance Corp.
and the General Partner, shall have furnished to you their written opinion,
dated the Closing Date, in form and substance satisfactory to you, to the
effect that:
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(i) Each of the Partnership and the Master Partnership has been duly
formed and is validly existing as a limited partnership under the Delaware
Act, with partnership power and authority to own or lease its properties and
conduct its business as described in the Prospectus.
(ii) The General Partner is and, upon consummation of the Transactions,
will be the sole general partner of the Partnership with a general partner
interest in the Partnership of 1.0101%; such general partner interest is duly
authorized by the Partnership Agreement, is validly issued and fully paid,
and is owned by the General Partner free and clear of all liens,
encumbrances, charges or claims of record (A) in respect of which a financing
statement under the Uniform Commercial Code of the State of Delaware naming
the General Partner as debtor is on file in the office of the Secretary of
State of the State of Delaware or (B) otherwise known (based solely upon its
participation as special counsel in matters relating to the Transactions, and
without having conducted an independent investigation) to such counsel, other
than those created by or arising under the Delaware Act.
(iii) The Master Partnership is, and upon consummation of the
Transactions will be, the sole limited partner of the Partnership, with a
limited partner interest of 98.9899%; such limited partner interest is duly
authorized by the Partnership Agreement and is validly issued, fully paid and
non-assessable (except as such non-assessability may be affected by matters
described in the Prospectus relating to the Common Units under the caption
"The Partnership Agreement--Limited Liability"); and, the Master Partnership
will own such limited partner interest in the Partnership free and clear of
all liens, encumbrances, charges or claims of record (A) in respect of which
a financing statement under the Uniform Commercial Code of the State of
Delaware naming the Partnership as debtor is on file in the office of the
Secretary of State of the State of Delaware or (B) otherwise known (based
solely upon its participation as special counsel in matters relating to the
Transactions, and without having conducted an independent investigation) to
such counsel, other than those created by or arising under the Delaware Act.
(iv) The Partnership Agreement has been duly authorized, executed and
delivered by the parties thereto and the Partnership Agreement constitutes a
valid and legally binding agreement of the parties thereto, enforceable
against each of them in accordance with its terms, subject to (A) bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights and to
general equity principles and (B) limitations imposed by public policy,
applicable law relating to fiduciary duties and the judicial imposition of an
implied covenant of good faith and fair dealing.
(v) The issuance and sale of the Senior Notes by the Issuers and the
execution, delivery and performance by the Partnership, Finance Corp. and the
Master Partnership, as the case may be, of this Agreement and the Operative
Agreements and the consummation by the Partnership, Finance Corp. and the
Master Partnership, as the case may be, of the Transactions will not conflict
with or result in a breach or violation of any of the provisions of the
Partnership Agreement;
(vi) None of the Partnership, Finance Corp. or the General Partner is
an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(vii) None of the Partnership, Finance Corp. or the General Partner is
a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
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In addition, such counsel shall also state that it has participated in the
preparation of the Registration Statement and Prospectus and, although such
counsel is not passing upon, and does not assume responsibility for the
accuracy, completeness or fairness of, any portion of the Registration
Statement and the Prospectus, as amended or supplemented, subject to
customary qualifications and assumptions and relying as to materiality to a
large extent upon the statements of officers and other representatives of the
Partnership, nothing has come to the attention of such counsel that causes
such counsel to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Issuers prior to such
Closing Date (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any further amendment
or supplement thereto made by the Issuers prior to such Closing Date (other
than the financial statements and related schedules therein, as to which such
counsel need express no opinion) contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading or that, as of such Closing Date, either the Registration
Statement or the Prospectus or any further amendment or supplement thereto
made by the prior to such Closing Date (other than the financial statements
and related schedules therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may (A) rely in respect of matters
of fact upon certificates of the Partnership and the Master Partnership and
of officers and employees of the General Partner and Finance Corp. and upon
information obtained from public officials and upon opinions of other counsel
issued in connection with the Transactions, and may assume that the
signatures on all documents examined by such counsel are genuine, (B) state
that their opinion is limited to federal laws, the Delaware Act and the
Delaware General Corporation Law and the laws of the State of Texas, (C)
state that they express no opinion with respect to the title of any of the
General Partner, the Partnership or the Master Partnership to any real or
personal property transferred by or to them and that they express no opinion
regarding the accuracy of the description or references to any real or
personal property, (D) state that they express no opinion with respect to
state or local taxes or tax statutes to which any of the General Partner, the
Partnership, the Master Partnership or the limited partners of the Master
Partnership may be subject, and (E) state that their opinion is furnished as
special counsel for the Partnership, the Master Partnership and the General
Partner to you, as representatives of the several Underwriters, and is solely
for the benefit of the several Underwriters;
(d) Smith, Gill, Fisher & Butts, counsel to the General Partner and
Ferrell, shall have furnished to you their written opinion, dated such
Closing Date in form and substance satisfactory to you, to the effect that:
(i) Finance Corp. has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the state of its
incorporation, with power and authority (corporate and otherwise) to own
or lease its properties, to conduct its businesses as described in the
Prospectus.
(ii) The General Partner has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state of
its incorporation, with power and
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authority (corporate and otherwise) to own or lease its properties, to
conduct its businesses and to act as general partner of the Partnership
and of the Master Partnership, in each case as described in the
Prospectus.
(iii) Based solely on opinions of local counsel (copies of which shall
have been provided to you pursuant to paragraph (e) of this Section 7),
the Partnership has been duly qualified or registered as a foreign
partnership to transact business in, and is in good standing under the
laws of, each of the jurisdictions set forth on Schedule I hereto; based
solely upon certificates of foreign qualification provided by the
Secretary of State of such jurisdiction (each of which shall be dated as
of a date not more than one business day prior to the Closing Date and
shall be provided to you), the Partnership has been duly qualified or
registered as a foreign limited partnership to transact business in, and
is in good standing under the laws of, each of the jurisdictions set forth
on Schedule II hereto; and, to the knowledge of such counsel, such
jurisdictions and the State of Missouri are the only jurisdictions in
which the Partnership owns or leases property, or conducts any business,
so as to require qualification or registration to conduct business as a
foreign limited partnership, except where the failure to so qualify or
register would not (i) have a material adverse effect upon the Partnership
or the General Partner or (ii) subject the holders of Senior Notes to any
material liability or disability.
(iv) Based solely on opinions of local counsel (copies of which shall
have been provided to you pursuant to paragraph (e) of this Section 7),
the General Partner has been duly qualified or registered as a foreign
corporation and is in good standing under the laws of each of the
jurisdictions set forth on Schedule III hereto; based solely upon
certificates of foreign qualification provided by the Secretary of State
of such jurisdiction (each of which shall be dated as of a date not more
than one business day prior to the Closing Date and shall be provided to
you), the General Partner has been duly qualified or registered as a
foreign corporation and is in good standing under the laws of each of the
jurisdictions set forth on Schedule IV hereto; and to the knowledge of
such counsel, such jurisdictions and the State of Missouri are the only
jurisdictions in which the General Partner owns or leases property, or
conducts any business, so as to require qualification or registration to
conduct business as a foreign corporation, and in which the failure so to
qualify or register would be likely in the judgment of such counsel to
subject the General Partner to any liability or disability which is
material to the General Partner, the Partnership or Finance Corp. or would
be likely in the judgment of such counsel to subject the holders of Senior
Notes to any material liability or disability; all of the issued shares of
capital stock of the General Partner have been duly authorized and validly
issued and are fully paid and nonassessable; and, to the knowledge of such
counsel, all of the issued shares of capital stock of the General Partner
are owned, directly or indirectly, by Ferrell, free and clear of all Liens
(A) in respect of which a financing statement under the Uniform Commercial
Code of the State of Delaware naming the General Partner or Ferrell, as
the case may be, as debtor is on file in the office of the Secretary of
State of the State of Delaware or (B) otherwise known, without
investigation, to such counsel, except for such Liens in favor of the
lenders under the Wells Fargo Agreement pursuant to such agreement;
(v) All of the issued and outstanding shares of capital stock of, or
other ownership interests in, each Subsidiary of the Partnership, Finance
Corp., the General Partner and the Master Partnership have been duly and
validly authorized and issued, and all of the shares of capital stock of,
or other ownership interests in, each such Subsidiary are owned, directly
or through other Subsidiaries, by the Partnership, Finance Corp., the
General Partner and the
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Master Partnership; all such shares of capital stock are fully paid and
nonassessable, and are owned free and clear of any Liens, except as set
forth in the Prospectus and except (A) for such Liens in favor of the
lenders under the Wells Fargo Agreement pursuant to such agreement and (B)
for such Liens in favor of the trustee under the Existing Indenture
pursuant to the Existing Pledge Agreement; there are no outstanding
subscriptions, rights, warrants, options, calls, convertible securities,
commitments of sale or Liens related to or entitling any person to
purchase or otherwise to acquire any shares of the capital stock of, or
other ownership interest in, any such Subsidiary.
(vi) Each of the Closing Agreement, the Credit Facility and the
Indenture (collectively, the "Other Operative Agreements") and this
Agreement has been duly authorized, executed and delivered by the
Partnership, the Master Partnership, the General Partner and Finance
Corp., as the case may be, and each of the Other Operative Agreements and
this Agreement constitutes a valid and legally binding agreement of the
Partnership, the Master Partnership, the General Partner and Finance
Corp., as the case may be, enforceable against the Partnership, the Master
Partnership, the General Partner and Finance Corp., as the case may be, in
accordance with their respective terms, subject to (A) bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles and (B) limitations imposed by public
policy, applicable law relating to fiduciary duties and the judicial
imposition of an implied covenant of good faith and fair dealing.
(vii) When authenticated in accordance with the terms of the Indenture
and delivered to and paid for by you in accordance with the terms of this
Agreement, the Senior Notes will constitute valid and legally binding
obligations of each Issuer, enforceable against each Issuer in accordance
with their terms and entitled to the benefits of the Indenture, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(viii) The Indenture, assuming due authorization, execution and
delivery thereof by the Trustee, constitutes a valid and legally binding
agreement of each Issuer, enforceable against each Issuer in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law
or in equity).
(ix) None of the Partnership, Finance Corp., the General Partner or
the Master Partnership is in violation of its partnership agreement or
charter, as the case may be, or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which it is a party or by which it or any of
them or their properties may be bound.
(x) The statements made in the Prospectus under the caption
"Description of Senior Notes", insofar as they purport to constitute
summaries of the terms of the Senior Notes and the Indenture, under the
caption "The Partnership", under the caption "Tax Considerations" and
under the caption "Underwriting", insofar as they describe the provisions
of the documents therein described, are accurate, complete and fair
summaries.
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(xi) The issuance and sale of the Senior Notes by the Issuers and the
execution, delivery and performance by the Partnership, Finance Corp., the
General Partner and the Master Partnership, as the case may be, of this
Agreement and the Operative Agreements and the consummation by the
Partnership, Finance Corp., the General Partner and the Master
Partnership, as the case may be, of the Transactions will not conflict
with or result in a breach or violation of any of the terms or provisions
of, or constitute a default or cause an acceleration of any obligation
under, or result in the imposition or creation of (or the obligation to
create or impose) 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 to which the Partnership, Finance Corp., the General
Partner, the Master Partnership or any of their Subsidiaries is a party or
by which the Partnership, Finance Corp., the General Partner, the Master
Partnership or any of their Subsidiaries is bound or to which any of their
properties or assets is subject (other than any default or event of
default under the Existing Indenture arising as a result of the
Transactions) nor will such action result in any breach or violation of
the charter or bylaws of Finance Corp. or the General Partner, or any of
the Subsidiaries of the Partnership, Finance Corp., the General Partner or
the Master Partnership or contravene any order of any court or
governmental agency or body having jurisdiction over the Partnership,
Finance Corp., the General Partner or the Master Partnership or any of
their Subsidiaries or any of their respective properties, or violate or
conflict with any statute, rule or regulation or administrative or court
decree applicable to the Partnership, Finance Corp., the General Partner,
the Master Partnership or any of their Subsidiaries or any of their
respective properties, excluding in each case any violations which,
individually or in the aggregate, would not have a material adverse effect
upon the holders of Senior Notes or on the Partnership, Finance Corp., the
General Partner or any of their Subsidiaries; provided, however, that, for
the purposes of this paragraph (xi), no opinion is expressed with respect
to federal or state securities laws, other antifraud laws and fraudulent
transfer laws; and, provided, further, that performance by the
Partnership, Finance Corp., the General Partner and the Master Partnership
of their respective obligations under the Operative Agreements are subject
to (A) bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles and (B)
limitations imposed by public policy, applicable law relating to fiduciary
duties and the judicial imposition of an implied covenant of good faith
and fair dealing.
(xii) No consent, approval, authorization, order, registration or
qualification of or with any court or governmental agency or body of the
United States or the State of Missouri having jurisdiction over the
Partnership, Finance Corp., the General Partner, the Master Partnership,
any of their Subsidiaries or any of their properties is required for the
issuance and sale of the Senior Notes by the Issuers or for the
consummation by the Partnership, Finance Corp., the General Partnership or
the Master Partnership of the Transactions or this Agreement, except in
each case (A) such consents, approvals, authorizations, orders,
registrations or qualifications (1) as have been obtained, (2) as may be
required under state securities or Blue Sky laws, (3) as are of a routine
or administrative nature and are either (i) not customarily obtained or
made prior to the consummation of transactions such as the Transactions or
(ii) expected in the judgment of such counsel to be obtained in the
ordinary course of business subsequent to the consummation of the
Transactions, (4) which, if not obtained, would not, individually or in
the aggregate, have a material adverse effect upon the holders of Senior
Notes or upon the properties, business, general affairs, management,
prospects, condition (financial or otherwise),
22
<PAGE>
financial position, securityholder's equity or results of operations of,
the Partnership, Finance Corp., the General Partner or any of their
Subsidiaries.
(xiii) The descriptions in the Registration Statement and the
Prospectus of statutes, legal and governmental proceedings and contracts
and other documents are accurate in all material respects and fairly
present the information required to be shown; and such counsel does not
know of any legal or governmental proceedings required to be described in
the Registration Statement or Prospectus which are not described as
required or of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement which are not described and filed
as required.
(xiv) The Registration Statement has become effective under the Act;
and to the knowledge of such counsel no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission.
(xv) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Issuers prior to such
Closing Date (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the
rules and regulations thereunder; although such counsel is not passing
upon, and does not assume responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or
Prospectus, they have no reason to believe that, as of its effective date,
the Registration Statement, or any further amendment thereto made by the
Issuers prior to such Closing Date (other than the financial statements
and related schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement thereto made by the
Issuers prior to such Closing Date (other than the financial statements
and related schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading or that,
as of such Closing Date, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
Partnership prior to such Closing Date (other than the financial
statements and related schedules therein, as to which such counsel need
express no opinion) contains an untrue statement of a material fact or
omits to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
and they do not know of any contracts or other documents of a character
required to be filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement or the Prospectus
which are not filed or described as required.
(xvi) The Indenture has been duly qualified under the TIA.
(xvii) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Issuers prior to such
Closing Date (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the
rules and regulations thereunder.
23
<PAGE>
In addition, such counsel shall also state that it has participated in the
preparation of the Registration Statement and Prospectus and, although such
counsel is not passing upon, and does not assume responsibility for the
accuracy, completeness or fairness of, any portion of the Registration
Statement and the Prospectus, as amended or supplemented, nothing has come to
the attention of such counsel that causes such counsel to believe that, as of
its effective date, the Registration Statement, or any further amendment
thereto made by the Issuers prior to such Closing Date (other than the
financial statements and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement thereto made by the Issuers
prior to such Closing Date (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or that, as of such
Closing Date, either the Registration Statement or the Prospectus or any
further amendment or supplement thereto made by the Issuers prior to such
Closing Date (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading; and they do not know of any contracts or other
documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as required.
In rendering such opinion, such counsel may (A) rely in respect of matters
of fact upon certificates of officers and employees of the General Partner
and Ferrell and upon information obtained from public officials and upon
opinions of other counsel issued in connection with the Transactions, and may
assume that the signatures on all documents examined by such counsel are
genuine and (B) state that their opinion is limited to federal laws, the laws
of the State of Missouri and the Delaware General Corporation Law.
(e) Each of Smith, Gill, Fisher & Butts, with respect to the State of
Missouri, Andrews and Kurth, with respect to the State of Texas, ___________,
with respect to the State of Georgia, _____________, with respect to the
State of Kentucky, ______________, with respect to the State of Michigan,
and _____________, with respect to the State of Ohio, each of which is
special counsel for the Partnership, Finance Corp., the General Partner and
the Master Partnership, shall have furnished to you their written opinion or
opinions, dated such Closing Date in form and substance satisfactory to you,
to the effect that:
(i) The Partnership has been duly qualified or registered as a foreign
limited partnership for the transaction of business under the laws of such
state.
(ii) The General Partner has been duly qualified or registered as a
foreign corporation and is in good standing under the laws of such state;
(iii) The Partnership has all requisite partnership power and
authority as a limited partnership under the laws of such state to own or
lease the Properties and to conduct its business in such state.
(iv) The execution, delivery and performance of the Closing Agreement
relating to the transfer of property in such state in accordance with the
terms thereof will not violate any
24
<PAGE>
statute of such state or, to the knowledge of such counsel, based solely
upon such counsel's participation as special local counsel with respect to
matters relating to the Transactions and without having conducted an
independent investigation, any order, rule or regulation of any agency of
such state having jurisdiction over any of the Partnership, the General
Partner, the Master Partnership or any of their respective properties,
except for (A) any such violations which, individually or in the
aggregate, would not have a material adverse effect upon the holders of
Senior Notes or upon the General Partner or the Partnership, and (B) as to
performance by the parties thereto of the Closing Agreement, any
violations which may arise by reason of the business activities of the
Partnership or the Master Partnership, the nature of the assets of either
of them or the manner in which such assets were constructed or are
operated; provided, that such counsel need express no opinion with respect
to the securities or Blue Sky laws of such state, other antifraud laws or
fraudulent transfer laws or the extent to which indemnity and contribution
provisions of such documents may be limited by the laws of such state; and
provided, further, that insofar as performance by the parties to the
Closing Agreement of their respective obligations thereunder, such counsel
need express no opinion as to bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and similar laws of general applicability
relating to or affecting creditors' rights.
(iv) The Closing Agreement, assuming the due authorization, execution
and delivery thereof by the parties thereto, to the extent it is a valid
and legally binding agreement under the applicable law as stated therein
and that such law applies thereto, is a valid and legally binding
agreement of the parties thereto under the laws of such state, enforceable
in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting the rights of contracting
parties and to general equity principles; each of the Closing Agreement
and the form of deeds and assignments is in a form legally sufficient as
between the parties thereto to convey to the transferee thereunder all of
the General Partner's right, title and interest in and to the Properties
located in such state, as described in the Closing Agreement or the form
of deeds and assignments, as the case may be, subject to the conditions,
reservations and limitations contained in the Closing Agreement or the
form of deeds and assignments, as the case may be, except motor vehicles
or other property requiring conveyance of certificated title as to which
the Closing Agreement is legally sufficient to compel delivery of such
certificated title. No opinion is expressed as to whether the Closing
Agreement complies with applicable recording, filing and registration laws
and regulations.
(v) No consent, approval, authorization, order, registration or
qualification of or with any governmental agency or body of such state
governing (A) changes in ownership or control of industrial or other
facilities generally, (B) retail propane sales generally or (C) the
issuance of securities by entities owning retail propane sales facilities,
or, to such counsel's knowledge, any other governmental agency or body of
such state having jurisdiction over the Partnership, Finance Corp., the
General Partner or the Master Partnership, as the case may be, or any of
their respective properties is required for the issue and sale of the
Senior Notes by the Issuers or for the conveyance of the Properties
located in such state purported to be conveyed to the Partnership pursuant
to the Closing Agreement, except such consents, approvals, authorizations,
orders, registrations or qualifications (1) as have been obtained, (2) as
may be required under the Act or state securities or Blue Sky laws, (3) as
are of a routine or administrative nature and either are (i) not
customarily obtained or made prior to the consummation of transactions
such as the Transactions, or (ii) expected in the reasonable judgment of
such counsel to be obtained in the ordinary course of business subsequent
to the consummation of the Transaction, (4)
25
<PAGE>
which, if not obtained, would not, individually or in the aggregate, have
a material adverse effect upon the ability of the Partnership to conduct
its business substantially in accordance with the past practice of the
General Partner, (5) that relate to zoning or subdivision mapping, or (6)
as set forth or contemplated in the Prospectus.
In rendering such opinion, such counsel may (A) rely in respect of matters of
fact upon certificates of the Partnership, the Master Partnership and of
officers and employees of the General Partner and Finance Corp., and upon
information obtained from public officials, and upon opinions of other counsel
issued in connection with the Transactions, and may assume that the signatures
on all documents examined by such counsel are genuine, (B) state that their
opinion is limited to the laws of their state of practice, excepting therefrom
municipal and local ordinances and regulations, (C) state that they express no
opinion with respect to state or local taxes or tax statutes and (D) state that
they express no opinion with respect to the title of any of the General Partner,
the Partnership or the Master Partnership to any real or personal property
purported to be transferred by or to them, that they have not made any review of
specific property or facilities or title files relating to any such properties,
that they express no opinion regarding the accuracy of the description or
references to any real or personal property, that they have assumed that
references in exhibits or schedules to other instruments already of record are
correct and that such instruments contain legally sufficient property
descriptions.
The opinions described in subsections (c), (d) and (e) of this Section 7
shall be rendered to you by each respective counsel at the request of the
Partnership and shall so state therein.
(f) You shall have received an opinion, dated the Closing Date, of Latham
& Watkins, counsel for the Underwriters, in form and substance reasonably
satisfactory to you;
(g) On the effective date of the Registration Statement and the most
recently filed post-effective amendment to the Registration Statement and
also on the Closing Date, Deloitte & Touche shall have furnished to you a
letter or letters, dated the respective date of delivery thereof, in form and
substance satisfactory to you;
(h) (i) Since the date hereof or since the dates as of which information
is given in the Registration Statement and the Prospectus, there shall not
have been, singly or in the aggregate, any change, or any development which
may reasonably be expected to involve a change, in the properties, business,
general affairs, management, condition (financial or otherwise), financial
position, or prospects of the Partnership, Finance Corp., the General Partner
and the Subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Prospectus, (ii) since the respective dates as of which
information is given in the Registration Statement and Prospectus, there
shall not have been any change in the capital stock or long-term debt, or
increase in short-term debt, of the Partnership, Finance Corp., the General
Partner or any of the Subsidiaries, and (iii) each of the Partnership,
Finance Corp., the General Partner, and the Subsidiaries shall not have
incurred (A) since the date of the latest audited financial statements
included in the Registration Statement and the Prospectus, any material loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus or (B) any liability or obligation, direct or
contingent, that is required to be disclosed on a balance sheet in accordance
with generally accepted accounting principles and is not disclosed on the
latest balance sheet included in the Registration Statement and the
Prospectus, the effect of which, in any such case described in clause (i),
(ii) or (iii), is in your judgment so material and adverse as to make it
26
<PAGE>
impracticable or inadvisable to proceed with the public offering or the
delivery of the Senior Notes being delivered at the Closing Date on the terms
and in the manner contemplated in the Prospectus;
(i) The closing under the Common Units Underwriting Agreement shall have
occurred;
(j) Ferrell shall have accepted for purchase all of the Senior
Subordinated Debentures validly tendered and not withdrawn pursuant to the
Offer to Purchase;
(k) The Existing Senior Notes shall have been called for redemption and
an amount of funds reasonably anticipated to be sufficient to redeem such
Existing Senior Notes shall be deposited with the trustee therefor;
(l) The closing of the Credit Facility shall have occurred;
(m) All indebtedness and other obligations outstanding pursuant to the
Wells Fargo Agreement shall have been repaid in full and the lenders
thereunder shall have released all Liens on collateral securing obligations
of the borrowers thereunder; and
(n) There shall have been furnished to you on the Closing Date
certificates reasonably satisfactory to you, signed on behalf of the General
Partner and Finance Corp. by a President or Vice President thereof and on
behalf of the Partnership by the General Partner by an authorized officer
thereof to the effect that:
(i) In the case of the Partnership and Finance Corp. (A) the
representations and warranties of the Partnership and Finance Corp.
contained in this Agreement are true and correct at and as of the Closing
Date as though made at and as of the Closing Date; (B) each of the
Partnership and Finance Corp. has duly performed all obligations required
to be performed by it pursuant to the terms of this Agreement at or prior
to the Closing Date; (C) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose
has been initiated or, to the knowledge of the Partnership or Finance
Corp., threatened by the Commission, and all requests for additional
information on the part of the Commission have been complied with or
otherwise satisfied; and (D) no event contemplated by subsection (g) of
this Section 8 in respect of the Partnership shall have occurred.
(ii) In the case of the General Partner (A) the representations
and warranties of the General Partner contained in this Agreement are true
and correct at and as of the Closing Date as though made at and as of the
Closing Date; (B) the General Partner has duly performed all obligations
required to be performed by it pursuant to the terms of this Agreement at
or prior to the Closing Date; and (C) no event contemplated by subsection
(g) of this Section 7 in respect of the General Partner shall have
occurred.
8. Defaults. If at the Closing Date, any of the Underwriters shall fail
--------
or refuse to purchase Senior Notes which it has agreed to purchase hereunder on
such date, and the aggregate principal amount of such Senior Notes that such
defaulting Underwriter(s) agreed but failed or refused to purchase does not
exceed 10% of the total principal amount of such Senior Notes that all of the
Underwriters are obligated to purchase at such Closing Date, each non-defaulting
Underwriter shall be obligated to purchase the amount of the Senior Notes that
such defaulting Underwriter(s) agreed but failed or refused to purchase on such
date. If, at the Closing Date, any of the Underwriters shall fail or refuse to
purchase
27
<PAGE>
Senior Notes in an aggregate principal amount that exceeds 10% of such total
principal amount of the Senior Notes and arrangements satisfactory to the other
Underwriter(s) and the Issuers for the purchase of such Senior Notes are not
made within 48 hours after such default, this Agreement shall terminate without
liability on the part of the non-defaulting Underwriter(s) or the Issuers,
except as otherwise provided in Section 9. In any such case that does not
result in termination of this Agreement, the Underwriters or the Issuers may
postpone the Closing Date for not longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under
this paragraph shall not relieve a defaulting underwriter from liability in
respect of any default by any such Underwriter under this Agreement.
9. Effective Date of Agreement and Termination.
-------------------------------------------
(a) This Agreement shall become effective upon the later of (i) the
execution and delivery of this Agreement by the parties hereto, (ii) the
effectiveness of the Registration Statement and (iii) if a post-effective
amendment is required to be filed pursuant to Rule 430A under the Act, the
effectiveness of such post-effective amendment;
(b) This Agreement may be terminated at any time on or prior to the
Closing Date by you by notice to the Partnership if any of the following has
occurred: (i) subsequent to the date the Registration Statement is declared
effective or the date of this Agreement, singly or in the aggregate, any
material adverse change, or any development which may be expected to involve
a material adverse change, in the properties, business, general affairs,
management, condition (financial or otherwise), financial position or
prospects of the Partnership, Finance Corp., the General Partner and the
Subsidiaries taken as a whole, which in your judgment materially impairs the
investment quality of the Senior Notes; (ii) any suspension or limitation of
trading generally in securities on the New York Stock Exchange or in the
over-the-counter markets or any setting of minimum prices for trading on such
exchange or markets; (iii) any suspension or material limitation in trading
of the securities of the Partnership, Finance Corp., the General Partner or
any of the Subsidiaries on the New York Stock Exchange or in the over-the-
counter markets; (iv) a general moratorium on commercial banking activities
in New York declared by either Federal or New York State authorities; (v) any
outbreak or escalation of hostilities involving the United States, the
declaration by the United States of a national emergency or war, or any other
national or international calamity or crisis or material adverse change in
the financial markets of the United States or elsewhere, or any other
substantial national or international calamity or emergency if the effect of
any such event in your judgment makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Senior Notes being
delivered at the Closing Date on the terms and in the manner contemplated by
the Prospectus; (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs that in
your judgment has a material adverse effect on the financial markets in the
United States and would, in your judgment, make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Senior
Notes being delivered at the Closing Date on the terms and in the manner
contemplated by the Prospectus; (vii) the enactment, publication, decree, or
other promulgation of any federal or state statute, regulation, rule or order
of any court or other governmental authority which, in your judgment,
materially and adversely affect the business or operations of the
Partnership, Finance Corp., the General Partner or any Subsidiary; or (viii)
any downgrading in the rating accorded the securities of the Partnership,
Finance Corp., the General Partner or any Subsidiary by any "nationally
recognized statistical rating organization," as that term is defined by the
Commission for purposes of Rule 436(g)-(2) under the Act, or any such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of such
securities;
28
<PAGE>
(c) The indemnities and contribution provisions and other agreements,
representations and warranties of the Issuers, their officers and directors
and of the Underwriters set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of
and payment for the Securities, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of any of the
Underwriters or by or on behalf of the Issuers, the officers or directors of
any Issuer or any controlling person of any Issuer, (ii) acceptance of the
Securities and payment for them hereunder and (iii) termination of this
Agreement;
(d) If this Agreement shall be terminated by the Underwriters pursuant to
clauses (i) or (viii) of paragraph (b) of this Section 9 or because of the
failure or refusal on the part of the Issuers to comply with the terms or to
fulfill any of the conditions of this Agreement, the Issuers agree, jointly
and severally, to reimburse you for all out-of-pocket expenses (including the
fees and disbursements of counsel) incurred by you. Notwithstanding any
termination of this Agreement, the Issuers shall be liable, jointly and
severally, for all expenses which it has agreed to pay pursuant to Section
4(k) hereof;
(e) Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Issuers, the
Underwriters, any Indemnified Person referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement,
and no other person shall acquire or have any right under or by virtue of
this Agreement. The terms "successors and assigns" shall not include a
purchaser of any of the Securities from any of the Underwriters merely
because of such purchase.
10. Notices. Notices given pursuant to any provision of this Agreement
-------
shall be addressed as follows: (a) if to the Partnership or Finance Corp., to
Ferrellgas, L.P., One Liberty Plaza, Liberty, MO 64068, Attention:
_______________, with a copy to Smith, Gill, Fisher & Butts, One Kansas City
Place, 1200 Main Street, Kansas City, MO 64105, Attention: Kendrick T. Wallace,
Esq., and (b) if to any Underwriter, to it c/o Donaldson, Lufkin & Jenrette
Securities Corporation, 140 Broadway, New York, New York 10005, Attention:
Syndicate Department, with a copy to Latham & Watkins, 885 Third Avenue, New
York, New York 10022, Attention: Philip E. Coviello, Esq., or in any case to
such other address as the person to be notified may have requested in writing.
11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK.
12. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and other persons referred to in Section 7, and no other person
will have any right or obligation hereunder.
29
<PAGE>
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument. Please confirm that the foregoing
correctly sets forth the agreement among the Issuers and you.
Very truly yours,
FERRELLGAS, L.P.
By: FERRELLGAS, INC., as General Partner
By: _________________________________
Name:
Title:
FERRELLGAS FINANCE CORP.
By: _________________________________
Name:
Title:
FERRELLGAS, INC.
By: _________________________________
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: _________________________________
Name:
Title:
GOLDMAN, SACHS & CO.
By: _________________________________
Name:
Title:
30
<PAGE>
SCHEDULE A
Principal
Underwriter Amount
----------- ------
Donaldson, Lufkin & Jenrette
Securities Corporation .......................................... $
Goldman, Sachs & Co. ............................................. ____________
Total ....................................................... $250,000,000
============
31
<PAGE>
Exhibit 3.1
DRAFT OF JUNE 8, 1994
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
FERRELLGAS, L.P.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I - ORGANIZATIONAL MATTERS............................. 1
1.1 Formation........................................... 1
1.2 Name................................................ 1
1.3 Registered Office; Principal Office................. 1
1.4 Power of Attorney................................... 2
1.5 Term................................................ 3
1.6 Possible Restrictions on Transfer................... 3
ARTICLE II - DEFINITIONS........................................ 4
"Additional Limited Partner".............................. 4
"Adjusted Capital Account"................................ 4
"Adjusted Property"....................................... 4
"Affiliate"............................................... 5
"Agreed Allocation"....................................... 5
"Agreed Value"............................................ 5
"Agreement"............................................... 5
"Audit Committee"......................................... 5
"Available Cash".......................................... 5
"Book-Tax Disparity"...................................... 7
"Business Day"............................................ 7
"Capital Account"......................................... 7
"Capital Contribution".................................... 7
"Capital Interests"....................................... 7
"Carrying Value".......................................... 7
"Certificate of Limited Partnership"...................... 8
"Closing Date"............................................ 8
"Code".................................................... 8
"Common Unit"............................................. 8
"Contributed Property".................................... 8
"Contribution Agreement".................................. 8
"Curative Allocation"..................................... 8
"Delaware Act"............................................ 8
"Departing Partner"....................................... 8
"Economic Risk of Loss"................................... 8
"Event of Withdrawal"..................................... 8
"Exchange Act"............................................ 9
"Ferrell"................................................. 9
"Ferrellgas".............................................. 9
"General Partner"......................................... 9
"IDR"..................................................... 9
"Indemnitee".............................................. 9
"Initial Limited Partner"................................. 9
"Limited Partner"......................................... 9
"Liquidation Date"........................................ 9
"Liquidator".............................................. 9
"Merger Agreement"........................................ 9
"MLP"..................................................... 10
"MLP Agreement"........................................... 10
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
"MLP Offering"........................................... 10
"MLP Registration Statement"............................. 10
"MLP Subsidiary"......................................... 10
"MLP Underwriting Agreement"............................. 10
"National Securities Exchange"........................... 10
"Net Agreed Value"....................................... 10
"Net Income"............................................. 10
"Net Loss"............................................... 11
"Net Termination Gain"................................... 11
"Net Termination Loss"................................... 11
"Nonrecourse Built-in Gain".............................. 12
"Nonrecourse Deductions"................................. 12
"Nonrecourse Liability".................................. 12
"OLP Offering"........................................... 12
"OLP Registration Statement"............................. 12
"OLP Subsidiary"......................................... 12
"OLP Underwriting Agreement"............................. 12
"Opinion of Counsel"..................................... 12
"Partners"............................................... 12
"Partner Nonrecourse Debt"............................... 12
"Partner Nonrecourse Debt Minimum Gain".................. 12
"Partner Nonrecourse Deductions"......................... 13
"Partnership"............................................ 13
"Partnership Interest"................................... 13
"Partnership Minimum Gain"............................... 13
"Percentage Interest".................................... 13
"Person"................................................. 13
"Quarter"................................................ 13
"Recapture Income"....................................... 13
"Registration Statements"................................ 13
"Required Allocations"................................... 13
"Residual Gain".......................................... 14
"Residual Loss".......................................... 14
"Restricted Activities".................................. 14
"Securities Act"......................................... 14
"Senior Notes"........................................... 14
"Special Approval"....................................... 14
"Subsidiary"............................................. 14
"Substituted Limited Partner"............................ 14
"Surviving Business Entity".............................. 14
"Termination Capital Transactions"....................... 15
"Underwriting Agreements"................................ 15
"Unit"................................................... 15
"Unrealized Gain"........................................ 15
"Unrealized Loss"........................................ 15
"Withdrawal Opinion of Counsel".......................... 15
ARTICLE III - PURPOSE.......................................... 15
3.1 Purpose and Business.............................. 15
3.2 Powers............................................ 16
</TABLE>
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ARTICLE IV - CAPITAL CONTRIBUTIONS.............................. 16
4.1 Initial Contributions............................... 16
4.2 Contributions by Ferrellgas and the MLP............. 16
4.3 Additional Capital Contributions.................... 17
4.4 No Preemptive Rights................................ 17
4.5 Capital Accounts.................................... 17
4.6 Interest............................................ 20
4.7 No Withdrawal....................................... 20
4.8 Loans from Partners................................. 20
ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS...................... 21
5.1 Allocations for Capital Account Purposes............ 21
(a) Net Income...................................... 21
(b) Net Losses...................................... 21
(c) Net Termination Gains and Losses................ 22
(d) Special Allocations............................. 23
(i) Partnership Minimum Gain Chargeback...... 23
(ii) Chargeback of Partner Nonrecourse Debt
Minimum Gain............................. 23
(iii) Qualified Income Offset.................. 23
(iv) Gross Income Allocations................. 24
(v) Nonrecourse Deductions................... 24
(vi) Partner Nonrecourse Deductions........... 24
(vii) Nonrecourse Liabilities.................. 24
(viii) Code Section 754 Adjustments............. 25
(ix) Curative Allocation...................... 25
5.2 Allocations for Tax Purposes........................ 26
5.3 Requirement of Distributions........................ 28
ARTICLE VI - MANAGEMENT AND OPERATION OF BUSINESS............... 28
6.1 Management.......................................... 28
6.2 Certificate of Limited Partnership.................. 30
6.3 Restrictions on General Partner's Authority......... 31
6.4 Reimbursement of the General Partner................ 31
6.5 Outside Activities.................................. 32
6.6 Loans to and from the General Partner; Contracts
with Affiliates..................................... 33
6.7 Indemnification..................................... 35
6.8 Liability of Indemnitees............................ 37
6.9 Resolution of Conflicts of Interest................. 37
6.10 Other Matters Concerning the General Partner........ 39
6.11 Title to Partnership Assets......................... 40
6.12 Reliance by Third Parties........................... 40
ARTICLE VII - RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER..... 41
7.1 Limitation of Liability............................. 41
7.2 Management of Business.............................. 41
7.3 Return of Capital................................... 41
7.4 Rights of the Limited Partner Relating
to the Partnership.................................. 42
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ARTICLE VIII - BOOKS, RECORDS, ACCOUNTING AND REPORTS........ 43
8.1 Records and Accounting......................... 43
8.2 Fiscal Year.................................... 43
ARTICLE IX - TAX MATTERS................................... 43
9.1 Preparation of Tax Returns..................... 43
9.2 Tax Elections.................................. 43
9.3 Tax Controversies.............................. 44
9.4 Organizational Expenses........................ 44
9.5 Withholding.................................... 44
9.6 Opinions of Counsel............................ 44
ARTICLE X - TRANSFER OF INTERESTS......................... 44
10.1 Transfer....................................... 44
10.2 Transfer of the General Partner's Partnership
Interest....................................... 45
10.3 Transfer of the Limited Partner's Partnership
Interest....................................... 45
ARTICLE XI - ADMISSION OF PARTNERS......................... 45
11.1 Admission of Initial Partners.................. 45
11.2 Admission of Ferrellgas as a Limited Partner... 45
11.3 Admission of Substituted Limited Partners...... 46
11.4 Admission of Successor General Partner......... 46
11.5 Amendment of Agreement and Certificate of
Limited Partnership............................ 46
11.6 Admission of Additional Limited Partners....... 46
ARTICLE XII - WITHDRAWAL OR REMOVAL OF PARTNERS............. 47
12.1 Withdrawal of the General Partner.............. 47
12.2 Removal of the General Partner................. 49
12.3 Interest of Departing Partner and
Successor General Partner...................... 49
12.4 Reimbursement of Departing Partner............. 49
12.5 Withdrawal of the Limited Partner.............. 49
ARTICLE XIII - DISSOLUTION AND LIQUIDATION................... 50
13.1 Dissolution.................................... 50
13.2 Continuation of the Business of the Partnership
after Dissolution.............................. 50
13.3 Liquidation.................................... 51
13.4 Distributions in Kind.......................... 52
13.5 Cancellation of Certificate of Limited
Partnership.................................... 53
13.6 Reasonable Time for Winding Up................. 53
13.7 Return of Capital.............................. 53
13.8 Capital Account Restoration.................... 53
13.9 Waiver of Partition............................ 54
ARTICLE XIV - AMENDMENT OF PARTNERSHIP AGREEMENT............ 54
14.1 Amendment to be Adopted Solely by General
Partner........................................ 54
14.2 Amendment Procedures........................... 55
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ARTICLE XV - MERGER...................................... 56
15.1 Authority.................................... 56
15.2 Procedure for Merger or Consolidation........ 56
15.3 Approval by Limited Partner of
Merger or Consolidation...................... 57
15.4 Certificate of Merger........................ 57
15.5 Effect of Merger............................. 57
ARTICLE XVI - GENERAL PROVISIONS.......................... 58
16.1 Addresses and Notices........................ 58
16.2 References................................... 58
16.3 Pronouns and Plurals......................... 58
16.4 Further Action............................... 58
16.5 Binding Effect............................... 58
16.6 Integration.................................. 59
16.7 Creditors.................................... 59
16.8 Waiver....................................... 59
16.9 Counterparts................................. 59
16.10 Applicable Law............................... 59
16.11 Invalidity of Provisions..................... 59
</TABLE>
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AGREEMENT OF LIMITED PARTNERSHIP OF
FERRELLGAS, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP OF FERRELLGAS, L.P., dated as of
_________________________, 1994, is entered into by and among Ferrellgas, Inc.,
a Delaware corporation, as the General Partner, and Ferrellgas Partners, L.P., a
Delaware limited partnership, as the Initial Limited Partner, together with any
other Persons who become Partners in the Partnership as provided herein. In
consideration of the covenants, conditions and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 FORMATION. (a) The General Partner and the Initial Limited Partner
have previously formed the Partnership as a limited partnership pursuant to the
provisions of the Delaware Act. Except as expressly provided to the contrary in
this Agreement, the rights and obligations of the Partners and the
administration, dissolution and termination of the Partnership shall be governed
by the Delaware Act. All Partnership Interests shall constitute personal
property of the owner thereof for all purposes.
1.2 NAME. The name of the Partnership shall be, and the business of the
Partnership shall be conducted under the name of, "Ferrellgas, L.P." The
Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the General Partner, including, without limitation,
the name of the General Partner or any Affiliate thereof. The words "Limited
Partnership," "L.P.," "Ltd." or similar words or letters shall be included in
the Partnership's name where necessary for the purposes of complying with the
laws of any jurisdiction that so requires. The General Partner in its sole
discretion may change the name of the Partnership at any time and from time to
time and shall notify the Limited Partner of such change in the next regular
communication to the Limited Partner.
1.3 REGISTERED OFFICE; PRINCIPAL OFFICE. Unless and until changed by the
General Partner, the registered office of the Partnership in the State of
Delaware shall be located at The Corporation Trust Center, 1209 Orange Street,
New Castle County, Wilmington, Delaware 19801, and the registered agent for
service of process on the Partnership in the State of Delaware at such
registered office shall be The Corporation Trust Company. The principal office
of the Partnership and the address of the General
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Partner shall be One Liberty Plaza, Liberty, Missouri 64068, or such other place
as the General Partner may from time to time designate by notice to the Limited
Partner. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems necessary
or appropriate.
1.4 POWER OF ATTORNEY. (a) The Limited Partner hereby constitutes and
appoints each of the General Partner and, if a Liquidator shall have been
selected pursuant to Section 13.3, the Liquidator severally (and any successor
to either thereof by merger, transfer, assignment, election or otherwise) and
each of their authorized officers and attorneys-in-fact, with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in its name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other instruments
(including, without limitation, this Agreement and the Certificate of Limited
Partnership and all amendments or restatements thereof) that the General Partner
or the Liquidator deems necessary or appropriate to form, qualify or continue
the existence or qualification of the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) in the State
of Delaware and in all other jurisdictions in which the Partnership may conduct
business or own property; (B) all certificates, documents and other instruments
that the General Partner or the Liquidator deems necessary or appropriate to
reflect, in accordance with its terms, any amendment, change, modification or
restatement of this Agreement; (C) all certificates, documents and other
instruments (including, without limitation, conveyances and a certificate of
cancellation) that the General Partner or the Liquidator deems necessary or
appropriate to reflect the dissolution and liquidation of the Partnership
pursuant to the terms of this Agreement; (D) all certificates, documents and
other instruments relating to the admission, withdrawal, removal or substitution
of any Partner pursuant to, or other events described in, Article X, XI, XII or
XIII or the Capital Contribution of any Partner; (E) all certificates, documents
and other instruments relating to the determination of the rights, preferences
and privileges of any class or series of Partnership Interests; and (F) all
certificates, documents and other instruments (including, without limitation,
agreements and a certificate of merger) relating to a merger or consolidation of
the Partnership pursuant to Article XV; and
(ii) execute, swear to, acknowledge, deliver, file and record all ballots,
consents, approvals, waivers, certificates, documents and other instruments
necessary or appropriate, in the sole discretion of the General Partner or the
Liquidator,
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to make, evidence, give, confirm or ratify any vote, consent, approval,
agreement or other action that is made or given by the Partners hereunder or is
consistent with the terms of this Agreement or is necessary or appropriate, in
the sole discretion of the General Partner or the Liquidator, to effectuate the
terms or intent of this Agreement; provided, that when the consent or approval
of the Limited Partner is required by any provision of this Agreement, the
General Partner or the Liquidator may exercise the power of attorney made in
this Section 1.4(a)(ii) only after the necessary consent or approval of the
Limited Partner is obtained.
Nothing contained in this Section 1.4(a) shall be construed as authorizing the
General Partner to amend this Agreement except in accordance with Article XIV or
as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be irrevocable and
a power coupled with an interest, and it shall survive and not be affected by
the subsequent death, incompetency, disability, incapacity, dissolution,
bankruptcy or termination of the Limited Partner and the transfer of all or any
portion of the Limited Partner's Partnership Interest and shall extend to the
Limited Partner's heirs, successors, assigns and personal representatives. The
Limited Partner hereby agrees to be bound by any representation made by the
General Partner or the Liquidator acting in good faith pursuant to such power of
attorney; and the Limited Partner hereby waives any and all defenses that may be
available to contest, negate or disaffirm the action of the General Partner or
the Liquidator taken in good faith under such power of attorney. The Limited
Partner shall execute and deliver to the General Partner or the Liquidator,
within 15 days after receipt of the General Partner's or the Liquidator's
request therefor, such further designation, powers of attorney and other
instruments as the General Partner or the Liquidator deems necessary to
effectuate this Agreement and the purposes of the Partnership.
1.5 TERM. The Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall continue in
existence until the close of Partnership business on July 31, 2084, or until the
earlier termination of the Partnership in accordance with the provisions of
Article XIII.
1.6 POSSIBLE RESTRICTIONS ON TRANSFER. Notwithstanding anything to the
contrary contained in this Agreement, in the event of (a) the enactment (or
imminent enactment) of any legislation, (b) the publication of any temporary or
final regulation by the Treasury Department, (c) any ruling by the Internal
Revenue Service or (d) any judicial decision, that, in any such case, in the
Opinion of Counsel, would result in the taxation of the Partnership as an
association taxable as a corporation or would otherwise result in the
Partnership being taxed as an entity for federal
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income tax purposes, then, the General Partner may impose such restrictions on
the transfer of Partnership Interests as may be required, in the Opinion of
Counsel, to prevent the Partnership from being taxed as an association taxable
as a corporation or otherwise as an entity for federal income tax purposes,
including, without limitation, making any amendments to this Agreement as the
General Partner in its sole discretion may determine to be necessary or
appropriate to impose such restrictions.
ARTICLE II
DEFINITIONS
The following definitions shall be for all purposes, unless otherwise clearly
indicated to the contrary, applied to the terms used in this Agreement.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the Partnership as a
Limited Partner pursuant to Section 11.6 and who is shown as such on the books
and records of the Partnership.
"ADJUSTED CAPITAL ACCOUNT" means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)), and
(b) decreased by (i) the amount of all losses and deductions that, as of the end
of such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 5.1(d)(i)
or 5.1(d)(ii)). The foregoing definition of Adjusted Capital Account is
intended to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"ADJUSTED PROPERTY" means any property the Carrying Value of which has been
adjusted pursuant to Section 4.5(d)(i) or 4.5(d)(ii). Once an Adjusted Property
is deemed distributed by, and recontributed to, the Partnership for federal
income tax purposes upon a termination thereof pursuant to Section 708
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<PAGE>
of the Code, such property shall thereafter constitute a Contributed Property
until the Carrying Value of such property is subsequently adjusted pursuant to
Section 4.5(d)(i) or 4.5(d)(ii).
"AFFILIATE" means, with respect to any Person, any other Person that directly
or indirectly controls, is controlled by or is under common control with, the
Person in question. As used herein, the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
"AGREED ALLOCATION" means any allocation, other than a Required Allocation, of
an item of income, gain, loss or deduction pursuant to the provisions of Section
5.1, including, without limitation, a Curative Allocation (if appropriate to the
context in which the term "Agreed Allocation" is used).
"AGREED VALUE" of any Contributed Property means the fair market value of such
property or other consideration at the time of contribution as determined by the
General Partner using such reasonable method of valuation as it may adopt;
provided, however, that the Agreed Value of any property deemed contributed by
the Partnership for federal income tax purposes upon termination and
reconstitution thereof pursuant to Section 708 of the Code shall be determined
in accordance with Section 4.5(c)(i). Subject to Section 4.5(c)(i), the General
Partner shall, in its sole discretion, use such method as it deems reasonable
and appropriate to allocate the aggregate Agreed Value of Contributed Properties
contributed to the Partnership in a single or integrated transaction among each
separate property on a basis proportional to the fair market value of each
Contributed Property.
"AGREEMENT" means this Agreement of Limited Partnership of Ferrellgas, L.P.,
as it may be amended, supplemented or restated from time to time.
"AUDIT COMMITTEE" means a committee of the Board of Directors of the General
Partner composed entirely of two or more directors who are neither officers nor
employees of the General Partner or any of its Affiliates.
"AVAILABLE CASH" means with respect to any period and without duplication:
(a) the sum of:
(i) all cash receipts of the Partnership during such period from all
sources (including, without limitation, distributions of cash received by the
5
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Partnership from an OLP Subsidiary) plus, in the case of the Quarter ending
October 31, 1994, the cash balance of the Partnership as of the close of
business on the Closing Date and all cash receipts of the Partnership from all
sources during the Quarter ended July 31, 1994; and
(ii) any reduction in a cash reserve previously established pursuant to
(b)(ii) below (either by reversal or utilization) with respect to such period
from the level of such reserve at the end of the prior period;
(b) less the sum of:
(i) all cash disbursements of the Partnership 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 and contributions, if any, to an OLP Subsidiary (but excluding
all cash distributions to Partners to the extent of Available Cash for the
immediately preceding Quarter); and
(ii) any cash reserves established with respect to such period, and any
increase in cash reserves established with respect to prior periods, 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 Partnership (including, without limitation, reserves for future capital
expenditures or capital contributions to an OLP Subsidiary) or (B) 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 Partnership is a party or by which it is
bound or its assets are subject.
Notwithstanding the foregoing (x) disbursements (including, without limitation,
contributions to an OLP Subsidiary or disbursements on behalf of an OLP
Subsidiary) made or reserves established, increased or reduced after the end of
any Quarter but on or before the date on which the Partnership makes its
distribution of Available Cash in respect of such 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 period if the
General Partner so determines and (y) "Available Cash" with respect to any
Quarter
6
<PAGE>
shall not include any cash receipts or reductions in reserves or take into
account any disbursements made or reserves established after the Liquidation
Date.
"BOOK-TAX DISPARITY" means with respect to any item of Contributed Property or
Adjusted Property, as of the date of any determination, the difference between
the Carrying Value of such Contributed Property or Adjusted Property and the
adjusted basis thereof for federal income tax purposes as of such date. A
Partner's share of the Partnership's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Partner's Capital Account balance as maintained pursuant to Section
4.5 and the hypothetical balance of such Partner's Capital Account computed as
if it had been maintained strictly in accordance with federal income tax
accounting principles.
"BUSINESS DAY" means Monday through Friday of each week, except that a legal
holiday recognized as such by the government of the United States or the states
of New York or Missouri shall not be regarded as a Business Day.
"CAPITAL ACCOUNT" means the capital account maintained for a Partner pursuant
to Section 4.5.
"CAPITAL CONTRIBUTION" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership
pursuant to Section 4.1, 4.2, 4.3, 4.5(c) or 13.8.
"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 any 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.
"CARRYING VALUE" means (a) with respect to a Contributed Property, the Agreed
Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' Capital
Accounts in respect of such Contributed Property, and (b) with respect to any
other Partnership property, the adjusted basis of such property for federal
income tax purposes, all as of the time of determination. The Carrying Value of
any property shall be adjusted from time to time in accordance with Sections
4.5(d)(i) and 4.5(d)(ii) and to reflect changes, additions or other adjustments
to the Carrying Value for dispositions and acquisitions of Partnership
properties, as deemed appropriate by the General Partner.
7
<PAGE>
"CERTIFICATE OF LIMITED PARTNERSHIP" means the Certificate of Limited
Partnership filed with the Secretary of State of the State of Delaware as
referenced in Section 6.2, as such Certificate of Limited Partnership may be
amended, supplemented or restated from time to time.
"CLOSING DATE" means the first date on which Common Units are sold by the MLP
to the Underwriters pursuant to the provisions of the MLP Underwriting
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended and in effect from
time to time, as interpreted by the applicable regulations thereunder. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.
"COMMON UNIT" has the meaning assigned to such term in the MLP Agreement.
"CONTRIBUTED PROPERTY" means each property or other asset, in such form as may
be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership (or deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying
Value of a Contributed Property is adjusted pursuant to Section 4.5(d), such
property shall no longer constitute a Contributed Property, but shall be deemed
an Adjusted Property.
"CONTRIBUTION AGREEMENT" has the meaning assigned to such term in the MLP
Agreement.
"CURATIVE ALLOCATION" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 5.1(d)(ix).
"DELAWARE ACT" means the Delaware Revised Uniform Limited Partnership Act, 6
Del C. (S) 17-101, et seq., as amended, supplemented or restated from time to
time, and any successor to such statute.
"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.
"ECONOMIC RISK OF LOSS" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"EVENT OF WITHDRAWAL" has the meaning assigned to such term in Section
12.1(a).
8
<PAGE>
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
supplemented or restated from time to time, and any successor to such statute.
"FERRELL" means Ferrell Companies, Inc., a Kansas corporation.
"FERRELLGAS" means Ferrellgas, Inc., a Delaware corporation and a wholly owned
subsidiary of Ferrell.
"GENERAL PARTNER" means Ferrellgas, and its successors as general partner of
the Partnership.
"IDR" has the meaning assigned to such term in the MLP Agreement.
"INDEMNITEE" means the General Partner, any Departing Partner, any Person who
is or was an Affiliate of the General Partner or any Departing Partner, any
Person who is or was an officer, director, employee, partner, agent or trustee
of the General Partner or any Departing Partner or any such Affiliate, or any
Person who is or was serving at the request of the General Partner or any
Departing Partner or any such Affiliate as a director, officer, employee,
partner, agent or trustee of another Person.
"INITIAL LIMITED PARTNER" means the MLP.
"LIMITED PARTNER" means the Initial Limited Partner, Ferrellgas pursuant to
Section 4.2, 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, but excluding any such
Person from and after the time it withdraws from the Partnership.
"LIQUIDATION DATE" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 13.2, the date on which the applicable time period
during which the Partners have the right to elect to reconstitute the
Partnership 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 Partnership, the date on which such event occurs.
"LIQUIDATOR" means the General Partner or other Person approved pursuant to
Section 13.3 who performs the functions described therein.
"MERGER AGREEMENT" has the meaning assigned to such term in Section 15.1.
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"MLP" means Ferrellgas Partners, L.P., a Delaware limited partnership.
"MLP AGREEMENT" means the Agreement of Limited Partnership of Ferrellgas
Partners, L.P., as it may be amended, supplemented or restated from time to
time.
"MLP OFFERING" means the initial offering of Common Units to the public, as
described in the MLP Registration Statement.
"MLP REGISTRATION STATEMENT" means the Registration Statement on Form S-1
(Registration No. 33-53383), as it has been or as it may be amended or
supplemented from time to time, filed by the MLP with the Securities and
Exchange Commission under the Securities Act to register the offering and sale
of the Common Units in the MLP Offering.
"MLP SUBSIDIARY" means a Subsidiary of the MLP.
"MLP UNDERWRITING AGREEMENT" means the underwriting agreement dated ________,
1994, among the MLP, the General Partner, Ferrell and the Underwriters named in
Schedule I thereto providing for the purchase of Common Units by such
Underwriters.
"NATIONAL SECURITIES EXCHANGE" means an exchange registered with the
Securities and Exchange Commission under Section 6(a) of the Exchange Act.
"NET AGREED VALUE" means, (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by the
Partnership upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Partner by the
Partnership, the Partnership's Carrying Value of such property (as adjusted
pursuant to Section 4.5(d)(ii)) at the time such property is distributed,
reduced by any indebtedness either assumed by such Partner upon such
distribution or to which such property is subject at the time of distribution,
in either case, as determined under Section 752 of the Code.
"NET INCOME" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain (other than those items attributable to
dispositions constituting Termination Capital Transactions) for such taxable
period over the Partnership's items of loss and deduction (other than those
items attributable to dispositions constituting Termination Capital
Transactions) for such taxable period. The items included in the calculation of
Net Income shall be determined in accordance with Section 4.5(b) and shall not
include any items specially allocated under Section 5.1(d). Once an item
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of income, gain, loss or deduction that has been included in the initial
computation of Net Income is subjected to a Required Allocation or a Curative
Allocation, Net Income or Net Loss, whichever the case may be, shall be
recomputed without regard to such item.
"NET LOSS" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction (other than those items attributable
to dispositions constituting Termination Capital Transactions) for such taxable
period over the Partnership's items of income and gain (other than those items
attributable to dispositions constituting Termination Capital Transactions) for
such taxable period. The items included in the calculation of Net Loss shall be
determined in accordance with Section 4.5(b) and shall not include any items
specially allocated under Section 5.1(d). Once an item of income, gain, loss or
deduction that has been included in the initial computation of Net Loss is
subjected to a Required Allocation or a Curative Allocation, Net Income, or Net
Loss, whichever the case may be, shall be recomputed without regard to such
item.
"NET TERMINATION GAIN" means, for any taxable period, the sum, if positive, of
all items of income, gain, loss or deduction recognized by the Partnership
(including, without limitation, such amounts recognized through an OLP
Subsidiary, if applicable) from Termination Capital Transactions occurring in
such taxable period. The items included in the determination of Net Termination
Gain shall be determined in accordance with Section 4.5(b) and shall not include
any items of income, gain or loss specially allocated under Section 5.1(d).
Once an item of income, gain or loss that has been included in the initial
computation of Net Termination Gain is subjected to a Required Allocation or a
Curative Allocation, Net Termination Gain or Net Termination Loss, whichever the
case may be, shall be recomputed without regard to such item.
"NET TERMINATION LOSS" means, for any taxable period, the sum, if negative, of
all items of income, gain, loss or deduction recognized by the Partnership
(including, without limitation, such amounts recognized through an OLP
Subsidiary, if applicable) from Termination Capital Transactions occurring in
such taxable period. The items included in the determination of Net Termination
Loss shall be determined in accordance with Section 4.5(b) and shall not include
any items of income, gain or loss specially allocated under Section 5.1(d).
Once an item of gain or loss that has been included in the initial computation
of Net Termination Loss is subjected to a Required Allocation or a Curative
Allocation, Net Termination Gain or Net Termination Loss, whichever the case may
be, shall be recomputed without regard to such item.
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"NONRECOURSE BUILT-IN GAIN" means with respect to any Contributed Properties
or Adjusted Properties that are subject to a mortgage or pledge securing a
Nonrecourse Liability, the amount of any taxable gain that would be allocated to
the Partners pursuant to Sections 5.2(b)(i)(A), 5.2(b)(ii)(A) or 5.2(b)(iii) if
such properties were disposed of in a taxable transaction in full satisfaction
of such liabilities and for no other consideration.
"NONRECOURSE DEDUCTIONS" means any and all items of loss, deduction or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in accordance
with the principles of Treasury Regulation Section 1.704-(2)(b), are
attributable to a Nonrecourse Liability.
"NONRECOURSE LIABILITY" has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
"OLP OFFERING" means the initial offering of Senior Notes to the public, as
described in the OLP Registration Statement.
"OLP REGISTRATION STATEMENT" means the Registration Statement on Form S-1
(Registration No. 33-53379), as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership and Ferrellgas Finance
Corp. with the Securities and Exchange Commission under the Securities Act to
register the offering and sale of the Senior Notes in the OLP Offering.
"OLP SUBSIDIARY" means a Subsidiary of the Partnership.
"OLP UNDERWRITING AGREEMENT" means the underwriting agreement dated ________,
1994, among the Partnership, Ferrellgas Finance Corp., the General Partner and
the Underwriters named in Schedule A thereto providing for the purchase of
Senior Notes by such Underwriters.
"OPINION OF COUNSEL" means a written opinion of counsel (who may be regular
counsel to the General Partner, any Affiliate of the General Partner, or the
Partnership) acceptable to the General Partner.
"PARTNERS" means the General Partner and the Limited Partner.
"PARTNER NONRECOURSE DEBT" has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
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"PARTNER NONRECOURSE DEDUCTIONS" means any and all items of loss, deduction or
expenditure (including, without limitation, any expenditure described in Section
705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury
Regulation Section 1.704-2(i), are attributable to a Partner Nonrecourse Debt.
"PARTNERSHIP" means Ferrellgas, L.P., a Delaware limited partnership,
established by the Certificate of Limited Partnership, and any successor
thereto.
"PARTNERSHIP INTEREST" means the interest of a Partner in the Partnership.
"PARTNERSHIP MINIMUM GAIN" means that amount determined in accordance with the
principles of Treasury Regulation Section 1.704-2(d).
"PERCENTAGE INTEREST" means (a) as to the General Partner, in its capacity as
such, 1.0101% and (b) as to the Limited Partner, 98.9899%.
"PERSON" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"QUARTER" means, unless the context requires otherwise, a three-month period
of time ending on October 31, January 31, April 30, or July 31; provided,
however, that the General Partner in its sole discretion may amend such period
as it deems necessary or appropriate in connection with a change in the fiscal
year of the Partnership.
"RECAPTURE INCOME" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Sections 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"REGISTRATION STATEMENTS" means the MLP Registration Statement and the OLP
Registration Statement.
"REQUIRED ALLOCATIONS" means any allocation (or limitation imposed on any
allocation) of an item of income, gain, deduction or loss pursuant to (a)
Section 5.1(b)(i) or (b) Sections 5.1(d)(i)-(vi) and (viii), such allocations
(or limitations thereon) being directly or indirectly required by the Treasury
regulations promulgated under Section 704(b) of the Code.
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"RESIDUAL GAIN" or "RESIDUAL LOSS" means any item of gain or loss, as the case
may be, of the Partnership recognized for federal income tax purposes resulting
from a sale, exchange or other disposition of a Contributed Property or Adjusted
Property, to the extent such item of gain or loss is not allocated pursuant to
Section 5.2(b)(i)(A) or 5.2(b)(ii)(A), respectively, to eliminate Book-Tax
Disparities.
"RESTRICTED ACTIVITIES" means the retail sale of propane to end users within
the continental United States in the manner engaged in by Ferrellgas immediately
prior to the Closing Date.
"SECURITIES ACT" means the Securities Act of 1933, as amended, supplemented or
restated from time to time and any successor to such statute.
"SENIOR NOTES" means the ____% Senior Notes due 2001 in the aggregate
principal amount of $250 million to be issued by the Partnership and Ferrellgas
Finance Corp. and offered and sold in the OLP Offering.
"SPECIAL APPROVAL" means approval by the Audit Committee.
"SUBSIDIARY" means, with respect to any Person, (i) a corporation of which
more than 50% of the voting power of shares of Capital Interests entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors or other governing body of such corporation is owned, directly or
indirectly, by such Person, by one or more Subsidiaries of such Person, or a
combination thereof, (ii) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
Capital Interests of such partnership is owned or controlled, directly or
indirectly, by such Person, by one or more Subsidiaries of such Person, or a
combination thereof, or (iii) any other Person (other than a corporation or a
partnership) in which such Person, directly or indirectly, at the date of
determination, has (x) at least a majority ownership interest or (y) the power
to elect or direct the election of a majority of the directors or other
governing body of such Person.
"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.3 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 Partnership.
"SURVIVING BUSINESS ENTITY" has the meaning assigned to such term in Section
15.2(b).
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"TERMINATION CAPITAL TRANSACTIONS" means any sale, transfer or other
disposition of property of the Partnership occurring upon or incident to the
liquidation and winding up of the Partnership pursuant to Article XIII.
"UNDERWRITING AGREEMENTS" means the MLP Underwriting Agreement and the OLP
Underwriting Agreement.
"UNIT" has the meaning assigned to such term in the MLP Agreement.
"UNREALIZED GAIN" attributable to any item of Partnership property means, as
of any date of determination, the excess, if any, of (a) the fair market value
of such property as of such date (as determined under Section 4.5(d)) over (b)
the Carrying Value of such property as of such date (prior to any adjustment to
be made pursuant to Section 4.5(d) as of such date).
"UNREALIZED LOSS" attributable to any item of Partnership property means, as
of any date of determination, the excess, if any, of (a) the Carrying Value of
such property as of such date (prior to any adjustment to be made pursuant to
Section 4.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 4.5(d)).
"WITHDRAWAL OPINION OF COUNSEL" has the meaning assigned to such term in
Section 12.1(b).
ARTICLE III
PURPOSE
3.1 PURPOSE AND BUSINESS. The purpose and nature of the business to be
conducted by the Partnership shall be (a) to acquire, manage, and operate the
assets described in the Contribution Agreement as being transferred to the
Partnership and any similar assets or properties and to engage directly in, or
to enter into or form any corporation, limited liability company, partnership,
joint venture or other arrangement to engage indirectly in, any type of business
or activity engaged in by Ferrellgas immediately prior to the Closing Date and,
in connection therewith, to exercise all of the rights and powers conferred upon
the Partnership pursuant to the agreements relating to such assets, (b) to
engage directly in, or enter into or form any corporation, limited liability
company, partnership, joint venture or other arrangement to engage indirectly
in, any business activity that is approved by the General Partner and which may
lawfully be conducted by a limited partnership organized pursuant to the
Delaware Act and, in connection therewith, to exercise all of the rights and
powers conferred upon the Partnership pursuant to the agreements relating to
such business activity, and (c) to do anything
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necessary or appropriate to the foregoing, including, without limitation, the
making of capital contributions to any OLP Subsidiary or loans to the MLP, an
MLP Subsidiary or an OLP Subsidiary (including, without limitation, those
contributions or loans that may be required in connection with its involvement
in the activities referred to in clause (b) of this sentence). The General
Partner has no obligation or duty to the Partnership or the Limited Partner to
propose or approve, and in its sole discretion may decline to propose or
approve, the conduct by the Partnership of any business.
3.2 POWERS. The Partnership shall be empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described in
Section 3.1 and for the protection and benefit of the Partnership.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 INITIAL CONTRIBUTIONS. In connection with the formation of the
Partnership under the Delaware Act, the General Partner has made an initial
Capital Contribution to the Partnership in the amount of $10.10 for an interest
in the Partnership and has been admitted as the general partner of the
Partnership, and the Initial Limited Partner has made an initial Capital
Contribution to the Partnership in the amount of $989.90 for an interest in the
Partnership and has been admitted as a limited partner of the Partnership.
4.2 CONTRIBUTIONS BY FERRELLGAS AND THE MLP. (a) On the Closing Date,
Ferrellgas shall, as a Capital Contribution, contribute, transfer, convey,
assign and deliver to the Partnership the property and other rights described in
the Contribution Agreement as being so contributed, transferred, conveyed,
assigned and delivered in exchange for (i) the continuation of its general
partner interest in the Partnership consisting of a Partnership Interest
representing a 1.0101% Percentage Interest, (ii) a limited partner interest in
the Partnership, which shall be contributed, transferred, conveyed, assigned and
delivered by the General Partner to the MLP as set forth in the Contribution
Agreement, and which, together with the Partnership Interest previously held by
the MLP, will represent a 98.9899% Percentage Interest in the Partnership, and
(iii) the Partnership's assumption of, or taking of assets subject to, certain
indebtedness and other liabilities, including, without limitation, the
Partnership's assumption of the payment obligations of certain indebtedness of
Ferrellgas, all as provided for in the Contribution Agreement.
(b) On the Closing Date, the MLP shall contribute in respect of its
Partnership Interest [approximately $_____ million out of]
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the net proceeds to the MLP from the issuance of the Common Units pursuant to
the MLP Offering.
4.3 ADDITIONAL CAPITAL CONTRIBUTIONS. With the consent of the General
Partner, the Limited Partner may, but shall not be obligated to, make additional
Capital Contributions to the Partnership. Contemporaneously with the making of
any such additional Capital Contributions by the Limited Partner, the General
Partner shall be obligated to make an additional Capital Contribution to the
Partnership in an amount equal to 1.0102% of the additional Capital Contribution
then made by the Limited Partner. Except as set forth in the immediately
preceding sentence and Section 13.8, the General Partner shall not be obligated
to make any additional Capital Contributions to the Partnership.
4.4 NO PREEMPTIVE RIGHTS. Except as provided in Section 4.3, no Person
shall have any preemptive, preferential or other similar right with respect to
(a) additional Capital Contributions; (b) issuance or sale of any class or
series of Partnership Interests, whether unissued, held in the treasury or
hereafter created; (c) issuance of any obligations, evidences of indebtedness or
other securities of the Partnership convertible into or exchangeable for, or
carrying or accompanied by any rights to receive, purchase or subscribe to, any
such Partnership Interests; (d) issuance of any right of subscription to or
right to receive, or any warrant or option for the purchase of, any such
Partnership Interests; or (e) issuance or sale of any other securities that may
be issued or sold by the Partnership.
4.5 CAPITAL ACCOUNTS. (a) The Partnership shall maintain for each Partner
owning a Partnership Interest a separate Capital Account with respect to such
Partnership Interest in accordance with the rules of Treasury Regulation Section
1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of
all Capital Contributions made to the Partnership with respect to such
Partnership Interest pursuant to this Agreement and (ii) all items of
Partnership income and gain (including, without limitation, income and gain
exempt from tax) computed in accordance with Section 4.5(b) and allocated with
respect to such Partnership Interest pursuant to Section 5.1, and decreased by
(x) the amount of cash or the Net Agreed Value of all actual and deemed
distributions of cash or property made with respect to such Partnership Interest
pursuant to this Agreement and (y) all items of Partnership deduction and loss
computed in accordance with Section 4.5(b) and allocated with respect to such
Partnership Interest pursuant to Section 5.1.
(b) For purposes of computing the amount of any item of income, gain, loss or
deduction to be reflected in the Partners' Capital
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Accounts, the determination, recognition and classification of any such item
shall be the same as its determination, recognition and classification for
federal income tax purposes (including, without limitation, any method of
depreciation, cost recovery or amortization used for that purpose), provided,
that:
(i) Solely for purposes of this Section 4.5, the Partnership shall be
treated as owning directly its proportionate share (as determined by the
General Partner) of all property owned by any OLP Subsidiary that is
classified as a partnership for federal income tax purposes.
(ii) All fees and other expenses incurred by the Partnership to promote
the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code, if any, shall, for
purposes of Capital Account maintenance, be treated as an item of
deduction at the time such fees and other expenses are incurred and shall
be allocated among the Partners pursuant to Section 5.1.
(iii) Except as otherwise provided in Treasury Regulation Section 1.704-
1(b)(2)(iv)(m), the computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754
of the Code which may be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
regard to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes.
(iv) Any income, gain or loss attributable to the taxable disposition of
any Partnership property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such
date.
(v) In accordance with the requirements of Section 704(b) of the Code,
any deductions for depreciation, cost recovery or amortization
attributable to any Contributed Property shall be determined as if the
adjusted basis of such property on the date it was acquired by the
Partnership were equal to the Agreed Value of such property. Upon an
adjustment pursuant to Section 4.5(d) to the Carrying Value of any
Partnership property subject to depreciation, cost recovery or
amortization, any further deductions for such depreciation, cost recovery
or amortization attributable to such property shall be determined (A) as
if the adjusted basis of such property were equal to the Carrying Value of
such property immediately following such adjustment and (B) using a rate
of depreciation, cost recovery or amortization derived from the same
method and useful life (or, if applicable, the remaining useful life) as
is applied for federal income tax purposes;
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provided, however, that, if the asset has a zero adjusted basis for
federal income tax purposes, depreciation, cost recovery or amortization
deductions shall be determined using any reasonable method that the
General Partner may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is
placed in service and shall be allocated among the Partners pursuant to
Section 5.1. Any restoration of such basis pursuant to Section 48(q)(2) of
the Code shall, to the extent possible, be allocated in the same manner to
the Partners to whom such deemed deduction was allocated.
(c) A transferee of a Partnership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the Partnership
Interest so transferred; provided, however, that, if the transfer causes a
termination of the Partnership under Section 708(b)(1)(B) of the Code, the
Partnership's properties shall be deemed to have been distributed in liquidation
of the Partnership to the Partners (including any transferee of a Partnership
Interest that is a party to the transfer causing such termination) pursuant to
Sections 13.3 and 13.4 and recontributed by such Partners in reconstitution of
the Partnership. Any such deemed distribution shall be treated as an actual
distribution for purposes of this Section 4.5. In such event, the Carrying
Values of the Partnership properties shall be adjusted immediately prior to such
deemed distribution pursuant to Section 4.5(d)(ii) and such Carrying Values
shall then constitute the Agreed Values of such properties upon such deemed
contribution to the reconstituted Partnership. The Capital Accounts of such
reconstituted Partnership shall be maintained in accordance with the principles
of this Section 4.5.
(d) (i) Consistent with the provisions of Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests
for cash or Contributed Property, the Capital Account of all Partners and
the Carrying Value of each Partnership property immediately prior to such
issuance shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Partnership property, as if
such Unrealized Gain or Unrealized Loss had been recognized on an actual
sale of each such property immediately prior to such issuance and had been
allocated to the Partners at such time pursuant to Sections 5.1(a) and
5.1(b). In determining such Unrealized Gain or Unrealized Loss, the
aggregate cash amount and fair market value of all Partnership assets
(including, without limitation, cash or cash equivalents) immediately
prior to the issuance of additional
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Partnership Interests shall be determined by the General Partner using
such reasonable method of valuation as it may adopt; provided, however,
that the General Partner, in arriving at such valuation, must take fully
into account the fair market value of the Partnership Interests of all
Partners at such time. The General Partner shall allocate such aggregate
value among the assets of the Partnership (in such manner as it determines
in its sole discretion to be reasonable) to arrive at a fair market value
for individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to
a Partner of any Partnership property (other than a distribution of cash
that is not in redemption or retirement of a Partnership Interest), the
Capital Accounts of all Partners and the Carrying Value of such
Partnership property shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Partnership
property, as if such Unrealized Gain or Unrealized Loss had been
recognized in a sale of such property immediately prior to such
distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 5.1. Any
Unrealized Gain or Unrealized Loss attributable to such property shall be
allocated in the same manner as Net Termination Gain or Net Termination
Loss pursuant to Section 5.1(c); provided, however, that, in making any
such allocation, Net Termination Gain or Net Termination Loss actually
realized shall be allocated first. In determining such Unrealized Gain or
Unrealized Loss the aggregate cash amount and fair market value of all
Partnership assets (including, without limitation, cash or cash
equivalents) immediately prior to a distribution shall (A) in the case of
a deemed distribution occurring as a result of a termination of the
Partnership pursuant to Section 708 of the Code, be determined and
allocated in the same manner as that provided in Section 4.5(d)(i) or (B)
in the case of a liquidating distribution pursuant to Section 14.3 or
14.4, be determined and allocated by the Liquidator using such reasonable
method of valuation as it may adopt.
4.6 INTEREST. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
4.7 NO WITHDRAWAL. No Partner shall be entitled to withdraw any part of its
Capital Contributions or its Capital Account or to receive any distribution from
the Partnership, except as provided in Articles V, VII, XII and XIII.
4.8 LOANS FROM PARTNERS. Loans by a Partner to the Partnership shall not
constitute Capital Contributions. If any Partner shall advance funds to the
Partnership in excess of the amounts required hereunder to be contributed by it
to the capital of the
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Partnership, the making of such excess advances shall not result in any increase
in the amount of the Capital Account of such Partner. The amount of any such
excess advances shall be a debt obligation of the Partnership to such Partner
and shall be payable or collectible only out of the Partnership assets in
accordance with the terms and conditions upon which such advances are made.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES. For purposes of maintaining
the Capital Accounts and in determining the rights of the Partners among
themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Section 4.5(b)) shall be allocated among the
Partners in each taxable year (or portion thereof) as provided hereinbelow.
(a) Net Income. After giving effect to the special allocations set forth
in Section 5.1(d), Net Income for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net
Income for such taxable period shall be allocated as follows:
(i) First, 100% to the General Partner until the aggregate Net Income
allocated to the General Partner pursuant to this Section 5.1(a)(i) for
the current taxable year and all previous taxable years is equal to the
aggregate Net Losses allocated to the General Partner pursuant to
Section 5.1(b)(ii) for all previous taxable years; and
(ii) Second, the balance, if any, 100% to the General Partner and the
Limited Partner in accordance with their respective Percentage
Interests.
(b) Net Losses. After giving effect to the special allocations set forth
in Section 5.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net
Losses for such taxable period shall be allocated as follows:
(i) First, 100% to the General Partner and the Limited Partner in
accordance with their respective Percentage Interests; provided, that
Net Losses shall not be allocated pursuant to this Section 5.1(b)(i) to
the extent that such allocation would cause any Limited Partner to have
a deficit balance in its Adjusted Capital Account at the end of such
taxable year (or increase any existing deficit balance in its Adjusted
Capital Account); and
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(ii) Second, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to the special
allocations set forth in Section 5.1(d), all items of income, gain, loss
and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same
manner as such Net Termination Gain or Net Termination Loss is allocated
hereunder. All allocations under this Section 5.1(c) shall be made after
Capital Account balances have been adjusted by all other allocations
provided under this Section 5.1 and after all distributions of Available
Cash provided under Section 5.3 have been made with respect to the taxable
period ending on the date of the Partnership's liquidation pursuant to
Section 13.3.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 4.5(d)) from Termination Capital Transactions, such
Net Termination Gain shall be allocated between the General Partner and
the Limited Partner in the following manner (and the Adjusted Capital
Accounts of the Partners shall be increased by the amount so allocated in
each of the following subclauses, in the order listed, before an
allocation is made pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in its Adjusted
Capital Account, in the proportion that such deficit balance bears to
the total deficit balances in the Adjusted Capital Accounts of all
Partners, until each such Partner has been allocated Net Termination
Gain equal to any such deficit balance in its Adjusted Capital Account;
and
(B) Second, the balance, if any, 100% to the General Partner and the
Limited Partner in accordance with their respective Percentage
Interests.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 4.5(d)) from Termination Capital Transactions, such
Net Termination Loss shall be allocated to the Partners in the following
manner:
(A) First, 100% to the General Partner and the Limited Partner in
proportion to, and to the extent of, the positive balances in their
respective Adjusted Capital Accounts; and
(B) Second, the balance, if any, 100% to the General Partner.
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(d) Special Allocations. Notwithstanding any other provision of this
Section 5.1, the following special allocations shall be made for such
taxable period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 5.1, if there is a net decrease in
Partnership Minimum Gain during any Partnership taxable period, each
Partner shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(f)(6), 1.704-
2(g)(2) and 1.704-2(j)(2)(i), or any successor provision. For purposes
of this Section 5.1(d), each Partner's Adjusted Capital Account balance
shall be determined, and the allocation of income or gain required
hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 5.1(d) with respect to such
taxable period (other than an allocation pursuant to Sections 5.1(d)(v)
and (vi)). This Section 5.1(d)(i) is intended to comply with the
Partnership Minimum Gain chargeback requirement in Treasury Regulation
Section 1.704-2(f) and shall be interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 5.1 (other than
Section 5.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain
for such period (and, if necessary, subsequent periods) in the manner
and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii), or any successor provisions. For purposes of this
Section 5.1(d), each Partner's Adjusted Capital Account balance shall
be determined, and the allocation of income or gain required hereunder
shall be effected, prior to the application of any other allocations
pursuant to this Section 5.1(d), other than Section 5.1(d)(i) and other
than an allocation pursuant to Sections 5.1(d)(v) and (vi), with
respect to such taxable period. This Section 5.1(d)(ii) is intended to
comply with the chargeback of items of income and gain requirement in
Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
(iii) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations
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or distributions described in Treasury Regulation Sections 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6),
items of Partnership income and gain shall be specifically allocated to
such Partner in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations promulgated under Section
704(b) of the Code, the deficit balance, if any, in its Adjusted Capital
Account created by such adjustments, allocations or distributions as
quickly as possible, unless such deficit balance is otherwise eliminated
pursuant to Section 5.1(d)(i) or (ii).
(iv) Gross Income Allocations. In the event any Partner has a deficit
balance in its Adjusted Capital Account at the end of any Partnership
taxable period such Partner shall be specially allocated items of
Partnership gross income and gain in the amount of such excess as quickly
as possible; provided, that an allocation pursuant to this Section
5.1(d)(iv) shall be made only if and to the extent that such Partner would
have a deficit balance in its Adjusted Capital Account after all other
allocations provided in this Section 5.1 have been tentatively made as if
this Section 5.1(d)(iv) were not in this Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its
good faith discretion that the Partnership's Nonrecourse Deductions must
be allocated in a different ratio to satisfy the safe harbor requirements
of the Treasury Regulations promulgated under Section 704(b) of the Code,
the General Partner is authorized, upon notice to the Limited Partner, to
revise the prescribed ratio to the numerically closest ratio that does
satisfy such requirements.
(vi) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for
any taxable period shall be allocated 100% to the Partner that bears the
Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i). If more than one Partner
bears the Economic Risk of Loss with respect to a Partner Nonrecourse
Debt, such Partner Nonrecourse Deductions attributable thereto shall be
allocated between or among such Partners in accordance with the ratios in
which they share such Economic Risk of Loss.
(vii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners
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agree that Nonrecourse Liabilities of the Partnership in excess of the sum
of (A) the amount of Partnership Minimum Gain and (B) the total amount of
Nonrecourse Built-in Gain shall be allocated among the Partners in
accordance with their respective Percentage Interests.
(viii) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(b) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to
be adjusted pursuant to such Section of the Treasury Regulations.
(ix) Curative Allocation.
(A) Notwithstanding any other provision of this Section 5.1, other
than the Required Allocations, the Required Allocations shall be taken
into account in making the Agreed Allocations so that, to the extent
possible, the net amount of items of income, gain, loss and deduction
allocated to each Partner pursuant to the Required Allocations and the
Agreed Allocations, together, shall be equal to the net amount of such
items that would have been allocated to each such Partner under the
Agreed Allocations had the Required Allocations and the related
Curative Allocation not otherwise been provided in this Section 5.1.
Notwithstanding the preceding sentence, Required Allocations relating
to (1) Nonrecourse Deductions shall not be taken into account except to
the extent that there has been a decrease in Partnership Minimum Gain
and (2) Partner Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section
5.1(d)(ix)(A) shall only be made with respect to Required Allocations
to the extent the General Partner reasonably determines that such
allocations will otherwise be inconsistent with the economic agreement
among the Partners. Further, allocations pursuant to this Section
5.1(d)(ix)(A) shall be deferred with respect to allocations pursuant to
clauses (1) and (2) hereof to the extent the General Partner reasonably
determines that such allocations are likely to be offset by subsequent
Required Allocations.
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(B) The General Partner shall have reasonable discretion, with
respect to each taxable period, to (1) apply the provisions of Section
5.1(d)(ix)(A) in whatever order is most likely to minimize the
economic distortions that might otherwise result from the Required
Allocations, and (2) divide all allocations pursuant to Section
5.1(d)(ix)(A) among the Partners in a manner that is likely to
minimize such economic distortions.
5.2 ALLOCATIONS FOR TAX PURPOSES. (a) Except as otherwise provided herein,
for federal income tax purposes, each item of income, gain, loss and deduction
shall be allocated among the Partners in the same manner as its correlative item
of "book" income, gain, loss or deduction is allocated pursuant to Section 5.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners in the manner provided under
Section 704(c) of the Code that takes into account the variation between
the Agreed Value of such property and its adjusted basis at the time of
contribution; and (B) except as otherwise provided in Section 5.2(b)(iii),
any item of Residual Gain or Residual Loss attributable to a Contributed
Property shall be allocated among the Partners in the same manner as its
correlative item of "book" gain or loss is allocated pursuant to Section
5.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 4.5(d)(i) or (ii), and (2) second,
in the event such property was originally a Contributed Property, be
allocated among the Partners in a manner consistent with Section
5.2(b)(i)(A); and (B) except as otherwise provided in Section 5.2(b)(iii),
any item of Residual Gain or Residual Loss attributable to an Adjusted
Property shall be allocated among the Partners in the same manner as its
correlative item of "book" gain or loss is allocated pursuant to Section
5.1.
(iii) The General Partner shall apply the principles of Temporary
Regulation Section 1.704-3T to eliminate Book-Tax Disparities.
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(c) For the proper administration of the Partnership and for the preservation
of uniformity of Units of the MLP (or any class or classes thereof), the General
Partner shall have sole discretion to (i) adopt such conventions as it deems
appropriate in determining the amount of depreciation, amortization and cost
recovery deductions; (ii) make special allocations for federal income tax
purposes of income (including, without limitation, gross income) or deductions;
and (iii) amend the provisions of this Agreement as appropriate (x) to reflect
the proposal or promulgation of Treasury Regulations under Section 704(b) or
Section 704(c) of the Code or (y) otherwise to preserve or achieve uniformity of
Units of the MLP (or any class or classes thereof). The General Partner may
adopt such conventions, make such allocations and make such amendments to this
Agreement as provided in this Section 5.2(c) only if such conventions,
allocations or amendments would not have a material adverse effect on the
Partners, the holders of any class or classes of Units of the MLP issued and
outstanding or the Partnership, and if such allocations are consistent with the
principles of Section 704 of the Code.
(d) The General Partner in its sole discretion may determine to depreciate or
amortize the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the extent
of the unamortized Book-Tax Disparity) using a predetermined rate derived from
the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite the inconsistency of such
approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury
Regulation Section 1.167(c)-1(a)(6) or the legislative history of Section 197 of
the Code. If the General Partner determines that such reporting position cannot
reasonably be taken, the General Partner may adopt depreciation and amortization
conventions under which all purchasers acquiring Units of the MLP in the same
month would receive depreciation and amortization deductions, based upon the
same applicable rate as if they had purchased a direct interest in the
Partnership's property. If the General Partner chooses not to utilize such
aggregate method, the General Partner may use any other reasonable depreciation
and amortization conventions to preserve the uniformity of the intrinsic tax
characteristics of any class or classes of Units of the MLP that would not have
a material adverse effect on the Limited Partner or the holders of any class or
classes of Units of the MLP.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 5.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
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(f) All items of income, gain, loss, deduction and credit recognized by the
Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) The General Partner may adopt such methods of allocation of income, gain,
loss or deduction between a transferor and a transferee of a Partnership
Interest as it determines necessary, to the extent permitted or required by
Section 706 of the Code and the regulations or rulings promulgated thereunder.
5.3 REQUIREMENT OF DISTRIBUTIONS. (a) Within 45 days following the end of
each Quarter (or following the period from the Closing Date to October 31, 1994)
an amount equal to 100% of Available Cash with respect to such Quarter (or
period) shall be distributed in accordance with this Article V by the
Partnership to the Partners in accordance with their respective Percentage
Interests. The immediately preceding sentence shall not require any
distribution of cash if and to the extent such distribution would be prohibited
by applicable law or by any loan agreement, security agreement, mortgage, debt
instrument or other agreement or obligation to which the Partnership is a party
or by which it is bound or its assets are subject.
(b) Notwithstanding the foregoing, in the event of the dissolution and
liquidation of the Partnership, all proceeds of such liquidation shall be
applied and distributed in accordance with, and subject to the terms and
conditions of, Sections 13.3 and 13.4
ARTICLE VI
MANAGEMENT AND OPERATION OF BUSINESS
6.1 MANAGEMENT. (a) The General Partner shall conduct, direct and manage
all activities of the Partnership. Except as otherwise expressly provided in
this Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the General Partner, and the Limited
Partner shall have no right of control or management power over the business and
affairs of the Partnership. In addition to the powers now or hereafter granted
a general partner of a limited partnership under applicable law or which are
granted to the General Partner under any other provision of this Agreement, the
General Partner, subject to Section 6.3, shall have full power and authority to
do all things and on such terms as it, in its sole discretion, may deem
necessary or appropriate to conduct the business of the Partnership, to exercise
all powers set forth in Section 3.2 and to
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effectuate the purposes set forth in Section 3.1, including, without limitation,
(i) the making of any expenditures, the lending or borrowing of money, the
assumption or guarantee of, or other contracting for, indebtedness and other
liabilities, the issuance of evidences of indebtedness and the incurring of any
other obligations; (ii) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership; (iii) the
acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or
exchange of any or all of the assets of the Partnership or the merger or other
combination of the Partnership with or into another Person (the matters
described in this clause (iii) being subject, however, to any prior approval
that may be required by Section 6.3); (iv) the use of the assets of the
Partnership (including, without limitation, cash on hand) for any purpose
consistent with the terms of this Agreement, including, without limitation, the
financing of the conduct of the operations of the Partnership, the lending of
funds to other Persons (including, without limitation, an OLP Subsidiary), the
repayment of obligations of the Partnership and the making of capital
contributions to an OLP Subsidiary; (v) the negotiation, execution and
performance of any contracts, conveyances or other instruments (including,
without limitation, instruments that limit the liability of the Partnership
under contractual arrangements to all or particular assets of the Partnership,
with the other party to the contract to have no recourse against the General
Partner or its assets other than its interest in the Partnership, even if same
results in the terms of the transaction being less favorable to the Partnership
than would otherwise be the case); (vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees and agents (including, without
limitation, employees having titles such as "president," "vice president,"
"secretary" and "treasurer") and agents, outside attorneys, accountants,
consultants and contractors and the determination of their compensation and
other terms of employment or hiring; (viii) the maintenance of such insurance
for the benefit of the Partnership and the Partners (including, without
limitation, the assets of the Partnership) as it deems necessary or appropriate;
(ix) the formation of, or acquisition of an interest in, and the contribution of
property and the making of loans to, any further limited or general
partnerships, joint ventures, corporations, limited liability companies or other
relationships; (x) the control of any matters affecting the rights and
obligations of the Partnership, including, without limitation, the bringing and
defending of actions at law or in equity and otherwise engaging in the conduct
of litigation and the incurring of legal expense and the settlement of claims
and litigation; and (xi) the indemnification of any Person against liabilities
and contingencies to the extent permitted by law.
(b) Notwithstanding any other provision of this Agreement, the MLP Agreement,
the Delaware Act or any applicable law, rule or
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regulation, each of the Partners hereby (i) approves, ratifies and confirms the
execution, delivery and performance by the parties thereto of the MLP Agreement,
the Underwriting Agreements, the Contribution Agreement, the agreements and
other documents filed as exhibits to the Registration Statements, and the other
agreements described in or filed as a part of the Registration Statements, and
the engaging by any Affiliate of the General Partner in business and activities
(other than Restricted Activities) that are in direct competition with the
business and activities of the MLP, the Partnership, any OLP Subsidiary and any
MLP Subsidiary; (ii) agrees that the General Partner (on its own or through any
officer of the Partnership) is authorized to execute, deliver and perform the
agreements referred to in clause (i) of this sentence and the other agreements,
acts, transactions and matters described in the Registration Statements on
behalf of the Partnership without any further act, approval or vote of the
Partners; and (iii) agrees that the execution, delivery or performance by the
General Partner, the MLP, the Partnership or any Affiliate of any of them of
this Agreement or any agreement authorized or permitted under this Agreement, or
the engaging by any Affiliate of the General Partner in any business and
activities (other than Restricted Activities) that are in direct competition
with the business and activities of the MLP, the Partnership, any OLP Subsidiary
and any MLP Subsidiary, shall not constitute a breach by the General Partner of
any duty that the General Partner may owe the Partnership or the Limited
Partners or any other Persons under this Agreement (or any other agreements) or
of any duty stated or implied by law or equity. The term "Affiliate" when used
in this Section 6.1(b) with respect to the General Partner shall not include the
Partnership, the MLP, any OLP Subisidary or any MLP Subsidiary.
6.2 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner has caused the
Certificate of Limited Partnership of Ferrellgas, L.P. to be filed with the
Secretary of State of the State of Delaware as required by the Delaware Act and
shall use all reasonable efforts to cause to be filed such other certificates or
documents as may be determined by the General Partner in its sole discretion to
be reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the Limited Partner has limited liability) in the State of Delaware or any other
state in which the Partnership may elect to do business or own property. To the
extent that such action is determined by the General Partner in its sole
discretion to be reasonable and necessary or appropriate, the General Partner
shall file amendments to and restatements of the Certificate of Limited
Partnership and do all things to maintain the Partnership as a limited
partnership (or a partnership in which the Limited Partner has limited
liability) under the laws of the State of Delaware or of any other state in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 7.4(a), the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the
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Certificate of Limited Partnership, any qualification document or any amendment
thereto to the Limited Partner.
6.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY. (a) The General Partner
may not, without written approval of the specific act by the Limited Partner or
by other written instrument executed and delivered by the Limited Partner
subsequent to the date of this Agreement, take any action in contravention of
this Agreement, including, without limitation, (i) any act that would make it
impossible to carry on the ordinary business of the Partnership, except as
otherwise provided in this Agreement; (ii) possess Partnership property, or
assign any rights in specific Partnership property, for other than a Partnership
purpose; (iii) admit a Person as a Partner, except as otherwise provided in this
Agreement; (iv) amend this Agreement in any manner, except as otherwise provided
in this Agreement; or (v) transfer its interest as general partner of the
Partnership, except as otherwise provided in this Agreement.
(b) Except as provided in Articles XIII and XV, the General Partner may not
sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
without the approval of the Limited Partner; provided, however, that this
provision shall not preclude or limit the General Partner's ability to mortgage,
pledge, hypothecate or grant a security interest in all or substantially all of
the Partnership's assets and shall not apply to any forced sale of any or all of
the Partnership's assets pursuant to the foreclosure of, or other realization
upon, any such encumbrance.
(c) Unless approved by the Limited Partner, 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 Partnership to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes; provided that this Section 6.3(c)
shall not be construed to apply to amendments to this Agreement (which are
governed by Article XIV) or mergers or consolidations of the Partnership with
any Person (which are governed by Article XV).
(d) At all times while serving as the general partner of the Partnership, the
General Partner shall not make any dividend or distribution on, or repurchase
any shares of, its stock or take any other action within its control if the
effect of such dividend, distribution, repurchase or other action would be to
reduce its net worth below an amount necessary to receive an Opinion of Counsel
that the Partnership will be treated as a partnership for federal income tax
purposes.
6.4 REIMBURSEMENT OF THE GENERAL PARTNER. (a) Except as provided in this
Section 6.4 and elsewhere in this Agreement, the
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General Partner shall not be compensated for its services as general partner of
the Partnership.
(b) The General Partner shall be reimbursed on a monthly basis, or such other
basis as the General Partner may determine in its sole discretion, for (i) all
direct and indirect expenses it incurs or payments it makes on behalf of the
Partnership (including, without limitation, salary, bonus, incentive
compensation and other amounts paid to any Person to perform services for the
Partnership or for the General Partner in the discharge of its duties to the
Partnership) and (ii) 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 (including, without
limitation, expenses allocated to the General Partner by its Affiliates). The
General Partner shall determine the fees and expenses that are allocable to the
Partnership in any reasonable manner determined by the General Partner in its
sole discretion. Reimbursements pursuant to this Section 6.4 shall be in
addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 6.7.
6.5 OUTSIDE ACTIVITIES. (a) After the Closing Date, the General Partner,
for so long as it is the general partner of the Partnership, (i) agrees that its
sole business will be to act as the general partner of the Partnership, the MLP,
any OLP Subsidiary and any MLP Subsidiary and to undertake activities that are
ancillary or related thereto (including being a limited partner in the MLP),
(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 this Agreement or the MLP Agreement or
described in or contemplated by the Registration Statements and (B) the
acquisition, ownership or disposition of partnership interests in the
Partnership, the MLP, any OLP Subsidiary and any MLP Subsidiary, except that,
notwithstanding the foregoing, employees of the General Partner may perform
services for Ferrell and its Affiliates and (iii) shall cause its Affiliates not
to engage in any Restricted Activities.
(b) Except as described or provided for in the MLP Agreement, the
Registration Statements or Section 6.5(a), no Indemnitee shall be expressly or
implicitly restricted or proscribed pursuant to the MLP Agreement or this
Agreement or the partnership relationship established hereby or thereby from
engaging in other activities for profit, whether in the businesses engaged in by
the Partnership, an OLP Subsidiary, the MLP or an MLP Subsidiary or anticipated
to be engaged in by the Partnership, an OLP Subsidiary, the MLP, an MLP
Subsidiary or otherwise, including, without limitation, in the case of any
Affiliates of the General Partner those businesses and activities (other than
Restricted Activities) in direct competition with the business and activities of
the Partnership, the MLP, an
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OLP Subsidiary or an MLP Subsidiary or otherwise described in or contemplated by
the Registration Statements. Without limitation of and subject to the foregoing
each Indemnitee (other than the General Partner) shall have the right to engage
in businesses of every type and description and to engage in and possess an
interest in other business ventures of any and every type or description,
independently or with others, including, without limitation, in the case of any
Affiliates of the General Partner, business interests and activities (other than
Restricted Activities) in direct competition with the business and activities of
the Partnership, the MLP, an OLP Subsidiary or an MLP Subsidiary, and none of
the same shall constitute a breach of this Agreement or any duty to the
Partnership, the MLP or any Partners. Neither the Partnership, the MLP, any
Limited Partner nor any other Person shall have any rights by virtue of this
Agreement or the MLP Agreement or the partnership relationship established
hereby or thereby in any business ventures of any Indemnitee (subject, in the
case of the General Partner, to compliance with Section 6.5(c)) and such
Indemnitees shall have no obligation to offer any interest in any such business
ventures to the Partnership, the MLP, any Limited Partner or any other Person.
(c) Subject to the terms of Sections 6.5(a) and (b) but otherwise
notwithstanding anything to the contrary in this Agreement, (i) the competitive
activities of any Indemnitees (other than the General Partner) are hereby
approved by the Partnership and all Partners and (ii) it shall be deemed not to
be a breach of the General Partner's fiduciary duty or any other obligation of
any type whatsoever of the General Partner for the General Partner to permit an
Affiliate of the General Partner to engage, or for any such Affiliate to engage,
in business interests or activities (other than Restricted Activities) in
preference to or to the exclusion of the Partnership.
(d) The term "Affiliates" when used in this Section 6.5 with respect to the
General Partner shall not include the Partnership, the MLP, an OLP Subsidiary or
an MLP Subsidiary.
6.6 LOANS TO AND FROM THE GENERAL PARTNER; CONTRACTS WITH AFFILIATES. (a)
(i) The General Partner, the Limited Partner, an OLP Subsidiary or any of their
Affiliates may lend to the Partnership, and the Partnership may borrow, funds
needed or desired by the Partnership for such periods of time as the General
Partner may determine and (ii) the General Partner, the Limited Partner, an OLP
Subsidiary or any Affiliate thereof may borrow from the Partnership, and the
Partnership may lend to such Persons, excess funds of the Partnership for such
periods of time and in such amounts as the General Partner may determine;
provided, however, that in either such case the lending party may not charge the
borrowing party interest at a rate greater than the rate that would be charged
the borrowing party (without reference to the lending party's financial
abilities or guarantees) by unrelated lenders on comparable loans. The
borrowing party shall reimburse
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the lending party for any costs (other than any additional interest costs)
incurred by the lending party in connection with the borrowing of such funds.
For purposes of this Section 6.6(a) and Section 6.6(b), the term "Partnership"
shall include any Affiliate of the Partnership that is controlled by the
Partnership.
(b) The General Partner may itself, or may enter into an agreement with any
of its Affiliates to, render services to the Partnership or to the General
Partner in the discharge of its duties as general partner of the Partnership.
Any service rendered to the Partnership by the General Partner or any of its
Affiliates shall be on terms that are fair and reasonable to the Partnership;
provided, however, that the requirements of this Section 6.6(b) shall be deemed
satisfied as to (i) any transaction approved by Special Approval, (ii) any
transaction the terms of which are no less favorable to the Partnership than
those generally being provided to or available from unrelated third parties or
(iii) any transaction that, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership), is equitable
to the Partnership. The provisions of Section 6.4 shall apply to the rendering
of services described in this Section 6.6(b).
(c) The Partnership may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(d) Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 6.6(d) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Section 4.2, the Contribution Agreement and
any other transactions described in or contemplated by the Registration
Statements, (ii) any transaction approved by Special Approval, (iii) any
transaction the terms of which are no less favorable to the Partnership than
those generally being provided to or available from unrelated third parties or
(iv) any transaction that, taking into account the totality of the relationships
between the parties involved (including other transactions that may be
particularly favorable or advantageous to the Partnership), is equitable to the
Partnership.
(e) The General Partner and its Affiliates will have no obligation to permit
the Partnership, an OLP Subsidiary or the MLP to use any facilities or assets of
the General Partner and its Affiliates, except as may be provided in contracts
entered into from time to time specifically dealing with such use, nor shall
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there be any obligation on the part of the General Partner or its Affiliates to
enter into such contracts.
(f) Without limitation of Sections 6.6(a) through 6.6(e), and notwithstanding
anything to the contrary in this Agreement, the existence of the conflicts of
interest described in the Registration Statements are hereby approved by all
Partners.
6.7 INDEMNIFICATION. (a) To the fullest extent permitted by law but
subject to the limitations expressly provided in this Agreement, the General
Partner, any Departing Partner, any Person who is or was an officer or director
of the Partnership, the General Partner or any Departing Partner and all other
Indemnitees shall be indemnified and held harmless by the Partnership from and
against any and all losses, claims, damages, liabilities, joint or several,
expenses (including, without limitation, legal fees and expenses), judgments,
fines, penalties, interest, settlements and other amounts arising from any and
all claims, demands, actions, suits or proceedings, whether civil, criminal,
administrative or investigative, in which any Indemnitee may be involved, or is
threatened to be involved, as a party or otherwise, by reason of its status as
(i) the General Partner, a Departing Partner or any of their Affiliates, (ii) an
officer, director, employee, partner, agent or trustee of the Partnership, the
General Partner, any Departing Partner or any of their Affiliates or (iii) a
Person serving at the request of the Partnership in another entity in a similar
capacity, provided, that in each case the Indemnitee acted in good faith and in
a manner which such Indemnitee reasonably believed to be in, or not opposed to,
the best interests of the Partnership and, with respect to any criminal
proceeding, had no reasonable cause to believe its conduct was unlawful;
provided, further, no indemnification pursuant to this Section 6.7 shall be
available to the General Partner with respect to its obligations incurred
pursuant to the Contribution Agreement (other than obligations incurred by the
General Partner on behalf of the Partnership or the MLP). The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that the Indemnitee acted in a manner contrary to that specified
above. Any indemnification pursuant to this Section 6.7 shall be made only out
of the assets of the Partnership, it being agreed that the General Partner shall
not be personally liable for such indemnification and shall have no obligation
to contribute or loan any monies or property to the Partnership to enable it to
effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including, without
limitation, legal fees and expenses) incurred by an Indemnitee who is
indemnified pursuant to Section 6.7(a) in defending any claim, demand, action,
suit or proceeding shall, from time to time, be advanced by the Partnership
prior to the final disposition of such claim, demand, action, suit or proceeding
upon
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receipt by the Partnership of an undertaking by or on behalf of the Indemnitee
to repay such amount if it shall be determined that the Indemnitee is not
entitled to be indemnified as authorized in this Section 6.7.
(c) The indemnification provided by this Section 6.7 shall be in addition to
any other rights to which an Indemnitee may be entitled under any agreement,
pursuant to any vote of the Partners, as a matter of law or otherwise, both as
to actions in the Indemnitee's capacity as (i) the General Partner, a Departing
Partner or an Affiliate thereof, (ii) an officer, director, employee, partner,
agent or trustee of the Partnership, the General Partner, any Departing Partner
or an Affiliate thereof or (iii) a Person serving at the request of the
Partnership in another entity in a similar capacity, and as to actions in any
other capacity (including, without limitation, any capacity under the
Underwriting Agreements), and shall continue as to an Indemnitee who has ceased
to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the General
Partner or its Affiliates for the cost of) insurance, on behalf of the General
Partner and such other Persons as the General Partner shall determine, against
any liability that may be asserted against or expense that may be incurred by
such Person in connection with the Partnership's activities, regardless of
whether the Partnership would have the power to indemnify such Person against
such liability under the provisions of this Agreement.
(e) For purposes of this Section 6.7, the Partnership shall be deemed to have
requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute "fines"
within the meaning of Section 6.7(a); and action taken or omitted by it with
respect to an employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is in, or
not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partner to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 6.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
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(h) The provisions of this Section 6.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 6.7 or any provision
hereof shall in any manner terminate, reduce or impair the right of any past,
present or future Indemnitee to be indemnified by the Partnership, nor the
obligation of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 6.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
6.8 LIABILITY OF INDEMNITEES. (a) Notwithstanding anything to the contrary
set forth in this Agreement, no Indemnitee shall be liable for monetary damages
to the Partnership, the Limited Partner, or any other Persons who have acquired
interests in the Partnership, for losses sustained or liabilities incurred as a
result of any act or omission if such Indemnitee acted in good faith.
(b) Subject to its obligations and duties as General Partner set forth in
Section 6.1(a), the General Partner may exercise any of the powers granted to it
by this Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents, and the General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
(c) Any amendment, modification or repeal of this Section 6.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership and the Limited Partner of the
General Partner, its directors, officers and employees and any other Indemnitees
under this Section 6.8 as in effect immediately prior to such amendment,
modification or repeal with respect to claims arising from or relating to
matters occurring, in whole or in part, prior to such amendment, modification or
repeal, regardless of when such claims may arise or be asserted.
6.9 RESOLUTION OF CONFLICTS OF INTEREST. (a) Unless otherwise expressly
provided in this Agreement or the MLP Agreement, whenever a potential conflict
of interest exists or arises between the General Partner or any of its
Affiliates, on the one hand, and the Partnership, the MLP or the Limited
Partner, on the other hand, any resolution or course of action in respect of
such conflict of interest shall be permitted and deemed approved by the Limited
Partner, and shall not constitute a breach of this Agreement, of the MLP
Agreement or of any agreement contemplated herein or
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therein, or of any duty stated or implied by law or equity, if the resolution or
course of action is, or by operation of this Agreement is deemed to be, fair and
reasonable to the Partnership. The General Partner shall be authorized but not
required in connection with its resolution of such conflict of interest to seek
Special Approval of a resolution of such conflict or course of action. Any
conflict of interest and any resolution of such conflict of interest shall be
conclusively deemed fair and reasonable to the Partnership if such conflict of
interest or resolution is (i) approved by Special Approval, (ii) on terms no
less favorable to the Partnership than those generally being provided to or
available from unrelated third parties or (iii) fair to the Partnership, taking
into account the totality of the relationships between the parties involved
(including other transactions that may be particularly favorable or advantageous
to the Partnership). The General Partner may also adopt a resolution or course
of action that has not received Special Approval. The General Partner
(including the Audit Committee in connection with Special Approval) shall be
authorized in connection with its determination of what is "fair and reasonable"
to the Partnership and in connection with its resolution of any conflict of
interest to consider (A) the relative interests of any party to such conflict,
agreement, transaction or situation and the benefits and burdens relating to
such interest; (B) any customary or accepted industry practices and any
customary or historical dealings with a particular Person; (C) any applicable
generally accepted accounting or engineering practices or principles; and (D)
such additional factors as the General Partner (including such Audit Committee)
determines in its sole discretion to be relevant, reasonable or appropriate
under the circumstances. Nothing contained in this Agreement, however, is
intended to nor shall it be construed to require the General Partner (including
such Audit Committee) to consider the interests of any Person other than the
Partnership. In the absence of bad faith by the General Partner, the
resolution, action or terms so made, taken or provided by the General Partner
with respect to such matter shall not constitute a breach of this Agreement, the
MLP Agreement or any other agreement contemplated herein or a breach of any
standard of care or duty imposed herein or therein or under the Delaware Act or
any other law, rule or regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the General Partner or any of its Affiliates is permitted or
required to make a decision (i) in its "sole discretion" or "discretion," that
it deems "necessary or appropriate" or under a grant of similar authority or
latitude, the General Partner or such Affiliate shall be entitled to consider
only such interests and factors as it desires and shall have no duty or
obligation to give any consideration to any interest of, or factors affecting,
the Partnership, the MLP, an OLP Subsidiary, the Limited Partner or any limited
partner in the MLP, (ii) it may make such decision in its sole discretion
(regardless of whether there
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is a reference to "sole discretion" or "discretion") unless another express
standard is provided for, or (iii) in "good faith" or under another express
standard, the General Partner or such Affiliate shall act under such express
standard and shall not be subject to any other or different standards imposed by
this Agreement, the MLP Agreement, any other agreement contemplated hereby or
under the Delaware Act or any other law, rule or regulation. In addition, any
actions taken by the General Partner or such Affiliate consistent with the
standards of "reasonable discretion" set forth in the definition of Available
Cash shall not constitute a breach of any duty of the General Partner to the
Partnership or the Limited Partner. The General Partner shall have no duty,
express or implied, to sell or otherwise dispose of any asset of the Partnership
or of an OLP Subsidiary, other than in the ordinary course of business. No
borrowing by the Partnership or the approval thereof by the General Partner
shall be deemed to constitute a breach of any duty of the General Partner to the
Partnership or the Limited Partner by reason of the fact that the purpose or
effect of such borrowing is directly or indirectly to (A) enable the holders of
IDRs to receive distributions under the MLP Agreement or increase the amount of
any such distributions, (B) hasten the termination of the "Subordination Period"
under the MLP Agreement or (C) reduce the "Cumulative Common Unit Arrearage"
under the MLP Agreement in order to hasten the conversion of the "Subordinated
Units" in the MLP into Common Units.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
6.10 OTHER MATTERS CONCERNING THE GENERAL PARTNER. (a) The General
Partner may rely and shall be protected in acting or refraining from acting upon
any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including, without limitation, an Opinion of Counsel) of such
Persons as to matters that such General Partner reasonably believes to be within
such Person's professional or expert competence shall be conclusively presumed
to have been done or omitted in good faith and in accordance with such opinion.
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(c) The General Partner shall have the right, in respect of any of its powers
or obligations hereunder, to act through any of its duly authorized officers and
a duly appointed attorney or attorneys-in-fact. Each such attorney shall, to
the extent provided by the General Partner in the power of attorney, have full
power and authority to do and perform each and every act and duty that is
permitted or required to be done by the General Partner hereunder.
(d) Any standard of care and duty imposed by this Agreement or under the
Delaware Act or any applicable law, rule or regulation shall be modified, waived
or limited as required to permit the General Partner to act under this Agreement
or any other agreement contemplated by this Agreement and to make any decision
pursuant to the authority prescribed in this Agreement so long as such action is
not reasonably believed by the General Partner to be in, or not inconsistent
with, the best interests of the Partnership.
6.11 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner, one or more of its
Affiliates or one or more nominees, as the General Partner may determine. The
General Partner hereby declares and warrants that any Partnership assets for
which record title is held in the name of the General Partner or one or more of
its Affiliates or one or more nominees shall be held by the General Partner or
such Affiliate or nominee for the use and benefit of the Partnership in
accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use its reasonable efforts to cause record title to such
assets (other than those assets in respect of which the General Partner
determines that the expense and difficulty of conveyancing makes transfer of
record title to the Partnership impracticable) to be vested in the Partnership
as soon as reasonably practicable; provided that, prior to the withdrawal or
removal of the General Partner or as soon thereafter as practicable, the General
Partner shall use reasonable efforts to effect the transfer of record title to
the Partnership and, prior to any such transfer, will provide for the use of
such assets in a manner satisfactory to the Partnership. All Partnership assets
shall be recorded as the property of the Partnership in its books and records,
irrespective of the name in which record title to such Partnership assets is
held.
6.12 RELIANCE BY THIRD PARTIES. Notwithstanding anything to the contrary
in this Agreement, any Person dealing with the Partnership shall be entitled to
assume that the General Partner has full power and authority to encumber, sell
or otherwise use in any manner any and all assets of the Partnership and to
enter into
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any contracts on behalf of the Partnership, and such Person shall be entitled to
deal with the General Partner as if it were the Partnership's sole party in
interest, both legally and beneficially. The Limited Partner hereby waives any
and all defenses or other remedies that may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (a) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (b) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (c)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
ARTICLE VII
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER
7.1 LIMITATION OF LIABILITY. The Limited Partner shall have no liability
under this Agreement except as expressly provided in this Agreement or the
Delaware Act.
7.2 MANAGEMENT OF BUSINESS. The Limited Partner, in its capacity as such,
shall not participate in the operation, management or control (within the
meaning of the Delaware Act) of the Partnership's business, transact any
business in the Partnership's name or have the power to sign documents for or
otherwise bind the Partnership. The transaction of any such business by the
Partnership, the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the General Partner or any of
its Affiliates, in its capacity as such, shall not affect, impair or eliminate
the limitations on the liability of the Limited Partner under this Agreement.
7.3 RETURN OF CAPITAL. The Limited Partner shall not be entitled to the
withdrawal or return of its Capital Contribution, except to the extent, if any,
that distributions made pursuant to this Agreement or upon termination of the
Partnership may be considered as such by law and then only to the extent
provided for in this Agreement.
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7.4 RIGHTS OF THE LIMITED PARTNER RELATING TO THE PARTNERSHIP. (a) In
addition to other rights provided by this Agreement or by applicable law, and
except as limited by Section 7.4(b), the Limited Partner shall have the right,
for a purpose reasonably related to the Limited Partner's interest as a limited
partner in the Partnership, upon reasonable demand and at the Limited Partner's
own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local tax returns for each year;
(iii) to have furnished to it, upon notification to the General Partner,
a current list of the name and last known business, residence or mailing
address of each Partner;
(iv) to have furnished to it, upon notification to the General Partner,
a copy of this Agreement and the Certificate of Limited Partnership and
all amendments thereto, together with a copy of the executed copies of all
powers of attorney pursuant to which this Agreement, the Certificate of
Limited Partnership and all amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash and
a description and statement of the Agreed Value of any other Capital
Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) Notwithstanding any other provision of this Agreement, the General
Partner may keep confidential from the Limited Partner for such period of time
as the General Partner deems reasonable, any information that the General
Partner reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the General Partner in good faith believes
is not in the best interests of the Partnership or could damage the Partnership
or that the Partnership is required by law or by agreements with third parties
to keep confidential (other than agreements with Affiliates of the General
Partner the primary purpose of which is to circumvent the obligations set forth
in this Section 7.4).
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ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
8.1 RECORDS AND ACCOUNTING. The General Partner shall keep or cause to be
kept at the principal office of the Partnership appropriate books and records
with respect to the Partnership's business, including, without limitation, all
books and records necessary to provide to the Limited Partner any information,
lists and copies of documents required to be provided pursuant to Section
7.4(a). Any books and records maintained by or on behalf of the Partnership in
the regular course of its business, including, without limitation, books of
account and records of Partnership proceedings, may be kept on, or be in the
form of, computer disks, hard drives, punch cards, magnetic tape, photographs,
micrographics or any other information storage device, provided, that the books
and records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial reporting purposes, on an accrual basis in accordance
with generally accepted accounting principles.
8.2 FISCAL YEAR. The fiscal year of the Partnership shall be August 1 to
July 31.
ARTICLE IX
TAX MATTERS
9.1 PREPARATION OF TAX RETURNS. The General Partner shall arrange for the
preparation and timely filing of all returns of Partnership income, gains,
deductions, losses and other items required of the Partnership for federal and
state income tax purposes and shall use all reasonable efforts to furnish,
within 90 days of the close of each calendar year, the tax information
reasonably required by the Partners for federal and state income tax reporting
purposes. The classification, realization and recognition of income, gain,
losses and deductions and other items shall be on the accrual method of
accounting for federal income tax purposes. The taxable year of the Partnership
shall be August 1 to July 31.
9.2 TAX ELECTIONS. Except as otherwise provided herein, the General Partner
shall, in its sole discretion, determine whether to make any available election
pursuant to the Code; provided, however, that the General Partner shall make the
election under Section 754 of the Code in accordance with applicable regulations
thereunder. The General Partner shall have the right to seek to revoke any such
election (including, without limitation, the election under Section 754 of the
Code) upon the General Partner's determination in its sole discretion that such
revocation is in the best interests of the Limited Partner.
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9.3 TAX CONTROVERSIES. Subject to the provisions hereof, the General
Partner is designated the Tax Matters Partner (as defined in Section 6231 of the
Code), and is authorized and required to represent the Partnership (at the
Partnership's expense) in connection with all examinations of the Partnership's
affairs by tax authorities, including, without limitation, resulting
administrative and judicial proceedings, and to expend Partnership funds for
professional services and costs associated therewith. The Limited Partner
agrees to cooperate with the General Partner and to do or refrain from doing any
or all things reasonably required by the General Partner to conduct such
proceedings.
9.4 ORGANIZATIONAL EXPENSES. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
60-month period as provided in Section 709 of the Code.
9.5 WITHHOLDING. Notwithstanding any other provision of this Agreement, the
General Partner is authorized to take any action that it determines in its sole
discretion to be necessary or appropriate to cause the Partnership to comply
with any withholding requirements established under the Code or any other
federal, state or local law including, without limitation, pursuant to Sections
1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is
required to withhold and pay over to any taxing authority any amount resulting
from the allocation or distribution of income to any Partner (including, without
limitation, by reason of Section 1446 of the Code), the amount withheld shall be
treated as a distribution of cash pursuant to Section 5.3 in the amount of such
withholding from such Partner.
9.6 OPINIONS OF COUNSEL. Notwithstanding any other provision of this
Agreement, if the Partnership is treated as an association taxable as a
corporation at any time or is otherwise taxable for federal income tax purposes
as an entity at any time and, pursuant to the provisions of this Agreement, an
Opinion of Counsel would otherwise be required to the effect that an action will
not cause the Partnership to become so treated as an association taxable as a
corporation or otherwise taxable as an entity for federal income tax purposes,
such requirement for an Opinion of Counsel shall be deemed automatically waived.
ARTICLE X
TRANSFER OF INTERESTS
10.1 TRANSFER. (a) The term "TRANSFER," when used in this Article X with
respect to a Partnership Interest, shall be deemed to refer to a transaction by
which a Partner disposes of its Partnership Interest to another Person and
includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage,
exchange or any other disposition by law or otherwise.
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(b) No Partnership Interest shall be transferred, in whole or in part, except
in accordance with the terms and conditions set forth in this Article X. Any
transfer or purported transfer of a Partnership Interest not made in accordance
with this Article X shall be null and void.
(c) Nothing contained in this Article X shall be construed to prevent a
disposition by the parent entity of the General Partner of any or all of the
issued and outstanding capital stock of the General Partner.
10.2 TRANSFER OF THE GENERAL PARTNER'S PARTNERSHIP INTEREST. If the
general partner of the MLP transfers its partnership interest as the general
partner therein to any Person in accordance with the provisions of the MLP
Agreement, the General Partner shall contemporaneously therewith transfer its
Partnership Interest as the general partner of the Partnership to such Person,
and the Limited Partner hereby expressly consents to such transfer. Except as
set forth in the immediately preceding sentence, the General Partner may not
transfer all or any part of its Partnership Interest as the general partner in
the Partnership.
10.3 TRANSFER OF THE LIMITED PARTNER'S PARTNERSHIP INTEREST. If the
Limited Partner merges, consolidates or otherwise combines into any other Person
or transfers all or substantially all of its assets to another Person, such
Person may become a Substituted Limited Partner pursuant to Article XI. Except
as set forth in the immediately preceding sentence and except for the transfer
by Ferrellgas of its Partnership Interest as a limited partner in the
Partnership to the MLP as provided in the Contribution Agreement and
contemplated by Sections 4.2 and 11.2, a Limited Partner may not transfer all or
any part of its Partnership Interest or withdraw from the Partnership.
ARTICLE XI
ADMISSION OF PARTNERS
11.1 ADMISSION OF INITIAL PARTNERS. Upon the formation of the Partnership
pursuant to the filing of the Certificate of Limited Partnership, Ferrellgas was
admitted to the Partnership as the sole general partner and the MLP was admitted
to the Partnership as the sole limited partner.
11.2 ADMISSION OF FERRELLGAS AS A LIMITED PARTNER. Upon the making by
Ferrellgas of the Capital Contributions described in Section 4.2, Ferrellgas
shall be admitted to the Partnership as a limited partner. Upon the transfer by
Ferrellgas of its Partnership Interest as a limited partner to the MLP as
provided in the Contribution Agreement, Ferrellgas shall cease to be a limited
partner of the Partnership.
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11.3 ADMISSION OF SUBSTITUTED LIMITED PARTNERS. Any person that is the
successor in interest to a Limited Partner as described in Section 10.3 shall be
admitted to the Partnership as a limited partner upon (a) furnishing to the
General Partner (i) acceptance in form satisfactory to the General Partner of
all of the terms and conditions of this Agreement and (ii) such other documents
or instruments as may be required to effect its admission as a limited partner
in the Partnership and (b) obtaining the consent of the General Partner, which
consent may be withheld or granted in the sole discretion of the General
Partner. Such Person shall be admitted to the Partnership as a limited partner
immediately prior to the transfer of the Partnership Interest, and the business
of the Partnership shall continue without dissolution.
11.4 ADMISSION OF SUCCESSOR GENERAL PARTNER. A successor General Partner
approved pursuant to Section 12.1 or 12.2 or the transferee of or successor to
all of the General Partner's Partnership Interest as the general partner in the
Partnership pursuant to Section 10.2 who is proposed to be admitted as a
successor General Partner shall, subject to compliance with the terms of Section
12.3, if applicable, be admitted to the Partnership as the successor General
Partner, effective immediately prior to the withdrawal or removal of the General
Partner pursuant to Section 12.1 or 12.2 or the transfer of the General
Partner's Partnership Interest as the general partner of the Partnership
pursuant to Section 10.2. Any such successor shall, subject to the terms
hereof, carry on the business of the Partnership without dissolution. In each
case, the admission of such successor General Partner to the Partnership shall,
subject to the terms hereof, be subject to the successor General Partner
executing and delivering to the Partnership an acceptance of all of the terms
and conditions of this Agreement and such other documents or instruments as may
be required to effect such admission.
11.5 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP. To
effect the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Delaware Act to amend
the records of the Partnership to reflect such admission and, if necessary, to
prepare as soon as practical an amendment of this Agreement and, if required by
law, to prepare and file an amendment to the Certificate of Limited Partnership
and may for this purpose, among others, exercise the power of attorney granted
pursuant to Section 1.4.
11.6 ADMISSION OF ADDITIONAL LIMITED PARTNERS. (a) A Person (other than
the General Partner, the Initial Limited Partner or a Substituted Limited
Partner) who makes a Capital Contribution to the Partnership in accordance with
this Agreement shall be admitted to the Partnership as an Additional Limited
Partner only upon furnishing to the General Partner (i) evidence of acceptance
in form satisfactory to the General Partner of all of the terms and
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conditions of this Agreement, including, without limitation, the granting of the
power of attorney granted in Section 1.4, and (ii) such other documents or
instruments as may be required in the discretion of the General Partner to
effect such Person's admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 11.6, no Person
shall be admitted as an Additional Limited Partner without the consent of the
General Partner, which consent may be given or withheld in the General Partner's
sole discretion. The admission of any Person as an Additional Limited Partner
shall become effective on the date upon which the name of such Person is
recorded as such in the books and records of the Partnership, following the
consent of the General Partner to such admission.
ARTICLE XII
WITHDRAWAL OR REMOVAL OF PARTNERS
12.1 WITHDRAWAL OF THE GENERAL PARTNER. (a) The General Partner shall be
deemed to have withdrawn from the Partnership upon the occurrence of any one of
the following events (each such event herein referred to as an "Event of
Withdrawal");
(i) the General Partner voluntarily withdraws from the Partnership by
giving written notice to the Limited Partner;
(ii) the General Partner transfers all of its rights as General Partner
pursuant to Section 10.2;
(iii) the General Partner is removed pursuant to Section 12.2;
(iv) the general partner of the MLP withdraws from, or is removed as the
general partner of, the MLP;
(v) the General Partner (A) makes a general assignment for the benefit
of creditors; (B) files a voluntary bankruptcy petition; (C) files a
petition or answer seeking for itself a reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any law; (D) files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against the
General Partner in a proceeding of the type described in clauses (A)-(C)
of this Section 12.1(a)(v); or (E) seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of the General Partner or
of all or any substantial part of its properties;
(vi) a final and non-appealable judgment is entered by a court with
appropriate jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable
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order for relief is entered by a court with appropriate jurisdiction against the
General Partner, in each case under any federal or state bankruptcy or
insolvency laws as now or hereafter in effect; or
(vii) a certificate of dissolution or its equivalent is filed for the
General Partner, or 90 days expire after the date of notice to the General
Partner of revocation of its charter without a reinstatement of its
charter, under the laws of its state of incorporation.
If an Event of Withdrawal specified in Section 12.1(a)(v), (vi) or (vii) occurs,
the withdrawing General Partner shall give notice to the Limited Partner within
30 days after such occurrence. The Partners hereby agree that only the Events
of Withdrawal described in this Section 12.1 shall result in the withdrawal of
the General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances:
(i) at any time during the period beginning on the Closing Date and
ending at 12:00 Midnight, Central Standard Time, on July 31, 2004 the
General Partner voluntarily withdraws by giving at least 90 days' advance
notice of its intention to withdraw to the Limited Partner, provided, that
prior to the effective date of such withdrawal the Limited Partner
approves such withdrawal and the General Partner delivers to the
Partnership an Opinion of Counsel ("WITHDRAWAL OPINION OF COUNSEL") that
such withdrawal (following the selection of the successor General Partner)
would not result in the loss of the limited liability of the Limited
Partner or cause the Partnership to be treated as an association taxable
as a corporation or otherwise to be taxed as an entity for federal income
tax purposes;
(ii) at any time on or after 12:00 Midnight, Central Standard Time, on
July 31, 2004, the General Partner voluntarily withdraws by giving at
least 90 days' advance notice to the Limited Partner, such withdrawal to
take effect on the date specified in such notice; or
(iii) at any time that the General Partner ceases to be the General
Partner pursuant to Section 12.1(a)(ii), (iii) or (iv). If the General
Partner gives a notice of withdrawal pursuant to Section 12.1(a)(i), the
Limited Partner may, prior to the effective date of such withdrawal or
removal, elect a successor General Partner, provided, that such successor
shall be the same Person, if any, that is elected by the limited partners
of the MLP pursuant to Section 13.1 of the MLP Agreement as the successor
to the General Partner in its
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capacity as general partner of the MLP. If, prior to the effective date of the
General Partner's withdrawal, a successor is not selected by the Limited Partner
as provided herein or the Partnership does not receive a Withdrawal Opinion of
Counsel, the Partnership shall be dissolved in accordance with Section 13.1.
Any successor General Partner elected in accordance with the terms of this
Section 12.1 shall be subject to the provisions of Section 11.4.
12.2 REMOVAL OF THE GENERAL PARTNER. The General Partner shall be removed
if such General Partner is removed as a general partner of the MLP pursuant to
Section 13.2 of the MLP Agreement. Such removal shall be effective concurrently
with the effectiveness of the removal of such General Partner as the general
partner of the MLP pursuant to the terms of the MLP Agreement. If a successor
General Partner is elected in connection with the removal of such General
Partner as a general partner of the MLP, such successor General Partner shall,
upon admission pursuant to Article XI, automatically become a successor General
Partner of the Partnership. The admission of any such successor General Partner
to the Partnership shall be subject to the provisions of Section 11.4.
12.3 INTEREST OF DEPARTING PARTNER AND SUCCESSOR GENERAL PARTNER. The
Partnership Interest of a Departing Partner departing as a result of withdrawal
or removal pursuant to Section 12.1 or 12.2 shall (unless it is otherwise
required to be converted into Common Units pursuant to Section 13.3(b) of the
MLP Agreement) be purchased by the successor to the Departing Partner for cash
in the manner specified in the MLP Agreement. Such purchase (or conversion into
Common Units, as applicable) shall be a condition to the admission to the
Partnership of the successor as the General Partner. Any successor General
Partner shall indemnify the Departing General Partner as to all debts and
liabilities of the Partnership arising on or after the effective date of the
removal of the Departing Partner.
12.4 REIMBURSEMENT OF DEPARTING PARTNER. The Departing Partner shall be
entitled to receive all reimbursements due such Departing Partner pursuant to
Section 6.4, including, without limitation, any employee-related liabilities
(including, without limitation, severance liabilities), incurred in connection
with the termination of any employees employed by such departing Partner for the
benefit of the Partnership.
12.5 WITHDRAWAL OF THE LIMITED PARTNER. Without the prior consent of the
General Partner, which may be granted or withheld in its sole discretion, the
Limited Partner shall not have the right to withdraw from the Partnership.
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ARTICLE XIII
DISSOLUTION AND LIQUIDATION
13.1 DISSOLUTION. The Partnership shall not be dissolved by the admission
of Substituted Limited Partners or Additional Limited Partners or by the
admission of a successor General Partner in accordance with the terms of this
Agreement. Upon the removal or withdrawal of the General Partner any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve and, subject to Section 13.2, its affairs should be wound up,
upon:
(a) the expiration of its term as provided in Section 1.5;
(b) an Event of Withdrawal of the General Partner as provided in Section
12.1(a) (other than Section 12.1(a)(ii)), unless a successor is elected and an
Opinion of Counsel is received as provided in Section 12.1(b) or 12.2 and such
successor is admitted to the Partnership pursuant to Section 11.4;
(c) an election to dissolve the Partnership by the General Partner that is
approved by the Limited Partner;
(d) entry of a decree of judicial dissolution of the Partnership pursuant to
the provisions of the Delaware Act;
(e) the sale of all or substantially all of the assets and properties of the
Partnership; or
(f) the dissolution of the MLP.
13.2 CONTINUATION OF THE BUSINESS OF THE PARTNERSHIP AFTER DISSOLUTION.
Upon (a) dissolution of the Partnership following an Event of Withdrawal caused
by the withdrawal or removal of the General Partner as provided in Section
12.1(a)(i) or (iii) and following a failure of the Limited Partner to appoint a
successor General Partner as provided in Section 12.1 or 12.2, then within 90
days thereafter or (b) dissolution of the Partnership upon an event constituting
an Event of Withdrawal as defined in Section 12.1(a)(v), (vi) or (vii), then
within 180 days thereafter, the Limited Partner may elect to reconstitute the
Partnership and continue its business on the same terms and conditions set forth
in this Agreement by forming a new limited partnership on terms identical to
those set forth in this Agreement and having as a general partner a Person
approved by the Limited Partner. In addition, upon dissolution of the
Partnership pursuant to Section 13.1(f), if the MLP is reconstituted pursuant to
Section 14.2 of the MLP Agreement, the reconstituted MLP may, within 180 days
after such event of dissolution, as the Limited Partner, elect to reconstitute
the Partnership in accordance with the immediately preceding sentence. Upon any
such election by the Limited Partner,
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all Partners shall be bound thereby and shall be deemed to have approved same.
Unless such an election is made within the applicable time period as set forth
above, the Partnership shall conduct only activities necessary to wind up its
affairs. If such an election is so made, then:
(i) the reconstituted Partnership shall continue until the end of the
term set forth in Section 1.5 unless earlier dissolved in accordance with
this Article XIII;
(ii) if the successor General Partner is not the former General Partner,
then the interest of the former General Partner shall be purchased by the
successor General Partner or converted into Common Units of the MLP as
provided in the MLP Agreement; and
(iii) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership and to enter into and, as
necessary, to file a new partnership agreement and certificate of limited
partnership, and the successor General Partner may for this purpose
exercise the powers of attorney granted the General Partner pursuant to
Section 1.4; provided, that the right to approve a successor General
Partner and to reconstitute and to continue the business of the
Partnership shall not exist and may not be exercised unless the
Partnership has received an Opinion of Counsel that (x) the exercise of
the right would not result in the loss of limited liability of the Limited
Partner and (y) neither the Partnership nor the reconstituted limited
partnership would be treated as an association taxable as a corporation or
otherwise be taxable as an entity for federal income tax purposes upon the
exercise of such right to continue.
13.3 LIQUIDATION. Upon dissolution of the Partnership, unless the
Partnership is continued under an election to reconstitute and continue the
Partnership pursuant to Section 13.2, the General Partner, or in the event the
General Partner has been dissolved or removed, become bankrupt as set forth in
Section 12.1 or withdrawn from the Partnership, a liquidator or liquidating
committee approved by the Limited Partner, shall be the Liquidator. The
Liquidator (if other than the General Partner) shall be entitled to receive such
compensation for its services as may be approved by the Limited Partner. The
Liquidator shall agree not to resign at any time without 15 days' prior notice
and (if other than the General Partner) may be removed at any time, with or
without cause, by notice of removal approved by the Limited Partner. Upon
dissolution, removal or resignation of the Liquidator, a successor and
substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be approved
by the Limited Partner. The right to approve a successor or substitute
Liquidator in the manner
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provided herein shall be deemed to refer also to any such successor or
substitute Liquidator approved in the manner herein provided. Except as
expressly provided in this Article XIII, the Liquidator approved in the manner
provided herein shall have and may exercise, without further authorization or
consent of any of the parties hereto, all of the powers conferred upon the
General Partner under the terms of this Agreement (but subject to all of the
applicable limitations, contractual and otherwise, upon the exercise of such
powers, other than the limitation on sale set forth in Section 6.3(b)) to the
extent necessary or desirable in the good faith judgment of the Liquidator to
carry out the duties and functions of the Liquidator hereunder for and during
such period of time as shall be reasonably required in the good faith judgment
of the Liquidator to complete the winding-up and liquidation of the Partnership
as provided for herein. The Liquidator shall liquidate the assets of the
Partnership, and apply and distribute the proceeds of such liquidation in the
following order of priority, unless otherwise required by mandatory provisions
of applicable law:
(a) the payment to creditors of the Partnership, including, without
limitation, Partners who are creditors, in the order of priority provided by
law; and the creation of a reserve of cash or other assets of the Partnership
for contingent liabilities in an amount, if any, determined by the Liquidator to
be appropriate for such purposes; and
(b) to all Partners in accordance with the positive balances in their
respective Capital Accounts, as determined after taking into account all Capital
Account adjustments (other than those made by reason of this clause) for the
taxable year of the Partnership during which the liquidation of the Partnership
occurs (with the date of such occurrence being determined pursuant to Treasury
Regulation Section 1.704-1(b)(2)(ii)(g)); and such distribution shall be made by
the end of such taxable year (or, if later, within 90 days after said date of
such occurrence).
13.4 DISTRIBUTIONS IN KIND. (a) Notwithstanding the provisions of
Section 13.3, which require the liquidation of the assets of the Partnership,
but subject to the order of priorities set forth therein, if prior to or upon
dissolution of the Partnership the Liquidator determines that an immediate sale
of part or all of the Partnership's assets would be impractical or would cause
undue loss to the Partners, the Liquidator may, in its absolute discretion,
defer for a reasonable time the liquidation of any assets except those necessary
to satisfy liabilities of the Partnership (including, without limitation, those
to Partners as creditors) and/or distribute to the Partners or to specific
classes of Partners, in lieu of cash, as tenants in common and in accordance
with the provisions of Section 13.3, undivided interests in such Partnership
assets as the Liquidator deems not suitable for
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liquidation. Any such distributions in kind shall be made only if, in the good
faith judgment of the Liquidator, such distributions in kind are in the best
interest of the Limited Partner, and shall be subject to such conditions
relating to the disposition and management of such properties as the Liquidator
deems reasonable and equitable and to any agreements governing the operation of
such properties at such time. The Liquidator shall determine the fair market
value of any property distributed in kind using such reasonable method of
valuation as it may adopt.
(b) In accordance with Section 704(c)(1)(B) of the Code, in the case of any
deemed distribution occurring as a result of a termination of the Partnership
pursuant to Section 708(b)(1)(B) of the Code, to the maximum extent possible
consistent with the priorities of Section 13.3, the General Partner shall have
sole discretion to treat the deemed distribution of Partnership assets to
Partners as occurring in a manner that will not cause a shift of the Book-Tax
Disparity attributable to a Partnership asset existing immediately prior to the
deemed distribution to another asset upon the deemed contribution of assets to
the reconstituted Partnership, including, without limitation, deeming the
distribution of any Partnership assets to be made either to the Partner who
contributed such assets or to the transferee of such Partner.
13.5 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP. Upon the
completion of the distribution of Partnership cash and property as provided in
Sections 13.3 and 13.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be cancelled and such other
actions as may be necessary to terminate the Partnership shall be taken.
13.6 REASONABLE TIME FOR WINDING UP. A reasonable time shall be allowed
for the orderly winding up of business and affairs of the Partnership and the
liquidation of its assets pursuant to Section 13.3 in order to minimize any
losses otherwise attendant upon such winding up, and the provisions of this
Agreement shall remain in effect between the Partners during the period of
liquidation.
13.7 RETURN OF CAPITAL. The General Partner shall not be personally
liable for, and shall have no obligation to contribute or loan any monies or
property to the Partnership to enable it to effectuate, the return of the
Capital Contributions of the Limited Partner, or any portion thereof, it being
expressly understood that any such return shall be made solely from Partnership
assets.
13.8 CAPITAL ACCOUNT RESTORATION. No Limited Partner shall have any
obligation to restore any negative balance in its Capital Account upon
liquidation of the Partnership. The General Partner
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shall be obligated to restore any negative balance in its Capital Account upon
liquidation of its interest in the Partnership by the end of the taxable year of
the Partnership during which such liquidation occurs, or, if later, within 90
days after the date of such liquidation.
13.9 WAIVER OF PARTITION. Each Partner hereby waives any right to
partition of the Partnership property.
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT
14.1 AMENDMENT TO BE ADOPTED SOLELY BY GENERAL PARTNER. The Limited
Partner agrees that the General Partner (pursuant to its powers of attorney from
the Limited Partner), without the approval of the Limited Partner, may amend any
provision of this Agreement, and execute, swear to, acknowledge, deliver, file
and record whatever documents may be required in connection therewith, to
reflect:
(a) a change in the name of the Partnership, the location of the principal
place of business of the Partnership, the registered agent of the Partnership or
the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in accordance
with this Agreement;
(c) a change that, in the sole discretion of the General Partner, is necessary
or appropriate to qualify or continue the qualification of the Partnership as a
limited partnership or a partnership in which the limited partners have limited
liability under the laws of any state or that is necessary or advisable in the
opinion of the General Partner to ensure that the Partnership will not be
treated as an association taxable as a corporation or otherwise taxed as an
entity for federal income tax purposes;
(d) a change (i) that, in the sole discretion of the General Partner, does not
adversely affect the Limited Partner in any material respect, (ii) that is
necessary or desirable to satisfy any requirements, conditions or guidelines
contained in any opinion, directive, order, ruling or regulation of any federal
or state agency or judicial authority or contained in any federal or state
statute (including, without limitation, the Delaware Act), compliance with any
of which the General Partner determines in its sole discretion to be in the best
interests of the Partnership and the Limited Partner, (iii) that is required to
effect the intent of the provisions of this Agreement or is otherwise
contemplated by this Agreement or (iv) that is required to conform the
provisions of this
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Agreement with the provisions of the MLP Agreement as the provisions of the MLP
Agreement may be amended, supplemented or restated from time to time;
(e) a change in the fiscal year and taxable year of the Partnership and any
changes that, in the sole discretion of the General Partner, are necessary or
appropriate as a result of a change in the fiscal year and taxable year of the
Partnership including, without limitation, if the General Partner shall so
determine, a change in the definition of "Quarter" and the dates on which
distributions are to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to prevent the
Partnership or the General Partner or its directors or officers from in any
manner being subjected to the provisions of the Investment Company Act of 1940,
as amended, the Investment Advisers Act of 1940, as amended, or "plan asset"
regulations adopted under the Employee Retirement Income Security Act of 1974,
as amended, whether or not substantially similar to plan asset regulations
currently applied or proposed by the United States Department of Labor;
(g) any amendment expressly permitted in this Agreement to be made by the
General Partner acting alone;
(h) an amendment effected, necessitated or contemplated by a Merger Agreement
approved in accordance with Section 15.3;
(i) an amendment that, in the sole discretion of the General Partner, is
necessary or desirable to reflect, account for and deal with appropriately the
formation by the Partnership of, or investment by the Partnership in, any
corporation, partnership, joint venture, limited liability company or other
entity, in connection with the conduct by the Partnership of activities
permitted by the terms of Section 3.1; or
(j) any other amendments substantially similar to the foregoing.
14.2 AMENDMENT PROCEDURES. Except with respect to amendments of the type
described in Section 14.1, all amendments to this Agreement shall be made in
accordance with the following requirements. Amendments to this Agreement may be
proposed only by or with the consent of the General Partner. Each such proposal
shall contain the text of the proposed amendment. A proposed amendment shall be
effective upon its approval by the Limited Partner.
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ARTICLE XV
MERGER
15.1 AUTHORITY. The Partnership may merge or consolidate with one or more
corporations, business trusts or associations, real estate investment trusts,
common law trusts or unincorporated businesses, including, without limitation, a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article.
15.2 PROCEDURE FOR MERGER OR CONSOLIDATION. Merger or consolidation of
the Partnership pursuant to this Article requires the prior approval of the
General Partner. If the General Partner shall determine, in the exercise of its
sole discretion, to consent to the merger or consolidation, the General Partner
shall approve the Merger Agreement, which shall set forth:
(a) The names and jurisdictions of formation or organization of each of the
business entities proposing to merge or consolidate;
(b) The name and jurisdictions of formation or organization of the business
entity that is to survive the proposed merger or consolidation (the "Surviving
Business Entity")
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity securities of
each constituent business entity for, or into, cash, property or general or
limited partnership interests, rights, securities or obligations of the
Surviving Business Entity; and (i) if any general or limited partnership
interests, securities or rights of any constituent business entity are not to be
exchanged or converted solely for, or into, cash, property or general or limited
partnership interests, rights, securities or obligations of the Surviving
Business Entity, the cash, property or general or limited partnership interests,
rights, securities or obligations of any limited partnership, corporation, trust
or other entity (other than the Surviving Business Entity) which the holders of
such general or limited partnership interests, securities or rights are to
receive in exchange for, or upon conversion of, their general or limited partner
interests, securities or rights, and (ii) in the case of securities represented
by certificates, upon the surrender of such certificates, which cash, property
or general or limited partnership interests, rights, securities or obligations
of the Surviving Business Entity or any general or limited partnership,
corporation, trust or other entity
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(other than the Surviving Business Entity), or evidences thereof, are to be
delivered;
(e) A statement of any changes in the constituent documents or the adoption of
new constituent documents (the articles or certificate of incorporation,
articles of trust, declaration of trust, certificate or agreement of limited
partnership or other similar charter or governing document) of the Surviving
Business Entity to be effected by such merger or consolidation;
(f) The effective time of the merger, which may be the date of the filing of
the certificate of merger pursuant to Section 15.4 or a later date specified in
or determinable in accordance with the Merger Agreement (provided, that if the
effective time of the merger is to be later than the date of the filing of the
certificate of merger, the effective time shall be fixed no later than the time
of the filing of the certificate of merger and stated therein); and
(g) Such other provisions with respect to the proposed merger or consolidation
as are deemed necessary or appropriate by the General Partner.
15.3 APPROVAL BY LIMITED PARTNER OF MERGER OR CONSOLIDATION. (a) The
General Partner of the Partnership, upon its approval of the Merger Agreement,
shall direct that a copy or a summary of the Merger Agreement be submitted to
the Limited Partner for its approval.
(b) The Merger Agreement shall be approved upon receiving the consent of the
Limited Partner. After such approval by the Limited Partner, and at any time
prior to the filing of the certificate of merger pursuant to Section 15.4, the
merger or consolidation may be abandoned pursuant to provisions therefor, if
any, set forth in the Merger Agreement.
15.4 CERTIFICATE OF MERGER. Upon the required approval by the General
Partner and the Limited Partner of a Merger Agreement, a certificate of merger
shall be executed and filed with the Secretary of State of the State of Delaware
in conformity with the requirements of the Delaware Act.
15.5 EFFECT OF MERGER. (a) At the effective time of the certificate of
merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities shall be vested in the Surviving Business Entity and after the
merger
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or consolidation shall be the property of the Surviving Business Entity to the
extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in any
of those constituent business entities shall not revert and is not in any
way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interest in
property of any of those constituent business entities shall be preserved
unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity, and may be
enforced against it to the same extent as if the debts, liabilities and
duties had been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article shall
not be deemed to result in a transfer or assignment of assets or
liabilities from one entity to another having occurred.
ARTICLE XVI
GENERAL PROVISIONS
16.1 ADDRESSES AND NOTICES. Any notice, demand, request or report
required or permitted to be given or made to a Partner under this Agreement
shall be in writing and shall be deemed given or made when received by it at the
principal office of the Partnership referred to in Section 1.3.
16.2 REFERENCES. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
16.3 PRONOUNS AND PLURALS. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
16.4 FURTHER ACTION. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
16.5 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
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16.6 INTEGRATION. This Agreement constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
16.7 CREDITORS. None of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
16.8 WAIVER. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
16.9 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which together shall constitute an agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto, independently of the signature of any other
party.
16.10 APPLICABLE LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
16.11 INVALIDITY OF PROVISIONS. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
GENERAL PARTNER:
FERRELLGAS, INC.
By: ____________________________
INITIAL LIMITED PARTNER:
FERRELLGAS PARTNERS, L.P.
BY: Ferrellgas, Inc., as general partner
By: ___________________________
LIMITED PARTNER:
FERRELLGAS, INC.
By: ____________________________
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Exhibit 5.1
June 9, 1994
Ferrellgas, L.P.
One Liberty Plaza
Liberty, Missouri 64068
Ferrellgas Finance Corp.
One Liberty Plaza
Liberty, Missouri 64068
Re: Registration Statement on Form S-1
Registration No. 33-53379
Ladies and Gentlemen:
In connection with the above-captioned registration statement and the
amendments thereto on Form S-1 (the "Registration Statement") filed by
Ferrellgas, L.P. and Ferrellgas Finance Corp. (collectively, the "Issuers") with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder, you have
requested that we furnish our opinion in connection with the registration of the
Issuers' offer to sell $250,000,000 aggregate principal amount of their Senior
Notes due 2001 (the "Senior Notes").
In this connection, we have reviewed (a) the Registration Statement
and the exhibits thereto; (b) the charter and organizational documents, as
amended, of each of the Issuers; (c) the Senior Notes; (d) the Indenture
relating to the Senior Notes (the "Indenture"); and (e) certain records of the
corporate proceedings of each of the Issuers as reflected in its respective
minute book. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity with originals of all documents submitted to us as copies
thereof. In addition, we have made such other examinations of law and fact as
we have considered necessary in order to form a basis for the opinions
hereinafter expressed.
<PAGE>
June 9, 1994
Page 2
Based upon the foregoing and subject to the assumptions, exceptions,
qualifications and limitations set forth below, we are of the opinion that the
Senior Notes, when duly authenticated by the trustee under the Indenture, will
be valid and binding obligations of the Issuers entitled to the benefits of the
Indenture and enforceable in accordance with their terms.
The opinions expressed herein are limited by, subject to and based
upon the following assumptions, exceptions, qualifications and limitations:
a. Our opinions are subject to (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other laws affecting
creditors' rights generally; and (ii) general principles of equity,
including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law
or in equity) and the discretion of the court before which any proceedings
with respect to enforceability may be brought, and our opinions are further
qualified to the extent that rights to indemnification and contribution
provided in the Indenture or the Senior Notes may be limited by Federal or
state securities laws or public policy relating thereto.
b. We express no opinion as to (i) any provision for payment of
a prevailing party's attorneys' fees; (ii) the availability of specific
performance; and (iii) the enforceability of the waiver of rights under any
usury laws.
c. We are admitted to practice in the State of Missouri and do
not purport to be experts in the laws of any jurisdictions other than the
State of Missouri and Delaware (but only with respect to the General
Corporation Law of the State of Delaware ("Delaware Corporate Law")) and
the United States of America. Our opinions herein reflect only the
application of the applicable Missouri, Delaware Corporate Law and Federal
law. In rendering our opinions, we have not considered, and hereby
disclaim any opinion as to, the application or impact of any other laws,
cases, decisions, rules or regulations of any other jurisdiction, court or
administrative agency. For purposes of this legal opinion we have assumed,
without inquiry or review, that
<PAGE>
June 9, 1994
Page 3
the laws of the State of New York applicable to the opinions rendered
herein are substantially similar to the laws of the State of Missouri.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" contained in the Prospectus included in the Registration Statement.
Very truly yours,
SMITH, GILL, FISHER & BUTTS,
a Professional Corporation
By /s/ P. Mitchell Woolery
P. Mitchell Woolery
PMW/dkc
<PAGE>
EXHIBIT 8.1
[SMITH, GILL, FISHER & BUTTS LETTERHEAD]
June 9, 1994
Ferrellgas, Inc.
Ferrellgas Finance Corp.
One Liberty Plaza
Liberty, MO 64068
Gentlemen:
We refer to the Preliminary Prospectus (the "Prospectus") included in
the Registration Statement on Form S-1 filed by Ferrellgas, Inc. and Ferrellgas
Finance Corp. with the Securities and Exchange Commission on June ___, 1994,
relating to the offering of the Senior Notes described in the Prospectus.
Defined terms used therein have the same meaning when used herein.
We are of the opinion that the statements of legal conclusion with
respect to the principal Federal income tax consequences of ownership and
disposition of the Senior Notes to Holders under the heading "Certain Federal
Income Tax Consequences" in the Prospectus are materially correct.
In reaching such conclusion, we have relied on the accuracy of the
facts recited, the terms and conditions of the instruments referred to and the
representations made in the Prospectus. We have also assumed that Ferrellgas,
L.P. will be treated as a partnership for Federal income tax purposes.
Our opinion is based upon Federal income tax law as of the date
hereof, including the provisions of the Code, the applicable regulations
thereunder, existing judicial authority and current administrative rulings and
practice. Future legislative, judicial or administrative changes or
interpretations, which may or may not be retroactive, could affect the
statements of legal conclusion upon which we are opining.
<PAGE>
We hereby consent to the filing of this opinion letter as Exhibit __
to the Registration Statement to which the Prospectus relates.
Very truly yours,
SMITH, GILL, FISHER & BUTTS,
a Professional Corporation
By /s/ James M. Lucas
James M. Lucas
JML:scw
<PAGE>
EXHIBIT 10.1
================================================================================
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
DATED AS OF __________________, 1994
AMONG
FERRELLGAS, L.P.,
STRATTON INSURANCE COMPANY,
FERRELLGAS, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS AGENT,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BA SECURITIES, INC.
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms................................... 1
1.02 Other Interpretive Provisions........................... 31
1.03 Accounting Principles................................... 32
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitments........................ 32
(a) Facility A Revolving Loans, Swingline Loans and
Letters of Credit................................. 32
(b) Facility B Term Loans, Revolving Loans and
Takeout Loans..................................... 33
2.02 Loan Accounts........................................... 34
2.03 Procedure for Borrowing................................. 34
2.04 Conversion and Continuation Elections................... 35
2.05 Voluntary Termination or Reduction of Commitments....... 37
2.06 Optional Prepayments.................................... 37
2.07 Mandatory Prepayments of Loans; Mandatory
Commitment Reductions................................... 38
2.08 Repayment............................................... 39
(a) Facility A Revolving Loans and Swingline Loans.... 39
(b) Facility B Term Loans and Facility B Revolving
Loans............................................. 39
(c) Facility B Takeout Loans.......................... 40
2.09 Interest................................................ 40
2.10 Fees.................................................... 41
(a) Arrangement, Agency Fees.......................... 41
(b) Commitment Fees................................... 41
2.11 Computation of Fees and Interest........................ 42
2.12 Payments by the Borrower................................ 42
2.13 Payments by the Banks to the Agent...................... 42
2.14 Sharing of Payments, Etc................................ 43
2.15 Discretionary Swingline Loans........................... 44
ARTICLE III
THE LETTERS OF CREDIT
3.01 The Letter of Credit Subfacility........................ 45
3.02 Issuance, Amendment and Renewal of Letters of Credit.... 47
3.03 Existing Letters of Credit; Risk Participations,
Drawings and Reimbursements............................. 49
3.04 Repayment of Participations............................. 51
3.05 Role of the Issuing Banks............................... 52
3.06 Obligations Absolute.................................... 53
i
<PAGE>
Section Page
3.07 Cash Collateral Pledge.................................. 54
3.08 Letter of Credit Fees................................... 54
3.09 Uniform Customs and Practice............................ 55
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes................................................... 56
4.02 Illegality.............................................. 57
4.03 Increased Costs and Reduction of Return................. 58
4.04 Funding Losses.......................................... 59
4.05 Inability to Determine Rates............................ 60
4.06 Survival................................................ 60
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions of Initial Credit Extensions................. 60
(a) Credit Agreement and any Notes.................... 60
(c) Resolutions; Incumbency........................... 60
(d) Organization Documents; Good Standing............. 61
(e) Legal Opinions.................................... 61
(f) Payment of Fees................................... 61
(g) Certificate....................................... 62
(h) Cancellation of Existing Revolving Credit......... 62
(i) Due Diligence Review.............................. 62
(j) No Material Change................................ 62
(k) Insurance Certificate............................. 62
(l) Reorganization.................................... 62
(n) Other Documents................................... 63
5.02 Conditions to All Credit Extensions..................... 63
(a) Notice, Application............................... 63
(b) Continuation of Representations and Warranties.... 63
(c) No Existing Default............................... 63
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.01 Corporate or Partnership Existence and Power............ 64
6.02 Corporate or Partnership Authorization; No Contravention 65
6.03 Governmental Authorization.............................. 65
6.04 Binding Effect.......................................... 65
6.05 Litigation.............................................. 66
6.06 No Default.............................................. 66
6.07 ERISA Compliance........................................ 66
6.08 Use of Proceeds; Margin Regulations..................... 67
6.09 Title to Properties..................................... 67
6.10 Taxes................................................... 67
ii
<PAGE>
Section Page
6.11 Financial Condition..................................... 68
6.12 Environmental Matters................................... 68
6.13 Regulated Entities...................................... 68
6.14 No Burdensome Restrictions.............................. 69
6.15 Copyrights, Patents, Trademarks and Licenses, etc....... 69
6.16 Subsidiaries and Affiliates............................. 69
6.17 Insurance............................................... 69
6.18 Tax Status.............................................. 69
6.19 Full Disclosure......................................... 69
6.20 Fixed Price Supply Contracts............................ 70
6.21 Trading Policies........................................ 70
ARTICLE VII
AFFIRMATIVE COVENANTS
7.01 Financial Statements.................................... 70
7.02 Certificates; Other Information......................... 72
7.03 Notices................................................. 73
7.04 Preservation of Corporate or Partnership Existence, Etc. 74
7.05 Maintenance of Property................................. 74
7.06 Insurance............................................... 75
7.07 Payment of Obligations.................................. 75
7.08 Compliance with Laws.................................... 75
7.09 Inspection of Property and Books and Records............ 75
7.10 Environmental Laws...................................... 76
7.11 Use of Proceeds......................................... 76
7.12 Financial Covenants..................................... 76
7.13 Officer Loans........................................... 76
7.14 Trading Policies........................................ 76
7.15 Other General Partner Obligations....................... 77
7.16 Other Stratton Obligations.............................. 78
7.17 Monetary Judgments...................................... 78
7.18 Maintenance of Subsidiary............................... 78
ARTICLE VIII
NEGATIVE COVENANTS
8.01 Limitation on Liens..................................... 78
8.02 Asset Sales............................................. 80
8.03 Consolidations and Mergers.............................. 81
8.04 Acquisitions............................................ 83
8.05 Limitation on Indebtedness.............................. 83
8.06 Transactions with Affiliates............................ 85
8.07 Use of Proceeds......................................... 86
8.08 Use of Proceeds - Ineligible Securities................. 86
8.09 Contingent Obligations.................................. 86
8.10 Joint Ventures.......................................... 87
8.11 Lease Obligations....................................... 87
8.12 Restricted Payments..................................... 87
iii
<PAGE>
Section Page
8.13 Dividend and Other Payment Restrictions
Affecting Subsidiaries.................................. 89
8.14 Change in Business...................................... 90
8.15 Accounting Changes...................................... 90
8.16 Limitation on Sale and Leaseback Transactions........... 90
8.17 Restrictions On Nature Of Indebtedness And Activities
Of Finance Corp......................................... 90
8.18 Amendments of Organization Documents or Indenture....... 90
8.19 Fixed Price Supply Contracts............................ 91
8.20 Operations through Subsidiaries......................... 91
8.21 Operations of MLP....................................... 91
8.22 Senior Note Purchase Offer.............................. 92
ARTICLE IX
EVENTS OF DEFAULT
9.01 Event of Default........................................ 92
(a) Non-Payment....................................... 92
(b) Representation or Warranty........................ 92
(c) Specific Defaults................................. 92
(d) Other Defaults.................................... 92
(e) Cross-Default..................................... 92
(f) Insolvency; Voluntary Proceedings................. 93
(g) Involuntary Proceedings........................... 93
(h) ERISA............................................. 93
(i) Monetary Judgments................................ 94
(j) Non-Monetary Judgments............................ 94
(k) Loss of Licenses.................................. 94
(l) Adverse Change.................................... 94
(m) Indenture Cross-Defaults.......................... 94
9.02 Remedies................................................ 95
9.03 Rights Not Exclusive.................................... 95
9.04 Certain Financial Covenant Defaults..................... 95
ARTICLE X
THE AGENT
10.01 Appointment and Authorization.......................... 96
10.02 Delegation of Duties................................... 96
10.03 Liability of Agent and Issuing Banks................... 97
10.04 Reliance by Agent and Issuing Banks.................... 97
10.05 Notice of Default...................................... 98
10.06 Credit Decision........................................ 98
10.07 Indemnification........................................ 99
10.08 Agent in Individual Capacity........................... 99
10.09 Successor Agent........................................ 99
10.10 Withholding Tax........................................100
ARTICLE XI
iv
<PAGE>
Section Page
MISCELLANEOUS
11.01 Amendments and Waivers.................................101
11.02 Notices................................................102
11.03 No Waiver; Cumulative Remedies.........................103
11.04 Costs and Expenses.....................................103
11.05 Indemnity..............................................104
11.06 Payments Set Aside.....................................104
11.07 Successors and Assigns.................................105
11.08 Assignments, Participations, Etc.......................105
11.09 Set-off................................................107
[11.10 Automatic Debits of Fees].............................108
11.11 Notification of Addresses, Lending Offices, Etc........108
11.12 Counterparts...........................................108
11.13 Severability...........................................108
11.14 No Third Parties Benefited.............................108
11.15 Governing Law and Jurisdiction.........................109
11.16 Waiver of Jury Trial...................................109
11.17 Entire Agreement.......................................109
v
<PAGE>
SCHEDULES AND EXHIBITS
Schedule 2.01 Commitments
Schedule 3.03 Existing Letters of Credit
Schedule 6.05 Litigation
Schedule 6.07 ERISA
Schedule 6.10 Taxes
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.16 Subsidiaries and Minority Interests
Schedule 6.17 Insurance Matters
Schedule 7.13 Affiliates
Schedule 8.01 Permitted Liens
Schedule 8.05 Permitted Indebtedness
Schedule 8.08 Contingent Obligations
Schedule 8.19 Tradenames and Trademarks
Schedule 11.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinion of Borrower's Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Note
Exhibit G Form of Subsidiary Guaranty
Exhibit H Form of Commercial Letter of Credit
Exhibit I Form of Standby Letter of Credit
Exhibit J Alternate Form of Standby Letter of Credit
vi
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of_________, 1994,
among FERRELLGAS, L.P., a Delaware limited partnership (the "Borrower"),
--------
STRATTON INSURANCE COMPANY, a Vermont corporation and a Wholly-Owned Subsidiary
of the Borrower ("Stratton"), 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 letter of credit issuing bank (in such capacity, an
----
"Issuing Bank"), and as agent for the Banks (in such capacity, the "Agent").
- ------------- -----
WHEREAS, the Banks have agreed to make available to the Borrower and
Stratton certain revolving and term loan credit facilities with a letter of
credit subfacility on the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.01 Certain Defined Terms. The following terms have the following
---------------------
meanings:
"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.
1
<PAGE>
"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.
"Agent" has the meaning specified in the introductory clause hereto.
-----
References to the "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 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.
"Agent's Payment Office" means the address for payments set forth on
----------------------
the signature page hereto in relation to the Agent, or such other address
as the 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 Leverage Ratio
applicable to such fiscal quarter as set forth herein.
<TABLE>
<CAPTION>
Leverage Ratio Base Rate Loans Eurodollar Loans
- ---------------- --------------- ----------------
<S> <C> <C>
Level 1 0 b.p. 62.5 b.p.
Level 2 0 b.p. 87.5 b.p.
Level 3 12.5 b.p. 112.5 b.p.
Level 4 25 b.p. 125 b.p.
</TABLE>
"Arranger" means BA Securities, Inc., 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.
2
<PAGE>
"Available Cash" has the meaning given to such term in the Partnership
--------------
Agreement, as amended to the date of this Agreement; 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 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 (11
---------------
U.S.C. (S)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.
3
<PAGE>
"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 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 Agent, for the benefit of the 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 Agent (which documents are hereby consented to by the
Banks). Derivatives of such term shall have corresponding meaning. The
Borrower hereby grants to the Agent, for the benefit of the 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 Agent and the Majority Banks (which
consent may be given or withheld in their sole and absolute discretion)
provided that the 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.
4
<PAGE>
"Cash Costs" means, with respect to any Acquisition, the total costs
----------
thereof to the acquiring Person in such Acquisition, excluding the
aggregate amount of Acquired Debt and all financing provided by the selling
Person or Persons in connection therewith.
"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 twelve 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 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 nine
months 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), provided that for purposes of this
--------
clause (vi) securities in such money market funds of the type described in
clause (ii) above may have maturities of not more than 13 months from the
date of acquisition.
"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 or less than 20% of the
Equity Interests of the Borrower, and (iv) the occurrence of any
transaction, the result of which
5
<PAGE>
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 Term Loan, Facility B
Revolving Loan or Facility B Takeout Loan.
"Closing Date" means the date on which all conditions precedent set
------------
forth in Section 5.01 are satisfied or waived by all Banks (or, in the case
of subsection 5.01(e), waived by the Person entitled to receive such
payment).
"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.
"Commitment Fee Rate" means, as of any date and based upon the Level
-------------------
of the Leverage Ratio on such date, the percent per annum (expressed in
basis points) set forth below opposite such Level:
Leverage Ratio Commitment Fee Rate
-------------- -------------------
Level 1 27.5 b.p.
Level 2 32.5 b.p.
Level 3 37.5 b.p.
Level 4 37.5 b.p.
"Commitments" means, as to each Bank, collectively, its Facility A
-----------
Commitment and its Facility B Commitment.
"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, 7.14, 7.17 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
6
<PAGE>
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, 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.
"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 the referent 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 the referent 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
7
<PAGE>
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 Closing 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
8
<PAGE>
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 __________.
"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.
9
<PAGE>
"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 $100,000,000; (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 $200,000,000, 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, 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
10
<PAGE>
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, if necessary, upward to the nearest 1/16th of 1%)
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, if necessary, upward to the
nearest 1/100th of 1%) 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 Fixed Rate Notes" means the Series B and D Fixed Rate Senior
-------------------------
Notes due 1996 of the General Partner.
"Existing Floating Rate Notes" means the Series A and C Floating Rate
----------------------------
Senior Notes due 1996 of the General Partner.
11
<PAGE>
"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 Closing
Date and as more fully set forth on Schedule .
-------------
"Existing Letters of Credit" means the letters of credit issued and
--------------------------
outstanding on the Closing 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.
"Existing Senior Notes" means the Existing Fixed Rate Notes and the
---------------------
Existing Floating Rate Notes.
"Existing Subordinated Debentures" means the General Partner's 11 5/8%
--------------------------------
Senior Subordinated Debentures due December 15, 2003.
"Facility A Commitment", as to each Bank, means 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 $100,000,000 at any time.
"Facility A Revolving Loan" has the meaning specified in Section
-------------------------
2.01(a), and may be a Base Rate Loan or a Eurodollar Rate Loan.
"Facility B Commitment", as to each Bank, means the amount set forth
---------------------
opposite such Bank's name on Schedule 2.01 hereof under the caption
-------------
"Facility B Commitment - Total", as such amount 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 $85,000,000 at any time.
"Facility B Loans" means, collectively, the Facility B Revolving Loans
----------------
and the Facility B Term Loans and, after the Revolving Termination Date if
made in accordance with the terms hereof, the Facility B Takeout Loans.
"Facility B Maximum Amount" as of any date means the excess, if any,
-------------------------
on such date of (x) the sum of (i) the aggregate Cash Costs of all
Permitted Acquisitions by the Borrower and its Subsidiaries during the
period from the Closing Date through the date of calculation plus (ii) the
aggregate Growth-Related Capital Expenditures by the Borrower and its
Subsidiaries during such period, over (y) the sum of (i) the aggregate Net
Proceeds of Asset Sales during the period from the Closing Date to the date
that is
12
<PAGE>
270 days prior to the date of calculation plus (ii) the aggregate Net
Proceeds of MLP New Unit Sales from the Closing Date through the
calculation date.
"Facility B Revolving Loan" has the meaning specified in Section
-------------------------
2.01(b), and may be a Base Rate Loan or a Eurodollar Rate Loan.
"Facility B Revolving Loan Commitment", as to each Bank, means the sum
------------------------------------
of (i) the amount set forth opposite such Bank's name on Schedule 2.01
-------------
hereof under the caption "Facility B Commitment - Revolving Loans" plus
----
(ii) from and after the date 45 days after the Closing Date, the excess, if
any, of such Bank's Facility B Term Loan Commitment over the amount of its
Facility B Term Loan outstanding as of the date 45 days after the Closing
Date, as such sum may be reduced under Section 2.05 or 2.07 or as a result
of one or more assignments under Section 11.08.
"Facility B Takeout Loan" has the meaning specified in Section
-----------------------
2.01(b).
"Facility B Term Loan" has the meaning specified in Section 2.01(b).
--------------------
"Facility B Term Loan Commitment", as to each Bank, means the amount
-------------------------------
set forth opposite such Bank's name on Schedule 2.01 hereof under the
-------------
caption "Facility B Commitment - Term Loan", 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.
"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 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 Agent.
"Fee Letter" has the meaning specified in subsection 2.10(a).
----------
13
<PAGE>
"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 the reference 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 and Facility B 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 the
reference 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 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. If the applicable reference period for any
calculation of the Fixed Charge Coverage Ratio with respect to the Borrower
shall include a portion prior to the Closing Date, then such Fixed Charge
Coverage Ratio shall be calculated based upon the
14
<PAGE>
Consolidated Cash Flow and the Fixed Charges of the General Partner for
such portion of the reference period prior to the Closing Date and the
Consolidated Cash Flow and the Fixed Charges of the Borrower for the
remaining portion of the reference period on and after the Closing Date,
giving pro forma effect, as described in the two foregoing sentences, to
all applicable transactions occurring on the date of this Agreement or
otherwise.
"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.
"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 Borrower, excluding all
-----------
Contingent Obligations of Borrower 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.
15
<PAGE>
"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, and includes Finance Corp.
"Guaranty" means a continuing guaranty of the Obligations in favor of
--------
the Agent on behalf of the Banks, in form and substance satisfactory to the
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
16
<PAGE>
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.
"Indemnified Liabilities" has the meaning specified in Section 11.05.
-----------------------
"Indemnified Person" has the meaning specified in Section 11.05.
------------------
"Indenture" means the Indenture dated as of ______________, 1994,
---------
among the Borrower, Finance Corp. and Norwest Bank Minnesota, National
Association, pursuant to which the Senior Notes are to be issued, as it may
be amended from time to time.
"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. (S) 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 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, that if there is no
17
<PAGE>
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;
(iii) no Interest Period for any Facility A Revolving Loan,
Facility B Term Loan or Facility B Revolving Loan shall extend beyond
June 30, 1997; and
(iv) no Interest Period applicable to a Facility B Takeout Loan
or portion thereof shall extend beyond any date upon which is due any
scheduled principal payment in respect thereof unless the aggregate
principal amount of Facility B Takeout Loans represented by Base Rate
Loans, or by Eurodollar Rate Loans having Interest Periods that will
expire on or before such date, equals or exceeds the amount of such
principal payment.
"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
18
<PAGE>
"Issued," "Issuing" and "Issuance" have corresponding meanings.
------ ------- --------
"Issuing Banks" means BofA and any other Bank designated by the Agent
-------------
to Issue Letters of Credit, in their respective capacities as issuers of
one or more Letters of Credit hereunder, together with any replacement
Letter of Credit issuer arising under subsection 10.01(b) or Section 10.09.
"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 A 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 A 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 A
--------
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
19
<PAGE>
of the Borrower and Stratton 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 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 or Level 4,
-----
based on the amount of the Leverage Ratio at such time. For purposes of
this Agreement, the following "Levels" of Leverage Ratio (LR) shall apply:
<TABLE>
<CAPTION>
Level Leverage Ratio
- ---------------- --------------------------------------------------------------
<S> <C>
Level 1 LR (LESS THAN) 2.0
Level 2 2.0 (LESS THAN OR EQUAL TO) LR (LESS THAN) 2.5
Level 3 2.5 (LESS THAN OR EQUAL TO) LR (LESS THAN) 3.25
Level 4 LR (GREATER THAN OR EQUAL TO) 3.25
</TABLE>
The level of the Leverage Ratio for the period from the Closing Date to the
end of the fiscal quarter of the Borrower during which the Closing Date
occurs shall be equal to Level 3. Any change in the Level of the Leverage
Ratio shall be determined by the Agent based upon the financial information
required to be contained in the Compliance Certificates delivered by the
Borrower to the 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 Agent, and
without limiting the other rights and remedies of the Agent and the Banks
hereunder, the Leverage Ratio shall be deemed to be Level 4 as of the first
day of the fiscal quarter beginning after the fiscal quarter for which such
Compliance Certificate was due.
20
<PAGE>
"Leverage Ratio" means, with respect to any Person for any period, the
--------------
ratio of Funded Debt of such Person to Consolidated Cash Flow of such
Person. In the event that the reference 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 the
reference 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. If
the applicable reference period for any calculation of the Leverage Ratio
with respect to the Borrower and its Subsidiaries shall include a portion
prior to the Closing Date, then such Leverage Ratio shall be calculated
based upon the Consolidated Cash Flow and Funded Debt of the Borrower and
its Subsidiaries for such portion of the reference period prior to the
Closing Date and the Consolidated Cash Flow and the Funded Debt of the
Borrower for the remaining portion of the reference period on and
21
<PAGE>
after the Closing Date, giving pro forma effect, as described in the two
foregoing sentences, to all applicable transactions occurring on the
Closing Date or otherwise.
"LIBOR" means the rate of interest per annum determined by the 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 Agent by BofA as the rate 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, L/C
Advance, Facility B Term Loan, Facility B Revolving Loan, Facility B
Takeout Loan 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 Agent or any Bank in connection herewith.
"Majority Banks" means at any time Banks then holding 51% or more 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 51% or more of the aggregate 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
22
<PAGE>
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 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.
"Maximum Amount Certificate" means a certificate delivered to the
--------------------------
Agent pursuant to subsection 7.02(c).
"MLP" means Ferrellgas Partners, L.P., a Delaware limited partnership
---
and the sole limited partner of the Borrower.
"MLP New Units" means any units of limited partner interests of MLP
-------------
sold by MLP other than those registered pursuant to the MLP Registration
Statement (including the overallotment provisions thereof).
"MLP Registration Statement" means the Ferrellgas Partners, L.P., Form
--------------------------
S-1 Registration Statement No. 33-53383, as amended from time to time.
"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
-------- -------
retirement of the Existing Senior Notes and the Existing Subordinated
Debentures, including, without limitation, cash premiums, tender offer
premiums, consent payments and all fees and expenses in connection
therewith, shall be added back to Net Income to the extent that the same
were deducted from the Net Income of the Borrower or its Subsidiaries in
accordance with GAAP.
"Net Proceeds from MLP New Unit Sales" means the aggregate amount of
------------------------------------
all cash proceeds of the sale of any MLP New Units sold after the Closing
Date net of the direct costs relating to such sale (including, without
limitation, legal, accounting and investment banking fees and sales
commissions) and taxes paid or payable as a result thereof unless and to
the extent such net amount is contributed or invested in a Person other
than the Borrower, other than the issuance of up to 500,000 MLP New Units
(as adjusted to
23
<PAGE>
reflect distributions of equity and similar transactions) upon the exercise
of options to purchase such units granted to employees of the General
Partner from time to time pursuant to an option plan.
"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 Interest 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 8.21 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
24
<PAGE>
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.
"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 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 ________, 1994, as amended from time to
time.
25
<PAGE>
"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 (other than Indebtedness under the Senior Notes) or the
Indebtedness represented by the then outstanding Existing Subordinated
Debentures; 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 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) such Indebtedness is subordinated in right
26
<PAGE>
of payment to the Obligations on terms at least as favorable to the Banks
as those, if any, contained in the documentation governing the Prior
Indebtedness; and (d) such Indebtedness (other than Indebtedness incurred
to refinance, replace, defease or refund the Existing Subordinated
Debentures) is incurred by the Borrower or the Subsidiary who is the
obligor on the Prior Indebtedness.
"Permitted Senior Debt" means, with respect to any Person, (i) any
---------------------
Acquired Debt of such Person, (ii) any Indebtedness incurred by such
Person, the proceeds of which are applied solely to finance Growth-Related
Capital Expenditures and (iii) any Indebtedness incurred by such Person,
the proceeds of which are used solely for working capital purposes.
"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.
"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.
"Registration Statements" means, collectively, the MLP Registration
-----------------------
Statement and the Senior Note Registration Statement.
"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 or (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.
"Reorganization" has the meaning specified in subsection 5.01(l).
--------------
"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.
27
<PAGE>
"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 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.
"Revolving Commitment" means, as to each Bank, collectively, its
--------------------
Facility A Commitment and its Facility B Revolving Loan Commitment.
"Revolving Termination Date" means the earlier to occur of:
--------------------------
(a) June 30, 1997; and
(b) the date on which the Facility A Commitment and the Facility
B Revolving Loan Commitment terminate in accordance with the
provisions of this Agreement.
"Risk Participation Percentage" means, as of any date and based upon
-----------------------------
the Level of the Leverage Ratio on such date, the percent per annum
(expressed in basis points) set forth below opposite such Level:
Leverage Ratio Risk Participation Percentage
-------------- -----------------------------
Level 1 50 b.p.
Level 2 75 b.p.
Level 3 100 b.p.
Level 4 112.5 b.p.
"SEC" means the Securities and Exchange Commission, or any
---
Governmental Authority succeeding to any of its principal functions.
"Senior Debt" means, without duplication, (i) the Obligations, (ii)
-----------
all other Indebtedness of the Borrower or Finance Corp., unless the
instrument under which such Indebtedness is incurred expressly provides
that it is subordinated in right of payment to the Obligations and (iii)
all Indebtedness of Subsidiaries of the Borrower, other than Finance Corp.
28
<PAGE>
"Senior Note Registration Statement" means the Ferrellgas, L.P., and
----------------------------------
Ferrellgas Finance Corp. Form S-1 Registration Statement No. 33-53379, as
amended from time to time.
"Senior Notes" means the ____% Senior Notes due 2001, as amended or
------------
supplemented from time to time, offered and sold by the Borrower and
Finance Corp., as issuers, pursuant to the Senior Note Registration
Statement and the Indenture.
"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 Act, 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.
"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.
29
<PAGE>
"Swingline Loan" has the meaning specified in Section 2.15.
--------------
"Tax Audit" means the adjustments and disallowances proposed by the
---------
IRS relating to purchase price allocations for the acquisition of _______
in 1987.
"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 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 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.
"Wholly-Owned Subsidiary" means any corporation or partnership of
-----------------------
which 100% of the Capital Interests (other than directors' qualifying
shares required by law), at the time as of which any determination is being
made, is owned, beneficially and of record, by the Borrower, or by one or
more of the other Wholly-Owned Subsidiaries, or both.
30
<PAGE>
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 Agent, the Borrower
and the other parties, and are the products of all parties. Accordingly, they
shall not be
31
<PAGE>
construed against the Banks or the Agent merely because of the 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) 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 Commitments.
--------------------------------
(a) Facility A Revolving Loans, Swingline 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 A Revolving Loan") from time to time on any Business Day during
-------------------------
the period from the Closing Date to the Revolving 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 sum of the Effective Amount of all outstanding Facility A
Revolving Loans plus the Effective Amount of all L/C Obligations plus the
Effective Amount of all Swingline 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 plus the participation of such Bank in the
Effective Amount of all L/C Obligations 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 A Commitment.
32
<PAGE>
(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 Section 2.01(a), prepay under Section 2.06 and reborrow
under this Section 2.01(a); provided, that the Borrower shall cause the
--------
aggregate outstanding principal amount of Facility A Revolving Loans and
Swingline Loans not to exceed $25,000,000 for at least one period of 30
consecutive days during each fiscal year of Borrower, commencing with its
fiscal year beginning August 1, 1994.
(iii) As a subfacility of the Banks' Facility A Commitments, the
Borrower and Stratton may request the Issuing Banks to Issue Letters of
Credit from time to time pursuant to Article III.
(iv) In addition, the Borrower may request BofA to make
Swingline Loans to the Borrower from time to time pursuant to Section 2.15.
(b) Facility B Term Loans, Revolving Loans and Takeout Loans.
--------------------------------------------------------
(i) Tranche I - Facility B Term Loans. Each Bank severally agrees,
---------------------------------
on the terms and subject to the conditions set forth herein, to make a single
loan to the Borrower (each such loan, a "Facility B Term Loan") on the Closing
--------------------
Date in a principal amount not to exceed such Bank's Facility B Term Loan
Commitment. Amounts borrowed as Facility B Term Loans which are repaid or
prepaid by the Borrower may not be reborrowed.
(ii) Tranche II - Facility B Revolving Loans. 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 Closing Date to the
Revolving Termination Date, in an aggregate principal amount not to exceed at
any time outstanding the lesser of (x) such Bank's Facility B Revolving Loan
Commitment as in effect at such time, and (y) such Bank's Pro Rata Share of the
Facility B Maximum Amount as in effect at such time; provided, however, that,
-------- -------
after giving effect to any Borrowing of Facility B Revolving Loans, the
Effective Amount of all outstanding Facility B Revolving Loans shall not at any
time exceed the lesser of (a) the aggregate Facility B Revolving Loan
Commitments, and (b) the Facility B Maximum Amount, and the Effective Amount of
all outstanding Facility B Revolving Loans of any Bank shall not at any time
exceed the lesser of (A) such Bank's Facility B Revolving Loan Commitment, and
(B) such Bank's Pro Rata Share of the Facility B Maximum Amount then in effect.
Within the limits of each Bank's Facility B Revolving Loan Commitment, and on
the other terms and subject to the other terms and conditions hereof, the
Borrower may borrow under this Section 2.01(b)(ii), prepay under Section 2.06
and reborrow under this Section 2.01(b)(ii).
33
<PAGE>
(iii) Facility B Takeout Loan. Each Bank severally agrees, on the
-----------------------
terms and subject to the conditions set forth herein, to make a single loan to
the Borrower (each such loan, a "Facility B Takeout Loan") on the Revolving
-----------------------
Termination Date in an aggregate amount not to exceed the lesser of (x) the
aggregate outstanding Effective Amount of such Bank's Facility B Loans on the
Revolving Termination Date and (y) such Bank's Facility B Commitment. Amounts
borrowed as Facility B Takeout Loans which are repaid or prepaid by the Borrower
may not be reborrowed.
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 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 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 Procedure for Borrowing. (a) Each Borrowing of Loans shall be made
-----------------------
upon the Borrower's irrevocable written notice delivered to the Agent in the
form of a Notice of Borrowing (which notice must be received by the Agent prior
to 10:00 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;
34
<PAGE>
(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 Agent will promptly notify each Bank of the 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 Agent for the account of the Borrower at the Agent's
Payment Office by 10:00 a.m. San Francisco time on the Borrowing Date requested
by the Borrower in funds immediately available to the Agent. The proceeds of
all such Loans will then be made available to the Borrower by the 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 Agent by the Banks and in like
funds as received by the 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.
2.04 Conversion and Continuation Elections. (a) The Borrower may, upon
-------------------------------------
irrevocable written notice to the 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
35
<PAGE>
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 Agent not later than 10:00 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 resulting 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 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 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.
36
<PAGE>
2.05 Voluntary Termination or Reduction of Commitments.
-------------------------------------------------
(a) The Borrower may, not later than 10:00 a.m. San Francisco time at
least three Business Days prior to its effective date by notice to the 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, (i) the Effective Amount of all Facility A Revolving
Loans, Swingline Loans and L/C Obligations together would exceed the amount of
the combined Facility A Commitments then in effect, or (ii) the Effective Amount
of all L/C Obligations then outstanding would exceed the L/C Commitment.
(b) The Borrower may, not later than 10:00 a.m. San Francisco time at
least three Business Days prior to its effective date by notice to the 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, the Effective Amount of all Facility B Term Loans and
all Facility B Revolving Loans together would exceed the amount of the combined
Facility B Commitments then in effect.
(c) Once reduced in accordance with this Section, the Commitments may
not be increased. Any reduction of the Facility A Commitments or the Facility B
Commitments shall be applied to each Bank according to its Pro Rata Share.
2.06 Optional Prepayments. (a) Subject to Section 4.04, the Borrower may,
--------------------
at any time or from time to time, not later than 10:00 a.m. San Francisco time
at least three (3) Business Days prior to its effective date by irrevocable
notice to the Agent, in the case of Eurodollar Rate Loans, and not later than
10:00 a.m. San Francisco time at least one (1) Business Day prior to its
effective date by irrevocable notice to the 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 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
37
<PAGE>
Borrower of the aggregate amount of any associated funding losses of any
affected Banks pursuant to Section 4.04. The 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. Optional prepayments
occurring after the Revolving Termination Date shall be applied to the Facility
B Takeout Loan in inverse order of maturity.
2.07 Mandatory Prepayments of Loans; Mandatory Commitment Reductions. (a)
---------------------------------------------------------------
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 Swingline Loans and Facility A Revolving Loans then
outstanding plus the Effective Amount of all L/C Obligations exceeds the
combined Facility A Commitments, the Borrower shall immediately, and without
notice or demand, prepay the outstanding principal amount of the Swingline
Loans, Facility A Revolving Loans and any L/C Advances by an aggregate amount
equal to the applicable excess.
(b) Subject to Section 4.04, if on any date on or prior to the
Revolving Termination Date the Effective Amount of the Facility B Revolving
Loans exceeds the lesser of (i) the aggregate Facility B Revolving Loan
Commitment, and (ii) the Facility B Maximum Amount then in effect, then the
Borrower shall immediately, and without notice or demand, prepay the outstanding
principal amount of the Facility B Revolving Loans in an aggregate amount equal
to such excess. If on any date after the Revolving Termination Date, the
Effective Amount of Facility B Takeout Loans exceeds the Facility B Maximum
Amount, then the Borrower shall immediately, and without notice or demand,
prepay the outstanding principal amount of the Facility B Takeout Loans in an
aggregate amount equal to such excess, in the inverse order of maturity.
(c) If on any date, (x) the sum of (i) aggregate Net Proceeds from
MLP New Unit Sales from the Closing Date through such date plus (ii) aggregate
Net Proceeds of Asset Sales during the period from the Closing Date through the
date that is 270 days prior to such date, exceeds (y) the aggregate Cash Costs
of Permitted Acquisitions during the period from the Closing Date through such
date plus aggregate Growth-Related Capital
38
<PAGE>
Expenditures of the Borrower and its Subsidiaries during such period (any such
excess being referred to herein as a "Downsize Amount"), then (A) if such date
---------------
is on or prior to the Revolving Termination Date and after giving effect to any
mandatory Cash Collateralization or prepayment of outstanding Facility B
Revolving Loans under subsection 2.07(b) above, the Borrower shall immediately,
and without notice or demand, prepay the Obligations in an aggregate amount
equal to the Downsize Amount as follows: first, Facility B Term Loans, second,
Swingline Loans, third, Facility A Revolving Loans, and fourth, L/C Obligations;
and (B) if such date is after the Revolving Termination Date, the Borrower shall
immediately, and without notice or demand, prepay payments due under the
Facility B Takeout Loan in an aggregate amount equal to the Downsize Amount, in
the inverse order of maturity.
(d) In the event that prior to the Revolving Termination Date any
portion of the Downsize Amount remains after the Facility B Maximum Amount has
been reduced to zero, the Facility A Commitment shall be automatically reduced
by an aggregate amount equal to such remaining portion of the Downsize Amount.
(e) 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
Commitments shall be automatically reduced to zero, in each case on the 30th day
after any Change in Control shall have occurred and be continuing.
(f) If and to the extent that the Facility A Commitment and the
Facility B Revolving Commitment are not equal to zero on the Revolving
Termination Date, each such amount shall be automatically reduced to zero on the
Revolving Termination Date.
2.08 Repayment.
---------
(a) Facility A Revolving Loans and Swingline Loans. The Borrower
----------------------------------------------
shall repay to the Banks in full on the Revolving Termination Date the aggregate
principal amount of Facility A Revolving Loans outstanding on such date together
with all accrued and unpaid interest thereon. The Borrower shall repay to BofA
in full on the Revolving Termination Date the aggregate principal amount of
Swingline Loans outstanding on such date, together with all accrued and unpaid
interest thereon.
(b) Facility B Term Loans and Facility B Revolving Loans. Subject to
----------------------------------------------------
the provisions of subsection 2.08(c), the Borrower shall repay in full on the
Revolving Termination Date the aggregate principal amount of Facility B Term
Loans and
39
<PAGE>
Facility B Revolving Loans outstanding on such date together with all accrued
and unpaid interest thereon.
(c) Facility B Takeout Loans. At the Borrower's option, to be
------------------------
exercised by the giving of an appropriate Notice of Borrowing to the Agent in
the manner set forth herein and subject to the conditions set forth in Section
2.01(b)(iii), the Borrower may request the Banks to make Facility B Takeout
Loans to the Borrower on the Revolving Termination Date in repayment of up to
all of the aggregate principal amount of Facility B Term Loans and Facility B
Revolving Loans outstanding on such date. If and to the extent that the
Borrower shall have borrowed the Facility B Takeout Loan on the terms and
subject to the conditions set forth herein, the Borrower shall repay the
aggregate principal amount of the Facility B Takeout Loan in twelve (12) equal
quarterly installments commencing on September 30, 1997, and continuing on the
last day of every third calendar month thereafter through June 30, 2000;
provided, that all outstanding principal and accrued and unpaid interest on the
- --------
Facility B Takeout Loans shall be repaid in full on or prior to June 30, 2000.
2.09 Interest. (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(e) 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 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
40
<PAGE>
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.
2.10 Fees. 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 Agent for the Agent's own account, as required by the letter agreement
("Fee Letter") between the Borrower and the Arranger and Agent dated May 11,
- ------------
1994.
(b) Commitment Fees. The Borrower shall pay to the Agent for the
---------------
account of each Bank a commitment fee with respect to such Bank's Facility A
Commitment equal to the Commitment Fee Rate per annum times the daily average
amount by which such Bank's Facility A Commitment exceeded the sum of the
aggregate Effective Amount of its Facility A Revolving Loans plus its Pro Rata
Share of the Effective Amount of L/C Obligations (other than with respect to
Commercial Letters of Credit). The Borrower shall pay to the Agent for the
account of each Bank a commitment fee with respect to such Bank's Facility B
Commitment, equal to the Commitment Fee rate per annum times the daily average
amount by which such Bank's Facility B Revolving Commitment exceeded the
aggregate Effective Amount of its Facility B Revolving Loans. Such commitment
fees shall accrue from the date of this Agreement to the Revolving 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 August 1, 1994 through the Revolving Termination Date, with the
final payment to be made on the Revolving Termination Date; provided that, in
--------
connection with the full termination of 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.
41
<PAGE>
2.11 Computation of Fees and Interest. (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 Agent shall be
conclusive and binding on the Borrower and the Banks in the absence of manifest
error.
2.12 Payments by the Borrower. (a) All payments to be made by the
------------------------
Borrower shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Borrower shall be made
to the Agent for the account of the Banks at the 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 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 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 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 Agent may assume that the
Borrower has made such payment in full to the Agent on such date in immediately
available funds and the 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 Agent, each Bank shall repay to the 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.
2.13 Payments by the Banks to the Agent. (a) Unless the Agent receives
----------------------------------
notice from a Bank on or prior to the Closing Date or, with respect to any
Borrowing after the Closing Date, at
42
<PAGE>
least one (1) Business Day prior to the date of such Borrowing, that such Bank
will not make available as and when required hereunder to the Agent for the
account of the Borrower the amount of that Bank's Pro Rata Share of the
Borrowing, the Agent may assume that each Bank has made such amount available to
the Agent in immediately available funds on the Borrowing Date and the 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 Agent in immediately
available funds and the 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 Agent, together with interest
at the Federal Funds Rate for each day during such period. A notice of the
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 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 Agent on the Business Day following the Borrowing Date,
the Agent will notify the Borrower of such failure to fund and, upon demand by
the Agent, the Borrower shall pay such amount to the Agent for the 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.
2.14 Sharing of Payments, Etc. 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 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
43
<PAGE>
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 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.
2.15 Discretionary Swingline Loans.
-----------------------------
(a) From time to time, subject to the conditions set forth below, at
the request of the Borrower, made through the 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
$10,000,000, 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 aggregate Effective
Amount of all Swingline Loans, together with the aggregate Effective Amount of
all Facility A Revolving Loans and the Effective Amount of all L/C Obligations,
without duplication, shall not exceed the aggregate Facility A 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 Agent, shall be funded by BofA through the Agent, and shall be
repaid by the Borrower through the Agent (in order that the 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 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 Agent substantially in
the form of a Notice of Borrowing (which notice must be received by the Agent
prior to 10:00 a.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 $250,000 or any multiple of $100,000 in excess
thereof; and
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(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 A Revolving Loan which is a Base
Rate Loan, and upon receipt of such notice each Bank shall fund to the Agent,
for the account of BofA, such Bank's ratable share of such Facility A 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 A 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 A 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
---------------------
3.01 The Letter of Credit Subfacility. (a) On the terms and subject to
--------------------------------
the conditions set forth herein and as a subfacility of the Facility A
Commitment, (i) the Issuing Banks agree, from time to time on any Business Day
during the period from the Closing Date to the date that is 30 days prior to the
Revolving Termination Date to issue Letters of Credit for the account of the
Borrower and Stratton 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 and Stratton; provided, that the Issuing Banks shall
--------
not be obligated to Issue, and no Bank shall
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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 A
Revolving Loans plus the Effective Amount of all Swingline Loans exceeds the
combined Facility A 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 and Stratton to
obtain Letters of Credit shall be fully revolving, and, accordingly, the
Borrower and Stratton 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 Closing Date, or shall impose upon such Issuing Bank any
unreimbursed loss, cost or expense which was not applicable on the Closing
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 Agent, the Borrower or Stratton, 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 Termination Date, unless the
Majority Banks have approved such expiry date in writing, or (B) with
respect to any other Letter of Credit, 30 days prior to the Revolving
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
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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 working capital or any permitted use of the proceeds of Facility B
Revolving Loans as set forth in Section 7.11.
3.02 Issuance, Amendment and Renewal of Letters of Credit. (a) Each
----------------------------------------------------
Letter of Credit shall be issued upon the irrevocable written request of the
Borrower and, if Stratton is the applicant, Stratton, received by the Issuing
Bank (with a copy sent by the Borrower or Stratton to the 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 expiration 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 Agent (by telephone or in writing) that the
Agent has received a copy of the L/C Application or L/C Amendment Application
from the Borrower and, if Stratton is the applicant, from Stratton and, if not,
such Issuing Bank will provide the Agent with a copy thereof. Unless such
Issuing Bank has received notice on or before 10:00 a.m. (San Francisco time) on
the date such Issuing Bank is to issue a requested Letter of Credit from the
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
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result of the limitations set forth in clauses (i)(1) or (i)(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 for the
account of the Borrower and Stratton 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 Termination Date, any Issuing Bank will, upon the written
request of the Borrower and, if Stratton is the applicant, Stratton, received by
such Issuing Bank (with a copy sent by the Borrower or Stratton to the 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 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 Termination Date, at the option
of the Borrower and Stratton and upon the written request of the Borrower and,
if Stratton is the applicant, Stratton, received by the applicable Issuing Bank
(with a copy sent by the Borrower or Stratton to the 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 so to 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
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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 either
or both of the Borrower and Stratton, as applicable, but such Issuing Bank shall
not have received any L/C Amendment Application with respect to such renewal or
other written direction by either or both of the Borrower and Stratton, as
applicable, with respect thereto, such Issuing Bank shall nonetheless be
permitted to allow such Letter of Credit to renew, and the Borrower and Stratton
and the Banks hereby authorize such renewal, and, accordingly, such Issuing Bank
shall be deemed to have received an L/C Amendment Application from either or
both of the Borrower and Stratton, as applicable, requesting such renewal.
(e) The Issuing Banks may, at their election (or as required by the
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 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 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.
3.03 Existing Letters of Credit; Risk Participations, Drawings and
-------------------------------------------------------------
Reimbursements. (a) On and after the Closing 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
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unconditionally agrees to, purchase from the Issuing Banks on the Closing 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(b) 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 A 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 and, if Stratton is the applicant, Stratton.
The Borrower or Stratton 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 or
Stratton 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
Agent and the 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 or Stratton on the Honor Date). Any notice given by an Issuing
Bank or the 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 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
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Facility A 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 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 _____________ (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 Agent will promptly give notice of the occurrence of
the Honor Date, but failure of the 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 A 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 and Stratton
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 A 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 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, Stratton 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.
3.04 Repayment of Participations. (a) Upon (and only upon) receipt by the
---------------------------
Agent for the account of an Issuing Bank of immediately available funds from the
Borrower or Stratton (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
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 Agent will pay to each Bank, in the same funds as those received by
the 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
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amount of the Pro Rata Share of such funds of any Bank that did not so pay the
Agent for the account of such Issuing Bank.
(b) If the Agent or any Issuing Bank is required at any time to
return to the Borrower or Stratton, or to a trustee, receiver, liquidator,
custodian, or any official in any Insolvency Proceeding, any portion of the
payments made by the Borrower or Stratton to the 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 Agent, forthwith return to the Agent or such Issuing Bank the
amount of its Pro Rata Share of any amounts so returned by the 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 Agent or such Issuing Bank, at a
rate per annum equal to the Federal Funds Rate in effect from time to time.
3.05 Role of the Issuing Banks. (a) Each Bank, the Borrower and Stratton
-------------------------
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 and Stratton hereby assume 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 or Stratton's pursuing such rights and remedies as
either 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 and Stratton may have a claim against an Issuing Bank, and an
Issuing Bank may be liable to the Borrower and Stratton, to the extent, but only
to the extent, of any direct, as opposed to consequential or exemplary, damages
suffered by the Borrower and Stratton which the Borrower and Stratton prove were
caused by an Issuing Bank's willful misconduct or gross negligence or an Issuing
Bank's willful
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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.
3.06 Obligations Absolute. The obligations of the Borrower and Stratton
--------------------
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 A 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 and
Stratton 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 or Stratton 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
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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 or
Stratton 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, Stratton or a guarantor.
3.07 Cash Collateral Pledge. Upon (i) the request of the 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 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(a) 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.
3.08 Letter of Credit Fees. (a) The Borrower and Stratton jointly and
---------------------
severally agree to pay to the Agent for the account of each of the Banks based
on their respective Pro Rata Shares a letter of credit fee with respect to the
Standby Letters of Credit equal to the Risk Participation Percentage of the
average daily maximum amount available to be drawn of the outstanding Standby
Letters of Credit, computed on a quarterly basis in arrears on the last Business
Day of each fiscal quarter based upon Standby Letters of Credit outstanding for
that quarter as calculated by the 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 are outstanding,
commencing on the first such quarterly date to occur after the Closing Date,
through the Revolving Termination Date (or such later date upon which the
outstanding Standby Letters of Credit shall expire), with the final payment to
be made on the Revolving Termination Date (or such later expiration date).
(b) The Borrower and Stratton jointly and severally agree to pay to
the applicable Issuing Bank for its sole account a letter of credit fronting fee
for each Standby Letter of Credit
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Issued by such Issuing Bank, equal to 0.15% per annum of the face amount (or
increased face amount, as the case may be) of such Standby 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 Closing Date.
(c) The Borrower and Stratton jointly and severally agree 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.
3.09 Uniform Customs and Practice. 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.
3.10 Acknowledgment of Accommodation; Waiver of Defenses. (a) For the
---------------------------------------------------
purposes of implementing the provisions of this Article III, the Borrower and
Stratton each irrevocably appoints the other as its agent and attorney-in-fact
for all purposes, including the giving and receiving of notices and other
communications.
(b) Each of the Borrower and Stratton acknowledges and agrees that
the Letter of Credit subfacility provided for herein has been established on a
joint and several basis as an accommodation to the Borrower and Stratton and at
their request, and that each is benefited thereby.
(c) The Borrower shall be absolutely and unconditionally liable for
the repayment of all L/C Obligations, whether incurred by the Borrower or
Stratton, all as if the Borrower was the primary beneficiary of all Letters of
Credit.
(d) Each of the Borrower and Stratton authorizes the Agent and the
Banks, without notice or demand and without affecting the liability of either
hereunder, from time to time, either before or after the termination of this
Agreement, to (i) renew, compromise, extend, accelerate or otherwise change the
time for payment of, or otherwise change the terms of the L/C Obligations or any
other Obligation or any part thereof including any increase or decrease of the
rate of interest thereon; (ii) receive and hold security for the payment of the
L/C Obligations or any other Obligation, and exchange, enforce, waive, release,
fail to perfect, sell, or otherwise dispose of any such security; (iii) apply
such security and direct the order or manner of sale thereof as the Agent in its
discretion may determine; and (iv) release Stratton or any other party and hold
55
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the Borrower liable for all L/C Obligations or other Obligations or other
Obligations of Stratton.
(e) Each of the Borrower and Stratton waives any right to require the
Agent to (i) proceed against the Borrower or Stratton in any particular order or
proceed first or concurrently against any other party; (ii) proceed against or
exhaust any security held from the Borrower or Stratton or any other party; or
(iii) pursue any other remedy in the Agent's or the Banks' power whatsoever.
Each of the Borrower and Stratton waives any defense arising by reason of any
disability or other defense, or the cessation from any cause whatsoever of the
liability of the Borrower or Stratton or any other party, or any claim that the
obligations of one exceed or are more burdensome than those of the other. Each
of the Borrower and Stratton waives any right of subrogation, reimbursement,
indemnification and contribution (contractual, statutory or otherwise),
including without limitation, any claim or right of subrogation under the
Bankruptcy Code (Title 11 of the U.S. Code) or any successor statute, arising
from the existence or performance of its obligations hereunder, and each waives
any right to enforce any remedy which the Agent or the Banks now have or may
hereafter have against either of them, and waives any benefit of and any right
to participate in any security now or hereafter held by the Agent or the Banks.
Each of the Borrower and Stratton waives all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, and notices of acceptance of this Agreement and of the existence,
creation, or incurrence of new or additional indebtedness.
(f) Each of the Borrower and Stratton warrants and agrees that the
waivers and consents set forth in this Section 3.10 are made with full knowledge
of their significance and with the understanding that events giving rise to any
defense waived may diminish, destroy or otherwise adversely affect rights which
the Borrower or Stratton may have against each other, the Agent, the Banks or
others.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
4.01 Taxes. (a) Any and all payments by the Borrower to each Bank or the
-----
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 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 Agent and any liability (including interest,
56
<PAGE>
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 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 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 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 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 Agent the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Agent.
(e) If the Borrower is required to pay additional amounts to any Bank
or the 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.
4.02 Illegality. (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
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<PAGE>
Borrower through the Agent, any obligation of that Bank to make Eurodollar Rate
Loans shall be suspended until the Bank notifies the 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 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 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 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.
4.03 Increased Costs and Reduction of Return. (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 Agent), pay to the Agent for the account of such
Bank, additional amounts as are sufficient to compensate such Bank for such
increased costs.
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(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 Commitments, loans, credits or obligations under this
Agreement, then, upon demand of such Bank to the Borrower through the 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.
4.04 Funding Losses. 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
59
<PAGE>
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.
4.05 Inability to Determine Rates. If the 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 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 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.
4.06 Survival. The agreements and obligations of the Borrower in this
--------
Article IV shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
--------------------
5.01 Conditions of Initial Credit Extensions. The obligation of each Bank
---------------------------------------
to make its initial Credit Extension hereunder is subject to the condition that
the Agent have received on or before the Closing Date all of the following, in
form and substance satisfactory to the Agent and 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) Guaranty. A Guaranty in the form of Exhibit G hereto executed by
--------
Finance Corp.;
(c) Resolutions; Incumbency.
-----------------------
(i) Copies of partnership authorizations for the Borrower and
the MLP and resolutions of the board of directors of the General Partner
and Finance Corp. authorizing the transactions contemplated hereby and by
the Guaranties, certified as of the Closing Date by the
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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, this Agreement and all other Loan
Documents to be delivered by the Borrower 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 Limited Partnership Agreement of the
Borrower, in each case as in effect on the Closing Date, certified by the
Secretary or Assistant Secretary of the General Partner as of the Closing
Date; and
(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 state where the General Partner or
the Borrower is qualified to do business as a foreign entity as of a recent
date, together with bring-down certificates by facsimile, dated the Closing
Date;
(e) Legal Opinions.
--------------
(i) opinions of Smith, Gill, Fisher & Butts, P.C. and of Andrews
& Kurth, LLP., counsel to the Borrower, the General Partner and the
Guarantor, addressed to the Agent and the Banks, substantially in the form
of Exhibit D;
---------
(ii) a favorable opinion of Orrick, Herrington & Sutcliffe,
special counsel to the Agent;
(iii) opinions delivered in connection with the Reorganization,
upon which the Agent and the Banks may rely;
(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 Closing Date, together with Attorney Costs of the Agent to the extent
invoiced prior to or on the Closing Date, plus such additional amounts of
Attorney Costs as shall constitute the 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 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;
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<PAGE>
(g) Certificate. A certificate signed by a Responsible Officer,
-----------
dated as of the Closing 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;
(iii) there has occurred since April 30, 1994, no event or
circumstance that has resulted or could reasonably be expected to result in
a Material Adverse Effect; and
(iv) the Reorganization has been consummated.
(h) Cancellation of Existing Revolving Credit. Evidence that all
-----------------------------------------
outstanding obligations and other liabilities of the General Partner under the
Amended and Restated Loan Agreement dated as of May 10, 1993 among the General
Partner, certain of its subsidiaries, Ferrell Companies, Inc. and One Liberty
Oil Company, as guarantors, the banks listed therein and Wells Fargo Bank,
National Association, as agent, have been paid in full and the obligations of
all parties under each of the documents executed and delivered in connection
therewith have been terminated, except for such provisions as shall by their
terms survive such termination;
(i) Due Diligence Review. The Agent, BA Securities and each of the
--------------------
Banks shall have completed their normal and customary due diligence for
transactions in the nature contemplated by the Loan Documents, including,
without limitation, review of the terms and conditions of each of the
Organizational Documents of the Borrower and each of its Affiliates, the
Registration Statements, the Indenture and the Senior Notes, and the proposed
capital structure of the Borrower and its Affiliates, and such due diligence
review shall be satisfactory to each of them in their sole and absolute
discretion;
(j) No Material Change. There shall have been no Material Adverse
------------------
Effect between April 30, 1994 and the Closing Date, and there shall have been no
material adverse change in the financial markets since May 12, 1994;
(k) Insurance Certificate. A certificate from the Borrower's
---------------------
insurance broker, dated the Closing Date, setting forth in such detail as the
Agent or any Bank shall reasonably request the types, amounts, deductibles,
principal exclusions and other material terms of the insurance then in effect
for the Borrower and its Subsidiaries;
(l) Reorganization. Each of the transactions contemplated by the
--------------
Registration Statements to be consummated on
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<PAGE>
the Closing Date has been consummated and remains in effect according to the
terms and conditions described in the Registration Statements and all applicable
laws, including, without limitation, the contribution by the General Partner to
the Borrower of substantially all of its assets and liabilities in connection
with the business of the General Partner as operated on the Closing Date, and
the issuance and sale of the Senior Notes and the MLP Units in amounts and on
such terms and conditions as are acceptable to the Agent and the Banks in their
sole and absolute discretion (collectively, the "Reorganization").
--------------
(m) Trading Policies. The commodities trading and supply policies as
----------------
in effect on the Closing Date, as evidenced by the written policies delivered to
the Agent, shall be satisfactory to the Agent and the Majority Banks.
(n) Other Documents. Such other approvals, opinions, documents or
---------------
materials as the Agent or any Bank may request.
5.02 Conditions to All Credit Extensions. 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 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 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 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
as of such earlier date);
(c) No Existing Default. No Default or Event of Default shall exist
-------------------
or shall result from such Borrowing, continuation or conversion or Issuance; and
(d) Facility B Revolving Loans. With respect only to Borrowings of
--------------------------
Facility B Revolving Loans and in addition to all other terms and conditions set
forth herein, the amount of such Borrowing shall not exceed the excess, if any,
of (i) the sum of
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the aggregate Cash Costs of Permitted Acquisitions by the Borrower and its
Subsidiaries from the Closing Date through the Borrowing Date plus the aggregate
Growth-Related Capital Expenditures by the Borrower and its Subsidiaries during
such period, over (ii) the sum of (x) the aggregate Net Proceeds of Asset Sales
received by the Borrower and its Subsidiaries during the period from the Closing
Date through the Borrowing Date plus (y) the aggregate Net Proceeds from MLP New
Unit Sales from the Closing Date through the Borrowing Date plus (z) the
Effective Amount of Facility B Revolving Loans outstanding on the Borrowing Date
(without regard to such Borrowing), and the Borrower shall have delivered to the
Agent a Maximum Amount Certificate dated the Borrowing Date which shall
demonstrate compliance with the foregoing test.
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, the General Partner and Stratton represents and
warrants to the Agent and each Bank that:
6.01 Corporate or Partnership Existence and Power. The General Partner,
--------------------------------------------
Stratton, 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
in the manner contemplated by the Registration Statements and to execute,
deliver, and perform its obligations under the Loan Documents and such
additional obligations as are contemplated by the Registration Statements;
(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
not have a Material Adverse Effect; and
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(d) is in compliance with all material Requirements of Law.
6.02 Corporate or Partnership Authorization; No Contravention. The
--------------------------------------------------------
execution, delivery and performance by the Borrower, the General Partner and
Stratton of this Agreement and each other Loan Document to which the General
Partner, the MLP, the Borrower or any Subsidiary is party, have been duly
authorized by all necessary partnership action on behalf of the Borrower and the
MLP 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.
6.03 Governmental Authorization. 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
consummation of the Reorganization according to the terms and conditions
described in the Registration Statements and in accordance with applicable law,
(b) 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 (c) the continued operation of Borrower's business as
contemplated to be conducted after the date hereof by the Loan Documents and the
Registration Statements 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), (b) or (c) 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), (b)
or (c), (iv) that, if not obtained, could reasonably be expected to have a
Material Adverse Effect.
6.04 Binding Effect. This Agreement and each other Loan Document to which
--------------
the General Partner, the Borrower or any
65
<PAGE>
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.
6.05 Litigation. Except as specifically disclosed in Schedule 6.05, 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, the Registration Statements 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 any of the transactions contemplated by the Registration Statements, or
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
6.06 No Default. 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 Closing 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 Closing Date, create an Event of Default under subsection
9.01(e) other than a default under Section 4.09 of the Indenture relating to the
Existing Senior Notes.
6.07 ERISA Compliance. (a) Except as specifically disclosed in Schedule
---------------- --------
6.07, 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,
nothing has occurred which would cause the loss of such qualification.
(b) There are no pending, or to the best knowledge of Borrower,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has
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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) Except as specifically disclosed in Schedule 6.07, 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.
(e) Except as specifically disclosed in Schedule 6.07, 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) Except as specifically disclosed in Schedule 6.07, 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) 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. 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.
6.08 Use of Proceeds; Margin Regulations. 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.
6.09 Title to Properties. Except as set forth in Schedule 6.09 hereto or
------------------- -------------
provided for in Section 7.05, the Borrower and each Subsidiary have (or will
have within the time period specified in Section 7.05) good record and
marketable title in fee simple to, or valid leasehold interests in, all real
property necessary or used in the ordinary conduct 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 Closing Date and subject to the
preceding sentence, the property of the Borrower and its Subsidiaries is subject
to no Liens other than Permitted Liens.
6.10 Taxes. The General Partner has filed all Federal and other material
-----
tax returns and reports required to be filed, for
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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 except with respect to the Tax Audit as described in
Schedule 6.10 hereof.
- -------------
6.11 Financial Condition. (a) The audited consolidated financial
-------------------
statements of the General Partner and its Subsidiaries dated April 30, 1994, and
the pro forma consolidated financial statements of the Borrower dated
____________, 1994, 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) except as specifically disclosed in Schedule 6.11, 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, 1994, 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 the Reorganization and each of the other
transactions contemplated by the Loan Documents, and any Acquisitions; and each
of such Persons delivered fair consideration for all assets acquired by it in
connection with the Reorganization and such transactions and Acquisitions, in
each case in arm's length transactions.
6.12 Environmental Matters. 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, except as specifically
disclosed in Schedule 6.12, such Environmental Laws and Environmental Claims
-------------
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
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6.13 Regulated Entities. 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.
6.14 No Burdensome Restrictions. 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.
6.15 Copyrights, Patents, Trademarks and Licenses, etc. The Borrower or
-------------------------------------------------
its Subsidiaries own or are licensed or otherwise has 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. Except as
specifically disclosed in Schedule 6.05, no claim or litigation regarding any of
-------------
the foregoing is pending or 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.
6.16 Subsidiaries and Affiliates. 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.
- -------------
6.17 Insurance. Except as specifically disclosed in Schedule 6.17, 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.
6.18 Tax Status. The Borrower is subject to taxation under the Code only
----------
as a partnership and not as a corporation.
6.19 Full Disclosure. None of the representations or warranties made by
---------------
the Borrower or any Affiliate of the Borrower
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<PAGE>
in the Loan Documents or any of the Registration Statements 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 or the Registration Statements (including the other
offering and disclosure materials delivered by or on behalf of the Borrower to
the Banks prior to the Closing Date), 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.
6.20 Fixed Price Supply Contracts. None of the Borrower and its
----------------------------
Subsidiaries is a party to any contract for the supply of propane or other
product in which the price is set without reference to a spot index or indices
substantially contemporaneously with the delivery of such product, other than
_______________.
6.21 Trading Policies. The Borrower has provided to the Agent an accurate
----------------
and complete summary of its commodities trading policies and supply policies and
the Borrower has complied in all respects with such policies.
ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
So long as any Bank shall have any 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:
7.01 Financial Statements. The Borrower shall deliver to the Agent, in
--------------------
form and detail satisfactory to the Agent and the Majority Banks and, in any
event at least, consistent with the form and detail of financial statements and
projections provided to the Agent by the Borrower and its Affiliates prior to
the Closing 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, 1994), 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
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<PAGE>
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, 1994), 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, 1994),
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; and
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<PAGE>
(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, 1994, 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 Section
7.01(a)).
7.02 Certificates; Other Information. The Borrower shall furnish to the
-------------------------------
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 Agent and Majority Banks shall require;
(c) concurrently with the delivery of the financial statements
referred to in subsections 7.01(a) and (b), and at such other times as the Agent
shall request in its sole discretion from time to time or as the Borrower shall
provide in its discretion, a certificate (a "Maximum Amount Certificate")
--------------------------
executed by a Responsible Officer pursuant to which the Borrower shall certify
to the Agent, for the benefit of the Banks and in such form and detail as the
Agent shall request and in each case, compared to the applicable amounts set
forth in the previously delivered Maximum Amount Certificate, (i) the aggregate
Cash Costs of all Permitted Acquisitions by the Borrower and its Subsidiaries
(together with the aggregate amount of any Acquired Debt and seller financing
associated therewith and the amount of such Cash Costs which were or could have
been financed with Facility B Revolving Loans) during the periods from the
Closing Date to the date that is 270 days prior to the date of such Maximum
Amount Certificate (the "Hold Period Date"), and from the Hold Period Date
----------------
through the date of the such Maximum Amount Certificate, and the total amount;
(ii) the aggregate Growth-Related Capital Expenditures by the Borrower and its
Subsidiaries during the period from the Closing Date through the date of such
Maximum Amount Certificate; (iii) the aggregate Net Proceeds of Asset Sales
during the periods from the Closing Date through the Hold Period Date and from
the Hold Period Date through the date of such Maximum Amount Certificate, and
the total; (iv) the
72
<PAGE>
aggregate Net Proceeds of MLP New Unit Sales during the period from the Closing
Date through the date of such Maximum Amount Certificate; and (v) a calculation
of the Facility B Maximum Amount as of the date of such Maximum Amount
Certificate, based on the information contained therein.
(d) promptly, copies of all financial statements and reports that the
Borrower, the General Partner, the MLP or Finance Corp. or any other 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 Finance Corp. or any other Subsidiary may make to, or file with, the SEC; and
(e) promptly, such additional information regarding the business,
financial or corporate affairs of the Borrower, the General Partner, the MLP or
Finance Corp. or any other Subsidiary as the Agent, at the request of any Bank,
may from time to time request.
7.03 Notices. The Borrower shall promptly notify the Agent and each Bank:
-------
(a) of the occurrence of any Default or Event of 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 Finance Corp. or any other Subsidiary; (ii) any dispute,
litigation, investigation, proceeding or suspension between the Borrower, the
General Partner, the MLP or Finance Corp. or any other 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 Finance Corp. or any other Subsidiary, including pursuant to
any applicable Environmental Laws;
(c) of any of the following events affecting the Borrower, the
General Partner, the MLP or Finance Corp. or any other 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;
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<PAGE>
(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; and
(d) of any material change in accounting policies or financial
reporting practices by the Borrower or any of its consolidated Subsidiaries.
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.
7.04 Preservation of Corporate or Partnership Existence, Etc. 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;
(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.
7.05 Maintenance of Property. 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
74
<PAGE>
typical in the industry in the operation and maintenance of its facilities. By
December 31, 1994, the Borrower shall have good and marketable title to all
material properties and other assets which by the terms of the Reorganization
are to be transferred to the Borrower and its Subsidiaries.
7.06 Insurance. 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.
7.07 Payment of Obligations. The Borrower, the General Partner and
----------------------
Stratton 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 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 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.
7.08 Compliance with Laws. 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.
7.09 Inspection of Property and Books and Records. 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 Agent or any Bank to visit
and inspect any of their respective properties, to
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<PAGE>
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 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.
7.10 Environmental Laws. The Borrower shall, and shall cause each
------------------
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws.
7.11 Use of Proceeds. The Borrower (and Stratton, with respect to Letters
---------------
of Credit) shall use the proceeds of the Facility A Revolving Loans and Facility
B Revolving Loans for working capital and other general partnership purposes, in
each case not in contravention of any Requirement of Law or of any Loan
Document; the Borrower shall use the proceeds of the Facility B Term Loans for
the purpose of repaying up to $25,000,000 in outstanding amount of Existing Debt
on the Closing Date; and the Borrower shall use the proceeds of all Facility B
Takeout Loans to repay up to all of the aggregate outstanding principal amount
of the Facility B Loans on the Revolving Termination Date.
7.12 Financial Covenants.
-------------------
(a) Leverage Ratio. The Borrower shall maintain as of the last day
--------------
of each fiscal quarter a Leverage Ratio for the fiscal period consisting of such
fiscal quarter and the three immediately preceding fiscal quarters, equal to or
less than 4.00 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.
(b) Minimum Partners' Equity. The Borrower shall maintain at all
------------------------
times a minimum Partners' Equity of not less than [$50,000,000].
7.13 Officer Loans. The Borrower shall cause the loans made by the
-------------
General Partner or its Affiliates to James Ferrell or his Affiliates listed in
Schedule 7.13 to be repaid within 60 days after the Closing Date.
- -------------
7.14 Trading Policies. The Borrower and its Affiliates shall comply with
----------------
the Borrower's trading policy and supply policy guidelines as in effect on the
Closing Date, copies of which have
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<PAGE>
been provided to the Agent on or prior to the Closing Date. Not later than 45
days after the end of each fiscal quarter, the Borrower shall deliver to the
Agent a summary of its trading activities for such quarter, including
__________.
7.15 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
Reorganization and each of the other 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, and will
retain sufficient assets upon the consummation of the transactions contemplated
by the Registration Statements and from time to time thereafter to pay, in full,
the maximum potential liability of the General Partner under or in connection
with the Tax Audits. The General Partner shall advise the Agent in writing from
time to time of all material developments in connection with the Tax Audit,
including, without limitation, any material change in the maximum potential
liability of the General Partner in connection therewith or any material change
in the amount of assets retained by the General Partner regarding such liability
pursuant to this Section 7.15.
(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 MLP Partnership Agreement or the Borrower's 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 and its Affiliates.
(d) The General Partner agrees that, until all Obligations hereunder
shall have been repaid in full and all
77
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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.
7.16 Other Stratton Obligations. Stratton shall not engage in any
--------------------------
business other than [the insurance business].
7.17 Monetary Judgments. 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.
7.18 Maintenance of Subsidiary. The Borrower agrees at all times to
-------------------------
maintain Stratton as a Wholly-Owned Subsidiary.
ARTICLE VIII
NEGATIVE COVENANTS
------------------
So long as any Bank shall have any 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:
8.01 Limitation on Liens. 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 Closing Date set forth in Schedule 8.01;
-------------
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(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
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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) financing statements filed or recorded 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, provided that such financing
--------
statements are filed or recorded solely in connection with such leases and not
the borrowing of money or the obtaining of advances or credit or Capital Lease
Obligations;
(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 Agent, any Issuing Bank and the Banks
relating to the Cash Collateralization of the Borrower's Obligations.
8.02 Asset Sales. The Borrower shall not, and shall not permit any of
-----------------
its Subsidiaries to, (i) sell, lease, convey or
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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 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
8.14 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.
8.03 Consolidations and Mergers.
--------------------------
(a) The Borrower shall not consolidate or merge with or into (whether
or not the Borrower is the surviving corporation), 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
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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 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 pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test.
(b) Finance Corp. may not consolidate or merge with or into (whether
or not Finance Corp. 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 such
transaction shall be permitted under the terms and conditions of the Indenture.
(c) The Borrower or Finance Corp., as the case may be, shall deliver
to the 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 Agent stating that the proposed transaction complies with this Agreement.
The 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
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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.
8.04 Acquisitions. 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 Acquisitions are 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.
8.05 Limitation on Indebtedness. The Borrower shall not, and shall not
--------------------------
permit any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with respect
to (collectively, "incur") any Indebtedness (including Acquired Debt) 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 may incur Indebtedness and any Subsidiary of the Borrower may incur
Acquired Debt if:
(a) the Fixed Charge Coverage Ratio 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 additional
Indebtedness is incurred would have been at least 2.75 to 1 if such date is
on or prior to July 31, 1996 and 3.00 to 1 if such date is after July 31,
1996, in each case, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred at the beginning of such four-quarter
period; and
(b) either (x) such Indebtedness shall be subordinated in right of
payment to the Obligations and no principal payment thereon shall be
required prior to July 1, 2000, whether upon stated maturity, mandatory
prepayment, acceleration or otherwise, or (y) such Indebtedness shall be
Permitted Senior Debt and the Senior Debt Ratio Test shall have been met at
the time of incurrence thereof.
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The foregoing limitations of this Section 8.05 will not apply to: (i)
the Indebtedness represented by the Senior Notes and any Subsidiary Note
Guarantees; (ii) the Obligations; (iii) the incurrence by the Borrower of
Indebtedness in respect of Capitalized Lease Obligations in an aggregate
principal amount not to exceed $15,000,000; (iv) the Existing Indebtedness; (v)
the incurrence by the Borrower or any of its Subsidiaries of Permitted
Refinancing Indebtedness in exchange for, or the proceeds of which are used to
extend, refinance, renew, replace, defease or refund any then outstanding
Indebtedness of the Borrower on such Subsidiary not incurred in violation of
this Agreement; (vi) Hedging Obligations with respect to any floating rate
Indebtedness that is permitted by the terms of this Agreement to be outstanding;
(vii) Indebtedness of any Subsidiary of the Borrower to the Borrower [or any of
its Wholly-Owned Subsidiaries]; (viii) the incurrence by the Borrower or
Stratton of Indebtedness owing directly to its insurance carriers (without
duplication) in connection with the Borrower's, its Subsidiaries' or its
Affiliates' self-insurance programs or other similar forms of retained insurable
rights for their respective retail propane businesses, consisting of reinsurance
agreements and indemnification agreements (and guarantees of the foregoing)
secured by Letters of Credit, provided that the Indebtedness evidenced by such
reinsurance agreements, indemnification agreements, guarantees and Letters of
Credit shall be counted (without duplication) for purposes of all calculations
pursuant to the Fixed Charge Coverage Ratio test; (ix) Surety Instruments
required in the ordinary course of business or in connection with the
enforcement of rights or claims of the Borrower or any of its Subsidiaries or in
connection with judgments that do not result in a Default or Event of Default;
(x) subject to the provisions of Section 8.04, the incurrence by the Borrower
(or any Subsidiary of the Borrower that is a Guarantor) of Indebtedness in
connection with Acquisitions of retail propane businesses in favor of the
sellers of such businesses in a principal amount not to exceed $15,000,000 in
any fiscal year or $45,000,000 in the aggregate outstanding at any one time,
provided that the principal amount of such Indebtedness incurred in connection
- --------
with any such acquisition shall not exceed the fair market value of the assets
so acquired, and the Borrower shall deliver an officer's certificate to the
Agent, signed by a Responsible Officer, stating that the acquiring Person is
Solvent, both before and after giving effect to the Acquisition; and (xi) in
addition to the Indebtedness permitted under the foregoing clauses (i) through
(x), the incurrence by the Borrower of Indebtedness in an aggregate principal
amount outstanding not to exceed $15,000,000 at any time, provided that any
--------
Indebtedness incurred pursuant to this clause (xi) shall be subordinated in
right of payment to the Obligations and no principal payment thereon shall be
required prior to July 1, 2000, whether upon stated maturity, mandatory
prepayment, acceleration or otherwise.
The "Senior Debt Ratio Test" will be met with respect to the
incurrence of any Indebtedness by the Borrower or any
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Subsidiary of the Borrower if the ratio of (1) the aggregate outstanding
principal amount of Senior Debt on the date of and after giving effect to the
incurrence of such Indebtedness (the "Incurrence Date") to (2) Consolidated Cash
Flow for the Borrower's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the Incurrence
Date would have been 2.50 to 1 or less. For purposes of the computation in
clause (1) of the foregoing sentence, the outstanding principal amount of
Indebtedness under this Agreement shall be deemed to equal the aggregate amount
of the Commitments hereunder. The foregoing 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
operations that have been made by the Borrower or any of its Subsidiaries during
the four-quarter reference period or subsequent to such reference period and on
or prior to the Incurrence Date in the manner set forth in the definition of
Leverage Ratio.
For purposes of this Section 8.05, any revolving Indebtedness (under
this Agreement or otherwise) shall be deemed to have been incurred only at such
time at which the agreements and instruments (or any amendments thereto that
increase the amount of such revolving Indebtedness) are executed, in an amount
equal to the maximum amount of such revolving Indebtedness permitted to be
borrowed thereunder.
8.06 Transactions with Affiliates. 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 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
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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 or
Stratton 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.
8.07 Use of Proceeds. 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.
8.08 Use of Proceeds - Ineligible Securities. 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 during
any period in which the Arranger 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
(iii) to make payments of principal or interest on Ineligible Securities
underwritten or privately placed by the Arranger and issued by or for the
benefit of the Borrower or any Affiliate of the Borrower.
8.09 Contingent Obligations. 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 on the
Closing Date as submitted to the Agent, Hedging Obligations entered into in the
ordinary course of business as bona fide hedging transactions;
(c) Contingent Obligations of the Borrower and its Subsidiaries
existing as of the Closing Date and listed in Schedule 8.09; and
-------------
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(d) Subsidiary Note Guaranties, under the terms and conditions set
forth in the Indenture and the Guaranties hereunder.
8.10 Joint Ventures. The Borrower shall not, and shall not suffer or
--------------
permit any Subsidiary to enter into any Joint Venture.
8.11 Lease Obligations. The aggregate obligations of the Borrower and its
-----------------
Subsidiaries for the payment of rent for any property under lease or agreement
to lease for any [fiscal year] [twelve month period] shall not exceed the
greater of $15 million or 15% of Consolidated Cash Flow for such [fiscal year]
[twelve-month period].
8.12 Restricted Payments. 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 Stock) of the Borrower, (y) dividends or distributions
payable to the Borrower or a Wholly-Owned Subsidiary of the Borrower 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; (iii) purchase, redeem, call or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Obligations; (iv)
make any Investment other than a Permitted Investment; or (v) prepay, purchase,
redeem, retire, defease or refinance the Senior Notes, (all such payments and
other actions set forth in clauses (i) through (v) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to 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
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evidenced by a resolution in an officer's certificate signed by a
Responsible Officer and delivered to the Agent), together with the
aggregate of all other Restricted Payments (including any Restricted
Payments permitted by the provisions, other than clause (iv), of the
immediately succeeding paragraph) made by the Borrower and its Subsidiaries
in the fiscal quarter during which such Restricted Payment is made
(including Restricted Payments permitted by the next succeeding paragraph),
shall not exceed the amount of Available Cash of the Borrower for the
immediately preceding fiscal quarter (or, with respect to the first fiscal
quarter during which Restricted Payments are made, the amount of Available
Cash of the Borrower for the period commencing on the date of this
Indenture and ending on the last day of the immediately preceding fiscal
quarter); provided that for purposes of this clause (c), the principal
--------
amount of any working capital Indebtedness (net of repayments) incurred by
the Borrower during the first 45 days of any fiscal quarter (including
Swingline Loans and Facility A Revolving Loans) may be included in the
amount of Available Cash for the immediately preceding fiscal quarter so
long as (i) the Borrower would have been permitted to incur such working
capital Indebtedness on the last day of such immediately preceding fiscal
quarter under the terms of this Agreement and any other agreements and
instruments governing its outstanding Indebtedness on such date and (ii)
the principal amount of such working capital Indebtedness so included (but
not reborrowings thereof after repayment) shall be excluded from the amount
of Available Cash for purposes of determining the amount of Restricted
Payments permitted in any subsequent fiscal quarter; and provided, further,
-------- -------
that for purposes of this clause (c), the amount of any cash receipts of
the Borrower during the first 45 days of any fiscal quarter may be included
in the amount of Available Cash for the immediately preceding fiscal
quarter so long as (i) the amount so included does not exceed the lesser of
(A) the amount of unused available working capital Indebtedness that the
Borrower would have been permitted to incur on the last day of such
immediately preceding fiscal quarter under the terms of this Agreement and
instruments governing its outstanding Indebtedness on such date and (B) the
amount of unused available working capital Indebtedness that the Borrower
would have been permitted to incur on the 45th day of such fiscal quarter
under the terms of this Agreement on such date and (ii) the amount of such
cash receipts so included shall be excluded from the amount of Available
Cash for purposes of determining the amount of Restricted Payments
permitted in any subsequent fiscal quarter.
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
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with the provisions of this Agreement; (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); (iii) the defeasance,
redemption or repurchase of subordinated Indebtedness with the proceeds of
Permitted Refinancing Indebtedness; (iv) the defeasance, redemption or
repurchase of any Existing Subordinated Debentures of the General Partner
outstanding on the date of this Agreement and the payment of all costs and
expenses in connection therewith; and (v) any payment of Excess Proceeds to the
holders of the Senior Notes pursuant to the provisions of Section 8.02(b).
Not later than the date of making any Restricted Payment, the General
Partner shall deliver to the 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.
8.13 Dividend and Other Payment Restrictions Affecting Subsidiaries. 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 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)
the Indenture and the 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 the 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
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ordinary course of business that impose restrictions of the nature described in
clause (d) above on the property so acquired, or (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.
8.14 Change in Business. 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.
8.15 Accounting Changes. 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.
8.16 Limitation on Sale and Leaseback Transactions. 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 Fixed Charge Coverage Ratio Test set forth in
paragraph (a) of Section 8.05 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 useful remaining life of such property.
8.17 Restrictions On Nature Of Indebtedness And Activities Of Finance
----------------------------------------------------------------
Corp. Notwithstanding the provisions of Section 8.05 hereof, Finance Corp.
- -----
shall not incur any Indebtedness unless (a) the Borrower is a co-obligor or
guarantor of such Indebtedness or (b) the net proceeds of such Indebtedness are
lent to the Borrower, used to acquire outstanding debt securities issued by the
Borrower or used directly or indirectly to refinance or discharge Indebtedness
permitted under the limitations of this paragraph. Finance Corp. shall not
engage in any business not related directly or indirectly to obtaining money or
arranging financing for the Borrower.
8.18 Amendments of Organization Documents or Indenture. 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 MLP, Borrower or any Subsidiary of the Borrower, the
Indenture, any
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Senior Note, any Existing Subordinated Debenture or any document executed and
delivered in connection with any of the foregoing, in each case without the
prior written consent of the Agent and the Majority Banks.
8.19 Fixed Price Supply Contracts. 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 in which the price is set without reference
to a spot index or indices substantially contemporaneously with the delivery of
such product, other than ____________________.
8.20 Operations through Subsidiaries. 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 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 trade debt; (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 100% of the consolidated
value of the assets of the Borrower and its Subsidiaries for such fiscal year,
as determined in accordance with GAAP.
8.21 Operations of MLP. 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 8.21, 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,
the Borrower shall have first obtained at its expense an opinion from a
nationally recognized investment banking firm, addressed to it, the Agent and
the Banks and opining without qualification and based on assumptions that are
realistic at the time as determined by the Majority Banks in their reasonable
discretion, 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, the Agent shall have first retained,
at the Borrower's expense, an investment banking firm on behalf of the Banks who
shall also
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have rendered an opinion containing the statements and content referred to in
clause (i).
8.22 Senior Note Purchase Offer. The Borrower shall not make any
--------------------------
Purchase Offer (as defined in the Indenture) to holders of Senior Notes unless
the Borrower shall have terminated the Facility A Commitment and the Facility B
Commitment and there shall then exist no Default or Event of Default.
ARTICLE IX
EVENTS OF DEFAULT
-----------------
9.01 Event of Default. Any of the following shall constitute an "Event of
---------------- --------
Default":
- -------
(a) Non-Payment. The Borrower 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 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, 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, 7.14, 7.17 or in any Section in Article
VIII; or
(d) Other Defaults. The Borrower 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 Agent or any Bank; or
(e) Cross-Default. The Borrower 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
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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, excluding any
acceleration of maturity of Indebtedness represented by the Existing Senior
Notes to the extent that such Indebtedness shall be redeemed on or prior to the
40th day after the Closing Date; 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
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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 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 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) Indenture Cross-Defaults. 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 Indenture; 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.
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9.02 Remedies. If any Event of Default occurs, the 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 Agent, any Issuing Bank or any Bank.
9.03 Rights Not Exclusive. 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.
9.04 Certain Financial Covenant Defaults. 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
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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 Agent its audited annual or unaudited quarterly
financial statements in respect of such fiscal period reflecting such Charge as
taken.
ARTICLE X
THE AGENT
---------
10.01 Appointment and Authorization. (a) Each of the Banks and each
-----------------------------
Issuing Bank hereby irrevocably appoints, designates and authorizes the 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 Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the 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 Agent.
(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 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 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 "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.
10.02 Delegation of Duties. The 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 Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
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10.03 Liability of Agent and Issuing Banks. 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 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.
10.04 Reliance by Agent and Issuing Banks. (a) The 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 Agent or applicable Issuing Bank. The 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 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 Agent or an Issuing Bank to such
Bank for consent, approval, acceptance or satisfaction, or required
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thereunder to be consented to or approved by or acceptable or satisfactory to
the Bank.
10.05 Notice of Default. The 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 Agent for the account of the Banks, unless the 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 Agent will notify the Banks of its receipt of any such
notice. The 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 Agent has received any such
-------- -------
request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Banks.
10.06 Credit Decision. 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 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 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 expressly herein required to be furnished to the Banks by the Agent or
any Issuing Bank, neither the 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.
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10.07 Indemnification. 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, 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 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 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 Agent or any Issuing Bank.
10.08 Agent in Individual Capacity. 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 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 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
Agent or an Issuing Bank.
10.09 Successor Agent. The Agent may, and at the request of the Majority
---------------
Banks shall, resign as Agent upon 30 days' notice to the Banks. If the 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 Agent, the 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 Agent and the term "Agent" shall mean such successor
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agent and the retiring Agent's appointment, powers and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as 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 Agent
under this Agreement. If no successor agent has accepted appointment as Agent
by the date which is 30 days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become effective
and the Banks shall perform all of the duties of the 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
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.
10.10 Withholding Tax. (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 Agent, to deliver to
the 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 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 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; 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 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
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participation in, or otherwise transfers all or part of the Obligations of the
Borrower to such Bank, such Bank agrees to notify the 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 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 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 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 Agent, then the 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 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 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 Agent fully for all amounts paid, directly
or indirectly, by the Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the 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 Agent.
ARTICLE XI
MISCELLANEOUS
-------------
11.01 Amendments and Waivers. 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
Agent at the written request of the Majority Banks) and the Borrower and
acknowledged by the Agent, and then any such waiver or consent shall be
effective only in the specific instance and
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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 Agent, do
any of the following:
(a) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to Section 8.02);
(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 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 Agent in addition
to the Majority Banks or all the Banks, as the case may be, affect the rights or
duties of the 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.
11.02 Notices. (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 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
102
<PAGE>
address as shall be designated by such party in a written notice to the Borrower
and the 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 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 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 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 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 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 Agent
and the Banks to receive written confirmation of any telephonic or facsimile
notice or the receipt by the Agent and the Banks of a confirmation which is at
variance with the terms understood by the Agent and the Banks to be contained in
the telephonic or facsimile notice.
11.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay
------------------------------
in exercising, on the part of the Agent or any Bank, any right, remedy, power or
privilege hereunder, 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.
11.04 Costs and Expenses. The Borrower shall:
------------------
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent and an
Issuing Bank) within five Business Days after demand (subject to subsection
5.01(e)) for all costs and expenses incurred by BofA (including in its capacity
as Agent and an Issuing Bank) in connection with the development, preparation,
delivery, administration and execution of, and any amendment, supplement, waiver
or modification to (in each case, whether or not consummated), this Agreement,
any Loan Document and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby,
103
<PAGE>
including reasonable (giving due regard to the prevailing circumstances)
Attorney Costs incurred by BofA (including in its capacity as Agent and an
Issuing Bank) with respect thereto; and
(b) pay or reimburse the 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).
11.05 Indemnity. Whether or not the transactions contemplated hereby are
---------
consummated, the Borrower shall indemnify and hold the Agent-Related Persons,
the Issuing Banks, 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 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 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.
11.06 Payments Set Aside. To the extent that the Borrower makes a payment
------------------
to the Agent or the Banks, or the 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
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any
104
<PAGE>
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
Agent upon demand its pro rata share of any amount so recovered from or repaid
by the Agent.
11.07 Successors and Assigns. 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 Agent and each Bank. Any attempted or purported assignment in
contravention of the preceding sentence shall be null and void.
11.08 Assignments, Participations, Etc. (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 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 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 Commitments, the L/C Obligations and the other rights and obligations
of such Bank hereunder with respect to Facility A and Facility B, in an
aggregate minimum amount of $10,000,000, pro-rated between Facility A and
Facility B; 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 Assigners on the
time and subject to the conditions set forth herein; and provided, further,
-------- -------
however, that the Borrower and the 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 Agent by such Bank and the
Assignee; (ii) such Bank and its Assignee shall have delivered to the Borrower
and the 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 or Assignee has paid to the Agent a processing fee
in the amount of $3,500.
(b) From and after the date that the 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
105
<PAGE>
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
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 Agent, new Notes evidencing such Assignee's
assigned Loans and Commitment and, if the assignor Bank has retained a portion
of its Loans and its Commitment 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 Commitments arising therefrom. The
Commitment allocated to each Assignee shall reduce such Commitments of the
assigning Bank pro tanto and the 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 Commitment 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 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
106
<PAGE>
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 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 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 (S)203.14, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.
11.09 Set-off. 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
107
<PAGE>
(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 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 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.
[11.10 Automatic Debits of Fees]. With respect to any commitment fee,
------------------------
arrangement fee, letter of credit fee or other fee, or any other cost or expense
(including Attorney Costs) due and payable to the Agent, any Issuing Bank, BofA
or the Arranger under the Loan Documents, the Borrower hereby irrevocably
authorizes BofA to debit any deposit account of the Borrower with BofA in an
amount such that the aggregate amount debited from all such deposit accounts
does not exceed such fee or other cost or expense. If there are insufficient
funds in such deposit accounts to cover the amount of the fee or other cost or
expense then due, such debits will be reversed (in whole or in part, in BofA's
sole discretion) and such amount not debited shall be deemed to be unpaid. No
such debit under this Section shall be deemed a set-off.]
11.11 Notification of Addresses, Lending Offices, Etc. Each Bank shall
------------------------------------------------
notify the 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 Agent shall reasonably request.
11.12 Counterparts. 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.
11.13 Severability. 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.
11.14 No Third Parties Benefited. This Agreement is made and entered into
--------------------------
for the sole protection and legal benefit of the Borrower, the Banks, the Agent
and the Agent-Related Persons, 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.
108
<PAGE>
11.15 Governing Law and Jurisdiction. (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 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 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 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 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.
11.16 Waiver of Jury Trial. THE BORROWER, THE BANKS AND THE 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
BANKS AND THE 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.
11.17 Entire Agreement. From and after the Closing 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 Banks and
the Agent, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
109
<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.,
as Borrower
By: Ferrellgas, Inc.,
General Partner
By: ______________________
Title: ___________________
By: ______________________
Title: ___________________
FERRELLGAS, INC.,
as General Partner
By: ______________________
Title: ___________________
By: ______________________
Title: ___________________
STRATTON INSURANCE COMPANY
By: ______________________
Title: ___________________
110
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: _________________________
Title: ______________________
Address for notices:
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attn: Global Agency #5596
Facsimile:
Tel:
Address for payments:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Issuing Bank
By: _________________________
Title: ______________________
By: _________________________
Title: ______________________
Address for notices:
International Trade
Banking Division #5655
333 S. Beaudry Ave., 19th Floor
Los Angeles, CA 90017
Copies to:
111
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By: _________________________
Title: ______________________
Address for notices:
Domestic and Eurodollar Lending Office:
1850 Gateway Boulevard
Concord, CA 94520
[OTHER BANKS]
112
<PAGE>
SCHEDULE 2.01
-------------
<TABLE>
<CAPTION>
Facility A Facility B Commitment
-------------------------------------------------
Tranche I Tranche II Pro Rata
Bank Commitment Term Loan Revolving Loans Total Share
- ------------ --------------- -------------- ---------------- ----- -----
<S> <C> <C> <C> <C> <C>
Bank of
America __________ __________ ________*
_________ __________ __________ ________*
_________ __________ __________ ________*
Total: $100,000,000.00 $25,000,000.00 $60,000,000*
</TABLE>
* Any unused portion of a Bank's Facility B Term Loan Commitment or any
amount of the Facility B Term Loan prepaid within 45 days of the Closing
Date as a result of the partial or full exercise of the underwriters'
overallotment option, as described in the MLP Registration Statement, will
be transferred to such Bank's Facility B Revolving Loan Commitment on the
Closing Date pursuant to the terms and subject to the conditions set forth
in Section _____.
113
<PAGE>
SCHEDULE 6.10
-------------
[Description of 1986 and 1987 IRS audits of the General Partner, and scope
of potential liability.]
114
<PAGE>
SCHEDULE 11.02
--------------
EURODOLLAR AND DOMESTIC LENDING OFFICES,
----------------------------------------
ADDRESSES FOR NOTICES
---------------------
Attention:
Telephone:
Facsimile:
BANK OF AMERICA NATIONAL TRUST
- ------------------------------
AND SAVINGS ASSOCIATION,
- -----------------------
as Agent
Bank of America National Trust
and Savings Association
Global Agency #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention:
Vice President
Telephone: (415) 622-
Facsimile: (415) 622-4894
BANK OF AMERICA NATIONAL TRUST
- ------------------------------
AND SAVINGS ASSOCIATION,
- -----------------------
as a Bank
Domestic and Eurodollar Lending Office:
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Bank of America National Trust
and Savings Association
[Address]
115
<PAGE>
EXHIBIT C
---------
COMPLIANCE CERTIFICATE
1. Financial covenant compliance
- Consolidated Cash Flow (rolling four quarters)
- Funded Debt
- Leverage Ratio / Level
- Partners' Equity
- Amount of additional Indebtedness that the Borrower may incur
2. [No Default or Event of Default]
3. Attached hereto is a summary of results of the customer satisfaction survey
for the quarter, if any, conducted by or on behalf of the General Partner.
C-1
<PAGE>
EXHIBIT H
---------
[FORM OF COMMERCIAL LETTER OF CREDIT]
[ISSUING BANK]
_______________(1)_________________
Irrevocable Letter of Credit Number (2)
(3)
Ladies and Gentlemen:
We hereby open our irrevocable documentary letter of credit number (2)
in your favor and authorize you to draw at sight on [Issuing Bank] [location],
(4)(5)(6) for the account of (7).
Drafts are to be accompanied by:
1. This Letter of Credit.
2. Original of (8).
Partial drawings and/or shipments are permitted.
This Letter of Credit expires (9) at our counters.
Drafts under this Letter of Credit must bear on their face the clause
"Drawn under the [Issuing Bank] Letter of Credit Number (2) dated (1)".
We hereby agree with bona fide holders that all drafts under and in
compliance with the terms of this credit will be duly honored upon compliance if
presented on or before the expiration date.
This credit is subject to the Uniform Customs and Practice for
Documentary Credit (1993 Revision in force as from January 1, 1994)
International Chamber of Commerce Publication No. 500.
Best Regards,
[ISSUING BANK]
By: ___________________________________
Title: ________________________________
H-1
<PAGE>
______________________________
(1) Date of Letter of Credit.
(2) Letter of Credit Number.
(3) Name and address of Beneficiary.
(4) Insert one of the phrases identified in clauses (a) through (d):
a. an amount
b. up to an amount of US$ (5)(6)
c. approximately US$ (5)(6)
d. US$ (5)(6), plus or minus [insert number]%
(5) Aggregate initial stated amount of Letter of Credit.
(6) Aggregate initial stated amount of Letter of Credit stated in words.
(7) Ferrellgas, L.P.
(8) Description of applicable invoice and/or product movement documentation.
(9) Insert a date not later than 90 days from the date of issuance.
H-2
<PAGE>
EXHIBIT I
---------
[FORM OF STANDBY LETTER OF CREDIT]
[ISSUING BANK]
_______________(1)_________________
Irrevocable Letter of Credit Number (2)
(3)
Ladies and Gentlemen:
We hereby open our irrevocable standby letter of credit number (2) in
your favor and authorize you to draw at sight on [Issuing Bank] [location],
(4)(5)(6) for the account of (7).
Drafts are to be accompanied by:
1. This Letter of Credit.
OPTIONAL: 2. Copy of (8).
- --------
3. A signed statement by an authorized officer of (3) certifying
that the product has been delivered and that although the invoice(s) presented
under this Letter of Credit was (were) due according to contract terms, (7)
failed to make payment and payment remains outstanding at time of drawing.
Partial drawings and/or shipments are permitted.
This Letter of Credit expires (9) at our counters.
Drafts drawn under this Letter of Credit must bear on their face the
clause "Drawn under the [Issuing Bank] Letter of Credit Number (2) dated (1)".
OPTIONAL: The amount available for drawing under this letter of credit will be
- --------
reduced by the amount of any payments made outside the letter of
credit to _______________ for this product if such payments are made
by [Issuing Bank], [location] and make reference to this letter of
credit number.
We hereby agree with bona fide holders that all drafts drawn under and
in compliance with the terms of this credit will be duly honored upon compliance
if presented on or before the expiration date.
I-1
<PAGE>
This credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision in force as from January 1, 1994)
International Chamber of Commerce Publication NO. 500.
Best Regards,
[ISSUING BANK]
By: ______________________________
Title:___________________________
______________________________
(1) Date of Letter of Credit.
(2) Letter of Credit Number.
(3) Name and address of Beneficiary.
(4) Insert one of the phrases identified in clauses (a) through (d):
a. an amount of US$ (5)(6)
b. up to an amount of US$ (5)(6)
c. approximately US$ (5)(6)
d. US$ (5)(6), plus or minus [insert number]%
(5) Aggregate initial stated amount of Letter of Credit.
(6) Aggregate initial stated amount of Letter of Credit stated in words.
(7) Ferrellgas, L.P. or Stratton Insurance Company, Inc. (as the case may be).
(8) Description of applicable invoice and/or product movement documentation.
(9) Insert a date not later than 180 days from the date of issuance.
I-2
<PAGE>
EXHIBIT J
---------
[ALTERNATIVE FORM OF STANDBY LETTER OF CREDIT]
_______________(1)_________________
Irrevocable Letter of Credit Number (2)
(3)
Ladies and Gentlemen:
We hereby establish our irrevocable standby Letter of Credit Number
(2) in your favor by order and for the account of Ferrellgas, L.P. for (4)(5)(6)
available at [Issuing Bank] [Location] by payment against your drafts at sight
to be accompanied by:
1. Signed statement by a representative of (3) that the amount drawn
under this letter of credit (2) represents an amount due and owing to (3) and
unpaid or defaulted by Ferrellgas, L.P.
Drafts must be presented no later than (7).
Special Conditions:
A. Partial drawings are permitted.
B. Notwithstanding the above, this letter of credit shall also be
available at [Issuing Bank] [Location] by payment against drafts of (3) at sight
accompanied by:
Signed statement by a representative of (3) that:
(i) as a result of pending or possible bankruptcy,
reorganization or insolvency proceedings involving Ferrellgas, L.P. (3) has
tendered to an escrow agent designated by (3) payments or deliveries (3)
reasonably believes are or may be subject to the aforementioned
proceedings;
(ii) the amount drawn under this letter of credit represents or
corresponds to such payments or deliveries; and
(iii) the escrow agent designated by (3) has been instructed to
release such payments or deliveries to Ferrellgas, L.P. upon receipt by (3)
of the amount drawn under this letter of credit.
J-1
<PAGE>
We hereby engage with you that all drawings made under and in
conformity with the terms of this letter of credit will be duly honored upon
presentation to us as specified.
This letter of credit is subject to the Uniform Customs and Practice
for Documentary Credits (1993 Revision) International Chamber of Commerce
Publication No. 500.
Very truly yours,
[ISSUING BANK]
By: ____________________________________
Title: _________________________________
- -----------------------------
(1) Date of Letter of Credit,
(2) Letter of Credit Number.
(3) Insert either (a) Exxon Company USA [and its address the first time its
name appears], or (b) Exxon Supply Company [and its address the first time
its name appears], as the case may be.
(4) Insert one of the phrases identified in clauses (a) through (d):
a. an amount of US$ (5)(6)
b. up to an amount of US$ (5)(6)
c. approximately US$ (5)(6)
d. US$ (5)(6), plus or minus [insert number]%.
(5) Aggregate initial stated amount of Letter of Credit.
(6) Aggregate initial stated amount of Letter of Credit stated in words.
(7) Date by which drafts must be presented.
J-2
<PAGE>
EXHIBIT 10.2
================================================================================
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
__% SENIOR NOTES DUE 2001
_________________
INDENTURE
Dated as of ________ __, 1994
_________________
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1)..................................................... 7.10
(a)(2)..................................................... 7.10
(a)(3)..................................................... N.A.
(a)(4)..................................................... N.A.
(a)(5)..................................................... 7.10
(b) ....................................................... 7.10
(c) ....................................................... N.A.
311 (a) ....................................................... 7.11
(b) ....................................................... 7.11
(c) ....................................................... N.A.
312 (a)........................................................ 2.05
(b)........................................................ 11.03
(c) ....................................................... 11.03
313 (a) ....................................................... 7.06
(b) ....................................................... 7.06
(c) ....................................................... 7.06;11.02
(d)........................................................ 7.06
314 (a) ....................................................... 4.03;11.05
(b) ....................................................... 10.02
(c)(1) .................................................... 11.04
(c)(2) .................................................... 11.04
(c)(3) .................................................... N.A.
(d)........................................................ N.A.
(e)........................................................ 11.05
(f)........................................................ N.A.
315 (a)........................................................ 7.01
(b)........................................................ 7.05,11.02
(c)........................................................ 7.01
(d)........................................................ 7.01
(e)........................................................ 6.11
316 (a)(last sentence) ........................................ 2.09
(a)(1)(A).................................................. 6.05
(a)(1)(B) ................................................. 6.04
(a)(2) .................................................... N.A.
(b) ....................................................... 6.07
(c) ....................................................... 2.12
317 (a)(1)..................................................... 6.08
(a)(2)..................................................... 6.09
(b) ....................................................... 2.04
318 (a)........................................................ 11.01
(b)........................................................ N.A.
(c)........................................................ 11.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 -- DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions......................................... 1
Section 1.02. Other Definitions................................... 11
Section 1.03. Incorporation by Reference of Trust
Indenture Act....................................... 11
Section 1.04. Rules of Construction............................... 12
ARTICLE 2 -- THE NOTES
Section 2.01. Form and Dating..................................... 12
Section 2.02. Execution and Authentication........................ 12
Section 2.03. Registrar and Paying Agent.......................... 13
Section 2.04. Paying Agent to Hold Money in Trust................. 13
Section 2.05. Lists of Holders of the Notes....................... 14
Section 2.06. Transfer and Exchange............................... 14
Section 2.07. Replacement Notes................................... 15
Section 2.08. Outstanding Notes................................... 15
Section 2.09. Treasury Notes...................................... 15
Section 2.10. Temporary Notes..................................... 16
Section 2.11. Cancellation........................................ 16
Section 2.12. Defaulted Interest.................................. 16
Section 2.13. Record Date......................................... 16
Section 2.14. CUSIP Number........................................ 16
ARTICLE 3 -- REDEMPTION AND OFFERS TO PURCHASE
Section 3.01. Notices to Trustee.................................. 17
Section 3.02. Selection of Notes to Be Purchased or Redeemed...... 17
Section 3.03. Notice of Redemption................................ 18
Section 3.04. Effect of Notice of Redemption...................... 18
Section 3.05. Deposit of Redemption Price......................... 19
Section 3.06. Notes Redeemed in Part.............................. 19
Section 3.07. Optional Redemption................................. 19
Section 3.08. Mandatory Redemption................................ 19
Section 3.09. Offers to Purchase.................................. 19
ARTICLE 4 -- COVENANTS
Section 4.01. Payment of Notes.................................... 21
Section 4.02. Maintenance of Office or Agency..................... 21
Section 4.03. Reports............................................. 22
Section 4.04. Compliance Certificate.............................. 22
Section 4.05. Taxes............................................... 23
Section 4.06. Stay, Extension and Usury Laws...................... 23
Section 4.07. Restricted Payments................................. 23
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries........................................ 24
Section 4.09. Incurrence of Indebtedness and Issuance of
Disqualified Interests.............................. 25
Section 4.10. Asset Sales......................................... 27
Section 4.11. Transactions with Affiliates........................ 28
Section 4.12. Liens............................................... 28
Section 4.13. Subsidiary Note Guarantees.......................... 28
Section 4.14. Offer to Purchase Upon Change of Control............ 29
Section 4.15. Partnership or Corporate Existence.................. 29
Section 4.16. Line of Business.................................... 29
Section 4.17. Limitation on Sale and Leaseback Transactions....... 29
Section 4.18. Restrictions on Nature of Indebtedness and
Activities of Finance Corp.......................... 30
ARTICLE 5 -- SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets............ 30
Section 5.02. Successor Person Substituted........................ 31
ARTICLE 6 -- DEFAULTS AND REMEDIES
Section 6.01. Events of Default................................... 31
Section 6.02. Acceleration........................................ 33
Section 6.03. Other Remedies...................................... 33
Section 6.04. Waiver of Past Defaults............................. 34
Section 6.05. Control by Majority................................. 34
Section 6.06. Limitation on Suits................................. 34
Section 6.07. Rights of Holders of Notes to Receive Payment....... 35
Section 6.08. Collection Suit by Trustee.......................... 35
Section 6.09. Trustee May File Proofs of Claim.................... 35
Section 6.10. Priorities.......................................... 36
Section 6.11. Undertaking for Costs............................... 36
ARTICLE 7 - TRUSTEE
Section 7.01. Duties of Trustee................................... 36
Section 7.02. Rights of Trustee................................... 37
Section 7.03. Individual Rights of Trustee........................ 38
Section 7.04. Trustee's Disclaimer................................ 38
Section 7.05. Notice of Defaults.................................. 38
Section 7.06. Reports by Trustee to Holders of the Notes.......... 38
Section 7.07. Compensation and Indemnity.......................... 39
Section 7.08. Replacement of Trustee.............................. 39
Section 7.09. Successor Trustee by Merger, etc.................... 40
Section 7.10. Eligibility; Disqualification....................... 40
Section 7.11. Preferential Collection of Claims Against Issuers... 41
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8 - LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance.......................................... 41
Section 8.02. Legal Defeasance and Discharge...................... 41
Section 8.03. Covenant Defeasance................................. 41
Section 8.04. Conditions to Legal or Covenant Defeasance.......... 42
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions....... 43
Section 8.06. Repayment to Issuers................................ 44
Section 8.07. Reinstatement....................................... 44
ARTICLE 9 - AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes................. 44
Section 9.02. With Consent of Holders of Notes.................... 45
Section 9.03. Compliance with Trust Indenture Act................. 46
Section 9.04. Revocation and Effect of Consents................... 47
Section 9.05. Notation on or Exchange of Notes.................... 47
Section 9.06. Trustee to Sign Amendments, etc..................... 47
ARTICLE 10 - NOTE GUARANTEES
Section 10.01. Note Guarantee..................................... 47
Section 10.02. Limitation of Guarantor's Liability................ 49
Section 10.03. Guarantors May Consolidate, etc., on Certain Terms. 49
Section 10.04. Releases Following Sale of Assets.................. 49
ARTICLE 11 - MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls........................ 50
Section 11.02. Notices............................................. 50
Section 11.03. Communication by Holders of Notes with Other
Holders of Notes.................................... 51
Section 11.04. Certificate and Opinion as to Conditions Precedent.. 51
Section 11.05. Statements Required in Certificate or Opinion....... 52
Section 11.06. Rules by Trustee and Agents......................... 52
Section 11.07. No Personal Liability of Directors, Officers,
Employees and Stockholders.......................... 52
Section 11.08. Governing Law....................................... 52
Section 11.09. No Adverse Interpretation of Other Agreements....... 52
Section 11.10. Successors.......................................... 52
Section 11.11. Severability........................................ 53
Section 11.12. Counterpart Originals............................... 53
Section 11.13. Table of Contents, Headings, etc.................... 53
</TABLE>
iii
<PAGE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF SUPPLEMENTAL INDENTURE
Exhibit C FORM OF NOTATION ON SENIOR SUBORDINATED
NOTE RELATING TO NOTE GUARANTEE
iv
<PAGE>
INDENTURE dated as of __________ __, 1994 between Ferrellgas, L.P., a
Delaware limited partnership (the "Partnership"), Ferrellgas Finance Corp., a
Delaware corporation ("Finance Corp." and, together with the Partnership, the
"Issuers") and Norwest Bank Minnesota, National Association, as trustee (the
"Trustee").
The Partnership, Finance Corp. and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the __% Senior Notes due 2001:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"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.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"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 the interest rate of the Notes and annual
compounding) 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 the date of the Indenture.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means the Board of Directors of the General Partner
(as defined below), or any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
<PAGE>
"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.
"Capital Interests" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, with respect to partnerships, partnership interests (whether
general or limited) and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership.
"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 six
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 lender party to the Credit
Facility or with any 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 and (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months 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 Partnership'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
Partnership 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 Partnership.
"Common Units" means the common units, representing limited partner
interests, being offered by the Master Partnership contemporaneously with the
sale of the Notes.
"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,
2
<PAGE>
to the extent such depreciation and amortization were deducted in computing
Consolidated Net Income, in each case, for such period without duplication on a
consolidated basis and determined in accordance with GAAP.
"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 the referent
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 the
referent 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 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 date of this Indenture 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.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Partnership.
"Credit Facility" means the credit facility under that certain Credit
Agreement, dated as of , 1994, by and among the Partnership and
_____________, providing for up to $185 million of credit borrowings and letters
of credit, including any related notes, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be 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 __________.
3
<PAGE>
"Distribution" means, for purposes of Article 10, a distribution
consisting of cash, securities or other property, by set off or otherwise.
"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).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Fixed Rate Notes" means the Series B and D Fixed Rate Senior
Notes due 1996 of the General Partner.
"Existing Floating Rate Notes" means the Series A and C Floating Rate
Senior Notes due 1996 of the General Partner.
"Existing Indebtedness" means up to $___ million in aggregate principal
amount of Indebtedness of the Partnership and its Subsidiaries (other than under
the Credit Facility) in existence on the date of this Indenture, until such
amounts are repaid.
"Existing Senior Notes" means the Existing Fixed Rate Notes and the
Existing Floating Rate Notes.
"Existing Subordinated Debentures" means the General Partner's 11 5/8%
Senior Subordinated Debentures due December 15, 2003.
"Finance Corp." means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
reference 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 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 discontinuance of businesses or assets that have been made by
the reference 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 discontinuance of
businesses or assets had occurred on the first day of the reference period;
provided, however, that (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 Partnership's Fixed Charges
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 in the reference
period minus the pro forma expenses that would have been incurred by the
Partnership in the operation of such
4
<PAGE>
acquired business or asset during such period computed on the basis of (i)
personnel expenses for employees retained by the Partnership in the operation of
the acquired business or asset and (ii) non-personnel costs and expenses
incurred by the Partnership on a per gallon basis in the operation of the
Partnership's business at similarly situated Partnership facilities. If the
applicable reference period for any calculation of the Fixed Charge Coverage
Ratio with respect to the Partnership shall include a portion prior to the date
of this Indenture, then such Fixed Charge Coverage Ratio shall be calculated
based upon the Consolidated Cash Flow and the Fixed Charges of the General
Partner for such portion of the reference period prior to this date of this
Indenture and the Consolidated Cash Flow and the Fixed Charges of the
Partnership for the remaining portion of the reference period on and after the
date of the Indenture, giving pro forma effect, as described in the two
foregoing sentences, to all applicable transactions occurring on the date of the
Indenture or otherwise.
"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
discount, non-cash interest payments, the interest component of all payments
associated with Capital Lease Obligations and net payments (if any) pursuant to
Hedging Obligations), (b) commissions, discounts and other fees and charges
incurred with respect to letters of credit and bankers' acceptances financing,
(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.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect in the United States on the date of this
Indenture.
"General Partner" means Ferrellgas, Inc., a Delaware corporation and the
sole General Partner of the Partnership.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means any Subsidiary of the Partnership that executes a Note
Guarantee in accordance with the provisions of Section 4.13 hereof, and their
respective successors and assigns.
"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.
5
<PAGE>
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others secured by a Lien on
any asset of such Person (whether or not such indebtedness is assumed by such
Person) and, to the extent not otherwise included, the Guarantee by such Person
of any Indebtedness of any other Person.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Insurance Company Subsidiary" means Stratton Insurance Company, a Vermont
corporation, a wholly owned subsidiary of the Partnership.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
Guarantees), advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Issuers" means the parties named as such in this Indenture until a
successor replaces any such Issuer pursuant to this Indenture and thereafter
means the remaining Issuer and the successor.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Master Partnership" means Ferrellgas Partners, L.P., a Delaware limited
partnership and the sole limited partner of the Partnership.
"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
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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 retirement of the Existing Senior Notes and the
Existing Subordinated Debentures, 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 General Partner, the
Partnership or their Subsidiaries to the extent that the same were deducted from
such Net Income in accordance with GAAP.
"Net Proceeds" means the aggregate cash proceeds received by the
Partnership 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), 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 and any reserve for adjustment in respect of the sale
price of such asset or assets.
"Non-Recourse Subsidiary" means (1) the Insurance Company Subsidiary and
(2) any other Person that would otherwise be a Subsidiary of the Partnership but
is designated as a Non-Recourse Subsidiary in a resolution of the Board of
Directors of the General Partner, so long as (a) no portion of the Indebtedness
or any other obligation (contingent or otherwise) of such Person (i) is
guaranteed by the Partnership or any of its Subsidiaries, (ii) is recourse or
obligates the Partnership or any of its Subsidiaries in any way or (iii)
subjects any property or asset of the Partnership or any of its Subsidiaries,
directly or indirectly, contingently or otherwise, to satisfaction thereof, (b)
neither the Partnership 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
Partnership and its Subsidiaries than those that might be obtained at the time
from persons who are not Affiliates of the Partnership, (c) neither the
Partnership 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, and (d) such Person has no more than
$1,000 of assets at the time of such designation.
"Notes" means the ___% Senior Notes due 2001, as amended or supplemented
from time to time pursuant to the terms hereof, that are issued under this
Indenture.
"Note Guarantee" means each guarantee of the Notes by a Guarantor pursuant
to Article 10 hereof.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person; provided, however, that any
reference to an Officer with respect to the Partnership shall mean the
respective Officer of the General Partner.
"Officers' Certificate" means a certificate signed on behalf of (i) the
General Partner (acting on behalf of the Partnership) by two Officers of the
General Partner, one of whom must be the principal
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executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the General Partner, or (ii) Finance Corp. by
two Officers of Finance Corp., one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of Finance Corp., in either case that meets the requirements
of Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05 hereof.
The counsel may be an employee of or counsel to the Partnership, the General
Partner, Finance Corp., any of their respective Subsidiaries or the Trustee.
"Partnership Agreement" means __________________________________________.
"Partnership" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Permitted Investments" means (a) any Investments in Cash Equivalents; (b)
any Investments in the Partnership or in a Wholly Owned Subsidiary of the
Partnership that is a Guarantor; (c) Investments by the Partnership or any
Subsidiary of the Partnership in a Person, if as a result of such Investment (i)
such Person becomes a Wholly Owned Subsidiary of the Partnership 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 Partnership or a Wholly Owned Subsidiary of the Partnership that is a
Guarantor; and (d) other Investments in Non-Recourse Subsidiaries of the
Partnership that do not exceed $30 million at any time outstanding.
"Permitted Liens" means (a) Liens existing on the date of the Indenture;
(b) Liens in favor of the Issuers or Liens to secure Indebtedness of a
Subsidiary of the Partnership to the Partnership or a Wholly Owned Subsidiary of
the Partnership; (c) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Partnership or any Subsidiary of
the Partnership, 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 Partnership;
(d) Liens on property existing at the time of acquisition thereof by the
Partnership or any Subsidiary of the Partnership, provided that such Liens were
in existence prior to the contemplation of such acquisition; (e) Liens on any
property or asset acquired by the Partnership or any of its Subsidiaries 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 Partnership or such
Subsidiary to secure the purchase price or other obligation of the Partnership
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 Partnership 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,
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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 Partnership or impair the use of such property in the operation of
the business of the Partnership 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 Partnership or
any of its Subsidiaries in the ordinary course of business; (k) financing
statements granted with respect to personal property leased by the Partnership
and its Subsidiaries in the ordinary course of business to the owners of such
personal property, provided that such financing statements are granted solely in
connection with such leases and not the borrowing of money or the obtaining of
advances or credit; (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 Partnership or any Subsidiary of the
Partnership with respect to obligations that do not exceed $5 million in the
aggregate in 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 Partnership or such
Subsidiary; (n) Liens securing Indebtedness incurred to refinance Indebtedness
that has been secured by a Lien permitted under the Indenture, 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 4.09 hereof and
shall not have a principal amount in excess of the Indebtedness so refinanced;
and (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.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Partnership or any Subsidiary of the Partnership issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Partnership or any of its Subsidiaries (other
than Indebtedness under the Credit Facility) or the Indebtedness represented by
the then outstanding Existing Subordinated Debentures of the General Partner;
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 (plus the amount of reasonable expenses incurred in
connection therewith); (b) such Indebtedness has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (c) such Indebtedness is subordinated in right of payment to the Notes
on terms at least as favorable to the Holders of Notes as those, if any,
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (d) such Indebtedness
(other than indebtedness incurred to refinance, replace, defease or refund the
Existing Subordinated Debentures) is incurred by the Partnership or the
Subsidiary who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Permitted Senior Debt" means, with respect to any Person, (i) any
Acquired Debt of such Person, (ii) any Indebtedness incurred by such Person, the
proceeds of which are applied solely to finance capital expenditures made to
improve or enhance the existing capital assets of such Person or to acquire or
construct new capital assets (but excluding capital expenditures necessary to
maintain the existing capital assets of such Person) and (iii) any Indebtedness
incurred by such Person, the proceeds of which are used solely for working
capital purposes.
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"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof.
"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 or (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.
"Responsible Officer" when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means, without duplication, (i) the Notes, (ii) all other
Indebtedness of the Partnership or Finance Corp., unless the instrument under
which such Indebtedness is incurred expressly provides that it is subordinated
in right of payment to the Notes and (iii) all Indebtedness of Subsidiaries of
the Partnership, other than Finance Corp.
"Significant Subsidiary" means any Subsidiary of the Partnership that
would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect
on the date hereof.
"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 the 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
Partnership that is designated a Non-Recourse Subsidiary pursuant to the
definition thereof shall not thereafter be deemed a Subsidiary of the
Partnership.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"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
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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" of any Person means a Subsidiary of such Person
all of the outstanding Capital Interests or other ownership interests or, in the
case of a limited partnership, all of the partners' Capital Interests (other
than up to a 1% general partner interest), of which (other than directors'
qualifying shares) shall at the time be owned by such Person or by one or more
Wholly Owned Subsidiaries of such Person and one or more Wholly Owned
Subsidiaries of such Person.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"..... 4.11
"Asset Sale"................ 4.10
"Benefitted Party".......... 10.01
"Covenant Defeasance"....... 8.03
"Commencement Date"......... 3.09
"Event of Default".......... 6.01
"Excess Proceeds"........... 4.10
"Guarantor"................. 10.01
"incur"..................... 4.09
"Incurrence Date"........... 4.09
"Legal Defeasance".......... 8.02
"Offer Amount".............. 3.09
"Offer Period".............. 3.09
"Paying Agent".............. 2.03
"Payment Default"........... 6.01
"Permitted Refinancing"..... 4.09
"Purchase Date"............. 3.09
"Purchase Offer"............ 3.09
"Refinancing Indebtedness".. 4.09
"Registrar"................. 2.03
"Restricted Payments"....... 4.07
"Senior Debt Ratio Test".... 4.09
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture, other than those
provisions of the TIA that may be excluded herein, which provision shall be
excluded to the extent specifically excluded in this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes and the Note Guarantees, if any;
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"indenture security holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Issuers, the Guarantors, if any, and any
successor obligor upon the Notes or any Note Guarantee, as the case may be.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule or regulation
promulgated by the SEC under the TIA have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act or the
Exchange Act shall be deemed to include substitute, replacement or successor
sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of this Indenture. The Notes may have
notations, legends or endorsements approved as to form by the Issuers and
required by law, stock exchange rule, agreements to which the Issuers or each
Guarantor, if any, is subject, or usage. Each Note shall be dated the date
of its authentication. The Notes shall be issuable only in denominations of
$1,000 and integral multiples thereof.
Section 2.02. Execution and Authentication.
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Two Officers of each of the General Partner (in the case of the
Partnership) and Finance Corp. shall sign the Notes for the Issuers by manual or
facsimile signature. The seal of each Issuer shall be reproduced on the Notes
and may be in facsimile form.
If an Officer of the General Partner or Finance Corp. whose signature is
on a Note no longer holds that office at the time the Note is authenticated, the
Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature of the Trustee shall be conclusive evidence that the
Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A hereto.
The Trustee shall, upon a written order of the Issuers signed by two
Officers of the General Partner and Finance Corp., authenticate Notes for
original issue up to an aggregate principal amount stated in paragraph 4 of the
Notes. The aggregate principal amount of Notes outstanding at any time shall
not exceed the amount set forth herein except as provided in Section 2.07
hereof.
The Trustee may appoint an authenticating agent acceptable to the Issuers
to authenticate Notes. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Partnership or Finance Corp. or an Affiliate of the
Partnership or Finance Corp.
Section 2.03. Registrar and Paying Agent.
The Issuers shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange (including any co-
registrar, the "Registrar") and (ii) an office or agency where Notes may be
presented for payment ("Paying Agent"). The Registrar shall keep a register of
the Notes and of their transfer and exchange. The Issuers may appoint one or
more co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. The Issuers may change any Paying
Agent, Registrar or co-registrar without prior notice to any Holder of a Note.
The Issuers shall notify the Trustee and the Trustee shall notify the Holders of
the Notes of the name and address of any Agent not a party to this Indenture.
The Partnership, Finance Corp. or any Guarantor may act as Paying Agent,
Registrar or co-registrar. The Issuers shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which shall be subject
to any obligations imposed by the provisions of the TIA. The agreement shall
implement the provisions of this Indenture that relate to such Agent. The
Issuers shall notify the Trustee of the name and address of any such Agent. If
the Issuers fail to maintain a Registrar or Paying Agent, or fails to give the
foregoing notice, the Trustee shall act as such, and shall be entitled to
appropriate compensation in accordance with Section 7.07 hereof.
The Issuers initially appoints the Trustee as Registrar, Paying Agent and
agent for service of notices and demands in connection with the Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Issuers shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders of the Notes or the Trustee all money held by the Paying Agent for
the payment of principal of, premium, if any, and interest on the Notes, and
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<PAGE>
shall notify the Trustee of any Default by the Issuers or any Guarantors in
making any such payment. While any such Default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Issuers
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Partnership, Finance Corp. or a Guarantor) shall have no further liability for
the money delivered to the Trustee. If the Partnership, Finance Corp. or any
Guarantor acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders of the Notes all money held by it as Paying
Agent. Upon any bankruptcy or reorganization proceeding relating to the
Partnership, Finance Corp. or any Guarantor, the Trustee shall serve as Paying
Agent for the Notes.
Section 2.05. Lists of Holders of the Notes.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders of the Notes and shall otherwise comply with TIA (S) 312(a). If the
Trustee is not the Registrar, the Issuers and/or any Guarantors shall furnish to
the Trustee at least seven Business Days before each interest payment date and
at such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Holders of the Notes, including the aggregate principal amount of
the Notes held by each thereof, and the Issuers and each Guarantor, if any,
shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
When Notes are presented to the Registrar with a request to register the
transfer or to exchange them for an equal principal amount of Notes of other
denominations, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met; provided, however, that any Note
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar and the Trustee duly executed by the Holder
thereof or by his attorney duly authorized in writing. To permit registrations
of transfer and exchanges, the Issuers shall issue and the Trustee shall
authenticate Notes at the Registrar's request, subject to such rules as the
Trustee may reasonably require.
Neither the Issuers nor the Registrar shall be required to (i) issue,
register the transfer of or exchange Notes during a period beginning at the
opening of business on a Business Day 15 days before the day of any selection of
Notes for redemption under Section 3.02 hereof or (ii) register the transfer of
or exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
No service charge shall be made to any Holder of a Note for any
registration of transfer or exchange (except as otherwise expressly permitted
herein), but the Issuers may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to Sections 2.10, 3.06 or 9.05 hereof, which shall be paid by
the Issuers).
Prior to due presentment to the Trustee for registration of the transfer
of any Note, the Trustee, any Agent, the Issuers and each Guarantor, if any, may
deem and treat the Person in whose name any Note is registered as the absolute
owner of such Note for the purpose of receiving payment of principal of,
premium, if any, and interest on such Note and for all other purposes
whatsoever, whether or not
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such Note is overdue, and none of the Trustee, any Agent, the Issuers or any
Guarantor shall be affected by notice to the contrary.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Issuers and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Note, the Issuers shall issue and the Trustee, upon the written
order of the Issuers signed by (i) two Officers of the General Partner and (ii)
two Officers of Finance Corp., shall authenticate a replacement Note if the
Trustee's requirements for replacements of Notes are met. If required by the
Trustee, the Issuers or the Guarantors, if any, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee, the
Issuers and the Guarantors to protect the Issuers, the Guarantors, the Trustee,
any Agent or any authenticating agent from any loss which any of them may suffer
if a Note is replaced. Each of the Partnership, Finance Corp, each Guarantor
and the Trustee may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Issuers and the
Guarantors, if any, and shall be entitled to all of the benefits of this
Indenture equally and ratably with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for cancellation
and those described in this Section 2.08 as not outstanding. If a Note is
replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a
bona fide purchaser. If the principal amount of any Note is considered paid
under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases
to accrue. Subject to Section 2.09 hereof, a Note does not cease to be
outstanding because the Partnership, Finance Corp., any Guarantor, a Subsidiary
of the Partnership, Finance Corp. or any Guarantor or an Affiliate of the
Partnership, Finance Corp. or any Guarantor holds the Note.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Partnership, Finance Corp., any Guarantor, any of their respective Subsidiaries
or any Affiliate of the Partnership, Finance Corp. or any Guarantor shall be
considered as though not outstanding, except that for purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes which a Responsible Officer knows to be so owned shall be
so considered. Notwithstanding the foregoing, Notes that are to be acquired by
the Partnership, Finance Corp., any Guarantor, any Subsidiary of the
Partnership, Finance Corp. or any Guarantor or an Affiliate of the Partnership,
Finance Corp. or any Guarantor pursuant to an exchange offer, tender offer or
other agreement shall not be deemed to be owned by the Partnership, Finance
Corp., such Guarantor, a Subsidiary of the Partnership, Finance Corp. or such
Guarantor or an Affiliate of the Partnership, Finance Corp. or such Guarantor
until legal title to such Notes passes to the Partnership, Finance Corp., such
Guarantor, Subsidiary of the Partnership, Finance Corp. or such Guarantor or
Affiliate of the Partnership, Finance Corp. or such Guarantor, as the case may
be.
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Section 2.10. Temporary Notes.
Until definitive Notes are ready for delivery, the Issuers may prepare and
the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Issuers and the Trustee consider appropriate for temporary Notes. Without
unreasonable delay, the Issuers shall prepare and the Trustee, upon receipt of
the written order of the Issuers signed by (i) two Officers of the General
Partner and (ii) two Officers of Finance Corp., shall authenticate definitive
Notes in exchange for temporary Notes. Until such exchange, temporary Notes
shall be entitled to the same rights, benefits and privileges as definitive
Notes.
Section 2.11. Cancellation.
The Issuers at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall destroy cancelled Notes
(subject to the record retention requirement of the Exchange Act), unless the
Issuers direct cancelled Notes to be returned to them. The Issuers may not
issue new Notes to replace Notes that they have redeemed or paid or that have
been delivered to the Trustee for cancellation. All cancelled Notes held by the
Trustee shall be destroyed and certification of their destruction delivered to
the Issuers, unless by a written order, signed by (i) two Officers of the
General Partner and (ii) two Officers of Finance Corp., the Issuers shall direct
that cancelled Notes be returned to them.
Section 2.12. Defaulted Interest.
If the Issuers or any Guarantor defaults in a payment of interest on the
Notes, the Issuers or such Guarantor (to the extent of its obligations under its
Note Guarantees) shall pay the defaulted interest in any lawful manner plus, to
the extent lawful, interest payable on the defaulted interest, to the Persons
who are Holders of the Notes on a subsequent special record date, which date
shall be at the earliest practicable date but in all events at least five
Business Days prior to the payment date, in each case at the rate provided in
the Notes and in Section 4.01 hereof. The Issuers shall fix or cause to be
fixed each such special record date and payment date, and shall, promptly
thereafter, notify the Trustee of any such date. At least 15 days before the
special record date, the Issuers (or the Trustee, in the name of and at the
expense of the Issuers) shall mail to Holders of the Notes a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
Section 2.13. Record Date.
The record date for purposes of determining the identity of Holders of the
Notes entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA (S)
316(c).
Section 2.14. CUSIP Number.
The Issuers in issuing the Notes may use a "CUSIP" number and, if they do
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes and that reliance may be placed only on
the other
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identification numbers printed on the Notes. The Issuers will promptly notify
the Trustee of any change in the CUSIP number.
ARTICLE 3
REDEMPTION AND OFFERS TO PURCHASE
Section 3.01. Notices to Trustee.
If the Issuers elect to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, they shall furnish to the Trustee, at least
30 days but not more than 75 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
If the Issuers are required to make an offer to purchase Notes pursuant to
the provisions of Sections 4.10 or 4.15 hereof, they shall furnish to the
Trustee, at least 30 days before the scheduled Purchase Date, an Officers'
Certificate setting forth (i) the Section of this Indenture pursuant to which
the offer to purchase shall occur, (ii) the terms of the offer, (iii) the
purchase price, (iv) the principal amount of the Notes to be purchased, and (v)
further setting forth a statement to the effect that (a) the Partnership or one
of its Subsidiaries has made an Asset Sale and there are Excess Proceeds
aggregating more than $15 million and the amount of such Excess Proceeds, or (b)
a Change of Control has occurred, as applicable.
Section 3.02. Selection of Notes to Be Purchased or Redeemed.
If less than all of the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed among the applicable Holders of the Notes
in compliance with the requirements of the principal national securities
exchange, if any, or the Nasdaq National Market on which the Notes are listed or
quoted, as applicable or, if the Notes are not so listed or quoted, on a pro
rata basis, by lot or in accordance with any other method the Trustee considers
fair and appropriate, provided that no Notes of $1,000 or less shall be redeemed
in part. In the event of partial redemption by lot, the particular Notes to be
redeemed shall be selected, unless otherwise provided herein, not less than 30
nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption. In the event that less
than all of the Notes properly tendered in a Purchase Offer pursuant to Section
4.10 hereof are to be purchased, the Trustee shall select the particular Notes
to be purchased on a pro rata basis among the applicable Holders of Notes
promptly upon the expiration of such Purchase Offer.
The Trustee shall promptly notify the Issuers in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
purchase or redemption, the principal amount thereof to be purchased or
redeemed. Notes and portions of Notes selected shall be in amounts of $1,000 or
whole multiples of $1,000; except that if all of the Notes of a Holder are to be
purchased or redeemed, the entire outstanding amount of Notes held by such
Holder, even if not a multiple of $1,000, shall be purchased or redeemed.
Except as provided in the preceding sentence, provisions of this Indenture that
apply to Notes called for redemption also apply to portions of Notes called for
redemption.
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In the event the Issuers are required to make a Purchase Offer pursuant to
Section 4.10 hereof and the amount of Excess Proceeds to be applied to such
purchase would result in the purchase of a principal amount of Notes which is
not evenly divisible by $1,000, the Trustee shall promptly refund to the Issuers
the portion of such Excess Proceeds that is not necessary to purchase the
immediately lesser principal amount of Notes that is so divisible.
Section 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a purchase or redemption
date, the Issuers shall mail or cause to be mailed, by first class mail, a
notice of redemption to each Holder whose Notes are to be redeemed at its
registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion shall be issued upon cancellation of the
original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Issuers default in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Issuers' request, the Trustee shall give the notice of redemption
in the Issuers' name and at their expense; provided, however, that the Issuers
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph (which request may be revoked by so notifying the Trustee in
writing on or before the Business Day immediately preceding the date requested
for the mailing of such notice).
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
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Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Issuers shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Issuers any money
deposited with the Trustee or the Paying Agent by the Issuers in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Notes to be redeemed.
If the Issuers comply with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Issuers to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Issuers shall issue
and, upon the Issuers' written request, the Trustee shall authenticate for the
Holder at the expense of the Issuers a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
The Notes shall not be redeemable at the Issuers' option prior to
__________, 1998. Thereafter, the Notes shall be subject to redemption at the
option of the Issuers, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on __________ of the years indicated below:
YEAR PERCENTAGE
1998 ___.__%
1999 ___.__%
2000 100.00%
Section 3.08. Mandatory Redemption.
Except as set forth below under Section 4.10 and Section 4.14 hereof, the
Issuers shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Section 3.09. Offers to Purchase.
(a) In the event that, pursuant to Section 4.10 or Section 4.14 hereof,
the Issuers shall be required to commence an offer to all Holders to purchase
Notes (each, a "Purchase Offer"), it shall follow the procedures specified in
this Section 3.09.
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(b) The Purchase Offer shall commence on the date (the "Commencement
Date") specified in Section 4.10 or Section 4.14 hereof, as the case may be,
remain open for a period specified by the Issuers, which shall be in accordance
with Section 4.10 or Section 4.14 hereof, as the case may be, except to the
extent that a longer period is required by applicable law (the "Offer Period").
No later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Issuers shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 or 4.14 hereof (the "Offer
Amount") or, if less than the Offer Amount has been tendered, all Notes tendered
in response to such Purchase Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest, if
any, shall be paid to the Person in whose name a Note is registered at the close
of business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to such Purchase Offer.
Upon the commencement of a Purchase Offer, the Issuers shall send, by
first class mail, a notice to the Trustee and each of the Holders. The notice
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to such Purchase Offer. The Purchase Offer shall be made
to all Holders. The notice, which shall govern the terms of the Purchase Offer,
shall state:
(a) that the Purchase Offer is being made pursuant to Section 4.10 or
Section 4.14 hereof, as the case may be, the Offer Period, and the expiration
date of the Offer Period;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered and accepted for payment shall continue
to accrue interest;
(d) that, unless the Issuers default in making such payment, any Note
accepted for payment pursuant to the Purchase Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to any
Purchase Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Issuers, a depositary, if appointed by the Issuers, or a
Paying Agent at the address specified in the notice prior to the close of the
Offer Period;
(g) that Holders shall be entitled to withdraw their election if the
Issuers, the depositary or the Paying Agent, as the case may be, receives,
not later than the close of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that
such Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Issuers shall select the Notes to be
purchased pursuant to the terms of Section 3.02 hereof, and that Holders
whose Notes were purchased only in part shall be issued new Notes
(accompanied by a notation of the Note Guarantees duly endorsed by each
Guarantor) equal in principal amount to the unpurchased portion of the Notes
surrendered; and
(i) (x) if such Purchase Offer was pursuant to Section 4.14 hereof,
the circumstances and material facts regarding such Change of Control,
including but not limited to, information with
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respect to pro forma and historical financial information after giving effect
to such Change of Control, and information regarding the Person or Persons
acquiring control and (y) if such Purchase Offer was pursuant to Section 4.10
hereof, the circumstances and material facts regarding the Asset Sale or
Asset Sales giving rise to such Purchase Offer, including but not limited to,
information with respect to pro forma and historical financial information if
material operations of the Partnership or any Subsidiary were divested in
such Asset Sale or Asset Sales.
On or before the Purchase Date, the Issuers shall, to the extent lawful,
accept for payment, pursuant to the terms of Section 3.02 hereof, the Offer
Amount of Notes or portions thereof tendered pursuant to the Purchase Offer, or
if less than the Offer Amount has been tendered, all Notes tendered, and shall
deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Issuers in accordance with the
terms of this Section 3.09. The Issuers, the depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Issuers for purchase, and the Issuers shall promptly issue a new Note, and the
Trustee, upon written request from the Issuers shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Issuers to the Holder thereof. The Issuers
shall publicly announce the results of such Purchase Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof to the extent applicable.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Issuers shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Issuers or any Guarantor, holds
as of 10:00 a.m. Eastern Time on the due date money deposited by the Issuers in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest then due.
The Issuers shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.02. Maintenance of Office or Agency.
The Issuers shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and
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demands to or upon the Issuers or any Guarantor in respect of the Notes and this
Indenture may be served. The Issuers shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Issuers shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Issuers may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Issuers
of their obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Issuers shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Issuers hereby designate the Corporate Trust Office of the Trustee as
one such office or agency of the Issuers in accordance with Section 2.03 hereof.
Section 4.03. Reports.
Whether or not required by the rules and regulations of the SEC, so long
as any Notes are outstanding, the Issuers will furnish to the Holders of Notes
(i) all quarterly and annual financial information that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K if the Issuers were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by the Issuers' certified independent
accountants and (ii) all reports that would be required to be filed with the SEC
on Form 8-K if the Issuers were required to file such reports. In addition,
whether or not required by the rules and regulations of the SEC, the Issuers
will file a copy of all such information with the SEC for public availability
(unless the SEC will not accept such a filing) and make such information
available to investors who request it in writing.
Section 4.04. Compliance Certificate.
(a) Each Issuer shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Partnership and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether each Issuer, each Guarantor, if any, and each obligor on the
Notes and this Indenture has kept, observed, performed and fulfilled its
obligations under this Indenture (including with respect to any Restricted
Payments made during such year, the basis upon which the calculations required
by Section 4.07 hereof were computed, which calculations may be based on the
Partnership's latest available financial statements), and further stating, as to
each such Officer signing such certificate, that to the best of his or her
knowledge, each Issuer, each Guarantor, if any, and each such obligor has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action each Issuer, each
Guarantor, if any, or each such obligor, as the case may be, is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action each Issuer, each Guarantor, if any, or each such obligor, as the case
may be, is taking or proposes to take with respect thereto.
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(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 hereof shall be accompanied by a
written statement of the Partnership's independent public accountants (who shall
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Issuers have violated
any provisions of Article Four or Article Five hereof or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) Each Issuer shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer of such Issuer (or of the
General Partner, in the case of the Partnership) becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action such Issuer is taking or proposes to take with
respect thereto.
Section 4.05. Taxes.
The Issuers shall pay, and shall cause each of their Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
Each of the Issuers and each of the Guarantors, if any, covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Indenture;
and each of the Issuers and each of the Guarantors, if any (to the extent that
it may lawfully do so), hereby expressly waives all benefit or advantage of any
such law, and covenants that it shall not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
had been enacted.
Section 4.07. Restricted Payments.
The Partnership 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 Partnership's or any Subsidiary's Equity
Interests (other than (x) dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Partnership, (y) dividends or
distributions payable to the Partnership or a Wholly Owned Subsidiary of the
Partnership 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 or otherwise acquire or retire for value any Equity Interests of the
Partnership or any Subsidiary or other Affiliate of the Partnership (other than
any such Equity Interests owned by the Partnership or a Wholly Owned Subsidiary
of the Partnership that is a Guarantor); (iii) purchase, redeem or otherwise
acquire or retire for value any Indebtedness that is subordinated to the Notes;
or (iv) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iv) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to such
Restricted Payment:
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(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Fixed Charge Coverage Ratio of the Partnership for the
Partnership'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 Officers' Certificate
delivered to the Trustee), together with the aggregate of all other
Restricted Payments (including any Restricted Payments permitted by the
provisions, other than clause (iv), of the immediately succeeding paragraph)
made by the Partnership and its Subsidiaries in the fiscal quarter during
which such Restricted Payment is made (including Restricted Payments
permitted by the next succeeding paragraph), shall not exceed the amount of
Available Cash of the Partnership for the immediately preceding fiscal
quarter (or, with respect to the first fiscal quarter during which Restricted
Payments are made, the amount of Available Cash of the Partnership for the
period commencing on the date of this Indenture and ending on the last day of
the immediately preceding fiscal quarter); provided that for purposes of this
clause (c), the amount of any Available Cash of the Partnership during the
first 45 days of any fiscal quarter may be included in the amount of
Available Cash for the immediately preceding fiscal quarter so long as (1)
the amount of such Available Cash so included does not exceed the amount of
unused available working capital Indebtedness that the Partnership would have
been permitted to incur on the last day of such immediately preceding fiscal
quarter under the terms of the agreements and instruments governing its
outstanding Indebtedness on such date and (2) the amount of such Available
Cash so included shall be excluded from the amount of Available Cash for
purposes of determining the amount of Restricted Payments permitted in any
subsequent fiscal quarter.
The foregoing provisions will not prohibit (i) the payment of any
distribution within 60 days after the date on which the Partnership becomes
committed to make such distribution, if at said date of commitment such payment
would have complied with the provisions of this Indenture; (ii) the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Partnership in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Partnership) of other Equity
Interests of the Partnership (other than any Disqualified Interests); (iii) the
defeasance, redemption or repurchase of subordinated Indebtedness with the
proceeds of Permitted Refinancing Indebtedness; and (iv) the defeasance,
redemption or repurchase of any Existing Subordinated Debentures of the General
Partner and the payment of all costs and expenses in connection therewith.
Not later than the date of making any Restricted Payment, the General
Partner shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed, which calculations may
be based upon the Partnership's latest available financial statements.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Partnership 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 Partnership or any
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of its Subsidiaries (1) on its Capital Interests or (2) with respect to any
other interest or participation in, or measured by, its profits, (b) pay any
indebtedness owed to the Partnership or any of its Subsidiaries, (c) make loans
or advances to the Partnership or any of its Subsidiaries or (d) transfer any of
its properties or assets to the Partnership or any of its Subsidiaries, except
for such encumbrances or restrictions existing under or by reason of (i)
Existing Indebtedness as in effect on the date of this Indenture, (ii) this
Indenture and the Notes, (iii) applicable law, (iv) any instrument governing
Indebtedness or Capital Interests of a Person acquired by the Partnership 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 the Indenture, (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, or (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.
Section 4.09. Incurrence of Indebtedness and Issuance of Disqualified Interests.
The Partnership shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and the Partnership 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 Partnership may incur
Indebtedness and any Subsidiary of the Partnership may incur Acquired Debt if:
(a) the Fixed Charge Coverage Ratio for the Partnership's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional
Indebtedness is incurred would have been at least 2.75 to 1 if such date is
on or prior to , 1996 and 3.00 to 1 if such date is after ,
1996, in each case, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred at the beginning of such four-quarter period; and
(b) either (x) such Indebtedness shall be subordinated in right of
payment to the Notes and shall have a Weighted Average Life to Maturity
greater than the remaining Weighted Average Life to Maturity of the Notes or
(y) such Indebtedness shall be Permitted Senior Debt and the Senior Debt
Ratio Test shall have been met at the time of incurrence thereof.
The foregoing limitations of this Section 4.09 will not apply to: (i) the
Indebtedness represented by the Notes and any Note Guarantees; (ii) the
incurrence by the Partnership of Indebtedness pursuant to the Credit Facility in
an aggregate principal amount at any time outstanding not to exceed $185
million; (iii) revolving Indebtedness incurred solely for working capital
purposes in an aggregate outstanding principal amount not to exceed $20 million
at any time on or prior to __________, 1996 and $40 million thereafter,
provided, in each case, that the outstanding principal balance of such revolving
Indebtedness (or, if such revolving Indebtedness is incurred as an addition or
extension to the Credit
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Facility, the outstanding principal balance under the Credit Facility in excess
of the limits set forth in clause (ii) above) shall be reduced to zero for a
period of 30 consecutive days during each fiscal year; (iv) the incurrence by
the Partnership of Indebtedness in respect of Capitalized Lease Obligations in
an aggregate principal amount not to exceed $15 million; (v) the Existing
Indebtedness; (vi) the incurrence by the Partnership or any of its Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the proceeds of which
are used to extend, refinance, renew, replace, defease or refund any then
outstanding Indebtedness of the Partnership or such Subsidiary not incurred in
violation of the Indenture; (vii) Hedging Obligations that are incurred for the
purpose of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of the Indenture to be
outstanding; (viii) Indebtedness of any Subsidiary of the Partnership to the
Partnership or any of its Wholly Owned Subsidiaries; (ix) the incurrence by the
Partnership or the Insurance Company Subsidiary of Indebtedness owing directly
to its insurance carriers (without duplication) in connection with the
Partnership's, its Subsidiaries' or its Affiliates' self-insurance programs or
other similar forms of retained insurable rights for their respective retail
propane businesses, consisting of reinsurance agreements and indemnification
agreements (and guarantees of the foregoing) secured by letters of credit,
provided that the Indebtedness evidenced by such reinsurance agreements,
indemnification agreements, guarantees and letters of credit shall be counted
(without duplication) for purposes of all calculations pursuant to the Fixed
Charge Coverage Ratio test above; (x) surety bonds and appeal bonds required in
the ordinary course of business or in connection with the enforcement of rights
or claims of the Partnership or any of its Subsidiaries or in connection with
judgments that do not result in a Default or Event of Default; (xi) the
incurrence by the Partnership (or any Subsidiary of the Partnership that is a
Guarantor) of Indebtedness in connection with acquisitions of retail propane
businesses in favor of the sellers of such businesses in a principal amount not
to exceed $15 million in any fiscal year or $45 million in the aggregate
outstanding at any one time, provided that the principal amount of such
Indebtedness incurred in connection with any such acquisition shall not exceed
the fair market value of the assets so acquired; and (xii) in addition to the
Indebtedness permitted under the foregoing clauses (i) through (xi), the
incurrence by the Partnership of Indebtedness in an aggregate principal amount
outstanding not to exceed $15 million at any time, provided that any
Indebtedness incurred pursuant to this clause (xii) shall be subordinated in
right of payment to the Notes and shall have a Weighted Average Life to Maturity
greater than the remaining Weighted Average Life to Maturity of the Notes.
The "Senior Debt Ratio Test" will be met with respect to the incurrence of
any Indebtedness by the Partnership or any Subsidiary of the Partnership if the
ratio of (1) the aggregate outstanding principal amount of Senior Debt on the
date of and after giving effect to the incurrence of such Indebtedness (the
"Incurrence Date") to (2) the Consolidated Cash Flow for the Partnership's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the Incurrence Date would have been 2.50 to
1 or less. For purposes of the computation in clause (1) of the foregoing
sentence, the outstanding principal amount of Indebtedness under the Credit
Facility shall be deemed to equal the principal amount of such Indebtedness
actually outstanding plus the maximum additional principal amount of such
Indebtedness available thereunder, and letters of credit shall be deemed to have
a principal amount equal to the maximum potential liability of the Partnership
or any of its Subsidiaries thereunder. The foregoing calculation of
Consolidated Cash Flow shall give pro forma effect to acquisitions (including
all mergers and consolidations), dispositions and discontinuance of operations
that have been made by the Partnership or any of its Subsidiaries during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Incurrence Date assuming that all such acquisitions, dispositions
and discontinuance of operations had occurred on the first day of the four-
quarter reference period in the same manner as described in the definition of
"Fixed Charge Coverage Ratio".
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For purposes of this Section 4.09, any revolving Indebtedness (under the
Credit Agreement or otherwise) shall be deemed to have been incurred only at
such time at which the agreements and instruments (or any amendments thereto
that increase the amount, reduce the Weighted Average Life to Maturity, change
any subordination provisions or create any additional obligor of such revolving
Indebtedness) are executed, in an amount equal to the maximum amount of such
revolving Indebtedness permitted to be borrowed thereunder, and the
Partnership's ability to borrow or reborrow such revolving Indebtedness up to
such maximum permitted amount shall not thereafter be limited by the provisions
of this Section 4.09 (other than the proviso set forth in clause (iii) of the
second paragraph of this Section 4.09).
Section 4.10. Asset Sales.
The Partnership 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
Partnership shall be governed by the provisions of Sections 4.14 and/or 5.01
hereof and not by the provisions of this Section 4.10), 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 million, or (b) for net
proceeds in excess of $5 million (each of the foregoing, an "Asset Sale"),
unless (x) the Partnership (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 set forth in an
Officers' Certificate delivered to the Trustee) of the assets sold or otherwise
disposed of and (y) at least 80% of the consideration therefor received by the
Partnership or such Subsidiary is in the form of cash; provided, however, that
the amount of (A) any liabilities (as shown on the Partnership's or such
Subsidiary's most recent balance sheet or in the notes thereto), of the
Partnership or any Subsidiary (other than liabilities that are by their terms
subordinated in right of payment to the Notes) that are assumed by the
transferee of any such assets and (B) any notes or other obligations received by
the Partnership or any such Subsidiary from such transferee that are immediately
converted by the Partnership 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 (1) any transfer of assets
by the Partnership or any of its Subsidiaries to a Subsidiary of the Partnership
that is a Guarantor, (2) any transfer of assets by the Partnership or any of its
Subsidiaries to any Person in exchange for other assets used in a line of
business permitted under Section 4.17 hereof and having a fair market value not
less than that of the assets so transferred and (3) any transfer of assets
pursuant to a Permitted Investment.
Within 270 days after any Asset Sale, the Partnership may apply the Net
Proceeds from such Asset Sale to (a) permanently reduce Indebtedness outstanding
under the Credit Facility (with a permanent reduction of availability in the
case of revolving Indebtedness) or (b) an investment in capital expenditures or
other long-term tangible assets, in each case, in the same line of business as
the Partnership was engaged in on the date of this Indenture. Pending the final
application of any such Net Proceeds, the Partnership may temporarily reduce
borrowings under the Credit Facility or otherwise invest such Net Proceeds in
any manner that is not prohibited by this Indenture. Any Net Proceeds from the
Asset Sale that are not applied or invested as provided in the first sentence of
this paragraph will be deemed to
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constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $15 million, the Issuers shall make a Purchase Offer to all Holders of
Notes to purchase the maximum principal amount of Notes that may be purchased
out of the Excess Proceeds, at an offer price in cash in an amount equal to 100%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase, in accordance with the procedures set forth in Article 3
hereof. The Issuers shall commence a Purchase Offer with respect to Excess
Proceeds within 10 Business Days after the date that Excess Proceeds exceeds $15
million by mailing the notice required in Section 3.09 hereof to the Holders.
The Offer Period shall be not less than 30 days and not more than 40 days,
unless a longer period is required by law. The Issuers shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with such Purchase Offer. To the extent that the
aggregate amount of Notes tendered pursuant to such Purchase Offer is less than
the Excess Proceeds, the Partnership may use such deficiency for general
business purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such Purchase
Offer, the amount of Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates.
The Partnership 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 Partnership or the relevant Subsidiary than
those that would have been obtained in a comparable transaction by the
Partnership 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 million, the Partnership
delivers to the Trustee an opinion as to the fairness to the Partnership 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 Partnership or any of its
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Partnership (or the General Partner) or such Subsidiary, (ii)
Restricted Payments permitted by the provisions of Section 4.07 hereof, and
(iii) transactions entered into by the Partnership or the Insurance Company
Subsidiary 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 Partnership, its Subsidiaries and
its Affiliates, in each case, shall not be deemed Affiliate Transactions.
Section 4.12. Liens.
The Partnership shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien on
any asset now owned or hereafter acquired, or any income or profits therefrom or
assign or convey any right to receive income therefrom, except Permitted Liens.
Section 4.13. Subsidiary Note Guarantees.
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The Partnership may, at any time that it transfers or causes to be
transferred to any of its Subsidiaries assets, businesses or properties having a
fair market value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a resolution of such Board)
of $5 million or more, cause such Subsidiary to unconditionally guarantee,
jointly and severally, the Issuers' payment obligations under the Notes as
provided in Article 10 hereof, together with an Opinion of Counsel to the effect
that such supplemental indenture has been duly executed and delivered by such
Subsidiary and is in compliance with the terms of this Indenture.
Section 4.14. Offer to Purchase Upon Change of Control.
Upon the occurrence of a Change of Control, the Issuers shall make a
Purchase Offer to each Holder to purchase all or any part of such Holder's Notes
at an offer price in cash equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase. Such
Purchase Offer shall be made in accordance with the procedures set forth in
Article 3 hereof. The Issuers shall commence such Purchase Offer within 10 days
following any Change of Control by mailing the notice set forth in Section 3.09
hereof to the Holders. The Offer Period shall be not less than 30 days and not
more than 40 days, unless a longer period is required by law. The Issuers shall
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with such Purchase Offer.
Section 4.15. Partnership or Corporate Existence.
Subject to Article 5 and Article 10 hereof, as the case may be, each
Issuer and each of the Guarantors, if any, shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
or partnership existence, and the corporate or partnership existence of each of
their Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of each Issuer, any such
Guarantor or any such Subsidiary, as the case may be, and (ii) the rights
(charter and statutory), licenses and franchises of each Issuer, the Guarantors
and their respective Subsidiaries; provided, however, that the Issuers and the
Guarantors shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of their
respective Subsidiaries, if an officer of the General Partner or Finance Corp.,
as the case may be, shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Issuers, the Guarantors and
their Subsidiaries, taken as a whole and that the loss thereof is not adverse in
any material respect to the Holders of the Notes.
Section 4.16. Line of Business.
For so long as any Notes are outstanding, the Partnership and its
Subsidiaries will not materially or substantially engage in any business other
than that in which the Partnership and its Subsidiaries were engaged on the date
of this Indenture.
Section 4.17. Limitation on Sale and Leaseback Transactions.
The Partnership will not, and will not permit any of its Subsidiaries to,
enter into any arrangement with any Person providing for the leasing by the
Partnership or such Subsidiary of any property that has been or is to be sold or
transferred by the Partnership or such Subsidiary to such Person in
contemplation of such leasing; provided, however, that the Partnership or such
Subsidiary may enter into such sale and leaseback transaction if (i) the
Partnership could have (A) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Fixed
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Charge Coverage Ratio Test set forth in paragraph (a) of Section 4.09 and (B)
secured a Lien on such Indebtedness pursuant to Section 4.12, 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 useful remaining life of such property.
Section 4.18. Restrictions on Nature of Indebtedness and Activities of Finance
Corp.
Notwithstanding the provisions of Section 4.09 hereof, Finance Corp. shall
not incur any Indebtedness unless (a) the Partnership is a co-obligor or
guarantor of such Indebtedness or (b) the net proceeds of such Indebtedness are
lent to the Partnership, used to acquire outstanding debt securities issued by
the Partnership or used directly or indirectly to refinance or discharge
Indebtedness permitted under the limitations of this Section 4.18. Finance
Corp. shall not engage in any business not related directly or indirectly to
obtaining money or arranging financing for the Partnership.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
(a) The Partnership shall not consolidate or merge with or into (whether
or not the Partnership is the surviving corporation), 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
Partnership is the surviving Person, or the Person formed by or surviving any
such consolidation or merger (if other than the Partnership) 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; (ii) the
Person formed by or surviving any such consolidation or merger (if other than
the Partnership) or Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the obligations
of the Partnership pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, under the Notes and this Indenture; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) the Partnership 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 Partnership immediately preceding the transaction
and (B) shall, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
Section 4.09 hereof.
(b) Finance Corp. may not consolidate or merge with or into (whether or
not Finance Corp. 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) Finance
Corp. is the surviving Person, or the Person formed by or surviving any such
consolidation or merger (if other than Finance Corp.) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia and a Wholly Owned Subsidiary of
the Partnership; (ii) the Person formed by or surviving any such consolidation
or merger (if other than Finance Corp.) or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have
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been made assumes all the obligations of Finance Corp., pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, under
the Notes and the Indenture; and (iii) immediately after such transaction no
Default or Event of Default exists.
(c) The Partnership or Finance Corp., as the case may be, shall deliver
to the Trustee prior to the consummation of the proposed transaction pursuant to
the foregoing paragraphs (a) and (b) an Officers' Certificate to the foregoing
effect and an Opinion of Counsel stating that the proposed transaction and such
supplemental indenture comply with this Indenture. The Trustee shall be
entitled to conclusively rely upon such Officers' Certificate and Opinion of
Counsel.
Section 5.02. Successor Person Substituted.
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 Partnership or Finance Corp. in accordance with Section 5.01 hereof, the
successor Person formed by such consolidation or into or with which the
Partnership or Finance Corp. 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
Indenture referring to the "Partnership," "Finance Corp.," or the "Issuers," as
the case may be shall refer to or include instead the successor Person and not
the Partnership or Finance Corp., as the case may be), and may exercise every
right and power of the Partnership or Finance Corp., as the case may be under
this Indenture with the same effect as if such successor Person had been named
as the Partnership or Finance Corp., as the case may be, herein; provided,
however, that the predecessor Issuer shall not be relieved from the obligation
to pay the principal of, premium, if any, and interest on the Notes except in
the case of a sale of all of such Issuer's assets that meets the requirements of
Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Issuers or the Guarantors default in the payment of interest
on the Notes when the same becomes due and payable and such default continues
for a period of 30 days;
(b) the Issuers or the Guarantors default in the payment of principal
of or premium, if any, on the Notes when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to purchase)
or otherwise;
(c) the Issuers fail for a period of 20 days to observe or perform any
covenant, condition or agreement on the part of the Issuers to be observed or
performed pursuant to Sections 4.07, 4.09, 4.10, 4.15 and 5.01 hereof;
(d) the Issuers or any Guarantor fails to comply with any of their
other respective agreements or covenants in, or provisions of, the Notes, the
Note Guarantees or this Indenture and the Default continues for the period
and after the notice specified below;
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(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Partnership or any of its Subsidiaries
(or the payment of which is Guaranteed by the Partnership or any of its
Subsidiaries), whether such Indebtedness or Guarantee now exists or shall be
created hereafter, which default (i) is caused by a failure to pay principal
of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness (a "Payment
Default") or (ii) results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal amount of such
Indebtedness, together with the principal amount of any other Indebtedness as
to which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10 million or more, excluding any acceleration of
maturity of the Indebtedness represented by the General Partner's Existing
Floating Rate Notes and Existing Fixed Rate Notes to the extent that such
Indebtedness shall be redeemed on or prior to the 40th day after the date of
the Indenture;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the
Partnership or any of its Subsidiaries and such judgments are not paid,
discharged or stayed for a period of 60 days, provided that the aggregate of
all such undischarged judgments exceeds $10 million;
(g) except as otherwise permitted hereunder, any Note Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor (or its
successors or assigns), or any Person acting on behalf of any Guarantor (or
its successors or assigns), shall deny or disaffirm its obligations under its
Note Guarantee;
(h) the Partnership or any of its Subsidiaries pursuant to or within
the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Partnership or any Subsidiary of the
Partnership in an involuntary case,
(ii) appoints a Custodian of the Partnership or any Subsidiary of
the Partnership or for all or substantially all of the property of the
Partnership or any Subsidiary of the Partnership, or
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(iii) orders the liquidation of the Partnership or any Subsidiary of
the Partnership,
and the order or decree remains unstayed and in effect for 60 consecutive
days.
A Default under clause (d) is not an Event of Default until the Trustee
notifies the Issuers, or the Holders of at least 25% in principal amount of the
then outstanding Notes notify the Issuers and the Trustee, of the Default and
the Issuers do not cure the Default within 60 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default."
In the case of any Event of Default pursuant to the provisions of this
Section 6.01 occurring by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Issuers with the intention of avoiding payment
of the premium that the Issuers would have had to pay if the Issuers then had
elected to redeem the Notes pursuant to Section 3.07 hereof, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law, anything in this Indenture or in the Notes to the contrary
notwithstanding. If an Event of Default occurs prior to __________, 1998 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Issuers with the intention of avoiding the prohibition on redemption of
the Notes prior to __________, 1998 pursuant to Section 3.07 hereof, then the
premium payable for purposes of this paragraph for each of the years beginning
on __________ of the years set forth below shall be as set forth in the
following table expressed as a percentage of the amount that would otherwise be
due but for the provisions of this sentence, plus accrued interest, if any, to
the date of payment:
Year Percentage
---- ----------
1994 ____%
1995 ____%
1996 ____%
1997 ____%
Section 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
clauses (h) and (i) of Section 6.01 hereof relating to either Issuer, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary) occurs and is continuing, the Trustee by
notice to the Issuers, or the Holders of at least 25% in principal amount of the
then outstanding Notes by written notice to the Issuers and the Trustee may
declare the unpaid principal of and any accrued interest on all the Notes to be
due and payable. Upon such declaration the principal and interest shall be due
and payable immediately (together with the premium referred to in Section 6.01
hereof, if applicable). If an Event of Default specified in clause (h) or (i)
of Section 6.01 hereof relating to either Issuer, any Significant Subsidiary or
any group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary occurs, such an amount shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder. The Holders of a majority in principal amount of the then
outstanding Notes by written notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived.
Section 6.03. Other Remedies.
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If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal of, premium, if any,
and interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium, if any, or interest on, the Notes
(including in connection with an offer to purchase) (provided, however, that the
Holders of a majority in aggregate principal amount of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration). Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture or that the Trustee determines may be
unduly prejudicial to the rights of other Holders of Notes or that may involve
the Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default or the Trustee receives such notice from either
Issuer;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any
loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request; provided,
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however, that such provision does not affect the right of a Holder of a Note
to sue for enforcement of any overdue payment thereon.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal of, premium, if any, and
interest on the Note, on or after the respective due dates expressed in the Note
(including in connection with a Purchase Offer), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) hereof occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Issuers for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Issuers
(or any other obligor upon the Notes, including the Guarantors), its creditors
or its property and shall be entitled and empowered to collect, receive and
distribute any money or other property payable or deliverable on any such claims
and any custodian in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee, and in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding shall be denied for
any reason, payment of the same shall be secured by a Lien on, and shall be paid
out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
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Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expenses and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes
for principal, premium, if any, and interest, respectively; and
Third: to the Partnership or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only those
duties that are specifically set forth in this Indenture and no others, and
no implied covenants or obligations shall be read into this Indenture against
the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or
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opinions furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction received
by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Issuers. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require from
either Issuer an Officers' Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Trustee may consult with counsel and the written advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
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(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from either Issuer shall be sufficient if signed by
an Officer of the General Partner (in the case of the Partnership) or by an
Officer of Finance Corp. (in the case of Finance Corp.)
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with either Issuer, any Guarantor or
any Affiliate of either Issuer or any Guarantor with the same rights it would
have if it were not Trustee. However, in the event that the Trustee acquires
any conflicting interest it must eliminate such conflict within 90 days, apply
to the SEC for permission to continue as trustee or resign. Any Agent may do
the same with like rights and duties. The Trustee is also subject to Sections
7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Issuers' use of the proceeds from the Notes or any money
paid to the Issuers or upon the Issuers' direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each _________ beginning with the __________
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA (S) 313(a) (but if no
event described in TIA (S) 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA (S) 313(b)(2). The Trustee shall also transmit by mail
all reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Issuers and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with
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TIA (S) 313(d). The Issuers shall promptly notify the Trustee when the Notes
are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Issuers and the Guarantors, if any, shall pay to the Trustee from time
to time reasonable compensation for its acceptance of this Indenture and its
services hereunder. The Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Issuers and the
Guarantors, if any, shall reimburse the Trustee promptly upon request for all
reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Issuers and the Guarantors, if any, shall indemnify the Trustee
against any and all losses, liabilities or expenses incurred by it arising out
of or in connection with the acceptance or administration of its duties under
this Indenture, including the costs and expenses of enforcing this Indenture
against the Issuers and the Guarantors (including this Section 7.07), and
defending itself against any claim (whether asserted by either Issuer, any
Guarantor or any Holder or any other person) or liability in connection with the
exercise or performance of any of its powers or duties hereunder, except to the
extent any such loss, liability or expense may be attributable to its negligence
or bad faith. The Trustee shall notify the Issuers promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Issuers
shall not relieve the Issuers and the Guarantors, if any, of their obligations
hereunder. The Issuers and the Guarantors, if any, shall defend the claim and
the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Issuers and the Guarantors, if any, shall pay the reasonable
fees and expenses of such counsel. The Issuers and the Guarantors, if any, need
not pay for any settlement made without their consent, which consent shall not
be unreasonably withheld.
The obligations of the Issuers and the Guarantors, if any, under this
Section 7.07 shall survive the satisfaction and discharge of this Indenture.
To secure the Issuers' and the Guarantors' payment obligations in this
Section, the Trustee shall have a Lien prior to the Notes on all money or
property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Issuers. The Holders of Notes of a
majority in principal amount of the then
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outstanding Notes may remove the Trustee by so notifying the Trustee and the
Issuers in writing. The Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuers.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers, any
Guarantor, or the Holders of Notes of at least 10% in principal amount of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10
hereof, such Holder of a Note may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuers. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Issuers' and the Guarantors' obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
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This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Issuers.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Issuers may, at the option of the Board of Directors and the Board of
Directors of Finance Corp. evidenced in each case by a resolution set forth in
an Officers' Certificate, at any time elect to have either Section 8.02 or 8.03
hereof be applied to all outstanding Notes upon compliance with the conditions
set forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, each of the Issuers and each of the Guarantors,
if any, shall, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, be deemed to have been discharged from its obligations with
respect to all outstanding Notes and Note Guarantees on the date the conditions
set forth below are satisfied (hereinafter, "Legal Defeasance"). For this
purpose, Legal Defeasance means that the Issuers shall be deemed to have paid
and discharged the entire Indebtedness represented by the outstanding Notes,
which shall thereafter be deemed to be "outstanding" only for the purposes of
Section 8.05 hereof and the other Sections of this Indenture referred to in (a)
and (b) below, and to have satisfied all their other obligations under such
Notes and this Indenture (and the Trustee, on demand of and at the expense of
the Issuers, shall execute proper instruments acknowledging the same), except
for the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
solely from the trust fund described in Section 8.04 hereof, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (b) the Issuers' and
Guarantors' obligations with respect to such Notes under Article 2 and Section
4.02 hereof, (c) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Issuers' and the Guarantors' obligations in connection
therewith and (d) this Article 8. Subject to compliance with this Article 8,
the Issuers may exercise their option under this Section 8.02 notwithstanding
the prior exercise of its option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Issuers' exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, each of the Issuers and each of the Guarantors,
if any, shall, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, be released from its obligations under the covenants
contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16,
4.17, 4.18 and 5.01 hereof with respect to the outstanding Notes and Note
Guarantees on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not
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"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance means that,
with respect to the outstanding Notes, the Issuers may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference in
any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture, such Notes and the Note Guarantees, if any, shall be unaffected
thereby. In addition, upon the Issuers' exercise under Section 8.01 hereof of
the option applicable to this Section 8.03 hereof, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, Sections 6.01(e) and 6.01(f)
hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuers shall irrevocably have deposited or caused to be
deposited with the Trustee as trust funds in trust for the purpose of making
the following payments, specifically pledged as security for, and dedicated
solely to, the benefit of the Holders of such Notes, (i) cash in U.S. Dollars
in an amount, or (ii) non-callable Government Securities which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than one day before the due date of
any payment, cash in U.S. Dollars in an amount, or (iii) a combination
thereof, in such amounts, as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge
and which shall be applied by the Trustee (or other qualifying trustee) to
pay and discharge (A) the principal of, premium, if any, and interest on the
outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, of such principal or installment of principal,
premium, if any, or interest and (B) any mandatory sinking fund payments or
analogous payments applicable to the outstanding Notes on the day on which
such payments are due and payable in accordance with the terms of the
Indenture and of such Notes; provided that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds of such non-
callable Government Securities to said payments with respect to the Notes;
(b) in the case of an election under Section 8.02 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel (which counsel may
be an employee of either Issuer or any Subsidiary of either Issuer)
reasonably acceptable to the Trustee confirming that (i) the Issuers have
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date of this Indenture, there has been a change in
the applicable federal income tax law, in either case to the effect that, and
based thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
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(c) in the case of an election under Section 8.03 hereof, the Issuers
shall have delivered to the Trustee an Opinion of Counsel (which counsel may
be an employee of either Issuer or any Subsidiary of either Issuer)
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(d) no Event of Default shall have occurred and be continuing on the
date of such deposit or, insofar as Sections 6.01(h) or 6.01(i) hereof is
concerned, at any time in the period ending on the 91st day after the date of
deposit (or greater period of time in which any such deposit of trust funds
may remain subject to Bankruptcy Law insofar as those apply to the deposit by
the Issuers);
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement
or instrument (other than this Indenture) to which either Issuer or any of
their Subsidiaries is a party or by which either Issuer or any of their
Subsidiaries is bound;
(f) the Issuers shall have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the
intent of preferring the Holders over any other creditors of the Issuers or
the Guarantors, if any, or with the intent of defeating, hindering, delaying
or defrauding any other creditors of the Issuers or others; and
(h) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with as contemplated hereby.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including either Issuer acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Issuers and the Guarantors, if any, shall pay and indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against the
cash or non-callable Government Securities deposited pursuant to Section 8.04
hereof or the principal and interest received in respect thereof other than any
such tax, fee or other charge which by law is for the account of the Holders of
the outstanding Notes.
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Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon the request
of the Issuers any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06. Repayment to Issuers.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Issuers, in trust for the payment of the principal of, premium, if any, or
interest, if any, on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest, if any, have become due and payable
shall be paid to the Issuers on its request or (if then held by the Issuers)
shall be discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuers for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Issuers as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Issuers cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Issuers.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Issuers' and the Guarantors' obligations under this
Indenture, the Notes and the Note Guarantees shall be revived and reinstated as
though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.02 or 8.03 hereof, as the case may be; provided,
however, that, if the Issuers and the Guarantors make any payment of principal
of, premium, if any, or interest, if any, on any Note following the
reinstatement of its obligations, the Issuers and the Guarantors shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Issuers, the
Guarantors, if any, and the Trustee may amend or supplement this Indenture or
the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
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<PAGE>
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Partnership's, Finance
Corp.'s or any Guarantor's obligations to the Holders of the Notes in the
case of a merger or consolidation pursuant to Article 5 or Article 10 hereof,
as the case may be;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes (including providing for Note Guarantees
pursuant to Section 4.13 hereof) or that does not adversely affect the legal
rights hereunder of any Holder of the Note; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Issuers accompanied by a resolution of the Board
of Directors of each of the General Partner and Finance Corp. authorizing the
execution of any such amended or supplemental Indenture, and upon receipt by the
Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Issuers and the Guarantors in the execution of any amended or
supplemental Indenture authorized or permitted by the terms of this Indenture
and make any further appropriate agreements and stipulations that may be therein
contained, but the Trustee shall not be obligated to enter into such amended or
supplemental Indenture that affects its own rights, duties or immunities under
this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Issuers, the
Guarantors, if any, and the Trustee may amend or supplement this Indenture or
the Notes with the written consent of the Holders of at least a majority in
principal amount of the Notes then outstanding (including consents obtained in
connection with a tender offer or exchange offer for the Notes), and, subject to
Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other
than a Default or Event of Default in the payment of the principal of, premium,
if any, or interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the Notes).
Upon the request of the Issuers accompanied by a resolution of the Board
of Directors of each of the General Partner and Finance Corp. authorizing the
execution of any such amended or supplemental Indenture, and upon the filing
with the Trustee of evidence satisfactory to the Trustee of the consent of the
Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Issuers and
the Guarantors, if any, in the execution of such amended or supplemental
Indenture unless such amended or supplemental Indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Issuers shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement
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or waiver. Any failure of the Issuers to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and
6.07 hereof, the Holders of a majority in aggregate principal amount of the
Notes then outstanding may waive compliance in a particular instance by the
Issuers or any Guarantor with any provision of this Indenture, the Note or the
Note Guarantees. However, without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a non-consenting
Holder):
(a) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter any of the provisions with respect to the redemption of the Notes
(other than provisions of Section 4.10 and Section 4.15 hereof);
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in Section 6.04 or 6.07 hereof or in the
provisions of this Indenture relating to the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on the
Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Section 4.10 or Section 4.15 hereof);
(h) make any change to the subordination provisions of Article 10
hereof that adversely affects Holders;
(i) except pursuant to Article 8 and Article 10 hereof, release any
Guarantor from its obligations under its Note Guarantee, or change any Note
Guarantee in any manner that would adversely affect the Holders; or
(j) make any change in this sentence of this Section 9.02.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in an amended or supplemental Indenture that complies with the TIA as then
in effect.
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Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Issuers in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
(accompanied by a notation of the Note Guarantees duly endorsed by the
Guarantors) that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The
Issuers and the Guarantors may not sign an amendment or supplemental Indenture
until the Board of Directors of each of the General Partner and Finance Corp.
approves it. In executing any amended or supplemental indenture, the Trustee
shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully
protected in relying upon, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10
NOTE GUARANTEES
Section 10.01. Note Guarantee.
Each Subsidiary of the Partnership which in accordance with Section 4.13
hereof is required or permitted to guarantee the obligations of the Issuers
under the Notes, upon execution of a counterpart of this Indenture, hereby
jointly and severally unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee irrespective of the validity or
enforceability of this Indenture, the Notes or the obligations of the Issuers
under this Indenture or the Notes, that: (i) the principal of and interest on
the Notes will be paid in full when due, whether at the maturity or interest
payment or mandatory redemption date, by acceleration, call for redemption or
otherwise, and interest on the overdue principal of and interest, if any, on the
Notes and all other obligations of the Issuers to the Holders or the Trustee
under this Indenture or the Notes will be promptly paid in full or performed,
all in accordance with the terms of this Indenture and the Notes; and (ii) in
case of any extension of time of payment or renewal of any Notes or any of such
other obligations, they will be paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at maturity, by acceleration
or
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otherwise. Failing payment when due of any amount so guaranteed for whatever
reason, each Guarantor will be obligated to pay the same whether or not such
failure to pay has become an Event of Default which could cause acceleration
pursuant to Section 6.02 hereof. Each Guarantor agrees that this is a guarantee
of payment not a guarantee of collection.
Each Guarantor hereby agrees that its obligations with regard to this Note
Guarantee shall be joint and several, unconditional, irrespective of the
validity or enforceability of the Notes or the obligations of the Issuers under
this Indenture, the absence of any action to enforce the same, the recovery of
any judgment against either Issuer or any other obligor with respect to this
Indenture, the Notes or the obligations of the Issuers under this Indenture or
the Notes, any action to enforce the same or any other circumstances (other than
complete performance) which might otherwise constitute a legal or equitable
discharge or defense of a Guarantor. Each Guarantor further, to the extent
permitted by law, waives and relinquishes all claims, rights and remedies
accorded by applicable law to guarantors and agrees not to assert or take
advantage of any such claims, rights or remedies, including but not limited to:
(a) any right to require the Trustee, the Holders or the Issuers (each, a
"Benefitted Party") to proceed against the Issuers or any other Person or to
proceed against or exhaust any security held by a Benefitted Party at any time
or to pursue any other remedy in any Benefitted Party's power before proceeding
against such Guarantor; (b) the defense of the statute of limitations in any
action hereunder or in any action for the collection of any Indebtedness or the
performance of any obligation hereby guaranteed; (c) any defense that may arise
by reason of the incapacity, lack of authority, death or disability of any other
Person or the failure of a Benefitted Party to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of any other
Person; (d) demand, protest and notice of any kind including but not limited to
notice of the existence, creation or incurring of any new or additional
Indebtedness or obligation or of any action or non-action on the part of such
Guarantor, either Issuer, any Benefitted Party, any creditor of such Guarantor,
either Issuer or on the part of any other Person whomsoever in connection with
any Indebtedness or obligations hereby guaranteed; (e) any defense based upon an
election of remedies by a Benefitted Party, including but not limited to an
election to proceed against such Guarantor for reimbursement; (f) any defense
based upon any statute or rule of law which provides that the obligation of a
surety must be neither larger in amount nor in other respects more burdensome
than that of the principal; (g) any defense arising because of a Benefitted
Party's election, in any proceeding instituted under the Federal Bankruptcy
Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code;
or (h) any defense based on any borrowing or grant of a security interest under
Section 364 of the Federal Bankruptcy Code. Each Guarantor hereby covenants
that its Note Guarantees will not be discharged except by complete performance
of the obligations contained in its Note Guarantees and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to either the Partnership, Finance Corp. or any Guarantor, or any
Custodian acting in relation to any of the Partnership, Finance Corp. or such
Guarantor, any amount paid by the Partnership, Finance Corp. or such Guarantor
to the Trustee or such Holder, the applicable Note Guarantees, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor agrees that it will not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between such Guarantor, on the one
hand, and the Holders and the Trustee, on the other hand, (i) the maturity of
the obligations guaranteed hereby may be accelerated as provided in Section 6.02
hereof for the purposes of this Note Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration as to the Issuers
or any other obligor on the Notes of the obligations guaranteed hereby, and (ii)
in the event of any declaration of
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acceleration of those obligations as provided in Section 6.02 hereof, those
obligations (whether or not due and payable) will forthwith become due and
payable by such Guarantor for the purpose of this Note Guarantee.
Section 10.02. Limitation of Guarantor's Liability.
Each Guarantor and by its acceptance hereof, each beneficiary hereof,
hereby confirm that it is its intention that the Note Guarantees by such
Guarantor not constitute a fraudulent transfer or conveyance for purposes of the
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to any
Note Guarantees. To effectuate the foregoing intention, each such person hereby
irrevocably agrees that the obligation of such Guarantor under its Note
Guarantees under this Article 10 shall be limited to the maximum amount as will,
after giving effect to such maximum amount and all other (contingent or
otherwise) liabilities of such Guarantor that are relevant under such laws, and
after giving effect to any collections from, rights to receive contribution from
or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under this Article 10, result in the
obligations of such Guarantor in respect of such maximum amount not constituting
a fraudulent conveyance. Each beneficiary under the Note Guarantees, by
accepting the benefits hereof, confirms its intention that, in the event of a
bankruptcy, reorganization or other similar proceeding of either Issuer or any
Guarantor in which concurrent claims are made upon such Guarantor hereunder, to
the extent such claims will not be fully satisfied, each such claimant with a
valid claim against such Issuer shall be entitled to a ratable share of all
payments by such Guarantor in respect of such concurrent claims.
Section 10.03. Guarantors May Consolidate, etc., on Certain Terms.
No Guarantor shall consolidate with or merge with or into (whether or not
such Guarantor is the surviving Person), another corporation, Person or entity
whether or not it is affiliated with such Guarantor unless (i) subject to the
provisions of the following paragraph and Section 10.4 hereof, the Person formed
by or surviving any such consolidation or merger (if other than such Guarantor)
assumes all the obligations of such Guarantor pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, under its Note
Guarantee, the Notes and this Indenture, (ii) immediately after giving effect to
such transaction, no Default or Event of Default exists, and (iii) such
Guarantor, or any Person formed by or surviving any such consolidation or
merger, (A) shall have Consolidated Net Worth (immediately after giving effect
to such transaction), equal to or greater than the Consolidated Net Worth of
such Guarantor immediately preceding the transaction and (B) will be permitted
by virtue of the Partnership pro forma Fixed Charge Coverage Ratio to incur,
immediately after giving effect to such transaction, at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the Section 4.09 hereof. In case of any such consolidation, merger,
sale or conveyance and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the Note Guarantee in this Indenture and the due and
punctual performance and observance of all of the covenants and conditions of
this Indenture to be performed by the Guarantor, such successor corporation
shall succeed to and be substituted for the Guarantor with the same effect as if
it had been named herein as a Guarantor.
Notwithstanding the foregoing, (A) a Guarantor may consolidate with or
merge with or into the Partnership or Finance Corp. (subject to the provisions
of Section 5.01 hereof) and (B) a Guarantor may consolidate with or merge with
or into any other Guarantor.
Section 10.04. Releases Following Sale of Assets.
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Upon a sale or other disposition of all or substantially all of the assets
of any Guarantor, by way of merger, consolidation or otherwise, or a sale or
other disposition of all of the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the Capital Interests of such Guarantor)
or the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) shall
be released and relieved of its obligations under its Note Guarantees; provided
that the Net Proceeds of such sale or other disposition are applied in
accordance with Section 4.10 hereof. The Trustee will deliver to such Guarantor
a signed acknowledgment of such release.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S)318(c), the imposed duties shall control.
Section 11.02. Notices.
Any notice or communication by the Issuers, the Guarantors or the Trustee
to the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Issuers or any Guarantor:
Ferrellgas, L.P.
One Liberty Plaza
Liberty, Missouri 64068
Telecopier No.: ______________
Attention: ____________________
With a copy to:
Smith, Gill, Fisher, & Butts
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Telecopier No.: ______________
Attention: ____________________
If to the Trustee:
Norwest Bank Minnesota,
National Association
_______________________________
_______________________________
Telecopier No.: ______________
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Attention: ____________________
The Issuers, the Guarantors or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the either Issuer or any Guarantor mails a notice or communication to
Holders, it shall mail a copy to the Trustee and each Agent at the same time.
Section 11.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Issuers, the
Guarantors, if any, the Trustee, the Registrar and anyone else shall have the
protection of TIA (S) 312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuers or the Guarantors, if any,
to the Trustee to take any action under this Indenture, each of the Issuers or
the Guarantors, if any, shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
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Section 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether such covenant or condition has been
satisfied; and
(d) a statement as to whether, in the opinion of such Person, such
condition or covenant has been satisfied.
Section 11.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 11.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No past, present or future director, officer, employee, incorporator or
stockholder of either Issuer or any Guarantor, as such, shall have any liability
for any obligations of the Issuers or any Guarantor under the Notes, the Note
Guarantees, this Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note and the related Note Guarantees waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes.
Section 11.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES.
Section 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Issuers or their Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 11.10. Successors.
All agreements of the Issuers and the Guarantors, if any, in this
Indenture and the Notes and the Note Guarantees, as the case may be, shall bind
their respective successors. All agreements of the Trustee in this Indenture
shall bind its successors.
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Section 11.11. Severability.
In case any provision in this Indenture, in the Notes or in the Note
Guarantees, if any, shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 11.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 11.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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<PAGE>
SIGNATURES
Dated as of ______, 1994 FERRELLGAS, L.P.
By: Ferrellgas, Inc.
General Partner
By: ______________________________
Name:
Title:
(SEAL)
Dated as of ______, 1994 FERRELLGAS FINANCE CORP.
By: ______________________________
Name:
Title:
(SEAL)
Dated as of ______, 1994 NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By: ______________________________
Name:
Title:
(SEAL)
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Exhibit A
(Face of Note)
____% Senior Notes due 2001
No. $__________
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
promise to pay to
or registered assigns,
the principal sum of
Dollars on _________ __, 2001.
Interest Payment Dates: ________ __, and ________ __
Record Dates: ________ __, and ________ __
Dated: _______________ __, 1994
FERRELLGAS, L.P.
By: Ferrellgas, Inc.
General Partner
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
FERRELLGAS FINANCE CORP.
By:____________________________________
Name:
Title:
By:____________________________________
Name:
Title:
A-1
<PAGE>
This is one of the Notes
referred to in the
within-mentioned Indenture:
- ---------------------------------
as Trustee
By:__________________________________
A-2
<PAGE>
(Back of Security)
___% SENIOR NOTE
DUE ________, 2001
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated.
1. Interest. Ferrellgas L.P., a Delaware limited partnership (the
"Partnership") and Ferrellgas Finance Corp., a Delaware corporation ("Finance
Corp." and, together with the Partnership, the "Issuers") promise to pay
interest on the principal amount of this Note at the rate and in the manner
specified below. The Issuers shall pay in cash interest on the principal amount
of this Note at the rate per annum of __%. The Issuers will pay interest semi-
annually in arrears on _______ and _______ of each year, commencing on
__________, 1994, to Holders of record on the immediately preceding _______ and
________, or if any such day is not a Business Day (as defined in the
Indenture), on the next succeeding Business Day (each an "Interest Payment
Date"). Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Interest shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of the
original issuance of the Notes. To the extent lawful, the Issuers shall pay
interest on overdue principal at the rate of 1% per annum in excess of the then
applicable interest rate on the Notes; it shall pay interest on overdue
installments of interest (without regard to any applicable grace periods) at the
same rate to the extent lawful.
2. Method of Payment. The Issuers will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the record date next preceding the Interest Payment
Date, even if such Notes are cancelled after such record date and on or before
such Interest Payment Date. The Holder hereof must surrender this Note to a
Paying Agent to collect principal payments. The Issuers will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. The Issuers, however, may pay
principal, premium, if any, and interest by check payable in such money. The
Notes will be payable both as to principal and interest at the office or agency
of the Issuers maintained for such purpose within the City and State of New York
or, at the option of the Issuers, payment of interest may be made by check
mailed to the Holders of Notes at their respective addresses set forth in the
register of Holders. Unless otherwise designated by the Issuers, the Issuers'
office or agency in New York, New York will be the office of the Trustee
maintained for such a purpose.
3. Paying Agent and Registrar. Initially, the Trustee will act as
Paying Agent and Registrar. The Issuers may change any Paying Agent, Registrar
or co-registrar without notice to any Holder. Either Issuer or any Guarantor
may act in any such capacity.
4. Indenture. The Issuers issued the Notes under an Indenture dated
as of _________, 1994 (the "Indenture") between Partnership, Finance Corp. and
the Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture.
The Notes are subject to all such terms, and Holders of the Notes are referred
to the Indenture and such act for a statement of such terms. The terms of the
Indenture shall govern any inconsistencies between the Indenture and the Notes.
The Notes are unsecured general obligations of the Issuers limited to
$250,000,000 in aggregate principal amount.
A-3
<PAGE>
5. Optional Redemption. The Issuers shall not have the option to
redeem the Notes pursuant to Section 3.07 of the Indenture prior to
____________, 1998. Thereafter, the Issuers shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of the principal amount) set
forth below, plus accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the 12 month period beginning on __________
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
1998 ....................... ___.__%
1999 ....................... ___.__%
2000 ....................... 100.00%
</TABLE>
6. Mandatory Redemption. Except as described in paragraph 7 below,
the Issuers shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
7. Redemption or Repurchase at Option of Holder. (a) If there is a
Change of Control (as defined in the Indenture), the Issuers shall be required
to offer to purchase all Notes at 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase.
Holders of Notes that are subject to an offer to purchase will receive a notice
therefor from the Issuers prior to any related purchase date, and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
(b) When the aggregate amount of Excess Proceeds from Asset Sales (as
defined in the Indenture) exceeds $15 million, the Issuers shall be required to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds at 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date fixed for the closing of such offer. If the
aggregate principal amount of Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Notes to be redeemed shall be selected pursuant
to the terms of Section 3.02 of the Indenture (with such adjustments as may be
deemed appropriate by the Issuers so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased). To the extent that the
aggregate amount of Notes tendered by Holders thereof is less than the Excess
Proceeds, the Issuers may use such deficiency for general business purposes.
Holders of Notes which are the subject of an offer to purchase will receive a
notice therefor from the Issuers prior to any related purchase date, and may
elect to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing below.
8. Notice of Redemption. Notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at its registered address. Notes may be redeemed
in part but only in whole multiples of $1,000, unless all of the Notes held by a
Holder are to be redeemed. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
9. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture.
The Registrar need not exchange or register the transfer of any Note or portion
of a Note selected for redemption. Also, it need
A-4
<PAGE>
not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed, during the period between a record
date and the corresponding Interest Payment Date.
10. Persons Deemed Owners. Prior to due presentment to the Trustee
for registration of the transfer of this Note, the Trustee, any Agent, the
Issuers and the Guarantors may deem and treat the Person in whose name this Note
is registered as its absolute owner for the purpose of receiving payment of
principal of and interest on this Note and for all other purposes whatsoever,
whether or not this Note is overdue, and neither the Trustee, any Agent, the
Issuers nor any Guarantor shall be affected by notice to the contrary. The
registered holder of a Note shall be treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Notes may be amended with the consent of the Holders of at
least a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of any Holder, the Indenture or the Notes may be amended to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for assumption of
the Issuers' or any Guarantor's obligations to Holders in the case of a merger
or consolidation or to make any change that would provide any additional rights
or benefits to the Holders or that does not adversely affect the rights of any
Holder under the Indenture or to comply with the requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act. Without the consent of each Holder affected, an amendment
or waiver may not (with respect to any Notes held by a non-consenting Holder of
Notes): (i) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes (other than provisions relating to the covenants
described above under the caption "Redemption or Repurchase at the Option of
Holders"), (iii) reduce the rate of or change the time for payment of interest
on any Note, (iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Note payable in money other than that
stated in the Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on the Notes,
(vii) waive a redemption payment with respect to any Note (other than a payment
required by one of the covenants described above under the caption "Redemption
or Repurchase at the Option of Holders"), (viii) except as otherwise permitted
in the Indenture, release any Guarantor from its obligations under its Note
Guarantee or change any Note Guarantee in any manner that would adversely affect
the rights of the Holders of Senior Notes or (ix) make any change in the
foregoing amendment and waiver provisions.
12. Defaults and Remedies. Events of Default include: default for
30 days in the payment when due of interest on the Notes; default in payment
when due of principal of or premium, if any, on the Notes at maturity, upon
redemption or otherwise; failure by the Partnership to comply with Sections
4.07, 4.09, 4.10 or 5.01 of the Indenture; failure by the Partnership or the
Guarantors for 60 days after notice from the Trustee or the Holder of at least
25% in principal amount of the Notes then outstanding to comply with any of its
other agreements in the Indenture or the Notes; default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Partnership or
any of its Subsidiaries (or the payment of which is guaranteed by the
Partnership or any of its Subsidiaries) whether such Indebtedness or Guarantee
now exists, or is created after the date of the Indenture, which default (a) is
caused by a
A-5
<PAGE>
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10 million or more, excluding any acceleration of
maturity of the Indebtedness represented by the General Partner's Existing
Floating Rate Notes and Existing Fixed Rate Notes to the extent that such
Indebtedness shall be redeemed on or prior to the 40th day after the date of
this Indenture; failure by the Partnership or any of its Subsidiaries to pay
final judgments aggregating in excess of $10 million, which judgments are not
paid, discharged or stayed for a period of 60 days; except as permitted by the
Indenture, any Note Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations under its Note Guarantees; and certain events
of bankruptcy or insolvency with respect to the Partnership or any of its
Subsidiaries. If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately; except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, relating to the Partnership, any Significant Subsidiary or any group
of Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes will become due and payable without further action or
notice. Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount of the Notes then
outstanding, by notice to the Trustee, may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of principal of, premium, if any, and interest on the Notes. The
Issuers are required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Issuers are required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
13. Trustee Dealings with Issuers. The Trustee under the Indenture,
in its individual or any other capacity, may make loans to, accept deposits
from, and perform services for the Issuers, any Guarantor or their respective
Affiliates, and may otherwise deal with the Issuers, any Guarantor or their
respective Affiliates, as if it were not Trustee; however, if the Trustee
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue as Trustee or resign.
14. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator or stockholder, as such, of either Issuer or any
Guarantor, as such, shall have any liability for any obligations of the Issuers
or any Guarantor under the Notes, the Note Guarantees or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Note and the related Note Guarantees, if
any, waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of the Notes.
15. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
A-6
<PAGE>
16. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
18. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE NOTE GUARANTEES,
IF ANY.
The Issuers will furnish to any Holder upon written request and
without charge a copy of the Indenture. Request may be made to:
Ferrellgas, L.P.
One Liberty Plaza
Liberty, Missouri 64068
Telecopier No.: ___________
Attention: _________________
A-7
<PAGE>
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Issuers. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date: ______________________________
Your Signature: _______________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee.
A-8
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Issuers pursuant
to Section 4.10 or 4.15 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.15
If you want to elect to have only part of the Note purchased by the
Issuers pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $___________
Date: ____________________ Your Signature: _______________________________
(Sign exactly as your name appears on the Note)
Tax Identification No.:________________________
Signature Guarantee.
A-9
<PAGE>
EXHIBIT B
Form of Supplemental Indenture to Be Delivered by Future Guarantors
Supplemental Indenture (this "Supplemental Indenture"), dated as of
________________, between __________________ (the "Guarantor"), a subsidiary of
Ferrellgas, L.P., (or its successor), a Delaware limited partnership (the
"Partnership"), and Norwest Bank Minnesota, National Association, a national
banking association, as trustee under the indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Partnership and Ferrellgas Finance Corp., a Delaware
corporation ("Finance Corp." and, together with the Partnership, the "Issuers")
have heretofore executed and delivered to the Trustee an indenture (the
"Indenture"), dated as of _______ __, 1994, providing for the issuance of an
aggregate principal amount of $250,000,000 of ______% Senior Notes due 2001 (the
"Notes");
WHEREAS, Section 4.13 of the Indenture provides that under certain
circumstances the Partnership may cause the Guarantor to execute and deliver to
the Trustee a supplemental indenture pursuant to which the Guarantor shall
unconditionally guarantee all of the Issuers' obligations under the Notes
pursuant to a Note Guarantee on the terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition shall
have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guarantor hereby agrees that its obligations
to the Holder and the Trustee pursuant to this Note Guarantee shall be as
expressly set forth in Article 10 of the Indenture and in such other provisions
of the Indenture as are applicable to Guarantors, and reference is made to the
Indenture for the precise terms of this Supplemental Indenture. The terms of
Article 10 of the Indenture and such other provisions of the Indenture as are
applicable to Guarantors are incorporated herein by reference.
3. Execution and Delivery of Note Guarantees.
(a) To evidence its Note Guarantee set forth in this Supplemental
Indenture, the Guarantor hereby agrees that a notation of such Note Guarantee
substantially in the form of Exhibit C to the Indenture shall be endorsed by
an Officer of such Guarantor on each Note authenticated and delivered by the
Trustee after the date hereof.
(b) Notwithstanding the foregoing, the Guarantor hereby agrees that its
Note Guarantee set forth herein shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such Note
Guarantee.
B-1
<PAGE>
(c) If an Officer whose signature is on this Supplemental Indenture or on
the Note Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Note Guarantee is endorsed, the Note
Guarantee shall be valid nevertheless.
(d) The delivery of any Note by the Trustee, after the authentication
thereof under the Indenture, shall constitute due delivery of the Note
Guarantee set forth in this Supplemental Indenture on behalf of the
Guarantor.
6. No Recourse Against Others. No past, present or future director,
officer, employee, incorporator, stockholder of the Guarantor, as such, shall
have any liability for any obligations of the Issuers or any Guarantor under the
Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for
any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes.
7. New York Law to Govern. The internal law of the State of New York shall
govern and be used to construe this Supplemental Indenture and the Note
Guarantee.
8. Counterparts The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
9. Effect of Headings. The Section headings herein are for convenience only
and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ____________, ____ [Guarantor]
By: ___________________________
Name:
Title:
Dated: ____________, ____ _________________________________,
as Trustee
By: ___________________________
Name:
Title:
B-2
<PAGE>
EXHIBIT C
FORM OF NOTATION ON SENIOR SUBORDINATED NOTE
RELATING TO NOTE GUARANTEE
Each Guarantor set forth below and each Subsidiary of the Partnership
which in accordance with Section 4.13 of the Indenture is required to guarantee
the obligations of the Issuers under the Notes upon execution of a counterpart
of the Indenture, has jointly and severally unconditionally guaranteed (i) the
due and punctual payment of the principal of and interest on the Notes, whether
at the maturity or interest payment or mandatory redemption date, by
acceleration, call for redemption or otherwise, and of interest on the overdue
principal of and interest, if any, on the Notes and all other obligations of the
Issuers to the Holders or the Trustee under the Indenture or the Notes and (ii)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
maturity, by acceleration or otherwise.
The obligations of each Guarantor to the Holder and to the Trustee
pursuant to this Note Guarantee and the Indenture are as expressly set forth in
Article 10 of the Indenture and in such other provisions of the Indenture as are
applicable to Guarantors, and reference is hereby made to such Indenture for the
precise terms of this Note Guarantee. The terms of Article 10 of the Indenture
and such other provisions of the Indenture as are applicable to Guarantors are
incorporated herein by reference.
This is a continuing guarantee and shall remain in full force and effect
and shall be binding upon each Guarantor and its successors and assigns until
full and final payment of all of the Issuers' obligations under the Notes and
the Indenture and shall inure to the benefit of the successors and assigns of
the Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof. This is a
guarantee of payment and not a guarantee of collection.
This Note Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Note upon which this Note Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
By:__________________________________________
Name:
Title:
C-1
<PAGE>
EXHIBIT 10.7
CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT
-------------------------------------------------
This Contribution, Conveyance and Assumption Agreement, dated as of
____________, 1994, is entered into by and among FERRELLGAS PARTNERS, L.P., a
Delaware limited partnership (the "Master Partnership"), FERRELLGAS, L.P., a
Delaware limited partnership (the "Operating Partnership"), and FERRELLGAS,
INC., a Delaware corporation (the "Company").
RECITALS
WHEREAS, the Company and the Master Partnership have heretofore formed
the Operating Partnership pursuant to the Delaware Revised Uniform Limited
Partnership Act (the "Delaware Act") for the purpose of acquiring, owning and
operating the retail propane business and assets of the Company (the
"Business"); and
WHEREAS, the Company contributed $10.10 to the capital of the
Operating Partnership and received a 1.0101% general partner interest therein;
and the Master Partnership contributed $989.90 to the capital of the Operating
Partnership and received a 98.9899% limited partner interest therein; and
WHEREAS, the Company, as the general partner, and Danley K. Sheldon
("Sheldon"), as the organizational limited partner, have formed the Master
Partnership pursuant to the Delaware Act for the purpose of serving as the sole
limited partner of the Operating Partnership; and
WHEREAS, the Company contributed $10.00 to the capital of the Master
Partnership and received a 1% general partner interest therein; and Sheldon
contributed $990.00 to the capital of the Master Partnership and received a 99%
limited partner interest therein; and
WHEREAS, as of the date hereof, the Company and the Master Partnership
have entered into that certain Agreement of Limited Partnership of the Operating
Partnership (the "Operating Partnership Agreement"); and
WHEREAS, as of the date hereof, Sheldon, as the organizational limited
partner, and the Company, as the general partner and as attorney-in-fact for all
limited partners, have entered into that certain Agreement of Limited
Partnership of the Master Partnership (the "Master Partnership Agreement"); and
WHEREAS, pursuant to the Operating Partnership Agreement, the Company
has agreed to contribute to the Operating Partnership,
<PAGE>
as a capital contribution thereto, substantially all of its assets related to
the System in exchange for (a) the continuation of its 1.0101% general partner
interest in the Operating Partnership, (b) a limited partner interest in the
Operating Partnership which shall be contributed by the Company to the Master
Partnership pursuant to this Agreement and which, together with the limited
partner interest previously held by the Master Partnership will represent a
98.9899% limited partner interest in the Operating Partnership, (c) the
assumption of certain liabilities by the Operating Partnership, including,
without limitation, the Operating Partnership's assumption of the payment
obligations of certain indebtedness of the Company, and (d) other good and
valuable consideration; and
WHEREAS, pursuant to the Master Partnership Agreement, the Company has
agreed to contribute to the Master Partnership, as a capital contribution
thereto, all of its limited partner interest in the Operating Partnership in
exchange for (a) its continued 1% general partner interest in the Master
Partnership, (b) 1,000,000 Common Units, (c) 16,118,559 Subordinated Units, (d)
certain Incentive Distribution Rights, and (e) other good and valuable
consideration; and
WHEREAS, in connection with the above described contributions the
Company has agreed to indemnify the Master Partnership and the Operating
Partnership from and against certain liabilities and the Master Partnership and
the Operating Partnership have agreed to indemnify the Company from and against
certain liabilities;
NOW, THEREFORE, in consideration of their mutual undertakings and
agreements hereunder, the Master Partnership, the Operating Partnership and the
Company undertake and agree as follows:
ARTICLE I
Definitions
-----------
The following capitalized terms shall have the meanings given below.
"Agreement" means this Contribution, Conveyance and Assumption
---------
Agreement.
"Assets" means all of the assets owned, leased or held by the Company,
------
as of the Effective Time, of every kind, character and description, whether
tangible or intangible, whether real, personal or mixed, whether accrued or
contingent, and wherever located, including, without limitation, all of the
assets necessary to
<PAGE>
operate the Business as presently being operated by the Company and all right,
title and interest of the Company in and to the following assets:
(a) propane inventory;
(b) inventories and supplies of any kind;
(c) storage tanks and containers, propane cylinders, office
furniture, furnishings, computers and equipment of any kind;
(d) all real property wherever located;
(e) all rights in real property or personal property arising under
leases, easements or other contracts or arrangements;
(f) all motor vehicles, trailers, tanks, railcars, distribution
centers and related equipment, whether owned or leased;
(g) every contract, agreement, arrangement, grant, gift, trust or
other arrangement or understanding of any kind;
(h) any and all rights, claims and causes of action that the Company
may have under insurance policies or otherwise against any person
or property, whether known or unknown, accrued or contingent, and
whether or not reflected on the books and records of the Company
as of the Effective Time, insofar as any of the same relate to
the operation of the Assets or the business conducted with the
Assets prior to the Effective Time and such rights, claims or
causes of action representing reimbursement or recovery of
amounts actually paid by the Master Partnership or the Operating
Partnership after the Effective Time;
(i) every right to sell or distribute any product or service;
(j) all trade names, trade marks, service marks, logos, marks and
symbols of any kind, together with all goodwill associated
therewith, except as specifically provided for in Article IX of
this Agreement and subject to the right of the Company to
repurchase same as provided in Article IX of this Agreement;
<PAGE>
(k) all know-how, every trade secret, every customer list and all
other confidential information of every kind;
(l) every customer relationship, employee relationship, supplier
relationship and other relationship of any kind;
(m) every business conducted prior to the Effective Time by the
Company, including, without limitation, Stratton Insurance
Company;
(n) every other proprietary right of any kind; and
(o) all governmental licenses, permits and authorizations of every
kind;
excluding, however, any of such assets that constitute Excluded Assets.
"Assumed Liabilities" means all of the Company's liabilities arising
-------------------
from or relating to the Assets or the business conducted with the Assets, as of
the Effective Time, of every kind, character and description, whether known or
unknown, accrued or contingent, and whether or not reflected on the books and
records of the Company as of the Effective Time, including, without limitation,
the obligations, liabilities and outstanding indebtedness of the Company
described on Schedule 3 hereto; excluding, however, any of such liabilities that
----------
constitute Excluded Liabilities.
"Business" has the meaning assigned to such term in the Recitals to
--------
this Agreement.
"Company" has the meaning assigned to such term in the opening
-------
paragraph of this Agreement.
"Conveyance, Assignment and Bill of Sale" means that certain
---------------------------------------
Conveyance, Assignment and Bill of Sale, dated __________, 1994, in recordable
form from the Company to the Operating Partnership, the form of which is
attached hereto as Exhibit A.
---------
"Credit Facility" means the Credit Agreement dated as of
---------------
_______________, 1994 by and among the Company, the Operating Partnership,
Stratton Insurance Company and Bank of America National Trust and Savings
Association, as agent, and the financial institutions listed therein, providing
for an aggregate amount of borrowings up to $185,000,000.00.
<PAGE>
"Delaware Act" has the meaning assigned to such term in the Recitals
------------
to this Agreement.
"Effective Time" means 9:00 a.m. Eastern Standard Time on ___________,
--------------
1994.
"Excluded Assets" means those assets of the Company described on
---------------
Schedule 1 hereto.
- ----------
"Excluded Liabilities" means all of the liabilities described on
--------------------
Schedule 2 hereto.
- ----------
"Existing Fixed Rate Notes" means the $177,600,000 of 12% series B and
-------------------------
series D fixed rate senior notes due in August, 1996.
"Existing Floating Rate Notes" means the $50,000,000 of series A and
----------------------------
series C floating rate senior notes due in August, 1996.
"Existing Indebtedness" means and includes all of the indebtedness
---------------------
currently outstanding evidenced by the following: (a) the Existing Fixed Rate
Notes, (b) the Existing Floating Rate Notes, and (c) the Existing Subordinated
Debentures.
"Existing Subordinated Debentures" means the $246,400,000 of 11-5/8%
--------------------------------
senior subordinated debentures due in December, 2003.
"FCI" means Ferrell Companies, Inc., a Kansas corporation and the
---
owner all of the outstanding capital stock of the Company.
"FFC" means Ferrellgas Finance Corp., a Delaware corporation, a wholly
---
owned subsidiary of the Operating Partnership.
"Incentive Distribution Right" has the meaning assigned to the term
----------------------------
"IDR" in the Master Partnership Agreement.
"Laws" means any and all laws, statutes, ordinances, rules or
----
regulations promulgated by a governmental authority, orders of a governmental
authority, judicial decisions, decisions of arbitrators or determinations of any
governmental authority or court.
"Limited Partner Interest" has the meaning assigned to such term in
------------------------
Section 2.2.
"Master Partnership" has the meaning assigned to such term in the
------------------
opening paragraph of this Agreement.
"Master Partnership Agreement" has the meaning assigned
----------------------------
<PAGE>
to such term in the Recitals to this Agreement.
"Operating Partnership" has the meaning assigned to such term in the
---------------------
opening paragraph of this Agreement.
"Operating Partnership Agreement" has the meaning assigned to such
-------------------------------
term in the Recitals to this Agreement.
"Operating Partnership Debt Offering" means the $250,000,000 in debt
-----------------------------------
to be evidenced by notes to be issued by the Operating Partnership and FFC and
due in 2001.
"Restriction" has the meaning assigned to such term in Section 10.2.
-----------
"Restriction-Asset" has the meaning assigned to such term in Section
-----------------
10.2.
"Underwriting Agreement" means the Underwriting Agreement dated as of
----------------------
____________________, by and among the Partnership, the Company, and Goldman
Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation, A.G. Edwards &
Sons, Inc., PaineWebber Incorporated and Smith Barney Shearson, Inc., as
representatives of the several underwriters named in Schedule I thereto,
----------
relating to the public offering of up to 15,065,000 Common Units representing
limited partner interests in the Master Partnership.
ARTICLE II
Contribution to the Operating Partnership
-----------------------------------------
2.1 Contribution. The Company hereby grants, contributes, bargains,
------------
sells, conveys, assigns, transfers, sets over and delivers to the Operating
Partnership, its successors and assigns, for its and their own use forever, all
right, title and interest of the Company in and to the Assets in exchange for
(a) the consideration stated in Section 2.2, (b) the assumption of certain
liabilities by the Operating Partnership as provided in Article IV, and (c)
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and the Operating Partnership hereby accepts the Assets as
a contribution to the capital of the Operating Partnership.
TO HAVE AND TO HOLD the Assets unto the Operating Partnership, its
successors and assigns, together with all and singular the rights and
appurtenances thereto in any way belonging, subject, however, to the terms and
conditions stated in this Agreement, forever.
<PAGE>
2.2 Consideration for Contribution. In consideration for the
------------------------------
contribution of the Assets to the Operating Partnership, the Operating
Partnership hereby (a) continues the Company's 1.0101% general partner interest
in the Operating Partnership, and (b) issues, grants, contributes, bargains,
sells, conveys, transfers, sets over and delivers to the Company a limited
partner interest in the Operating Partnership (the "Limited Partner Interest")
which shall be contributed, transferred, conveyed, assigned and delivered by the
Company to the Master Partnership as provided in Section 3.1 of this Agreement,
and which, together with the limited partnership interest previously held by the
Master Partnership will represent a 98.9899% limited partner interest in the
Operating Partnership.
2.3 Forms of Conveyance. To further evidence this conveyance with
-------------------
respect to the real property included in the Assets, the Company has executed
and delivered to the Operating Partnership the Conveyance, Assignment and Bill
of Sale substantially in the form attached hereto as Exhibit A.
---------
ARTICLE III
Contribution to the Master Partnership
--------------------------------------
3.1 Contribution. The Company hereby grants, contributes,
------------
bargains, sells, conveys, assigns, transfers, sets over and delivers to the
Master Partnership, its successors and assigns, for its and their own use
forever, all right, title and interest of the Company in and to the Limited
Partner Interest in exchange for (a) the consideration stated in Section 3.2,
and (b) other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, and the Master Partnership hereby accepts the
Limited Partner Interest, as a contribution to the capital of the Master
Partnership.
TO HAVE AND TO HOLD the Limited Partner Interest unto the Master
Partnership, its successors and assigns, together with all and singular the
rights and appurtenances thereto in any way belonging, subject, however, to the
terms and conditions stated in this Agreement, forever.
3.2 Consideration for Contribution. In consideration for the
------------------------------
contribution of the Limited Partner Interest to the Master Partnership, the
Partnership hereby (a) continues the Company's 1% general partner interest in
the Master Partnership, and (b) issues, grants, contributes, bargains, sells,
conveys, assigns, transfers, sets over and delivers to the Company (i) 1,000,000
Common Units, (ii) 16,118,559 Subordinated Units, and (iii) the Incentive
Distribution Rights which, after giving effect to (1) the withdrawal of the
organizational limited partner of the
<PAGE>
Master Partnership as provided in the Master Partnership Agreement, and (2) the
sale of 13,100,000 Common Units pursuant to the Underwriting Agreement (or
15,065,000 Common Units if the overallotment option provided for in the
Underwriting Agreement is exercised in full), will represent an approximate
____% limited partner interest in the Master Partnership (or an approximate
____% limited partner interest in the Master Partnership if the overallotment
option provided for in the Underwriting Agreement is exercised in full).
ARTICLE IV
Assumption of Certain Liabilities
by the Operating Partnership
----------------------------
In connection with the contribution and transfer of the Assets to the
Operating Partnership, the Operating Partnership hereby assumes and agrees to
duly and timely pay, perform and discharge the Assumed Liabilities, including
the Existing Indebtedness and the indebtedness due under the Credit Facility, to
the full extent that the Company has been heretofore or would have been in the
future, were it not for the execution and delivery of this Agreement, obligated
to pay, perform and discharge the Assumed Liabilities; provided, however, that
said assumption and agreement to duly and timely pay, perform and discharge the
Assumed Obligations shall not increase the obligation of the Operating
Partnership with respect to the Assumed Liabilities beyond that of the Company,
waive any valid defense that was available to the Company with respect to the
Assumed Liabilities or enlarge any rights or remedies of any third party under
any of the Assumed Liabilities.
ARTICLE V
Indemnification
---------------
5.1 Indemnification With Respect to Excluded Liabilities. The
----------------------------------------------------
Company shall indemnify, defend and hold harmless the Operating Partnership, the
Master Partnership and their respective successors and assigns from and against
any and all claims, demands, costs, liabilities and expenses (including court
costs and reasonable attorneys' fees) of every kind, character and description,
whether known or unknown, accrued or contingent, and whether or not reflected on
the books and records of the Company as of the Effective Time, arising from or
relating to the Excluded Liabilities.
5.2 Indemnification With Respect to Operations Prior to the Effective
-----------------------------------------------------------------
Time. The Operating Partnership shall indemnify,
- ----
<PAGE>
defend and hold harmless the Company, the Master Partnership and their
respective successors and assigns from and against any and all claims, demands,
costs (including, without limitation, costs of environmental investigation and
remediation and penalties and other assessments), liabilities (including,
without limitation, liabilities arising by way of active or passive negligence)
and expenses (including court costs and reasonable attorneys' fees) of every
kind, character and description, whether known or unknown, accrued or
contingent, and whether or not reflected on the books and records of the Company
as of the Effective Time, arising from or relating to the operation of the
Assets or the business conducted with the Assets prior to the Effective Time,
including all tax liabilities including franchise taxes associated with the
Assets or the business other than any such claims, demands, costs, liabilities
and expenses arising from or relating to (a) federal and state income tax
liabilities incurred by the Company prior to the Effective Time; and (b) the
Excluded Liabilities, provided, however, that notwithstanding the foregoing, the
Operating Partnership shall not be required to indemnify, defend and hold
harmless the Company and its successors and assigns to the extent that any of
the foregoing claims, demands, costs, liabilities and expenses are recovered
through insurance proceeds paid to the owner of the Business.
5.3 Indemnification With Respect to Assumed Liabilities. Except as
---------------------------------------------------
set forth in Section 5.2, the Operating Partnership shall indemnify, defend and
hold harmless the Company, its successors and assigns from and against any and
all claims, demands, costs, liabilities (including, without limitation,
liabilities arising by way of active or passive negligence) and expenses
(including court costs and reasonable attorneys' fees) of every kind, character
and description, whether known or unknown, accrued or contingent, and whether or
not reflected on the books and records of the Company as of the Effective Time,
arising from or relating to the Assumed Liabilities.
5.4 Indemnification With Respect to Existing Indebtedness and Credit
----------------------------------------------------------------
Facility. The Operating Partnership shall indemnify, defend and hold harmless
- --------
the Company, its successors and assigns from and against any and all claims,
demands, costs, liabilities (including, without limitation, liabilities arising
by way of active or passive negligence) and expenses (including court costs and
reasonable attorneys' fees) of every kind, character and description, whether
known or unknown, accrued or contingent, and whether or not reflected on the
books and records of the Company as of the Effective Time, arising from or
relating to the liabilities and outstanding indebtedness of the Company under
the Existing Indebtedness and the Credit Facility.
<PAGE>
ARTICLE VI
Title Matters
-------------
6.1 Encumbrances. The contribution of the Assets made under Section
------------
2.1 is made expressly subject to all recorded and unrecorded liens,
encumbrances, agreements, defects, restrictions, adverse claims and all laws,
rules, regulations, ordinances, judgments and orders of governmental authorities
or tribunals having or asserting jurisdiction over the Assets or the business
and operations conducted thereon or therewith, in each case to the extent the
same are valid, enforceable and affect the Assets, including, without
limitation, all matters that a current survey or visual inspection of the Assets
would reflect, and to the Assumed Liabilities.
6.2 Disclaimer of Warranties; Subrogation; Waiver of Bulk Sales
-----------------------------------------------------------
Laws.
- ----
(a) THE COMPANY IS CONVEYING THE ASSETS "AS IS" WITHOUT
REPRESENTATION OR WARRANTY, WHETHER EXPRESS, IMPLIED OR STATUTORY (ALL OF WHICH
THE COMPANY HEREBY DISCLAIMS), AS TO (i) TITLE, (ii) FITNESS FOR ANY PARTICULAR
PURPOSE OR MERCHANTABILITY OR DESIGN OR QUALITY, OR (iii) ANY OTHER MATTER
WHATSOEVER. THE PROVISIONS OF THIS SECTION 6.2 HAVE BEEN NEGOTIATED BY THE
OPERATING PARTNERSHIP AND THE COMPANY AFTER DUE CONSIDERATION AND ARE INTENDED
TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR WARRANTIES OF
THE COMPANY, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE ASSETS
THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE,
EXCEPT AS EXPRESSLY SET FORTH HEREIN.
(b) The contribution of the Assets made under Section 2.1 is made
with full rights of substitution and subrogation of the Operating Partnership,
and all persons claiming by, through and under the Operating Partnership, to the
extent assignable, in and to all covenants and warranties by the predecessors-
in-title of the Company, and with full subrogation of all rights accruing under
applicable statutes of limitation and all rights of action of warranty against
all former owners of the Assets.
(c) The Company and the Operating Partnership agree that the
disclaimers contained in this Section 6.2 are "conspicuous" disclaimers. Any
covenants implied by statute or law by the use of the words "grant," "convey,"
"bargain," "sell," "assign," "transfer," "deliver," or "set over" or any of them
or any other words used in this Agreement are hereby expressly disclaimed,
waived and negated.
(d) Each of the parties hereto hereby waives compliance with any
applicable bulk sales law or any similar law in any
<PAGE>
applicable jurisdiction in respect of the transactions contemplated by this
Agreement.
ARTICLE VII
Further Assurances
------------------
7.1 Company Assurances. From time to time after the date hereof,
------------------
and without any further consideration, the Company shall execute, acknowledge
and deliver all such additional deeds, assignments, conveyances, instruments,
notices, releases, acquittances and other documents, and will do all such other
acts and things, all in accordance with applicable law, as may be necessary or
appropriate (i) more fully to assure the Operating Partnership, its successors
and assigns, all of the properties, rights, titles, interests, estates,
remedies, powers and privileges by this Agreement granted to the Operating
Partnership or intended so to be, (ii) to more fully and effectively vest in the
Master Partnership, its successors and assigns, beneficial and record title to
the Limited Partner Interest hereby contributed and assigned to the Master
Partnership or intended so to be and to put the Master Partnership in actual
possession and control of the Limited Partner Interest and (iii) to more fully
and effectively carry out the purposes and intent of this Agreement.
7.2 Operating Partnership and Master Partnership Assurances. From
-------------------------------------------------------
time to time after the date hereof, and without any further consideration, the
Operating Partnership and the Master Partnership shall execute, acknowledge and
deliver all such additional instruments, notices and other documents, and will
do all such other acts and things, all in accordance with applicable law, as may
be necessary or appropriate to more fully and effectively carry out the purposes
and intent of this Agreement.
ARTICLE VIII
Power of Attorney
-----------------
The Company hereby constitutes and appoints the Operating Partnership,
its successors and assigns, the true and lawful attorney-in-fact of the Company
with full power of substitution for it and in its name, place and stead or
otherwise on behalf of the Company, its successors and assigns, and for the
benefit of the Operating Partnership, its successors and assigns, to demand and
receive from time to time the Assets and to execute in the name of the Company
and its successors and assigns instruments of conveyance, instruments of further
assurance and to give receipts and releases in respect of the same, and from
time to time to institute and prosecute in the name of the Operating Partnership
or
<PAGE>
the Company for the benefit of the Operating Partnership, as may be appropriate,
any and all proceedings at law, in equity or otherwise which the Operating
Partnership, its successors and assigns may deem proper in order to collect,
assert or enforce any claims, rights or titles of any kind in and to the Assets,
and to defend and compromise any and all actions, suits or proceedings in
respect of any of the Assets and to do any and all such acts and things in
furtherance of this Agreement as the Operating Partnership, its successors or
assigns shall deem advisable. The Company hereby declares that the appointment
hereby made and the powers hereby granted are coupled with an interest and are
and shall be irrevocable and perpetual and shall not be terminated by any act of
the Company or its successors or assigns or by operation of law.
ARTICLE IX
Trademarks and Tradenames
-------------------------
The Company markets the Business under the tradename "Ferrellgas" and
uses the tradename "Ferrell North America" for its other operations. The Company
has a trademark on the name "Ferrellmeter", its patented gas leak detection
device. The Company hereby contributes all of its right, title and interest in
these tradenames and trademarks in the continental United States to the
Operating Partnership subject to the following express conditions:
(a) In the event that the Company is removed as general partner of
the Operating Partnership "for cause," the Company may repurchase the tradenames
and trademarks for their fair market value; and
(b) In the event that the Company ceases to be general partner of
the Operating Partnership for any reason other than by removal for cause, the
Company may repurchase the tradenames and trademarks contributed to the
Operating Limited Partnership for the nominal consideration of one dollar
($1.00).
ARTICLE X
Miscellaneous
-------------
10.1 Order of Completion of Transactions; Effective Time. (a) The
---------------------------------------------------
transactions provided for in Articles II and III of this Agreement shall be
completed on the date of this Agreement in the following order:
<PAGE>
first: the transactions provided for in Article II shall be completed;
------
and
second: following the completion of the transactions as provided in first
------ -----
above and the incurrence by the Operating Partnership of
$___________ in aggregate principal amount of borrowings under
the Operating Partnership Debt Offering and Credit Facility, the
transactions provided for in Article III shall be completed.
(a) The contribution of the Assets to the Operating Partnership shall
be effective for all purposes as of the Effective Time.
10.2 Consents; Restriction on Assignment. If there are prohibitions
-----------------------------------
against or conditions to the conveyance of one or more portions of the Assets
without the prior written consent of third parties, including, without
limitation, governmental agencies (other than consents of a ministerial nature
which are normally granted in the ordinary course of business), which if not
satisfied would result in a breach of such prohibitions or conditions or would
give an outside party the right to terminate the Operating Partnership's rights
with respect to such portion of the Assets (herein called a Restriction), then
any provision contained in this Agreement to the contrary notwithstanding, the
transfer of title to or interest in each such portion of the Assets (herein
called the "Restriction-Asset") pursuant to this Agreement shall not become
effective unless and until such Restriction is satisfied, waived or no longer
applies. When and if such a Restriction is so satisfied, waived or no longer
applies, to the extent permitted by applicable law and any applicable
contractual provisions, the assignment of the Restriction-Asset subject thereto
shall become effective automatically as of the Effective Time, without further
action on the part of the Operating Partnership or the Company. The Company and
the Operating Partnership agree to use their best efforts to obtain satisfaction
of any Restriction on a timely basis. The description of any portion of the
Assets as a "Restriction-Asset" shall not be construed as an admission that any
Restriction exists with respect to the transfer of such portion of the Assets.
In the event that any Restriction-Asset exists, the Company agrees to hold such
Restriction-Asset in trust for the exclusive benefit of the Operating
Partnership and to otherwise use its best efforts to provide the Operating
Partnership with the benefits thereof, and the Company will enter into other
agreements, or take such other action as it deems necessary, in order to help
ensure that the Operating Partnership has the assets and concomitant rights
necessary to enable it to operate the Assets contributed to the Operating
Partnership in all material respects as described in the Prospectus contained in
and made a part of the Registration Statement on Form S-1 (Registration No. 33-
53383)
<PAGE>
filed by the Master Partnership with the United States Securities and Exchange
Commission.
10.3 Costs. The Operating Partnership shall pay all sales, use and
-----
similar taxes arising out of the contributions, conveyances and deliveries to be
made hereunder and shall pay all documentary, filing, recording, transfer, deed,
and conveyance taxes and fees required in connection therewith. In addition,
the Operating Partnership shall be responsible for all costs, liabilities and
expenses (including court costs and attorneys' fees) incurred in connection with
the satisfaction or waiver of any Restriction pursuant to Section 10.2.
10.4 Headings; References; Interpretation. All Article and Section
------------------------------------
headings in this Agreement are for convenience only and shall not be deemed to
control or affect the meaning or construction of any of the provisions hereof.
The words "hereof", "herein" and "hereunder" and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole, including,
without limitation, all Schedules and Exhibits attached hereto, and not to any
particular provision of this Agreement. All references herein to Articles,
Sections, Schedules and Exhibits shall, unless the context requires a different
construction, be deemed to be references to the Articles and Sections of this
Agreement and the Schedules and Exhibits attached hereto, and all such Schedules
and Exhibits attached hereto are hereby incorporated herein and made a part
hereof for all purposes. All personal pronouns used in this Agreement, whether
used in the masculine, feminine or neuter gender, shall include all other
genders, and the singular shall include the plural and vice versa. The use
herein of the word "including" following any general statement, term or matter
shall not be construed to limit such statement, term or matter to the specific
items or matters set forth immediately following such word or to similar items
or matters, whether or not nonlimiting language (such as "without limitation",
"but not limited to", or words of similar import) is used with reference
thereto, but rather shall be deemed to refer to all other items or matters that
could reasonably fall within the broadest possible scope of such general
statement, term or matter.
10.5 Successors and Assigns. The Agreement shall be binding upon and
----------------------
inure to the benefit of the parties signatory hereto and their respective
successors and assigns.
10.6 No Third Party Rights. The provisions of this Agreement are
---------------------
intended to bind the parties signatory hereto as to each other and are not
intended to and do not create rights in any other person or confer upon any
other person any benefits, rights or remedies and no person is or is intended to
be a third party beneficiary of any of the provisions of this Agreement.
<PAGE>
10.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which together shall constitute one agreement binding on
the parties hereto.
10.8 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Missouri applicable to
contracts made and to be performed wholly within such state without giving
effect to conflict of law principles thereof, except to the extent that it is
mandatory that the law of some other jurisdiction, wherein the Assets are
located, shall apply.
10.9 Severability. If any of the provisions of this Agreement are
------------
held by any court of competent jurisdiction to contravene, or to be invalid
under, the laws of any political body having jurisdiction over the subject
matter hereof, such contravention or invalidity shall not invalidate the entire
Agreement. Instead, this Agreement shall be construed as if it did not contain
the particular provision or provisions held to be invalid, and an equitable
adjustment shall be made and necessary provision added so as to give effect to
the intention of the parties as expressed in this Agreement at the time of
execution of this Agreement.
10.10 Deed; Bill of Sale; Assignment. To the extent required by
------------------------------
applicable law, this Agreement shall also constitute a "deed," "bill of sale" or
"assignment" of the Assets.
10.11 Amendment or Modification. This Agreement may be amended or
-------------------------
modified from time to time only by the written agreement of all the parties
hereto. Each such instrument shall be reduced to writing and shall be
designated on its face "Amendment" to this Agreement.
10.12 Integration. This Agreement supersedes all previous
-----------
understandings or agreements between the parties, whether oral or written, with
respect to its subject matter. This document is an integrated agreement which
contains the entire understanding of the parties. No understanding,
representation, promise or agreement, whether oral or written, is intended to be
or shall be included in or form part of this Agreement unless it is contained in
a written amendment hereto executed by the parties hereto after the date of this
Agreement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
FERRELLGAS, INC.
By:________________________________
Name: ____________________
Title: ____________________
ATTEST: By:________________________________
Name: ____________________
Title: ____________________
FERRELLGAS, L.P.
By: Ferrellgas, Inc., its general partner
By:________________________________
Name: ____________________
Title: ____________________
ATTEST: By:_________________________________
Name: _____________________
Title: _____________________
FERRELLGAS PARTNERS, L.P.
By: Ferrellgas, Inc., its general partner
By:_________________________________
Name: _____________________
Title: _____________________
ATTEST: By:_________________________________
Name: _____________________
Title: _____________________
<PAGE>
Schedule 1
----------
EXCLUDED ASSETS
[TO BE SUPPLIED]
<PAGE>
Schedule 2
----------
EXCLUDED LIABILITIES
[TO BE SUPPLIED]
Income Tax Liabilities
<PAGE>
Schedule 3
----------
LIABILITIES AND OUTSTANDING INDEBTEDNESS
1. All liabilities of the Company from or relating to the Assets or
the business conducted with the Assets to the extent that such liabilities would
be reflected as a liability on a balance sheet of the Company as at the time
immediately prior to the Effective Time prepared in accordance with generally
accepted accounting principles consistently applied; excluding, however, any of
such liabilities that constitute Excluded Liabilities and but including the
following liabilities and outstanding indebtedness of the Company:
[INSERT INFORMATION ON THE EXISTING
INDEBTEDNESS DUE AND THE CREDIT FACILITY]
<PAGE>
EXHIBIT A
---------
STATE OF MISSOURI
COUNTY OF JACKSON
CONVEYANCE, ASSIGNMENT AND BILL OF SALE
---------------------------------------
KNOW ALL MEN BY THESE PRESENTS:
This Conveyance, Assignment and Bill of Sale (this "Conveyance") is
from Ferrellgas, Inc., a Delaware corporation, with its general office and
mailing address at One Liberty Plaza, Liberty, Missouri 64068 (herein called
"Grantor"), and in favor of Ferrellgas, L.P., a Delaware limited partnership,
with its general office and mailing address at One Liberty Plaza, Liberty,
Missouri 64068 (herein called "Grantee").
PART I
GRANTING AND HABENDUM CLAUSES
I.1 Granting and Habendum Clauses. For good and valuable
-----------------------------
consideration, the receipt and sufficiency of which Grantor hereby acknowledges,
Grantor hereby grants, conveys, bargains, sells, assigns, transfers, delivers,
and sets over unto Grantee, its successors and assigns, all right, title,
interest and estate of Grantor in and to the following described property, to
wit:
(a) Fee Lands. The fee owned tracts or parcels of land, if any,
---------
described in Exhibit A hereto, together with all tanks, containers,
---------
buildings, structures, improvements, equipment, appurtenances and fixtures
of every kind or nature located on said tracts or parcels of land
(collectively, the "Fee Lands" and singularly, the "Fee Land");
(b) Easements. All easements, rights-of-way, servitudes, leases,
---------
surface rights, interests in land, permits, licenses and grants, and all
amendments to each thereof, including, without limitation, those described
in Exhibit B hereto, together with all prescriptive rights and all
---------
franchises, privileges, permits, grants, leases and consents in favor of
Grantor, or Grantor's predecessors-in-title, in, on, over, under or
adjacent to lands, roads, highways, railroads, rivers, canals, ditches,
drains, bridges, state and national parks, forests, reservations and
wilderness areas, public grounds or structures, or elsewhere, and all
rights incident thereto, rights under condemnation judgments, judgments on
declaration of taking, and permits and grants for the installation,
maintenance, repair, removal and operation of above and below ground tanks,
storage containers and
<PAGE>
pipelines (as hereinafter defined) (collectively, the "Easements" and
singularly, the "Easement");
(c) Storage Facilities. The presently existing tanks, containers and
------------------
storage facilities (i) owned by Grantor, and located in, on, over, under or
adjacent to the property described in (a) and (b) above or (ii) used by
Grantor in the operation of its propane business, together with all
buildings, structures, improvements, equipment, and appurtenances of every
kind or nature that are a part of, affixed to or used in connection
therewith (collectively, together with additions or replacements, the
"Storage Facilities" and singularly, a "Storage Facility"); and
(d) Other Interests. With respect to the Fee Lands, the Easements
---------------
and the Storage Facilities all and singular the tenements, hereditaments
and appurtenances belonging or in any wise appertaining thereto, or any
part thereof, including, without limitation, all reversionary interests,
reversions and remainders thereof, and all the right, title, interest,
estate and claim whatsoever, at law as well as in equity, of Grantor in and
to the above-described property.
(The property described in Section 1.1 shall be referred to herein as
the "Subject Property").
TO HAVE AND TO HOLD the Subject Property, subject to the terms,
conditions and reservations hereof, unto Grantee, its successors and assigns,
forever.
PART II
PERMITTED ENCUMBRANCES; OTHER TERMS AND CONDITIONS
II.1 Permitted Encumbrances.
----------------------
This Conveyance is made and accepted expressly subject to (i) the
terms and conditions set forth in the conveyances, assignments, bills of sale
and other instruments described in Exhibit A and Exhibit B and to all recorded
--------- ---------
and unrecorded liens, encumbrances, agreements, defects, restrictions, adverse
claims and all laws, rules, regulations, ordinances, judgments and orders of
governmental authorities or tribunals having or asserting jurisdiction over the
Subject Property or the business and operations conducted thereon, in each case
to the extent the same are valid, enforceable and affect the Subject Property;
(ii) all matters that a current survey or visual inspection would reflect; and
(iii) the Contribution Agreement (defined in Section 2.2) (collectively, the
"Permitted Encumbrances").
<PAGE>
II.2 Contribution Agreement.
----------------------
This Conveyance is expressly made subject to the terms and conditions
of that certain Contribution, Conveyance and Assumption Agreement dated
______________, 1994, between Grantor, Grantee and Ferrellgas Partners, L.P., a
Delaware limited partnership.
II.3 Disclaimer of Warranties; Subrogation.
-------------------------------------
(a) GRANTOR IS CONVEYING THE SUBJECT PROPERTY "AS IS" WITHOUT
REPRESENTATION OR WARRANTY, WHETHER EXPRESS, IMPLIED OR STATUTORY (ALL OF
WHICH GRANTOR HEREBY DISCLAIMS), AS TO (i) TITLE, (ii) FITNESS FOR ANY
PARTICULAR PURPOSE OR MERCHANTABILITY OR DESIGN OR QUALITY, OR (iii) ANY
OTHER MATTER WHATSOEVER. THE PROVISIONS OF THIS SECTION HAVE BEEN
NEGOTIATED BY GRANTEE AND GRANTOR AFTER DUE CONSIDERATION AND ARE INTENDED
TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY REPRESENTATIONS OR
WARRANTIES OF GRANTOR, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT
TO THE SUBJECT PROPERTY THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER
IN EFFECT, OR OTHERWISE, EXCEPT AS EXPRESSLY SET FORTH HEREIN.
(b) This Conveyance is made with full rights of substitution and
subrogation of Grantee and all persons claiming by, through, and under
Grantee, to the extent assignable, in and to all covenants and warranties
by the predecessors-in-title of Grantor, and with full subrogation of all
rights accruing under applicable statutes of limitation and all rights of
action of warranty against all former owners of the Subject Property.
(c) Grantee agrees that the disclaimers contained in this section are
"conspicuous" disclaimers. Any covenants implied by statute or law by the
use of the words "grant", "convey", "bargain", "sell", "assign",
"transfer", "deliver" or "set over" or any of them or any other words used
in this Conveyance are hereby expressly disclaimed, waived and negated.
PART III
MISCELLANEOUS
III.1 Further Assurances.
------------------
Grantor agrees to take all such further actions and to execute,
acknowledge and deliver all such further documents as are necessary or
appropriate in carrying out the purposes of this Conveyance. Grantor agrees to
execute, acknowledge and deliver to
<PAGE>
Grantee all such other additional instruments, notices, and to do all such other
and further acts, and things as may be to more fully and effectively grant,
convey, bargain, sell, assign, transfer and deliver and set over to Grantee the
Subject Property.
III.2 Consents; Restriction on Assignment.
-----------------------------------
If there are prohibitions against or conditions to the Conveyance of
one or more portions of the Subject Property without the prior written consent
of third parties, including, without limitation, governmental agencies (other
than consents of ministerial nature which are normally granted in the ordinary
course of business), which if not satisfied would result in a breach of such
prohibitions or conditions or would give an outside party the right to terminate
Grantee's rights with respect to such portion of the Subject Property (herein
called a "Restriction"), then any provision contained in this Conveyance to the
contrary notwithstanding, the transfer of title to or interest in such portion
of the Subject Property (herein called the "Restriction-Subject Property")
pursuant to this Conveyance shall not become effective unless and until such
Restriction is satisfied, waived or no longer applies. When and if such a
Restriction is so satisfied, waived or no longer applies, to the extent
permitted by applicable law and any applicable contractual provisions, the
assignment of the Restriction-Subject Property subject thereto shall become
effective automatically as of the date hereof, without further action on the
part of Grantee or Grantor. Grantor and Grantee agree to use their best efforts
to obtain satisfaction of any Restriction. The description of any portion of
the Subject Property as "Restriction-Subject Property" shall not be construed as
an admission that any Restrictions exist with respect to the transfer of such
portion of the Subject Property. In the event any Restriction-Subject Property
exists, Grantor agrees to hold such Restriction-Subject Property in trust for
the exclusive benefit of Grantee and to otherwise use its best efforts to
provide Grantee with the benefits thereof.
III.3 Successors and Assigns; No Third Party Beneficiary.
--------------------------------------------------
This Conveyance shall be binding upon and inure to the benefit of
Grantor and Grantee and their respective successors and assigns, but shall not
inure to the benefit of or be enforceable by any other party.
III.4 Governing Law.
-------------
This Conveyance and the legal relations between the parties shall be
governed by, and construed in accordance with, the laws of the State of
Missouri, excluding any conflict of law rule which would refer any issue to the
laws of another jurisdiction, except when it is mandatory that the law of the
jurisdiction
<PAGE>
wherein the Subject Property is located shall apply.
III.5 The Exhibits.
------------
Reference is made to Exhibit A and Exhibit B, which are attached
--------- ---------
hereto and made a part hereof for all purposes. Reference in Exhibits to an
instrument on file in the public records is made for all purposes, but shall not
imply that such instrument is valid, binding or enforceable or affects any
Subject Property nor creates any right, title, interest or claim in favor of any
party other than Grantor and Grantee, respectively.
III.6 Headings.
--------
Headings are included in this Conveyance for convenience and shall not
define, limit, extend or describe the scope or intent of any provision.
III.7 Counterparts.
------------
This Conveyance may be executed in multiple counterparts all of which
taken together shall constitute a single agreement with the same force and
effect as if all parties had signed the same copy of this conveyance.
<PAGE>
WITNESS THE EXECUTION HEREOF on the _____ day of ______________, 1994.
GRANTEE: GRANTOR:
FERRELLGAS, L.P., a Delaware FERRELLGAS, INC., a Delaware
limited partnership corporation
By: ________________________ By: ________________________
Name: ______________________ Name: ______________________
Title: _____________________ Title: _____________________
Attachments: Exhibit A: Fee Lands
Exhibit B: Easements
This instrument was prepared by:
Smith, Gill, Fisher & Butts
Attn: Michael J. Van Dyke
1200 Main Street, Suite 3500
Kansas City, Missouri 64105
Recording Requested by and
When Recorded Return To:
Smith, Gill, Fisher & Butts
Attn: Michael J. Van Dyke
1200 Main Street, Suite 3500
Kansas City, Missouri 64105
Mail Tax Statements to:
-------------------------
-------------------------
-------------------------
<PAGE>
STATE OF MISSOURI
COUNTY OF JACKSON
Before me, a Notary Public in and for said County and State,
personally appeared ______________, the _________
_____________________________________________ of Ferrellgas, Inc., a Delaware
corporation, who acknowledged the execution of the foregoing instrument for and
on behalf of said corporation and who, having been duly sworn, stated that the
representations contained therein are true.
WITNESS my hand and Notarial Seal this ______ day of ______________,
1994.
______________________________
Notary Public Residing in
___________ County, __________
______________________________
(printed signature)
My Commission Expires:
- ------------------------
STATE OF MISSOURI
COUNTY OF JACKSON
Before me, a Notary Public in and for said County and State,
personally appeared __________________, the __________________________________
of Ferrellgas, Inc., a Delaware corporation, as general partner of Ferrellgas,
L.P., a Delaware limited partnership, who acknowledged the execution of the
foregoing instrument for and on behalf of said corporation, as general partner,
and who, having been duly sworn, stated that the representations contained
therein are true.
WITNESS my hand and Notarial Seal this _____ day of ________, 1994.
------------------------------
Notary Public Residing in
___________ County, __________
------------------------------
(printed signature)
My Commission Expires:
- -----------------------
<PAGE>
EXHIBIT A TO CONVEYANCE, ASSIGNMENT AND BILL OF SALE
FROM FERRELLGAS, INC. TO FERRELLGAS, L.P.
STATE OF MISSOURI
COUNTY OF JACKSON
[FEE LANDS]
<PAGE>
EXHIBIT B TO CONVEYANCE, ASSIGNMENT AND BILL OF SALE
FROM FERRELLGAS, INC. TO FERRELLGAS, L.P.
STATE OF MISSOURI
COUNTY OF JACKSON
[EASEMENTS]
<PAGE>
EXHIBIT 10.8
FIRST SUPPLEMENTAL INDENTURE
This FIRST SUPPLEMENTAL INDENTURE, dated as of the 2nd day of June, 1994 by
and between FERRELLGAS, INC., a Delaware corporation (the "Company"), and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, as
Trustee (the "Trustee") under an Indenture dated as of December 1, 1991,
pursuant to which the Company issued its 11 5/8% Senior Subordinated Debentures
due December 15, 2003 (the "Indenture"). All capitalized terms used herein and
not otherwise defined shall have the respective meanings provided such terms in
the Indenture.
WHEREAS, the Company desires to amend the Indenture as set forth below; and
WHEREAS, pursuant to Section 9.02 of the Indenture, the Company and the
Trustee may amend the Indenture with the written consent of the Holders of a
majority in principal amount of the then outstanding Securities; and
WHEREAS, pursuant to a solicitation of consent by the Company, the
requisite consent of the Holders of outstanding Securities has been received;
and
WHEREAS, all other conditions precedent to the execution of this First
Supplemental Indenture have been complied with;
NOW, THEREFORE, each party, for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Securities, agrees as follows:
Section 1. Definitions. The following definitions are hereby added to
Section 1.01 of the Indenture:
"Acceptance Date" means the date on which the Company shall have
accepted for purchase and payment the Securities validly tendered pursuant
to the Tender Offer and shall have so advised the Trustee in writing upon
which the Trustee may conclusively rely.
"Tender Offer" means the offer and solicitation made by the Company to
the Holders of the Securities pursuant to the Offer to Purchase and Consent
Solicitation, dated May 4, 1994, as amended and supplemented.
<PAGE>
Section 2. Amendment of Indenture.
(a) The following sections of the Indenture -- Section 4.04 (Compliance
Certificate), Section 4.05 (Taxes), Section 4.06 (Stay, Extension and Usury
Laws), Section 4.07 (Limitation on Restricted Payments), Section 4.08
(Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries),
Section 4.09 (Limitation on Additional Debt), Section 4.11 (Limitation on
Transactions with Affiliates), Section 4.12 (Limitation on Liens), Section
4.13 (Corporate Existence), Section 4.14 (Liquidation) and Section 4.15 (No
Senior Subordinated Debt) -- are hereby amended by adding a new first
paragraph below the heading of each such Section as follows:
"This Section shall read in its entirety as set forth below until
the Acceptance Date at which time this Section and any and all references
hereto in this Indenture shall, without any further action by any person, be
eliminated in their entirety."
(b) Clause (a) of Section 4.10 of the Indenture is hereby amended by adding
a new first paragraph after the paragraph designation "(a)" but before the
current language of such Section 4.10(a) as follows:
"This Section 4.10(a) shall read in its entirety as set forth below
until the Acceptance Date at which time this Section 4.10(a) shall, without
any further action by any person, read in its entirety as set forth in
brackets at the end of this Section 4.10(a)."
and by adding the following paragraph to the end of such Section 4.10(a):
["The Company will not, and will not permit any of its subsidiaries
(other than Unrestricted Subsidiaries) to, (i) sell, lease, convey or
otherwise dispose of any assets (including by way of a sale-and-leaseback)
other than in the ordinary course of business (provided that the sale,
lease, conveyance or other disposition of all or substantially all of the
assets of the Company shall be governed by the provisions of Section 5.01
hereof), in one or a series of related transactions involving assets or
securities having a fair market value in excess of $50 million in the
aggregate, (an "Asset Sale"), unless the Company shall comply with this
Section 4.10."]
2
<PAGE>
(c) Clause (f) of Section 4.10 of the Indenture is hereby amended by adding
after the paragraph designation "(f)" but before the current language of such
Section 4.10(f) as follows:
"This Section 4.10(f) shall read in its entirety as set forth below
until the Acceptance Date at which time this Section 4.10(f) and any and all
references hereto in this Indenture shall, without any further action by any
person, be eliminated in their entirety."
(d) The definitions of "Change in Control" and "Related Parties" in Section
4.16 of the Indenture are hereby amended by adding immediately before the
current definition of "Change in Control" as follows:
"The definitions of 'Change in Control' and 'Related Parties' in this
Section 4.16 shall read in their entirety as set forth below until the
Acceptance Date at which time this such definitions shall, without any
further action by any person, read in their entirety as set forth in
brackets at the end of this Section 4.16."
and by adding the following paragraph to the end of such Section 4.16:
["'Change in Control' means any transaction the result of which is that
James E. Ferrell and the Related Parties (as defined below) 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 Company
(other than on account of a consolidation or merger or a sale of all or
substantially all of the assets of the Company that complies with Section
5.01 hereof)."]
["'Related Parties' means any lineal descendant of James E. Ferrell,
any trust for his benefit or for the benefit of his spouse or any such
lineal descendant or any corporation or partnership in which James E.
Ferrell and/or any of the foregoing Persons is the beneficial owner,
directly or indirectly, of 51% or more of the voting equity interests."]
(e) Section 5.01 of the Indenture is hereby amended by adding a new first
paragraph below the heading to such Section 5.01 as follows:
3
<PAGE>
"This Section 5.01 shall read in its entirety as set forth below until
the Acceptance Date at which time this Section 5.01 shall, without any
further action by any person, read in its entirety as set forth in brackets
at the end of this Section 5.01 and the current clauses (iii) and (iv) of
such Section 5.01 shall be deleted in their entirety."
and by adding the following paragraph to the end of such Section 5.01:
["Section 5.01. When the Company May Merge,etc.
["The Company will not consolidate or merge with or into (whether or
not the Company is the surviving corporation), 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
corporation, person or entity unless:
["(i) with respect to transactions entered into after the consummation
of the Transaction, as that term is defined in the Tender Offer, either the
Company is the surviving person or the entity or the person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation, partnership, limited
partnership or other entity organized or existing under the laws of the
United States, any state thereof or the District of Columbia; and
["(ii) either (a) the person formed by or surviving any such
consolidation or merger (if other than the Company) or the person to which
such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all of the Obligations of the Company pursuant
to a supplemental indenture in a form reasonably satisfactory to the
Trustee, under the Securities and this Indenture; or (b) the Company shall
make an offer to redeem the Securities pursuant to Section 3.09."]
(f) Section 5.02 of the Indenture is hereby amended by adding a new first
paragraph below the heading to such Section 5.02 as follows:
4
<PAGE>
"This Section 5.02 shall read in its entirety as set forth below until
the Acceptance Date at which time this Section 5.02 shall, without any
further action by any person, read in its entirety as set forth in brackets
at the end of this Section 5.02."
and by adding the following paragraph to the end of such Section 5.02:
["Section 5.02. Successor Entity Substituted.
["Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company,
in accordance with Section 5.01, the successor entity formed by such
consolidation or into or with which the Company is merged or to which such
sale, lease, conveyance or other disposition is made shall, in the event
such successor elects to comply with Section 5.01(ii)(a), succeed to, and be
substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor person has
been named as the Company herein; and, upon such compliance, the Company
shall be released or discharged from the obligation to pay the principal of
or interest on the securities."]
(g) Clauses (5) and (6) of Section 6.01 of the Indenture are hereby amended
by adding a new first paragraph after the paragraph designations "(5)" and
"(6)," respectively, but before the current language of such Clauses as follows:
"This Clause shall read in its entirety as set forth below until the
Acceptance Date at which time this Clause and any and all references hereto
in this Indenture shall, without any further action by any person, be
eliminated in their entirety."
(h) Clause (3) of Section 6.01 of the Indenture is hereby amended by adding
a new first paragraph after the designation "(3)" but before the current
language of such Clause (3) as follows:
"This Clause (3) of Section 6.01 shall read in its entirety as set
forth below until the Acceptance Date at which time this Clause (3) of
Section 6.01 shall, without any further action by any person, read in its
entirety as set forth in
5
<PAGE>
brackets at the end of this Clause (3) of Section 6.01."
and by adding the following paragraph to the end of such Clause (3) to Section
6.01:
["(3) the Company fails to observe or perform any covenant, condition
or agreement on the part of the Company to be observed or performed pursuant
to Sections 4.10, 4.16 and 5.01 hereof;"]
Section 3. Amendment of Exhibit A.
(a) Exhibit A of the Indenture is hereby amended by adding a new paragraph
below the reference to such Exhibit A as follows:
"Ferrellgas, Inc. and the Trustee have entered into a First
Supplemental Indenture dated as of June 2, 1994 which (i) eliminated certain
of the definitions contained therein; (ii) eliminated or modified certain
restrictive and other covenants contained therein; and (iii) eliminated or
modified certain Events of Default contained therein. Reference is hereby
made to such First Supplemental Indenture, copies of which are on file with
the Trustee.
(b) The first sentence of Paragraph 13 on the reverse side of Exhibit A of
the Indenture is hereby amended by adding a new first sentence after the
paragraph designation "13" as follows:
"This Paragraph 13 shall read in its entirety as set forth below until
the Acceptance Date at which time the first sentence of this Paragraph 13
shall, without any further action by any person, read in its entirety as set
forth in brackets at the end of this Paragraph 13 and the balance of this
Paragraph 13 shall read as it currently does."
and by adding the following paragraph to the end of such Paragraph 13:
["Events of Default include: default in payment of interest on the
Securities for 30 days; default in payment of principal on the Securities;
failure by the Company to comply with certain agreements in the Indenture or
the Securities; failure by the Company for 30 days after notice to it to
comply with certain of its other agreements
6
<PAGE>
in the Indenture or the Securities; and certain events of bankruptcy or
insolvency."]
Section 4. Ratification of Indenture.
As amended by this First Supplemental Indenture, the Indenture is in all
respects ratified and confirmed and shall be read, taken and construed as one
and the same instrument.
Section 5. The Trustee.
The Trustee shall not be responsible in any manner whatsoever for the
correctness of the recitals of fact herein, all of which are made by the
Company, and the Trustee shall not be responsible or accountable in any manner
whatsoever for or with respect to the validity or sufficiency of this First
Supplemental Indenture.
Section 6. Effective Date.
This First Supplemental Indenture shall become effective and binding upon
the date and time hereof.
Section 7. Governing Law.
This First Supplemental Indenture shall be governed by and construed in
accordance with the laws of State of New York.
Section 8. Counterparts.
This First Supplemental Indenture may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original, but all of which shall
together constitute but one and the same instrument.
Section 9. No Default.
The Company represents and warrants that, as of the date hereof, no Default
or Event of Default exists or, as a result of the execution and delivery of the
First Supplemental Indenture, will exist.
7
<PAGE>
Section 10. Notation on Securities. (a) Securities authenticated and delivered
after the effectiveness of this First Supplemental Indenture shall be imprinted
by the Trustee with substantially the following notation pursuant to Section
9.05 of the Indenture:
"This Company and the Trustee have entered into a First Supplemental
Indenture dated as of June 2, 1994 which (i) eliminated certain of the
definitions contained therein; (ii) eliminated or modified certain
restrictive and other covenants contained therein; and (iii) eliminated or
modified certain Events of Default contained therein. Reference is hereby
made to such First Supplemental Indenture, copies of which are on file with
the Trustee.
(b) Upon effectiveness of this First Supplemental Indenture, the Company
shall notify each remaining Holder of such effectiveness and of the amended form
of Security and if the Company so determines, new Securities shall be prepared
and executed by the Company, at its expense, so modified as to conform, in the
opinion of the Trustee and the Company, to this First Supplemental Indenture,
authenticated by the Trustee and delivered in exchange for the Securities then
outstanding. The Trustee shall give notice to each Holder of the time, place and
manner in which any such exchange shall be made.
Section 11. Miscellaneous.
(a) All of the covenants, stipulations, promises and agreements in this
First Supplemental Indenture by or on behalf of the Company shall bind its
successors and assigns, whether so expressed or not.
(b) If and to the extent that any provision of this First Supplemental
Indenture limits, qualifies or conflicts with another provision which is
required to be included herein or in the Indenture by the Trust Indenture Act,
such required provision shall be deemed to be included herein and shall control.
(c) In case any provision of this First Supplemental Indenture or the
Securities shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions hereof or of the Securities shall
not in any way be affected or impaired thereby.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed and delivered as of the date first written above.
FERRELLGAS, INC.
By: /S/ Danley K. Sheldon
Name: Danley K. Sheldon
Title: Vice President & Chief
Financial Officer
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By: /S/ Raymond S. Haverstock
Name: Raymond S. Haverstock
Title: Assistant Vice President
9
<PAGE>
EXHIBIT 12.1
FERRELLGAS, L.P.
COMPUTATION OF RATIO OF NET EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIO OF EARNINGS TO FIXED CHARGES)
<TABLE>
<CAPTION>
HISTORICAL PARTNERSHIP PRO FORMA (4)
------------------------------------------------------------------ ---------------------------
PRO FORMA (4)
NINE MONTHS NINE MONTHS PRO FORMA (4) NINE MONTHS
YEAR ENDED JULY 31, ENDED ENDED YEAR ENDED ENDED
------------------------------------------ APRIL 30, APRIL 30, JULY 31, APRIL 30,
1989 1990 1991 1992 1993 1993 1994 1993 1994
------- ------- ------- ------- ------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Earnings (loss) before
income taxes and
extraordinary loss ... $(2,364) $ (112) $ 3,537 $(2,369) $ 595 $21,038 $33,115 $28,750 $53,892
Add fixed charges (see
below)................ 57,143 57,903 64,142 65,230 64,317 48,316 47,246 33,275 24,200
------- ------- ------- ------- ------- ------- ------- ------- -------
Earnings, as
adjusted(1)........... 54,779 57,791 67,679 62,861 64,912 69,354 80,361 62,025 78,092
FIXED CHARGES:
Interest expense,
including amortization
of financing costs.... 54,572 55,095 60,507 61,219 60,071 45,056 44,233 29,029 21,187
Add interest factor of
rent expense(3)....... 2,571 2,808 3,635 4,011 4,246 3,260 3,013 4,246 3,013
------- ------- ------- ------- ------- ------- ------- ------- -------
Fixed charges........... $57,143 $57,903 $64,142 $65,230 $64,317 $48,316 $47,246 $33,275 $24,200
======= ======= ======= ======= ======= ======= ======= ======= =======
Ratio of earnings to
fixed charges.......... 1.06 1.01 1.44 1.70 1.86 3.23
Deficiency(2)........... $(2,364) $ (112) $(2,369)
</TABLE>
- --------------------
(1) In computing the ratio of earnings to fixed charges: (A) earnings have been
based on earnings (loss) from continuing operations before income taxes and
fixed charges and (B) fixed charges consist of interest expense and
amortization of debt issuance costs.
(2) The deficiency is the amount by which earnings are inadequate to cover
fixed charges.
(3) The interest factor of rent expense is assumed to be 46% of vehicle lease
rent expense and one-third of all other operating lease rent expense.
(4) See the pro forma financial statements and related notes included elsewhere
in the Registration Statement.
<PAGE>
Exhibit 21.1
Subsidiaries of
Ferrellgas, L.P.
----------------
Ferrellgas Finance Corp., a Delaware corporation
Stratton Insurance Company, Inc., a Vermont corporation
<PAGE>
EXHIBIT 23.1
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
33-53379 of $250,000,000 aggregate principal amount of senior notes of
Ferrellgas, L.P., and Ferrellgas Finance Corp. of our report dated June 3,
1994, on Ferrellgas Inc. (which expressed an unqualified opinion and included
an explanatory paragraph concerning an uncertainty involving an income tax
matter), appearing in the Prospectus, which is part of this Registration
Statement, and of our report dated June 3, 1994 relating to the financial
statement schedules appearing elsewhere in this Registration Statement.
We also consent to the use in this Amendment No. 1 to Registration Statement
No. 33-53379 of $250,000,000 aggregate principal amount of senior notes of
Ferrellgas, L.P., and Ferrellgas Finance Corp. of our report dated June 3,
1994, on Ferrellgas, L.P., appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the use in this Amendment No. 1 to Registration Statement
No. 33-53379 of $250,000,000 aggregate principal amount of senior notes of
Ferrellgas, L.P., and Ferrellgas Finance Corp. of our report dated June 3,
1994, on Ferrellgas Finance Corp., appearing in the Prospectus, which is part
of this Registration Statement.
We also consent to the use in this Amendment No. 1 to Registration Statement
No. 33-53379 of $250,000,000 aggregate principal amount of senior notes of
Ferrellgas, L.P., and Ferrellgas Finance Corp. of our report dated June 3, 1994
accompanying the pro forma financial information of Ferrellgas, L.P., appearing
in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected
Historical and Pro Forma Consolidated Financial and Operating Data" and
"Experts" in such Prospectus.
DELOITTE & TOUCHE
Kansas City, Missouri
June 6, 1994
<PAGE>
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT
---
TO SECTION 305(b)(2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specfied in its charter)
A NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Adress of principal executive offices) (Zip code)
------------------------
FERRELLGAS, L.P.
FERRELLGAS FINACE CORP.
(Exact name of obligor as specfied in its charter)
DELAWARE 43-1676206
DELAWARE 43-1677595
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
ONE LIBERTY PLAZA
LIBERTY, MISSOURI 64068
(Adress of principal executive offices) (Zip code)
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% SENIOR NOTES
DUE 2001
(Title of the indenture securities)
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Item 1. General Information. Furnish the following information as to the
------------------- trustee:
(a) Name and address of each examining or supervising authority
to which it is subject
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
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trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-15 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 16. List of Exhibits. List below all exhibits filed as a part of this
----------------
Statement of Eligibility. Norwest Bank
incorporates by reference into this form T-1 the
exhibits attached hereto.
Exhibit 1. a. A copy of Articles of Association of the trustee
now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28,
1872, by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of
the Currency dated January 2, 1934, approving
the consolidation of the Northwestern National
Bank of Minneapolis and the Minnesota Loan and
Trust Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January 12,
1943, as to change of corporate title of
Northwestern National Bank and Trust Company of
Minneapolis to Northwestern National Bank of
Minneapolis.*
d. A copy of the certificate of the Comptroller of
the Currency dated May 1, 1983, authorizing
Norwest Bank Minneapolis, National Association,
to act as fiduciary.*
<PAGE>
Exhibit 3. A copy of the authorization of the trustee to exercise corporate
trust powers issued January 2, 1934, by the Federal Reserve
Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b) of the
Act.*
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority.**
Exhibit 8. A copy of the certificate dated May 10, 1983 of name change from
Northwestern National Bank Minneapolis to Norwest Bank
Minneapolis, National Association.*
Exhibit 9. A copy of the certificate dated January 11, 1988, of name change
from Norwest Bank Minneapolis, National Association to Norwest
Bank Minnesota, National Association.*
* Incorporated by reference to the exhibit of the same number filed with the
registration statement number 33-66086.
** Incorporated by reference to the exhibit of the same number filed with the
registration statement number 33-77032.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 23rd day of May 1994.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
_________________________
Raymond S. Haverstock
Assistant Vice President
