<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 1994
REGISTRATION NO. 33-53379
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 2
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 43-1676206
DELAWARE 6799 43-1677595
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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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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<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
of Prospectus............................. Inside Front and Outside Back
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>
PROSPECTUS
JUNE 29, 1994
$250,000,000
[LOGO OF FERRELLGAS, L.P.
FERRELLGAS, L.P. FERRELLGAS FINANCE CORP.
APPEARS HERE]
$200,000,000 10% FIXED RATE SENIOR NOTES DUE 2001
$50,000,000 FLOATING RATE SENIOR NOTES DUE 2001
The 10% Fixed Rate Senior Notes due 2001 (the "Fixed Rate Senior Notes") and
the Floating Rate Senior Notes due 2001 (the "Floating Rate Senior Notes" and,
together with the Fixed Rate Senior Notes, 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 Fixed Rate Senior Notes will bear interest from the date of issuance at
the rate of 10% per annum, payable semi-annually in arrears on February 1 and
August 1 of each year commencing on February 1, 1995. The Floating Rate Senior
Notes will bear interest from the date of issuance at the Applicable LIBOR
Rate (as defined herein), payable quarterly in arrears on February 1, May 1,
August 1 and November 1 of each year commencing on November 1, 1994. The Fixed
Rate Senior Notes are redeemable at the option of the Issuers, in whole or in
part, at any time on or after August 1, 1998 at the redemption prices set
forth herein, plus accrued and unpaid interest to the redemption date. The
Floating Rate Senior Notes are redeemable at the option of the Issuers on any
Floating Rate Interest Payment Date (as defined herein) on or after August 1,
1995, in whole or in part, at a redemption price equal to 100% of the
principal amount thereof, plus accrued and unpaid interest to the redemption
date. Sinking fund payments of $5.0 million on each of August 1, 1999 and
August 1, 2000 are calculated to retire an aggregate of 20% of the Floating
Rate Senior Notes prior to maturity. 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 $273.9 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........................ 100% 2.0% 98.0%
Total.................................. $250,000,000 $5,000,000 $245,000,000
</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 $750,000 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 July 5, 1994, against payment therefor.
DONALDSON, LUFKIN & JENRETTE GOLDMAN, SACHS & CO.
SECURITIES CORPORATION
<PAGE>
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.
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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<PAGE>
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, 16,593,721 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 (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 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 $255.5 million at an initial offering price of $21
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
$244.3 million). The book value of the assets being contributed to the
Partnership will be approximately $83 million less than the liabilities to be
assumed by the Partnership. 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 $15.0 million under the Credit Facility which will enable
the Partnership to commence operations with an initial cash balance of at least
$20.0 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. 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 $21 (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 16,593,721 Subordinated Units representing an
effective 56.2% limited partner interest in the Partnership (51.4% 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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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.
8
<PAGE>
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 29,220
Earnings (loss) from
continuing operations. (1,506) (347) 1,979 (1,700)(1) 109 28,578
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 21,291
Earnings from continuing operations. 12,785 20,356 53,770
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 $ 53,510
Total assets........................ 602,063 600,113 478,460
Payable to (receivable from) parent
and affiliates..................... 2,076 (3,909) 91
Long-term debt...................... 500,227 476,471 272,441
Stockholder's equity................ 21,855 30,848
Partners' capital:
Limited partner..................... 138,277
General partner..................... 1,410
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). The Partnership will be
prohibited from making any distribution to the Master Partnership if the
fixed charge coverage ratio for the preceding four fiscal quarters both
before and after giving pro forma effect to such distribution as if it had
occurred at the beginning of such four quarter period does not exceed 2.25
to 1.
(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.......... $200 million aggregate principal amount of 10%
Fixed Rate Senior Notes due 2001 (the "Fixed Rate
Senior Notes") and $50 million aggregate
principal amount of Floating Rate Senior Notes
due 2001 (the "Floating Rate Senior Notes" and,
together with the Fixed Rate Senior Notes, the
"Senior Notes").
Maturity Date............... August 1, 2001.
Interest Payment Dates...... The Fixed Rate Senior Notes will bear interest
from the date of issuance at the rate of 10% per
annum, payable semi-annually in arrears on
February 1 and August 1 of each year commencing
on February 1, 1995. The Floating Rate Senior
Notes will bear interest from the date of
issuance at the Applicable LIBOR Rate (as defined
herein), payable quarterly in arrears on February
1, May 1, August 1 and November 1 of each year
commencing on November 1, 1994.
Optional Redemption......... The Fixed Rate Senior Notes will be redeemable,
in whole or in part, at the option of the
Issuers, at any time on or after August 1, 1998,
at the redemption prices set forth herein plus
accrued and unpaid interest thereon to the
redemption date. The Floating Rate Senior Notes
will be redeemable at the option of the Issuers
on any Floating Rate Interest Payment Date (as
defined herein) on or after August 1, 1995, in
whole or in part, at a redemption price equal to
100% of the principal amount thereof, plus
accrued and unpaid interest to the redemption
date.
Mandatory Redemption........ Sinking fund payments of $5 million on each of
August 1, 1999 and August 1, 2000 are calculated
to retire an aggregate of 20% of the Floating
Rate Senior Notes prior to maturity. Except
pursuant to the foregoing and as set forth below
under "Change of Control," 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 $273.9 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
$20.0 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 $15.0 million,
assuming that the Underwriters' overallotment
option in the MLP Offering is not exercised.
11
<PAGE>
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.
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 $244.3 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 $272.4 million of long-term indebtedness (excluding current
maturities) and $139.7 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.
At April 30, 1994 on a pro forma basis, the Issuers would have had
outstanding approximately $70.0 million of Indebtedness bearing interest at
floating rates. In addition, pursuant to the Credit Facility, the
13
<PAGE>
Partnership would have had available an additional $165.0 million of
borrowings, all of which would have borne interest at floating rates.
Accordingly, following the Offering, the Partnership will be affected by
increases in interest rates 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 58.2% 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, 16,593,721 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 $255.5
million at an initial public offering price of $21 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 $244.3 million). The
book value of the assets being contributed to the Partnership will be
approximately $83 million less than the liabilities to be assumed by the
Partnership. 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 $15.0 million under the Credit Facility which will enable
the Partnership to commence operations with an initial cash balance of at least
$20.0 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. 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 $21 (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 16,593,721 Subordinated Units representing an
effective 56.2% limited partner interest in the Partnership (51.4% 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 $244.3 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 be $255.5 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 $38.6 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 $15.0
million) to enable the Partnership to commence operations with an initial cash
balance of at least $20.0 million. 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 $21 (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
offering price of $21 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:
Fixed Rate Senior Notes, interest at
10%, due 2001 ........................ -- $ 200,000 $200,000
Floating Rate Senior Notes, interest at
Applicable LIBOR Rate plus 3.125%, due
2001.................................. -- 50,000 50,000
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 20,000(2) 22,441
-------- --------- --------
Total long-term debt................. 476,471 (204,030) 272,441
-------- --------- --------
Stockholder's equity..................... 30,848 (30,848) --
Partners' capital:
Limited partner(3)..................... -- 138,277 138,277
General partner........................ -- 1,410 1,410
-------- --------- --------
Total stockholder's equity/partners'
capital............................. 30,848 108,839 139,687
-------- --------- --------
Total capitalization................. $507,319 $ (95,191) $412,128
======== ========= ========
</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 $255.5 million.
(2) 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. The Partnership anticipates it will borrow approximately $15.0
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.
(3) 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 net proceeds of
the MLP Offering of $255.5 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 29,220
Earnings (loss) from
continuing operations... (1,506) (347) 1,979 (1,700)(1) 109 28,578
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 21,291
Earnings from continuing operations. 12,785 20,356 53,770
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 $ 53,510
Total assets........................ 602,063 600,113 478,460
Payable to (receivable from) parent
and affiliates..................... 2,076 (3,909) 91
Long-term debt...................... 500,227 476,471 272,441
Stockholder's equity................ 21,855 27,348
Partners' capital:
Limited Partner..................... 138,277
General partner..................... 1,410
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). The Partnership will be prohibited from making any distribution
to the Master Partnership if the fixed charge coverage ratio for the
preceding four fiscal quarters both before and after giving pro forma
effect to such distribution as if it had occurred at the beginning of such
four quarter period does not exceed 2.25 to 1.
(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 2.6% to
$89,979,000. 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, 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 $47,081,000 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 $255.5 million, which
proceeds, along with the estimated $244.3 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 $268.9 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.
The Partnership anticipates it will borrow approximately $15.0 million under
the Credit Facility at the closing of this Offering. Actual borrowings under
the Credit Facility at the closing of this Offering will depend upon the
Partnership's cash balances at such time. If the Underwriters' overallotment
option is exercised
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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.
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 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, and customers that own their tank, the Partnership's
continued ability to deliver propane to customers when
33
<PAGE>
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 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
34
<PAGE>
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 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
35
<PAGE>
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 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
36
<PAGE>
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 73 million, 95 million and 129 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(1).......... 43 -- Communications
</TABLE>
- --------
(1) Mr. Smith has indicated his intention to resign from the Company effective
July 31, 1994.
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, 16,593,721 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 $2.5 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 64068.
(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 was 6% during fiscal 1993, ranged
from 6.0% to 8.5% during fiscal 1992, and ranged from 8.5% to 10.0% 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 at the prime rate plus 1.375%, 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. Pursuant to the
Partnership Agreement, the Master Partnership, as the sole limited partner of
the Partnership, has agreed that any successor to the general partner of the
Master Partnership so elected shall also 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. Pursuant to the Partnership
Agreement, the Master Partnership, as the sole limited partner of the
Partnership, has agreed that any successor to the general partner of the Master
Partnership so approved shall also become the successor general partner of the
Partnership.
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
48
<PAGE>
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 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.
INCENTIVE DISTRIBUTION RIGHTS
All cash distributions from the Partnership will be made 1% to the General
Partner and 99% to the Master Partnership as limited partner.
As an incentive, if quarterly distributions of Available Cash by the Master
Partnership exceed certain specified target levels an affiliate of the General
Partner will receive distributions of Available Cash of the Master Partnership
as described below. The target levels are based on the amounts of Available
Cash distributed by the Master Partnership and incentive distributions will not
be made unless the Unitholders have received distributions at specified levels
above the minimum quarterly distribution of $.50 per Unit with respect to each
quarter, subject to adjustment under certain circumstances (the "Minimum
Quarterly Distribution"). The rights to receive incentive distributions are
referred to as "Incentive Distribution Rights."
For any quarter for which Available Cash is distributed by the Master
Partnership in respect of both the Common Units and the Subordinated Units in
an amount equal to the Minimum Quarterly Distribution, then any additional
Available Cash of the Master Partnership will be distributed among the
Unitholders, the General Partner and the holders of the Incentive Distribution
Rights in the following manner:
first, 99% to all Unitholders, pro rata, and 1% to the General Partner,
until the Unitholders have received a total of $0.55 for such quarter in
respect of each Unit;
second, 86% to all Unitholders, pro rata, 13% to the holders of the
Incentive Distribution Rights, pro rata, and 1% to the General Partner,
until the Unitholders have received a total of $0.63 for such quarter in
respect of each Unit;
third, 76% to all Unitholders, pro rata, 23% to the holders of the
Incentive Distribution Rights, pro rata, and 1% to the General Partner,
until the Unitholders have received a total of $0.82 for such quarter in
respect of each Unit; and
fourth, 51% to all Unitholders, pro rata, 48% to the holders of the
Incentive Distribution Rights, pro rata, and 1% to the General Partner.
Because the General Partner also receives 1% from the Partnership, the
effective distribution to the General Partner will be 2% under all
circumstances and the effective distribution to all Unitholders will be reduced
by 1% in each instance.
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 August 1, 2001. The Fixed Rate Senior Notes will be
limited in aggregate principal amount to $200,000,000 and the Floating Rate
Senior Notes will be limited in aggregate principal amount to $50,000,000.
Interest on the Fixed Rate Senior Notes will accrue at the rate of 10% per
annum and will be payable semi-annually in arrears on February 1 and August 1
of each year, commencing on February 1, 1995, to Holders of record on the
immediately preceding January 15 and July 15. Interest on the Fixed Rate Senior
Notes will be computed on the basis of a 360-day year comprised of twelve 30-
day months. Interest on the Floating Rate Senior Notes will accrue at a rate
equal to the Applicable LIBOR Rate and will be payable quarterly in arrears on
February 1, May 1, August 1 and November 1 of each year, or if any such day is
not a Business Day, on the next succeeding Business Day, commencing on November
1, 1994 (each, a "Floating Rate Interest Payment Date") to Holders of record on
the immediately preceding January 15, April 15, July 15 and October 15.
Interest on the Floating Rate Senior Notes will be calculated on a formula
basis by multiplying the principal amount of the Floating Rate Senior Notes
then outstanding by the Applicable LIBOR Rate, and multiplying such product by
the LIBOR Fraction.
The "Applicable LIBOR Rate" means for each Quarterly Period during which any
Floating Rate Senior Note is outstanding subsequent to the Initial Quarterly
Period, 312.50 basis points over the rate determined by the Partnership (notice
of such rate to be sent to the Trustee by the Company on the date of
determination thereof) equal to the average (rounded upwards, if necessary, to
the nearest 1/16 of 1%) of the offered rates for deposits in U.S. dollars for a
period of three months, as set forth on the Reuters Screen LIBO Page as of
11:00 a.m., London time, on the Interest Rate Determination Date for such
Quarterly Period; provided, however, that if only one such offered rate appears
on the Reuters Screen LIBO Page, the Applicable LIBOR Rate for such Quarterly
Period will mean such offered rate. If such rate is not available at 11:00
a.m., London time, on the Interest Rate Determination Date for such Quarterly
Period, then the Applicable LIBOR Rate for such Quarterly Period will mean the
arithmetic mean (rounded upwards, if necessary, to the nearest 1/16 of 1%) of
the interest rates per annum at which deposits in amounts equal to $1 million
in U.S. dollars are offered by the Reference Banks to leading banks in the
London Interbank Market for a period of six months as of 11:00 a.m., London
time, on the Interest Rate Determination Date for such Quarterly Period. If on
any Interest Rate Determination Date, at least two of the Reference Banks
provide such offered quotations, then
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<PAGE>
the Applicable LIBOR Rate for such Quarterly Period will be determined in
accordance with the preceding sentence on the basis of the offered quotation of
those Reference Banks providing such quotations; provided, however that if
fewer than two of the Reference Banks are so quoting such interest rates as
mentioned above, the Applicable LIBOR Rate for such Quarterly Period shall be
deemed to be the Applicable LIBOR Rate for the next preceding Quarterly Period
and in the case of the Quarterly Period next succeeding the Initial Quarterly
Period, the Applicable LIBOR Rate shall be 7 7/8%. Notwithstanding the
foregoing, the Applicable LIBOR Rate for the Initial Quarterly Period shall be
7 7/8%.
"Interest Rate Determination Date" means, with respect to each Quarterly
Period, the second Working Day prior to the first day of such Quarterly Period.
"LIBOR Fraction" means the actual number of days in the Initial Quarterly
Period or Quarterly period, as applicable, divided by 360; provided, however,
that the number of days in the Initial Quarterly Period and each Quarterly
Period shall be calculated by including the first day of such Initial Quarterly
Period or Quarterly Period and excluding the last.
"Initial Quarterly Period" means the period from and including July 5, 1994
through and including October 31, 1994.
"Quarterly Period" means the period from and including a scheduled Floating
Rate Interest Payment Date through the day next preceding the following
scheduled Floating Rate Interest Payment Date.
"Reference Banks" means each of Barclays Bank PLC, London Branch, the Bank of
Tokyo, Ltd, London Branch, Bankers Trust Company, London Branch, and National
Westminster Bank PLC, London Branch, and any such replacement bank thereof as
listed on the Reuters Screen LIBO Page and their respective successors, and if
any of such banks are not at the applicable time providing interest rates as
contemplated within the definition of the "Applicable LIBOR Rate," Reference
Banks shall mean the remaining bank or banks so providing such rates. In the
event that less than two of such banks are providing such rates, the Issuers
shall use reasonable efforts to appoint additional Reference Banks so that
there are at least two such banks providing such rates; provided, however, that
such banks appointed by the Issuers shall be London offices of leading banks
engaged in the Eurodollar Market.
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on the
Reuter Monitor Money Rates Service (or such other page as may replace the LIBO
page on that service for the purpose of displaying London Interbank Offered
Rates of leading banks).
"Working Day" means any day which is not a Saturday, Sunday or a day on which
banking institutions in New York, New York or London, England are authorized or
obligated by law or executive order to close.
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.
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.
OPTIONAL REDEMPTION
The Fixed Rate Senior Notes are not redeemable at the Issuers' option prior
to August 1, 1998. Thereafter, the Fixed Rate Senior Notes will be subject to
redemption at the option of the Issuers, in whole
52
<PAGE>
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 August 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
1998.......................................................... 105.0%
1999.......................................................... 102.5%
2000.......................................................... 100.0%
</TABLE>
The Floating Rate Senior Notes will be redeemable at the option of the
Issuers on any Floating Rate Interest Payment Date on or after August 1, 1995,
in whole or in part, at a redemption price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest to the redemption date.
MANDATORY REDEMPTION
Sinking fund payments of $5 million on each of August 1, 1999 and August 1,
2000 are calculated to retire an aggregate of 20% of the Floating Rate Senior
Notes prior to maturity. The Issuers may reduce the principal amount of
Floating Rate Senior Notes to be redeemed pursuant to the foregoing by
subtracting 100% of the principal amount of any Floating Rate Senior Notes that
the Issuers have delivered to the Trustee for cancellation or that the Issuers
have redeemed other than pursuant to the mandatory redemption provisions of the
Indenture. Except pursuant to the foregoing and 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.
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 the next succeeding Floating Rate Interest
Payment Date which is at least 40 days after the Change of Control (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
53
<PAGE>
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.
"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."
54
<PAGE>
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 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 between the Floating Rate Senior Notes and the Fixed Rate
Senior Notes on a pro rata basis and then among the Holders of Floating Rate
Senior Notes and Fixed Rate Senior Notes on a pro rata basis. Upon completion
of such offer to purchase, the amount of Excess Proceeds shall be reset at
zero.
55
<PAGE>
Selection and Notice
If less than all of either series of Notes are to be redeemed pursuant to the
optional redemption provisions of the Indenture, the Trustee shall select the
Floating Rate Senior Notes or Fixed Rate Senior Notes (as applicable) to be
redeemed among the Holders of the same series of Senior Notes on a pro rata
basis. 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 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
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<PAGE>
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 penultimate paragraph of this covenant) made by the Partnership
and its Subsidiaries in the fiscal quarter during which such Restricted
Payment is made shall not exceed an amount equal to the sum of (i)
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) plus
(ii) the lesser of (x) the amount of Available Cash of the Partnership for
the first 45 days of the fiscal quarter during which such Restricted
Payment is made and (y) the amount of working capital Indebtedness that the
Partnership could have incurred on the last day of the immediately
preceding fiscal quarter under the terms of the agreements and instruments
governing its outstanding Indebtedness on such date; and
(d) the Partnership and its Subsidiaries and Non-Recourse Subsidiaries
shall have in the aggregate (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>
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<PAGE>
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 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 August 1, 1996 and 3.00 to 1 if such date is after August 1,
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 $185.0 million; (iii)
revolving Indebtedness incurred solely for working capital purposes in an
aggregate outstanding principal amount not to exceed $20.0 million at any time
on or prior to August 1, 1996 and $40.0 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
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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 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
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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 Credit Facility, as in effect on the date of
the Indenture, the Indenture, the Notes and the Subsidiary Guarantees, (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, (vii)
Permitted Refinancing Indebtedness of any Existing Indebtedness, provided that
the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced or (viii) agreements
governing any Indebtedness that is permitted to be incurred pursuant to the
Indenture and that is incurred to extend, refinance, renew, replace, defease or
refund Indebtedness outstanding pursuant to the Credit Facility, provided that
the restrictions contained in the agreements governing such refinancing
Indebtedness are no more restrictive than those contained in the Credit
Facility, as in effect on the date of the Indenture.
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
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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 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
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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 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
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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 August 1, 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.
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.
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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, 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
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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 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.
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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.
"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
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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 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 July 5, 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.
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"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 August 1, 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 $5.0 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 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
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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 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
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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.
"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
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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 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
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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 partnership, more than 50% of the partners' Capital
Interests (considering all partners' Capital Interests as a single class), 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.
"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.
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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 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.
73
<PAGE>
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 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.
74
<PAGE>
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......... $150,000,000
Goldman, Sachs & Co......................................... 100,000,000
------------
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. 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.
75
<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
76
<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.
77
<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 the 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 $ 255,520 (A) $ 20,886
(254,001)(B)
(29,679)(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 (67,765) 109,308
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 (13,857)(B),(C),(D) 8,160
Note receivable from parent.... 4,000 (4,000)(D) --
-------- --------- --------
TOTAL ASSETS................. $600,113 $(121,653) $478,460
======== ========= ========
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 (204,030)(B),(C) 272,441
Other liabilities.............. 10,534 -- 10,534
Deferred income taxes.......... 9,351 (9,351)(D) --
SPONSOR EQUITY/PARTNERS' CAPITAL:
Equity of sponsor.............. 30,848 255,520 (A) --
(24,641)(B)
(38,597)(C)
(83,443)(D)
(139,687)(E)
PARTNERS' CAPITAL:
Limited partner................ -- 138,277 (E) 138,277
General partner................ -- 1,410 (E) 1,410
-------- --------- --------
TOTAL SPONSOR
EQUITY/PARTNERS' CAPITAL.... 30,848 108,839 139,687
-------- --------- --------
TOTAL LIABILITIES AND SPONSOR
EQUITY/PARTNERS' CAPITAL.... $600,113 $(121,653) $478,460
======== ========= ========
</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 (2,368)(G) 898 2,791 (1,912)(G) 879
Interest expense...... (60,071) 30,851 (H) (29,220) (44,233) 22,942 (H) (21,291)
-------- ------- -------- -------- ------- --------
EARNINGS BEFORE INCOME
TAXES AND EXTRAORDINARY
ITEM................... 595 27,983 28,578 33,115 20,655 53,770
Income tax expense...... 486 (486)(I) -- 12,759 (12,759)(I) --
-------- ------- -------- -------- ------- --------
EARNINGS FROM CONTINUING
OPERATIONS (BEFORE
EXTRAORDINARY ITEM).... $ 109 $28,469 28,578 $ 20,356 $33,414 53,770
======== ======= ======== =======
GENERAL PARTNER'S
INTEREST IN EARNINGS
FROM CONTINUING
OPERATIONS............. 289 544
-------- --------
LIMITED PARTNERS'
INTEREST IN NET
EARNINGS FROM
CONTINUING OPERATIONS.. $ 28,289 $ 53,226
======== ========
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
$255,520,000) and the net proceeds from the issuance of $200,000,000 aggregate
principal amount of 10% Fixed Rate Senior Notes (the "Fixed Rate Senior Notes")
and $50,000,000 aggregate principal amount of Floating Rate Senior Notes (the
"Floating Rate Senior Notes" and, together with the Fixed Rate Senior Notes,
the "Senior Notes") (estimated to be $244,250,000) to be issued by the
Partnership.
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
$255,520,000 from the issuance and sale of 13,100,000 Common Units at an
offering price of $21.0 per Common Unit, net of the Underwriters' discount
($17,881,500) and offering expenses (estimated to be $1,700,000), 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
$244,250,000 from the issuance of $250,000,000 of Senior Notes, net of the
Underwriters' discount ($5,000,000) and offering expenses (estimated
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
to be $750,000), and the proceeds from term loan borrowings on the
Partnership's Credit Facility of approximately $20,000,000 (anticipated to be
approximately $15,000,000 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>
NINE
YEAR MONTHS
ENDED ENDED
JULY 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:
Weighted average interest rate of 9.56% per annum on
the Senior Notes...................................... (23,906) (17,921)
Amortization of note discount and financing costs on
all indebtedness...................................... (1,056) (792)
Interest expense attributable to Credit Facility....... (2,568) (1,222)
--------- ---------
(27,530) (19,935)
--------- ---------
Pro forma interest expense reductions.................. $ 30,851 $ 22,942
========= =========
</TABLE>
(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>
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................................... 73
Underwriting.............................................................. 75
Legal Matters............................................................. 76
Experts................................................................... 76
Additional Information.................................................... 76
Index to Financial Statements............................................. F-1
Glossary of Terms......................................................... A-1
</TABLE>
-----------
UNTIL SEPTEMBER 27, 1994, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGIS-
TERED SECURITIES WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE RE-
QUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEAL-
ERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[LOGO OF FERRELLGAS, L.P. APPEARS HERE]
$250,000,000
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
$200,000,000 10% FIXED RATE SENIOR NOTES DUE 2001
$50,000,000 FLOATING RATE SENIOR NOTES DUE 2001
---------------
PROSPECTUS
---------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
JUNE 29, 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......................................... 155,000
Accounting fees and expenses.................................... 68,750
Blue Sky fees and expenses...................................... 15,675
Trustee fees and expenses....................................... 12,000
Funding fee for Floating Rate Senior Notes...................... 250,000
Miscellaneous................................................... 5,000
--------
Total......................................................... $748,132
========
</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 July 5, 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 POST-EFFECTIVE AMENDMENT NO. 2 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 29TH DAY OF
JUNE, 1994.
Ferrellgas Finance Corp.
By: *
---------------------------------
JAMES E. FERRELL
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
POST-EFFECTIVE AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
* Director, Chairman June 29, 1994
- ------------------------------------- of the Board and
JAMES E. FERRELL Chief Executive
Officer (Principal
Executive Officer)
/s/ Danley K. Sheldon Chief Financial June 29, 1994
- ------------------------------------- Officer/Treasurer
DANLEY K. SHELDON (Principal
Financial and
Accounting Officer)
*By: /s/ Danley K. Sheldon
--------------------------------
DANLEY K. SHELDON
ATTORNEY-IN-FACT
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT NO. 2 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 29TH DAY OF
JUNE, 1994.
Ferrellgas, L.P.
By: Ferrellgas, Inc., as General
Partner
By: *
---------------------------------
JAMES E. FERRELL
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
POST-EFFECTIVE AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
* Director, Chairman June 29, 1994
- ------------------------------------- of the Board and
JAMES E. FERRELL Chief Executive
Officer (Principal
Executive Officer)
/s/ Danley K. Sheldon Chief Financial June 29, 1994
- ------------------------------------- Officer/Treasurer
DANLEY K. SHELDON (Principal
Financial and
Accounting Officer)
*By: /s/ Danley K. Sheldon
--------------------------------
DANLEY K. SHELDON
ATTORNEY-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>
REGISTRATION NO. 33-53379
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
EXHIBITS
TO
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
NO. 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 July 5, 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>
EXECUTION COPY
--------------
FERRELLGAS, L.P.
and
FERRELLGAS FINANCE CORP.
10% Fixed Rate Senior Notes Due 2001
Floating Rate Senior Notes Due 2001
UNDERWRITING AGREEMENT
June 27, 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 $200,000,000 principal amount of their 10% Fixed Rate Senior Notes
due 2001 (the "Fixed Rate Senior Notes") and $50,000,000 principal amount of
their Floating Rate Senior Notes due 2001 (the "Floating Rate Senior Notes" and,
together with the Fixed Rate Senior Notes, the "Senior Notes"). The Senior
Notes are to be issued pursuant to the provisions of an Indenture to be dated as
of July 5, 1994 by and among the Issuers and Norwest Bank Minnesota, National
Association, 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 the Master Partnership 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) Ferrellgas, Inc., a Delaware
corporation (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
<PAGE>
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 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 $185 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 2% 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 on
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
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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 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;
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(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 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
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(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;
(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";
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(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;
(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
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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 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;
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(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 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 created pursuant to the pledge
agreement entered into in connection with (A) 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") and
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(B) the Existing Indenture (such pledge agreement is referred to herein as
the "Existing Pledge 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 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 for such Liens created 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;
(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,
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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, the Contribution,
Conveyance and Assumption 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
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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, 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
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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 (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,
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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 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
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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
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
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(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.
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
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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
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
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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 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
17
<PAGE>
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 L.L.P., 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:
(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 (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
and (C) the effect of general principles of equity, whether enforcement is
considered in a proceeding in equity or at law, and the discretion of the
court before which any proceeding therefor may be brought.
(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
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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.
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, 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.
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:
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(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 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 B 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 ten business days prior to the Closing Date) and
oral or written confirmation of the continuance of such foreign
qualification as of a date which is not more than one business day prior
to the Closing Date (which shall be provided by the Secretary of State of
such jurisdiction), 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 C 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 B 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 ten business days prior to the Closing Date) and oral or written
confirmation of the continuance of such foreign qualification as of a date
which is not more than one business day prior to the Closing Date (which
shall be provided by the Secretary of State of such jurisdiction), 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 C 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
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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 created pursuant to the Existing Pledge 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 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 for such Liens
created 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
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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.
(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
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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), 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.
(xvi) The Indenture has been duly qualified under the TIA.
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
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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, P.C., with respect to the State
of Missouri, Andrews and Kurth L.L.P., with respect to the State of Texas,
Arnall, Golden & Gregory, with respect to the State of Georgia, Miller,
Canfield, Paddock & Stone, with respect to the State of Michigan and Taft,
Stettinius & Hollister, with respect to the States of Ohio and Kentucky, 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 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 as to 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
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general applicability relating to or affecting creditors' rights, or as to
the effect of general equity principles.
(v) 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.
(vi) 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, 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 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) 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
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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
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 and the proceeds therefrom shall have been transferred to the
Partnership in immediately available funds pursuant to the terms and
conditions of the Partnership Agreement;
(j) The General Partner 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 have been deposited with the trustee therefor;
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(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 (h) of
this Section 7 in respect of the Partnership or Finance Corp. 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
(h) 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 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.
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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;
(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;
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(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(j) 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: Danley K.
Sheldon, with a copy to Smith, Gill, Fisher & Butts, P.C., 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: Danley K. Sheldon
Title: Vice President and Chief Financial
Officer/Treasurer
FERRELLGAS FINANCE CORP.
By:
-----------------------------------------
Name: Danley K. Sheldon
Title: Vice President and Chief Financial
Officer/Treasurer
FERRELLGAS, INC.
By:
-----------------------------------------
Name: Danley K. Sheldon
Title: Vice President and Chief Financial
Officer/Treasurer
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:
----------------------------
30
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal Principal
Amount Amount
Fixed Rate Floating Rate
Senior Notes Senior Notes
------------ -------------
<S> <C> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation $120,000,000 $30,000,000
Goldman, Sachs & Co. $ 80,000,000 $20,000,000
Total: $200,000,000 $50,000,000
============ =============
</TABLE>
31
<PAGE>
SCHEDULE B
Georgia
Kentucky
Michigan
Ohio
Texas
<PAGE>
SCHEDULE C
Alabama Nebraska
Arizona Nevada
Arkansas New Jersey
California New Mexico
Colorado New York
Connecticut North Carolina
District of Columbia North Dakota
Florida Oklahoma
Idaho Oregon
Illinois Pennsylvania
Indiana Rhode Island
Iowa South Carolina
Kansas South Dakota
Louisiana Tennessee
Maine Utah
Maryland Vermont
Massachussetts Virginia
Minnesota Washington
Mississippi West Virginia
Wisconsin
Wyoming
<PAGE>
L&W DRAFT 06/27/94
================================================================================
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
$250,000,000
$200,000,000 10% SERIES A FIXED RATE SENIOR NOTES
$50,000,000 SERIES B FLOATING RATE SENIOR NOTES
_________________
INDENTURE
Dated as of July 5, 1994
_________________
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
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
N.A. means not applicable.
*This Cross-Reference Table is not part of this Indenture.
<PAGE>
TABLE OF CONTENTS
Page
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............................................... 12
Section 1.04. Rules of Construction............................. 12
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating................................... 13
Section 2.02. Execution and Authentication...................... 13
Section 2.03. Registrar and Paying Agent........................ 14
Section 2.04. Paying Agent to Hold Money in Trust............... 14
Section 2.05. Lists of Holders of the Notes..................... 14
Section 2.06. Transfer and Exchange............................. 15
Section 2.07. Replacement Notes................................. 15
Section 2.08. Outstanding Notes................................. 16
Section 2.09. Treasury Notes.................................... 16
Section 2.10. Temporary Notes................................... 16
Section 2.11. Cancellation...................................... 16
Section 2.12. Defaulted Interest................................ 17
Section 2.13. Record Date....................................... 17
Section 2.14. CUSIP Number...................................... 17
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.... 18
Section 3.03. Notice of Redemption.............................. 18
Section 3.04. Effect of Notice of Redemption.................... 19
Section 3.05. Deposit of Redemption Price....................... 19
Section 3.06. Notes Redeemed in Part............................ 20
Section 3.07. Optional Redemption............................... 20
Section 3.08. Mandatory Redemption.............................. 20
Section 3.09. Asset Sale Offers................................. 20
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.................................. 22
Section 4.02. Maintenance of Office or Agency................... 22
Section 4.03. Reports........................................... 22
Section 4.04. Compliance Certificate............................ 23
Section 4.05. Taxes............................................. 24
Section 4.06. Stay, Extension and Usury Laws.................... 24
Section 4.07. Restricted Payments............................... 24
i
<PAGE>
Section 4.08. Dividend and Other Payment Restrictions
Affecting Subsidiaries............................ 26
Section 4.09. Incurrence of Indebtedness and Issuance of
Disqualified Interests............................ 26
Section 4.10. Asset Sales....................................... 28
Section 4.11. Transactions with Affiliates...................... 29
Section 4.12. Liens............................................. 30
Section 4.13. Subsidiary Note Guarantees........................ 30
Section 4.14. Offer to Purchase Upon Change of Control.......... 30
Section 4.15. Partnership or Corporate Existence................ 31
Section 4.16. Line of Business.................................. 32
Section 4.17. Limitation on Sale and Leaseback Transactions..... 32
Section 4.18. Restrictions on Nature of Indebtedness and
Activities of Finance Corp........................ 32
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.......... 32
Section 5.02. Successor Person Substituted...................... 33
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default................................. 34
Section 6.02. Acceleration...................................... 36
Section 6.03. Other Remedies.................................... 36
Section 6.04. Waiver of Past Defaults........................... 36
Section 6.05. Control by Majority............................... 37
Section 6.06. Limitation on Suits............................... 37
Section 6.07. Rights of Holders of Notes to Receive Payment..... 37
Section 6.08. Collection Suit by Trustee........................ 37
Section 6.09. Trustee May File Proofs of Claim.................. 38
Section 6.10. Priorities........................................ 38
Section 6.11. Undertaking for Costs............................. 38
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee................................. 39
Section 7.02. Rights of Trustee................................. 40
Section 7.03. Individual Rights of Trustee...................... 40
Section 7.04. Trustee's Disclaimer.............................. 40
Section 7.05. Notice of Defaults................................ 41
Section 7.06. Reports by Trustee to Holders of the Notes........ 41
Section 7.07. Compensation and Indemnity........................ 41
Section 7.08. Replacement of Trustee............................ 42
Section 7.09. Successor Trustee by Merger, etc.................. 43
Section 7.10. Eligibility; Disqualification..................... 43
Section 7.11. Preferential Collection of Claims Against
Issuers........................................... 43
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
ii
<PAGE>
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance........................................ 43
Section 8.02. Legal Defeasance and Discharge.................... 43
Section 8.03. Covenant Defeasance............................... 44
Section 8.04. Conditions to Legal or Covenant Defeasance........ 44
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions......46
Section 8.06. Repayment to Issuers.............................. 46
Section 8.07. Reinstatement..................................... 47
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes............... 47
Section 9.02. With Consent of Holders of Notes.................. 48
Section 9.03. Compliance with Trust Indenture Act............... 49
Section 9.04. Revocation and Effect of Consents................. 49
Section 9.05. Notation on or Exchange of Notes.................. 49
Section 9.06. Trustee to Sign Amendments, etc................... 50
ARTICLE 10
NOTE GUARANTEES
Section 10.01. Note Guarantee.................................... 50
Section 10.02. Limitation of Guarantor's Liability............... 51
Section 10.03. Guarantors May Consolidate, etc., on Certain
Terms............................................. 52
Section 10.04. Releases Following Sale of Assets................. 52
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls...................... 52
Section 11.02. Notices........................................... 53
Section 11.03. Communication by Holders of Notes with Other
Holders of Notes.................................. 54
Section 11.04. Certificate and Opinion as to Conditions
Precedent......................................... 54
Section 11.05. Statements Required in Certificate or Opinion..... 54
Section 11.06. Rules by Trustee and Agents....................... 54
Section 11.07. No Personal Liability of Directors, Officers,
Employees and Stockholders........................ 55
Section 11.08. Governing Law..................................... 55
Section 11.09. No Adverse Interpretation of Other Agreements..... 55
Section 11.10. Successors........................................ 55
Section 11.11. Severability...................................... 55
Section 11.12. Counterpart Originals............................. 55
Section 11.13. Table of Contents, Headings, etc.................. 55
iii
<PAGE>
EXHIBITS
Exhibit A FORM OF SERIES A FIXED RATE SENIOR NOTE
Exhibit B FORM OF SERIES B FLOATING RATE SENIOR NOTE
Exhibit C FORM OF SUPPLEMENTAL INDENTURE
Exhibit D FORM OF NOTATION ON SENIOR NOTE RELATING TO NOTE GUARANTEE
iv
<PAGE>
INDENTURE dated as of July 5, 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 Notes (as defined below):
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,
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 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
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 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 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).
"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, 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.
"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
3
<PAGE>
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 August 1, 2001.
"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 $5.0 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
4
<PAGE>
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 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 the 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.
"Fixed Rate Senior Notes" means the 10% Series A Fixed Rate Senior Notes,
in the form attached hereto as Exhibit A and as amended or supplemented from
---------
time to time pursuant to the terms hereof, issued by the Issuers pursuant to
this Indenture.
"Floating Rate Senior Notes" means the Series B Floating Rate Senior
Notes, in the form attached hereto as Exhibit B and as amended or supplemented
---------
from time to time pursuant to the terms hereof, issued by the Issuers pursuant
to this Indenture.
"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.
5
<PAGE>
"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.
"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
6
<PAGE>
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 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 Fixed Rate Senior Notes and the Floating Rate Senior
Notes.
"Note Guarantee" means each guarantee of the Notes by a Guarantor pursuant
to Article 10 hereof.
7
<PAGE>
"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 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 the Agreement of Limited Partnership of
Ferrellgas, L.P., dated as of July 5, 1994, between Ferrellgas, Inc. and
Ferrellgas Partners, L.P.
"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
8
<PAGE>
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, 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
9
<PAGE>
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 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, 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 partnership, more than 50% of the partners' Capital
Interests (considering all partners' Capital Interests as a single class), is at
the time owned or controlled, directly or indirectly, by
10
<PAGE>
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 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
"Aggregate Consideration"......... 4.07
"Asset Sale"...................... 4.10
"Asset Sale Offer"................ 3.09
"Benefitted Party"................ 10.01
"Capital Investment".............. 4.07
"Change of Control Offer"......... 4.14
"Change of Control Payment"....... 4.14
"Change of Control Payment Date".. 4.14
"Covenant Defeasance"............. 8.03
"Commencement Date"............... 3.09
"Event of Default"................ 6.01
"Excess Proceeds"................. 4.10
"incur"........................... 4.09
"Incurrence Date"................. 4.09
"Legal Defeasance"................ 8.02
"Offer Amount".................... 3.09
"Offer Period".................... 3.09
</TABLE>
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<TABLE>
<S> <C>
"Paying Agent".................... 2.03
"Payment Default"................. 6.01
"Purchase Date"................... 3.09
"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;
"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
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<PAGE>
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 Fixed Rate Senior Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A which is part
---------
of this Indenture and shall be in a principal amount of no greater than
$200,000,000. The Floating Rate Senior Notes and the Trustee's certificate
of authentication shall be substantially in the form of Exhibit B which is a
---------
part of this Indenture and shall be in a principal amount of no greater than
$50,000,000. The Notes may have notations, legends or endorsements required
by law, stock exchange rule or usage which will be provided by the Company.
Each Note shall be dated the date of its authentication.
The terms and provisions contained in the Notes annexed hereto as
Exhibit A and Exhibit B, and the Guarantees annexed hereto as Exhibit C shall
- ----------------------- ---------
constitute, and are hereby expressly made, a part of this Indenture. To the
extent applicable, the Company, each Guarantor and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Section 2.02. Execution and Authentication.
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.
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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 appoint 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
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).
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<PAGE>
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 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.
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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.
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
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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 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 elect to reduce the principal amount of Floating Rate
Senior Notes to be redeemed pursuant to the mandatory redemption provisions of
paragraph 6 of the Floating Rate Senior Notes, it shall notify the Trustee of
the amount of the reduction and the basis for it at least 50 days prior to the
applicable mandatory redemption date. If the Issuers elect to credit against
any such redemption Floating Rate Senior Notes they have not previously
delivered to the Trustee for cancellation, the Issuers shall deliver such
Floating Rate Senior Notes with the notice to the Trustee.
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If the Issuers are required to make an offer to purchase Notes pursuant to
the provisions of Sections 4.10 or 4.14 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 the Issuers elect to redeem less than all of either series of Notes
pursuant to the optional redemption provisions of Section 3.07 hereof and
paragraph 5 of the applicable series of Notes, the Trustee shall select the
Notes to be redeemed as follows:
The Trustee shall select the Floating Rate Senior Notes or Fixed Rate
Senior Notes (as applicable) to be redeemed among the Holders of the same series
of Notes on a pro rata basis.
If less than all of the Notes properly tendered in an Asset Sale Offer
pursuant to Sections 3.09 and 4.10 hereof are to be purchased, the Trustee shall
select the Floating Rate Senior Notes and Fixed Rate Senior Notes to be
purchased as follows:
The Trustee shall select the Notes to be purchased between the Floating
Rate Senior Notes and the Fixed Rate Senior Notes on a pro rata basis and then
among the Holders of Floating Rate Senior Notes and Fixed Rate Senior Notes on a
pro rata basis.
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.
In the event the Issuers are required to make an Asset Sale 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 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:
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(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.
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
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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 Issuers may redeem all or any portion of either series of Notes, upon
the terms and at the redemption prices set forth in paragraph 5 of the
applicable series of Notes. Any redemption pursuant to this Section 3.07 shall
be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall redeem $5,000,000 principal amount of the Floating Rate
Senior Notes on each of August 1, 1999 and August 1, 2000, upon the terms and
subject to the conditions set forth in paragraph 6 of the Floating Rate Senior
Notes. Except pursuant to the preceding sentence and 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. Asset Sale Offers.
(a) In the event that, pursuant to Section 4.10 hereof, the Issuers shall
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified in this Section 3.09.
(b) The Asset Sale Offer shall commence on the date (the "Commencement
Date") specified in Section 4.10 hereof and shall remain open for a period
specified by the Issuers, which shall be in accordance with Section 4.10 hereof
(the "Offer Period"). No later than five Business Days after the termination of
the Offer Period and, in any event, on a Floating Rate Interest Payment Date (as
defined in the Floating Rate Senior Notes) (the "Purchase Date"), the Issuers
shall purchase the principal amount of Notes required to be purchased pursuant
to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount
has been tendered, all Notes tendered in response to such Asset Sale 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 Asset Sale Offer.
Upon the commencement of an Asset Sale 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 Asset Sale Offer. The Asset Sale
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Offer shall be made to all Holders. The notice, which shall govern the terms of
the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to Section 4.10
hereof, 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 Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to any
Asset Sale 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 Notes to be purchased shall be selected
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) the circumstances and material facts regarding the Asset Sale or
Asset Sales giving rise to such Asset Sale 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 Asset Sale 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 Asset Sale Offer on the Purchase
Date.
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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 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
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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. To the extent
permissible under the rules and regulations of the SEC (assuming at all times
that the Issuers were required to file reports with the SEC), such information
and reports with respect to the Master Partnership may be filed and provided in
lieu of such information and reports with respect to the Partnership.
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.
(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.
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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:
(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, 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 (other than any Restricted Payments permitted by the
provisions of clauses (ii), (iii) or (iv) of the penultimate paragraph of
this Section 4.07) made by the Partnership and its Subsidiaries in the fiscal
quarter during which such Restricted Payment is made, shall not exceed an
amount equal to the sum of (i) Available Cash of the Partnership for the
immediately preceding
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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) plus (ii) the lesser of
(x) the amount of Available Cash of the Partnership for the first 45 days of
the fiscal quarter during which such Restricted Payment is made and (y) the
amount of working capital Indebtedness that the Partnership could have
incurred on the last day of the immediately preceding fiscal quarter under
the terms of the agreements and instruments governing its outstanding
Indebtedness on such date; and
(d) the Partnership and its Subsidiaries and Non-Recourse Subsidiaries
shall have, in the aggregate (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 this 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 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 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.
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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
of its Subsidiaries (1) on its Capital Interests or (2) with respect to any
other interest or participation in, or interest measured by, its profits, (b)
pay any indebtedness owed to the 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) the Credit Facility, as in effect on the date of this Indenture, this
Indenture, the Notes and the Note Guarantees, (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, (vii) Permitted Refinancing Indebtedness of any
Existing Indebtedness, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced or (viii) agreements governing any Indebtedness that is
permitted to be incurred hereunder and that is incurred to extend, refinance,
renew, replace, defease or refund Indebtedness outstanding pursuant to the
Credit Facility, provided that the restrictions contained in the agreements
governing such refinancing Indebtedness are no more restrictive than those
contained in the Credit Facility as in effect on the date of this Indenture.
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 August 1, 1996 and 3.00 to 1 if such date is after August 1,
1996, in each case,
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<PAGE>
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 August 1, 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 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
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<PAGE>
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".
For purposes of this Section 4.09, 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
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%
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<PAGE>
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 4.16 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 constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $15 million, the Issuers shall make
an Asset Sale 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 an
Asset Sale 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 Asset Sale Offer.
To the extent that the aggregate amount of Notes tendered pursuant to such 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
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 Asset Sale 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
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<PAGE>
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.
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 pursuant to a supplemental indenture in the form
attached hereto as Exhibit B, 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 an
offer (a "Change of Control Offer") to each Holder to purchase all or any part
of such Holder's Notes on the next succeeding Floating Rate Interest Payment
Date which is at least 40 days after the Change of Control (the "Change of
Control Payment Date") 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"). 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 Change of Control Offer.
The Issuers shall commence such Change of Control Offer within 10 days
following any Change of Control by mailing a notice of such Change of Control to
each Holder at its last registered address with a copy to the Trustee and the
Paying Agent. The Change of Control Offer shall remain open from the time of
mailing until the close of business on the Business Day preceding the Change of
Control Payment Date. The notice, which shall govern the terms of the Change of
Control Offer, shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.14 and that all Notes tendered will be accepted for payment;
(2) the amount of the Change of Control Payment and the Change of Control
Payment Date;
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(3) that any Notes not tendered will continue to accrue interest in
accordance with the terms of the Indenture;
(4) that, unless the Issuers default in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that Holders electing to have Notes purchased pursuant to the Change
of Control Offer will be required to surrender their Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the 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 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 Notes the Holder delivered for purchase, and a
statement that such Holder is withdrawing its election to have such
Notes purchased;
(7) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof; and
(8) the circumstances and relevant facts regarding such Change of Control
(including, but not limited to, information with respect to pro forma
historical financial information after giving effect to such Change of
Control, information regarding the Person or Persons acquiring control
and such Person's or Persons' business plans going forward).
On the Change of Control Payment Date, the Issuers shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent an amount equal
to the Change of Control Payment in respect of all Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Issuers. The Paying Agent shall promptly, but in no
event later than three Business Days following the Change of Control Payment
Date, mail to each Holder of Notes so accepted payment in an amount equal to the
Change of Control Payment for such Notes, and the Issuers shall promptly issue a
new Note, and the Trustee shall authenticate and mail or deliver a new Note to
such Holder equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided, that each such new Note shall be in a principal
amount of $1,000 or an integral multiple thereof. The Issuers shall publicly
announce in The Wall Street Journal, or if no longer published, a national
newspaper of general circulation the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
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
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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 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 remaining useful 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
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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 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.
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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, 4.14 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;
(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
this 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:
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(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
(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 August 1, 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 August 1, 1998 pursuant to Section 3.07 hereof, then the
premium payable for purposes of this paragraph for each of the years beginning
on August 1 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:
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<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1994 ................... 110.00%
1995 ................... 108.75%
1996 ................... 107.50%
1997 ................... 106.25%
</TABLE>
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.
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
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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, 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 an Asset Sale Offer or a Change of Control 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
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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.
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
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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 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.
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(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.
(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
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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 (including any failure to make any mandatory redemption
payment required hereunder), 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 November 1 beginning with the November 1
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 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.
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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 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.
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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.
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
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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 "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
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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;
(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
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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.
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.
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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;
(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.
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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 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
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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 4.14 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.
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.
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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 has guaranteed 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 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
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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 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
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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.
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.
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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.: (816) 792-6979
Attention: Danley K. Sheldon
With a copy to:
Smith, Gill, Fisher, & Butts, P.C.
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
Telecopier No.: (816) 391-7600
Attention: Kendrick T. Wallace
If to the Trustee:
Norwest Bank Minnesota,
National Association
6th Street & Marquette Ave.
Minneapolis, MN 55479
Telecopier No.: (612) 677-9875
Attention: Ray Haverstock
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.
53
<PAGE>
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.
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.
54
<PAGE>
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.
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]
55
<PAGE>
SIGNATURES
Dated as of July 5, 1994 FERRELLGAS, L.P.
By: Ferrellgas, Inc.
General Partner
By:
--------------------------------------
Name:
Title:
(SEAL)
Dated as of July 5, 1994 FERRELLGAS FINANCE CORP.
By:
-----------------------------------------
Name:
Title:
(SEAL)
Dated as of July 5, 1994 NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By:
-----------------------------------------
Name:
Title:
(SEAL)
56
<PAGE>
Exhibit A
(Face of Series A Fixed Rate Senior Note)
10% Series A Fixed Rate Senior Note due 2001
No. $__________
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
promise to pay to
or registered assigns,
the principal sum of
Dollars on August 1, 2001.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
Dated: July 5, 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:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By:__________________________________
A-2
<PAGE>
(Back of Note)
10% SERIES A FIXED RATE SENIOR NOTE
DUE AUGUST 1, 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 interest in cash on the principal amount
of this Note at the rate per annum of 10%. The Issuers will pay interest semi-
annually in arrears on February 1 and August 1 of each year, commencing on
February 1, 1995, to Holders of record on the immediately preceding January 15
and July 15, or if any such day is not a Business Day (as defined in the
Indenture), on the next succeeding Business Day (each a "Fixed Rate 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 Fixed Rate
Interest Payment Date, even if such Notes are cancelled after such record date
and on or before such Fixed Rate 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 July 5, 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
A-3
<PAGE>
$250,000,000 in aggregate principal amount. The Fixed Rate Senior Notes are
limited to $200,000,000 in aggregate principal amount.
5. Optional Redemption. The Issuers shall not have the option to
redeem the Notes pursuant to Section 3.07 of the Indenture prior to August 1,
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 August 1 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
1998 ....................... 105.00%
1999 ....................... 102.50%
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
A-4
<PAGE>
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 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 Fixed
Rate 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 for 20 days by the Partnership to comply with
Sections 4.07, 4.09, 4.14 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
A-5
<PAGE>
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 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.
A-6
<PAGE>
15. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
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.: (816) 792-6979
Attention: Danley K. Sheldon
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 4.14 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.14
If you want to elect to have only part of the Note purchased by the
Issuers pursuant to Section 4.10 or Section 4.14 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
(Face of Floating Rate Senior Note)
Floating Rate Senior Note due 2001
No. $__________
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
promise to pay to
or registered assigns,
the principal sum of
Dollars on August 1, 2001.
Interest Payment Dates: February 1, May 1, August 1 and November 1.
Record Dates: January 15, April 15, July 15 and October 15.
Dated: July 5, 1994
FERRELLGAS, L.P.
By: Ferrellgas, Inc.
General Partner
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
B-1
<PAGE>
FERRELLGAS FINANCE CORP.
By:____________________________________
Name:
Title:
By:____________________________________
Name:
Title:
This is one of the Floating Rate Senior
Notes referred to in the
within-mentioned Indenture:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
Trustee
By:__________________________________
B-2
<PAGE>
(Back of Note)
SERIES B FLOATING RATE SENIOR NOTE
DUE AUGUST 1, 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 a rate equal to the Applicable
LIBOR Rate. The Issuers will pay interest quarterly on February 1, May 1,
August 1 and November 1 of each year, or if any such day is not a Business Day,
on the next succeeding Business Day (each, a "Floating Rate Interest Payment
Date"), commencing on November 1, 1994, to Holders of record on the immediately
preceding January 15, April 15, July 15 and October 15. Interest on this Note
will 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 this Note.
Interest on this Note shall accrue to, but not including, the date of repayment
of such principal; provided, however, that if such repayment occurs after 12:00
noon, New York City time, interest shall be deemed to accrue until the following
Business Day. 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 this Note; they shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) at the same rate to the extent
lawful. On each Floating Rate Interest Payment Date, interest on this Note will
be paid for the Initial Quarterly Period or the immediately preceding Quarterly
Period, as applicable. Interest shall be calculated on a formula basis in
respect of the Initial Quarterly Period and each Quarterly Period by multiplying
the principal amount of this Note by the Applicable LIBOR Rate, and multiplying
such product by the LIBOR Fraction. Anything to the contrary in this Note
notwithstanding, the interest rate on this Note shall in no event be in excess
of the maximum rate permitted by the law of any state of applicable
jurisdiction, as the same may be modified by Federal law.
The "Applicable LIBOR Rate" means for each Quarterly Period during which
any Floating Rate Senior Note is outstanding subsequent to the Initial Quarterly
Period, 312.5 basis points over the rate determined by the Partnership (notice
of such rate to be sent to the Trustee by the Company on the date of
determination thereof) equal to the average (rounded upwards, if necessary, to
the nearest 1/16 of 1%) of the offered rates for deposits in U.S. dollars for a
period of three months, as set forth on the Reuters Screen LIBO Page as of 11:00
a.m., London time, on the Interest Rate Determination Date for such Quarterly
Period; provided, however, that if only one such offered rate appears on the
Reuters Screen LIBO Page, the Applicable LIBOR Rate for such Quarterly Period
shall mean such offered rate. If such rate is not available at 11:00 a.m.,
London time, on the Interest Rate Determination Date for such Quarterly Period,
then the Applicable LIBOR Rate for such Quarterly Period shall mean the
arithmetic mean (rounded upwards, if necessary, to the nearest 1/16 of 1%) of
the interest rates per annum at which deposits in amounts equal to $1 million in
U.S. dollars are offered by the Reference Banks to leading banks in the London
Interbank Market for a period of six months as of 11:00 a.m., London time, on
the Interest Rate Determination Date for such Quarterly Period. If on any
Interest Rate Determination Date, at least two of the Reference Banks provide
such offered quotations, then the Applicable LIBOR Rate for such Quarterly
Period shall be determined in accordance with the preceding sentence on the
basis of the offered quotation of those Reference Banks providing such
quotations; provided, however that if fewer than two of the Reference Banks are
so quoting such interest rates as mentioned above, the Applicable LIBOR Rate for
such Quarterly Period shall be deemed to be the Applicable LIBOR Rate for the
next
B-3
<PAGE>
preceding Quarterly Period and in the case of the Quarterly Period next
succeeding the Initial Quarterly Period, the Applicable LIBOR Rate shall be 7
7/8%. Notwithstanding the foregoing, the Applicable LIBOR Rate for the Initial
Quarterly Period shall be 7 7/8%.
"Interest Rate Determination Date" means, with respect to the Initial
Quarterly Period and each Quarterly Period, the second Working Day prior to the
first day of such Initial Quarterly Period or Quarterly Period, as applicable.
"LIBOR Fraction" means the actual number of days in the Initial Quarterly
Period or Quarterly period, as applicable, divided by 360; provided, however,
that the number of days in the Initial Quarterly Period and each Quarterly
Period shall be calculated by including the first day of such Initial Quarterly
Period or Quarterly Period and excluding the last.
"Initial Quarterly Period" means the period from and including July 5,
1994 through and including October 31, 1994.
"Quarterly Period" means the period from and including a scheduled
Floating Rate Interest Payment Date through the day next preceding the following
scheduled Floating Rate Interest Payment Date.
"Reference Banks" means each of Barclays Bank PLC, London Branch, the Bank
of Tokyo, Ltd, London Branch, Bankers Trust Company, London Branch, and National
Westminster Bank PLC, London Branch, and any such replacement bank thereof as
listed on the Reuters Screen LIBO Page and their respective successors, and if
any of such banks are not at the applicable time providing interest rates as
contemplated within the definition of the "Applicable LIBOR Rate," Reference
Banks shall mean the remaining bank or banks so providing such rates. In the
event that less than two of such banks are providing such rates, the Issuers
shall use reasonable efforts to appoint additional Reference Banks so that there
are at least two such banks providing such rates; provided, however, that such
banks appointed by the Issuers shall be London offices of leading banks engaged
in the Eurodollar Market.
"Reuters Screen LIBO Page" means the display designated as page "LIBO" on
the Reuter Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service for the purpose of displaying London Interbank Offered
Rates of major banks).
"Working Day" means any day which is not a Saturday, Sunday or a day on
which banking institutions in New York, New York or London, England are
authorized or obligated by law or executive order to close.
2. Method of Payment. The Issuers will pay interest on this Note (except
defaulted interest) to the Person who is the registered Holder of such Note at
the close of business on the record date next preceding the Floating Rate
Interest Payment Date, even if such Note is cancelled after such record date and
on or before such Floating Rate 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.
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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
July 5, 1994 (the "Indenture") between Partnership, Finance Corp. and the
Trustee. The terms 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. The Floating Rate Senior Notes are
limited to $50,000,000 in aggregate principal amount.
5. Optional Redemption. The Issuers may redeem all or any portion of the
Floating Rate Senior Notes on any Floating Rate Interest Payment Date on or
after August 1, 1995, on not less than 30 nor more than 60 days' notice to each
Holder, at a redemption price equal to 100% of the outstanding principal amount
then redeemed, plus accrued and unpaid interest to the redemption date.
6. Mandatory Redemption. The Issuers shall redeem $5,000,000 principal
amount of Floating Rate Senior Notes on each of August 1, 1999 and August 1,
2000 at a redemption price equal to 100% of principal amount thereof, plus
accrued and unpaid interest to the redemption date. The Issuers may reduce the
principal amount of Floating Rate Senior Notes to be redeemed pursuant to this
paragraph 6 by subtracting 100% of the principal amount of any Floating Rate
Senior Notes that the Issuers have delivered to the Trustee for cancellation or
that the Issuers have redeemed other than pursuant to this paragraph 6. The
Issuers may so subtract the principal amount of a Floating Rate Senior Note only
once.
Except as described in this paragraph 6 and 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. 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.
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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 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 Floating
Rate 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
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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 for 20 days by the Partnership to comply with
Sections 4.07, 4.09, 4.14 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 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
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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.
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.: (816) 792-6979
Attention: Danley K. Sheldon
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<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.
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<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 4.14 of the Indenture, check the box below:
[_] Section 4.10 [_] Section 4.14
If you want to elect to have only part of the Note purchased by the
Issuers pursuant to Section 4.10 or Section 4.14 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.
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EXHIBIT C
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 July 5, 1994, providing for the issuance of an
aggregate principal amount of $200,000,000 of 10% Fixed Rate Senior Notes (the
"Fixed Rate Senior Notes") and an aggregate principal amount of $50,000,000 of
Floating Rate Senior Notes (the "Floating Rate Senior Notes" and, together with
the Fixed Rate Senior Notes, the "Senior 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.
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(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 or 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:
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EXHIBIT D
FORM OF NOTATION ON SENIOR 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 has guaranteed 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:
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EXHIBIT 23.1
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to the use in this Post-Effective Amendment No. 2 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 Post-Effective Amendment No. 2 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 Post-Effective Amendment No. 2 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 Post-Effective Amendment No. 2 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 28, 1994
