UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended April 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file numbers: 33-53379
33-53379-01
Ferrellgas, L.P.
Ferrellgas Finance Corp.
(Exact name of registrants as specified in their charters)
Delaware 43-1698481
Delaware 43-1677595
(States or other jurisdictions of (I.R.S. Employer Identification Nos.)
incorporation or organization)
One Liberty Plaza, Liberty, Missouri 64068
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (816) 792-1600
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
At May 15, 1996, Ferrellgas Finance Corp. had 1,000 shares of $1.00 par value
common stock outstanding.
<PAGE>
FERRELLGAS, L.P.
FERRELLGAS FINANCE CORP.
Table of Contents
PART I - FINANCIAL INFORMATION
Page
ITEM 1. FINANCIAL STATEMENTS
FERRELLGAS, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets - April 30, 1996 and July 31, 1995 1
Consolidated Statements of Earnings - 2
Three months and nine months ended April 30, 1996 and 1995
Consolidated Statements of Partners' Capital - 3
Nine months ended April 30, 1996
Consolidated Statements of Cash Flows - 4
Nine months ended April 30, 1996 and 1995
Notes to Consolidated Financial Statements 5
FERRELLGAS FINANCE CORP.
Balance Sheets - April 30, 1996 and July 31, 1995 7
Statements of Earnings - 7
Three months and nine months ended April 30, 1996 and 1995
Statements of Stockholder's Equity - Nine months ended April 30, 1996 8
Statements of Cash Flows - Nine months ended April 30, 1996 and 1995 8
Note to Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 13
ITEM 2. CHANGES IN SECURITIES 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13
ITEM 5. OTHER INFORMATION 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SIGNATURES 14
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FERRELLGAS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
April 30, July 31,
ASSETS 1996 1995
------------------------------------------------------------------------ --------------- -------------
(unaudited)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 87,809 $ 29,877
Accounts and notes receivable 80,639 58,239
Inventories 24,316 44,090
Prepaid expenses and other current assets 5,619 5,884
--------------- -------------
Total Current Assets 198,383 138,090
Property, plant and equipment, net 342,593 345,642
Intangible assets, net 98,697 86,886
Other assets, net 7,456 7,978
--------------- -------------
Total Assets $647,129 $578,596
=============== =============
LIABILITIES AND PARTNERS' CAPITAL
------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 44,912 $ 57,729
Other current liabilities 30,278 31,432
Short-term borrowings 0 20,000
--------------- -------------
Total Current Liabilities 75,190 109,161
Long-term debt 272,307 338,188
Other liabilities 12,288 11,398
Contingencies and commitments
Partners' Capital:
Limited partner 284,442 118,638
General partner 2,902 1,211
--------------- -------------
Total Partners' Capital 287,344 119,849
--------------- -------------
Total Liabilities and Partners' Capital $647,129 $578,596
=============== =============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
FERRELLGAS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
- -------------------------------------------------- ------------------------------ --------------------------------
April 30, April 30, April 30, April 30,
1996 1995 1996 1995
-------------- ------------- -------------- -------------
Revenues:
<S> <C> <C> <C> <C>
Gas liquids and related product sales $181,241 $162,821 $522,446 $483,290
Other 9,502 5,192 31,266 22,797
-------------- ------------- -------------- -------------
Total revenues 190,743 168,013 553,712 506,087
Cost of product sold (exclusive of
depreciation, shown separately below) 105,263 94,759 300,844 285,059
-------------- ------------- -------------- -------------
Gross profit 85,480 73,254 252,868 221,028
Operating expense 45,742 40,638 134,362 120,334
Depreciation and amortization expense 8,703 8,443 25,839 23,855
General and administrative expense 2,981 3,118 9,535 8,366
Vehicle lease expense 1,418 1,080 3,621 3,227
-------------- ------------- -------------- -------------
Operating income 26,636 19,975 79,511 65,246
Interest expense (8,400) (8,221) (26,608) (23,536)
Interest income 443 433 1,068 947
Loss on disposal of assets (314) (126) (1,084) (429)
-------------- ------------- -------------- -------------
Net earnings $18,365 $12,061 $52,887 $42,228
============== ============= ============== =============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
FERRELLGAS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Limited General Total partner's
partner partner capital
----------------- ----------------- -----------------
<S> <C> <C> <C>
July 31, 1995 $118,638 $1,211 $119,849
Cash contributed in connection with debt offering 156,000 1,592 157,592
Assets contributed in connection with acquisitions 614 6 620
Additions to capital in connection
with acquisitions 3,938 41 3,979
Quarterly distributions (47,103) (480) (47,583)
Net earnings 52,355 532 52,887
----------------- ----------------- -----------------
April 30, 1996 $284,442 $2,902 $287,344
================= ================= =================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
FERRELLGAS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
------------------------------------
April 30, April 30,
1996 1995
----------------- -----------------
Cash Flows From Operating Activities:
<S> <C> <C>
Net earnings $52,887 $42,228
Reconciliation of net earnings to net
cash from operating activities:
Depreciation and amortization 25,839 23,855
Other 3,068 2,283
Changes in operating assets and liabilities net of effects from business
acquisitions:
Accounts and notes receivable (21,800) (10,344)
Inventories 20,062 19,505
Prepaid expenses and other current assets 429 (1,143)
Accounts payable (12,573) (6,270)
Other current liabilities (2,602) (4,568)
Other 704 (100)
----------------- -----------------
Net cash provided by operating activities 66,014 65,446
----------------- -----------------
Cash Flows From Investing Activities:
Business acquisitions (3,342) (17,135)
Capital expenditures (10,391) (13,273)
Other 1,427 456
----------------- -----------------
Net cash used by investing activities (12,306) (29,952)
----------------- -----------------
Cash Flows From Financing Activities:
Contribution from partners 158,372 135
Net reductions to short-term borrowings (20,000) (3,000)
Additions to long-term debt (exclusive of debt assumed in 7,752 60,000
acquisitions)
Reductions of long-term debt (94,319) (53,750)
Distributions (47,583) (36,369)
Other 2 (16)
----------------- -----------------
Net cash provided (used) by financing activities 4,224 (33,000)
----------------- -----------------
Increase in cash and cash equivalents 57,932 2,494
Cash and cash equivalents - beginning of period 29,877 14,535
================= =================
Cash and cash equivalents - end of period $87,809 $17,029
================= =================
Cash paid for interest $31,839 $17,153
================= =================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
FERRELLGAS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1996
(unaudited)
A. The unaudited consolidated financial statements reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of
the interim periods presented. All adjustments to the financial statements
were of a normal recurring nature.
B. The propane industry is seasonal in nature because propane is used
primarily for heating in residential and commercial buildings. Therefore,
the results of operations for the periods ended April 30, 1996 and April
30, 1995 are not necessarily indicative of the results to be expected for a
full year.
C. Supplementary balance sheet information (in thousands)
<TABLE>
<CAPTION>
Inventories consist of:
April 30, July 31,
1996 1995
----------------- -----------------
<S> <C> <C>
Liquefied propane gas and related products $17,483 $37,550
Appliances, parts and supplies 6,833 6,540
----------------- -----------------
$24,316 $44,090
================= =================
</TABLE>
In addition to inventories on hand, Ferrellgas, L.P. (the "Operating
Partnership or "OLP") 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 at date of delivery.
<TABLE>
<CAPTION>
Property, plant and equipment, net consist of:
April 30, July 31,
1996 1995
------------------ -----------------
<S> <C> <C>
Property, plant and equipment $528,740 $521,110
Less: accumulated depreciation 186,147 175,468
------------------ -----------------
$342,593 $345,642
================== =================
Intangibles, net consist of:
April 30, July 31,
1996 1995
------------------ -----------------
Intangibles $188,166 $168,881
Less: accumulated amortization 89,469 81,995
------------------ -----------------
$ 98,697 $ 86,886
================== =================
</TABLE>
5
<PAGE>
D. On April 26, 1996, Ferrellgas Partners, L.P. (the "Partnership" or "MLP")
issued $160,000,000 of 9 3/8% Senior Notes due 2006 ("Senior Notes") see note G.
The Senior Notes will become guaranteed by the Operating Partnership on a senior
subordinated basis if certain conditions are met. The Operating Partnership's
Credit Agreement and the Operating Partnership Indenture currently prohibit the
Operating Partnership from guaranteeing any indebtedness unless, among meeting
oher conditions, the fixed charge coverage ratio for the Operating Partnership
meets certain levels at prescribed dates. Currently the OLP does not meet such
conditions and, therefore, there can be no assurance as to whether or when this
guarantee will occur.
E. The Partnership is threatened with or named as a defendant in various
lawsuits which, among other items, claim damages for product liability. It
is not possible to determine the ultimate disposition of these matters;
however, management is of the opinion that there are no known claims or
contingent claims, that are likely to have a material adverse effect on the
results of operations, financial condition or liquidity of the Operating
Partnership.
F. Partners' capital is comprised of a 98.9899% limited partner interest held
by the MLP and a 1.0101% General Partner interest held by Ferrellgas, Inc.
In connection with the Senior Note offering mentioned above, the MLP
contributed $156,000,000 in cash to the OLP, thereby increasing its limited
partner interest. This cash will be used to retire outstanding indebtedness
and for future acquisitions. The General Partner then contributed
$1,592,000 in cash to the OLP to maintain its 1.0101% equity ownership.
G. On April 30, 1996, Ferrellgas, Inc. ("Ferrellgas"), the General
Partner of the Operating Partnership, consummated the purchase of all
of the stock of Skelgas Propane, Inc. ("Skelgas"), a subsidiary of
Superior Propane, Inc. of Toronto, Canada for a cash purchase price of
$89,650,000 including $21,200,000 of working capital). Ferrellgas
borrowed the funds for such purchase from Bank of America National Trust &
Savings Association ("BofA" and the "BofA Acquisition Loan").
As of May 1, 1996, Ferrellgas (i) caused Skelgas and each of its
subsidiaries to be merged into Ferrellgas and (ii) transferred all of the
assets of Skelgas and its subsidiaries to the Operating Partnership. In
exchange, the Operating Partnership assumed substantially all of the
liabilities, whether known or unknown, associated with Skelgas and its
subsidiaries and their propane business (excluding income tax liabilities).
In consideration of the retention by Ferrellgas of certain income tax
liabilities, the Partnership issued 41,203 Common Units to Ferrellgas. The
liabilities assumed by the Operating Partnership included the obligations
of Ferrellgas under the BofA Acquisition Loan. Immediately following the
transfer of assets and related transactions described above, the Operating
Partnership repaid the BofA Acquisition Loan with cash and borrowings under
the Operating Partnership's existing acquisition bank credit line. The
accompanying financial statements do not reflect this subsequent event.
6
<PAGE>
FERRELLGAS FINANCE CORP.
(A wholly owned subsidiary of
Ferrellgas, L.P.)
BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, July 31,
ASSETS 1996 1995
---------------------------------------------------------------- ---------------- ----------------
(unaudited)
<S> <C> <C>
Cash $1,000 $697
---------------- ----------------
Total Assets $1,000 $697
================ ================
LIABILITIES AND STOCKHOLDER'S EQUITY
----------------------------------------------------------------
Payable to affiliate $ - $153
Common stock, $1.00 par value; 2,000 shares
authorized; 1,000 shares issued and outstanding 1,000 1,000
Additional paid in capital 545 -
Accumulated deficit (545) (456)
---------------- ----------------
Total Stockholder's Equity 1,000 544
---------------- ----------------
Total Liabilities and Stockholder's Equity $1,000 $697
================ ================
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------- ----------------------------------------
April 30, April 30, April 30, April 30,
1996 1995 1996 1995
------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
General and administrative
expense $ - $ - $ 89 $ 40
------------------- ------------------- ------------------- -------------------
Net earnings (loss) $ - $ - $(89) $(40)
=================== =================== =================== ===================
</TABLE>
See note to financial statements.
7
<PAGE>
FERRELLGAS FINANCE CORP.
(a wholly owned subsidiary of Ferrellgas, L.P.)
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------------------------ paid in Accumulated stockholder's
Shares Dollars capital deficit equity
----------------- ----------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
July 31, 1995 1,000 $1,000 $ - $(456) $ 544
Capital contribution 545 - 545
Net earnings (loss) - (89) (89)
----------------- ----------------- ----------------- --------------- -----------------
April 30, 1996 1,000 $1,000 $545 $(545) $1,000
================= ================= ================= =============== =================
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------
April 30, April 30,
1996 1995
----------------- ------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings (loss) $ (89) $ (40)
----------------- ------------------
Cash used by operating activities (89) (40)
----------------- ------------------
Cash Flows From Financing Activities:
Capital contribution 545 -
Net payment to affiliate (153) -
----------------- ------------------
Cash provided by financing activities 392 -
----------------- ------------------
Increase (decrease) in cash 303 (40)
Cash - beginning of period 697 1,000
----------------- ------------------
================= ==================
Cash - end of period $1,000 $960
================= ==================
</TABLE>
See note to financial statements.
- ------------------------------------------------------------------------
NOTE TO FINANCIAL STATEMENTS
APRIL 30, 1996
(unaudited)
The unaudited financial statements reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of the interim periods
presented. All adjustments to the financial statements were of a normal
recurring nature.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Unaudited)
The following is a discussion of the results of operations and liquidity
and capital resources of the Operating Partnership.
Ferrellgas Finance Corp. has nominal assets and does not conduct any
operations. Accordingly, a discussion of the results of operations and liquidity
and capital resources is not presented.
Results of Operations
The propane industry is seasonal in nature with peak activity during the
winter months. Due to the seasonality of the business, results of operations for
the three and nine months ended April 30, 1996 and 1995, are not necessarily
indicative of the results to be expected for a full year. Other factors
affecting the results of operations include competitive conditions, demand for
product, variations in weather and fluctuations in propane prices.
Three Months Ended April 30, 1996 vs. April 30, 1995
Total Revenues. Total revenues increased 13.5% to $190,743,000 as compared
to $168,013,000 for the prior period. The increase is principally due to the
impact of colder weather on retail propane volumes and increased sales price per
gallon partially offset by revenues from other operations (net trading
operations, wholesale propane marketing and chemical feedstocks marketing) which
decreased 21.2% to $27,932,000. For the quarter ended April 30, 1996, winter
temperatures, as reported by the American Gas Association, were 12.7% colder
than the same period last year and 5.5% colder than normal.
The decrease in revenues from other operations is primarily due to a
decrease in chemical feedstocks marketing revenues due to a decrease in sales
volume and selling price. Both volume and selling price decreased as a result of
decreased availability of product from refineries and decreased demand from
petrochemical companies.
Gross Profit. Gross profit increased 16.7% to $85,480,000 as compared to
$73,254,000 for the prior period. The increase is primarily due to a $8,294,000
increase in retail sales gross profit and a $3,932,000 increase in other
operations gross profit. Retail propane operations results improved primarily
due to colder weather that resulted in a 12.6% increase in gallons sold to
183,458,000 gallons as compared to 162,914,000 gallons for the prior period.
Other operations results improved due to the high market volatility impact on
trading operations and improved wholesale propane marketing.
Operating Expenses. Operating expenses increased 12.6% to $45,742,000 as
compared to $40,638,000 for the prior period. The increase is attributable
principally to higher payroll and delivery cost associated with higher retail
and wholesale volumes and incremental costs of acquisitions.
Depreciation and Amortization. Depreciation and amortization expense
increased 3.1% to $8,703,000 as compared to $8,443,000 for the prior period
primarily due to acquisitions of propane businesses.
Interest Expense. Interest expense increased 2.2% to $8,400,000 as compared
to $8,221,000 in the prior period. This increase is primarily the result of the
increase in the net borrowings from the Operating Partnership's revolving credit
loans, partially offset by lower interest rates.
9
<PAGE>
Nine months ended April 30, 1996 vs. April 30, 1995
Total Revenues. Total revenues increased 9.4% to $553,712,000 as compared
to $506,087,000 for the prior period. The increase is primarily attributable to
the impact of colder weather on retail volumes and increased sales price per
gallon in the second and third quarters and acquisitions of propane businesses,
partially offset by declines in revenues from other operations (net trading
operations, wholesale propane marketing and chemical feedstocks marketing) which
decreased 22.9% to $84,433,000 and the impact of warmer weather in the first
quarter. To date, fiscal 1996 winter temperatures, as reported by the American
Gas Association, are 14.3% colder than the same period last year and 3.0% colder
than normal.
The decrease in revenues from other operations is primarily due to a
decrease in chemical feedstocks marketing revenues due to a decrease in sales
volume and selling price. Both volume and selling price decreased as a result of
decreased availability of product from refineries and decreased demand from
petrochemical companies.
Gross Profit. Gross profit increased 14.4% to $252,868,000 as compared with
$221,028,000 for the prior period. The increase is primarily attributable to a
$24,673,000 increase from retail sales gross profit. Retail operations results
increased primarily due to an increase in gallons sold to 557,897,000 gallons as
compared to 493,584,000 for the prior period and improved sales mix, partially
offset by a slight decrease in retail margins. The increase in gallons is
primarily attributable to favorable weather and acquisition related growth.
Increased sales to the residential customer base improved the sales mix, while
greater price competition by independent operators and some major marketers
slightly reduced overall gross margin per gallon. Other operations increased
gross profit primarily due to the impact of colder weather.
Operating Expenses. Operating expenses increased 11.7% to $134,362,000 as
compared to $120,334,000 for the prior period. The increase is primarily
attributable to acquisitions of propane businesses as well as general increases
in payroll and delivery costs associated with higher retail and wholesale
volumes.
Depreciation and Amortization. Depreciation and amortization expense
increased 8.3% to $25,839,000 as compared to $23,855,000 for the prior period
due primarily to acquisitions of propane businesses.
Interest Expense. Interest expense increased 13.1% to $26,608,000 as
compared to $23,536,000 in the prior period. This increase is primarily the
result of the increase in the net borrowings from the Operating Partnership's
revolving credit loans, partially offset by decreasing interest rates.
10
<PAGE>
Liquidity and Capital Resources
The ability of the Operating Partnership to satisfy its obligations is
dependent upon future performance, which will be subject to prevailing economic,
financial, business and weather conditions and other factors, many of which are
beyond its control. For the fiscal year ending July 31, 1996, the General
Partner believes that the Operating Partnership will generate sufficient
Avaliable Cash to meet its obligations and enable it to distribute to the
Partnership sufficient cash to permit the Partnership to meet its obligations
and enable it to distribute the Minimum Quarterly Distribution ($0.50 per Unit)
on all of the Partnership's Common Units and Subordinated Units. In general,
Available Cash equals the OLP's net cash flow adjusted for cash reserves. Future
maintenance and working capital needs of the Operating Partnership are expected
to be provided by cash generated from future operations, existing cash balances
and the working capital borrowing facility. In order to fund expansive capital
projects and future acquisitions, the Operating Partnership may borrow on
existing bank lines or the MLP may issue additional Common Units. Toward this
purpose, the MLP maintains a shelf registration statement filed with the
Securities and Exchange Commission registering 2,400,000 Common Units
representing limited partner interests in the MLP. The Common Units may be
issued from time to time by the MLP in connection with the Operating
Partnership's acquisition of other businesses, properties or securities in
business combination transactions.
Cash Flows From Operating Activities. Cash provided by operating activities
was $66,014,000 for the nine months ended April 30, 1996. This slight increase
of $568,000 as compared to the nine months ended April 30, 1995 is primarily due
to the increased net income offset by the increase in accounts receivable.
Accounts receivable increased due to the colder weather impact of increased
deliveries of product in the third quarter as compared to the same period last
year.
Cash Flows From Investing Activities. During the nine months ended April
30, 1996, the Operating Partnershipmade total acquisition capital expenditures
of $29,322,000 (including $1,015,000 of working capital). This amount was
financed by $3,342,000 cash, $20,956,000 debt incurred, $3,900,000 issuance of
MLP equity units, and $1,124,000 other costs and consideration. The Partnership
continues seeking to expand its operations through strategic acquisitions of
smaller retail propane operations located throughout the United States. These
acquisitions will be funded through internal cash flow, external borrowings or
the issuance of additional Partnership interests. See "Subsequent Event" below
for discussion of a significant acquisition consummated in May, 1996.
During the nine months ended April 30, 1996, the Operating Partnership made
aggregate growth and maintenance capital expenditures of $10,391,000 consisting
primarily of the following: 1) additions to Partnership-owned customer tanks and
cylinders, 2) vehicle lease buyouts, 3) relocating and upgrading district plant
facilities, and 4) development and upgrading computer equipment and software.
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 Operating Partnership's principal physical
assets, are generally primarily long. The Operating Partnership maintains its
vehicle and transportation equipment fleet by leasing light- and medium-duty
trucks and trailers. The General Partner believes vehicle leasing is a cost
effective method for meeting the Operating Partnership's transportation
equipment needs. The Operating Partnership does not have any material
commitments of funds (other than the "Subsequent Event" described below) for
capital expenditures other than to support the current level of operations.
11
<PAGE>
Cash Flows From Financing Activities. On April 26, 1996, the Partnership
issued $160,000,000 of 9 3/8% Senior Secured Notes due 2006. In connection with
this debt offering, the MLP contributed the net proceeds of $156,000,000 to the
OLP. The General Partner then contributed $1,592,000 in cash to the OLP to
maintain its 1.0101% equity ownership. A portion of the net proceeds was used to
retire outstanding indebtedness of $88,800,000 under the Operating Partnership's
credit facility. The remaining cash was held in cash equivalents to be used for
future acquisitions. See "Subsequent Event" below for discussion of a
significant acquisition consummated in May, 1996.
The Partnership's Senior Notes mentioned above will become guaranteed by
the Operating Partnership on a senior subordinated basis if certain conditions
are met. The Operating Partnership's Credit Agreement and the Operating
Partnership Indenture governing the OLP's Senior Notes currently prohibit the
Operating Partnership from guaranteeing any indebtedness unless, among meeting
other conditions, the fixed charge coverage ratio for the Operating Partnership
meets certain levels at prescribed dates. Currently the OLP does not meet such
conditions and, therefore, there can be no assurance as to whether or when this
guarantee will occur.
The Operating Partnership distributed $47,583,000 to the MLP during the
nine months ended April 30, 1996 which allowed the MLP to distribute its Minimum
Quarterly Distribution to all of the MLP's Common Units and Subordinated Units.
Effects of Inflation. In the past the Partnership has generally 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 has not had a material adverse
effect on profitability although revenues may be affected. Inflation has not
materially impacted the results of operations and management does not believe
normal inflationary pressures will have a material adverse effect on the
profitability of the Partnership in the future.
Subsequent Event. On April 30, 1996, Ferrellgas purchased all of the
capital stock of Skelgas for a cash purchase price of $89,650,000 (including
$21,200,000 of working capital). As of May 1, 1996 Ferrellgas (i) caused Skelgas
and each of its subsidiaries to be merged into Ferrellgas and (ii) transferred
all of the assets of Skelgas and its subsidiaries to the Operating Partnership.
In exchange, the Operating Partnership assumed substantially all of the
liabilities, whether known or unknown, associated with Skelgas and its
subsidiaries and their propane business (excluding income tax liabilities). The
liabilities assumed by the Operating Partnership included the obligations of
Ferrellgas under the BofA Acquisition Loan. Immediately following the transfer
of assets and related transactions described above, the Operating Partnership
repaid the BofA Acquisition Loan with cash and borrowings under the Operating
Partnership's existing acquisition bank credit line.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
3.1 Amended and Restated Agreement of Limited Partnership of
Ferrellgas, L.P. dated as of April 23, 1996.
4.1 Indenture dated as of April 26, 1996, among Ferrellgas Partners,
L.P., Ferrellgas Partners Finance Corp., Ferrellgas, L.P., and
American Bank National Association, as trustee, relating to
$160,000,000 aggregate principal amount of 9 3/8% Senior Secured
Notes due 2006 (Incorporated by reference to Exhibit 4.1 to the
Registrants' Current Report on Form 8-K filed May 6, 1996.)
27.1 Financial Data Schedule (filed in electronic format only)
(b) Reports on Form 8-K
The registrants filed the following reports on Form 8-K during the
quarter ended April 30, 1996:
(1) Form 8-K dated March 27, 1996, reporting the signing of a letter
of intent to acquire Skelgas.
(2) Form 8-K dated April 10, 1996, reporting a private placement of
debt securities to qualified institutional investors under Rule
144A.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
FERRELLGAS, L.P.
By Ferrellgas, Inc. (General Partner)
Date: June 12, 1996 By /s/ Danley K. Sheldon
----------------------
Danley K. Sheldon
Senior Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)
By Ferrellgas Finance Corp.
Date: June 12, 1996 By /s/ Danley K. Sheldon
----------------------
Danley K. Sheldon
Senior Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)
14
FIRST AMENDED AND RESTATED
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
FERRELLGAS, L.P.
KC01 220952.1
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 Formation.............................................. 1
1.2 Name................................................... 1
1.3 Registered Office; Principal Office.................... 1
1.4 Power of Attorney...................................... 1
1.5 Term................................................... 3
1.6 Possible Restrictions on Transfer...................... 3
ARTICLE II
DEFINITIONS
Additional Limited Partner...................................... 3
Adjusted Capital Account........................................ 3
Adjusted Property............................................... 3
Affiliate....................................................... 4
Agreed Allocation............................................... 4
Agreed Value.................................................... 4
Agreement....................................................... 4
Audit Committee................................................. 4
Available Cash.................................................. 4
Book-Tax Disparity.............................................. 5
Business Day.................................................... 5
Capital Account................................................. 5
Capital Contribution............................................ 5
Capital Interests............................................... 5
Carrying Value.................................................. 5
Certificate of Limited Partnership.............................. 6
Closing Date.................................................... 6
Code............................................................ 6
Common Unit..................................................... 6
Contributed Property............................................ 6
Contribution Agreement.......................................... 6
Curative Allocation............................................. 6
Delaware Act.................................................... 6
Departing Partner............................................... 6
Economic Risk of Loss........................................... 6
Event of Withdrawal............................................. 6
Exchange Act.................................................... 6
Ferrell......................................................... 7
Ferrellgas...................................................... 7
General Partner................................................. 7
IDR............................................................. 7
Indemnitee...................................................... 7
Initial Limited Partner......................................... 7
Limited Partner................................................. 7
Liquidation Date................................................ 7
Liquidator...................................................... 7
Merger Agreement................................................ 7
MLP............................................................. 7
MLP Agreement................................................... 7
MLP Offering.................................................... 7
MLP Registration Statement...................................... 7
MLP Subsidiary.................................................. 7
MLP Underwriting Agreement...................................... 8
National Securities Exchange.................................... 8
Net Agreed Value................................................ 8
Net Income...................................................... 8
Net Loss........................................................ 8
Net Termination Gain............................................ 8
Net Termination Loss............................................ 8
Nonrecourse Built-in Gain....................................... 9
Nonrecourse Deductions.......................................... 9
Nonrecourse Liability........................................... 9
OLP Offering.................................................... 9
OLP Registration Statement...................................... 9
OLP Subsidiary.................................................. 9
OLP Underwriting Agreement...................................... 9
Opinion of Counsel.............................................. 9
Partners........................................................ 9
Partner Nonrecourse Debt........................................ 9
Partner Nonrecourse Debt Minimum Gain........................... 9
Partner Nonrecourse Deductions.................................. 9
Partnership..................................................... 10
Partnership Interest............................................ 10
Partnership Minimum Gain........................................ 10
Percentage Interest............................................. 10
Person.......................................................... 10
Quarter......................................................... 10
Recapture Income................................................ 10
Registration Statements......................................... 10
Required Allocations............................................ 10
Residual Gain" or "Residual Loss................................ 10
Restricted Activities........................................... 10
Securities Act.................................................. 10
Senior Notes.................................................... 10
Special Approval................................................ 11
Subsidiary...................................................... 11
Substituted Limited Partner..................................... 11
Surviving Business Entity....................................... 11
Termination Capital Transactions................................ 11
Underwriting Agreements......................................... 11
Unit............................................................ 11
Unrealized Gain................................................. 11
Unrealized Loss................................................. 11
Withdrawal Opinion of Counsel................................... 11
ARTICLE III
PURPOSE
3.1 Purpose and Business................................... 12
3.2 Powers................................................. 12
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Initial Contributions.................................. 12
4.2 Contributions by Ferrellgas and the MLP................ 12
4.3 Additional Capital Contributions....................... 13
4.4 No Preemptive Rights................................... 13
4.5 Capital Accounts....................................... 13
4.6 Interest............................................... 15
4.7 No Withdrawal.......................................... 15
4.8 Loans from Partners.................................... 15
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations for Capital Account Purposes............... 15
5.2 Allocations for Tax Purposes........................... 19
5.3 Requirement of Distributions........................... 20
ARTICLE VI
MANAGEMENT AND OPERATION OF BUSINESS
6.1 Management............................................. 21
6.2 Certificate of Limited Partnership..................... 22
6.3 Restrictions on General Partner's Authority............ 22
6.4 Reimbursement of the General Partner................... 23
6.5 Outside Activities..................................... 23
6.6 Loans to and from the General Partner; Contracts with
Affiliates........................................... 24
6.7 Indemnification........................................ 25
6.8 Liability of Indemnitees............................... 27
6.9 Resolution of Conflicts of Interest.................... 27
6.10 Other Matters Concerning the General Partner........... 28
6.11 Title to Partnership Assets............................ 29
6.12 Reliance by Third Parties.............................. 29
ARTICLE VII
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER
7.1 Limitation of Liability................................ 30
7.2 Management of Business................................. 30
7.3 Return of Capital...................................... 30
7.4 Rights of the Limited Partner Relating to the
Partnership.......................................... 30
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
8.1 Records and Accounting................................. 31
8.2 Fiscal Year............................................ 31
<PAGE>
ARTICLE IX
TAX MATTERS
9.1 Preparation of Tax Returns............................... 31
9.2 Tax Elections............................................ 31
9.3 Tax Controversies........................................ 31
9.4 Organizational Expenses.................................. 32
9.5 Withholding.............................................. 32
9.6 Opinions of Counsel...................................... 32
ARTICLE X
TRANSFER OF INTERESTS
10.1 Transfer................................................. 32
10.2 Transfer of the General Partner's Partnership Interest... 32
10.3 Transfer of the Limited Partner's Partnership interest... 33
ARTICLE XI
ADMISSION OF PARTNERS
11.1 Admission of Initial Partners............................ 33
11.2 Admission of Ferrellgas as a Limited Partner............. 33
11.3 Admission of Substituted Limited Partners................ 33
11.4 Admission of Successor General Partner................... 33
11.5 Amendment of Agreement and Certificate of
Limited Partnership.................................... 34
11.6 Admission of Additional Limited Partners................. 34
ARTICLE XII
WITHDRAWAL OR REMOVAL OF PARTNERS
12.1 Withdrawal of the General Partner........................ 34
12.2 Removal of the General Partner........................... 35
12.3 Interest of Departing Partner and Successor General
Partner................................................ 36
12.4 Reimbursement of Departing Partner....................... 36
12.5 Withdrawal of the Limited Partner........................ 36
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
13.1 Dissolution.............................................. 36
13.2 Continuation of the Business of the Partnership after
Dissolution............................................ 37
13.3 Liquidation.............................................. 37
13.4 Distributions in Kind.................................... 38
13.5 Cancellation of Certificate of Limited Partnership....... 38
13.6 Reasonable Time for Winding Up........................... 39
13.7 Return of Capital........................................ 39
13.8 Capital Account Restoration.............................. 39
13.9 Waiver of Partition...................................... 39
<PAGE>
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT
14.1 Amendment to be Adopted Solely by General Partner........ 39
14.2 Amendment Procedures..................................... 40
ARTICLE XV
MERGER
15.1 Authority................................................ 40
15.2 Procedure for Merger or Consolidation.................... 40
15.3 Approval by Limited Partner of Merger or Consolidation... 41
15.4 Certificate of Merger.................................... 41
15.5 Effect of Merger......................................... 42
ARTICLE XVI
GENERAL PROVISIONS
16.1 Addresses and Notices.................................... 42
16.2 References............................................... 42
16.3 Pronouns and Plurals..................................... 42
16.4 Further Action........................................... 42
16.5 Binding Effect........................................... 42
16.6 Integration.............................................. 42
16.7 Creditors................................................ 43
16.8 Waiver................................................... 43
16.9 Counterparts............................................. 43
16.10 Applicable Law........................................... 43
16.11 Invalidity of Provisions................................. 43
<PAGE>
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
FERRELLGAS, L.P.
THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF FERRELLGAS, L.P., dated as of April 23, 1996, is entered into by
and among Ferrellgas, Inc., a Delaware corporation, as the General Partner, and
Ferrellgas Partners, L.P., a Delaware limited partnership, as the Limited
Partner, together with any other Persons who become Partners in the Partnership
as provided herein. The Partnership previously has been governed by the terms of
an Agreement of Limited Partnership dated as of July 5, 1994. The General
Partner and the Limited Partner now desire to amend and restate the original
Agreement of Limited Partnership in its entirety as set forth herein.
In consideration of the covenants, conditions and agreements
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 Formation. (a) The General Partner and the Initial Limited
Partner have previously formed the Partnership as a limited partnership pursuant
to the provisions of the Delaware Act. Except as expressly provided to the
contrary in this Agreement, the rights and obligations of the Partners and the
administration, dissolution and termination of the Partnership shall be governed
by the Delaware Act. All Partnership Interests shall constitute personal
property of the owner thereof for all purposes.
1.2 Name. The name of the Partnership shall be, and the
business of the Partnership shall be conducted under the name of "Ferrellgas,
L.P"' The Partnership's business may be conducted under any other name or names
deemed necessary or appropriate by the General Partner, including, without
limitation, the name of the General Partner or any Affiliate thereof. The words
"Limited Partnership," "L.P.," "Ltd." or similar words or letters shall be
included in the Partnership's name where necessary for the purposes of complying
with the laws of any jurisdiction that so requires. The General Partner in its
sole discretion may change the name of the Partnership at any time and from time
to time and shall notify the Limited Partner of such change in the next regular
communication to the Limited Partner.
1.3 Registered Office; Principal Office. Unless and until
changed by the General Partner, the registered office of the Partnership in the
State of Delaware shall be located at The Corporation Trust Center, 1209 Orange
Street, New Castle County, Wilmington, Delaware 19801, and the registered agent
for service of process on the Partnership in the State of Delaware at such
registered office shall be The Corporation Trust Company. The principal office
of the Partnership and the address of the General Partner shall be One Liberty
Plaza, Liberty, Missouri 64068, or such other place as the General Partner may
from time to time designate by notice to the Limited Partner. The Partnership
may maintain offices at such other place or places within or outside the State
of Delaware as the General Partner deems necessary or appropriate.
1.4 Power of Attorney. (a) The Limited Partner hereby
constitutes and appoints each of the General Partner and, if a Liquidator shall
have been selected pursuant to Section 13.3, the Liquidator severally (and any
successor to either thereof by merger, transfer, assignment, election or
otherwise) and each of their authorized officers and attorneys-in-fact, with
full power of substitution,
KC01 220952.1
<PAGE>
as its true,and lawful agent and attorney-in-fact, with full power and authority
in its name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices (A) all certificates,
documents and other instruments (including, without limitation, this
Agreement and the Certificate of Limited Partnership and all amendments
or restatements thereof) that the General Partner or the Liquidator
deems necessary or appropriate to form, qualify or continue the
existence or qualification of the Partnership as a limited partnership
(or a partnership in which the limited partners have limited liability)
in the State of Delaware and in all other jurisdictions in which the
Partnership may conduct business or own property; (B) all certificates,
documents and other instruments that the General Partner or the
Liquidator deems necessary or appropriate to reflect, in accordance
with its terms, any amendment, change, modification or restatement of
this Agreement; (C) all certificates, documents and other instruments
(including, without limitation, conveyances and a certificate of
cancellation) that the General Partner or the Liquidator deems
necessary or appropriate to reflect the dissolution and liquidation of
the Partnership pursuant to the terms of this Agreement; (D) all
certificates, documents and other instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant
to, or other events described in, Article X, XI, XII or XIII or the
Capital Contribution of any Partner; (E) all certificates, documents
and other instruments relating to the determination of the rights,
preferences and privileges of any class or series of Partnership
Interests; and (F) all certificates, documents and other instruments
(including, without limitation, agreements and a certificate of merger)
relating to a merger or consolidation of the Partnership pursuant to
Article XV; and
(ii) execute, swear to, acknowledge, deliver, file
and record all ballots, consents, approvals, waivers, certificates,
documents and other instruments necessary or appropriate, in the sole
discretion of the General Partner or the Liquidator, to make, evidence,
give, confirm or ratify any vote, consent, approval, agreement or other
action that is made or given by the Partners hereunder or is consistent
with the terms of this Agreement or is necessary or appropriate, in the
sole discretion of the General Partner or the Liquidator, to effectuate
the terms or intent of this Agreement; provided, that when the consent
or approval of the Limited Partner is required by any provision of this
Agreement, the General Partner or the Liquidator may exercise the power
of attorney made in this Section 1.4(a)(ii) only after the necessary
consent or approval of the Limited Partner is obtained.
Nothing contained in this Section 1.4(a) shall be construed as authorizing the
General Partner to amend this Agreement except in accordance with Article XIV or
as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and not
be affected by the subsequent death, incompetency, disability, incapacity,
dissolution, bankruptcy or termination of the Limited Partner and the transfer
of all or any portion of the Limited Partner's Partnership Interest and shall
extend to the Limited Partner's heirs, successors, assigns and personal
representatives. The Limited Partner hereby agrees to be bound by any
representation made by the General Partner or the Liquidator acting in good
faith pursuant to such power of attorney; and the Limited Partner hereby waives
any and all defenses that may be available to contest, negate or disaffirm the
action of the General Partner or the Liquidator taken in good faith under such
power of attorney. The Limited Partner shall execute and deliver to the General
Partner or the Liquidator, within 15 days after receipt of the General Partner's
or the Liquidator's request therefor, such further designation, powers of
attorney and other instruments as the General Partner or the Liquidator deems
necessary to effectuate this Agreement and the purposes of the Partnership.
KC01 220952.1
2
<PAGE>
1.5 Term. The Partnership commenced upon the filing of the
Certificate of Limited Partnership in accordance with the Delaware Act and shall
continue in existence until the close of Partnership business on July 31, 2084,
or until the earlier termination of the Partnership in accordance with the
provisions of Article XIII.
1.6 Possible Restrictions on Transfer. Notwithstanding
anything to the contrary contained in this Agreement, in the event of (a) the
enactment (or imminent enactment) of any legislation, (b) the publication of any
temporary or final regulation by the Treasury Department, (c) any ruling by the
Internal Revenue Service or (d) any judicial decision, that, in any such case,
in the Opinion of Counsel, would result in the taxation of the Partnership as an
association taxable as a corporation or would otherwise result in the
Partnership being taxed as an entity for federal income tax purposes, then, the
General Partner may impose such restrictions on the transfer of Partnership
Interests as may be required, in the Opinion of Counsel, to prevent the
Partnership from being taxed as an association taxable as a corporation or
otherwise as an entity for federal income tax purposes, including, without
limitation, making any amendments to this Agreement as the General Partner in
its sole discretion may determine to be necessary or appropriate to impose such
restrictions.
ARTICLE II
DEFINITIONS
The following definitions shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied to the terms used in this
Agreement.
"Additional Limited Partner" means a Person admitted
to the Partnership as a Limited Partner pursuant to Section 11.6 and
who is shown as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account
maintained for each Partner as of the end of each fiscal year of the
Partnership, (a) increased by any amounts that such Partner is
obligated to restore under the standards set by Treasury Regulation
Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under
Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)), and (b)
decreased by (i) the amount of all losses and deductions that, as of
the end of such fiscal year, are reasonably expected to be allocated to
such Partner in subsequent years under Sections 704(e)(2) and 706(d) of
the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and (ii)
the amount of all distributions that, as of the end of such fiscal
year, are reasonably expected to be made to such Partner in subsequent
years in accordance with the terms of this Agreement or otherwise to
the extent they exceed offsetting increases to such Partner's Capital
Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made
(other than increases as a result of a minimum gain chargeback pursuant
to Section 5.1(d)(i) or 5.1(d)(ii)). The foregoing definition of
Adjusted Capital Account is intended to comply with the provisions of
Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Property" means any property the Carrying
Value of which has been adjusted pursuant to Section 4.5(d)(i) or
4.5(d)(ii). Once an Adjusted Property is deemed distributed by, and
recontributed to, the Partnership for federal income tax purposes upon
a termination thereof pursuant to Section 708 of the Code, such
property shall thereafter constitute a Contributed Property until the
Carrying Value of such property is subsequently adjusted pursuant to
Section 4.5(d)(i) or 4.5(d)(ii).
KC01 220952.1
3
<PAGE>
"Affiliate" means, with respect to any Person, any
other Person that directly or indirectly controls, is controlled by or
is under common control with, the Person in question. As used herein,
the term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of a Person, whether through ownership of voting securities, by
contract or otherwise.
"Agreed Allocation" means any allocation, other than
a Required Allocation, of an item of income, gain, loss or deduction
pursuant to the provisions of Section 5. 1, including, without
limitation, a Curative Allocation (if appropriate to the context in
which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the
fair market value of such property or other consideration at the time
of contribution as determined by the General Partner using such
reasonable method of valuation as it may adopt; provided, however, that
the Agreed Value of any property deemed contributed by the Partnership
for federal income tax purposes upon termination and reconstitution
thereof pursuant to Section 708 of the Code shall be determined in
accordance with Section 4.5(c)(i). Subject to Section 4.5(c)(i), the
General Partner shall, in its sole discretion, use such method as it
deems reasonable and appropriate to allocate the aggregate Agreed Value
of Contributed Properties contributed to the Partnership in a single or
integrated transaction among each separate property on a basis
proportional to the fair market value of each Contributed Property.
"Agreement" means this First Amended and Restated
Agreement of Limited Partnership of Ferrellgas, L.P., as it may be
amended, supplemented or restated from time to time.
"Audit Committee" means a committee of the Board of
Directors of the General Partner composed entirely of two or more
directors who are neither officers nor employees of the General Partner
or any of its Affiliates.
"Available Cash" means with respect to any period and without duplication:
(a) the sum of:
(i) all cash receipts of the Partnership during such
period from all sources (including, without limitation, distributions
of cash received by the Partnership from an OLP Subsidiary) plus, in
the case of the Quarter ending October 31, 1994, the cash balance of
the Partnership as of the close of business on the Closing Date; and
(ii) any reduction with respect to such period in a
cash reserve previously established pursuant to clause (b)(ii) below
(either by reversal or utilization) from the level of such reserve at
the end of the prior period;
(b) less the sum of:
(i) all cash disbursements of the Partnership during
such period, including, without limitation, disbursements for operating
expenses, taxes, if any, debt service (including, without limitation,
the payment of principal, premium and interest), redemption of
Partnership Interests, capital expenditures, contributions, if any, to
an OLP Subsidiary and cash distributions to Partners (but only to the
extent that such cash distributions to Partners exceed Available Cash
for the immediately preceding Quarter); and
KC01 220952.1
4
<PAGE>
(ii) any cash reserves established with respect to
such period, and any increase with respect to such period in a cash
reserve previously established pursuant to this clause (b)(ii) from the
level of such reserve at the end of the prior period, in such amounts
as the General Partner determines in its reasonable discretion to be
necessary or appropriate (A) to provide for the proper conduct of the
business of the Partnership (including, without limitation, reserves
for future capital expenditures or capital contributions to an OLP
Subsidiary) or (B) to provide funds for distributions to the Partners
in respect of any one or more of the next four Quarters or (C) because
the distribution of such amounts would be prohibited by applicable law
or by any loan agreement, security agreement, mortgage, debt instrument
or other agreement or obligation to which the Partnership is a party or
by which it is bound or its assets are subject;
provided, however, that for purposes of determining Available Cash for
the Quarter ending October 31, 1994, such Quarter shall be deemed to
commence on the Closing Date. Notwithstanding the foregoing (x)
disbursements (including, without limitation, contributions to an OLP
Subsidiary or disbursements on behalf of an OLP Subsidiary) made or
reserves established, increased or reduced after the end of any Quarter
but on or before the date on which the Partnership makes its
distribution of Available Cash in respect of such Quarter pursuant to
Section 5.3(a) shall be deemed to have been made, established,
increased or reduced, for purposes of determining Available Cash, with
respect to such Quarter if the General Partner so determines and (y)
"Available Cash" with respect to any period shall not include any cash
receipts or reductions in reserves or take into account any
disbursements made or reserves established after the Liquidation Date.
"Book-Tax Disparity" means with respect to any item
of Contributed Property or Adjusted Property, as of the date of any
determination, the difference between the Carrying Value of such
Contributed Property or Adjusted Property and the adjusted basis
thereof for federal income tax purposes as of such date. A Partner's
share of the Partnership's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained
pursuant to Section 4.5 and the hypothetical balance of such Partner's
Capital Account computed as if it had been maintained strictly in
accordance with federal income tax accounting principles.
"Business Day" means Monday through Friday of each
week, except that a legal holiday recognized as such by the government
of the United States or the states of New York or Missouri shall not be
regarded as a Business Day.
"Capital Account" means the capital account
maintained for a Partner pursuant to Section 4.5.
"Capital Contribution" means any cash, cash
equivalents or the Net Agreed Value of Contributed Property that a
Partner contributes to the Partnership pursuant to Section 4.1, 4.2,
4.3, 4.5(c) or 13.8.
"Capital Interests" means, with respect to any
corporation, any and all shares, participations, rights or other
equivalent interests in the capital of the corporation, and with
respect to any partnership, any and all partnership interests (whether
general or limited) and any other interests or participations that
confer on a Person the right to receive a share of the profits and
losses of, or distributions of assets of, such partnership.
"Carrying Value" means (a) with respect to a
Contributed Property, the Agreed Value of such property reduced (but
not below zero) by all depreciation, amortization and cost
KC01 220952.1
5
<PAGE>
recovery deductions charged to the Partners' Capital Accounts in
respect of such Contributed Property, and (b) with respect to any other
Partnership property, the adjusted basis of such property for federal
income tax purposes, all as of the time of determination. The Carrying
Value of any property shall be adjusted from time to time in accordance
with Sections 4.5(d)(i) and 4.5(d)(ii) and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions
and acquisitions of Partnership properties, as deemed appropriate by
the General Partner.
"Certificate of Limited Partnership" means the
Certificate of Limited Partnership filed with the Secretary of State of
the State of Delaware as referenced in Section 6.2, as such Certificate
of Limited Partnership may be amended, supplemented or restated from
time to time.
"Closing Date" means the first date on which Common
Units are sold by the MLP to the Underwriters pursuant to the
provisions of the MLP Underwriting Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended and in effect from time to time, as interpreted by the
applicable regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference
to any corresponding provision of future law.
"Common Unit" has the meaning assigned to such term in the MLP Agreement.
"Contributed Property" means each property or other
asset, in such form as may be permitted by the Delaware Act, but
excluding cash, contributed to the Partnership (or deemed contributed
to the Partnership on termination and reconstitution thereof pursuant
to Section 708 of the Code). Once the Carrying Value of a Contributed
Property is adjusted pursuant to Section 4.5(d), such property shall no
longer constitute a Contributed Property, but shall be deemed an
Adjusted Property.
"Contribution Agreement" has the meaning assigned to such term in the MLP
Agreement.
"Curative Allocation" means any allocation of an item
of income, gain, deduction, loss or credit pursuant to the provisions
of Section 5.1(d)(ix).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del C. ss. 17-101, et seq., as amended, supplemented or restated from time to
time, and any successor to such statute.
"Departing Partner" means a former General Partner,
from and after the effective date of any withdrawal or removal of such
former General Partner pursuant to Section 12.1 or Section 12.2.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"Event of Withdrawal" has the meaning assigned to such term in Section
12.1(a).
"Exchange Act" means the Securities Exchange Act of
1934, as amended supplemented or restated from time to time, and any
successor to such statute.
KC01 220952.1
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<PAGE>
"Ferrell" means Ferrell Companies, Inc., a Kansas corporation.
"Ferrellgas" means Ferrellgas, Inc., a Delaware
corporation and a wholly owned subsidiary of Ferrell.
"General Partner" means Ferrellgas, and its successors as general partner
of the Partnership.
"IDR" has the meaning assigned to such term in the MLP Agreement.
"Indemnitee" means the General Partner, any Departing
Partner, any Person who is or was an Affiliate of the General Partner
or any Departing Partner, any Person who is or was an officer,
director, employee, partner, agent or trustee of the General Partner or
any Departing Partner or any such Affiliate, or any Person who is or
was serving at the request of the General Partner or any Departing
Partner or any such Affiliate as a director, officer, employee,
partner, agent or trustee of another Person.
"Initial Limited Partner" means the MLP.
"Limited Partner" means the Initial Limited Partner,
Ferrellgas pursuant to Section 4.2, each Substituted Limited Partner,
if any, each Additional Limited Partner and any Departing Partner upon
the change of its status from General Partner to Limited Partner
pursuant to Section 12.3, but excluding any such Person from and after
the time it withdraws from the Partnership.
"Liquidation Date" means (a) in the case of an event
giving rise to the dissolution of the Partnership of the type described
in clauses (a) and (b) of the first sentence of Section 13.2, the date
on which the applicable time period during which the Partners have the
right to elect to reconstitute the Partnership and continue its
business has expired without such an election being made, and (b) in
the case of any other event giving rise to the dissolution of the
Partnership, the date on which such event occurs.
"Liquidator" means the General Partner or other
Person approved pursuant to Section 13.3 who performs the functions
described therein.
"Merger Agreement" has the meaning assigned to such term in Section 15.1.
"MLP" means Ferrellgas Partners, L.P., a Delaware limited partnership.
"MLP Agreement" means the Agreement of Limited
Partnership of Ferrellgas Partners, L.P., as it may be amended,
supplemented or restated from time to time.
"MLP Offering" means the initial offering of Common
Units to the public, as described in the MLP Registration Statement.
"MLP Registration Statement" means the Registration
Statement on Form S-1 (Registration No. 33-53383), as it has been or as
it may be amended or supplemented from time to time, filed by the MLP
with the Securities and Exchange Commission under the Securities Act to
register the offering and sale of the Common Units in the MLP Offering.
"MLP Subsidiary" means a Subsidiary of the MLP.
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"MLP Underwriting Agreement" means the underwriting
agreement dated June 27, 1994, among the MLP, the General Partner,
Ferrell and the Underwriters named in Schedule I thereto providing for
the purchase of Common Units by such Underwriters.
"National Securities Exchange" means an exchange
registered with the Securities and Exchange Commission under Section
6(a) of the Exchange Act.
"Net Agreed Value" means, (a) in the case of any
Contributed Property, the Agreed Value of such property reduced by any
liabilities either assumed by the Partnership upon such contribution or
to which such property is subject when contributed, and (b) in the case
of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property (as adjusted pursuant to
Section 4.5(d)(ii)) at the time such property is distributed, reduced
by any indebtedness either assumed by such Partner upon such
distribution or to which such property is subject at the time of
distribution, in either case, as determined under Section 752 of the
Code.
"Net Income" means, for any taxable period, the
excess, if any, of the Partnership's items of income and gain (other
than those items attributable to dispositions constituting Termination
Capital Transactions) for such taxable period over the Partnership's
items of loss and deduction (other than those items attributable to
dispositions constituting Termination Capital Transactions) for such
taxable period. The items included in the calculation of Net Income
shall be determined in accordance with Section 4.5(b) and shall not
include any items specially allocated under Section 5.1(d). Once an
item of income, gain, loss or deduction that has been included in the
initial computation of Net Income is subjected to a Required Allocation
or a Curative Allocation, Net Income or Net Loss, whichever the case
may be, shall be recomputed without regard to such item.
"Net Loss" means, for any taxable period, the excess,
if any, of the Partnership's items of loss and deduction (other than
those items attributable to dispositions constituting Termination
Capital Transactions) for such taxable period over the Partnership's
items of income and gain (other than those items attributable to
dispositions constituting Termination Capital Transactions) for such
taxable period. The items included in the calculation of Net Loss shall
be determined in accordance with Section 4.5(b) and shall not include
any items specially allocated under Section 5.1(d). Once an item of
income, gain, loss or deduction that has been included in the initial
computation of Net Loss is subjected to a Required Allocation or a
Curative Allocation, Net Income, or Net Loss, whichever the case may
be, shall be recomputed without regard to such item.
"Net Termination Gain" means, for any taxable period,
the sum, if positive, of all items of income, gain, loss or deduction
recognized by the Partnership (including, without limitation, such
amounts recognized through an OLP Subsidiary, if applicable) from
Termination Capital Transactions occurring in such taxable period. The
items included in the determination of Net Termination Gain shall be
determined in accordance with Section 4.5(b) and shall not include any
items of income, gain or loss specially allocated under Section 5.1(d).
Once an item of income, gain or loss that has been included in the
initial computation of Net Termination Gain is subjected to a Required
Allocation or a Curative Allocation, Net Termination Gain or Net
Termination Loss, whichever the case may be, shall be recomputed
without regard to such item.
"Net Termination Loss" means, for any taxable period,
the sum, if negative, of all items of income, gain, loss or deduction
recognized by the Partnership (including, without limitation, such
amounts recognized through an OLP Subsidiary, if applicable) from
Termination
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Capital Transactions occurring in such taxable period. The items
included in the determination of Net Termination Loss shall be
determined in accordance with Section 4.5(b) and shall not include any
items of income, gain or loss specially allocated under Section 5.1(d).
Once an item of gain or loss that has been included in the initial
computation of Net Termination Loss is subjected to a Required
Allocation or a Curative Allocation, Net Termination Gain or Net
Termination Loss, whichever the case may be, shall be recomputed
without regard to such item.
"Nonrecourse Built-in Gain" means with respect to any
Contributed Properties or Adjusted Properties that are subject to a
mortgage or pledge securing a Nonrecourse Liability, the amount of any
taxable gain that would be allocated to the Partners pursuant to
Sections 5.2(b)(i)(A), 5.2(b)(ii)(A) or 5.2(b)(iii) if such properties
were disposed of in a taxable transaction in full satisfaction of such
liabilities and for no other consideration.
"Nonrecourse Deductions" means any and all items of
loss, deduction or expenditures (described in Section 705(a)(2)(B) of
the Code) that, in accordance with the principles of Treasury
Regulation Section 1.704-(2)(b), are attributable to a Nonrecourse
Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
"OLP Offering" means the initial offering of Senior
Notes to the public, as described in the OLP Registration Statement.
"OLP Registration Statement" means the Registration
Statement on Form S-1 (Registration No. 33-53379), as it has been or as
it may be amended or supplemented from time to time, filed by the
Partnership and Ferrellgas Finance Corp. with the Securities and
Exchange Commission under the Securities Act to register the offering
and sale of the Senior Notes in the OLP Offering.
"OLP Subsidiary" means a Subsidiary of the Partnership.
"OLP Underwriting Agreement" means the underwriting
agreement dated June 27,1994, among the Partnership, Ferrellgas Finance
Corp., the General Partner and the Underwriters named in Schedule A
thereto providing for the purchase of Senior Notes by such
Underwriters.
"Opinion of Counsel" means a written opinion of
counsel (who may be regular counsel to the General Partner, any
Affiliate of the General Partner, or the Partnership) acceptable to the
General Partner.
"Partners" means the General Partner and the Limited Partner.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all
items of loss, deduction or expenditure (including, without limitation,
any expenditure described in Section 705(a)(2)(B)
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of the Code) that, in accordance with the principles of Treasury
Regulation Section 1.704-2(i), are attributable to a Partner
Nonrecourse Debt.
"Partnership" means Ferrellgas, L.P., a Delaware
limited partnership, established by the Certificate of Limited
Partnership, and any successor thereto.
"Partnership Interest" means the interest of a Partner in the Partnership.
"Partnership Minimum Gain" means that amount
determined in accordance with the principles of Treasury Regulation
Section 1.704-2(d).
"Percentage Interest" means (a) as to the General
Partner, in its capacity as such, 1.0101% and (b) as to the Limited
Partner, 98.9899%.
"Person" means an individual or a corporation,
partnership, trust, unincorporated organization, association or other
entity.
"Quarter" means, unless the context requires
otherwise, a three-month period of time ending on October 31, January
31, April 30, or July 31; provided, however, that the General Partner
in its sole discretion may amend such period as it deems necessary or
appropriate in connection with a change in the fiscal year of the
Partnership.
"Recapture Income" means any gain recognized by the
Partnership (computed without regard to any adjustment required by
Sections 734 or 743 of the Code) upon the disposition of any property
or asset of the Partnership, which gain is characterized as ordinary
income because it represents the recapture of deductions previously
taken with respect to such property or asset.
"Registration Statements" means the MLP Registration Statement and the OLP
Registration Statement.
"Required Allocations" means any allocation (or
limitation imposed on any allocation) of an item of income, gain,
deduction or loss pursuant to (a) Section 5.1(b)(i) or (b) Sections
5.1(d)(i)-(vi) and (viii), such allocations (or limitations thereon)
being directly or indirectly required by the Treasury regulations
promulgated under Section 704(b) of the Code.
"Residual Gain" or "Residual Loss" means any item of
gain or loss, as the case may be, of the Partnership recognized for
federal income tax purposes resulting from a sale, exchange or other
disposition of a Contributed Property or Adjusted Property, to the
extent such item of gain or loss is not allocated pursuant to Sections
5.2(b)(i)(A) or 5.2(b)(ii)(A), respectively, to eliminate Book-Tax
Disparities.
"Restricted Activities" means the retail sale of
propane to end users within the continental United States in the manner
engaged in by Ferrellgas immediately prior to the Closing Date.
"Securities Act" means the Securities Act of 1933, as
amended, supplemented or restated from time to time and any successor
to such statute.
"Senior Notes" means, collectively, the $200 million
in aggregate principal amount of 10.0% Fixed Rate Senior Notes due 2001
and $50 million in aggregate principal
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amount of Floating Rate Senior Notes due 2001 to be issued by the
Partnership and Ferrellgas Finance Corp. and offered and sold in the OLP
Offering.
"Special Approval" means approval by the Audit Committee.
"Subsidiary" means, with respect to any Person, (i) a
corporation of which more than 50% of the voting power of shares of
Capital Interests entitled (without regard to the occurrence of any
contingency) to vote in the election of directors or other governing
body of such corporation is owned, directly or indirectly, by such
Person, by one or more Subsidiaries of such Person, or a combination
thereof, (ii) a partnership (whether general or limited) in which such
Person or a Subsidiary of such Person is, at the date of determination,
a general or limited partner of such partnership, but only if more than
50% of the Capital Interests of such partnership (considering all of
the Capital Interests of the partnership as a single class) is owned or
controlled, directly or indirectly, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (iii) any
other Person (other than a corporation or a partnership) in which such
Person, directly or indirectly, at the date of determination, has (x)
at least a majority ownership interest or (y) the power to elect or
direct the election of a majority of the directors or other governing
body of such Person.
"Substituted Limited Partner" means a Person who is
admitted as a Limited Partner to the Partnership pursuant to Section
11.3 in place of and with all the rights of a Limited Partner and who
is shown as a Limited Partner on the books and records of the
Partnership.
"Surviving Business Entity" has the meaning assigned to such term in
Section 15.2(b).
"Termination Capital Transactions" means any sale,
transfer or other disposition of property of the Partnership occurring
upon or incident to the liquidation and winding up of the Partnership
pursuant to Article XIII.
"Underwriting Agreements" means the MLP Underwriting Agreement and the OLP
Underwriting Agreement.
"Unit" has the meaning assigned to such term in this MLP Agreement.
"Unrealized Gain" attributable to any item of
Partnership property means, as of any date of determination, the
excess, if any, of (a) the fair market value of such property as of
such date (as determined under Section 4.5(d)) over (b) the Carrying
Value of such property as of such date (prior to any adjustment to be
made pursuant to Section 4.5(d) as of such date).
"Unrealized Loss" attributable to any item of
Partnership property means, as of any date of determination, the
excess, if any, of (a) the Carrying Value of such property as of such
date (prior to any adjustment to be made pursuant to Section 4.5(d) as
of such date) over (b) the fair market value of such property as of
such date (as determined under Section 4.5(d)).
"Withdrawal Opinion of Counsel" has the meaning assigned to such term in
Section 12.1(b).
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ARTICLE III
PURPOSE
3.1 Purpose and Business. The purpose and nature of this
business to be conducted by the Partnership shall be (a) to acquire, manage, and
operate the assets described in the Contribution Agreement as being transferred
to the Partnership and any similar assets or properties and to engage directly
in, or to enter into or form any corporation, limited liability company,
partnership, joint venture or other arrangement to engage indirectly in, any
type of business or activity engaged in by Ferrellgas immediately prior to the
Closing Date and, in connection therewith, to exercise all of the rights and
powers conferred upon the Partnership pursuant to the agreements relating to
such assets, (b) to engage directly in, or enter into or form any corporation,
limited liability company, partnership, joint venture or other arrangement to
engage indirectly in, any business activity that is approved by the General
Partner and which may lawfully be conducted by a limited partnership organized
pursuant to the Delaware Act and, in connection therewith, to exercise all of
the rights and powers conferred upon the Partnership pursuant to the agreements
relating to such business activity, and (c) to do anything necessary or
appropriate to the foregoing, including, without limitation, the making of
capital contributions to any OLP Subsidiary or loans to the MLP, an MLP
Subsidiary or an OLP Subsidiary (including, without limitation, those
contributions or loans that may be required in connection with its involvement
in the activities referred to in clause (b) of this sentence). The General
Partner has no obligation or duty to the Partnership or the Limited Partner to
propose or approve, and in its sole discretion may decline to propose or
approve, the conduct by the Partnership of any business.
3.2 Powers. The Partnership shall be empowered to do any and
all acts and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described in Section 3.1 and for the protection and benefit of the Partnership.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Initial Contributions. In connection with the formation of
the Partnership under the Delaware Act, the General Partner made an initial
Capital Contribution to the Partnership in the amount of $10.10 for an interest
in the Partnership and was admitted as the general partner of the Partnership,
and the Initial Limited Partner made an initial Capital Contribution to the
Partnership in the amount of $989.90 for an interest in the Partnership and was
admitted as a limited partner of the Partnership.
4.2 Contributions by Ferrellgas and the MLP. (a) On the
Closing Date, Ferrellgas, as a Capital Contribution, contributed, transferred,
conveyed, assigned and delivered to the Partnership the property and other
rights described in the Contribution Agreement as being so contributed,
transferred, conveyed, assigned and delivered in exchange for (i) the
continuation of its general partner interest in the Partnership consisting of a
Partnership Interest representing a 1.0101% Percentage Interest, (ii) a limited
partner interest in the Partnership, which was contributed, transferred,
conveyed, assigned and delivered by the General Partner to the MLP as set forth
in the Contribution Agreement, and which, together with the Partnership Interest
previously held by the MLP, represents a 98.9899% Percentage Interest in the
Partnership, and (iii) the Partnership's assumption of, or taking of assets
subject to, certain indebtedness and other liabilities, including, without
limitation, the Partnership's assumption of the payment obligations of certain
indebtedness of Ferrellgas, all as provided for in the Contribution Agreement.
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(b) On the Closing Date, the MLP contributed in respect of its
Partnership Interest approximately $255 million out of the net proceeds to the
MLP from the issuance of the Common Units pursuant to the MLP Offering.
4.3 Additional Capital Contributions. With the consent of the
General Partner, the Limited Partner may, but shall not be obligated to, make
additional Capital Contributions to the Partnership. Contemporaneously with the
making of any such additional Capital Contributions by the Limited Partner, the
General Partner shall be obligated to make an additional Capital Contribution to
the Partnership in an amount equal to 1.0102% of the additional Capital
Contribution then made by the Limited Partner. Except as set forth in the
immediately preceding sentence and Section 13.8, the General Partner shall not
be obligated to make any additional Capital Contributions to the Partnership.
4.4 No Preemptive Rights. Except as provided in Section 4.3,
no Person shall have any preemptive, preferential or other similar right with
respect to (a) additional Capital Contributions; (b) issuance or sale of any
class or series of Partnership Interests, whether unissued, held in the treasury
or hereafter created; (c) issuance of any obligations, evidences of indebtedness
or other securities of the Partnership convertible into or exchangeable for, or
carrying or accompanied by any rights to receive, purchase or subscribe to, any
such Partnership Interests; (d) issuance of any right of subscription to or
right to receive, or any warrant or option for the purchase of, any such
Partnership Interests; or (e) issuance or sale of any other securities that may
be issued or sold by the Partnership.
4.5 Capital Accounts. (a) The Partnership shall maintain for
each Partner owning a Partnership Interest a separate Capital Account with
respect to such Partnership Interest in accordance with the rules of Treasury
Regulation Section 1.704-1 (b)(2)(iv). Such Capital Account shall be increased
by (i) the amount of all Capital Contributions made to the Partnership with
respect to such Partnership Interest pursuant to this Agreement and (ii) all
items of Partnership income and gain (including, without limitation, income and
gain exempt from tax) computed in accordance with Section 4.5(b) and allocated
with respect to such Partnership Interest pursuant to Section 5. 1, and
decreased by (x) the amount of cash or the Net Agreed Value of all actual and
deemed distributions of cash or property made with respect to such Partnership
Interest pursuant to this Agreement and (y) all items of Partnership deduction
and loss computed in accordance with Section 4.5(b) and allocated with respect
to such Partnership Interest pursuant to Section 5.1.
(b) For purposes of computing the amount of any item of
income, gain, loss or deduction to be reflected in the Partners' Capital
Accounts, the determination, recognition and classification of any such item
shall be the same as its determination, recognition and classification for
federal income tax purposes (including, without limitation, any method of
depreciation, cost recovery or amortization used for that purpose), provided,
that:
(i) Solely for purposes of this Section 4.5, the
Partnership shall be treated as owning directly its proportionate share
(as determined by the General Partner) of all property owned by any OLP
Subsidiary that is classified as a partnership for federal income tax
purposes.
(ii) All fees and other expenses incurred by the
Partnership to promote the sale of (or to sell) a Partnership Interest
that can neither be deducted nor amortized under Section 709 of the
Code, if any, shall, for purposes of Capital Account maintenance, be
treated as an item of deduction at the time such fees and other
expenses are incurred and shall be allocated among the Partners
pursuant to Section 5. 1.
(iii) Except as otherwise provided in Treasury
Regulation Section 1.704-1 (b)(2)(iv)(m), the computation of all items
of income, gain, loss and deduction shall be made
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without regard to any election under Section 754 of the Code which may
be made by the Partnership and, as to those items described in Section
705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact
that such items are not includable in gross income or are neither
currently deductible nor capitalized for federal income tax purposes.
(iv) Any income, gain or loss attributable to the
taxable disposition of any Partnership property shall be determined as
if the adjusted basis of such property as of such date of disposition
were equal in amount to the Partnership's Carrying Value with respect
to such property as of such date.
(v) In accordance with the requirements of Section
704(b) of the Code, any deductions for depreciation, cost recovery or
amortization attributable to any Contributed Property shall be
determined as if the adjusted basis of such property on the date it was
acquired by the Partnership were equal to the Agreed Value of such
property. Upon an adjustment pursuant to Section 4.5(d) to the Carrying
Value of any Partnership property subject to depreciation, cost
recovery or amortization, any further deductions for such depreciation,
cost recovery or amortization attributable to such property shall be
determined (A) as if the adjusted basis of such property were equal to
the Carrying Value of such property immediately following such
adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal income
tax purposes; provided, however, that, if the asset has a zero adjusted
basis for federal income tax purposes, depreciation, cost recovery or
amortization deductions shall be determined using any reasonable method
that the General Partner may adopt.
(vi) If the Partnership's adjusted basis in a
depreciable or cost recovery property is reduced for federal income tax
purposes pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the
amount of such reduction shall, solely for purposes hereof, be deemed
to be an additional depreciation or cost recovery deduction in the year
such property is placed in service and shall be allocated among the
Partners pursuant to Section 5.1. Any restoration of such basis
pursuant to Section 48(q)(2) of the Code shall, to the extent possible,
be allocated in the same manner to the Partners to whom such deemed
deduction was allocated.
(c) A transferee of a Partnership Interest shall succeed to a
pro rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred; provided, however, that, if the transfer
causes a termination of the Partnership under Section 708(b)(1)(B) of the Code,
the Partnership's properties shall be deemed to have been distributed in
liquidation of the Partnership to the Partners (including any transferee of a
Partnership Interest that is a party to the transfer causing such termination)
pursuant to Sections 13.3 and 13.4 and recontributed by such Partners in
reconstitution of the Partnership. Any such deemed distribution shall be treated
as an actual distribution for purposes of this Section 4.5. In such event, the
Carrying Values of the Partnership properties shall be adjusted immediately
prior to such deemed distribution pursuant to Section 4.5(d)(ii) and such
Carrying Values shall then constitute the Agreed Values of such properties upon
such deemed contribution to the reconstituted Partnership. The Capital Accounts
of such reconstituted Partnership shall be maintained in accordance with the
principles of this Section 4.5.
(d) (i) Consistent with the provisions of Treasury
Regulation Section 1.704-1(b)(2)(iv)(f), on an issuance of additional
Partnership Interests for cash or Contributed Property, the Capital
Account of all Partners and the Carrying Value of each Partnership
property immediately prior to such issuance shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable
to such Partnership property, as if such Unrealized Gain or Unrealized
Loss had been recognized on an actual sale of each such property
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immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Sections 5.1(a) and 5.1(b). In
determining such Unrealized Gain or Unrealized Loss, the aggregate cash
amount and fair market value of all Partnership assets (including,
without limitation, cash or cash equivalents) immediately prior to the
issuance of additional Partnership Interests shall be determined by the
General Partner using such reasonable method of valuation as it may
adopt; provided, however, that the General Partner, in arriving at such
valuation, must take fully into account the fair market value of the
Partnership Interests of all Partners at such time. The General Partner
shall allocate such aggregate value among the assets of the Partnership
(in such manner as it determines in its sole discretion to be
reasonable) to arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of such Partnership property shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable
to such Partnership property, as if such Unrealized Gain or Unrealized
Loss had been recognized in a sale of such property immediately prior
to such distribution for an amount equal to its fair market value, and
had been allocated to the Partners, at such time, pursuant to Section
5.1. Any Unrealized Gain or Unrealized Loss attributable to such
property shall be allocated in the same manner as Net Termination Gain
or Net Termination Loss pursuant to Section 5.1(c); provided, however,
that, in making any such allocation, Net Termination Gain or Net
Termination Loss actually realized shall be allocated first. In
determining such Unrealized Gain or Unrealized Loss the aggregate cash
amount and fair market value of all Partnership assets, (including,
without limitation, cash or cash equivalents) immediately prior to a
distribution shall (A) in the case of a deemed distribution occurring
as a result of a termination of the Partnership pursuant to Section 708
of the Code, be determined and allocated in the same manner as that
provided in Section 4.5(d)(i) or (B) in the case of a liquidating
distribution pursuant to Section 14.3 or 14.4, be determined and
allocated by the Liquidator using such reasonable method of valuation
as it may adopt.
4.6 Interest. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
4.7 No Withdrawal. No Partner shall be entitled to withdraw any part of its
Capital Contributions or its Capital Account or to receive any distribution from
the Partnership, except as provided in Articles V, VII, XII and XIII.
4.8 Loans from Partners. Loans by a Partner to the Partnership
shall not constitute Capital Contributions. If any Partner shall advance funds
to the Partnership in excess of the amounts required hereunder to be contributed
by it to the capital of the Partnership, the making of such excess advances
shall not result in any increase in the amount of the Capital Account of such
Partner. The amount of any such excess advances shall be a debt obligation of
the Partnership to such Partner and shall be payable or collectible only out of
the Partnership assets in accordance with the terms and conditions upon which
such advances are made.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations for Capital Account Purposes. For purposes of maintaining
the Capital Accounts and in determining the rights of the Partners among
themselves, the Partnership's
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items of income, gain, loss and deduction (computed in accordance with Section
4.5(b)) shall be allocated among the Partners in each taxable year (or portion
thereof) as provided hereinbelow.
(a) Net Income. After giving effect to the special allocations
set forth in Section 5.1(d), Net Income for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable period shall be allocated as follows:
(i) First, 100% to the General Partner until the
aggregate Net Income allocated to the General Partner pursuant to this
Section 5.1 (a)(i) for the current taxable year and all previous
taxable years is equal to the aggregate Net Losses allocated to the
General Partner pursuant to Section 5.1 (b)(ii) for all previous
taxable years; and
(ii) Second, the balance, if any, 100% to the General
Partner and the Limited Partner in accordance with their respective
Percentage Interests.
(b) Net Losses. After giving effect to the special allocations
set forth in Section 5.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated as follows:
(i) First, 100% to the General Partner and the
Limited Partner in accordance with their respective Percentage
Interests; provided, that Net Losses shall not be allocated pursuant to
this Section 5.1(b)(i) to the extent that such allocation would cause
any Limited Partner to have a deficit balance in its Adjusted Capital.
Account at the end of such taxable year (or increase any existing
deficit balance in its Adjusted Capital Account); and
(ii) Second, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to
the special allocations set forth in Section 5.1(d), all items of income, gain,
loss and deduction taken into account in computing Net Termination Gain or Net
Termination Loss; for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 5.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
5.1(c) after all distributions of Available Cash provided under Section 5.3 have
been made with respect to the taxable period ending on the date of the
Partnership's liquidation pursuant to Section 13.3.
(i) If a Net Termination Gain is recognized (or
deemed recognized pursuant to Section 4.5(d)) from Termination Capital
Transactions, such Net Termination Gain shall be allocated between the
General Partner and the Limited Partner in the following manner (and
the Adjusted Capital Accounts of the Partners shall be increased by the
amount so allocated in each of the following subclauses, in the order
listed, before an allocation is made pursuant to the next succeeding
subclause):
(A) First, to each Partner having a deficit
balance in its Adjusted Capital Account, in the proportion
that such deficit balance bears to the total deficit balances
in the Adjusted Capital Accounts of all Partners, until each
such Partner has been allocated Net Termination Gain equal to
any such deficit balance in its Adjusted Capital Account; and
(B) Second, 100% to the General Partner and
the Limited Partner in accordance with their respective
Percentage Interests.
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(ii) If a Net Termination Loss is recognized (or
deemed recognized pursuant to Section 4.5(d)) from Termination Capital
Transactions, such Net Termination Loss shall be allocated to the
Partners in the following manner:
(A) First, 100% to the General Partner and
the Limited Partner in proportion to, and to the extent of,
the positive balances in their respective Adjusted Capital
Accounts; and
(B) Second, the balance, if any, 100% to the
General Partner.
(d) Specials Allocations. Notwithstanding any other provision of this
Section 5.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback.
Notwithstanding any other provision of this Section 5.1, if there is a
net decrease in Partnership Minimum Gain during any Partnership taxable
period, each Partner shall be allocated items of Partnership income and
gain for such period (and, if necessary, subsequent periods) in the
manner and amounts provided in Treasury Regulation Sections
1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor
provision. For purposes of this Section 5.1(d), each Partner's Adjusted
Capital Account balance shall be determined, and the allocation of
income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 5.1(d)
with respect to such taxable period (other than an allocation pursuant
to Sections 5.1 (d)(v) and (vi)). This Section 5.1(d)(i) is intended to
comply with the Partnership Minimum Gain chargeback requirement in
Treasury Regulation Section 1.704-2(f) and shall be interpreted
consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum
Gain. Notwithstanding the other provisions of this Section 5.1 (other
than Section 5.1(d) (i)), except as provided in Treasury Regulation
Section 1.704-2(i)(4), if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain during any Partnership taxable period,
any Partner with a share of Partner Nonrecourse Debt Minimum Gain at
the beginning of such taxable period shall be allocated items of
Partnership income and gain for such period (and, if necessary,
subsequent periods) in the manner and amounts provided in Treasury
Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any
successor provisions. For purposes of this Section 5.1(d), each
Partner's Adjusted Capital Account balance shall be determined, and the
allocation of income or gain required hereunder shall be effected,
prior to the application of any other allocations pursuant to this
Section 5.1(d), other than Section 5.1(d)(i) and other than an
allocation pursuant to Sections 5.1(d)(v) and (vi), with respect to
such taxable period. This Section 5.1(d)(ii) is intended to comply with
the chargeback of items of income and gain requirement in Treasury
Regulation Section 1.7041-2(i)(4) and shall be interpreted consistently
therewith.
(iii) Qualified Income Offset. In the event any
Partner unexpectedly receives any adjustments, allocations or
distributions described in Treasury Regulation Sections 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6),
items of Partnership income and gain shall be specifically allocated to
such Partner in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations promulgated under Section
704(b) of the Code, the deficit balance, if any, in its Adjusted
Capital Account created by such adjustments, allocations or
distributions as quickly as possible, unless such deficit balance is
otherwise eliminated pursuant to Section 5.1(d)(i) or (ii).
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(iv) Gross Income Allocations. In the event any
Partner has a deficit balance in its Adjusted Capital Account at the
end of any Partnership taxable period such Partner shall be specially
allocated items of Partnership gross. income and gain in the amount of
such excess as quickly as possible; provided, that an allocation
pursuant to this Section 5.1(d)(iv) shall be made only if and to the
extent that such Partner would have a deficit balance in its Adjusted
Capital Account after all other allocations provided in this Section
5.1 have been tentatively made as if this Section 5.1(d)(iv) were not
in this Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions
for any taxable period shall be allocated to the Partners in accordance
with their respective Percentage Interests. If the General Partner
determines in its good faith discretion that the Partnership's
Nonrecourse Deductions must be allocated in a different ratio to
satisfy the safe harbor requirements of the Treasury Regulations
promulgated under Section 704(b) of the Code, the General Partner is
authorized, upon notice to the Limited Partner, to revise the
prescribed ratio to the numerically closest ratio that does satisfy
such requirements.
(vi) Partner Nonrecourse Deductions. Partner
Nonrecourse Deductions for any taxable period shall be allocated 100%
to the Partner that bears the Economic Risk of Loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions
are attributable in accordance with Treasury Regulation Section
1.704-2(i). If more than one Partner bears the Economic Risk of Loss
with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse
Deductions attributable thereto shall be allocated between or among
such Partners in accordance with the ratios in which they share such
Economic Risk of Loss.
(vii) Nonrecourse Liabilities. For purposes of
Treasury Regulation Section 1.752-3(a)(3), the Partners agree that
Nonrecourse Liabilities of the Partnership in excess of the sum of (A)
the amount of Partnership Minimum Gain and (B) the total amount of
Nonrecourse Built-in Gain shall be allocated among the Partners in
accordance with their respective Percentage Interests.
(viii) Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant
to Section 734(b) or 743(b) of the Code is required, pursuant to
Treasury Regulation Section 1.704-1 (b)(2)(iv)(m), to be taken into
account in determining Capital Accounts, the amount of such adjustment
to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to
such Section of the Treasury Regulations.
(ix) Curative Allocation.
(A) Notwithstanding any other provision of
this Section 5.1, other than the Required Allocations, the
Required Allocations shall be taken into account in making the
Agreed Allocations so that, to the extent possible, the net
amount of items of income, gain, loss and deduction allocated
to each Partner pursuant to the Required Allocations and the
Agreed Allocations, together, shall be equal to the net amount
of such items that would have been allocated to each such
Partner under the Agreed Allocations had the Required
Allocations and the related Curative Allocation not otherwise
been provided in this Section 5.1. Notwithstanding the
preceding sentence, Required Allocations relating to (1)
Nonrecourse Deductions shall not be taken, into account except
to the extent that there has been a decrease in Partnership
Minimum Gain and (2) Partner Nonrecourse Deductions shall not
be taken into account except
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to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this
Section 5.1(d)(ix)(A) shall only be made with respect to
Required Allocations to the extent the General Partner
reasonably determines that such allocations will otherwise be
inconsistent with the economic agreement among the Partners.
Further, allocations pursuant to this Section 5.1(d)(ix)(A)
shall be deferred with respect to allocations pursuant to
clauses (1) and (2) hereof to the extent the General Partner
reasonably determines that such allocations are likely to be
offset by subsequent Required Allocations.
(B) The General Partner shall have
reasonable discretion, with respect to each taxable period, to
(1) apply the provisions of Section 5.1(d)(ix)(A) in whatever
order is most likely to minimize the economic distortions that
might otherwise result from the Required Allocations, and (2)
divide all allocations pursuant to Section 5.1(d)(ix)(A) among
the Partners in a manner that is likely to minimize such
economic distortions.
5.2 Allocations for Tax Purposes. (a) Except as otherwise
provided herein, for federal income tax purposes, each item of income, gain,
loss and deduction shall be allocated among the Partners in the same manner as
its correlative item of "book" income, gain, loss or deduction is allocated
pursuant to Section 5.1.
(b) In an attempt to eliminate Book-Tax Disparities
attributable to a Contributed Property or Adjusted Property, items of income,
gain, loss, depreciation, amortization and cost recovery deductions shall be
allocated for federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such
items attributable thereto shall be allocated among the Partners in the
manner provided under Section 704(c) of the Code that takes into
account the variation between the Agreed Value of such property and its
adjusted basis at the time of contribution; and (B) except as otherwise
provided in Section 5.2(b)i(iii), any item of Residual Gain or Residual
Loss attributable to a Contributed Property shall be allocated among
the Partners in the same manner as its correlative item of "book" gain
or loss is allocated pursuant to Section 5.1.
(ii) (A) In the case of an Adjusted Property, such
items shall (1) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code to take
into account the Unrealized Gain or Unrealized Loss attributable to
such property and the allocations thereof pursuant to Section 4.5(d)(i)
or (ii), and (2) second, in the event such property was originally a
Contributed Property, be allocated among the Partners in a manner
consistent with Section 5.2(b)(i)(A); and (B) except as otherwise
provided in Section 5.2(b)(iii), any item of Residual Gain or Residual
Loss attributable to an Adjusted Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or
loss is allocated pursuant to Section 5.1.
(iii) The General Partner shall apply the principles
of Temporary Regulation Section 1.704-3T to eliminate Book-Tax
Disparities.
(c) For the proper administration of the Partnership and for
the preservation of uniformity of Units of the MLP (or any class or classes
thereof), the General Partner shall have sole discretion to (i) adopt such
conventions as it deems appropriate in determining the amount of depreciation,
amortization and cost recovery deductions; (ii) make special allocations for
federal income tax purposes of income (including, without limitation, gross
income) or deductions; and (iii) amend the provisions of this Agreement as
appropriate (x) to reflect the proposal or promulgation of Treasury
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Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise
to preserve or achieve uniformity of Units of the MLP (or any class or classes
thereof). The General Partner may adopt such conventions, make such allocations
and make such amendments to this Agreement as provided in this Section 5.2(c)
only if such conventions, allocations or amendments would not have a material
adverse effect on the Partners, the holders of any class or classes of Units of
the MLP issued and outstanding or the Partnership, and if such allocations are
consistent with the principles of Section 704 of the Code.
(d) The General Partner in its sole discretion may determine
to depreciate or amortize the portion of an adjustment under Section 743(b) of
the Code attributable to unrealized appreciation in any Adjusted Property (to
the extent of the unamortized Book-Tax Disparity) using a predetermined rate
derived from the depreciation or amortization method and useful life applied to
the Partnership's common basis of such property, despite the inconsistency of
such approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury
Regulation Section 1.167(c)-1(a)(6) or the legislative history of Section 197 of
the Code. If the General Partner determines that such reporting position cannot
reasonably be taken, the General Partner may adopt depreciation and amortization
conventions under which all purchasers acquiring Units of the MLP in the same
month would receive depreciation and amortization deductions, based upon the
same applicable rate as if they had purchased a direct interest in the
Partnership's property. If the General Partner chooses not to utilize such
aggregate method, the General Partner may use any other reasonable depreciation
and amortization conventions to preserve the uniformity of the intrinsic tax
characteristics of any class or classes of Units of the MLP that would not have
a material adverse effect on the Limited Partner or the holders of any class or
classes of Units of the MLP.
(e) Any gain allocated to the Partners upon the sale or other
taxable disposition of any Partnership asset shall, to the extent possible,
after taking into account other required allocations of gain pursuant to this
Section 5.2, be characterized as Recapture Income in the same proportions and to
the same extent as such Partners (or their predecessors in interest) have been
allocated any deductions directly or indirectly giving rise to the treatment of
such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit
recognized by the Partnership for federal income tax purposes and allocated to
the Partners in accordance with the provisions hereof shall be determined
without regard to any election under Section 754 of the Code which may be made
by the Partnership; provided, however, that such allocations, once made, shall
be adjusted as necessary or appropriate to take into account those adjustments
permitted or required by Sections 734 and 743 of the Code.
(g) The General Partner may adopt such methods of allocation
of income, gain, loss or deduction between a transferor and a transferee of a
Partnership Interest as it determines necessary, to the extent permitted or
required by Section 706 of the Code and the regulations or rulings promulgated
thereunder.
5.3 Requirement of Distributions. (a) Within 45 days following
the end of (i) the period beginning on the Closing Date and ending on October
31, 1994 and (ii) each Quarter commencing with the Quarter beginning on November
1, 1994, an amount equal to 100% of Available Cash with respect to such period
or Quarter shall be distributed in accordance with this Article V by the
Partnership to the Partners in accordance with their respective Percentage
Interests. The immediately preceding sentence shall not require any distribution
of cash if and to the extent such distribution would be prohibited by applicable
law or by any loan agreement, security agreement, mortgage, debt instrument or
other agreement or obligation to which the Partnership is a party or by which it
is bound or its assets are subject.
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(b) Notwithstanding the foregoing, in the event of the
dissolution and liquidation of the Partnership, all proceeds of such liquidation
shall be applied and distributed in accordance with, and subject to the terms
and conditions of, Sections 13.3 and 13.4.
ARTICLE VI
MANAGEMENT AND OPERATION OF BUSINESS
6.1 Management. (a) The General Partner shall conduct, direct
and manage all activities of the Partnership. Except as otherwise expressly
provided in this Agreement, all management powers over the business and affairs
of the Partnership shall be exclusively vested in the General Partner, and the
Limited Partner shall have no right of control or management power over the
business and affairs of the Partnership. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to Section 6.3, shall have full
power and authority to do all things and on such terms as it, in its sole
discretion, may deem necessary or appropriate to conduct the business of the
Partnership, to exercise all powers set forth in Section 3.2 and to effectuate
the purposes set forth in Section 3.1, including, without limitation, (i) the
making of any expenditures, the lending or borrowing of money, the assumption or
guarantee of, or other contracting for, indebtedness and other liabilities, the
issuance of evidences of indebtedness and the incurring of any other
obligations; (ii) the making of tax, regulatory and other filings, or rendering
of periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership; (iii) the
acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or
exchange of any or all of the assets of the Partnership or the merger or other
combination of the Partnership with or into another Person (the matters
described in this clause (iii) being subject, however, to any prior approval
that may be required by Section 6.3); (iv) the use of the assets of the
Partnership (including, without limitation, cash on hand) for any purpose
consistent with the terms of this Agreement, including, without limitation, the
financing of the conduct of the operations of the Partnership, the lending of
funds to other Persons (including, without limitation, an OLP Subsidiary), the
repayment of obligations of the Partnership and the making of capital
contributions to an OLP Subsidiary; (v) the negotiation, execution and
performance of any contracts, conveyances or other instruments (including,
without limitation, instruments that limit the liability of the Partnership
under contractual arrangements to all or particular assets of the Partnership,
with the other party to the contract to have no recourse against the General
Partner or its assets other than its interest in the Partnership, even if same
results in the terms of the transaction being less favorable to the Partnership
than would otherwise be the case); (vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees and agents (including, without
limitation, employees having titles such as "president," "vice president,"
"secretary" and "treasurer") and agents, outside attorneys, accountants,
consultants and contractors and the determination of their compensation and
other terms of employment or hiring; (viii) the maintenance of such insurance
for the benefit of the Partnership and the Partners (including, without
limitation, the assets of the Partnership) as it deems necessary or appropriate;
(ix) the formation of, or acquisition of an interest in, and the contribution of
property and the making of loans to, any further limited or general
partnerships, joint ventures, corporations, limited liability companies or other
relationships; (x) the control of any matters affecting the rights and
obligations of the Partnership, including, without limitation, the bringing and
defending of actions at law or in equity and otherwise engaging in the conduct
of litigation and the incurring of legal expense and the settlement of claims
and litigation; and (xi) the indemnification of any Person against liabilities
and contingencies to the extent permitted by law.
(b) Notwithstanding any other provision of this Agreement, the
MLP Agreement, the Delaware Act or any applicable law, rule or regulation, each
of the Partners hereby (i) approves, ratifies and confirms the execution,
delivery and performance by the parties thereto of the MLP
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Agreement, the Underwriting Agreements, the Contribution Agreement, the
agreements and other documents filed as exhibits to the Registration Statements,
and the other agreements described in or filed as a part of the Registration
Statements, and the engaging by any Affiliate of the General Partner in business
and activities (other than Restricted Activities) that are in direct competition
with the business and activities of the MLP, the Partnership, any OLP Subsidiary
and any MLP Subsidiary; (ii) agrees that the General Partner (on its own or
through any officer of the Partnership) is authorized to execute, deliver and
perform the agreements referred to in clause (i) of this sentence and the other
agreements, acts, transactions and matters described in the Registration
Statements on behalf of the Partnership without any further act, approval or
vote of the Partners; and (iii) agrees that the execution, delivery or
performance by the General Partner, the MLP, the Partnership or any Affiliate of
any of them of this Agreement or any agreement authorized or permitted under
this Agreement, or the engaging by any Affiliate of the General Partner in any
business and activities (other than Restricted Activities) that are in direct
competition with the business and activities of the MLP, the Partnership, any
OLP Subsidiary and any MLP Subsidiary, shall not constitute a breach by the
General Partner of any duty that the General Partner may owe the Partnership or
the Limited Partners or any other Persons under this Agreement (or any other
agreements) or of any duty stated or implied by law or equity. The term
"Affiliate" when used in this Section 6.1(b) with respect to the General Partner
shall not include the Partnership, the MLP, any OLP Subsidiary or any MLP
Subsidiary.
6.2 Certificate of Limited Partnership. The General Partner
has caused the Certificate of Limited Partnership of Ferrellgas, L.P. to be
filed with the Secretary of State of the State of Delaware as required by the
Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the General Partner in
its sole discretion to be reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited partnership
(or a partnership in which the Limited Partner has limited liability) in the
State of Delaware or any other state in which the Partnership may elect to do
business or own property. To the extent that such action is determined by the
General Partner in its sole discretion to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate of Limited Partnership and do all things to maintain the
Partnership as a limited partnership (or a partnership in which the Limited
Partner has limited liability) under the laws of the State of Delaware or of any
other state in which the Partnership may elect to do business or own property.
Subject to the terms of Section 7.4(a), the General Partner shall not be
required, before or after filing, to deliver or mail a copy of the Certificate
of Limited Partnership, any qualification document or any amendment thereto to
the Limited Partner.
6.3 Restrictions on General Partner's Authority. (a) The
General Partner may not, without written approval of the specific act by the
Limited Partner or by other written instrument executed and delivered by the
Limited Partner subsequent to the date of this Agreement, take any action in
contravention of this Agreement, including, without limitation, (i) any act that
would make it impossible to carry on the ordinary business of the Partnership,
except as otherwise provided in this Agreement; (ii) possess Partnership
property, or assign any rights in specific Partnership property, for other than
a Partnership purpose; (iii) admit a Person as a Partner, except as otherwise
provided in this Agreement; (iv) amend this Agreement in any manner, except as
otherwise provided in this Agreement; or (v) transfer its interest as general
partner of the Partnership, except as otherwise provided in this Agreement.
(b) Except as provided in Articles XIII and XV, the General
Partner may not sell, exchange or otherwise dispose of all or substantially all
of the Partnership's assets in a single transaction or a series of related
transactions without the approval of the Limited Partner; provided, however,
that this provision shall not preclude or limit the General Partner's ability to
mortgage, pledge, hypothecate or grant a security interest in all or
substantially all of the Partnership's assets and shall
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not apply to any forced sale of any or all of the Partnership's assets pursuant
to the foreclosure of, or other realization upon, any such encumbrance.
(c) Unless approved by the Limited Partner, the General
Partner shall not take any action or refuse to take any reasonable action the
effect of which, if taken or not taken, as the case may be, would be to cause
the Partnership to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes; provided
that this Section 6.3(c) shall not be construed to apply to amendments to this
Agreement (which are governed by Article XIV) or mergers or consolidations of
the Partnership with any Person (which are governed by Article XV).
(d) At all times while serving as the general partner of the
Partnership, the General Partner shall not (except as provided below) make any
dividend or distribution on, or repurchase any shares of, its stock or take any
other action within its control unless it shall first receive an Opinion of
Counsel that the effect of such dividend, distribution, repurchase or other
action would not reduce its net worth below an amount such that the Partnership
will be treated as an association taxable as a corporation for federal income
tax purposes; provided, however, to the extent the General Partner receives
distributions of cash from the Partnership or any other partnership of which the
Partnership is, directly or indirectly, a partner, the General Partner shall not
use such cash to make any dividend or distribution on, or repurchase any shares
of, its stock or take any other action within its control if the effect of such
dividend, distribution, repurchase or other action would be to reduce its net
worth below an amount necessary to receive an Opinion of Counsel that the
Partnership will be treated as a partnership for federal income tax purposes.
6.4 Reimbursement of the General Partner. (a) Except as provided in this
Section 6.4 and elsewhere in this Agreement, the General Partner shall not be
compensated for its services as general partner of the Partnership.
(b) The General Partner shall be reimbursed on a monthly
basis, or such other basis as the General Partner may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership (including, without limitation, salary,
bonus, incentive compensation and other amounts paid to any Person to perform
services for the Partnership or for the General Partner in the discharge of its
duties to the Partnership) and (ii), all other necessary or appropriate expenses
allocable to the Partnership or otherwise reasonably incurred by the General
Partner in connection with operating the Partnership's business (including,
without limitation, expenses allocated to the General Partner by its
Affiliates). The General Partner shall determine the fees and expenses that are
allocable to the Partnership in any reasonable manner determined by the General
Partner in its sole discretion. Reimbursements pursuant to this Section 6.4
shall be in addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 6.7.
6.5 Outside Activities. (a) After the Closing Date, the
General Partner, for so long as it is the general partner of the Partnership,
(i) agrees that its sole business will be to act as the general partner of the
Partnership, the MLP, any OLP Subsidiary and any MLP Subsidiary and to undertake
activities that are ancillary or related thereto (including being a limited
partner in the MLP), (ii) shall not enter into or conduct any business or incur
any debts or liabilities except in connection with or incidental to (A) its
performance of the activities required or authorized by this Agreement or the
MLP Agreement or described in or contemplated by the Registration Statements and
(B) the acquisition, ownership or disposition of partnership interests in the
Partnership, the MLP, any OLP Subsidiary and any MLP Subsidiary, except that,
notwithstanding the foregoing, employees of the General Partner may perform
services for Ferrell and its Affiliates and (iii) shall not and shall cause its
Affiliates not to engage in any Restricted Activities.
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(b) Except as described or provided for in the MLP Agreement,
the Registration Statements or Section 6.5(a), no Indemnitee shall be expressly
or implicitly restricted or proscribed pursuant to the MLP Agreement or this
Agreement or the partnership relationship established hereby or thereby from
engaging in other activities for profit, whether in the businesses engaged in by
the Partnership, an OLP Subsidiary, the MLP or an MLP Subsidiary or anticipated
to be engaged in by the Partnership, an OLP Subsidiary, the MLP, an MLP
Subsidiary or otherwise, including, without limitation, in the case of any
Affiliates of the General Partner those businesses and activities (other than
Restricted Activities) in direct competition with the business and activities of
the Partnership, the MLP, an OLP Subsidiary or an MLP Subsidiary or otherwise
described in or contemplated by the Registration Statements. Without limitation
of and subject to the foregoing each Indemnitee (other than the General Partner)
shall have the right to engage in businesses of every type and description and
to engage in and possess an interest in other business ventures of any and every
type or description, independently or with others, including, without
limitation, in the case of any Affiliates of the General Partner, business
interests and activities (other than Restricted Activities) in direct
competition with the business and activities of the Partnership, the MLP, an OLP
Subsidiary or an MLP Subsidiary, and none of the same shall constitute a breach
of this Agreement or any duty to the Partnership, the MLP or any Partners.
Neither the Partnership, the MLP, any Limited Partner nor any other Person shall
have any rights by virtue of this Agreement or the MLP Agreement or the
partnership relationship established hereby or thereby in any business ventures
of any Indemnitee (subject, in the case of the General Partner, to compliance
with Section 6.5(c)) and such Indemnitees shall have no obligation to offer any
interest in any such business ventures to the Partnership, the MLP, any Limited
Partner or any other Person.
(c) Subject to the terms of Sections 6.5(a) and (b) but
otherwise notwithstanding anything to the contrary in this Agreement, (i) the
competitive activities of any Indemnitees (other than the General Partner) are
hereby approved by the Partnership and all Partners and (ii) it shall be deemed
not to be a breach of the General Partner's fiduciary duty or any other
Obligation of any type whatsoever of the General Partner for the General Partner
to permit an Affiliate of the General Partner to engage, or for any such
Affiliate to engage, in business interests or activities (other than Restricted
Activities) in preference to or to the exclusion of the Partnership.
(d) The term "Affiliates" when used in this Section 6.5 with
respect to the General Partner shall not include the Partnership, the MLP, an
OLP Subsidiary or an MLP Subsidiary.
6.6 Loans to and from the General Partner; Contracts with
Affiliates. (a) (i) The General Partner, the Limited Partner, an OLP Subsidiary
or any of their Affiliates may lend to the Partnership, and the Partnership may
borrow, funds needed or desired by the Partnership for such periods of time as
the General Partner may determine and (ii) the General Partner, the Limited
Partner, an OLP Subsidiary or any Affiliate thereof may borrow from the
Partnership, and the Partnership may lend to such Persons, excess funds of the
Partnership for such periods of time and in such amounts as the General Partner
may determine; provided, however, that in either such case the lending party may
not charge the borrowing party interest at a rate greater than the rate that
would be charged the borrowing party (without reference to the lending party's
financial abilities or guarantees) by unrelated lenders on comparable loans. The
borrowing party shall reimburse the lending party for any costs (other than any
additional interest costs) incurred by the lending party in connection with the
borrowing of such funds. For purposes of this Section 6.6(a) and Section 6.6(b),
the term "Partnership" shall include any Affiliate of the Partnership that is
controlled by the Partnership.
(b) The General Partner may itself, or may enter into an
agreement with any of its Affiliates to, render services to the Partnership or
to the General Partner in the discharge of its duties as general partner of the
Partnership. Any service rendered to the Partnership by the General Partner or
any of its Affiliates shall be on terms that are fair and reasonable to the
Partnership; provided,
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however, that the requirements of this Section 6.6(b) shall be deemed satisfied
as to (i) any transaction approved by Special Approval, (ii) any transaction the
terms of which are no less favorable to the Partnership than those generally
being provided to or available from unrelated third parties or (iii) any
transaction that, taking into account the totality of the relationships between
the parties involved (including other transactions that may be particularly
favorable or advantageous to the Partnership), is equitable to the Partnership.
The provisions of Section 6.4 shall apply to the rendering of services described
in this Section 6.6(b).
(c) The Partnership may transfer assets to joint ventures,
other partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(d) Neither the General Partner nor any of its Affiliates
shall sell, transfer or convey any property to, or purchase any property from,
the Partnership, directly or indirectly, except pursuant to transactions that
are fair and reasonable to the Partnership; provided, however, that the
requirements of this Section 6.6(d) shall be deemed to be satisfied as to (i)
the transactions effected pursuant to Sections 4.2, the Contribution Agreement
and any other transactions described in or contemplated by the Registration
Statements, (ii) any transaction approved by Special Approval, (iii) any
transaction the terms of which are no less favorable to the Partnership than
those generally being provided to or available from unrelated third parties or
(iv) any transaction that, taking into account the totality of the relationships
between the parties involved (including other transactions that may be
particularly favorable or advantageous to the Partnership), is equitable to the
Partnership.
(e) The General Partner and its Affiliates will have no
obligation to permit the Partnership, an OLP Subsidiary or the MLP to use any
facilities or assets of the General Partner and its Affiliates, except as may be
provided in contracts entered into from time to time specifically dealing with
such use, nor shall there be any obligation on the part of the General Partner
or its Affiliates to enter into such contracts.
(f) Without limitation of Sections 6.6(a) through 6.6(e), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statements are hereby
approved by all Partners.
6.7 Indemnification. (a) To the fullest extent permitted by
law but subject to the limitations expressly provided in this Agreement, the
General Partner, any Departing Partner, any Person who is or was an officer or
director of the Partnership, the General Partner or any Departing Partner and
all other Indemnitees shall be indemnified and held harmless by the Partnership
from and against any and all losses, claims, damages, liabilities, joint or
several, expenses (including, without limitation, legal fees and expenses),
judgments, fines, penalties, interest, settlements and other amounts arising
from any and all claims, demands, actions, suits or proceedings, whether civil,
criminal, administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as (i) the General Partner, a Departing Partner or any of their
Affiliates, (ii) an officer, director, employee, partner, agent or trustee of
the Partnership, the General Partner, any Departing Partner or any of their
Affiliates or (iii) a Person serving at the request of the Partnership in
another entity in a similar capacity, provided, that in each case the Indemnitee
acted in good faith and in a manner which such Indemnitee reasonably believed to
be in, or not opposed to, the best interests of the Partnership and, with
respect to any criminal proceeding, had no reasonable cause to believe its
conduct was unlawful; provided, further, no indemnification pursuant to this
Section 6.7 shall be available to the General Partner with respect to its
obligations incurred pursuant to the Contribution Agreement (other than
obligations incurred by the General Partner on behalf of the Partnership or the
MLP). The termination of any action, suit or proceeding by
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judgment, order, settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not create a presumption that the Indemnitee acted in a
manner contrary to that specified above. Any indemnification pursuant to this
Section 6.7 shall be made only out of the assets of the Partnership, it being
agreed that the General Partner shall not be personally liable for such
indemnification and shall have no obligation to contribute or loan any monies or
property to the Partnership to enable it to effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses
(including, without limitation, legal fees and expenses) incurred by an
Indemnitee who is indemnified pursuant to Section 6.7(a) in defending any claim,
demand, action, suit or proceeding shall, from time to time, be advanced by the
Partnership prior to the final disposition of such claim, demand, action, suit
or proceeding upon receipt by the Partnership of an undertaking by or on behalf
of the Indemnitee to repay such amount if it shall be determined that the
Indemnitee is not entitled to be indemnified as authorized in this Section 6.7.
(c) The indemnification provided by this Section 6.7 shall be
in addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, both as to actions in the Indemnitee's capacity as (i) the General
Partner, a Departing Partner or an Affiliate thereof, (ii) an officer, director,
employee, partner, agent or trustee of the Partnership, the General Partner, any
Departing Partner or an Affiliate thereof or (iii) a Person serving at the
request of the Partnership in another entity in a similar capacity, and as to
actions in any other capacity (including, without limitation, any capacity under
the Underwriting Agreements), and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse
the General Partner or its Affiliates for the cost of) insurance, on behalf of
the General Partner and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expense that
may be incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
(e) For purposes of this Section 6.7, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 6.7(a); and action taken
or omitted by it with respect to an employee benefit plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partner
to personal liability by reason of the indemnification provisions set forth in
this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole
or in part under this Section 6.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 6.7 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
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(i) No amendment, modification or repeal of this Section 6.7
or any provision hereof shall in any manner terminate, reduce or impair the
right of any past, present or future Indemnitee to be indemnified by the
Partnership, nor the obligation of the Partnership to indemnify any such
Indemnitee under and in accordance with the provisions of this Section 6.7 as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
6.8 Liability of Indemnitees. (a) Notwithstanding anything to
the contrary set forth in this Agreement, no Indemnitee shall be liable for
monetary damages to the Partnership, the Limited Partner, or any other Persons
who have acquired interests in the Partnership, for losses sustained or
liabilities incurred as a result of any act or omission if such Indemnitee acted
in good faith.
(b) Subject to its obligations and duties as General Partner
set forth in Section 6.1 (a), the General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents, and the General Partner
shall not be responsible for any misconduct or negligence on the part of any
such agent appointed by the General Partner in good faith.
(c) Any amendment, modification or repeal of this Section 6.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the liability to the Partnership and the Limited
Partner of the General Partner, its directors, officers and employees and any
other Indemnitees under this Section 6.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
6.9 Resolution of Conflicts of Interest. (a) Unless otherwise
expressly provided in this Agreement or the MLP Agreement, whenever a potential
conflict of interest exists or arises between the General Partner or any of its
Affiliates, on the one hand, and the Partnership, the MLP or the Limited
Partner, on the other hand, any resolution or course of action in respect of
such conflict of interest shall be permitted and deemed approved by the Limited
Partner, and shall not constitute a breach of this Agreement, of the MLP
Agreement or of any agreement contemplated herein or therein, or of any duty
stated or implied by law or equity, if the resolution or course of action is, or
by operation of this Agreement is deemed to be, fair and reasonable to the
Partnership. The General Partner shall be authorized but not required in
connection with its resolution of such conflict of interest to seek Special
Approval of a resolution of such conflict or course of action. Any conflict of
interest and any resolution of such conflict of interest shall be conclusively
deemed fair and reasonable to the Partnership if such conflict of interest or
resolution is (i) approved by Special Approval, (ii) on terms no less favorable
to the Partnership than those generally being provided to or available from
unrelated third parties or (iii) fair to the Partnership, taking into account
the totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership). The General Partner may also adopt a resolution or course of
action that has not received Special Approval. The General Partner (including
the Audit Committee in connection with Special Approval) shall be authorized in
connection with its determination of what is "fair and reasonable" to the
Partnership and in connection with its resolution of any conflict of interest to
consider (A) the relative interests of any party to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such interest;
(B) any customary or accepted industry practices and any customary or historical
dealings with a particular Person; (C) any applicable generally accepted
accounting or engineering practices or principles; and (D) such additional
factors as the General Partner (including such Audit Committee) determines in
its sole discretion to be relevant, reasonable or appropriate under the
circumstances. Nothing contained in this Agreement, however, is intended to
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nor shall it be construed to require the General Partner (including such Audit
Committee) to consider the interests of any Person other than the Partnership.
In the absence of bad faith by the General Partner, the resolution, action or
terms so made, taken or provided by the General Partner with respect to such
matter shall not constitute a breach of this Agreement, the MLP Agreement or any
other agreement contemplated herein or a breach of any standard of care or duty
imposed herein or therein or under the Delaware Act or any other law, rule or
regulation.
(b) Whenever this Agreement or any other agreement
contemplated hereby provides that the General Partner or any of its Affiliates
is permitted or required to make a decision (i) in its "sole discretion" or
"discretion," that it deems "necessary or appropriate" or under a grant of
similar authority or latitude, the General Partner or such Affiliate shall be
entitled to consider only such interests and factors as it desires and shall
have no duty or obligation to give any consideration to any interest of, or
factors affecting, the Partnership, the MLP, an OLP Subsidiary, the Limited
Partner or any limited partner in the MLP, (ii) it may make such decision in its
sole discretion (regardless of whether there is a reference to "sole discretion"
or "discretion") unless another express standard is provided for, or (iii) in
"good faith" or under another express standard, the General Partner or such
Affiliate shall act under such express standard and shall not be subject to any
other or different standards imposed by this Agreement, the MLP Agreement, any
other agreement contemplated hereby or under the Delaware Act or any other law,
rule or regulation. In addition, any actions taken by the General Partner or
such Affiliate consistent with the standards of "reasonable discretion" set
forth in the definition of Available Cash shall not constitute a breach of any
duty of the General Partner to the Partnership or the Limited Partner. The
General Partner shall have no duty, express or implied, to sell or otherwise
dispose of any asset of the Partnership or of an OLP Subsidiary, other than in
the ordinary course of business. No borrowing by the Partnership or the approval
thereof by the General Partner shall be deemed to constitute a breach of any
duty of the General Partner to the Partnership or the Limited Partner by reason
of the fact that the purpose or effect of such borrowing is directly or
indirectly to (A) enable the holders of IDRs to receive distributions under the
MLP Agreement or increase the amount of any such distributions, (B) hasten the
termination of the "Subordination Period" under the MLP Agreement or (C) reduce
the "Cumulative Common Unit Arrearage" under the MLP Agreement in order to
hasten the conversion of the "Subordinated Units" in the MLP into Common Units.
(c) Whenever a particular transaction, arrangement or
resolution of a conflict of interest is required under this Agreement to be
"fair and reasonable" to any Person, the fair and reasonable nature of such
transaction, arrangement or resolution shall be considered in the context of all
similar or related transactions.
6.10 Other Matters Concerning the General Partner. (a) The
General Partner may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties.
(b) The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the opinion (including, without limitation, an Opinion of
Counsel) of such Persons as to matters that such General Partner reasonably
believes to be within such Person's professional or expert competence shall be
conclusively presumed to have been done or omitted in good faith and in
accordance with such opinion.
(c) The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any of its duly
authorized officers and a duly appointed attorney
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or attorneys-in-fact. Each such attorney shall, to the extent provided by the
General Partner in the power of attorney, have full power and authority to do
and perform each and every act and duty that is permitted or required to be done
by the General Partner hereunder.
(d) Any standard of care and duty imposed by this Agreement or
under the Delaware Act or any applicable law, rule or regulation shall be
modified, waived or limited as required to permit the General Partner to act
under this Agreement or any other agreement contemplated by this Agreement and
to make any decision pursuant to the authority prescribed in this Agreement so
long as such action is not reasonably believed by the General Partner to be in,
or not inconsistent with, the best interests of the Partnership.
6.11 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner, individually
or collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner, one or more of its
Affiliates or one or more nominees, as the General Partner may determine. The
General Partner hereby declares and warrants that any Partnership assets for
which record title is held in the name of the General Partner or one or more of
its Affiliates or one or more nominees shall be held by the General Partner or
such Affiliate or nominee for the use and benefit of the Partnership in
accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use its reasonable efforts to cause record title to such
assets (other than those assets in respect of which the General Partner
determines that the expense and difficulty of conveyancing makes transfer of
record title to the Partnership impracticable) to be vested in the Partnership
as soon as reasonably practicable; provided that, prior to the withdrawal or
removal of the General Partner or as soon thereafter as practicable, the General
Partner shall use reasonable efforts to effect the transfer of record title to
the Partnership and, prior to any such transfer, will provide for the use of
such assets in a manner satisfactory to the Partnership. All Partnership assets
shall be recorded as the property of the Partnership in its books and records,
irrespective of the name in which record title to such Partnership assets is
held.
6.12 Reliance by Third Parties. Notwithstanding anything to
the contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the
Partnership and to enter into any contracts on behalf of the Partnership, and
such Person shall be entitled to deal with the General Partner as if it were the
Partnership's sole party in interest, both legally and beneficially. The Limited
Partner hereby waives any and all defenses or other remedies that may be
available against such Person to contest, negate or disaffirm any action of the
General Partner in connection with any such dealing. In no event shall any
Person dealing with the General Partner or its representatives be obligated to
ascertain that the terms of this Agreement have been complied with or to inquire
into the necessity or expedience of any act or action of the General Partner or
its representatives. Each and every certificate, document or other instrument
executed on behalf of the Partnership by the General Partner or its
representatives shall be conclusive evidence in favor of any and every Person
relying thereon or claiming thereunder that (a) at the time of the execution and
delivery of such certificate, document or instrument, this Agreement was in full
force and effect, (b) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the Partnership and (c) such certificate, document or instrument was
duly executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.
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ARTICLE VII
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER
7.1 Limitation of Liability. The Limited Partner shall have no
liability under this Agreement except as expressly provided in this Agreement or
the Delaware Act.
7.2 Management of Business. The Limited Partner, in its
capacity as such, shall not participate in the operation, management or control
(within the meaning of the Delaware Act) of the Partnership's business, transact
any business in the Partnership's name or have the power to sign documents for
or otherwise bind the Partnership. The transaction of any such business by the
Partnership, the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the General Partner or any of
its Affiliates, in its capacity as such, shall not affect, impair or eliminate
the limitations on the liability of the Limited Partner under this Agreement.
7.3 Return of Capital. The Limited Partner shall not be
entitled to the withdrawal or return of its Capital Contribution, except to the
extent, if any, that distributions made pursuant to this Agreement or upon
termination of the Partnership may be considered as such by law and then only to
the extent provided for in this Agreement.
7.4 Rights of the Limited Partner Relating to the Partnership.
(a) In addition to other rights provided by this Agreement or by applicable law,
and except as limited by Section 7.4(b), the Limited Partner shall have the
right, for a purpose reasonably related to the Limited Partner's interest as a
limited partner in the Partnership, upon reasonable demand and at the Limited
Partner's own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local tax returns for each year;
(iii) to have furnished to it, upon notification to
the General Partner, a current list of the name and last known
business, residence or mailing address of each Partner;
(iv) to have furnished to it, upon notification to
the General Partner, a copy of this Agreement and the Certificate of
Limited Partnership and all amendments thereto, together with a copy of
the executed copies of all powers of attorney pursuant to which this
Agreement, the Certificate of Limited Partnership and all amendments
thereto have been executed;
(v) to obtain true and full information regarding the
amount of cash and a description and statement of the Agreed Value of
any other Capital Contribution by each Partner and which each Partner
has agreed to contribute in the future, and the date on which each
became a Partner; and
(vi) to obtain such other information regarding the, affairs of the
Partnership as is just and reasonable.
(b) Notwithstanding any other provision of this Agreement, the
General Partner may keep confidential from the Limited Partner for such period
of time as the General Partner deems reasonable, any information that the
General Partner reasonably believes to be in the nature of trade secrets or
other information the disclosure of which the General Partner in good faith
believes is not
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in the best interests of the Partnership or could damage the Partnership or that
the Partnership is required by law or by agreements with third parties to keep
confidential (other than agreements with Affiliates of the General Partner the
primary purpose of which is to circumvent the obligations set forth in this
Section 7.4).
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
8.1 Records and Accounting. The General Partner shall keep or
cause to be kept at the principal office of the Partnership appropriate books
and records with respect to the Partnership's business, including, without
limitation, all books and records necessary to provide to the Limited Partner
any information, lists and copies of documents required to be provided pursuant
to Section 7.4(a). Any books and records maintained by or on behalf of the
Partnership in the regular course of its business, including, without
limitation, books of account and records of Partnership proceedings, may be kept
on, or be in the form of, computer disks, hard drives, punch cards, magnetic
tape, photographs, micrographics or any other information storage device,
provided, that the books and records so maintained are convertible into clearly
legible written form within a reasonable period of time. The books of the
Partnership shall be maintained, for financial reporting purposes, on an accrual
basis in accordance with generally accepted accounting principles.
8.2 Fiscal Year. The fiscal year of the Partnership shall be August 1 to
July 31.
ARTICLE IX
TAX MATTERS
9.1 Preparation of Tax Returns. The General Partner shall
arrange for the preparation and timely filing of all returns of Partnership
income, gains, deductions, losses and other items required of the Partnership
for federal and state income tax purposes and shall use all reasonable efforts
to furnish, within 90 days of the close of each calendar year, the tax
information reasonably required by the Partners for federal and state income tax
reporting purposes. The classification, realization and recognition of income,
gain, losses and deductions and other items shall be on the accrual method of
accounting for federal income tax purposes. The taxable year of the Partnership
shall be August 1 to July 31.
9.2 Tax Elections. Except as otherwise provided herein, the
General Partner shall, in its sole discretion, determine whether to make any
available election pursuant to the Code; provided, however, that the General
Partner shall make the election under Section 754 of the Code in accordance with
applicable regulations thereunder. The General Partner shall have the right to
seek to revoke any such election (including, without limitation, the election
under Section 754 of the Code) upon the General Partner's determination in its
sole discretion that such revocation is in the best interests of the Limited
Partner.
9.3 Tax Controversies. Subject to the provisions hereof, the
General Partner is designated the Tax Matters Partner (as defined in Section
6231 of the Code), and is authorized and required to represent the Partnership
(at the Partnership's expense) in connection with all examinations of the
Partnership's affairs by tax authorities, including, without limitation,
resulting administrative and judicial proceedings, and to expend Partnership
funds for professional services and costs associated therewith. The Limited
Partner agrees to cooperate with the General Partner and to do or refrain from
doing any or all things reasonably required by the General Partner to conduct
such proceedings.
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9.4 Organizational Expenses. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
60-month period as provided in Section 709 of the Code.
9.5 Withholding. Notwithstanding any other provision of this
Agreement, the General Partner is authorized to take any action that it
determines in its sole discretion to be necessary or appropriate to cause the
Partnership to comply with any withholding requirements established under the
Code or any other federal, state or local law including, without limitation,
pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that
the Partnership is required to withhold and pay over to any taxing authority any
amount resulting from the allocation or distribution of income to any Partner
(including, without limitation, by reason of Section 1446 of the Code), the
amount withheld shall be treated as a distribution of cash pursuant to Section
5.3 in the amount of such withholding from such Partner.
9.6 Opinions of Counsel. Notwithstanding any other provision
of this Agreement, if the Partnership is treated as an association taxable as a
corporation at any time or is otherwise taxable for federal income tax purposes
as an entity at any time and, pursuant to the provisions of this Agreement, an
Opinion of Counsel would otherwise be required to the effect that an action will
not cause the Partnership to become so treated as an association taxable as a
corporation or otherwise taxable as an entity for federal income tax purposes,
such requirement for an Opinion of Counsel shall be deemed automatically waived.
ARTICLE X
TRANSFER OF INTERESTS
10.1 Transfer. (a) The term "transfer," when used in this
Article X with respect to a Partnership Interest, shall be deemed to refer to a
transaction by which a Partner disposes of its Partnership Interest to another
Person and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or otherwise,
provided, however, that the term "Transfer" shall not include the pledge,
encumbrance or hypothecation by a Limited Partner of its Partnership Interest.
(b) No Partnership Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article X. Any Transfer or purported transfer of a Partnership Interest not made
in accordance with this Article X shall be null and void.
(c) Nothing contained in this Article X shall be construed to
prevent a disposition by the parent entity of the General Partner of any or all
of the issued and outstanding capital stock of the General Partner.
10.2 Transfer of the General Partner's Partnership Interest.
If the general partner of the MLP transfers its partnership interest as the
general partner therein to any Person in accordance with the provisions of the
MLP Agreement, the General Partner shall contemporaneously therewith transfer
its Partnership Interest as the general partner of the Partnership to such
Person, and the Limited Partner hereby expressly consents to such transfer. A
Limited Partner may not transfer all or any part of its Partnership Interest or
withdraw from the Partnership except for (i) a transfer described in the
immediately preceding sentence, (ii) the transfer by Ferrellgas of its
Partnership Interest as a Limited Partner in the Partnership to the MLP as
provided in the Contribution Agreement and contemplated by Sections 4.2 and
11.2, (iii) the forced sale or other transfer of a Limited Partner's Partnership
Interest pursuant to the foreclosure of, or other realization upon, any lien
resulting from the pledge, encumbrance or hypothecation of such Partnership
Interest, or (iv) any transfer of a Limited
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Partner's Partnership Interest by a Person acquiring such Partnership Interest
as a result of a sale or other transfer described in the immediately preceding
clause (iii), or any transfer by a transferee of any such Person.
10.3 Transfer of the Limited Partner's Partnership interest.
If the Limited Partner merges, consolidates or otherwise combines into any other
Person or transfers all or substantially all of its assets to another Person,
such Person may become a Substituted Limited Partner pursuant to Article XI.
Except as set forth in the immediately preceding sentence and except for the
transfer by Ferrellgas of its Partnership Interest as a limited partner in the
Partnership to the MLP as provided in the Contribution Agreement and
contemplated by Sections 4.2 and 11.2, a Limited Partner may not transfer all or
any part of its Partnership Interest or withdraw from the Partnership.
ARTICLE XI
ADMISSION OF PARTNERS
11.1 Admission of Initial Partners. Upon the formation of the
Partnership pursuant to the filing of the Certificate of Limited Partnership,
Ferrellgas was admitted to the Partnership as the sole general partner and the
MLP was admitted to the Partnership as the sole limited partner.
11.2 Admission of Ferrellgas as a Limited Partner. Upon the
making by Ferrellgas of the Capital Contributions described in Section 4.2,
Ferrellgas was admitted to the Partnership as a limited partner. Upon the
transfer by Ferrellgas of its Partnership Interest as a limited partner to the
MLP as provided in the Contribution Agreement, Ferrellgas ceased to be a limited
partner of the Partnership.
11.3 Admission of Substituted Limited Partners. Any person
that is the successor in interest to a Limited Partner as described in Section
10.3 shall be admitted to the Partnership as a limited partner upon (a)
furnishing to the General Partner (i) acceptance in form satisfactory to the
General Partner of all of the terms and conditions of this Agreement and (ii)
such other documents or instruments as may be required to effect its admission
as a limited partner in the Partnership and (b) obtaining the consent of the
General Partner, which consent may be withheld or granted in the sole discretion
of the General Partner; provided, however, that this clause (b) shall not be
applicable in the case of the admission as a Limited Partner of a Person
acquiring a Limited Partner's Partnership Interest as a result of a transfer
described in clauses (iii) or (iv) of the second sentence of Section 10.3. Such
Person shall be admitted to the Partnership as a limited partner immediately
prior to the transfer of the Partnership Interest, and the business of the
Partnership shall continue without dissolution.
11.4 Admission of Successor General Partner. A successor
General Partner approved pursuant to Section 12.1 or 12.2 or the transferee of
or successor to all of the General Partner's Partnership Interest as the general
partner in the Partnership pursuant to Section 10.2 who is proposed to be
admitted as a successor General Partner shall, subject to compliance with the
terms of Section 12.3, if applicable, be admitted to the Partnership as the
successor General Partner, effective immediately prior to the withdrawal or
removal of the General Partner pursuant to Section 12.1 or 12.2 or the transfer
of the General Partner's Partnership Interest as the general partner of the
Partnership pursuant to Section 10.2. Any such successor shall, subject to the
terms hereof, carry on the business of the Partnership without dissolution. In
each case, the admission of such successor General Partner to the Partnership
shall, subject to the terms hereof, be subject to the successor General Partner
executing and delivering to the Partnership an acceptance of all of the terms
and conditions of this Agreement and such other documents or instruments as may
be required to effect such admission.
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11.5 Amendment of Agreement and Certificate of Limited
Partnership. To effect the admission to the Partnership of any Partner, the
General Partner shall take all steps necessary and appropriate under the
Delaware Act to amend the records of the Partnership to reflect such admission
and, if necessary, to prepare as soon as practical an amendment of this
Agreement and, if required by law, to prepare and file an amendment to the
Certificate of Limited Partnership and may for this purpose, among others,
exercise the power of attorney granted pursuant to Section 1.4.
11.6 Admission of Additional Limited Partners. (a) A Person
(other than the General Partner, the Initial Limited Partner or a Substituted
Limited Partner) who makes a Capital Contribution to the Partnership in
accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation, the
granting of the power of attorney granted in Section 1.4, and (ii) such other
documents or instruments as may be required in the discretion of the General
Partner to effect such Person's admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section
11.6, no Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in the
General Partner's sole discretion. The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name of such
Person is recorded as such in the books and records of the Partnership,
following the consent of the General Partner to such admission.
ARTICLE XII
WITHDRAWAL OR REMOVAL OF PARTNERS
12.1 Withdrawal of the General Partner. (a) The General Partner shall be
deemed to have withdrawn from the Partnership upon the occurrence of any one of
the following events (each such event herein referred to as an "Event of
Withdrawal");
(i) the General Partner voluntarily withdraws from the Partnership by
giving written notice to the Limited Partner;
(ii) the General Partner transfers all of its rights as General Partner
pursuant to Section 10.2;
(iii) the General Partner is removed pursuant to Section 12.2;
(iv) the general partner of the MLP withdraws from the MLP;
(v) the General Partner (A) makes a general
assignment for the benefit of creditors; (B) files a voluntary
bankruptcy petition; (C) files a petition or answer seeking for itself
a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law; (D) files an answer or
other pleading admitting or failing to contest the material allegations
of a petition filed against the General Partner in a proceeding of the
type described in clauses (A)-(C) of this Section 12.1(a)(v); or (E)
seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator of the General Partner or of all or any
substantial part of its properties;
(vi) a final and non-appealable judgment is entered by a court with
appropriate jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and
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non-appealable order for relief is entered by a court with appropriate
jurisdiction against the General Partner, in each case under any
federal or state bankruptcy or insolvency laws as now or hereafter in
effect; or
(vii) a certificate of dissolution or its equivalent
is filed for the General Partner, or 90 days expire after the date of
notice to the General Partner of revocation of its charter without a
reinstatement of its charter, under the laws of its state of
incorporation.
If an Event of Withdrawal specified in Section 12.1(a)(v), (vi) or (vii) occurs,
the withdrawing General Partner shall give notice to the Limited Partner within
30 days after such occurrence. The Partners hereby agree that only the Events of
Withdrawal described in this Section 12.1 shall result in the withdrawal of the
General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership
upon the occurrence of an Event of Withdrawal shall not constitute a breach of
this Agreement under the following circumstances:
(i) at any time during the period beginning on the
Closing Date and ending at 12:00 Midnight, Central Standard Time, on
July 31, 2004 the General Partner voluntarily withdraws by giving at
least 90 days' advance notice of its intention to withdraw to the
Limited Partner, provided, that prior to the effective date of such
withdrawal the Limited Partner approves such withdrawal and the General
Partner delivers to the Partnership an Opinion of Counsel ("Withdrawal
Opinion of Counsel") that such withdrawal (following the selection of
the successor General Partner) would not result in the loss of the
limited liability of the Limited Partner or cause the Partnership to be
treated as an association taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes;
(ii) at any time on or after 12:00 Midnight, Central
Standard Time, on July 31, 2004, the General Partner voluntarily
withdraws by giving at least 90 days' advance notice to the Limited
Partner, such withdrawal to take effect on the date specified in such
notice; or
(iii) at any time that the General Partner ceases to
be the General Partner pursuant to Section 12.1(a)(ii), (iii) or (iv).
If the General Partner gives a notice of withdrawal pursuant to Section
12.1(a)(i) or Section 13.1(a)(i) of the MLP Agreement, the Limited
Partner may, prior to the effective date of such withdrawal, elect a
successor General Partner, provided, that such successor shall be the
same Person, if any, that is elected by the limited partners of the MLP
pursuant to Section 13.1 of the MLP Agreement as the successor to the
General Partner in its capacity as general partner of the MLP. If,
prior to the effective date of the General Partner's withdrawal, a
successor is not selected by the Limited Partner as provided herein or
the Partnership does not receive a Withdrawal Opinion of Counsel, the
Partnership shall be dissolved in accordance with Section 13.1. Any
successor General Partner elected in accordance with the terms of this
Section 12.1 shall be subject to the provisions of Section 11.4.
12.2 Removal of the General Partner. The General Partner shall
be removed if such General Partner is removed as a general partner of the MLP
pursuant to Section 13.2 of the MLP Agreement. Such removal shall be effective
concurrently with the effectiveness of the removal of such General Partner as
the general partner of the MLP pursuant to the terms of the MLP Agreement. If a
successor to the General Partner in its capacity as general partner of the MLP
is elected in connection with the removal of such General Partner as general
partner of the MLP, as provided in the MLP Agreement, then the Limited Partner
shall elect such successor as the successor General Partner of the Partnership
and such successor shall, upon admission pursuant to Article XI, automatically
become
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a successor General Partner of the Partnership. The admission of any such
successor General Partner to the Partnership shall be subject to the provisions
of Section 11.4.
12.3 Interest of Departing Partner and Successor General
Partner. The Partnership Interest of a Departing Partner departing as a result
of withdrawal or removal pursuant to Section 12.1 or 12.2 shall (unless it is
otherwise required to be converted into Common Units pursuant to Section 13.3(b)
of the MLP Agreement) be purchased by the successor to the Departing Partner for
cash in the manner specified in the MLP Agreement. Such purchase (or conversion
into Common Units, as applicable) shall be a condition to the admission to the
Partnership of the successor as the General Partner. Any successor General
Partner shall indemnify the Departing General Partner as to all debts and
liabilities of the Partnership arising on or after the effective date of the
removal of the Departing Partner.
12.4 Reimbursement of Departing Partner. The Departing Partner
shall be entitled to receive all reimbursements due such Departing Partner
pursuant to Section 6.4, including, without limitation, any employee-related
liabilities (including, without limitation, severance liabilities), incurred in
connection with the termination of any employees employed by such departing
Partner for the benefit of the Partnership.
12.5 Withdrawal of the Limited Partner. A Limited Partner
shall not have the right to withdraw from the Partnership without the prior
consent of the General Partner, which may be granted or withheld in its sole
discretion, provided, however, that immediately following a transfer of a
Limited Partner's Partnership Interest permitted under Section 11.3, the
transferring Limited Partner shall cease to be a Limited Partner with respect to
the Partnership Interest so transferred.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
13.1 Dissolution. The Partnership shall not be dissolved by
the admission of Substituted Limited Partners or Additional Limited Partners or
by the admission of a successor General Partner in accordance with the terms of
this Agreement. Upon the removal or withdrawal of the General Partner any
successor General Partner shall continue the business of the Partnership. The
Partnership shall dissolve and, subject to Section 13.2, its affairs should be
wound up, upon:
(a) the expiration of its term as provided in Section 1.5;
(b) an Event of Withdrawal of the General Partner as provided
in Section 12.1(a) (other than Section 12.1(a)(ii)), unless a successor is
elected and an Opinion of Counsel is received as provided in Section 12.1(b) or
12.2 and such successor is admitted to the Partnership pursuant to Section 11.4;
(c) an election to dissolve the Partnership by the General Partner that is
approved by the Limited Partner;
(d) entry of a decree of judicial dissolution of the Partnership pursuant
to the provisions of the Delaware Act;
(e) the sale of all or substantially all of the assets and properties of
the Partnership; or
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(f) the dissolution of the MLP.
13.2 Continuation of the Business of the Partnership after
Dissolution. Upon (a) dissolution of the Partnership following an Event of
Withdrawal caused by the withdrawal or removal of the General Partner as
provided in Section 12.1(a)(i) or (iii) and following a failure of the Limited
Partner to appoint a successor General Partner as provided in Section 12.1 or
12.2, then within 90 days thereafter or (b) dissolution of the Partnership upon
an event constituting an Event of Withdrawal as defined in Section 12.1(a)(v),
(vi) or (vii), then within 180 days thereafter, the Limited Partner may elect to
reconstitute the Partnership and continue its business on the same terms and
conditions set forth in this Agreement by forming a new limited partnership on
terms identical to those set forth in this Agreement and having as a general
partner a Person approved by the Limited Partner. In addition, upon dissolution
of the Partnership pursuant to Section 13.1(f), if the MLP is reconstituted
pursuant to Section 14.2 of the MLP Agreement, the reconstituted MLP may, within
180 days after such event of dissolution, as the Limited Partner, elect to
reconstitute the Partnership in accordance with the immediately preceding
sentence. Upon any such election by the Limited Partner, all Partners shall be
bound thereby and shall be deemed to have approved same. Unless such an election
is made within the applicable time period as set forth above, the Partnership
shall conduct only activities necessary to wind up its affairs. If such an
election is so made, then:
(i) the reconstituted Partnership shall continue
until the end of the term set forth in Section 1.5 unless earlier
dissolved in accordance with this Article XIII;
(ii) if the successor General Partner is not the
former General Partner, then the interest of the former General Partner
shall be purchased by the successor General Partner or converted into
Common Units of the MLP as provided in the MLP Agreement; and
(iii) all necessary steps shall be taken to cancel
this Agreement and the Certificate of Limited Partnership and to enter
into and, as necessary, to file a new partnership agreement and
certificate of limited partnership, and the successor General Partner
may for this purpose exercise the powers of attorney granted the
General Partner pursuant to Section 1.4; provided, that the right to
approve a successor General Partner and to reconstitute and to continue
the business of the Partnership shall not exist and may not be
exercised unless the Partnership has received an Opinion of Counsel
that (x) the exercise of the right would not result in the loss of
limited liability of the Limited Partner and (y) neither the
Partnership nor the reconstituted limited partnership would be treated
as an association taxable as a corporation or otherwise be taxable as
an entity for federal income tax purposes upon the exercise of such
right to continue.
13.3 Liquidation. Upon dissolution of the Partnership, unless
the Partnership is continued under an election to reconstitute and continue the
Partnership pursuant to Section 13.2, the General Partner, or in the event the
General Partner has been dissolved or removed, become bankrupt as set forth in
Section 12.1 or withdrawn from the Partnership, a liquidator or liquidating
committee approved by the Limited Partner, shall be the Liquidator. The
Liquidator (if other than the General Partner) shall be entitled to receive such
compensation for its services as may be approved by the Limited Partner. The
Liquidator shall agree not to resign at any time without 15 days' prior notice
and (if other than the General Partner) may be removed at any time, with or
without cause, by notice of removal approved by the Limited Partner. Upon
dissolution, removal or resignation of the Liquidator, a successor and
substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be approved
by the Limited Partner. The right to approve a successor or substitute
Liquidator in the manner provided herein shall be deemed to refer also to any
such successor or substitute Liquidator approved in the manner herein provided.
Except as expressly provided in this Article XIII, the Liquidator approved in
the manner provided herein shall
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have and may exercise, without further authorization or consent of any of the
parties hereto, all of the powers conferred upon the General Partner under the
terms of this Agreement (but subject to all of the applicable limitations,
contractual and otherwise, upon the exercise of such powers, other than the
limitation on sale set forth in Section 6.3(b)) to the extent necessary or
desirable in the good faith judgment of the Liquidator to carry out the duties
and functions of the Liquidator hereunder for and during such period of time as
shall be reasonably required in the good faith judgment of the Liquidator to
complete the winding up and liquidation of the Partnership as provided for
herein. The Liquidator shall liquidate the assets of the Partnership, and apply
and distribute the proceeds of such liquidation in the following order of
priority, unless otherwise required by mandatory provisions of applicable law:
(a) the payment to creditors of the Partnership, including,
without limitation, Partners who are creditors, in the order of priority
provided by law; and the creation of a reserve of cash or other assets of the
Partnership for contingent liabilities in an amount, if any, determined by the
Liquidator to be appropriate for such purposes; and
(b) to all Partners in accordance with the positive balances
in their respective Capital Accounts, as determined after taking into account
all Capital Account adjustments (other than those made by reason of this clause)
for the taxable year of the Partnership during which the liquidation of the
Partnership occurs (with the date of such occurrence being determined pursuant
to Treasury Regulation Section 1.704-1(b)(2)(ii)(g));and such distribution shall
be made by the end of such taxable year (or, if later, within 90 days after said
date of such occurrence).
13.4 Distributions in Kind. (a) Notwithstanding the provisions
of Section 13.3, which require the liquidation of the assets of the Partnership,
but subject to the order of priorities set forth therein, if prior to or upon
dissolution of the Partnership the Liquidator determines that an immediate sale
of part or all of the Partnership's assets would be impractical or would cause
undue loss to the Partners, the Liquidator may, in its absolute discretion,
defer for a reasonable time the liquidation of any assets except those necessary
to satisfy liabilities of the Partnership (including, without limitation, those
to Partners as creditors) and/or distribute to the Partners or to specific
classes of Partners, in lieu of cash, as tenants in common and in accordance
with the provisions of Section 13.3, undivided interests in such Partnership
assets as the Liquidator deems not suitable for liquidation. Any such
distributions in kind shall be made only if, in the good faith judgment of the
Liquidator, such distributions in kind are in the best interest of the Limited
Partner, and shall be subject to such conditions relating to the disposition and
management of such properties as the Liquidator deems reasonable and equitable
and to any agreements governing the operation of such properties at such time.
The Liquidator shall determine the fair market value of any property distributed
in kind using such reasonable method of valuation as it may adopt.
(b) In accordance with Section 704(c)(1)(B) of the Code, in
the case of any deemed distribution occurring as a result of a termination of
the Partnership pursuant to Section 708(b)(1)(B) of the Code, to the maximum
extent possible consistent with the priorities of Section 13.3, the General
Partner shall have sole discretion to treat the deemed distribution of
Partnership assets to Partners as occurring in a manner that will not cause a
shift of the Book Tax Disparity attributable to a Partnership asset existing
immediately prior to the deemed distribution to another asset upon the deemed
contribution of assets to the reconstituted Partnership, including, without
limitation, deeming the distribution of any Partnership assets to be made either
to the Partner who contributed such assets or to the transferee of such Partner.
13.5 Cancellation of Certificate of Limited Partnership. Upon
the completion of the distribution of Partnership cash and property as provided
in Sections 13.3 and 13.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other
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than the State of Delaware shall be cancelled and such other action as may be
necessary to terminate the Partnership shall be taken.
13.6 Reasonable Time for Winding Up. A reasonable time shall
be allowed for the orderly winding up of business and affairs of the Partnership
and the liquidation of its assets pursuant to Section 13.3 in order to minimize
any losses otherwise attendant upon such winding up, and the provisions of this
Agreement shall remain in effect between the Partners during the period of
liquidation.
13.7 Return of Capital. The General Partner shall not be
personally liable for, and shall have no obligation to contribute or loan any
monies or property to the Partnership to enable it to effectuate, the return of
the Capital Contributions of the Limited Partner, or any portion thereof, it
being expressly understood that any such return shall be made solely from
Partnership assets.
13.8 Capital Account Restoration. No Limited Partner shall
have any obligation to restore any negative balance in its Capital Account upon
liquidation of the Partnership. The General Partner shall be obligated to
restore any negative balance in its Capital Account upon liquidation of its
interest in the Partnership by the end of the taxable year of the Partnership
during which such liquidation occurs, or, if later, within 90 days after the
date of such liquidation.
13.9 Waiver of Partition. Each Partner hereby waives any right to partition
of the Partnership property.
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT
14.1 Amendment to be Adopted Solely by General Partner. The
Limited Partner agrees that the General Partner (pursuant to its powers of
attorney from the Limited Partner), without the approval of the Limited Partner,
may amend any provision of this Agreement, and execute, swear to, acknowledge,
deliver, file and record whatever documents may be required in connection
therewith, to reflect:
(a) a change in the name of the Partnership, the location of the principal
place of business of the Partnership, the registered agent of the Partnership or
the registered office of the, Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General
Partner, is necessary or appropriate to qualify or continue the qualification of
the Partnership as a limited partnership or a partnership in which the limited
partners have limited liability under the laws of any state or that is necessary
or advisable in the opinion of the General Partner to ensure that the
Partnership will not be treated as an association taxable as a corporation or
otherwise taxed as an entity for federal income tax purposes;
(d) a change (i) that, in the sole discretion of the General
Partner, does not adversely affect the Limited Partner in any material respect,
(ii) that is necessary or desirable to satisfy any requirements, conditions or
guidelines contained in any opinion, directive, order, ruling or regulation of
any federal or state agency or judicial authority or contained in any federal or
state statute (including, without limitation, the Delaware Act), compliance with
any of which the General Partner
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determines in its sole discretion to be in the best interests of the Partnership
and the Limited Partner, (iii) that is required to effect the intent of the
provisions of this Agreement or is otherwise contemplated by this Agreement or
(iv) that is required to conform the provisions of this Agreement with the
provisions of the MLP Agreement as the provisions of the MLP Agreement may be
amended, supplemented or restated from time to time;
(e) a change in the fiscal year and taxable year of the
Partnership and any changes that, in the sole discretion of the General Partner,
are necessary or appropriate as a result of a change in the fiscal year and
taxable year of the Partnership including, without limitation, if the General
Partner shall so determine, a change in the definition of "Quarter" and the
dates on which distributions are to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel,
to prevent the Partnership or the General Partner or its directors or officers
from in any manner being subjected to the provisions of the Investment Company
Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or
"plan asset" regulations adopted under the Employee Retirement Income Security
Act of 1974, as amended, whether or not substantially similar to plan asset
regulations currently applied or proposed by the United States Department of
Labor;
(g) any amendment expressly permitted in this Agreement to be made by the
General Partner acting alone;
(h) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 15.3;
(i) an amendment that, in the sole discretion of the General
Partner, is necessary or desirable to reflect, account for and deal with
appropriately the formation by the Partnership of, or investment by the
Partnership in, any corporation, partnership, joint venture, limited liability
company or other entity, in connection with the conduct by the Partnership of
activities permitted by the terms of Section 3.1; or
(j) any other amendments substantially similar to the foregoing.
14.2 Amendment Procedures. Except with respect to amendments
of the type described in Section 14.1, all amendments to this Agreement shall be
made in accordance with the following requirements. Amendments to this Agreement
may be proposed only by or with the consent of the General Partner. Each such
proposal shall contain the text of the proposed amendment. A proposed amendment
shall be effective upon its approval by the Limited Partner.
ARTICLE XV
MERGER
15.1 Authority. The Partnership may merge or consolidate with
one or more corporations, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including,
without limitation, a general partnership or limited partnership, formed under
the laws of the State of Delaware or any other state of the United States of
America, pursuant to a written agreement of merger or consolidation ("Merger
Agreement") in accordance with this Article.
15.2 Procedure for Merger or Consolidation. Merger or consolidation of the
Partnership pursuant to this Article requires the prior approval of the General
Partner. If the General
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Partner shall determine, in the exercise of its sole discretion, to consent to
the merger or consolidation, the General Partner shall approve the Merger
Agreement, which shall set forth:
(a) The names and jurisdictions of formation or organization of each of the
business entities proposing to merge or consolidate;
(b) The name and jurisdictions of formation or organization of the business
entity that is to survive the proposed merger or consolidation (the "Surviving
Business Entity");
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the
equity securities of each constituent business entity for, or into, cash,
property or general or limited partnership interests, rights, securities or
obligations of the Surviving Business Entity; and (i) if any general or limited
partnership interests, securities or rights of any constituent business entity
are not to be exchanged or converted solely for, or into, cash, property or
general or limited partnership interests, rights, securities or obligations of
the Surviving Business Entity, the cash, property or general or limited
partnership interests, rights, securities or obligations of any limited
partnership, corporation, trust or other entity (other than the Surviving
Business Entity) which the holders of such general or limited partnership
interests, securities or rights are to receive in exchange for, or upon
conversion of, their general or limited partner interests, securities or rights,
and (ii) in the case of securities represented by certificates, upon the
Surrender of such certificates, which cash, property or general or limited
partnership interests, rights, securities or obligations of the Surviving
Business Entity or any general or limited partnership, corporation, trust or
other entity (other than the Surviving Business Entity), or evidences thereof,
are to be delivered;
(e) A statement of any changes in the constituent documents or
the adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or agreement
of limited partnership or other similar charter or governing document) of the
Surviving Business Entity to be effected by such merger or consolidation;
(f) The effective time of the merger, which may be the date of
the filing of the certificate of merger pursuant to Section 15.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided,
that if the effective time of the merger is to be later than the date of the
filing of the certificate of merger, the effective time shall be fixed no later
than the time of the filing of the certificate of merger and stated therein);
and
(g) Such other provisions with respect to the proposed merger
or consolidation as are deemed necessary or appropriate by the General Partner.
15.3 Approval by Limited Partner of Merger or Consolidation. (a) The
General Partner of the Partnership, upon its approval of the Merger Agreement,
shall direct that a copy or a summary of the Merger Agreement be submitted to
the Limited Partner for its approval.
(b) The Merger Agreement shall be approved upon receiving the
consent of the Limited Partner. After such approval by the Limited Partner, and
at any time prior to the filing of the certificate of merger pursuant to Section
15.4, the merger or consolidation may be abandoned pursuant to provisions
therefor, if any, set forth in the Merger Agreement.
15.4 Certificate of Merger. Upon the required approval by the
General Partner and the Limited Partner of a Merger Agreement, a certificate of
merger shall be executed and filed with the Secretary of State of the State of
Delaware in conformity with the requirements of the Delaware Act.
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15.5 Effect of Merger. (a) At the effective time of the Certificate of
merger:
(i) all of the rights, privileges and powers of each
of the business entities that has merged or consolidated, and all
property, real, personal and mixed, and all debts due to any of those
business entities and all other things and causes of action belonging
to each of those business entities shall be vested in the Surviving
Business Entity and after the merger or consolidation shall be the
property of the Surviving Business Entity to the extent they were of
each constituent business entity;
(ii) the title to any real property vested by deed or
otherwise in any of those constituent business entities shall not
revert and is not in any way impaired because of the merger or
consolidation;
(iii) all rights of creditors and all liens on or
security interest in property of any of those constituent business
entities shall be preserved unimpaired; and
(iv) all debts, liabilities and duties of those
constituent business entities shall attach to the Surviving Business
Entity, and may be enforced against it to the same extent as if the
debts, liabilities and duties had been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this
Article shall not be deemed to result in a transfer or assignment of assets or
liabilities from one entity to another having occurred.
ARTICLE XVI
GENERAL PROVISIONS
16.1 Addresses and Notices. Any notice, demand, request or
report required or permitted to be given or made to a Partner under this
Agreement shall be in writing, and shall be deemed given or made when received
by it at the principal office of the Partnership referred to in Section 1.3.
16.2 References. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
16.3 Pronouns and Plurals. Whenever the context may require,
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa,
16.4 Further Action. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
16.5 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
16.6 Integration. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.
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16.7 Creditors. None of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
16.8 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
16.9 Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute an agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto, independently of the
signature of any other party.
16.10 Applicable Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
16.11 Invalidity of Provisions. If any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
GENERAL PARTNER:
FERRELLGAS, INC.
By:
Danley K. Sheldon
Senior Vice President and Chief Financial Officer
LIMITED PARTNER:
FERRELLGAS PARTNERS, L.P.
BY: Ferrellgas, Inc., as general partner
By:
Danley K. Sheldon,
Senior Vice President and Chief Financial Officer
KC01 220952.1
43
<PAGE>
FERRELLGAS FINANCE CORP.
Date: June 12, 1996 By /s/ Danley K. Sheldon
Danley K. Sheldon
Senior Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM
FERRELLGAS L.P. AND SUBSIDIARIES BALANCE SHEET ON APRIL 30,1996
AND THE STATEMENT OF EARNINGS ENDED APRIL 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS)
</LEGEND>
<CIK> 0000922359
<NAME> Ferrellgas L.P.
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> APR-30-1996
<EXCHANGE-RATE> 1
<CASH> 87,809
<SECURITIES> 0
<RECEIVABLES> 81,433
<ALLOWANCES> 794
<INVENTORY> 24,316
<CURRENT-ASSETS> 198,383
<PP&E> 528,739
<DEPRECIATION> 186,146
<TOTAL-ASSETS> 647,129
<CURRENT-LIABILITIES> 75,190
<BONDS> 272,307
<COMMON> 0
0
0
<OTHER-SE> 287,344
<TOTAL-LIABILITY-AND-EQUITY> 647,129
<SALES> 522,446
<TOTAL-REVENUES> 553,712
<CGS> 300,844
<TOTAL-COSTS> 464,666
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,608
<INCOME-PRETAX> 52,887
<INCOME-TAX> 0
<INCOME-CONTINUING> 52,887
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,887
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
1. For the MLP, the Common and Subordinated are considered to possess the
characteristics of Common Stock. Note that both are included in the
determination of EPS providing support for such a classification.
2. For the OLP, ownership is maintained by the MLP and GP. Thus there is no
market and no relevant characteristics of either Common or Preferred Stock.
Classification is reasonable.
3. Ferrell Finance has no income statement items other than totals as their
only costs are G&A, and such costs are not required in the Financial
Data Schedule.
4. A determination was made the Deprec. & Amort. and Vehicle leases are more
appropriately reflected as costs and expenses related to sales and revenues.
Therefore, there will be no amounts reported for item 5-03(b)3
"other costs/expenses".
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM
FERRELLGAS FINANCE CORP. BALANCE SHEET ON APRIL 30,1996
AND THE STATEMENT OF EARNINGS ENDED APRIL 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS)
</LEGEND>
<CIK> 0000922360
<NAME> Ferrellgas Finance Corp.
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> APR-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 1,000
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (89)
<INCOME-TAX> 0
<INCOME-CONTINUING> (89)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (89)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
1. For the MLP, the Common and Subordinated are considered to possess the
characteristics of Common Stock. Note that both are included in the
determination of EPS providing support for such a classification.
2. For the OLP, ownership is maintained by the MLP and GP. Thus there is no
market and no relevant characteristics of either Common or Preferred Stock.
Classification is reasonable.
3. Ferrell Finance has no income statement items other than totals as their
only costs are G&A, and such costs are not required in the Financial
Data Schedule.
4. A determination was made the Deprec. & Amort. and Vehicle leases are more
appropriately reflected as costs and expenses related to sales and revenues.
Therefore, there will be no amounts reported for item 5-03(b)3
"other costs/expenses".
</FN>
</TABLE>
